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Massive Tidal Waves Coming to the Economy | Will Economic Issues Affect Real Estate with Ken McElroy - YouTube
Channel: Jason Hartman
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in a lot of jurisdictions especially the socialist聽
republic of california and the socialist republic聽聽
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of new york you got real problems if you're聽
a landlord in those places because you just聽聽
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have no rights it's not going to be your choice in聽
savvy business dealings and your kind heart that聽聽
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is going to guide your actions it's going to be聽
very anti-landlord landlord unfriendly regulations
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obviously 2020 has been crazy and you know聽
you know it's over now we're at 20 21 and聽聽
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people are kind of questioning you know where we聽
headed uh we have all kinds of things happening聽聽
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right now we have new administration coming聽
in we got the cares act pumped down the road聽聽
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you know till the end of um january and then we聽
have all these forbearance all these rental issues聽聽
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around evictions uh you know the states have聽
affordability issues we have unemployment issues聽聽
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so with all of that let's discuss the rental聽
moratorium you know obviously it's a mess and um聽聽
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you know when somebody doesn't pay uh obviously uh聽
in one of your rentals then you of course it's a聽聽
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tougher uh you can't really pay your mortgage and聽
uh obviously there's no cash flow and so it's just聽聽
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uh kind of a as you would say trickle down right聽
yeah yeah well i call this actually trickle up聽聽
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economics because yeah you know you know when聽
that when the landlord doesn't get his rent聽聽
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what does he do he plays the game a hot potato聽
he goes to the lender and says sorry i can't pay聽聽
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it's a mess but it is what it is so how do聽
you think the government gets us out of this聽聽
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you know i think and i i kind of hate to say this聽
philosophically but i'm coming around to the idea聽聽
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on my podcast a while back i had presidential聽
candidate andrew yang and you know andrew i聽聽
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don't know if you've interviewed him but he's聽
he's the one guy that ran for president when聽聽
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his platform was really centered around ubi聽
or universal basic income and interestingly聽聽
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you know i've been talking with a lot of my very聽
libertarian successful entrepreneur friends and聽聽
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they just don't think i i mean i'm surprised聽
these guys would say this like that they're coming聽聽
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around the idea of universal basic income and you聽
know what i am too and i gotta tell you the the聽聽
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reason is forget about the pandemic forget about聽
civil unrest and the new administration whatever聽聽
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right all these crazy things going on in the world聽
just technology alone is going to displace so many聽聽
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jobs can and it is going to take a long time聽
for people to adapt and to retool now throughout聽聽
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history they always have retooled you know when聽
elias howe invented the sewing machine there was聽聽
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an outcry from both men and women wondering聽
what will women do with all their spare time聽聽
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i think we figured that out okay i dare you to聽
bring that up today you'd get slapped for that聽聽
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one but what's also interesting if you look at聽
the department of labor or something they do聽聽
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this survey right of all the jobs and the only聽
job that has actually been completely lost in聽聽
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the last hundred years due to technology there's聽
only one job that has gone away elevator operator聽聽
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now people have to push the button themselves聽
and operate the elevator by themselves without聽聽
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an expert so there you go so so you mentioned ubi聽
or universal basic income and i i i like you i'm聽聽
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starting to come around people need money they聽
you know the government said stay home and you聽聽
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know get well stay healthy uh and by the way uh聽
you know your employer is um you know maybe we're聽聽
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going to give them money maybe we're not maybe聽
we're going to give maybe we're going to bail out聽聽
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the landlord maybe not maybe we're going to bail聽
out the rent maybe not but this is you know i do聽聽
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think this is coming is that is that do you think聽
that that's coming soon or you think it's gonna be聽聽
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in the foreseeable future you know what so many聽
people would object so vociferously to it that i聽聽
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don't know how soon it'll come but i kind of think聽
it needs to happen because you know if you just聽聽
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give the money to the people directly and you know聽
not to look we saw in this last bill everybody's聽聽
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so outraged about the foreign countries that got聽
the money and this and that and then you know聽聽
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when it comes to giving it to the businesses or聽
the landlords it's like that's all so uneven and聽聽
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it's so hard to figure out what's simple is that聽
if you just pay everybody a thousand bucks a month聽聽
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it's done yeah right they're gonna spend that聽
money the you know the rich will stick it in聽聽
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their bank account okay so what maybe they'll聽
invest it and they'll create you know economic聽聽
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growth that way but for sure the poor will buy聽
some groceries it's just simple now here's the聽聽
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danger in it though and i know our friend george聽
has talked about this a lot and he's got some聽聽
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great content on it but the way they're gonna do聽
it is the dangerous part and they're gonna do it聽聽
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ultimately not initially but ultimately it'll be聽
through a digital currency like you know a digital聽聽
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dollar or fed coin it'll come on our phone they聽
can program that money that money is programmable聽聽
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and that's what's scary about it ken where聽
they can say look you can only spend that聽聽
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money within a five mile radius of your home or聽
you have to spend it within 30 days or it expires聽聽
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or it loses value so they can do all sorts of聽
financial engineering and social engineering that聽聽
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is really quite scary but that's another topic聽
yeah no i talked to george gammon about that聽聽
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exact issue it'll just come into your app and and聽
then they can put a set of controls around it so聽聽
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they can decide what you're going to get to spend聽
it on what you're not and and you know the idea of聽聽
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having cash is a civil rights issue because the聽
way you spend your money should be private maybe聽聽
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you don't want the government to know how you聽
spend your money and that should be your right聽聽
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so let's talk about this i get this question a聽
lot in fact it's probably the question i get that聽聽
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what advice are you giving your investors and the聽
people that you're educating to help buy in some聽聽
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of these markets who have tenants uh that are have聽
trouble paying because obviously it is trickle up聽聽
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what are you telling them to do we deal in the聽
world of single-family homes and we really have聽聽
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had very few instances of tenants not paying rent聽
i mean there are a few but they're they're not聽聽
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many in the more institutional world that聽
you play in of apartments and especially聽聽
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these aren't your apartments so much but other聽
institutional landlords that are investing in聽聽
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in you know workforce housing where they have聽
a lot of restaurant workers and so forth those聽聽
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people are really struggling and the landlords聽
are finding creative ways to to work with people聽聽
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but i would say number one approach things from聽
an era of compassion because this is not the聽聽
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you know normally i would say you got to be strict聽
with your tenants because society falls apart when聽聽
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people don't obey the contract right you you聽
got to have people obey contracts or you just聽聽
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you have chaos it just doesn't work tenants are聽
great at inventing all sorts of sob stories and聽聽
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that's certainly true in the normal world right聽
and you really got to take them with a grain of聽聽
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salt mostly don't believe them okay but in today's聽
world you know a lot of those stories are true聽聽
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and people are having a hard time and聽
regardless of whether you believe them or not聽聽
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you may not have the choice right now the聽
interesting thing is you can still take the tenant聽聽
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to court and get a judgment against them for the聽
money they owe you but you can't kick them out聽聽
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remember whenever you have a tenant defaulting on聽
the rent obligation there are two forms of action聽聽
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number one is an unlawful detainer meaning聽
you remove them from the property so you can聽聽
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put a tenant in the property that will pay you聽
right and that's just eviction but number two聽聽
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is getting a judgment for rent owed聽
that those are two different roads聽聽
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okay usually they come together but not always聽
so you can still take a collection action聽聽
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at least in most jurisdictions i think you聽
know i'm not i'm not a lawyer so don't quote聽聽
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me on this stuff but in a lot of jurisdictions聽
especially the socialist republic of california聽聽
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and the socialist republic of new york you got聽
real problems if you're a landlord in those places聽聽
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because you just have no rights it's not going to聽
be your choice and your savvy business dealings聽聽
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and your kind heart that is going to guide your聽
actions it's going to be very anti-landlord聽聽
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landlord unfriendly regulations i agree so let's聽
let's jump over to businesses uh obviously uh i聽聽
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i just went on and saw that you know obviously聽
we're well over a hundred thousand businesses聽聽
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that are permanently closed and um you know we聽
don't really know a lot of them are run out of聽聽
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ppp money a lot of them are trying to uh adapt to聽
these new changes and be people's behaviors and聽聽
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and and obviously if you own an office you know聽
something at the bottom of an office building and聽聽
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and nobody's going to work anymore that coffee聽
shop that donut shop that dry cleaner that聽聽
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you know lunch place the dinner place whatever um聽
you know those are all going to be hurting and so聽聽
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what people don't realize i think well maybe聽
they do but the you know there's gonna we're聽聽
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gonna start to see massive state tax revenues聽
go down because people own those what one those聽聽
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sales those are real sales tax um those are you聽
know there's lots of taxes paid all over the聽聽
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place including the the bus the building聽
itself um so what do you what do you see聽聽
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you know happening next because nobody's really聽
talking about this massive tax issue that the聽聽
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states you know if you just want to pick on new聽
york city uh might as well or you know or you know聽聽
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san francisco or chicago or whatever yeah um you聽
know these cities are not going to have the tax聽聽
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revenue that they had yet they're certainly聽
not going to shrink their expenses down聽聽
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so what do you think is going to happen ken i聽
think i have the perfect sound effect for it聽聽
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it is bad bad bad news and it affects these聽
geographical areas unevenly and mostly those are聽聽
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the left-leaning high-density urban environments聽
that are already they were already suffering these聽聽
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are places where businesses were already leaving聽
and now the crisis has just accelerated that聽聽
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problem so dramatically so the tax base is going聽
to be just diminished it's it's awful sales taxes聽聽
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you didn't mention property taxes but there's聽
going to be a lot of property tax defaults聽聽
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these office buildings these retail centers聽
they're not going to be paying their taxes they're聽聽
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not there's not going to be the sales tax revenue聽
and the income tax base is leaving too because聽聽
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you know people that work for example in聽
new york city and by the way i think this聽聽
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is going in two rounds you know they've moved聽
outside of the city and maybe they moved to new聽聽
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jersey which is no tax friendly place either聽
right but it is more suburban in some parts or聽聽
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you know they've moved one step away but now that聽
they realize that you know maybe they can keep聽聽
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their job or they've spent some of this lockdown聽
time studying business for starting a business聽聽
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and you know they're going to move farther away聽
into a less expensive jurisdiction with lower聽聽
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taxes even and more space more breathing room聽
and we talked about that on the other video i聽聽
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did with you on pandemic investing but i think聽
it is a huge problem and we are going to see聽聽
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municipal bankruptcies and it may not take聽
the form of an actual bankruptcy in quotes but聽聽
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insolvency i'll put it that way and we're going聽
to see pressure on the federal government to bail聽聽
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them out and they may or may not do that i don't聽
know services will be cut crime will increase聽聽
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as police and fire protection is cut and services聽
are cut dramatically and what you didn't mention聽聽
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but i know you were thinking of it ken is that聽
all of these commercial mortgage-backed securities聽聽
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another giant tidal wave of defaults that will聽
affect investors you know so on that other round聽聽
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i mentioned you know if you own municipal bonds聽
wow that's not looking good if you own commercial聽聽
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mortgage-backed securities of any kind that is聽
not looking good now there's some commercial聽聽
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properties that aren't so bad there are some聽
retail properties that aren't so bad certainly聽聽
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your commercial properties apartments are in high聽
demand so those are okay industrial properties are聽聽
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doing pretty well warehouses are big now with聽
online shopping and so forth but office and聽聽
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retail not looking so good yeah yeah so for those聽
of you don't understand what he just said about聽聽
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commercial mortgage-backed securities what happens聽
is when i go get a loan i get debt and then it聽聽
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gets sold off in the secondary market and so it聽
might be sitting in one of your pension plans or聽聽
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or in one of your retirement plans and so pension聽
groups invest in mortgages and so do insurance聽聽
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companies they invest in mortgages and so as those聽
start to default um obviously nothing gets paid聽聽
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and it ends up basically in your quarterly聽
statement so yeah that's that's uh that's聽聽
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also another wave that's coming uh jason awesome聽
thank you as always i appreciate you being on your聽聽
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wealth of information hey ken my pleasure happy聽
investing to you and all of your listeners and
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viewers
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you
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