This is it, folks… the FINALE of the “CONSPIRACY THEORY” series, in which I make my predictions about where the United States is headed in terms of government control of the housing market… and today I tell you what it means for YOU as a self-directed investor. I’m Bryan Ellis. This is Episode #174.

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Hello, SDI Nation. Welcome to the podcast of record for savvy self-directed investors like you!

Today is the last day we address this “Conspiracy Theory” topic. And I’ll tell you in advance… this one is longer than normal. We may even reach a whopping 10 or 12 minutes long. Hehehehe.

You know, “conspiracy theory” is the wrong term to describe this… but that’s the term that is closest to the truth. What it really is is a policy objective by a whole lot of folks in Washington.

And this isn’t related to a particular political party. Many of you know that I’m rather conservative fiscally and socially too… but this conspiracy theory issue transcends party. It’s Democrats for sure, but it’s also clearly Republicans… and the evidence that both parties are guided by these corrupting influences grows each day.

Now I realize this is an investing show… and that we’ve spent a couple of days focused largely on what may appear to be political topics. If you’ve not heard the two previous shows, episodes 172 and 173, then you really should listen in to them right now at SDIRadio.com/172 and SDIRadio.com/173.

The basic summary is this: Harvard University has announced that there’s a new housing crisis, and this one is a “rental crisis”. According to their study, rent costs more than can be afforded by most people.

You know, my training is as an engineer. I proudly went to Georgia Tech, ranked among all Universities as #41 in the world, and consistently ranked as one of the top 5 engineering schools in America. And two of the things we learned there are that to build a solution, you’ve got to start with your objective in mind and work backwards; and that big objectives are achieved as an accumulation of smaller successes.

So what’s the big objective that government is trying to achieve? I suspect that government is trying to take over control of the private housing market. The form of that takeover is yet to be determined, and will be determined by the shifting winds of political sentiment, but this is not a far-fetched idea.

The process always works something like this: The government does something – theoretically in the interest of the elderly, the poor, or those facing some perceived or manufactured discrimination. So in the name of caring for these unfortunate souls – only a few of which have actual unmet needs – the government institutes a program.

In healthcare, those programs are medicare and Medicaid.

In nutrition, one of those programs is called “SNAP”… aka the “food stamps” program.

And in housing, that program was called the Community Reinvestment Act, which forced banks to make loans to unworthy borrowers based largely on qualifications of race and geography, not financial ability.

Without exception, these programs are imperfect from the start. They have to be. They’re financially foolish, each and every one. But the thing is: They’re not designed to be efficient or even effective. They’re designed to increase dependence on the government from the people who benefit from those programs… and they’re designed to attract more people into that dependence, even from people who

are on the fringes and could probably do just fine all by themselves. But more people in the program means more dependence on and power for the government, and remember: That’s the entire goal.

So then it becomes clear just how imperfect the programs are. And from the point of view of politicians, the only way to solve a problem with a bad program is to create more legislation. The answer is never to unwind these programs and start over… as an example, that’s why we still have Social Security even though it’s a mess.

So more law is instituted – sometimes in the form of additional statutes passed by Congress – but more frequently in the form of regulation written by the administration of whoever is currently President… and unfortunately, while there are some checks and balances to regulations, those checks and balances are very minor… and thus, law is implemented without consent of the people.

In the case of food, there was food stamps, then there was school lunch programs… and now Michelle Obama is forcing public school children to eat food that you and I wouldn’t feed to our dogs… all because the government has absolute say in the matter, and those dependent on those programs have been in them their entire lives and have no awareness that any other options exist for them.

In the case of healthcare, first there was medicare and Medicaid… then there were separate programs in each state that provide health insurance for children at no cost… even for middle-class families who have the ability to pay for it. And now we have ObamaCare… which is, by any reasonable analysis, a complete failure… and which will pave the way for the liberal fantasy of a “single payer system”, where the government directly pays for, and thus directly controls all health care.

And then there’s housing. First there was the Community Reinvestment Act that forced banks to make stupid loans to unqualified borrowers. But it didn’t feel like it really affected me or you, so we ignored it. But it turns out that even before that act was the creation of Fannie Mae with the New Deal under Roosevelt, which was designed nominally to help more people become homeowners. A laudible goal, right? But not the actual goal. Because years later – in the 1990’s – Fannie Mae would be authorized by Congress to buy mortgages on the secondary market… lots of mortgages… so much so that Fannie Mae became, far and away… the largest owner of mortgages in America. Over 90% of them at the height.

And along the way a program called Section 8 was created. This program provides vouchers for low-income people to have a rental home without the burden of actually having to pay for that home. It’s a giveaway, pure and simple… creating absolute dependency upon the government from people using the program. I bet fewer than 1% of the people in Section 8 housing will ever vote for anyone who doesn’t support Section 8… and that’s exactly the intention. Section 8 becomes important again in a moment, but back to Fannie Mae for now…

Fannie Mae was the government’s way of providing the means to make STUPID loans… loans demanded by the Community Reinvestment Act… loans that ANYBODY with the slightest modicum of intelligence could see would never work, because the borrowers themselves had no value. Thus we had the mortgage meltdown of 2008, that was timed and kicked off by a memo from Senator Chuck Schumer that was designed to, and succeeded in, causing a run on and destruction of one of the biggest banks in America at the time… and which kicked off the mortgage meltdown just in time for Barrack Obama to benefit politically. Obama then created TARP which allowed the Federal Reserve to buy out all of those

horrible loans and made it possible for some of those people to refinance their properties at the new, lower, valuations, effectively sticking the taxpayer – me and you – with the bill for those losses.

That brings us to now. The real estate market has largely recovered to pre-meltdown heights… which is disturbing in and of itself. Millions of people have been foreclosed – which was totally predictable – and now are unable to get a mortgage. So what do they do? They rent… that’s the only choice.

Now this Harvard study is released that says there’s a rent crisis, because – according to whatever standards the propeller heads at Harvard have devised – most people can’t afford their rents.

My friends, as I mentioned in the first episode of this series, Episode #172, I believe this to all be by design. Because what I predict is as follows: The government will, at some point, take action on this “crisis”, manufactured though it is. I don’t know the timing of it, but I suspect it will play out something like this:

First, the feds will expand Section 8 so that more people can get access to that program whereby they have to pay little or none of their own rent… thus creating substantial dependency on the part of those people.

Second, as that expanded program grows, the government will use the incredible leverage of providing income to property owners to force them into compliance with burdensome and harmful regulations. For example: I suspect that Section 8 properties will be required to comply with some sort of global warming standards, despite the fact that the scientific basis for climate change is, at best, incredibly suspect and at worst, absolute hokum. Climate change is a golden issue for government because it is so incredibly vague… it can mean anything they want it to mean, and be used for any purpose. So the amount of regulation will be overwhelming for property owners, and the cost of compliance will go so high as to de-motivate people from investing in rental property, thus depressing the market, and causing further economic instability…

Third, as memory of the mortgage meltdown fades, the government will again push lax credit standards, which will repeat the cycle in the future. This is already happening, actually… it’s rumored that Fannie Mae will, next year, return to allowing the use of “soft” documentation… like utility bills… to prove credit worthiness rather than requiring actual credit worthiness.

Fourth, there will be a consolidation of government services… not in how they’re implemented – because government isn’t about efficiency – but in how they’re offered to citizens. There will no longer be “Section 8” and “food stamps” and “Obamacare”, there will be “Whole Citizen Care” – or whatever the name is – which markets housing, nutrition, healthcare, retirement funding and all basic needs at low or no cost… first to the poor and downtrodden – which will certainly include illegal immigrants – and later on to more and more of the citizenry.

The response to which will be more government programs… more free housing, more free food, more free healthcare. It’s an unsustainable cycle.

Where does this leave you as a self-directed investor?

You have a few choices:

1. You can operate on a theory that’s different from mine. That’s ok, of course.

2. You can time the game… and a lot of people will make a lot of money doing this… you can go ahead and buy rental property, you can collect money from Section 8 because it’s hard to argue with the beauty of getting your money on time, every time, every month… and then unload your property – hopefully for a substantial windfall – just as the regulation starts to become problematic for you.

3. You can centralize your investments outside of the United States, in a country where the government has more respect for its citizens;

4. You can ignore all of this and just hope for the best.

No matter which approach you choose, you can and should vote for leaders who at least claim to appreciate and value the freedom that’s necessary for people like you and me to be self-directed investors. There was a time I’d have recommended that Democrats vote for Republicans instead, and that Republicans take their voting more seriously. But at this point, both of those parties are as awful as the other. I no longer claim allegiance to the Republican party.

But the point is this: Take your voting seriously, at the national and at the local level. Much of this will happen through regulations directed at local governments who are dependent on the federal government for their funding, and who will thus do as their told. You should take the election of your local officials very, very seriously to avoid being stuck in that kind of situation.

This is a little depressing, I’ll grant to you. But I want to close this “conspiracy theory” analysis discussion with this reassuring fact: Freedom prevails. Not always in the short term, but ultimately, freedom reigns. Live as a free person. Sure, you’ve got to respect the law… but don’t give it one iota more respect than is required, and realize that laws CAN be changed… even law that’s been “decided” at the Supreme Court.

My friends… tomorrow’s episode will be much, much happier. In fact, it’s our Christmas episode… and you fans of the classic movie “It’s A Wonderful Life” are going to love it. So please, do be sure that you’re on the PRIVATE SDI announcement list by texting the word SDIRADIO with no spaces or periods to 33444 right now. Again, text the word SDIRADIO with no spaces or periods to 33444 right now.

My friends… invest wisely today, and live well forever!

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