If there’s one thing that separates the truly wealthy from everyone else, it’s their relationship with risk.

Not blind risk. I’m talking about conviction — the ability to see an opportunity before everyone else does, to lean into it while others are frozen, and to hold through the storm until the payoff is undeniable.

The extreme example is Bitcoin. In 2012, when it was trading for less than the price of a cup of coffee, most people laughed it off as internet monopoly money. But a handful of people had conviction. 

They understood the asymmetric nature of the bet — the downside was capped at the small amount they put in, while the upside was exponential. Those early adopters didn’t just make returns; many became billionaires.

Of course, most people hadn’t even heard of Bitcoin in 2012, so that might not have even been an option for you. So let’s take another example that you almost certainly did live through.

Real estate after the Great Recession in 2008 was radioactive. Nobody wanted to touch it. Yet those who bought when fear was at its peak ended up riding one of the longest real estate bull markets in U.S. history. 

Data from the National Association of Realtors shows that home prices more than doubled from 2012 to 2022 in many markets. Imagine the rewards of being on the buy side in 2012.

I’ve said it before and I’ll say it again: I believe we are in a similar scenario with real estate right now as we head into a descending rate environment following a real estate bloodbath. 

Properties are severely discounted, and values are almost certain to go up as rates fall. But you have to see the big picture and not be scared. That’s not easy to do when everyone else is. 

Real estate moguls and business owners are the ones most likely to take their wealth to the next level. Real estate is accessible to you — and so is business ownership. 

Look at the Forbes billionaire list and you’ll see a pattern: nearly 70% of the world’s wealthiest people are business founders or owners. They didn’t get rich clipping coupons from the S&P 500. 

They got there by creating or buying businesses that became valuable, saleable assets. The risk was obvious: most startups fail. But the payoff for the ones that succeed dwarfs anything you’ll ever get in your brokerage account.

Now, the reality is that most high-paid professionals never play in this arena. They’re comfortable and don’t want to rock the boat. Some call it the “golden handcuffs” — you make enough money to feel comfortable, but that same comfort prevents you from ever taking risk. And you know what? That’s totally fine.

Just know that doing your 9-to-5 and investing into your 401(k) is not going to create life-changing money. If all you’re looking for is life-sustaining money, keep doing what you’re doing.

But ask yourself this question: What’s the life you dream about? If it’s the life you already have, then congratulations. If not, are you on a trajectory that even makes it possible to get there? If not, you’ve got to change course.

My guest this week on Wealth Formula Podcast has done a great deal of research on the wealthy and has written a book based on what he has learned.

Transcript

Disclaimer: This transcript was generated by AI and may not be 100% accurate. If you notice any errors or corrections, please email us at [email protected].

 An s and p 500 index fund would’ve outperformed like, you know, 75% of active managers. These are people who, it’s their job, they’re paid and compensated to try and beat the market, and they can’t.

Welcome everybody. This is Buck Joffrey with the Wealth Formula Podcast, coming to you from Montecito, California. And, uh, before we begin today, wanna remind you. There is a website associated with this podcast. It’s called wealth formula.com. Go check it out. There’s lots of resources there for you, uh, including, uh, a chance to join our credit investor group.

Our credit investor group is exactly what it sounds like. It’s a investor club and uh, it’s basically an opportunity to see deal flow where you might not otherwise see. I do think it’s, uh, you know, uh, following, uh, Richard Duncan’s, uh, podcast last week. I think it is something that you really ought to be thinking about.

We, I mean, even, even Richard, who generally is pretty negative about, uh, the economy and, and that kind of thing really sees a big boom, uh, and sort of a takeover of the Trump, uh. Take over the Fed by the Trump administration. Forcing rates to go down. Descending rate environment means increasing asset prices.

That’s just what it is. And if the Trump administration does what it wants, you’re gonna see rates going down, asset prices going up, liquidity going up, dollar going down. What that means is asset prices skyrocket. Dollar falls. I mean, listen, if you’re not buying real estate, fine. I don’t buy real estate here.

If you’re in our credit investor club, you know, we we’re continuously, uh, going after these distressed assets. Um, and, uh, but they may not be your cup of tea. Maybe go buy something yourself, you know, buy some stocks or buy some, uh, buy your own, uh, real estate, uh, whatever, whatever works. But I do think that.

Again, I’m not trying to give you financial advice. This is commentary. My commentary is this, is that I think the playbook that the Trump administration is trying to follow is pretty clear. Now it’s possible they, they’re unable to do it, but I doubt it. I mean, they’re gonna fire their way to controlling the Fed and if they can fire their way to controlling the Fed, they can control the Fed interest rates and they can control the bond market through quantitative easing.

So, anyway, just a reminder on that. I just feel like people need to wake up on this one. Okay. Let’s talk about today’s show. It’s, you know, it’s about, it’s a little different. It’s about wealth, right? So, um, I wanna talk about generally the idea of, you know, building substantial wealth and, and what does that even mean?

Right? Well, I would just say this, it’s the, it’s life changing, right? So that’s gonna be different for different people if you. Are going from, uh, you know, $50,000 a year job and all of a sudden you’ve got a million bucks. That’s life changing, right? So, uh, if you make a million dollars a year and you know, all of a sudden you’ve got, uh, eight figures of wealth, um, that it, that can be life changing, right?

Um, or going from, you know, eight to nine figures or whatever. These are life changing things. That’s what I’m talking about. You know, if there’s one thing. That separates those sort of truly wealthy from everyone else. It’s a relationship with risk that is different. Now, I’m not talking about blind risk, I’m talking about conviction.

The ability to see an opportunity before everyone else does, you know, to lean on it while others are frozen and to hold through the storm until the payoff is undeniable. Okay, so the extreme example. We’ve been talking a lot about Bitcoin lately, right? So in 2012, Bitcoin was, uh, trading for less than the price cup of coffee.

And I think it’s, uh, as of this, um, I’m recording this a little earlier than it’s being released, but it’s at about 117. I think Q4 is gonna be huge. So who knows? By the time, uh, by the time this comes out, it could be greater than 117,000. It could be a lot less, who knows? But anyway. Hell of a lot more than a cup of coffee.

Let’s just put it that way. Okay? But guess what? People laughed it off. They were laughing at this stuff. Even through 2017 when I first kind of got into this world myself in the bitcoin world, people were laughing. They thought it was a joke. They called it buffet, called it rat poison. Blah, rat, rat poison squared.

It wasn’t just even rat. But guess what? There was a bunch of people, not a bunch, but there were, there was handful of people who had crazy conviction, these Bitcoiners, right? And even, uh, you know, they started off, maybe they had a few hundred bucks or a few thousand bucks they put into it. The next thing you know, they saw that grow into like, you know, six figures.

And then they still didn’t sell. Then they saw it had their money go into the seven figures and they still didn’t sell, and some of these folks even became billionaires. It’s crazy. Crazy. What kind of conviction that takes. I mean, I don’t think, man, I don’t think I’d have that kind of conviction. If I saw, if I saw a hundred acts, I think I would kind of probably bail, to be honest.

So maybe I’m, you know, I’m not wired to become a billionaire, so who knows? Um. Got many zeroes to go before I could, uh, call myself that Anyway, so, uh, of course, you know, most people and, and myself, I think maybe I heard about 2000 Bitcoin in 2012, but. I think I was mostly hearing Peter Schiff bash it or something like that.

So then I completely went the other way. But you know, most people hadn’t heard of it then. So it probably really wasn’t realistic for that to, to use that as an example of conviction, because if you’d never even heard of something, then it’s hard to have conviction about it. So let’s take something that’s, well, I know, I know pretty much all of you have recollection of, and that is a great recession of 2008.

And guess what? Real estate was radioactive. In fact, I mean, kind of almost like now, right? Like where, you know, there was this bloodbath and all of a sudden nobody wanted to, you know, people were, people were all over it and then nobody wanted to touch it. Yet those, uh, who bought when the fear was at its peak.

Ended up rioting one of the longest real estate bull markets in US history, which really only ended like, you know, 20 22, 20 23. But it, there was a crash. There was a big crash. Now, data from the National Association of Realtors show that home prices, uh, more than double from 2012 to 2022 and many markets.

Now imagine the rewards of being on the buy side in 2012. If you had that kind of. Conviction. I’ve said it before and I’ll say it again. I actually think we’re in a very similar scenario with real estate right now as we head into this. You know what, you know what I keep calling this descending rate environment with this, uh, uh, Trump takeover of the Fed.

I mean, it’s the same kind of thing. Maybe it’s not quite as extreme as what you saw in 2008, 2009. That’s, that’s kind of crazy times, right? But, but you’re seeing a similar thing where you had this, you know, bloodbath and then now people are kind of. Skittish about getting back in. They don’t know if it’s a good time.

And at the same time, you know, assets are being sold at, uh, you know, 30, 40% discounts compared to just a couple of years ago. You know, the prices are reset. They’re making sense at the current interest rates. And then what happens? Interest rates go down. Cap rates compress, boom. We’re off to the races, right?

But you have to see the big picture and not be scared. And that’s not easy to do when everyone else is. I get it. But just remember, real estate moguls, business owners are the ones that really, I mean, look at the NFL owners, right? They’re either big real estate moguls or they’re business owners. That’s basically it.

Um, you know, real estate obviously is accessible too, but so is business ownership. And if you look at business ownership, the Forbes Billionaire List, you’ll see, you know, nearly 70% of the world’s wealthiest people are business founders or owners. So they didn’t get rich with the stocks, bonds, and mutual funds, and the s and p 500.

By the way, I’ve changed my tone on stocks. I am not a hater. Okay? I’m not a hater. I’m just saying, you know, if you want different results, you have to do things differently. These people became billionaires because they were creating or buying businesses, uh, that became valuable. Saleable assets. They, they did the work.

The risk was obvious, right? But the payoff for the ones that succeeded, um, you know, dwarfed anything that you could get just by investing in, like most people do. Now the reality is that most high paid professionals never play in this arena. And the reason for that is not because they’re not smart enough, it’s just that they’re comfortable and don’t wanna rock the boat.

Some call this the golden handcuffs, right? You make enough money to feel comfortable, but that comfort is a little bit, you know, too comfortable, and it prevents you from ever taking risks. And you know what? That’s totally fine. It’s totally fine if you just don’t really care. You know, just, you know, just know that doing your nine to five and investing in your 401k, it’s not gonna create life-changing money.

Nobody ever got rich from investing in a, you know, diversified portfolio of stock sponsor mutual funds. People don’t change their place in the economic hierarchy of this country by doing that. If all you’re looking for is life sustaining money, keep doing what you’re doing, and it’s probably easier if you are not that ambitious.

The only thing I’m asking you to do is to ask yourself the question, you know, what is it that you really want in your life? What is it that you dream about, right? As far as you know, you only got one of them, and if it’s the life you already have and you are totally fine with it, you don’t need. Um, dream any further than just keep doing what you’re doing and you can just listen to this podcast and think we’re a bunch of jokers.

Who are the dreamers out there? Um, but if not, you know, uh, the, the thing you gotta do is you have to look at your trajectory, right? Like, if you’re doing something right now, that, and, and there, there’s no motion or any sort of, uh, direction. If that could possibly get you where you wanna be, then you gotta change course.

Right. Anyway, that’s just a little pep talk for me. My, uh, my guest this week, um, on this week’s podcast, he’s done a lot of research on, on the Wealth. He’s written a book on what he’s learned, and I think it, uh, gives a little bit of backup to what I’m talking about, so we’ll have that right after these messages.

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It’s a refined strategy used by some of the wealthiest families in history, and it uses century old rock solid insurance companies as its backbone. Turbocharge your investments. Visit Wealth formula banking.com. Again, that’s wealth formula banking.com. Welcome back to Show Everyone Today my guest is Nick Maggiulli.

Uh, he is a Chief Operating Officer at WR Hols Wealth Management. He’s also the author of Just Keep Buying and runs the blog of Dollars and Data where he breaks down personal finance and investing using real world evidence. His focus is on what the data actually shows about building and keeping wealth.

And that’s exactly what we’re gonna talk about today. Uh, welcome to show Nick how. Good. Thanks. Having me on. So let’s, uh, let’s start with this. You’ve dug, uh, I guess you’ve dug into, you know, decades of financial market data and from all that work, what are the biggest myths about building wealth that the data, uh, just doesn’t support.

So I think the, the one I’m gonna focus on the most is that cutting your spending is the way to get rich or build a lot of wealth. And for some people that’s definitely true, but it’s the, it’s a very, very small minority, a very small percentage of people where that actually tends to be the case. And if you look at the data, overwhelmingly high wealth is correlated with high income and vice versa.

So it’s very rare that someone has high income and low wealth. Or someone has, uh, low income and high wealth. Right? So those are incredibly rare, and I’ve talked about this a lot, um, in my work over the years. It’s in my new book, the Wealth Flatter, and the second chapter, I just dig deep on income and I can say I basically take wealth and I break it into these six levels.

And then across the levels, within each level, as you kind of move up, the wealth flatter, the amount of income, the median income in each one of those levels just increases, um, pretty significantly as you move up. Mm-hmm. Sure. I mean, certainly I, I mean I’m, you know, I mean, if we’re talking about Starbucks and those kinds of things, uh, for, for high income people, that’s not gonna make a difference.

But, you know, certainly, uh, I mean there, there is probably a little bit of that. Don’t you think? I mean, like, if you take the example of professional athletes and you hear these stories about people making a ton of money and then just blowing through it and all that kind of stuff. Yeah, no, those, those definitely are the exception.

And once again, professional athletes are. You know, like they’re like the exception of the exception of the exception in so many ways. They’re very visible to us, and so they, it feels like they’re very normal. Like these are very normal occurrences, but they’re, they’re definitely not. And that’s, that’s the thing to keep in mind, right?

And so once you actually look at the data, like I think it’s like 95% of people who are, 95% of households that have a income over $200,000 a year have a net worth over $200,000 a year. Now, once again, $200,000 is not a lot of money. Doesn’t mean you’re super wealthy or anything like that. But at the same time, like.

That shows that there’s very, very few people that have an income of that high or higher and are broke. It just, it’s rare. It’s very rare. And that if you know, you probably know someone like that. I know people like that, but they’re incredibly rare. Most people that have a good income aren’t going crazy, and even if they are spending a lot, they still have some access to save.

Yeah. Yeah. Fair enough. Okay, so if someone earns a high income. Is late to the game of investing. What does the evidence say about how much they can realistically catch up? It really depends. I mean, what is high income? How much time do you have? I mean, those are all, there’s all these levers you have, right?

You can really think about building your wealth. You have these different levers, right? You have time. So how much time can you go and, and, and save, right? You have your savings rate. How much can you save, right? And that’s influenced by obviously your spending, but also your income. So the higher your income all else equal, the more you’re gonna save, right?

Assuming you don’t, you know, once again, all else equal, you’re gonna just save more money, right? So you think about the time lever, you think about the savings lever, which is both income and spending, right? And involved. And then you think about your investment returns. So those are the three big kind of things you, you can mess with, right?

And so. And investment returns are probably the hardest one to mess with. It’s really hard to beat the market so. I’m really more of an indexer. Not everyone agrees with that, but that’s kind of my take on that. So that variable solved. And then the other two are like, okay, what can I do on the savings front that’s spending and income.

You have probably the biggest, the most amount of, um, leverage there on those two factors. And then the last one is your time, which obviously if you’ve already, if you spend a couple decades not doing the right things financially, that’s fine. You can’t. Do much about that now it’s already happened. So the one things you gotta focus on are your income and your spending, right?

That’s where, if you think about this in terms of a formula, like that’s where it comes back to it. Like that’s the biggest factor. And the one I try and have people focus on is income given the data. Yeah. Yeah. And how do you help people with income? You have to talk about, okay, what can you do to raise your long-term income?

And I always mean like, okay, what can I do tomorrow? Like there’s side hustles. Things are out there that are great and you can do some of those things. It’s a long journey. I’m talking three to five years, right? At least, right? At least three to five years of what can I start working on to move in that direction.

Does that mean a promotion in my current job? Does that mean starting a side hustle that becomes a business? Does that mean learning a new skill and kind of pivoting to a brand new industry? Right? And so. A lot and we can start getting into this. There’s a lot to discuss in this topic. Um, but it’s the thing I focus on the most because that’s what the data tends to show.

It’s like, Hey, you’re not gonna, you know, clip coupons and make your way to wealth. Like, you can make some wealth doing that, but it’s, it’s not gonna be a lot. The real lever is gonna be when you raise your income so much that you don’t even have to worry about saving money. ’cause there’s just so much coming in that it’s just, it’s easy to save.

That’s what we, that’s the goal I want for, for everyone ideally. Well, let’s, you know, let’s talk about what you, you know, what you like to talk about. So, you know, give us some ideas on, you know, what do you tell people about increasing income? How do you do that? I mean, you’re talking to a group of, you know, individuals here that typically al are already higher income.

Um, generally, you know, professionals generally going to be making over three, $400,000 a year. What, what kind of advice do you have for them? So for those people, I think the, the main thing, if I, if I say how do you increase your income from here? A lot of those people are probably gonna be just high paid professionals.

And there’s just like the limits of how much you can work and how much you can earn day to day. The long-term solution to that is how much can you get equity ownership in this business that’s gonna pay off a higher income, especially over time if the business grows. Right? And so obviously it’s gonna vary based on if you’re like a lawyer, you’re like, oh, I’m getting paid X.

Well, can you get partnership where one day if the firm grows, you have a bigger book of business, now you’re getting paid. Multiple of X, right? It, it’s, it has to come through some form of equity ownership. There are obviously exceptions to this. There are people who are entertainers or athletes or something where you can get these big salary type contracts.

But once again, those are incredibly rare for most white collar professionals. It comes through business ownership and having income, or at least having a business that you’re reinvesting in. And over time you eventually sell and you have a very massive income event. So there’s a lot of different ways of thinking about this problem.

You either. Siphon the income off to yourself every year, or you reinvest in the business so it’s gets bigger and bigger. Then you have an exit of some sort, which is a very large income event. And so if you look at the data, that’s generally what people in, let’s say 10 million plus in net worth. That’s how they get there, right?

Besides the entertainers, the athletes, et cetera. The vast majority of people in the 10 million plus range, and that’s where I call level five on my wealth flatter framework. Those people are entrepreneurs like through and through. And so if we’re talking about, okay, well what can I do to like raise my income?

There’s this framework from, uh, Naval Akan where it talks about leverage. I don’t mean like just borrowing money, like that type of leverage. I mean, there’s different types of leverage and so obviously hiring people in a business where you’re having someone. Do something that earns more value than what you’re paying them, right?

That’s the oldest form of leverage in history, right? It’s like hiring people, having them, that’s one type. Another type is using money, so that’s owning real estate, right? Going and you’re, you’re using someone else’s money, the banks, and you’re borrowing it X percent and hopefully that real estate is returning a higher return than X.

That’s how you, you’re just leveraging the difference in, in the return versus what you’re paying for your money, right? Which is, you know, the interest on the mortgage. So that’s another type of leverage. And then the two new ones basically in the internet economy are content and code. Content is like kind of what you’re doing right now, buck, you’re putting out, we don’t have to have this conversation with the thousands of listeners or tens of thousands of listeners, one by one where we go to their house and we sit down at a convenient time for all of us.

Like this one episode would take like all the rest of our lives just to do. Right. And every time we’d have to have the same conversation hopefully. And you know, so because we can have this once through the internet and distributed networks, right? We can send it out to lots of people at once. And that’s the same thing.

That could be true of writing a book, that could be putting out other types of content, right. There’s all sorts of ways you can do that. You’re selling a product on the internet, that’s another kind of scalable thing that you can do. And then lastly, it’s code, which is also kind of related to, it’s not content exactly, but you’re, you’re creating a software that’s like software as a service.

That’s why this is such a profitable business model, because the marginal cost of the next user’s basically zero. I mean, it’s not exactly zero, but it’s almost zero. Yet you’re giving them a very valuable thing that they’re paying, you know, let’s say thousands of dollars a month for whether you’re doing business to business or.

Even B2C, you can be, you know, getting someone on Netflix, you know, you’re paying 10, 15 bucks a month, but they are just pumping this stuff out and it’s, it’s a very low cost thing to do. The cost really is in the content. That’s a whole separate thing to discuss. But if you just think about this in terms of like code, and what code can do, like there’s, and now with ai, like so many people are like building apps and coming out with different things where like the code can be created for you.

Whether or not that code’s perfect and good, and whether you actually still need to hire developers is a separate conversation. But you can see the point, like, these are scalable, right? It’s like every, the whole idea of leverage is I put in one unit of time and I get out more than what I’m putting in, and now it doesn’t necessarily happen right away, but that’s, that’s the long-term goal, is you need to divorce.

Your time from your earnings. If you’re a lawyer doing billable hours, right? You are getting paid on those billable hours, which is great, but at some point you need to divorce. How much time you put in with the number of amount of revenue coming in, right? So that’s where you hire other people. That’s where you put out content and brings in more clients.

That’s where you, you know, come up with an app or something. I don’t think lawyers would really do something like that, but you can imagine like there’s a lot of different ways where you can use leverage. To divorce your time from how much you’re earning in a given amount of time. I think the moral of the story, and I, you know, you like a lot of different things that you talked about there, but one I think is really important is that as a high income earner, um, who’s not, you know, when we’re talking about, say somebody who’s making half million, 2 million bucks a year.

Um, you’re not gonna earn your way into, uh, being wealthy. That is a really tricky thing. I mean, of course, if you’re making, well, gosh, Kirk Cousins, uh, sitting on the sidelines for Atlanta Falcons yesterday making $50 million a year as a backup quarterback. Um, yeah, those kinds of things, you, of course most of us are not gonna have.

But by the time you’re done with taxes and all that. It’s extremely difficult, and I can’t tell you the number of people that I’ve talked to, just coming through our own investor group that are making a half million, million dollars a year, and they’re in their mid forties, and I ask ’em what their net worth is, and it might be 2 million bucks.

And you know, I mean, that’s a lot of money, but on the other hand, you would just think, well, gosh, how does that happen? Right? Well, think about expenses, think about taxes, et cetera. So for those of, so for, for, for that cohort. It is extraordinarily important to do a num other things in order to get, become wealthier, you know, and, and, and you bring up a lot of those points and, you know, arguably, um, you know, some of the investment decisions that we make, uh, are a big part of that.

Obviously, you’re, if you’re going to be the SMB 500, you’re gonna do fine, but you’re not gonna, you know, you’re not gonna get rich just by doing SMB 500 for the next, you know, 20 years. You’re gonna do fine. You’re not gonna, you’re not gonna get super wealthy, right? You’re not gonna get super wealthy. And so it really comes down to, you know, asymmetric bets and investing or, and or, uh, business creation side hustles.

Although, uh, I guess that’s kind of what you’re describing, but you’re not all that easy to do, you know, but it, but, but you know, that’s another issue entirely. You kind of have to figure out where you fall into that, you know, framework. Yeah, and I think there’s a bigger question here, and so when I talked about, when I wrote the Wealth Flatter, like there’s this idea of, okay, there’s these levels of wealth and what you’re talking about when you say super wealthy is what I call level five and level six.

Level five is 10 million to a hundred million. Level six is a hundred million plus. The, the level I talk about the most, I think, I mean I talk about all of them in the book, but the one I focus on the most is level four, which is one to 10 million. There’s a lot of very successful people in that level.

It’s about, you know, roughly 18% of the United States in terms of households. So there’s like, you know, millions and millions of people, like, you know, 20 million people, 20 million households in that level, if not more, right? So you think about that, there’s a lot of people in that level. They’re doing very well.

There’s also a lot of them. That’s why the Amex lounge is overrun. That’s why people go on vacations and they have to get up at 7:00 AM to go get a a, a pool chair. ’cause like there’s so many people that have making good money, you know, living a good life and everything is I what I call the upper middle class.

And they’re in this exact situation you talk about where someone’s making 500 KA year, that’s incredible money. You’re in the, you know, you’re in the, you know, 1% among households, right? Or actually at least among individuals, maybe not among households. You know, you’re making incredible money, but then after tax, okay, that’s not cut in half.

Exactly. But let’s say you make 300 k and then you have expenses and everything, you can see how, you know, maybe you’re only saving a hundred KA year, which is still great. That’s amazing. But saving a hundred KA year, you can see it’s not gonna move. It helps initially, but it’s not gonna move the needle.

It’s some point, getting past 10 million is very difficult with that. Right, right. What do you mean when you, when you talk about, uh, just keep buying, what, what is that concept? The concept there is the idea that I, I have a mantra for just keep buying, which is the continual purchase of a diverse set of income producing assets.

And so the idea is, if I only had three words to give you on how to build wealth generally, like I don’t, when I, I don’t mean extreme wealth, I don’t mean 10 million plus. So when I say just wealth, I mean get into level four, let’s say one to 10 million. I would tell people just keep buying, right? So if I only had three words I could give you, right?

Just keep purchasing assets over long haul income producing assets. And the specific mantra is the continual purchase of a diverse set of income producing assets. That idea. It disproves market timing. It disprove it shows that you can do this with diversification and you have to do it for a long time.

Right? And so that’s where I kind of, I, my first book was me kind of showing that in depth, right? It was like one specific strategy and I just kind of proved it by looking at every single data set I could find. Different asset classes, all sorts of things to show all this, um, that this is the right way to go.

Then with the wealth ladder, I zoomed out from just that one strategy and I said, Hey, let’s look at the overall framework of wealth and like, hey, that’s a great strategy by itself. But if you wanna get to Extreme Wealth as you say, or um, you know, you need to do something different and that you’re still owning them from producing assets, but you have to control those things.

That’s, that’s the difference between like owning the s and p 500 and owning your own business, right? Like you have a lot more control over your own business. So you can kind of chart your own destiny a bit more than just owning the s and p 500. Now of course, there’s more risk there, right? You could lose everything with your own business.

It’s very unlikely the s and p five hundred’s gonna go to zero, right? Yep. That’s just the way it is. No risk it, no biscuit is what they say. Uh uh. So based on your research, how should, and that should, we don’t need to be giving advice here, but talking about diversification, what does the data show on the optimal mix?

I mean, is it more. There’s a lot of discussion about this, and a lot of times you hear about avoiding concentration risk, but then you have guys like, you know, Warren Buffett and, and, and Charlie Meyer will tell you no, you don’t wanna be just purely, you know, diversified into a million different things.

You find the good things and you invest in those. So what does a data show? I mean, the, if you’re trying to compare like, buffet to the ta, like buffet’s, well, I’m not comparing Buffet, but I think, but I think from, uh, from the standpoint of. The standpoint of, of looking at, you know, I mean, what, what do we know about diversification?

What, what is the data on diversification? I mean, the idea that you should own a basket of diversified securities like that has generally outperformed, you know, trying to. You know, beat the mar. Like, if you look at like just the s and p 500, let’s just use that. You know, you look at, there’s something called the, the Spiva reports, S-P-I-V-A, and over five, 10 year periods like the market s and p 500.

So an s and p 500 index fund would’ve outperformed like, you know, 75% of active managers. These are people who, it’s their job, they are paid in, compensated to try and beat the market. They can’t, only 25% of them can do it over a long period of time. And then the further you go, the the smaller that group gets.

Right? And so 25% is like a three to five year period. You go longer and longer, and the underperformance just starts showing up because of fees, especially like, especially after fees, it gets very difficult. So my whole take with this thing is like. Someone’s like, well, yeah, I’m just gonna buy the good company.

He’s like, yeah, of course. If we could all just buy the stocks and only go up, this would be very easy. I think it’s, it’s easy to seduce yourself that that’s easier than it is. I don’t think it’s easy as people think it is, and we don’t have, we don’t have a good data set on it. ’cause all we have is the winners.

We can talk about the buffets and all the. Successful stock investors. Where’s all the people that said, I’m gonna follow a value approach and then underperformed? They’re not gonna make the news, they’re not gonna make, no one’s gonna write books about them, so you’re not gonna see it. So the truth is, we do not have a data set.

I have not seen a data set of, Hey, here’s 100 value investors. They’re all gonna follow this approach, and we’re putting the line in the sand now and this date, and then let’s just see what happens. Let’s see what happens to those 100 over the next 30 years. There was Warren Buffet and a few of his buddies, and they all did well.

That’s already a weird elite group in some sense. If you know Warren Buffet personally and you’re a value investor, you’re probably already in some sort of elite, you know, group that’s not really representative of like stock pickers as a whole. And so that’s the only, my only pushback. I’m not saying it can’t be done, I do definitely think it can be done, but I think it’s much more difficult than people think it would be.

Like we just got a bunch of kids that. At age seven and said, Hey, these are the best basketball players in the school right now. How many of those kids are gonna make it to the NBA? We don’t know. And maybe, you know, we would’ve had one LeBron James there, and he would’ve made it, but most of the kids wouldn’t have.

And I think that’s the kind of the difference, right? Just because someone shows skill at some point doesn’t mean that they’re gonna necessarily have skill for a very long time. Yeah, no, I, I think the point I’m trying to make is this, is that, you know, you’re, you’re talking about sort of elevating from the different levels on this ladder that you have, right?

And, and that, um, I don’t personally believe that only buying indexes is gonna ever get you there. I don’t think you’re, I don’t think you’re gonna get up that high. I, I think you have to take some level of risk. Now, your form of risk that you’re talking about is through equity and businesses and stuff like that.

Not everybody’s gonna be able to do that. I do think that there is probably a role for things that are a little bit. Uh, a little bit riskier, and that’s where like alternatives come in there. For example, people buying real estate, people, you know, investing in startups. I mean, in, in this kind of space where we have people who can put some amount of money at risk, gives them a real opportunity potentially to see outside gains.

What is your take on that? Um, it’s definitely true and if you look at, you know, as you move up the wealth ladder, you tend to see more ownership of individual stocks, not just like reti, not just stocks and retirement accounts, which is why I think we would think of as like the s and p 500 or an index fund, right?

Um, but overwhelmingly, and you see this even more so. People own businesses, right? And so that’s if I’m like trying to, if I look through each one of these levels, now, once again, this is a, this is a logarithmic scale, so everything’s moving by 10 x, right? Level four is one to 10 million, level five is 10 to a hundred.

Level six is a hundred plus. If you just break up wealth that way and you look like, what, what are the biggest changes from the, for example levels, you know, four to six, what are you seeing? It’s business ownership. Right. So I like Elon Musk probably has 95%. Yeah. But I’m saying like, okay, does that mean that no one’s owning stocks?

No, of course not. Does that mean no one’s owning real estate? Of course not. Right. So those are other, other changes that are happening. I just think of those three between like real estate, you know, buying individual stocks that go up a ton. And business ownership. Business ownership is the one that I think tends to dominate, at least in the data.

And I, no, and I have this in the, I agree with you. There’s no doubt in my mind that if you, if you want to. Sort of become, you know, you want to take it to the next level. You have to own it. You have to own it, own your business. You have to create an asset that you can at some point that you can sell, that can be valued at a certain amount on a multiple.

And people who are high income, W2 wage earners, which is a lot of people in this show, um, they’re just not gonna be able to do that. So that’s what I’m trying to, that’s what I’m trying to get. My head around is like, okay, so what, what practical advice can we have for these, these folks? Right? Yeah. Then the, the thing I would say for them, assuming they’re not gonna go all out on that type of thing, is, you know.

Own a diversified portfolio if you want, you can make these one-off bets in startups, alternative things like that. Of course, some of those are gonna go to zero, like expect that, like that is what happens. You’re gonna have, you know, in 10 investments, one of them may like, you know, three or five x, which is great.

You know, a couple of ’em will probably go to zero and then a couple would just return your money, right? So that’s kind of, at least that’s what the VC on average type stuff happens. It depends what you’re investing in and how much you know, if you have better expertise or things like that. Besides that, I mean, you can think about like, are there other things you can do in terms of income?

Whether that means maybe not, you don’t have to start a whole business, maybe you start a side hustle and you can do on the side, or it’s, there’s different ways of parsing out owning a business, right? Like I technically own a business. I have a full-time job. I’m a COO at a wealth management firm, right?

And so I’ve been there since before we had a billion dollars in assets. Now we’re almost at seven, right? So I’ve seen a lot of changes, you know, just structurally within the org. While I’m doing that, I’m also writing, doing content. It’s not my main thing. You know, it makes some decent money, which is nice, but it’s not like my main thing.

And so I think people can come up with something else that, you know, ends up being beer money or rent money or whatever it is, and that’s still something, you know, or your mortgage payment, whatever you wanna call it, right. So there’s different ways of attacking this problem. And I, I don’t think they all ne need to be home runs to still be helpful.

Like I’m, I would say I’ve hit like two doubles, like I’m hitting a double in in my career and I’m hitting a double in like my content life. And none of them are like home run hits. I’m not like this super, super successful person, but I have two things that are doing pretty good. And so it actually does add up to be quite nice.

So I think that’s another way of looking at it. And that’s kinda what, that’s how I approach it, just because it’s what’s worked for me. I’m not saying that’s gonna work for everyone though. Yeah, yeah. Yeah. Um, let’s talk about sort of the in general economies. Uh, you know, you’ve looked at historical data, I understand, uh, and recessions in recovery.

What lessons can we draw from, you know, some of that history for today’s environment? I think the biggest takeaway is that the market’s gonna price all the stuff in before the headlines do, and so. For example, COVID was getting worse in April, 2020, and the market was already on its way back out. Right?

It’s like the market’s like, oh, well that’s gonna happen, and that, and people just, all that information just hits the market immediately. So you’re gonna be in a, a case where, you know, the market’s already rising. It’s already moving past what the, the, the, the train wreck that’s currently happening, which is such a weird thing to say, but that’s exactly how it works.

Like real estate prices didn’t bond, I think until. 2012 in the United States after the, after the GFC, the market bottomed in in March oh nine, right? So it’s like the market was already on its way back up and re the real estate thing was still going through. So markets move a different. Different speeds.

I think real estate tends to move slower than the stock market, just in general ’cause of the liquidity issues, right? Like selling houses is not easy, you know, buying and selling an index fund or individual stocks is pretty straightforward. So I think the liquidity, and so you’re gonna see that in crypto.

You’re gonna see that in, in. Inequities, it’s gonna move a lot quicker, and that’s gonna tell you a lot more. So if you’re like, Hey, I’m just gonna see what happens and oh, if the, if things are looking worse, like that doesn’t mean that the market’s gonna get worse. The market could have already priced that in and could already be on its way back up.

And that happens so many times. So I would not say, oh, well the headlines are getting worse. If the market has to get worse, that doesn’t necessarily happen. So that’s the thing I keep in mind here. Yeah. So you’ve done a lot of research. Um, what’s the most surprising thing you’ve found, and I guess.

Something that would have changed personally, how you handle your own finances. Yeah, I think it’s this idea of once you get in, the things that get you into level four, which is one to 10 million, are very different than the things that get you out. And I can just, let’s just do a quick thought experiment.

So we’re gonna just use the, you know, you said someone’s earning 500 KA year. Let’s say they’re saving a hundred thousand after tax and, and expenses, whatever. So let’s say you just hit a million dollars in, in net worth. Let’s just assume it’s all in a portfolio just to make this thought experiment very easy, right?

You’re saving a hundred KA year. Let’s say it’s earning 5% a year after inflation. So I’d say it’s a relatively conservative, not, not too crazy of a return. Right. How long does it take you to get to 10 million, you know, with, you know, start a million, a hundred KA year? 5%. The answer’s 28 years. So that’s 28 years of you earning, let’s say $500,000 a year.

A very good income. Right. And you’re, you know, obviously you have to, you’re sacrificing ’cause you have to save a hundred KA year. So even though you’re, you might be spending a decent amount of money, you’re still saving a hundred k. It’s still, you have to do that for 30 years. That’s after you hit a million.

It could have taken you 10, 15, 20 years to get to a million as it is, right? So you can think, you start doing the math on this, you’re like, wow. Like, yeah, this, this W2 thing. It’s great and all, and you can high paid W twos great, but at some point. It stops moving the needle, right? Like when you have a, when you have a million bucks, a hundred KA year, that’s 10% changing your wealth, right?

A hundred thousand over a million, it’s 10%. By the time you have 5 million bucks, it’s 2%. Like you, you don’t move the needle anymore. And there’s nothing wrong with that. That should happen. But I think the main takeaway, the thing that that spoke to me about this when I’m writing about this, is. Do I keep my foot on the gas or do I kind of relax a little bit and enjoy all the other parts of life that aren’t money?

And I said like, maybe I don’t need to get to 10 million. This is an arbitrary figure anyways. Like I don’t need to be in the, you know, upper class. I can be fine to have an amazing life in the upper middle class. And I think what happens is a lot of people get caught in this level four, like, we’ll call it the no man’s land.

It’s not a bad place to be, but it’s just, you know, you’re making good money, but you’re really like, oh, I want to get to the next level. And like thinking through that. I think you have to realize that maybe that’s not the right decision and maybe the right decision, the rational decision is to say, you know what?

I can take a step back. I don’t need to accumulate another $5 million to live a good life. And I think that is the, that is the big unlock that needs to happen and that I think a lot of people, especially this audience. Probably are not thinking about, ’cause I wasn’t thinking about it. And so that’s what I would say to this audience.

Like, hey, a lot of you’re probably, if you’re in that range, you know, one to 10, especially if you’re like the upper, you know, over five, you probably don’t need to keep accumulating wealth. And I, and, and I think you would’ve to make a very hard sell to prove to me that you do, because I bet you don’t. And that, that just, I, trust me, I work with wealth management clients, like a lot of these people are like, oh, I’m spending.

200 KA year. It’s like you have, using that 3% rule, you’re making 500 K. Like it’s, it’s the math doesn’t math in any way where like you’re never gonna spend down your wealth. There’s just no way this could happen. And yet people keep wanting to accumulate more and I, I don’t know where that comes from.

Yeah. So is there, uh, any data on striking that balance between savings for tomorrow and living today? I don’t know if we have like, good studies on this type of stuff. Yeah, I think it’s just really a question of like. What do you really want and what are the things you’re gonna do to get there? And I think the framework, I really like Sahil Bloom in this book called The Five Types of Wealth, and he talks about all the other types of wealth besides financial I, I obviously focus on financial because I’ve been writing about it for so long.

But he is like, you’re probably chasing more financial wealth, which you’re already like at the 99th percentile on to go and give up health or to give up. Mental health or to give up, you know, relationships, social wealth like or time wealth. You’re maybe you don’t have any time ’cause everything’s being taken up by everything else.

And so what are the trade offs you’re making and are, do, do those make sense? I don’t, I don’t think there’s. Any point in getting to 99th percentile on one metric, and then you’re like in the bottom 25% on everything else, or even on a few metrics, right? I don’t think it’s, it’s worth it to have the, the bottom 25% in, in hell just to have the top 1% in wealth, in financial wealth.

I think it’s a crazy trade off, but I think people do make that trade off all the time and it’s something they’re probably overlooking. Good stuff, man. Uh, well, tell us a little bit about where we can, uh, learn more about your work. So my blogs of dollars in data.com. Um, you can find me on LinkedIn at Nick Maggiulli Instagram, Nick Maggiulli, and yeah, I have my books on Amazon Target anywhere you just search my name, you can find all my stuff.

And, but, and I also, I answer every dm so feel free to DM me on Instagram or LinkedIn and I’m happy to, um, to chat about that. Great. Thanks so much for being on the show. Appreciate you having me on Buck. You make a lot of money, but are still worried about retirement. Maybe you didn’t start earning until your thirties and now you’re trying to catch up and meanwhile you’ve got a mortgage and private school to pay for and you feel like you’re getting farther and farther behind.

Good news. If you need to catch up on retirement, check out a program put out by some of the oldest and most prestigious life insurance companies in the world. It’s called Wealth Accelerator can help you amplify your returns quickly, protect your money from creditors, and provide financial protection to your family if something happens to you.

The concepts here are used by some of the wealthiest families in the world, and there’s no reason why they can’t be used by you. Check it out for yourself by going to wealth formula banking.com. Again, that’s wealth formula banking.com. Welcome back to the show everyone. Hope you enjoyed it. Uh, again, I guess the moral of the story is no risk.

It no biscuit, uh, I can’t remember is the name. Uh, that was the, it was a old Atlanta Falcons head coach who said that. I can’t remember. He is like some guy from New Orleans, but very, very true. And, uh, but again, if, if you don’t, um, if you’re not interested in the. The biscuit, then don’t, don’t worry about the, the risk.

Um, but if you want to invest differently, start doing. So. Just a reminder, you can start investing differently by going to wealth formula.com and, and signing up for Investor Club. Uh, and, uh, we’ll see you next week. This is Buck Joffrey signing off.

Something big is happening in Washington right now, and it has the potential to reshape everything you and I do as investors.

A few weeks ago, the Trump administration attempted to remove Fed Governor Lisa Cook, only to have an appeals court block the move on legal grounds. 

At almost the same time, Stephen Miran—one of Trump’s economic advisers—was confirmed by the Senate to the Fed’s Board of Governors by a razor-thin margin. 

On one side, an attempted subtraction. On the other, a confirmed addition. All of this is happening right before a major policy meeting, and it’s not hard to see the writing on the wall.

Trump’s takeover of the Fed is not a question of if—it’s a question of when. Whether it unfolds in a matter of weeks or drags out over the next few months, the direction is set and the outcome is inevitable. 

The endgame is to bring interest rates down and, if necessary, use quantitative easing to drive bond yields even lower. That kind of policy would flood the system with liquidity, and the immediate effect would be a booming economy. Asset prices would rip higher—stocks, real estate, gold, Bitcoin—you name it. If you own assets, you’d feel wealthier almost overnight.

But of course, there’s another side to this coin. A dollar that weakens under the weight of easy money. A gap between the asset-rich and the asset-poor that grows even wider. Rising inequality, rising tensions, and perhaps a long-term cost to the credibility of the U.S. financial system.

So is this takeover of the Fed a good thing? That depends entirely on where you sit. If you’re a wage earner with no meaningful assets, it’s bad news. If you’re an investor, it’s a reminder that ignoring policy shifts like this is done at your own peril. 

The time to prepare is now, not later. Don’t wait for rates to drop before acting. History shows that buying assets in a descending rate environment has been one of the most powerful wealth-creation maneuvers in the United States. 

Think back to 2008. The Fed responded to the financial crisis with unprecedented rate cuts and waves of quantitative easing. What followed was more than a decade of explosive gains in stocks, real estate, and other assets. 

Those who bought while rates were falling built extraordinary wealth. Those who stood on the sidelines missed out.

But don’t take my word. Listen to noted economist Richard Duncan explain the dynamics of this situation in this week’s episode of Wealth Forula Podcast. 

Learn more about Richard Duncan:

richardduncaneconomics.com

Transcript

Disclaimer: This transcript was generated by AI and may not be 100% accurate. If you notice any errors or corrections, please email us at [email protected].

By devaluing the dollar by 50% against the end of the mark by 1990, the trade deficit that had come back into balance.

Welcome everybody. This is Buck Joffrey with the Wealth Formula Podcast. Coming to you from Montecito, California. Uh, today before I begin, just a reminder. Go to wealth formula.com. If you haven’t done so and you are an accredited investor, join the Accredited Investor club. Lots of things coming in there in Q4.

Lots of tax mitigation, strategy related investments, that kind of thing take advantage a hundred percent. Bonus depreciation, take advantage of discounted assets and so on. So again, wealth formula.com. Now, uh, let’s talk about today’s show. Interesting one. Um, it’s with, uh, Richard Duncan again. Uh, and, uh, he’s an interesting guy, uh, and I wanted to talk to him because something big is happening in Washington right now, as you know, and it has the potential to reshape everything you and I do as investors.

As you may know, and as I am sure you probably know, a few, a few weeks ago, Trump administration attempted to remove, uh, fed Governor Lisa Cook, only to have appeals. Courts block, uh, and, uh, uh, move block the move on legal grounds. And at almost the same time, Stephen Moran, one of Trump’s economic advisors, was confirmed by the Senate to the Fed’s Board of Governors, uh, and uh, on one side and attempted a subtraction on the other, a confirmed edition.

All of this is happening right before a major policy meeting, which by the time you hear this is going to be. Uh, concluded, which is the, uh, announcement of either a 25 or 50, uh, basis. Point cut. Uh, you tell me because I’m doing this right before that meeting, uh, Trump’s takeover of Fed is, you know, really not a question of if it’s a question of when and how, and.

Whether it unfolds in a matter of weeks or drags out over the few months, uh, the direction is set and the outcome really, in my view, is inevitable. Right? The end game. What is the end game? The end game is to bring interest rates down and if necessary, use quantitative easing to drive bond yields down as well.

And that kind of policy. What would happen? It would basically flood the system with liquidity and immediate effect would be booming. To the economy, right? Asset prices would rip higher stocks, real estate, gold, Bitcoin, you name it. If you own assets, you will feel wealthier overnight. But of course, there’s another side of this coin.

Uh, you know, a dollar that weakens under the weight of easy money, a gap between the asset rich and the asset poor that grows even wider rising inequality, rising tensions, and perhaps the long-term cost of credibility of the US financial system. So the question is. You know what, this whole takeover thing, it sounds, you know, uh, it sounds sneaky, it sounds bad, and especially on the, if you listen to mainstream television, but is it such a bad thing, the takeover of, of the Fed?

That depends entirely where you sit. If you’re a wage earner with no meaningful assets, if you’re poor, it’s bad news. If you’re an investor, it’s a reminder that ignoring policy shifts like this is done at your own peril because the time to prepare is now. Don’t wait for rates to drop before acting.

History shows that buying assets in a descending rate environment has one of the most powerful wealth creation maneuvers in the history of the United States. All you have to do is look back in 2008, the Fed responded to the financial crisis with unprecedented rate, cuts and waves of quantitative easing.

And what followed was more than a decade of explosive gains in stocks, real estate, and other assets, which basically just ended. I mean, gosh, right? So those who bought while rates were falling, built extraordinary wealth, and those who stood on the sidelines missed out. And that is playing out in real time again, in my opinion.

But don’t take my words for it. Listen to Richard Duncan. Uh, he is clearly not a pro. If you’ve listened to him in the past, he calls balls and strikes, and if anything, he’s been sort of not on board with the Trump administration, the plan, but listen to what he has to say about this. We’ll have that interview right after these messages.

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It’s a refined strategy used by some of the wealthiest families in history, and it uses century old rock solid insurance companies as its backbone. Turbocharge your investments. Visit Wealth formula banking.com. Again, that’s wealth formula banking.com. Welcome back to the show everyone. Today. My guest on Wealth Formula podcast is Richard Duncan.

He’s been on the show, uh, several times before. He is an economist, an author known for his work on the global financial system and credit dynamics. He’s the creator of Macro Watch, which is an online video newsletter analyzing economic developments and the author of several influential books, including The Dollar Crisis, the Corruption of Capitalism, and The New Depression.

Uh, how you doing there? Uh, Richard. Great buck. Thanks for having me back on. Yeah. Nice to talk to you. You’re in, uh, Thailand, right? That’s right, that’s right. Well, good to, good to uh, uh, connect. It’s a sort of an unusual time. I think my time here is now 6:00 PM and, uh, it’s what, eight 8:00 AM your time. Uh, so it’s, it’s, it’s interesting how, uh, the business ever gets done between those two countries.

But, um, anyway, um. It’s hard during this podcast with the strange hours between gear and there. Yeah, yeah, yeah. Absolutely. Well, let’s talk about some of the things that you’ve been talking about. Uh, first topic, I think, um, that you’ve been sort of, uh, talking about is Will Trump and the Fed. And, um, so you have a video where you asked that question and you say that the, the Fed independence could become, uh, be coming to an end.

Tell us what that really means. Tell us what the background is here. Well, yes. Let me do again with the background. Yeah, because we really are living in extraordinary times as far as developments in the US and the global economy go. President Trump is very serious about remaking the American economy.

When he says, make America great again, he means it. And his plan to do that is to re industrialize the United States and to do that, he has a strategy. There’s a very clear plan. In fact, this plan is laid out very clearly in a paper published by Steven Moran, who is the chairman of the Council of Economic Advisors, and who has just become the next Fed governor.

He’s now a fed governor appointed by, uh, nominated by Trump and approved by the Senate. So in this paper by Stephen Moran, he lays out a, a three step strategy on what Trump. In tends to do what Trump should do, uh, regarding tariffs. And this paper was published in November last year. So the three step strategy is first put very high tariffs on all the United States trading partners.

Second, threaten all of those trading partners, if they retaliate, threaten them, that the United States will no longer defend them militarily. And then the third step is to then convene a meeting of these intimidated allies. And pressure them into devaluing the dollar. Something like we saw at the Plaza Accord.

This would be called the Mar-a-Lago Accord. So, so actually that’s what’s been happening. This has been a very clear blueprint as to what’s going on. We put on the very high tariff step one, we’ve threatened to remove our military protection. If anybody retaliates, that’s step two. Both those things are done, and so now they’re probably working on step three, which is devaluing the dollar.

Hey, hey, can I interrupt you, Richard? In order to devalue the dollar though, isn’t that, isn’t that as much just, um, I, I, I don’t know what, uh, the other nations would. They just relative to ours, they can just go in and step and devalue the dollar, or, I mean, are, don’t, the markets sort of dictate that the markets play a role and we’ll come to that in a moment, but yeah.

In the Plaza Accord. In 1985, the US got Japan and Germany to agree to devalue to allow their currencies to appreciate by about 50% against the dollar. The dollar was devalued by 50% against the yid and the mark in order to try to bring the trade deficit back in the balance. By 1985, the trade deficit was running out of control for the first time.

This worked when by devaluing the dollar by 50% against the end of the mark by 1990, the trade deficits that had come back into balance. And these were more or less brought about by government intervention rather than market forces. Yeah, it’s, um, yeah, I guess the, the mechanics maybe beyond the, the scope of what we’re talking about, but, um, I was just curious on, on how that works.

So, yeah, so what Trump wants to do is to, as I said, re industrialize the United States, but deal. As part of that, he wants to bring down the US trade deficit, bring the trade deficit back into balance, and here is where things become very dangerous. Trade between countries had to balance where the world was on a gold standard, or even the Brett Wood system because under a gold standard, if the country had a big trade deficit with another country, it’d had to pay for that deficit by shipping its gold to the other country.

And gold was money. So if we just stay in that country would run out of gold and stop. They would have to stop buying things from other countries and trade would come back into balance. So as long as the Britain Woods system was in place, the US didn’t have a trade deficit. But soon after Britain Woods broke down in 1971, by the early 1980s, the United States started running a very large trade deficit with other countries with the rest of the world.

And in fact, this trade deficit became so large last year, it was $1.2 trillion. This became the driver of global economic growth. It created a global economic revolution. It ushered in the age of globalization. It allowed the trade surplus countries like China to grow into a superpower. And altogether the, the cumulative US trade deficit since 1980 has been about $17 trillion.

So that’s found $17 trillion off into the global economy who created very rapid global economic growth. And it’s also supported US economic growth because. By buying things from other countries with very low wages like China and Vietnam and now and Bangladesh, that’s very disinflationary. So that drove down inflation rates from the double digits in the early 1980s to very low levels before COVID struck.

And that allowed us interest rates to follow the very low levels, very low interest rates, helped the US economy. In numerous ways, and it also pushed low interest rates, allow asset prices to rise, home prices and stock prices. So that helped the US economy. Low interest rates helped the US economy, and at the same time, the countries with the trade surpluses who were accumulating dollars had to invest those dollars back into the US dollar denominated assets because when they sell things in the US they’re paid in dollars.

They take the dollars back to China or wherever they came from. They’ve gotta do something with the dollars. And what they do with them is they buy treasury bonds or they invest them in the US stock market. And so this massive inflow of foreign capital was the direct result of the trade deficit and the capital inflow pushed up bond prices and that drove down interest rates.

It also pushed up the stock market and created more and more wealth. So now the problem is we have a. Big global economic bubble that has resulted from these trade deficits. You have a big credit bubble around the world. If you bring the US trade deficit back into balance, it’s going to cut off the fuel that has allowed that bubble to form the dollars going off into the world economy as a result of the US trade deficit are the bubble fuel.

If you head off the trade deficit. Dollars stopped going overseas and they also, the capital inflows stopped coming back into the us. So you get in a situation where without the capital inflows in the us, that would mean less foreign buying of US government bonds. So less upward pressure on US bond prices, and that would mean less downward pressure.

Government bond yields. Let me interrupt you again, uh, Richard. Just ’cause um, you know, I think some people, like, you know, we, we get in these conversations and sometimes there’s some basic questions people have and, and one of them, the way you describe the trade deficit when I’m listening to that, it’s like the, the thing that comes to my mind is why do we care if we had a trade deficit, if we were benefiting from it in the first place?

Well, that’s a question for you to pose to President Trump. Well, so the, the idea, his idea then, is it not that the, the issue with the trade, the trade deficit is it’s, it’s, it’s basically robbed us of manufacturing. That’s the main, is that the main driver from President Trump? Yes. And that is, and he is right to point that out.

That is the reason that US manufacturing has been hollowed out since the 1980s. This is left behind the American middle class whose relative wellbeing has stagnated since that time. And those are the people that for President Trump, many of the people who support Trump and President Trump has said he’s going to in this de-industrialization of the United States and re industrialize the United States by putting a place very high tariffs.

So what do you see happening here? Um. Moran gets in there. Okay. Obviously that’s not control of the Fed, but I think one of the, the, another video that you had talked about, the Fed’s final days. So talk a little bit about that, if you would, because, uh, the reason it’s so important for President Trump to take over control of the Fed, which he’s on the verge of doing, is because his policies are are very inflationary.

I putting up high tariffs on all of the goods being imported in the United States. This is going to cause the inflation rate to move higher. And by trying to re industrialize the United States, that will mean more factories will be built in the US or more Americans will be working in those factories.

And this is happening at a time when the administration is also deporting very large numbers of people. So the, we have a labor shortage to start with. In the US the unemployment rate is only 4.3%, which is very near historic loads. So if you do these things in combination, it’s very likely to, the tariff will create the first round effect higher goods prices, and then when you begin re industrializing the country.

So that will create a second round effect of higher wages and higher prices, and this is going to push up the inflation rate. And at the same time, if you’ve had less capital inflow coming in from abroad, that’s also going to put upward pressure on bond prices, making it more difficult to finance The government bonds, low interest rates because there’ll be less foreign capital coming in.

So it’s very important for him to take control over monetary policy. Because if the inflation rate starts to move higher, continues to move high, the low is 2.3%. In April, the fed’s target is 2%, and last month it moved up to 2.9%. So it’s moving higher now and it’s likely continuing moving considerably higher, in my opinion.

Normally, when the inflation rate is moving higher, fed with high, the federal funds rate and push interest rates, higher policy rates. President Trump doesn’t want the interest rates to go higher. In fact, he’s been very clear that he wants interest rates to go much lower. The federal funds rate is currently about 4.33%.

He said he’d like for the federal funds rate to be much closer to 1%. So if he takes control over Federal reserve policy, monetary policy, you can have the Ford FOMC. Vote for considerably lower interest rates on the federal funds rate. And he is very close now to taking over control of the Federal Reserve.

So far, Richard, and, and maybe this just is a function of time, um, inflation ticked up a little bit. It didn’t be seem to be that dramatic ’cause. It’s simply because in your view, tariffs have not been in place long enough. Yes, I think that’s right. The tariffs have not been in place long enough. The many companies stocked up on inventories when they knew that higher tariffs would soon be in place, and they’d been buying down those inventories, but now the inventories are running out and they’re going to either have to choose between taking a hit to their profits and presumably therefore also to their share prices or passing on the higher cost of the imports to.

Consumers and at higher prices and higher inflation, and similarly bond, the bond markets actually have, you know, uh, the bond, the, the tenure’s gone down. Um, talk about what’s going on right now with the bond markets compared to what you think’s going to happen. So this is interesting because last year, the federal funds rate three times in September, November, December.

But from the time the Fed started cutting, the 10 year bond yield has actually moved higher. It’s still higher now than it was in September last year. The 10 year bond yield has been moving lower over the last couple of weeks ago. I think in anticipation, one of the fact that the Fed is now expected to cut the federal funds rate at its FOMC meeting on September 17th, I had 25 basis points.

Also by the realization that once President Trump does have complete control over the fed over US monetary policy, if he’s going to cut, he’s going to instruct the Fed to cut interest rates radically. Right. But, but how does that affect, I mean, how does that affect the bond markets, which you know, are not really under the control of Fed?

Uh, because, I mean, you know what? I was talking, I was referring to something that, that happened recently. Obviously what you were talking about with the fed, uh, fed funds rate going down, the bond market’s going up and, you know, for, for, for regular everyday business people and stuff, a lot of, a lot of the, uh, interest rate that we, that we pay is mortgages, for example, are based on the bond market more than they’re the Fed rate.

So that, that’s a problem. But this time around with the anticipation of the Fed rate being cut. The bond markets actually went down too simultaneously. And maybe because of, maybe because of the fact, this fact, but there was a significant, uh, adjustment to the labor market, uh, to the jobs market news. I think they basically showed in the last few months there was almost, what, almost, almost a million jobs, less than they, they thought I, is that the reason, do you think that the bond market reacted the way it did?

Yes, I do think that is part of the reason why the bond yields are moving lower because of the downward revisions to the J numbers. But before I really answer your question fully, let me explain what is going on with, in terms of the President gaining control over the Federal Reserve. So the Federal Reserve is made up of a Board of Governors, seven governors based in Washington, DC.

And it’s also made up of 12 regional banks. Each regional bank has a president, so they’re 12 presidents of the Federal Reserve Regional Banks. Uh, eight times a year. The Federal Open Market Committee meets to vote on interest rates and also on the size of the Fed’s balance sheet. In other words, quantitative easing or quantitative tightening.

Now, here’s the thing. The seven governors always get to vote at every FOMC meeting, but only five of the regional presidents get to vote at this meeting. So there are 12 votes in total. Five presidents. Of the seven governors. The rules are if there are four Fed governors out of seven, a simple majority, four out of seven, and most Fed governors have the power to fire.

Any or all of their Federal Reserve bank presidents, and they also then have the right to approve the replacements of those then presidents. So what this means is if President Trump can appoint four of the seven Fed Governors, or if he has influence, if they are on his side and do what he wants them to do, then he can.

In theory, fire all the Fed Federal Reserve bank presidents and appoint new ones. And the new ones, they would have five votes on the FOMC at every meeting along with the four governors that support him. So that would give them a nine to three vote in every FOMC meeting. Does he have that kind of, uh, I, I guess I I, in terms of the governors that are on there right now, does he, do we know if they’re generally pro-Trump agenda right now?

I mean, ’cause obviously you’re gonna take, they, it would require them to, to make that maneuver against the presidents. Right? Right. And we do know precisely the most recent meeting, Christopher Waller dissented and also Michelle Bowman dissented. Both of those people are interested in replacing Chairman Howe as chairman of the Federal Reserve when his term expires in May, and they are, we can say on Team Trump, they, so they, the Fed voted to hold interest rates steady, that they dissent it.

They voted to cut the interest rates in Lyme of what President Trump wants to happen. Now more very recently, the President Trump just nominated and the Senate approved. Stephen Moran to be the third Fed governor. So that’s three votes for team Trump and President Trump. Last month fired Lisa Cook and claiming that he was firing her for cause because of fraudulent mortgage applications.

Therefore, if he succeeds in firing her, then he will replace her and with a fourth fed governor, and then he will have four out of seven. Fed governors on Team Trump, and they would then have the right to fire all the federal reserve night presidents or any dare to disagree with Trump’s policy. So once he has four governors on the board, which will happen as soon as he can get rid of Lisa Trump, and he will have complete control over monetary policy.

Now, the reason they said that, bringing this conversation now back to your question about the bond market and bond yields normally. If the Fed were to cut interest rates sharply as the president wants at a time when inflation is moving higher as it is now, and as expected to continue to do this, would cause investors in the bond market to come up very alarmed because they would expect that much lower interest rates, but overheat the US economy and lead to even higher rates of inflation very quickly so they wouldn’t be willing to buy.

US government bonds at current yields because they would expect higher rates of inflation. They would demand higher interest rates on government bonds, and just for example, no one would want to buy a 10 year government bond yielding 4% if the inflation rate is 5%, something more like 7% yield. So here’s why it’s so important for the President Trump to get control over the Fed and over monetary policy.

’cause if he’s first, he wants them to slash the short term interest rates to much lower levels. That would tend to be inflationary and that would tend to push up bond yields. But when the bond yields start to rise, if the president has control over monetary policy, then he can instruct the Fed to launch another round of quantitative easing.

Right. So basically buying up the bond market and driving those, uh, interest rate, ultimately the, the yields down. That’s right. There’s no limit as to how much money that Fed can create so that if instructed to do so by the president, the Fed could begin creating dollars and using those dollars to buy government bonds.

And they could do this until the bond prices rise and the bond yields fall to any level the President desires. And I think this is the scenario that will ultimately play out here. Once President Trump asked all over this, so going back to the, the paper that Moran wrote, okay, so that effectively, that’s kind of the plan, right?

So you bring down the fed rate, uh, by getting control, you do quantitative easing to bring down, uh, bond yields, and that creates a recipe for significant growth because of low interest rates. Business, real estate across the board. So then the theory I, I presume on the, on the Trump side is we do that, we grow at an enormous rate and to hell with inflation at that point.

’cause we’re gonna be growing so fast. Is that kind of the theory then that, that, that you think that they have, uh, on, on the Trump side? I think so, and yes, the inflationary could certainly move significantly higher, but it’s not certain that the government would actually report the actual true inflation numbers because after all, the president has recently fired the, the head of the Bureau of Labor Statistics because he was unhappy with the job numbers that she released a couple months ago.

And so. Government employees are gonna be very reluctant to report any job, any inflation numbers that the present president wouldn’t approve of. So it’s not sure that the government would be reporting the true inflation numbers, but this scenario that we just outlined would create, create an extraordinary economic boom in the us and the much lower interest rates in the quantitative easing would also drive up asset prices, create a stock market.

Boom, make home prices go much higher. All the asset classes gold. Cryptos, everything would move except, and, and, and the dollar would, the dollar would weaken significantly. The dollar would crash. That’s right. And that goes back to the part of the Moran paper you cited where he was talking about essentially, um, you know, even more devaluing it relative to various currencies.

That’s right. This Moran paper had two main parts. Chapter three was about tariffs and the tariff strategy. Chapter four was titled Currencies, and it discussed various strategies to devalue the dollar. One was part of the tariff strategy. We’ve already discussed forcing our partners into a Mar-a-Lago accord and agreeing to a lower dollar.

But he also discussed unilateral approaches to devaluing the dollar. For instance, he said that the Fed could create money and buy foreign currencies. Accumulate foreign currencies and push up the value of the foreign currencies and thereby drive down the value of the dollar. This is essentially what other countries have been doing to the United States for decades, buying up dollars and accumulating foreign exchange reserves and pushing up the value of the dollar.

So this would turn the tables on them. This one approach. He also suggested the United States could impose a, a tax or a user fee on the treasury holdings. Foreign central banks. So rather than pending foreign central banks’ interest on US government bonds, as is their right, he proposed withholding some of that interest was a tax in order to encourage them to sell their treasury bonds and to reduce their dollar holdings, which would drive down the value of the dollar.

So, and he discussed the importance of the correct sequence, tariffs first, and then the currency devaluation second. Because the tariffs give the United States leverage over its trading partners. So we’ve had the tariffs. Now it looks like the dollar devaluation is the next phase. So the net result of this, from what I can tell, would be ultimately, you know, significant, uh, a significant asset bubble, right?

Like significant growth in asset prices. So. Those benefiting would be people who already owned assets. Those, um, you know, you, you have an increase in disparity wealth. Tell, tell me, tell me the big problems that you see with this. Um, you know, with this happening with this, if they get what they want, obviously they think it’s the right thing for the United States.

They think it’s what’s gonna make. America great. Again, my sense is that you don’t believe that. So tell me why many things would happen. The wealthy would become wealthier, but I think the average Americans would also benefit from higher wages. As the reindustrialization of the country takes place, they would receive higher wages and the country would be significantly re industrialized, which would be a very good thing.

We can’t depend on other countries, especially potential. In the, in the next war for our steel and to build our ships and for pharmaceuticals and all the other things, we need much less computer chips. So I think the reindustrialization in the United States is a very good idea. I think it would benefit all Americans.

Of course, the rich always benefit most in in every environment, unless it involves much higher taxes on the rich, but that’s not on the cart. So I think the Reindustrialization would be a good thing. Now the problem is, is that this would probably create such a big economic boom that would last for several years, but ultimately this boom slash credit bubble slash asset price bubble, every boom ultimately pops.

And then few down years down the road, we would probably have a new systemic financial sector crisis. The leverage would become extremely high ultimately. The US private sector would run into difficulties as it did in 2008, and it was unable to repay its mortgage obligations, and then the banks would begin to fail and cascade into a new systemic financial sector crisis.

So that’s the threat that we get a big boom and then we get a big bust that there is hope that. There is a way to avoid that, and that’s one other element of this strategy that we haven’t really discussed or hit on yet. Now, once the President gains complete control over the Fed and complete control over monetary policy and begins using quantitative easing to push down bond yields, it won’t take him very long to realize that he can also use the fed and money creation to fund his US Sovereign Wealth Fund.

As you know, president Trump created a US Sovereign Wealth Fund in February, uh, through an executive order and having the Fed create money and use it. But money to invest in new industries and new technologies on a very aggressive scale should actually induce a technological revolution in the United States that would create a, a productivity miracle and turbocharge US economic growth.

Actually restructuring the economy. If he had his US Sovereign Wealth Fund financed by the Fed on say, a trillion dollar or multi-trillion dollar scale over the coming years, then the US Sovereign Wealth Fund could do things like invest in artificial intelligence, but not only that, in developing energy capacity so that the energy is available to, for the data centers that are necessary to run the ai.

He could invest in things like developing fusion, which could ultimately, in the not too distant future, lead to much lower energy cost and invest in things like quantitative robotics, vedic engineering, biotech nanotech. And by investing in these new industries on an aggressive enough scale, it could create a long lasting economic move fueled by a new technological revolution.

And that can actually see us far a decade or two into the future if cherry down on an aggressive enough scale. So we’re looking at an additional move into state directed capitalism, which we see Trump pursue already through a number of ways, creating the US Sovereign Wealth Fund, taking a 10% equity in Intel, getting other countries to.

Agreed to give the United States money for President Trump to invest in any way he see fit, taking a golden share in the US Steel. All of those areas are clear examples that the president is interested in state directed capitalism. And if done right, this could actually be a very good thing for the United States.

This is what China has been doing for a very long time, and China’s been so successful at it. They are now a very serious threat to US national security. China is a technological superpower, and China is investing through their government war in new industries and technologies in the United States is, and we’re now neck and neck in that race for AI dominance.

Whoever develops artificial general intelligence first or super intelligence is likely to end up ruling the world. And there’s a real chance that’s going to be China. Therefore, we need to take extraordinary measures to make sure that that doesn’t happen. And this is an opportunity for us to do that.

And I believe President Trump may very well take advantage of this opportunity. It seems, this seems to be the direction that we are going. I believe that would be a good thing. All of this sounds very positive to me. Uh, what’s a downside here? I mean, you mentioned, you know, an asset bubble. Ultimately that corrects, but I mean that happens in cycles where there’s booms and busts.

I mean, what should be we be concerned about in this scenario other than a significant loss of the val? Value of the dollar? Of course, there are always many things to worry about. One is increasing income inequality. It won’t be long now before the United States has trillionaires, and we’ve already seen the political power.

That people with hundred, 200, 300, $400 billion can bring to bear on elections if we have even at where we are now. It undermines democracy and creates an oligo, oligopoly, oligarchy, and that is not good for democracy. And this would lead to even greater income inequality for for London. Also, the unprecedented aggressiveness of President Trump’s.

Maneuvers are also consolidating power in the office of president in ways that we’d never seen before that could set precedents, that establish a trend that lead to even greater consolidation of power under the executive branch in years ahead, in ways that might turn out to be very undesirable historically.

Richard, are there examples? Where Central banks have lost their independence, and you know, what we’ve seen happen in those situations. The United States had a central bank before the Fed, and it was ended all together by Andrew Jackson, I believe, in the mid 1830s. In between the mid 1930s and 1913 when the Fed arenas was created, there was no central bank and at that time, the Treasury Department.

Carried out many of the functions that the Fed now carries out. For instance, during the Civil War, and again in the 19, in the 1890s, the Treasury Department created money on large scale and used it to fight the Civil War and for other purposes in the 1890s. So that’s one example of, you could say Auto Atlantic Central Bank, losing independence, but it was destroyed, all gathered and replaced by the Treasury Department.

So, um. From a practical standpoint, fed loses its independence and the net result of what you have kind of laid out for us, ultimately being sort of devaluing of the dollar. It seems to me that when investors, if they believe that to be true, the best way to protect themselves is to own assets. Is that fair?

But yes, that’s fair. That’s right. They can own assets or they can. Sell their dollars and buy yen or buy euros. That’s another way to protect themselves. That is the purest play. If you try to become very clever, then things become quite complicated. If you expect a short dollar devaluation against the yen and the Euro, the purest way of play that is to buy the yen and the Euro.

I don’t think I’ve seen you necessarily talk about this. Um. This other issue that’s been on my mind is that, you know, in terms of artificial intelligence, you’ve, you’ve talked about sort of the, you know, that this is fundamentally gonna change the world. Whoever controls AI, controls the world. One of the things about AI is that it is almost certainly a deflationary technology.

How much, uh, where does that play a role in, in the economy? How do you, how do you think that’s gonna. Come together the next five years. Well, we’re certainly right that it would be deflationary over the longer run, but it may be inflationary in the short run in terms of driving up energy choices. For instance, the big tech companies now are investing so much in data centers.

I believe I’ve read not long ago that four or five largest US tech companies are investing. Close to $400 billion next year in ai, according to their announcements. That’s more than the European Union spends on its military in total. That just puts this into perspective, and what they require is energy, new energy sources.

The United States doesn’t have enough energy capacity currently to allow these debit data centers to give all of the energy that they need, so we’re likely to see. Energy prices, electricity prices bit higher. We’re also likely to see a great deal of construction, of new types of energy production. Both those things, along with the investment into AI by these big companies, could all push high prices higher.

The near term, and China, for example, has been very clever since 2000. In 2000, the US had about three times as much electricity generating capacity as China does. China has expanded its electricity capacity by eight times since then, and it now has two and a half times as much electricity generating capacity as the United States does.

And according to all reports, they’re developing new nuclear facilities, nuclear power plants very aggressively, whereas the United States has not done that for decades. So we’re really behind the curve in terms of having the. Electricity generating capacity that we need to compete with China and that’s going to have to be ramped up or we’re going to lose this AI war.

And that’s going to put upward pressure on a lot of different choices. You know, you talk a lot about tracking credit. Uh, that’s a big part of the way you see the, uh, financial world. So what are some of the key signals you’re watching right now that could show us where this is headed? I always watch the total credit of the us.

You can say total credit is the flip side of total debt. One person’s credit is another person’s debt. So the easiest way to measure total credit is by measuring total debt. The data is more available, and this means the debt not only of the US government, but also the US households and corporations, Annie Mae and Freddie Mac, and the financial sector.

So the the total credit number. First went through $1 trillion in 1960, not 64, and now it’s something like $150 trillion approaching. I’m sorry, I haven’t looked at the number recently, but it’s just absolutely exploded. Well, sorry. It’s much closer to a hundred trillion dollars last year, so now it’s about $105 trillion moving toward 10 trillion.

So it’s been this critic growth that exploded once dollars ceased to be backed by gold that unleashed the amount of credit that could be created in the US and with the world. And this credit explosion has has fueled economic growth globally. I always say that capitalism, which was driven by saving and investment, has been replaced by what I call creditism.

Our current economic system is driven by credit creation. Consumption. So credit growth is absolutely essential Economic growth, and this explosion of credit is the reason that the world looks the way it does. Now, when I look out my window here in Bangkok, I can see hundreds of skyscrapers that were not there 20 years ago.

And these are the direct result of this new economic system that’s involved an explosion of credit globally, and that’s created an enormous wealth boom. Most recent data for wealth in the United States showed that the total wealth in the United States household wealth, so this is all of the assets of all of the Americans, minus all of their debts.

It increased by $9 trillion during the second quarter alone, and it’s currently, the total number now is $176 trillion of wealth in the United States, $60 trillion. In the last five and half years, it’s up 50% in the last five and a half years. Lemme repeat that. It’s up $59 trillion. Total US government debt is 35, let’s say 35, 30 $7 trillion depending on how you count it, but this is practically enough to pay off all the US government debt twice over.

This is the creation of wealth in just the last five and a half years. So there’s an explosion of wealth. The problem here is that if you compare the level of wealth to the level of income, that gives you a ratio, the wealth to income ratio. So this is household sector wealth, which is now $176 trillion.

If you could compare that to disposable personal income, this ratio is now something like seven 80%, which is much higher than it’s ever been before. The average going back to 1950 has been. Five 80%. Now it’s seven 80%. The only other times it’s become significant. The above its long-term average was during the.com bubble in 2000 and during the property bubble in 2008.

Then it got up to somewhere roughly around 650. So now this wealth to income ratio is way out of line already suggesting that. The problem with this is if income is not high enough. It’s very difficult to support the higher wealth levels ’cause people need to have income in order to be able to pay the interest on their mortgages.

For instance, if home prices are extremely high and income is in rising, but income is flat, it doesn’t take long before people no longer have enough income to be capable of tying the interest on their mortgage debt. And then attend policy correction. Is that, is that a marker of, of, uh, income disparity as well?

Because you’re, you’re measuring the full wealth of the United States versus the, I guess, the average income, right? Or not average, but the income. So, so, so a higher ratio would indicate a higher dis, uh, wealth dis or, um, income disparity. Is that That’s right. And that’s another, that’s another narrative about great income inequality because.

Wealth is more equally sprint and more people have moral income to be able to buy assets and buy them on an affordable and sustainable way. Anything else that you think we ought to know right now about what’s going on with this particular topic? No, I think that’s the big picture. This is truly revolutionary because what we’re talking about is changing the way that the global economy works.

The main driver of the global economy has been the US trade deficit. Now the objective of the tropical administration is to eliminate that trade deficit and to re industrialize the United States. This is a very big experiment and to make this work, the president is pulling out all the stops to take over control over the Fed and US monetary policy.

And if he does, then perhaps he can pull this off in terms of. Using the Fed to invest in the US Sovereign Wealth Fund and stimulating US economic growth, creating a technological revolution, a long lasting economic prosperity. But it’s a very big experiment. There’s real risk, but this global bubble that has developed under criticism could implode with the catastrophic conses.

Yeah. Richard, uh, it’s been a pleasure as always. The, the, um, newsletter, the video newsletter that you do is called Macro Watch. Can you tell us a little bit about that? Yes, thanks. I started Macro Watch 12 years ago. Every couple of weeks I upload a new video discussing something important happening in the global economy, such as we’ve been discussing today, and how less likely to impact asset prices.

These videos tend to be 20 or 30 minutes long and contain 30 to 15 charts that can be downloaded. So if, if your listeners are interested. They can find Macro Watch on my website, which is Richard Duncan economics.com. That’s Richard Duncan economics.com and I’d like to offer them a discount code that will give them a 50% discount.

If they would like to subscribe to Macro Watch, it’s a go to the website and hit the subscribe button. They’ll be prompted to put in a discount coupon code if they’ll use the code formula, they can subscribe at a 50% discount. So I hope they will check that out and at the very least while they’re there, they can sign up for my freed lock.

Fantastic. Richard, it’s always a pleasure. Thank you so much for your time and um, this conversation. Thank you, BAK. I look forward to the next time you make a lot of money, but are still worried about retirement. Maybe you didn’t start earning until you’re thirties and now you’re trying to catch up and meanwhile you’ve got a mortgage and private school to pay for and you feel like you’re getting farther and farther behind.

Good news. If you need to catch up on retirement, check out a program put out by some of the oldest and most prestigious life insurance companies in the world. It’s called Wealth Accelerator can help you amplify your returns quickly, protect your money from creditors, and provide financial protection to your family if something happens to you.

The concepts here are used by some of the wealthiest families in the world, and there’s no reason why they can’t be used by you. Check it out for yourself by going to wealth formula banking.com. Again, that’s wealth formula banking.com. Welcome back to the show everyone. Hope you enjoyed it and the moral of the story.

Buy, buy, buy, buy assets, and don’t sit around in cash because as Robert Kiosaki says, savers are losers money. Uh. Dollars are going to, uh, not be worth nearly as much as they are right now in just a matter of few years. So, uh, get off the sidelines. You have a descending rate environment. Do something if you want to join our Credit Investor club, uh, get exposure to some deals there at wealthformula.com.

That’s it for me this week on Wealth Formula Podcast. This is Buck Joffrey signing off.

When we think about investing, our minds usually go straight to stocks, bonds, and real estate. But some of the best opportunities come when you stop thinking of investing as something separate from your everyday life.

What do I mean by this? A lot of the things we buy are treated as expenses when they could be investments. You might wear a watch or jewelry simply because you like them, but you avoid spending too much because it feels frivolous. 

Yet what’s better—paying $250 for a decent watch that will be worthless in 10 years, or $5,000 for a Rolex that could be worth twice as much over the same period?

The same idea applies to cars and even furniture. I have a good friend who lives by this philosophy. For decades, he’s chosen to invest in the finer things rather than the ordinary, and it has become a cornerstone of his personal investment strategy.

It’s about thinking differently—turning what most people see as expenses into assets.

Art falls into that same category. I’m not a huge art guy myself. Sometimes I’ll buy a piece off the street because I’ve never thought of art as an investment. Yet for centuries, people have purchased art for its beauty, cultural value, and emotional impact—and often made a financial killing in the process.

Today, art is recognized as a legitimate asset class—something that not only enriches your life on the wall but also diversifies and strengthens your portfolio.

This week on Wealth Formula Podcast, we’re going to explore how fine art has evolved into an investment category in its own right, and how you might think about incorporating it into your wealth strategy.

Learn more about Philip Hoffman and The Fine Art Group:

www.fineartgroup.com

Transcript

Disclaimer: This transcript was generated by AI and may not be 100% accurate. If you notice any errors or corrections, please email us at [email protected].

 If you donate a hundred million dollars of art, you can probably get a tax rebate for the full amount of the donation.

Welcome, everybody. This is Buck Joffrey with the Wealth Formula Podcast. Coming to you from Montecito, California. Uh, today before we begin, I wanna remind you again, there’s, um, a website called wealth formula.com that you should check out. Um, one of the things on there is, uh, the ability to sign up for our accredited investor club now really do, um, suggest you check it out if you are an accredit investor and potentially get onboarded, uh, with our team.

Uh, because as we enter into this fourth quarter here, we have a number of, uh, potentially interesting opportunities, um, that involve significant tax, uh, tax mitigating type investments. Usually using depreciation, whether that’s, uh, related to, you know, apartment buildings, sometimes in commercial aircraft, things like that.

But if you are an accredit investor, I think you should at least get onboarded so that you can check out the opportunities that are out there that are coming your way. This is, of course, a private group, so that. Um, you will not get access to these, uh, opportunities unless you are part of investor clubs.

So go to wealth formula.com and sign up for our credit investor club if you, uh, if you are one. Uh, let’s talk today a little bit about a shift, uh, in thinking. Uh, you know, we, when we think about investing, you know, of course we’re usually going straight to. Whatever it is that we’re typically thinking about, whether that’s real estate, stocks, bonds, whatever.

But some of the best opportunities come when you stop thinking about investing as something separate from your everyday life and you start thinking about the things that are in your everyday life. So what do I mean by all of this? Well, a lot of things, uh, we buy, um, are treated as expenses. When if you kind of shift your mindset a little bit, they could be thought of as investments rather than expenses.

So here’s an example that’s kind of obvious, right? Many of you wear watches, many of you wear jewelry because you liked them, but you might also say to yourself, well, I like them, but I’m not gonna spend that much on it. Otherwise, it’d be frivolous. So. You, maybe you buy a, a nice watch for 250 bucks. Um, but here’s the thing, what happens, uh, with a watch that’s probably 250 bucks that you bought in the mall.

It’s probably gonna be worthless in about 10 years. Now, what if you actually paid like five grand for, you know, a Rolex? I might pay a little bit more than that, but let’s say you paid $5,000 for a Rolex or some other brand that has notoriously increased in value, that’s really hard to get your hands on.

Um, well, in 10 years, that $5,000 Rolex or that $10,000 Rolex or whatever, it, it’s probably gonna be worth more than when you bought it. At some point it will, if you look at the historical numbers on watches, for example, and various types of jewelry. That’s just what happens when you buy the really nice stuff.

The same idea applies to cars. Of course, you know, those of you who are car buffs, you know, that, um, you know, uh, you may, you may not, uh, you may not be looking for the most, uh, reliable whatever car you may be looking for something that you really want to drive that’s, uh, kind of a classic car that you know is gonna go up in value.

But you can even get that in things like furniture. I have a, I have a friend who lives by this philosophy and he’s. You know, for decades, he’s chosen to invest in the finer things, uh, rather than the ordinary, and has become, um, really a cornerstone of his personal investment strategy in some, you know, so it’s really about thinking differently, turning what most people see as expenses into assets.

So, you know, this particular interview we’re gonna do today is about art. Art falls into that same category, you know, especially for those of you who love art. I’m not a huge art guy myself. Okay. Sometimes I’ll buy a piece off the street because I’ve never, um, because I like it, you know? But I’ve never really thought of as an investment, and maybe this is not an area that I love enough to make part of my investments, right?

But some of, some of you will. Um, you know, I mean, for centuries people have purchased art for beauty, cultural value and emotional impact, and then. As a side effect of that, they’ve often made, uh, they’ve made financial killings in the process. So, you know, today, um, art is recognized as a legitimate asset class, something that.

Not only can enrich your life on the wall, but also diversifies and strengthens your portfolio. So that’s what we’re gonna talk about on this week’s, uh, wealth Formula podcast. We’re gonna explore how fine art has evolved into an investment category in its own right and how you might, uh, think about incorporating it into your personal wealth strategy.

We’ll have that interview right after these messages. Wealth Formula banking is an ingenious concept powered by whole life insurance, but instead of acting just as a safety net, the strategy supercharges your investments. First, you create a personal financial reservoir that grows at a compounding interest rate.

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Visit Wealth formula banking.com. Again, that’s wealth formula banking.com. Welcome back to the show everyone. Today my guest on Well, formula Podcast is Philip Hoffman. He’s the founder and chairman of the Fine Art Group, a global leader in art investment advisory and finance. Philip spent years as an executive at Christie’s before pioneering the first art investment fund, effectively creating a new asset class for investors.

And today the fine art group oversees more than 20 billion in, um, advised assets across 28 countries. Philip, welcome to program. Lovely to be here. Welcome from Sunny Lee, the Alps. Very nice. It’s, uh, very appropriate, I guess, for the art world to be coming from some nice places like that. Um, well, let’s, let’s get right into it.

Uh, you know, you, you started, uh, uh, at Christie’s, uh, and, uh. Then ended up, um, getting this situation in place where high income professionals can start thinking about, uh, art as an investment. What, tell us the story. What, how, how did that happen? So, I got into the art world completely by accident. I trained at KPM.

And as a CPA and then by accident, got asked to be CFO of Christie’s when I was 27. I was the youngest board director by about 20 years. Uh, I had no interest in joining Christie’s ’cause I thought he was a antiquated company selling, uh, with, with old fashioned people selling Rembrandts a little did I know that there was one and a half thousand staff involved that, um, they were trying to sell Basquiat and.

Picassos and Renoirs and, and, and everything from colored Damons to vintage motorcars. So it was a fascinating business to join when you are 27. And, uh, but I didn’t wanna be CFO, I wanted to actually get my hands dirty and find out what the business is all about. And that was my first exploit, was to meet a client who had bought two pictures, one a can leto for about 50,000 pounds and a.

Monet for around the same amount in 1976, and we went to the warehouse to look at it with my experts, and we recognized both were genuine and both, uh uh, what is it, 30 years later were worth. Between one and a half and 3 million each. So I suddenly tried to work out the maths and worked out, Hey, is this a good investment?

And, uh, it looked like a staggering investment and better than real estate. And then I asked a few more questions of that particular client and he said, oh, I bought a prince by a very famous artist called Domie for about, um, 10 cents a print. And I said, what are they now worth? And this was, uh. 30 years later, 35 years later, worth a thousand dollars a print.

So that’s a good multiple. And I suddenly had the idea that art was more than just fun, that it was investible. Um, the challenge is understanding what is good art, what is bad art, what is risky art? Outed by the art, uh, and I’ll give you some insights as we go. Yeah. Um, I mean, and in those, those, uh, those anecdotes are, are obviously very encouraging for people who are, uh, interested in, in, in investing in stocks.

But when you look at the big picture of art, and I don’t know exactly how you, you come up with these indices per se, but how has art performed historically compared to stocks or real estate? So I would say that art has probably underperformed in general against the s and p 500. So in broad outline, uh, you would be better off buying the s and p 500 as a, as an investment than buying art.

But art has the added plus. That there are in the US significant tax advantages over stocks. So if you look at most of the major families, they have donated their art collections to major museums. And of course there’s a huge tax benefit when you, if you donate a hundred million dollars of art. You can probably get a tax rebate for the full amount of the donation.

Uh, so suddenly not only do you get the return on the art, but you get the tax, uh, refund effectively on your other income as an offset. There are not many countries that offer that attractive term other than the us They’re probably half a dozen countries like that. But, but so in, in the US it’s particularly attractive.

And then if you are clever and you have the right advisors, yes. There are times when you can double your money. You can make, you know, my, my view is you can make 10% per year return if you are clever and well-advised. If you are badly advised or dunno what you’re doing, you could probably lose 10% per year on your investment.

So that’s why, uh. I, I think that art is a particularly niche investment and it’s gotta be well understood and well advised. And the fine group who’ve been in this space for nearly uh, 30 years, and I’ve been in the business 35 years, have advised probably for 50 of the Forbes 500 and, uh, work with some of the top investment banks in the us and that’s because we’ve.

Seen how to do it, and we’ve seen how not to do it. I’ll give you an example. So one of my friends, he rang me up. I was doing a presentation with one of the biggest family offices in America. They said, look, let’s get you on a, on a video with our top family friends. And one of the friends was watching my podcast and I went through the 20 do’s and don’ts of buying art, and he was listening to it and he rang me a couple of weeks later and he said, Philip, your talk resonated with me.

And I said, why is that? He said. I bought a painting by an artist called PORs and I bought it in Los Angeles, um, over in California from a great dealer. And I got it shipped to my house in Georgia, uh, and it had a cost of $250,000. And he said when UPS delivered it, uh, it arrived on my front lawn. I was away for a week’s holiday, so it was left on the front lawn, it rained the rain d um, completely destroyed the crate and destroyed the artwork inside it.

When I rang the gallery and said, Hey, um, once the insurance on this and am I gonna get my money back? They said. You didn’t insure with us, you insured through UPS rang UPS, and they said you only insured the crate and the packaging, so we can reverse you $250, not $250,000. So that client said, Philip, next time round, I need the fine art group to help me get it right.

And. And I, I give you one other story of how to mess it up. Uh, one of my, one of my friends had a a a $1,000,005 Damien Hurst Meds sink Cabinets. It’s a sort of meter and a half long meds sink cabinet with lots of bottles in it, all displayed in random rows. And Damien Hurst that auction for about 1.5 million, about 10 years ago.

And he hung it. He hung it behind his desk in his office and uh, he moved offices and he said to a shipping company, can you get it moved for me? Uh, and they said, yeah, that’ll be $4,000 to move it. And he said, I’m not paying $4,000 to move this 200 yards from my old office to my new office. He said, I’m gonna get Burt, my driver to do it for me.

Of course Bert said, look, I’ll get it done now. And he said, no, no, no. It’s a valuable item. Do it carefully, do it slowly. And, and, and, you know, take your time. He came back from lunch and Bert was standing at the front entrance of the new offices in the Gerkin in London, and he said, uh, governor, the uh. The Damien Hurst medicine cabinet looks better than ever.

And he said, well, it looked pretty amazing in my office before. What do you mean it looked better? He said, come and have a look. And he went up and bur the driver, not only, uh, reorganized every single bottle into sending order, but got rid of the empties, threw them away. So this was not. Damien Hurst medicine cabinet, but bur the driver’s medicine cabinet went from worth one and a half million dollars to about $5.

Uh, luckily they had a photo and they kept it. So the do’s and don’ts of buying and investing are, are, are hundreds of stories of what not to do, and probably 10 lessons of what to do. So, uh, we’ve been talking about some, you know, very expensive art and for, you know. High net worth individuals we’re not necessarily ultra high net worth individuals.

They may be thinking, well, gosh, I’m not gonna, I’m not gonna put a million dollars, um, in one piece of art. And what kind of, you know, that kind of risk. So what are some of the ways that, you know, if you’ve got money, but you don’t have millions to spend on art, what are, what are some of the main ways to invest, uh, uh, without buying, uh, you know, a Picasso outright?

So you can, there are, there are options to buy, uh, but like a horse, you buy a syndicate in pictures and there are one or two vehicles that offer that in the United States. And I warned clients, um, on that front to look at the, uh, the, the critical factor, which is fees, fees and fees. Um, and when you’re buying a stock and you spend, you buy a million dollars of stock or a hundred thousand dollars of stock, the fees are maybe a hundred dollars, $200, $500 when you’re buying art.

Some of these products charge somewhere between, uh. For every a hundred thousand, they’re charging somewhere between 20 and $40,000 in fees over a 10 year period. So stay clear of those, those funds and products that charge huge fees. ’cause you’ll never recover that 20 to 40% cost uplift. Um, now. My recommendation is there are certain artists I think, that are super interesting to buy in the secondary market.

So what I mean by that is buying at auction bought or buying privately artists that are well known that have perhaps come down in price quite considerably. And I could name you 10 or 20 artists. Super interesting right now that were maybe a hundred thousand dollars, $200,000 now down to $60,000 and. I would say those are gonna, we’re gonna see those coming back with a vengeance over the next three to five years.

But there are other artists, so going into a gallery and just sort of picking an artist you like and somebody saying, look, I’ll get you a 20% discount. That’s a meaningless, meaningless thing. I mean, uh, so the key is. Is there art to buy at $10,000 that you can make a big profit on? Probably not. Is there art to buy at a hundred thousand dollars to $200,000?

Definitely, yes. So my, my entry point would be somewhere in the 60 to a hundred thousand dollars level, maybe a bit lower, but not at the $10,000 level, and I would put. If you’ve got good advisors, like the Fine Art Group, they’re probably, they’re probably 10 in 10 or 15 in the world. Remember, there are about 4,000 people who call themselves ARS Advisors.

And, and probably most of those have done about a year, about as much education as you have done. Um, but they just put the label on the back of their envelope saying Art Advisor, because they walked into Sotheby’s and spent a, did a three month course there, or Christie’s or something. But you know what?

What, what somebody like the fine art group brings is a hundred people with average of 20 to 30 years of expertise each. And that type of information is critical in understanding before you buy. So critical in buying art is understanding the fees, understanding the margins. Um, buying an auction is not always the best thing to do because the cost of buying an auction is typically 20 to 30%.

And unless you are buying something that’s deeply discounted where there’s a real opportunity and we think the artist is gonna get much stronger over the next five years, you’re better to buy privately where no one knows what you paid for it. Because everything that’s sold at auction is then publicly available knowledge.

And if I wanna buy, if you buy a. Um, a Picasso work on paper for $50,000 and I see it. You bought it at Christie’s. Uh, everybody will know that you bought it at Christie’s. Everybody know you bought it for $50,000. So anyone who’s buying it off, you would say, Hey, you bought that for $50,000. Why should I pay you $250,000 for it?

You’re joking, I’ll pay you 55,000. Whereas if they dunno what you pay for it privately, uh, they dunno where to stock. Yeah. Um. You know, you mentioned how there’s some art right now that is, um, at a discount. I’m cur, I’m curious how art moves. Does it, does it typically. So moving independently based on what’s in vogue or you know, how do you, how do you determine that something is undervalued and that it will have greater value later?

So there are certain artists that will. Stick around for the next, uh, 150, 200 years. There are certain artists who will stick around for the next 30 years. There are certain artists who will stick around for the next three years, and there are a lot of artists who will stick around for the next three months.

So it’s differentiating. There are probably a million artists that will stick around for three months and there are probably. 2000 artists that will stick around for the next, uh, a hundred years. And then of those 200, of those thousand or 2000 artists, um, there are some on the periphery, but you’ve really gotta focus in and avoid.

Uh, avoid an awful lot of the art world. And then if you look at the long term trend, you’re not gonna make money in general in one year. You, this art is not the market where you buy something for $50,000 and sell it a month later for $65,000. It’s typically you buy it for 50,000, you hold onto it for three, four years, and if you know what you’re doing and you’ve got the right team, you might be selling it for 75 and maybe even a hundred thousand dollars.

You’re never gonna get is really, really rare. It is one in one in 10,000 times you’re gonna get five times your money or 10 times your money. So this sort of theory that you bought something for $10,000, you’re gonna sell it for $150,000. It is extremely rare and very few professionals even then get it right.

So, um, many families have put a sort of 5% of their wealth into art. A, because they enjoy it. B, because they’re well advised, and trust me, lots of people say, well, I bought this, I bought that. There’s always a very smart advisor behind all these big families who said. Who do all the homework and give you the risks, the rewards, the upside, the downside, I, when we do a due Dili for every work of art that we buy for our clients, we do like a 20 page due diligence document.

A bit like analyzing a company. So when you go and buy. If you go and buy a stock, if you put $500,000 into a stock, you’ve done all your homework, you’ve looked at the analyst reports, you’ve looked at the cash flows, you looked at the, uh, what the market reading is and, and, and, and what you think the balance sheet’s like, and you get advice as to help go through it.

When people buy art. 90% of the world who buy art do it in about 25 minutes, right? They go in, they spend a hundred thousand, 200,000, 25 minutes. They like the look of the picture. The dealer tells them it’s 25% discount, that it’s a great deal. Best opportunity for lifetime. The. Boom, the deal’s done. Instead of a hundred thousand, they buy for 75,000.

And then they get annoyed when we come in from the fine art group and say, oh, you could have bought that for $25,000 somewhere else. Um, so we try and do that homework for our clients, give them all the information and give them the. Terrain. So for instance, if the artist is coming up for big shows in museums, that’s a plus.

That’s gonna help the artist succeed if the artist has been bought by major collectors. The right sort of collectors, like. I don’t know. The biggest collector in, in California, the main collector in Paris, the main, the main museums in London or New York, that’s gonna massively help. So if a young artist gets picked up by the Tate in London, or by the Whitney or by the Guggenheim, that’s gonna have a big impact.

And if there’s gonna be a big show of an artist, so let’s say you own an Ed Roche, you bought Ned Rousche from Gian or one of the galleries, uh. A, a, a few years ago, and if you hear that there’s gonna be a big show at, um, the Guggenheim or in, in Abu Dhabi or wherever, that’ll have a big knock on impact on the pricing of that art upwards.

So, so, and sometimes the death of an artist has an impact. So there are about 10 or 20 things that matter. One of the most important is, is it Right? There are a lot of fakes out there. So I see, I see one fake every day. And that’s just distilled down from what my company sees. So we probably look at a few billion dollars of fakes out there.

So there are certain artists that easily faked, certain artists are not. So that’s number one. Number two, buy your art from a reputable place, just because it’s too good to be true. It probably is too good. Too good to be true. Again, it costs you nothing to get, it costs you very little or nick to nothing to get some advice.

Um, but without advice, you’re spreading dangerously. So is it genuine? Is it in original condition? So a lot of pictures have been robbed or been damaged or being in the, in the light and therefore the paint drops off or being. Or had water damage or fire damage, and suddenly the value of that impact can knock a picture from a hundred thousand dollars down to $20,000.

I mean, I saw a picture by a major major artist called Can Leto from the 1740s. It looked fantastic. When you looked at it, it should have been worth 3 million uh dollars. But when you look close up and put an ultraviolet light over it, you realize that most of it had been touched up in the last 20 years, and it was probably worth.

250,000. So 10% of what it, what, what it would be worth if it was in perfect condition. So there are, there’s a checklist of items that you’ve gotta go through. Then you, then, my recommendation is you buy for a reputable gallery or, or get a reputable advisor to help you. Don’t buy at these sort of remote auctions where they tell you this, Andy Warhol will give you a certificate with this, and it’s going at at 20% of what it would make at the big auctions in New York because one of my clients spent a million dollars on 10 works that should have been.

Worth $10 million and they’re all fake. So he bought a million dollars of fakes. So rather than getting a discount of 90%, he lost a hundred percent of his million. Um, so then he brought in the professionals to help advise it. Um, when you think about art in general and, and prices going up and prices going down, do the markets in art as, as a general rule, track other economic cycles, other markets, or do they tend to be, uh, uncorrelated?

So art. Art in general has shown a steady upward trajectory. If you bought the index of the top thousand artists, you’d probably find probably a, a circa 8% compound return. Pretty, pretty reasonable. Um, but that’s over a, you know, you’ve got hold over a 10, 20 year period and that assumes very little transaction costs.

Um, but, uh. Interest rates have a big impact on art. So high right now. Interest rates are, yeah, we’re looking at sort of, uh, the, the, the, the, the bank, the rates are 5% to 10% to borrow money, and that’s probably too high to give a boom to art. So when interest rates were close to zero and people were borrow at two.

That really kicked art off big time. And we think the, when interest rates start coming down, now, maybe that’s not gonna happen in 2025, who knows? Um, but if they start coming down from the four to 5% level down to the two, three, I think we’ll see a. 10 to 20% uplift in the price of art. But so long as interest rates stay heavy, uh, I think art will have a tough time over the next few years.

So you mentioned, um, I guess for somebody who’s already diversified, um, the slice of portfolio that makes sense for art. Can you talk a little bit more about that? Yeah. I would say that if you’ve got, again, good advice. And you’ve got a big enough portfolio. So I would say, you know, really. You need a portfolio of about $5 million, and I would put probably 250 to $500,000 of that into art.

So I’d put five to 10% of your portfolio. Now, if you are richer, let’s say you’ve got a hundred million dollars, I would say you could take 10 to 15% of your portfolio and put into art because there are two. There were two or three aspects. One is. In America, you’ve got a huge tax advantage if you gift it to a museum.

Um, secondly, you’ve got a, um, huge enjoyment factor. You can hang the pictures on your wall, but beware there are, uh, state taxes. If you buy a picture, uh, ad auction, let’s say in. Uh, tax free in Switzerland or in in UK and ship it out to the us. Uh, you’re gonna have to pay, uh, sales tax when you bring it into your state, which could be, you know, six, between zero and 10% so that that has a knock on effect.

And in Europe there are taxes that can go anywhere between five and 20% when you hang it on your wall. So quite a lot of investors put. A high value art into warehouses and they don’t actually hang it on the wall, and sometimes they put a copy on their wall so that they can enjoy it and know that they own it.

Um, the, the negative side of art is that you can’t really split it up. I, if you’ve got three kids and one work of art, it’s rather unfair to say, well, that, that one work of art goes to my eldest son, or my youngest son, and the others get nothing. So quite often what happens is clients with big collections.

Maybe they have 20 pictures worth a hundred thousand dollars each, and then they have one picture worth 2 million because they bought a basia. You know, I had a client who bought a Basia. Uh, 25 years ago for 250,000 today, that’s probably worth 20 million. Um, and that’s disproportionate value to his, to his, um, rest of his art collection.

So what he wants to do is he’s gonna get us to sell that work, um, realize the 25 million, redeploy some of it into, uh, other artworks and give some of that to his kids. So, um. Uh, but my view is that I would allocate at the bottom end 5% at the top end 15%. And if you’re very wealthy, plants in the billions of dollars sometimes put 30% of their wealth into our, because their, their disposable assets are so enormous that are starts taking a major feature.

Um, but I would say don’t buy art below $50,000. And, um, don’t buy art if you are very, very rich, um, you know, stick in the, don’t go much above 10 million or if you are super rich, then there’s the, what I would call the mega game, which is the sort of 80 million, a hundred million dollars plus. So there’s a, there was a big, um.

Middle Eastern country that invested circa uh, $30 billion in art over the last 10 years. And that collection is probably worth 300 million, 300 billion now it’s probably gone up 10 times. ’cause they bought discreetly at the very, very top end of the market. The rarest that the rep. But it’s, uh, it’s not an easy, you know, it’s, it’s, it’s a complicated thing and.

You know, it’s not always about art. You could buy vintage motor colors. You could buy wine, you can buy, um, jewelry. You know, some of our clients collect Cartier jewelry. Again, if you’re gonna buy jewelry. Be careful. A, is it genuine? So you’ve really gotta have the right experts on your side. And B, if you’re gonna buy jewelry, buy signed pieces, buy the big names, car Shave Van Cleef, perhaps graph, um, and, and just avoid the unbranded jewelry.

That looks great because that’s done really badly. And the Cartier pieces from the 1920s and the 1930s and later. Have done incredibly well. So you might have bought a Cartier piece for a hundred thousand 20 years ago. It might be worth. 1 million now. Um, so there are other avenues of buying. Right now.

Wines come down by 20 to 40%. Vintage cars come down by 20 to 40%. Uh, some of them, although some of the Ferrari’s have held their value. Uh, and, um, you know, some of the, some of. Uh, Picassos or Ed Roches, Bridget Riley’s, these big name artists, they’re probably off by 20, 25%. Uh, and that’s why I think now is the best time I’ve seen in the last 25 years to buy art.

If you’ve got, if you are cash and you’ve got the right advisors. So I told. My richest clients, my less rich clients, that now is the time to research, get comfortable, allocate a portfolio, and look at buying art. Because some, even there, there’ve been some artists that were 40,000, they went up to 200,000, real speculative, sort of like penny stocks and they come back down to 40,000.

Uh, so there’s a rollercoaster in the young contemporary, uh, some interesting, some stay away. How liquid are these markets? Obviously, if you are putting in, you know, 10% of your, uh, portfolio, um, the event that you need to get out quickly, I mean, how, how liquid are the markets? You cannot get out quickly.

Okay. So stocks, you can do a sell and get out in 20 minutes. Um, art, my guess is the fastest you could get out is probably a. A month, 30 days, and the slowest is three years. So 30 days to three years. Uh, on average. My instinct is if you buy now, um, you’ve gotta hold for three years, three to four years, and you could probably get out.

There’s a chance right now that you could double your money in a three to five year period because there’s so many great artists that have come off in price and there is an opportunity. Um, but if you have to, if you bought today and you suddenly said, no, I need the cash. I need to get out, you can. You can, there’s gonna be a, a, a discount for, for, for getting, getting out of it.

So anybody who needs that liquidity, don’t put it into art. You’ve gotta put this money aside for three to 10 years and, and, and as look at it like that and don’t look at it as a one year investment. It’s very, very rare that you turn the money around in a year, if ever. So, uh, tell us a little bit more about how your company works and you know, how people could potentially.

Reach out to you and, um, you know, so our company’s called the Fine Art Group, www.fineartgroup.com. I run it for, uh, 26 years. I’ve been in the art market 35 years. Uh, there’s close to a hundred people involved in our business worldwide. So we’ve got offices all over the US and, uh, headquartered in the Rockefeller Center in New York.

Uh, our clients do, our, our clients do five things with us. So some clients inherit collections of art and we help them. We do an audit. So it’s a bit like, uh, you know, your, your, your grandfather dies and they leave you the whole contents of the house, and some of it’s fantastic and some of it’s not very good.

We will come in and do a valuation and then we will tell you. Those 10 pictures are fantastic and the rest is not worth having. We recommend selling that and keeping those 10 and in five years time, those 10 could be worth five times it. So we give you an in insight into what we would do with a collection number one.

That’s a very, very useful service for people who inherit sort of next generation or families that have bought art over the years and, and then suddenly get thinking, what the hell do I do? I’ve gotta downsize my house, or I want to hand over the next generation. What do I do? And we help them gift it, do charity donations, philanthropy.

We do all that. Number two. We lend money against art. So you said is art liquid? Well, we make it liquid because we take, let’s say you’ve put $2 million into art, we’ll lend $1 million against that. And you can borrow that in like, uh, within like. 20 days. So you can say, Philip, I’ve got $2 million of art.

Would you lend me a million dollars in in in three weeks? And I’ll say, yes, we can. And we will. And we could, you could borrow that money for 1, 2, 3 years and that helps pay. Estate taxes, it helps take tax bills, it helps. Let’s say you wanna give some money to the kids or whatever it is. So there’s another avenue.

So our financing is a very, very interesting business, and we have investors who like to invest in that, and that gets a yield for our investors around. 10% net. So it’s a very interesting product for clients who are looking to get a sort of bond yield with a fantastic product where we’ve had no capital losses and uh, a quarterly dividend.

So clients get a two point half percent dividend every quarter and a 10% yield. So that’s quite an interesting money. So that’s something that, uh, that accredited investors can participate in as well. Indeed, indeed. And, and I would say that’s almost sexier right now than, uh, you know, if you, if you’ve got a lower risk appetite, it’s, I would say that’s a very low risk product with a very nice, steady yield.

And we’ve run a business like that for 10 years. What kind of, um, minimum investments are, are those? It, it’s, uh, unfortunately it’s a bit higher, so it’s sort of 500,000 per million dollars. Um, but it’s locked up for three years. So you, you have a three year commitment and you get out, so it’s, it’s, and it’s di you know, so million dollars is yielding about a hundred thousand dollars a year, so it’s very.

Interesting return in this current economic climate and, and we had no credit losses and no, uh, no capital losses. So I like that. Number three is we help clients who’ve got a little bit more money to set up private funds, so the. Let’s say they’re a bit wealthier and they’ve got three to $5 million to invest, we will run a private fund for them.

So we will help them buy, hold, and sell. And that’s, I, I think, very neat. And they can have the art on their wall, they can have it in a warehouse. We can run it tax efficiently. We can run it in the us, we can run it out of warehouses. Uh, in, in, in. Tax free jurisdictions like Delaware, um, and you know, you can borrow the art and hang it on your wall for a time.

You could buy and sell and you can have the top advisors doing that. So that’s an option. Then we help clients, um, buy art as pure advisory. So some clients say, look, I’ve sold my company for $10 million and I bought a house for 2 million, and I wanna put $500,000 of art on the wall. We help clients do that, and that’s a really nice product where clients get advice, they know what they’re doing.

They send us a WhatsApp saying, I’ve just been into this gallery, or this auction, or I’ve been to Sotheby’s or Christie’s. I like something there. What do you think? And within. Anywhere between an hour and 24 hours, we come back to you and say, here’s all our comparables. This is why we’d buy it. This is why we wouldn’t buy it, and we give you advice.

But at the end of the day, you might say, you know what? For $50,000, I love it and I don’t really care what your advice is. I wanna buy it because I love it and it’s not about a financial investment. So that’s the next product. So, so I’ll invest and then we will. We plan to come out with investment funds where people can go.

We used to run Delaware Limited partnerships where people could invest 250,000, $500,000 into a limited partnership with a typical fee of like one and a half and 20 over six, which is like a private equity product, standard product. But most of these, um, types. They’ve, that’s a low end type of game for, from, from what there is in the retail market.

So I just emphasize to clients, there are products out there with fee loads of 20 to 40%. Don’t touch them and do your due diligence. And quite often these documents have 130 pages to read and clients can’t be bothered to read them. And in on page 90 and 120 is where they set out where their 20%, 40% fees are.

So just avoid them like the plague. They’ll come back to haunt you. Um, but so the five products we have in our business are art investing, art financing, either to borrow money or to invest in the borrowing fund. Um. Art, valuation, art, audit, and philanthropy. So helping clients review their collections, sell them so we can sell, save clients a fortune on when they sell on the fees they they pay.

So if you didn’t have our help, you might pay 30 to 40% in fees when you sell. So you might sell a picture, you might sell a collection that you inherited for a million, and you might only get 600,000 after. After transaction fees? Well, with the help of the fine art group that may be down to, uh, instead of 400,000 transaction fees, we might be able to get that down to less than half that, or even less than that.

Um, you know, it can get as low as 5% as opposed to 40%. So that’s a big help and we can help give people an idea of. The current state of the market. You know, is it good time to sell blue dins? Is it a good time to buy white dins? You know, one of the challenges in the jewelry world is these synthetic manufactured dins, and that’s had a big impact on the white dins.

And then, you know. Um, quite often you go to, you travel abroad, have a lovely holiday and you know, like I do, I say to my wife, I’d love to buy you a nice sapphire ring or something. And I, I made that mistake 25 years ago. I was in India. I saw something that looked like it should be worth three to $5,000.

They said, look for you, sir. It’s only a thousand dollars. Well, I found it was a colored stone. So even experts like me. You know, I didn’t take advice at, at that level. I knew I should have, but I took a view of it. It, it gave my wife enormous joy and I’ve never really told her that I messed, messed up. So even the professionals mess up, but it was a thousand dollars, not a million dollars.

Well, very interesting stuff. Uh, Philip, I, uh, appreciate all of your insight into this space and, uh, obviously if, uh, people are interested. They can, uh, check out the website and it sounds like there’s all sorts of different ways to participate. So, uh, thank you. Thank you again for joining us. Thank you for inviting me.

I’d loved it. You make a lot of money, but are still worried about retirement. Maybe you didn’t start earning until your thirties and now you’re trying to catch up and meanwhile you’ve got a mortgage and private school to pay for, and you feel like you’re getting farther and farther behind. Good news. If you need to catch up on retirement, check out a program put out by some of the oldest and most prestigious life insurance companies in the world.

It’s called Wealth Accelerator. It can help you amplify your returns quickly, protect your money from creditors, and provide financial protection to your family if something happens to you. The concepts here are used by some of the wealthiest families in the world, and there’s no reason why they can’t be used by you.

Check it out for yourself by going to wealth formula banking.com. Again, that’s wealth formula banking.com. Welcome back to the show everyone. Hope you enjoyed it. Uh, you know, uh, what I try to do on the show ultimately is just try to make, make you think differently. And, um, you know, I mean, again, if we’re talking about art, like, you know, we just did, uh, in this interview, that’s one thing.

Maybe art’s not your thing, maybe, but you, maybe you like watches, maybe you like really nice furniture. I mean, all of this stuff has a niche where you start going out of the. The world of, of, uh, expense into the world of investment. And if you love stuff like that, I mean, hey, why not? Uh, think about, think about buying stuff that goes up in value and enjoying it while it does.

Uh, that’s it for me this week on Wealth Formula Podcast. Uh, this is Buck Joffrey signing off.

We all know technology and geopolitics shape the world, but there’s a quieter, less obvious force that dictates the flow of wealth and opportunity: demographics.

Where people live, where they move, and how populations grow or shrink — these are the currents that ultimately drive economic gravity. That’s why all of the multifamily investments you see through Investor Club focus on areas where there is job creation. Where there is job creation, there is population growth, and people have to live somewhere.

Scale that concept up to a global level, and you start to see why migration, climate, and demographics are the real megatrends of the century.

Take China — decades of the one-child policy have created a demographic cliff. Contrast that with parts of Africa and South Asia, where populations are booming. Add to this the wildcard of AI, which could either amplify the advantages of youthful nations or offset aging ones.

For investors, entrepreneurs, and anyone thinking long term, the key isn’t where the puck is today — it’s where the puck is going. That’s the topic of this week’s Wealth Formula Podcast.

Transcript

Disclaimer: This transcript was generated by AI and may not be 100% accurate. If you notice any errors or corrections, please email us at [email protected].

 If a place is attracting young people, it must be doing something right.

Welcome everybody. This is Buck Joffrey with the Wealth Formula Podcast. Coming to you from Montecito, California. Before we begin, I wanna remind you that there is a website associated with this podcast is called wealth formula.com. Go there and uh, check out some of the resources we have, including the opportunity.

To join our accredited investor club. Uh, this is a. A group, uh, for a credit investors to see a potential deal flow that you wouldn’t see otherwise, uh, because they are private, uh, private nature. So the process is easy. If you are an accredit investor, go ahead and sign up and get onboarded. Then basically wait to see what kind of deals are out there and see if you’re interested.

Check it out. Wealth formula.com. Okay, so let’s start. Uh, let’s talk a little bit today about something that’s really important, maybe not appreciated as much. You know, we know that technology and geopolitics shape the world, but there’s a quieter, sort of less obvious force that dictates the flow of wealth and opportunities.

And that is demographics, um, where people live, where they move, and how populations grow or shrink. These are the currents that ultimately drive economic gravity. And that’s why all of the multifamily investment you see through say investor club, uh, focus on areas where there’s job creation. Why? Because where there is job creation, there is population growth.

And guess what? People have to live somewhere, right? So that’s something that you might be familiar with already, but scale that concept up to a global level and you start to see why migration. Climate demographics, they’re really the sort of mega trends of the century. All you have to do is take a look at China, right?

Decades of one child policy have created essentially a demographic cliff for them. And you contrast that with parts of Africa and South Asia where populations are booming. And then you add to this, the wild card of ai, which could either amplify the advantages of youthful nations or, or potentially offset.

Aging ones like China, as we mentioned. So for investors, entrepreneurs, and anyone really thinking long, uh, term, the key isn’t necessarily where the Pak is today, as the Great Gretzky once said. It’s where the puck is going, and that is the topic of this Week’s Wealth Formula podcast, and we will have that for you right after these messages.

Wealth Formula banking is an ingenious concept powered by whole life insurance, but instead of acting just as a safety net, the strategy supercharges your investment. First, you create a personal financial reservoir that grows at a compounding interest rate much higher than any bank savings account. As your money accumulates, you borrow from your own bank to invest in other cash flowing investments.

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It’s a refined strategy used by some of the wealthiest families in history, and it uses century old rock solid insurance companies as its backbone. Turbocharge your investments visit. Wealth Formula banking.com. Again, that’s wealth formula banking.com. Welcome back to the show, everyone. Today I’m joined by Parag, Dr.

Parag Khanna, a globally recognized strategist, bestselling author, and founder of Alpha Geo. His work focuses on some of the most important forces shaping the future of wealth, opportunity, uh, wealth, opportunity, migration, demographics, climate and technology. He’s advised governments, global institutions, and even military leaders on how to navigate a rapidly changing world, and his books, including Move the Future is Asian, have become.

Essential guides for understanding where people capital and power are headed. Uh, welcome to show up Pak, how are you? Thank you. Great. Great to be with you. And, uh, thanks again for coming all the way across, uh, the world from Singapore. Uh, I just got you off your, uh, ice bath and, and tea, so we should be ready to go right now.

Ready to rock? For sure. That is the best way to start the day. So I wanna talk to you about things that, you know, you’re, you’re an expert on. Um, one of the things that you talk about is, uh, migration as an investment signal. So you’ve written that migration is, is a driver of growth, which makes intuitive sense.

So what migration trends should investors be watching closely as signals, uh, for where capital will flow next? Sure. I mean, there’s many reasons to talk about migration and you know, just backing up for a moment, it really is the original globalization. So when we think of globalization as a force for good, a force for prosperity, a force for comparative advantage among nations and so forth, well migration, it all began with a single step.

Now, the reason this is so important today is because not only do we have the mass migrations of today, which can be both. Enriching and also destabilizing. Right? It’s not merely an unadulterated good look at the politics of the United States right now, for example. Yeah, in Europe. Yeah. Migration, turning migration off or on literally has a significant measurable economic impact.

Right now, for example, already economists are debating how. The extent to which cutting off inflows of migrants is going negatively impact GDP as we head into a recession, right? Among other things, right? So will it be wages or is it simply going to choke the innovative capacity? In the productive capacity and just the output of key industries.

Uh, so that’s something to, to dig into in a, uh, for a bit. But the real, one of the big reasons why I wrote the book is because. Unlike the last a hundred plus years where the world population was going like this, right? Quadrupling over the past century. Now we’re reaching a plateau, as you know, and this is why Elon Musk and everyone talks about, yeah, you know, peak humanity and civilizational decline and low fertility rates.

I mean, he’s, he’s late to the game, quite frankly. You know, those of us who work on these issues have been talking about this for a very long time. We’ve also noticed that it’s too late. A lot of people on social media are still kind of saying, let’s get, let’s have more babies, or These rich people have babies, right?

I just need to remind everyone so we’re on the same page. It’s not enough. It’s not nearly enough. There are not enough children. There will never be enough children. You need humanoids in robots or whatever the case may be, to take care of the elderly and the young. At this point, there’s so few young people.

So migration matters because where young people go in particular, take millennials, gen Z, gen Alpha, take everyone between the ages of five and 40. 35 years, or they’re up to 45. So a 40 year block spanning a couple of generations. Everyone today, who’s young, where they go, they vote with their feet, whether they’re moving from California to Texas, right?

You know, LA’s loss is Austin’s gain, or San Francisco Boulder, Colorado’s gain, or you know, Boise Idaho’s gain, right? It’s zero sum when you don’t have population growth, right? My people, I lose. You gain people, you win. So the zero sum nature of demographics and migration is what’s new because up until the present, every place was just having more and more children.

So it’s like, oh, well a million Indians left India, like no big deal. Right? Um, but once, once you stop having population growth, it’s, it’s zero sum. So in other words, why does it matter for investors? It’s three words. Follow the people. If a country, so you know, you and I can sit here and pontificate and we can say, oh, Europe is finished.

Europe is dead. Well, I mean, look, go to Lisbon, go to Berlin. Go to Athens. Yeah. Those places feel dead. No, they’re attracting young people. So it’s not necessarily at a country level. Right. But city by city, place by place. It’s, you can boil down all the complexity of the world. Geographically into this one thing.

If a place is attracting young people there, mu it must be doing something right. So, so in that regard, pro, so who, who are some of the winners and who are some of the losers when it comes to, at the city level? So here’s a place that everyone’s heard of Dubai, right? The United Arab Emirates, right as a country and Dubai as a city.

But there’s multiple Emirates. All of them are doing great, uh, to greater illustrious the UAE as a country. Fun fact, I, I grew up there as a child until the early eighties and um, it had 200,000 people. So it has more than 12 million today. So it’s the, by as a percentage of its own population, it’s grown, uh, by a factor of 60.

So, you know, it’s the fastest growing population in the history of the world. By, by far. Right. So, and it continues to grow and grow and grow. It’s the number one destination for new millionaires. So it’s also relevant in that sense. Ultra high net worth individuals are choosing to ditch Country X and move to the UAE, right?

So it’s, you know, Singapore, where I live right now, uh, it’s another winner, right? It’s very, very selective. It’s not about the total number of population increase, but rather the value add in terms of wealth. Invested in the economy, in real estate, in consumption, in financial services, and so on. So Singapore is also a clear winner since COVID.

You can tell that places like Lisbon, like Berlin, like Bali, right in Indonesia, you know, they call it silicon Bali. Now, it’s not really a hotbed of innovation. It’s just a place for digital nomads to go. But wherever you’re seeing young digital nomads show up and plant roots to the extent that young people plant roots at all.

You know, you’ve got a winning place, and that is a place where you might look to increase your exposure in some way, shape or form. So who, who are the losers that maybe there’s some, uh, I mean probably like Los Angeles or something like that, right? I mean, what. No, you know, I mean, I, I come to LA all the time and I, I get some of the macro dec declines data that people point to, you know, like net population outflow from California and LA is a source of that.

But they may not be fully considering new inflow, you know, new arrivals. They’re not seeing economic diversification, you know, and, and these kinds of things. So I, I’m still okay with, with la, um, as a whole being America’s second biggest city, you know, an enormous GDP. The California turnaround in general, that is kind of, you know, being, um, enacted, uh, right now that that’s underway.

Um, so let’s think more at, if you wanna look at the US for different reasons. Florida is not. Kind of, I don’t wanna say peak, you know, I don’t wanna call the peak, but you’ve seen a significant outflow now, or at least homes being sold because of the climate crisis and other kinds of issues, cost of living issues and so on.

So I think, you know. Florida is gonna be balanced out by other places. Um, so I, I mentioned climate, you know, the Gulf Coast of the US obviously, but let’s look globally, you know, places like Italy, places like Korea, places like Russia that are in just terminal population decline. These are the places where they’re selling.

They used to just sell a single home or a villa for one euro as a gimmick. Now you can buy an entire town, you know, for like a hundred thousand bucks. So there, you know, these places that are in structural population decline are gonna remain in structural population decline. Their entire geographies are gonna be backfilled and sold off to private investors to turn into resorts.

That kind of thing that that’s what’s happening. Almost a remapping of the world in light of these dire demographic changes. So I, I guess the obvious one that comes to mind for me when I think about big players, uh, in the global economy is China and you know, obviously with their. One child, um, laws that they had enacted for, you know, decades.

And then on top of that, there’s, there’s not really any immigration. I mean, what, what’s going on in China? Right, so China actually ha doesn’t technically need immigrants in the sense that you would say, how can the second largest population in the world behind India need immigrants? But it’s not about the number.

In the end, as I mentioned, it’s about the functions in the economy. So when you have what’s known as the 1, 2, 4 population pyramid where a young, young person has to provide for their two parents and their four grandparents, that’s just a big burden on the young, you know, breadwinner, right? Or earner.

Especially at a time of, you know, financial stress because of the cost of living in major Chinese cities. So what they do need though, is more El is more caregivers for the elderly, right? So China is importing people, but specifically, you know, uh, Filipino nurses or Burmese nurses and just young women even, even brides.

Of course they have their gender imbalance because not only the one trial policy, but the male preference, uh, led to an imbalanced gender divide, just like India has as well. So you wind up in a situation where you do need to import certain types of people, like elderly care workers, nurses, and uh, and and so on.

But they, but China is more rapidly automating through robotics. Some of these functions even faster than Japan. So in Japan, you don’t have enough of an acceptance. You have a cultural acceptance of technology, but you don’t have a mass deployment of technology to take care of the elderly at a communal level.

You don’t have telemedicine, right? And these kinds of things as rapidly deployed in Japan as you do in China. So China has a technological sophistication that’s allowing it to kind of, you know, circumvent some of the pain of this demographic adjustment. Interesting. And, and then the other thing that I think you’ve alluded to a couple times, um, I, I really think about quite a bit is the role of robotics and, and artificial intelligence.

Um, which is likely to be probably more rapid and a bigger impact than we. Can imagine right now. How, how do you think of that as I guess somebody who looks at, uh, through your lens? Well, there’s no question that it already has, having that impact and people are debating so much what the magnitude of that impact is.

Um, and that’s because they are looking at one particular industry, one particular country. If we’re gonna talk about this globally, what you really want to create is something of like a matrix where you say, okay. What is the specific technology? What are the sectors that you’re applying it to? In which countries is it deploying at what pace?

And then measure what impact it’s gonna have because that’s how things go in the. Un full, uh, unfold In the real world, there’s a lot of fiction in reality, right? So you can say, oh wow, we’ve got, you know, uh, full, you know, full self-drive vehicles. But okay. In some countries, the regulations, the roads, the uh, and so forth are amenable.

In other places they’re not. Right. In some countries you can afford those cars. In some countries you can’t. So think about the friction in it. So people have said it for a long time. Well, truck drivers, that’s gone, right? But guess what? Humans are still driving trucks so. Maybe instead of teams of two, you have, you have one, you know, or you have different kinds of shifts and so forth.

And these things still play. They play, maybe it’s gonna be, um, you know, long haul rather than short haul or media hall. Right. So, you know, look, you have to really, really splice and dice every sector to see the impact. So lawyers, right. Well, people thought it would hurt, affect blue collar people more than white collar people.

Turns out it’s the lawyer that’s redundant. Right. Or the paralegal that’s redundant. Whereas the plumber. We’re gonna need plumbers for a long time. Right. So I wanna see a robot contort himself to get underneath your bathroom sink and fix the plumbing. Right? Well, ain’t gonna happen. Right? So, so that’s the, the, in terms of robotics.

It’s gonna play out in that very, very jagged, um, non-linear, bumpy way. And of course, those among other things are powered by ai. So you’ve even got software engineers now who are needed, look at the jobs crisis for some of the most highest, best educated young computer scientists, right? So yeah. Never had such a high rate of unemployment.

Among us computer science grads at the same time that America’s finally Amer, you know, we’ve been saying stem, stem, stem, right? And lo and behold, Americans are finally churning away from humanities towards stem. Yeah, they learned the code for no reason at all. And now you can’t get a job in stem. So this is the level, uh, pace and intensity of disruption that, um, that, that we’re facing.

So AI is a key upstream driver of these downstream impacts on fields like robotics, which then impact the labor market. Um, but again, there’s lots of new jobs to be created in. Building more electric vehicles and more, you know, the, the, the key components, you know, you know, the cameras and, and sensors and so forth that those vehicles need.

So the question is, where are those gonna be built and what skills need to build those? And, and, uh, and are we gonna have tariffs on those sectors to encourage those components to be built in the us? So again, the knock on effects ripple through supply chains, um, from every new technology, every new, you know, innovation.

Yeah, the, you call this sort of Asia’s, you know, is Asia’s century. Um, you, you argue that Asia will ultimately sort of dominate the global economy. What sectors or regions in Asia in particular and, and, and, and why? Well, so Asia is obviously a huge, uh, uh, mega region, right? And then that’s sort of, you know, actually the map behind me is, is one of my maps of Asia.

So a lot of people when, when. You say Asia, they think only of East Asia, the Pacific ri, and Greater China and Japan. In reality, there is not a debate among geographers what Asia is. Asia literally reaches the Mediterranean Sea and the Red Sea. Right? So Saudi Arabia, which we think of as the Middle East, is actually west.

Right. So that’s how far West Asia goes into the east. It’s Japan to the south, it’s Indonesia and even Australia. You might say though, Australia, you could say it’s Oceania, but economically it’s very tethered to Asia and to the north it’s Russia. Right. So that’s Asia, right. This sort of, you know, diamond shape, set up powers and everything in between them, such as India, of course.

And Southeast Asia. So Asia has many drivers. Japan is the original Asian economic miracle. Then you have the tiger economies, as they were called in the, in the sixties and seventies, South Korea, Taiwan, Singapore, Hong Kong. Then China itself has become the largest economy in Asia and and the world. And now you have a new wave of Asian growth from another sub region.

Which is, uh, India and Southeast Asia, right? The Ian countries like Indonesia, Thailand, Vietnam, Malaysia, uh, and so on. So you, Asia is vast. Asia’s five and a half billion people. Most human beings on Earth live on this map behind me, quite literally, and that will always be true for the rest of our lives, our children’s lives, our grandchildren’s lives, our great grandchildren’s lives.

Most of the human species, like a substantial majority of the human beings on Earth, live inside this rectangle. They do not live outside of Syria. You in LA are in a great big city, but you are in a small minority of the human species. Yeah. Just so that we understand geographically what we’re talking about.

Yeah. So Asia’s got a long way to grow because it also says most of the world’s young people. Let’s tie it back to our very first topic, right? Most of the world’s young people are also on this map, and if you don’t have young people, you don’t have workers, you don’t have taxpayers, you don’t have innovation, you don’t have growth.

So I’m bullish on Asia, despite all the geopolitical tensions and so forth, because of some of these fundamental demographic facts, economic facts, infrastructure, investment, middle class growth, wealth creation, technology, capital industry. It’s all here. Yeah, I mean, you’ve mentioned a couple areas. I mean, certainly when you, you’re talking about, uh, you know, growth cities, um, you’re talking about Dubai, even Singapore, but there’s also, you know.

A variety of, of other issues that come with a number of these countries, like laws and immigration restrictions and all that. How is that all gonna play out? Do you, do you, do you anticipate some, some changes, uh, to various immigration patterns based on the needs of nation? For sure. You know, when I wrote the book Move I, I.

Almost realized they should have titled it moving because it’s not really a one way ticket. And we’re seeing this in the US obviously right now. Look at all the people that came to the US and have been deported, right? Or, you know, have, uh, their visas canceled even if they were legally in the country. So on over the cancellation of H one B, uh, you know, uh, policy as the Trump is threatening and, and the way Indians, you know, and Indian Americans are being treated right now.

So that’s just one example, but it’s really a, a pinball game. Migration has literally become a pinball game of billions of people, billions of lives. And that was the essence of what I was arguing, is that, you know, you can only. Politics in certain countries, whether it’s Britain or America, or Canada or Germany, uh, or Japan, you know, are gonna have an impact on the directionality, the vectors of migration.

But just remember you squeeze a balloon in one place, it expands somewhere else. So literally, you know, right. Right now we’re having Indians and Chinese think about leaving the United States because they’re not feeling welcome. But right now, the um. Uh, the German foreign minister, the Indian Foreign Minister, I believe is in Germany or, or vice versa, signing a bilateral agreement to expand immigration.

Right? And so one of the things I wrote about in the book was that, um, you’re, you have, you have a, such a fast, the fastest growing student population and professional population in Germany is Indian. You never would’ve imagined this. I, I actually went to high school in Germany. I lived near Hamburg, and I was the only Indian guy, an Indian American, but ethnically Indian guy for like, you know, hundreds of kilometers.

And now I hear Germany all the time, and it’s like Indians everywhere, right? So in, in the, in the blink of an eye, you have new migration vectors forming as people relocate to geographies where they’re welcome geographies of opportunity and so on. So. One of the things as a general statement, we just never had this volume of migration between regions of the world as we have today.

You just get on a plane, you don’t have to take a ship, uh, like the, the Puritans in a land on Ellis Island, like, you know, early 20th century migrants. Um, you literally just get on a plane. Just think about the volumes of people moving. Every single day, but the directions in which they’re moving. So you’ve never had so many Asians in Europe, rather than they’re having America as their default preference.

You’ve never had as many Asians in Central Asia or in East Asia as you do today, as many Africans in Europe, as many Latin Americans in North America, but now some moving back. So again, think of it as a giant pinball game of very thick vectors of migration that are, that are changing direction all the time.

I dunno if you have any views on this, but it, it’s interesting to me that within all of the positive things that come from the immigration in various countries, there’s just like escalating tensions across the world, a lot in Europe, obviously in the us uh, as a reaction to globalization. Well, how, uh, what’s your take on that?

So a couple of things. You know, blaming globalization or scapegoating globalization for domestic policy failures is a worn out or not so worn out, apparently political game, right? Yeah, you can still hear JD Vance and Elon Musk and whoever blame the globalists, right? The globalists get blamed for everything from liberal agendas like high tax and mass migration to being warmongers and wanting to perpetuate the Ukraine war, and so on and so on, right?

So every, everything that’s global and globalists is a convenient bogeyman. To deflect from the fact that the US has not had sufficient trade adjustment assistance, not retrained workers, um, you know, not, not, um, redistributed income. All of these not built enough housing, right? You know, you can blame globalization for everything because globalization doesn’t have a constituency, a voice to defend itself, right?

Um. So, so I want to be clear that just because you hear people talking about the anti-globalization backlash, it doesn’t mean that A, you know, globalization is B, that globalization is actually to blame, or that C bashing globalization will actually make it better, because in reality, globalization always wins.

Globalization, whoever, whoever it is, is sitting there laughing because in the end we always turn back to globalization. Otherwise we wouldn’t be in this world that we’re in of hyperconnectivity, of transportation, of communications, of capital flows, of all of these things. Right? In the end, we always, you know, you and I are old enough to remember the nine 11 terrorist attacks 25 years ago.

Then you had the global financial crisis, then you had Trump. In 2016 and Brexit, then you had COVID, um, and, uh, and so, you know, five or six episodes in just 20, 25 years, and every single one of those episodes, what did the headlines say? It’s the end of globalization, right? Every time. Every time. And it’s always been wrong.

So we need to, if you want to have a serious conversation about this, and now I’m speaking obviously about our politicians and, uh, whether it’s business leaders or or political leaders, they need to get serious about the fact that the world has been remains and will be globalized in many ways. That it is their duty, their responsibility to harness those forces for public domestic benefit, for their constituents, for their citizens.

If they don’t have the capacity to do that, they should be the ones to step aside, not the globalists, quote unquote. Yeah. Interesting. Um, what, you know, obviously a majority, probably 90, certainly 95% of my audience is in the United States. What do you, when you look at the world through your lens again, where do you see the US headed and, you know, what are, what are some possible, uh, impacts of that?

Right. So, you know, uh, it may sound like I’m some kind of, uh, dec declines, but I’m actually very bullish on North America as a continental mega region, and America within that. If you rank the regions or continents of the world by their degree of self-sufficiency, like having enough land, labor, capital, industry, talent, technology, you know.

We natural resources, right? North America ranks number one by far, peace and stability right? As well, which is not to be discounted. So there are not just small but massive structural reasons to be very pro North America and to be continental list. And, and I am, that’s the kind of geopolitical tradition that I have trained in and written about in, in my books and so on.

And Ida potential is very much still there. That by the way, includes, I might add, you know, Greenland as a future member of a North American Union or part, part of the United States. No, no, no. Just part of the North American Union. Right. A or, or. Let’s create a milder term for it. A Federation of North American states, right?

And the United States is a sovereign state. Mexico’s a sovereign state. Canada’s a sovereign state. Greenland’s a sovereign state, uh, but for members of this federation, right? And, and I think that’s effectively what is happening in what will happen. We’re already in that in many ways, right? If you look at the functional reality, again, the trade flows, the supply chains, the capital flows.

Again, fun fact for your listeners. What are the two most busily, trafficked borders of Le legally not, not even illegally, legally traversed borders on the planet Earth? I, I mean, I’m kind of giving it away, right? Right. I think everyone should know. Right. And we need to appreciate the US Canada relationship.

The US Mexico relationship are fundamentally stable, right? These are the two busiest borders on earth by this much, right? And there’s not a third place that is even remotely meaning. And so we need to really, um, you know, kind of, you know, be, be grateful for it. Harness it. So I’m very bullish again on, um, on, on North America and, um, and I think the US is actually gonna sort itself out.

I’m also long on this reindustrialization, you know, industrial renaissance kind of paradigm too. It can be done. There’s no, you know, rule that is so steadfast that can’t be modified. No technology so arcane that we didn’t already invent that we can’t re domesticate. Nothing that we can’t produce cost effectively through technology on shore that we have to get from offshore.

It can all be done. It’s happened with oil and gas and shale energy. It’s happened, it can happen with semiconductors. Um, and, and on and on it goes. Yeah. Um, any particular areas in the US that, I mean, if you narrow in on, uh, geographically, you know, I know you mentioned sort of the sort of peaking of, of Florida, but.

Is there is particular areas within the US that might surprise us in terms of, of, of growth possibilities. Um, it kind of just, yes. I mean, the short answer, yes, it’s the Great Lakes, right? And so this is how I began the, the, the opening chapter of the MO book because when I was writing that book, it was the kind of post-industrial, post global financial crisis tail end of the already.

De industrializing wave that had hit the region and it was on its last legs. And you know, Detroit was bankrupt and so on. Yeah, yeah, yeah. But if you look today, there’s already green shoots of an industrial revival. You know, people are moving in, home, prices have come down, and then you have the climate resilience, right?

So the combination of hitting rock bottom. Attracting, you know, re and revitalizing industries, um, and attracting young people are all, and climate resilience, all of those things favor Michigan, right In the Great Lakes region. Wow. Okay. So, you know, I first wrote this right after the financial crisis. So in 2010, um, I wrote an article titled, where Will You Live in 2050?

So when that came, when that was, um, published, it was like, what Michigan? Are you joking? And I gave all the reasons why. And so then the book move came out a decade later and I used those passages as the opening chapter of the book because it, it really already started to come true. And now in the post COVID.

Landscape as we look at, again, the industrial renaissance in the US and some of these patterns and of course accelerating climate volatility affecting places like Arizona to Florida and so on, you that amplifies and accelerates the Great Lakes, uh, stories. So I’m more bullish than ever on that region.

And, and as Alpha Geo is a software company that does geospatial analysis on these geographies, um. We brought that to life with our data where we kind of correlate every new factory that’s being built, where tax receipts are increasing as people move in. The inflows of people housing, market stabilization, climate resilience, and models, new infrastructure spending.

We put all of that literally physically as pin drops on maps and uh, and again, Michigan is looking good, so, so what kind of growth are they seeing? Um, in Michigan? I, it’s like a shell big surprise to me actually. So, well, it’s not so much the growth rate because that’s gonna be, you know, sort of that’s gonna.

Very significantly potentially year on year. But again, it’s, it’s the reversal of negative trends and it’s the, it’s definitely a marked year on year increase in population, right? And, uh, and, and therefore again, tax receipts, people buying homes, uh, and and so forth. So, um, I guess one more question and, you know, sort of a world shaped reshaped, I guess, by climate migration, demographics.

Do you have a sense of what asset classes you think might win because of some of these, you know, major shifts? Yeah, for sure. I mean, you know, we could, we could run through the whole gamut, but right now we’re in the middle of a major global CapEx boom, right? The investments in, in mobility, transportation, the investments in, um, energy, obviously everything from, from still LNG to, to nuclear and wind and solar and, um, and, and, and hydrogen infusion, right?

And of course, uh, digital. Right. So everything from internet cables to data centers, to AI training models. So you know, the, the, I call it the connectivity asset class that encompasses transport energy communications, right? The overall infra asset classes are all doing well. You have to. Manage your exposure, whether these are privately driven or public, private driven, you know, or backstop kinds of ventures because of the long and CapEx cycle.

But I’m obviously law on infrastructure and that’s been a big theme, you know, in, in, in my work, uh, certain commodities, obviously because climate volatility is accelerating. Geographies of food production are gonna shift. Um, then I’m big on anything that is urbanization when it comes to the top 30, 40 cities in the world that are gonna be the magnets for talent, right?

So that’s gonna be everything like around, um, real estate, but from like a rental, from an asset standpoint, right? So multifamily mixed use. Kinds of developments that are, you know, last mile, very convenient. Have retail medical education, um, you know, multi-generational housing, walkable. Um, all of those kinds of, ask all of those types of functionalities that you would ideally see if you were to start from scratch and design livable communities.

Well guess how many of those exist in the whole world today? Like zero, right? Zero. Yeah. Yeah. Here we are. You know, and this is a great way to wrap it all up. Here we are, 8 billion people, soon to be 9 billion people, but probably peaking around there ish that are moving and relocating ourselves to concentrate in anywhere from 50 to a hundred or more.

I mean, there’s a long tail of smaller cities, right? But the places that people wanna be, where you’re gonna have economic growth and dynamism and resilience and innovation. 50 really important cities. Not forget 200 countries, right? 50 important cities. Where those who can afford to, who are allowed to relocate and move, are gonna migrate to those places, and those cities are gonna thrive economically.

And so you want to be investing in the infrastructure, in the talent, in the skills, in the fixed assets and in the, in the businesses of those people in those places. So yes, you can understand it from the standpoint of asset classes, like I could say, sure, I’m super long on Asian emerging market equities, right?

Um, or, you know, super long on, on digital connectivity, but I’m also long on certain geographies and you just wanna have exposure to those. Yeah, yeah, yeah. Fascinating stuff. Well, uh, tell us a little bit about, uh, alpha Geo. So we’re a geospatial software company, AI powered from top to bottom using AI to downscale very large data sets like climate models and other kinds of market data and put it all together into one map based plane and run scenarios and simulations on how economies are gonna perform so that you can, we can guide investors, especially real estate infrastructure, data centers and so on.

So real estate is a huge area for us. So, as I mentioned before, whether you’re the outliers like Michigan, or whether it’s what neighborhood of Manhattan, uh, or la our models help, uh, you know, corporate investors and real estate investors kind of pinpoint where they wanna locate their assets. So, you know.

Specific Palisades fire tragic, uh, event from last year. Um, where do you wanna avoid fire risk in the future? Where can you buy a home where the insurance premium is not likely to go up as much because of the fire defense measures or the resilience of the location? Proximity to water supply, avoiding drought.

So we calculate all of that and we tried it. Our clients, everyone from high net worth individuals, like n of one or two, you know, I have one property, I have wanna buy two or three, four more properties or the world’s largest sovereigns and pensions are also customers of ours, and they also use the data in the same way.

Fascinating stuff. And again, the, the, the, uh, latest book is It’s Move, right? That’s the name of the book. Yeah. Move in a and that can be, uh, found pretty much everywhere, I assume. Uh, Parag, thanks so much for being on the show today. It’s been a, uh, very interesting conversation. Lovely. Really a pleasure.

Thank you so much. You make a lot of money, but are still worried about retirement. Maybe you didn’t start earning until your thirties and now you’re trying to catch up and meanwhile you’ve got a mortgage and private school to pay for and you feel like you’re getting farther and farther behind. Good news.

If you need to catch up on retirement, check out a program put out by some of the oldest and most prestigious life insurance companies in the world. It’s called Wealth Accelerator can help you amplify your returns quickly, protect your money from creditors, and provide financial protection to your family if something happens to you.

The concepts here are used by some of the wealthiest families in the world, and there’s no reason why they can’t be used by you. Check it out for yourself by going to wealth formula banking.com. Again, that’s wealth formula banking.com. Welcome back to the show, everyone. Hope you enjoyed it. Uh, interesting stuff.

I think, uh, you know, we’ve talked about population demographics, uh, on the show before. Uh, it is, and it, it continues to be a very, very important, uh, variable when it comes to, uh, wealth. And so I think it’s something to pay attention to. As I emphasized before you see this, when we have. Opportunities coming through our investor club, for example.

We often see, uh, you know, we often have deals, for example, in Dallas-Fort Worth, massive growth in Dallas-Fort Worth. And that’s why you have, you know, companies coming in. Uh, you have, uh, you know, lots of new jobs, people moving there because tax, same thing goes for Charlotte or Phoenix or any of these places.

But that’s one of the things you really gotta look at. When you make your investment. So anyway, that’s all I have this week, uh, on Well, formula Podcast. This is Buck Joffrey Signing off.

One of the realities of building wealth is that the more you have, the more you have to lose. Asset protection and estate planning aren’t just legal technicalities—they’re essential parts of safeguarding everything you’ve worked for. 

The worst time to plan is when you actually need it. If you wait until you’re facing a lawsuit, a creditor, or a sudden death in the family, it’s already too late.

Think of asset protection like insurance. Most of us wouldn’t drive without auto insurance or own a home without homeowners’ insurance. Yet many wealthy people operate businesses, hold investments, and build family wealth without putting legal structures in place to shield those assets. One lawsuit or one major life event can undo decades of hard work.

On the estate side, not having a proper plan doesn’t just cost money—it creates stress and hardship for your loved ones. Without a solid estate plan, your family could end up tied up in probate courts, fighting over assets, and losing valuable time and resources. 

We’ve talked on this show before about basic steps everyone should take—like forming entities to protect your business or making sure you have not only a will, but also a living trust. Those are the starting points.

But as your wealth continues to grow, your planning needs to grow with it. High-net-worth families have to think about more robust strategies—things like dynasty trusts, asset protection trusts, and the best jurisdictions to set them up. 

These aren’t just technical details. They’re the difference between wealth that gets preserved and multiplies across generations and wealth that gets chipped away by taxes, lawsuits, and poor planning.

To help us understand these tools at the highest level, I’ve invited perhaps the most respected attorney in this space—someone who is seen by other attorneys as the thought leader in asset protection and estate planning—Steve Oshins. Steve has pioneered strategies that are now industry standards, and his work has shaped how families across the country protect and grow their wealth. You’re going to want to pay attention this conversation closely.

Transcript

Disclaimer: This transcript was generated by AI and may not be 100% accurate. If you notice any errors or corrections, please email us at [email protected].

 If your trust is drafted really well at the inception or via the first decanting, you probably will never have to decant the trust again simply because you’ve already built the flexibilities into the trust.

Welcome everybody. This is Buck Joffrey with the Wealth Formula Podcast coming to you from Montecito, California. Before we begin, reminder. There is a website associated with this podcast called wealth formula.com. Go check it out for the latest resources there. And also, uh, remember that if you are an accredited investor and you would like to potentially see deal flow, uh, go to wealth formula.com and sign up for the investor club.

You’ll get onboarded. At that point, potentially, uh, see opportunities that you wouldn’t otherwise see that are limited for accredit investors. Again, that’s wealth formula.com. Sign up for investor club. Now let’s, uh, let’s talk a little bit about issues, uh, related to, uh, building of wealth. One of the realities of building wealth is that the more you have, the more you have to lose asset protection and estate planning Art.

Just legal technicalities. They’re really an essential part of safeguarding everything you’ve worked for. You know, the worst time to plan this stuff is when you actually need it. So if you wait until you’re facing a lawsuit, a creditor or a sudden death in the family, it’s already too late. Right? Think of asset protection like insurance.

That’s basically what it is. Most of us would drive without auto insurance or own a home without homeowner’s insurance yet. Many wealthy people operate businesses, hold investments, build family wealth without putting legal structures in place to shield those assets. And all it takes is one lawsuit, one major life event that can undo decades of work on the estate side.

Not having a proper plan doesn’t just cost money. It actually creates an enormous amount of stress and hardship for your loved ones. Without a solid estate plan, your family could end up tied up in probate courts fighting over assets, losing valuable time and resources. Now, we’ve talked on this show a lot about the basics.

Everyone should take forming entities on the asset protection side, of course. And when it comes to the estate planning, you gotta have both a will and a living trust. Okay? You’ve got to do that. If you don’t, uh, if you don’t look it up right now and, and you’ll understand why it has to do with probate, but.

We’re going beyond that today, but your, as your wealth continues to grow, your planning needs to grow with it. High net worth families have to think about more robust strategies. Things like dynasty trust, asset protection trust, and the best jurisdictions to set them up. So these aren’t just technical details, they’re really the difference between wealth that gets preserved, uh, and.

Debt that does not. So to help understand the nuances of this stuff, particularly this concept of the dynasty trust, I’ve invited, um, one of the most respected attorneys in this space. Someone who’s really seen by other attorneys as a thought leader who essentially kind of follow his lead. Uh, Steve Oshins.

He’s pioneered strategies that are now industry standards and his work has shaped really how. Families, uh, across the country, high net worth families really protect and grow their wealth. You’re going to wanna listen to this ’cause even if you are not wealthy today, probably are on your way. And, uh, this, this could very much be about your.

Your future self, and we will have that interview with Steve Oshins right after these messages. Wealth Formula banking is an ingenious concept powered by whole life insurance, but instead of acting just as a safety net, the strategy supercharges your investments. First, you create a personal financial reservoir that grows at a compounding interest rate.

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Net result, you make money in two places at the same time. That’s why your investments get supercharged. This isn’t a new technique. It’s a refined strategy used by some of the wealthiest families in history, and it uses century old rock solid insurance companies as its backbone. Turbocharge your investments.

Visit Wealth formula banking.com. Again, that’s wealth formula banking.com. Welcome back to the show everyone. Today my guest on Wealth Formula podcast is Steve  Oshins.  He’s one of the nation’s leading experts on estate planning and asset protection. He’s based in Nevada and is really best known for pioneering strategies like the Nevada Dynasty Trust Hybrid Asset Protection Trust.

Uh, he also publishes the annual state rankings for Dynasty and Asset Protection Trust tools that attorneys across the country really rely on. He is really a thought leader in this field, and I really want to emphasize that. Um, a lot of people kind of listen to what he does and kind of pivot their own law practice based on what Steve is, is coming up with.

Uh, so really excited to have him. Steve, uh, welcome to the show. Thank you, buck. It’s great to be here. So Steve, let’s, let’s start out with this. Um, people in this, um, you know, in this audience, they hear about all sorts of different kind of trusts. What exactly is a Nevada dynasty trust and why is, uh, Nevada often considered one of the best jurisdictions for these types of things?

Well, let’s start with what a dynasty trust is. A dynasty trust is an irrevocable trust that continues for as long as applicable state law allows. Um, in many states that will be roughly 120 years, and in other states like Nevada, it can be 365 years, and there are other states where it can be perpetual.

So why would we wanna set that up? Because for as long as the trust is in existence, those assets are protected from estate taxes. Creditors and divorce and spouses are the beneficiaries. So all in all, we want to maximize the duration of the trust so we can protect the assets from estate, taxes, creditors, and divorce for the children, the grandchildren, the great-grandchildren, and so on and so forth.

So why is Nevada one of the leaders? Well, Nevada and South Dakota are the leaders and no state is even close. There’s a. Big drop off before you get to the next batch of states. Nevada and South Dakota are basically neck and neck. The, the dis, the difference is that South Dakota allows a perpetual trust, whereas Nevada allows a 365 year trust.

In my opinion, the world might not even be here in year 360 6, so that’s not a big deal. Uh, basically you go somewhere where you have a relationship with a well reasonably priced trust company. Uh, that that bills on a flat fee basis and it’s a low number that it’s not gonna scare anyone away. And then you, whether it’s South Dakota or Nevada, wherever your relationship is, and my best relationships are obviously in Nevada, that’s where you go.

These, you can’t go wrong with either of these two states. Got it. So with, uh, for someone with significant wealth, what are the real benefits of setting up a dynasty trust? Um, obviously, you know. You can talk about them, but asset protection, estate planning, something else. Sure. There are three different things that I’m looking for.

I’m looking for asset protection. I’m looking for state tax avoidance, and I’m looking for income tax savings opportunities. Um, not every client’s gonna fit into all three of those. Probably every one of them fits into the asset protection. Depending upon the net worth of the client, we may or may not care that much about the estate tax.

Um, right now. We’re looking at roughly a $28 million state tax exemption. And January 1st, 2026, it’s gonna go up to 15 million per spouse. So there’s $30 million per married couple. So if you’re under that number, especially substantially under that number, we’re not really focusing in on estate tax savings at this moment.

We can always make up for that in the future. Uh, for those people. We’re gonna be more in the asset protection world, and we’re also gonna look for. Income tax opportunities. If they are approaching the, the 28 or $30 million number, assuming they’re married, then we start thinking deeply about the estate tax avoidance, um, strategies.

And if we wait a little bit longer than we should have, which is fine, we can always make up for what we didn’t do years ago. So. Nobody should ever feel rushed. But if you’re, if you’re a married couple and you’re worth over $50 million, clearly you need to make, to set the dynasty trust up and make a big gift and, and maximize the use of your exemption.

Now, for those people that are under 30 million, we just take it on a case by case basis. Yeah. And, and that brings up a good question ’cause we we’re sort of talking offline about this, but, you know, at, at what point do you, because you brought up the idea that this is not just about estate planning, it’s also about asset protection.

So. What is, what is the right time? I mean, I guess you said it case by case, but give, give us an example of, you know, a situation where you might wanna start thinking about doing this. Uh, there’s obviously other ways that people are setting up asset protection, they’re doing offshore trusts and all that kind of thing.

What, what’s the right time, the right person for this at the lower level, the right time? Well, I, I should actually answer that by telling you the wrong time. Long time would be after a person has um, already had a problem and they’re in the middle of a problem. It’s not necessarily when they were served with a lawsuit, it’s when the problem started.

So the right time is going to always be while the coast is clear. It’s kind of like buying insurance. You can’t buy homeowners insurance while your house isn’t on fire. You can’t buy life insurance while you’re in hospice. You can’t buy health insurance while you’re getting chemotherapy. You know you have to buy it well in advance while the coast is queer.

There’s a chicken and egg column here. Uh, most people don’t want to pay to get something done unless they feel like there’s something they’re doing it for. That’s the wrong way to look at it. We have to look at it like, um, I’m a wealthy person, and we never know if today’s gonna be the day that something happens.

So let’s set it up. Just like you buy your, your insurance, your homeowner’s insurance, or your life insurance, your health insurance, or you buy your umbrella insurance, you buy it well in advance to the problem, and if a problem does occur. Thank God you, you set it up. Um, interestingly, you asked me about the types of trusts.

I know we’re gonna get into that. Yeah. Foreign Asset Protection Trust. I’ve never done one, but um, I just posted on LinkedIn this morning, 29 Foreign Asset Protection Trust cases that have gone south. So the case law is really bad there. That’s why we go to the Hybrid Domestic Protection Trust. And I know you’re gonna be getting there at some point.

Yeah. Yeah, absolutely. And, and I think that was one of the reasons I wanted to bring up this thing, because pe there’s people who are in this, you know, uh, situation, uh, where, you know, they’re high earners and, and say they have, uh, maybe they’re not ultra high net worth per se yet, but they’re, you know, they’re making over a million dollars a year.

They, they’re 40 years old and already have a net worth of 10 million. Should they be looking at this yet or not? I mean, if, if they’re looking at some sort of asset protection strategy anyway. Uh, a lot of people are looking offshore and so should they, even though their net worth is not 30 million, 40 million, something like that, should they be looking at this kind of option?

I don’t think the anybody should be looking offshore. Um, you know, with the 29 cases that I posted on LinkedIn this morning, uh, I, the problem is I don’t see any case where, where the person actually won. They either lost in some way or they had to sit in jail to protect their assets. And, uh, my, uh, my opinion of sitting in jail to protect your assets is, I wouldn’t do it.

No, I get that. But What, but what about, what about those people who are not at 30, 40 million? I mean, is this an option for them? Because they want asset protection. Sure. I get a lot of those two to $10 million doctor types, for example. Tons of those. Um, the, you know, the people worth even 1 million. If they know that they’re probably in a, in a type of industry where they’re gonna be sued, we can at least get it started.

There’s a point when it’s too small and it’s just not worth it. But I generally look for a $2 million net minimum net worth. That’s right. I mean, and I think the, uh, that’s helpful because I’d say probably the average net worth of the listener here is about 5 million, and they’re probably, uh, you know, high net worth people just in terms of, uh, you know, high earning doctors.

This is, this is the show for high earning doctors. So, but that’s good to know. So, um, okay, let’s go back to. Uh, you know, some of the mechanics here, so, a dynasty trust is designed essentially to last for centuries. So how does it, how, what, what is it that allows families to pass, uh, wealth across multiple generations without it being eroded by estate and gift taxes?

It’s, it’s actually very simple. You make a gift into a dynasty trust and then you file a gift tax return and you allocate generation skipping transfer tax exemption to the trust. Once you’ve allocated the generation skipping transfer tax exemption to the trust, no matter how large that trust grows, those assets are not subject to estate taxes for as long as applicable state law allows, which as we discussed earlier in Nevada, would be 365 years.

Right. And so here’s the, here’s the other question that a lot of people ask me about. Um, just in general when I mention that, like, I, I think these are good ideas for people. If they say, well, if I put money into a dynasty trust, do I completely lose control? Because of course. You have a trust, um, and that is no longer you, it’s out of your estate.

How do you structure these trusts so that families still have flexibility and influence without sacrificing protection? Uh, good question. It depends which attorney you go to. If you go to an attorney that, uh, didn’t take, uh, state tax co, um, code in, in law school, then you end up with a form agreement and the attorney’s petrified to, uh, make any adjustments to the document.

But any attorney that understands the estate tax code knows how to draft, where the grantor or settler of the trust who puts the assets in, can be the investment trustee of the trust. So generally we’ll have the seller who sets up the trustee, the investment trustee, or we’ll use the settler’s, spouse, or child or best friend or brother or sister as the investment trustee.

And then we’ll use a close friend as the distribution trustee, or we’ll use the Nevada based trust company as the distribution trustee. If we use a close friend is the distribution trustee, then we use the. Trust company in Nevada as a jurisdictional trustee. Um, some of, of what I just said won’t apply depending upon what we’re trying to accomplish.

For example, if we’re trying to avoid state income taxes, then we’re not going to use the grantor or grant or spouse as a trustee or anyone else who lives in their state or in certain other states that would cause a tax. And then regardless of who we pick, we can always have give the grantor. Who sets up the trust, the power to fire and hire trustees.

So even if the grantor’s not a controlling trustee, the grantor is the one pulling the strings in the background who always has a friendly trustee serving who will, uh, presumably do whatever the client wants. You can also, can you not Steve, have basically the idea that the trust can, you can, you can have a situation where a trust like this owns an LLC.

That LLC, uh, has a manager, right? So say for example, your assets are owned by this LLC, you don’t necessarily have the trustee to have to go do everything every time You wanna invest, every time you want to, you know, make a distribution or whatever you’re doing. You can have an LLC that is owned by a trust.

Choose a manager for that LLC and that could be you, correct? Sure, yeah. Yeah, sure. It depends how the trust is drafted. Sometimes you don’t need to do that. Um, you know, we can save you from an LLC fee, um, because you didn’t need it. But if there was a trust where you didn’t want whoever the trustees are to handle the direct manage management of the assets, yes, the assets can be transferred into an LLC owned by the trust.

Then whoever you want can be the manager of that LLC. Now we have to be careful if we’re trying to save state income taxes and we’re trying to avoid, uh, any contacts to the, the grantor’s home state. But generally, yes, you can have assets in an LLLC owned by the trust. Right. And I, I guess it’s kind of like in that regard, having your cake and eating it too.

In a lot of what we do, that’s the case. Yes. Right. Okay. Um, let’s, let’s talk a little bit about taxes. You mentioned this before, but beyond estate taxes, which, you know, it’s gonna be an issue for some, not for others. Um, you’ve, you’ve written that state income taxes obviously matter a lot. How can using a, a trust in Nevada help a California or New York family, for example, legally avoid state income taxes on investments inside the trust?

First of all, we have to make sure the trust is its own separate tax paying entity. So we have to set up what’s known as a non-grant for trust and, uh, we’re all gonna have to get a whole lot more familiar with those now that we have our new tax act. Because income tax declining is the new estate tax declining, uh, for a lot of these clients who have net worths below the the new permanent numbers.

For the exemption. So we have a non-grant or trust, meaning the trust pays its own income taxes except to the extent it makes distributions to the beneficiaries. And, uh, for New York and CA and California, we have to avoid any resident trustee. California has a, a, a very unique statute in that it prorates the tax on undistributed taxable income.

Based on the, partially based on the number of California resident trustees versus non California resident trustees. So we’re gonna avoid California resident trustees. New York’s, uh, statute, uh, causes a full New York State income tax if there is one or more New York resident trustee or $1 or more of New York sports income.

So you even have to move that little $50,000 in New York rental property out of the trust so you don’t screw up the taxation of that trust. Uh, so by setting up a non grantor trust in Nevada with no resident trustees from the client’s home state, we can avoid the New York or new or California state income tax on any taxable income that’s not sourced to California or, or New York sourced to means, uh, for example, a business operating in California or, or New York.

Or real estate operating or, or that is situated in California or New York. So this will work on selling a business, even if the business was located in that state. You can sell the business. That’s the, that’s the big opportunity here. Or investment portfolio or outstate real estate, for example. So it works for a lot of assets.

You just mentioned something I think is kind of important in that, um, so your trust could, um, you know, these kind of trusts can own. Active businesses, right? They can correct. Own active, and, and that, bring that up because you think of, uh, people often think of trust, primarily owning, you know, just stocks and, you know, passive assets.

But you can have, you can have, uh, a, an active business and this is a really, really important point potentially for business owners. Uh, thinking about exits. Is that fair? Yeah, we, our greatest opportunity is the non grantor trust where you’re gonna exit your business and sell it just because the business was operated in New York, where California as our examples doesn’t mean you can’t sell it, which is selling an intangible asset in out of that trust and avoid the state income tax in the sale.

How much control at that when you have, when you have a non-grant or trust, Steve, is that a lot less flexible for somebody in terms of control, um, or what they can do, uh, with that trust compared to a grantor trust? It’s, it’s definitely, I don’t know if I wanna say a lot, but it’s definitely less flexible than a grantor trust, uh, because you can, you can really mess it up easily if you give the grantor too much control.

We don’t want to use any local resident trustees or have administration in our, our. Grantor’s home state. Um, so you are giving up the direct control that you could have had with a grantor trust, but at the same time, for example, in California, we’re saving 13.3% on the sale of the business. So, um, it’s a question for every individual client, are you willing to give up the direct control in exchange for saving X percent on the, the sale of the business?

And almost always the answer is yes. So then the other question people have is once that money goes into the trust side of things, okay, whether it’s an LLC, whatever the case may be, what is okay to use, uh, that money for and what is, it’ll not okay to use it for, well, it’s okay to use it for anything that’s legal.

That would be the answer for any trust. Now if, if there are state income tax, if there’s state income tax planning going on, then we have to be very careful. Um, if the, if the grantor was a resident of either New York or New Jersey, which has a similar statute as New York’s, you can’t even have $1 of local, um, source income or you screw up the entire trust.

So you have to make sure you distribute any source income out of the trust and cleanse the trust. Uh, for other states, it’s just gonna. It’s not gonna, uh, destroy the tax savings in the trust. It’s just going to not get the tax savings for that particular income. So the New York and New Jersey residents especially have a, have more to worry about there, but basically ask, well, I guess the question is like, you can’t just give, make yourself distributions from that trust, uh, for personal expenses.

Can you? It depends what we’re trying to accomplish with the trust. Yeah. Um, well, the way we always draft our trust, we use in. An independent distribution trustee, as you know, to make the distribution decisions. Uh, now, the, now when you say you can’t just get it, um, I, you’re referring to a version of the trust where the settler or a grantor is a discretionary beneficiary, which would mean it’s a completed gift.

Domestic asset protection trust. One where, uh, let’s say buck sets the trust up for the benefit of buck, buck, spouse, and buck’s, descendants. In that case, if it’s a grantor trust, you just have the distribution trustee make the distribution decision to buck. If it’s a non-grant tour trust, then we need the distribution trustee plus any one adverse party, meaning, for example, one of your children whose interests are adverse to yours has to sign off on the distribution to you or to your spouse.

So with the non-grant tour trust, as you can see, um, it’s a, it’s a little. Tighter that we have to draft it and we have to be a little more careful not to mess up what we need to do in order to avoid the taxation going back to your return. Got it, got it. Okay. Well, you, um, you also created something called the hybrid Nevada Asset Protection Trust.

So what, what makes that different from the traditional one and, and why might people prefer it? For asset protection purposes, um, your, your basic options are either a foreign asset protection trust. I already, and I already told you, I’ve identified at least 29 cases that have gone south, so that seems to be a bad move at this point.

That was the way people were. Planning back in the eighties and nineties, but nowadays, I don’t think it’s smart or a regular domestic asset protection trust, which is one where you set it up in a state like Nevada or South Dakota for the benefit of yourself and your family. Um, those have been working well.

Uh, we don’t see a lot of case law. There’s only one bad case on that that I’ve ever seen. Uh, in fact, there was a local, uh, a recent good case, although it’s still an ongoing case, um, on those. And otherwise, so the issue is, can a person who lives in the state that doesn’t have a statute like this, set one of these up and have the law where the trust is, is set up, apply for creditor protection purposes?

And we’re still not a hundred percent sure on that. There’s almost no case law, which means it seems to be working. But if we wanna work around that and get to the point where we are as close to a hundred percent success as possible. We don’t make the settler a beneficiary of the trust. For example, uh, buck, you set the trust up for the benefit of your spouse and your descendants, assuming it’s coming from your separate property, not your community property with your spouse.

So you’re not a beneficiary. You set it up for spouse descendants. That because you’re not a beneficiary. We know that works in all 50 states, but we still set it up under Nevada and we build in this hybrid provision, which is the power of a trust protector, like your best friend. To be able to add and remove beneficiaries, including the power to add you.

So in the extremely unlikely situation where you need something outta that trust, which basically means your spouse predeceased you, and you run out, ran outta money, we have a backdoor ability to give you something outta that trust that’s better than any other asset protection option out there because it doesn’t have the potential taint that you’re a beneficiary of your own trust, which is what potentially can get you in trouble.

Got it. Um, let’s talk a little bit about decanting. Um, it’s basically the ability to pour an old trust into a new one, right? So how does that keep the flexibility over decades? Centuries? Okay, so it’s an interesting question because if, if your trust is drafted really well at the inception or via the first canting.

You probably will never have to decant the trust again simply because you’ve already built the flexibilities into the trust. Where we see the decanting would be where you have an inferior trust agreement. Uh, you know, a lot of the estate planning attorneys weren’t trained well and they just grab a form and you know they’re doing something that.

That meets the minimum, minimal state, uh, standards of what one would expect from an attorney, but they don’t do anything super. What if we want to fix and enhance that trust once we enhance it into a really, really nice trust? You probably don’t need to decant it after that unless there was something that, some flexibility that you somehow didn’t think about.

Spill it into the trust in the first place. Uh, the top attorneys forms have already built in these flexibilities in most cases, but, uh, we’re, none of us are perfect. You know, we don’t have superpowers. There’s no way that I can anticipate anything, every, anything and everything that could happen. I think that my documents, uh, get at least 99% of what anyone would wanna change.

But if there is something that I’m not thinking about, we can always decant the trust, which is where we have the distribution trustee distribute the assets into a new, a brand new trust. For the benefit of one or more of the same beneficiaries of the old trust in order to fix something over years. And that all being said, um, one other comment is sometimes we do set up a perfect trust, but then strategically we wanna divide the trust into more trusts for certain purposes, such as, uh, qualified small business stock and the $10 million QSBS exemption per trust.

So sometimes we have a perfect trust. Then there’s an opportunity to sell a business that’s gonna qualify for the $10 million per, per non grantor trust, um, um, exemption from federal income taxes. We have five kids, so we do decant that trust into five separate trusts because there’s a tax reason to do so because of a change in circumstances.

Steve, I have, um, a few clients I know of who are, uh, sitting on, uh, you know, eight figures of of Bitcoin. Uh, something like that, and they’re looking to potentially just sell and get out. Would this be a good option, a, a non-grant or trust if somebody lives in California or New York to move that over, then sell, uh, after it’s in a non-grant or trust?

Yeah, that’s a, that’s a, that’s a good opportunity there because, uh, you can save the state income taxes on the capital gains of the sale. Now, California, New York, funny that you mentioned, those two states and Washington, the state of Washington, are the three states where you can’t set up an incomplete gift non-grant or trust or so-called Ning or Ding Trust, as they call it, in Nevada or Delaware.

So for California. Residents, New York residents and Washington residents, we always have to set up a completed gift, not a grantor trust, which means we are limited to the client’s remaining gift tax exemption in how much we can transfer to the trust. So if the client is married, we’re looking at $27.98 million of gift tax exemption.

Um, whereas. If the, if the client lived in a different state where we set these up from, such as, uh, we do a lot in Oregon, Hawaii, Massachusetts, and some of these other high tax states, they can throw, uh, um, billions of dollars of, of Bitcoin or other assets into an incomplete gift trust and avoid the state income tax.

So for the California and New York. Residents, it makes sense to do it as soon as possible. I guess we, we just had a little bit of a dip in Bitcoin over the last, you know, week or two. You know, maybe, maybe today’s the day to make the gift, you know, at least, you know, high, a little short time ago. Uh, because the sooner you gift it, the, and get the appreciation moving out of your estate, the more you can avoid in state income taxes because of that limitation, because it can’t be the incomplete gift version.

If that makes sense. Yeah, yeah. Got it. Um, what, uh, what role does, um, do these trusts play in in situations of divorce? Uh, it depends who set the trust up. Uh, if it was a community property joint trust, it doesn’t play any role other than to increase legal fees and, and complexity. So they should have stayed married.

Um, if someone set up an asset protection trust that works such as a hybrid domestic asset protection trust, well before the, the marital issues. So not a week before filing for divorce, you know, not right before, um, you know, they, they were throwing things at each other in the living room. You set it up years ago, you’ve moved those assets, uh, away from your marital estate and then they’re not subject to division and a divorce.

So people, people who are in a bad marriage who have wealth should think about setting this up, but not those who are in such a bad marriage that they’re gonna be divorced over the next couple years, for example. It’s probably too late to set something up at that point. Um, so you wanna set it up now? So if you have, if you think in 10 years maybe there’s a 50% chance that we’re gonna be divorced, you might as well set it up right now.

If you think there’s a 50% chance you’re gonna be divorced in two months, uh, there’s a really good chance it’s too late because things have already gone too far. I mean, I guess the other way to think about it is, is this, um, a, a way to protect your own assets If you’re not married yet and you do get married and you already have one of these in place.

Uh, absolutely. Um, you wanna move, you want your prenuptial agreement to show the lowest number possible. This is not where we wanna brag. It’s kind of like when you die, you want the lowest number. When you’re bragging, you want the highest number, uh, or when you’re going trying to get a loan from the bank, you want the highest number Here, we want the lowest number on our, on our, um, exhibit A in our prenuptial agreement.

So if our client’s worth $10 million, why not throw, let’s say, $5 million into an asset protection trust, A hybrid version where the client’s not a beneficiary, so that when you’re putting the divorce. The prenuptial agreement together, it shows that you have a net worth of $5 million. Although it’s a good idea, in my opinion, although I’m not a family law attorney, to at least disclose the existence of the trust and note that the client is not a beneficiary of the trust.

I I, I like as much disclosure as possible. So you take away the argument that you were hiding something. Yeah. So tell us a little bit about like, the changes, um, you know, the changes of. Um, that, that we can potentially see with tax law IRS scrutiny in the future. How, how do you, how do you navigate those?

I mean, it just seems like, you know, a lot of this changing all the time and if sometimes I think there was some threats to the way grantor trusts were treated before during the Biden administration that seemed to pass. But can you, can you talk a little bit about how do you navigate some of those issues?

I mean, part of it might be trying to get into a trust when laws are favorable, right? Is is that kind of one of the strategies you talk about? Sure, yeah. When laws are favorable, such as where we have a high state and gift tax exemption, the ultra wealthy people now have a lifeline to be able to take their time a little bit here to make their gifts.

Although a gift today is better than a gift tomorrow because of appreciation, but we don’t have that pressure to get it done by the end of the year. For a client who is having trouble making some decisions, we can take a little bit more time. So, yeah, as long, anytime we have a good opportunity, we, we want to jump on it in case the law goes the other way the next time Congress meets.

Um, now it’s hard to navigate our job as. Estate planners is to try to help our clients understand when to jump and when not to jump. Um, a lot of what I’ve learned from doing this for now 31 years is, uh, there’s a lot of potential law changes such as the grantor trust law that you mentioned, and our job is to tell our clients to let us know those things just relax.

It’s extremely unlikely that anything like that could possibly pass. It’s just, you know, sometimes the Democrats wanna show, show their voters. Something in their potential act. The Republicans wanna show the voters something. These are just ideas that someone wants to get passed. It doesn’t mean that it’s going to get passed.

So our job is to calm our clients down and make sure they don’t make gifts with that they’re, they’re gonna regret. We don’t want donors remorse. So a lot of what I’ve had to do over the last few times that the estate tax exemption was gonna drop down, such as in 2012, there was a big concern in 2020, you know, with with Biden in 2021, with there being a potential democratic tax act.

And then this year a little bit of. A concern for a while because the exemption was gonna drop in half. My job was to calm the clients that shouldn’t be making the gifts, and then the ones like the 50 millionaires who should be making the gifts regardless of where the law goes. My job is to push them harder.

So I, I feel like I did a, a, mostly a good job. I, there were a lot of clients I couldn’t, they were begging me to take their money to set up their dynasty trusts. And I was, I was saying no to a lot of them. I was trying to say yes to the ones who do it, but there were a lot of them that just begged me and I said, you’re gonna regret it, but I will certainly take the retainer and I will set it up for you, but you’re gonna regret it.

And, and I was right. So our job is to try to, um, advise our clients not to do something they’re gonna regret. Yeah. Um, tell us a little bit about the process, Steve, of, um, you know, working with you, shedding, you know, discussing this possibility of doing something like this. How, uh, tell us, tell us how you work.

Okay. Sure. The best way to reach me is to send me an email. Um, uh, I’m at S-O-S-H-I-N-S at os HIN s.com. Send me an email and just say, here’s basically what I’m looking for, or, I don’t know what I’m looking for, but I’m wealthy and I’d like to set up a video meeting with you. And then we set up a meeting and then, um, if we know a direction, then it.

I usually set it for 45 minutes. If I’m, if it’s just a ultra high net worth person, I’ll set it for 60 and then we will explore a little bit. And where I’m gonna try to get the person is to is with either asset protection planning, the state tax avoidance planning, or state income tax avoidance planning usually.

And sometimes there’s some federal income tax avoidance planning as well. And usually if I’m. Uh, if I’m in a meeting with someone who has wealth, there’s something I can help ’em with. It’s, it’s very rare that there’s nothing. Sometimes we go into the meeting having absolutely no idea where the meeting’s gonna go, and I just take them to where I can help them.

If there’s, if I don’t think I should help them, I tell them very clearly, I don’t want to take your money because you’re better off just getting something basic done local, and there’s no reason to have me help you. Here’s a referral. Um, and then the process is assuming they like me and they want to go forward, either they think about it or they tell me on the spot, and then I get them the engagement agreement, take a re roughly a 50% retainer, and then intake questionnaires, and then we just draft and then do the follow-up meeting to go through the documents, get ’em executed if we’re okay, and then get them.

I would just, uh, say that, uh, I’ve worked with Steve, myself. Uh, definitely. Uh, Steve is one of the best attorneys out there. He’s a terrible salesman though, I’ll tell you not to get things. So, so he’s the perfect, it’s reverse psychology bucket. It’s worked on you so far. That’s right. That’s right. It’s worked on me for sure.

Uh, anyway. Uh. If, if, if people want to also, if it’s just easier, certainly, you know, send me an email, let me know if you’re interested in talking to Steve, and I’ll be happy to forward the email to him. Um, I’m, I’m a big fan. Hopefully some of you who, uh, you know, are doing risky stuff as physicians are starting to build wealth, maybe really something to think about.

So Steve, I wanna thank you so much for being on the show and, um, you know, I’d love to have you on again sometime. Alright. I, I don’t know if we, uh, ran out of material though. We’ll have to find a new, a new material. Got it. Next time. Thank you. It’s been a pleasure and I, I always enjoy talking to you.

Thanks. You make a lot of money, but are still worried about retirement. Maybe you didn’t start earning until you’re thirties and now you’re trying to catch up and meanwhile you’ve got a mortgage and private school to pay for and you feel like you’re getting farther and farther behind. Good news. If you need to catch up on retirement, check out a program put out by some of the oldest and most prestigious life insurance companies in the world.

It’s called Wealth Accelerator can help you amplify your returns quickly, protect your money from creditors, and provide financial protection to your family if something happens to you. The concepts here are used by some of the wealthiest families in the world, and there’s no reason why they can’t be used by you.

Check it out for yourself by going to wealth formula banking.com. Again, that’s wealth formula banking.com. Welcome back to Show Everyone. Hope you enjoyed it once again. Uh, can’t say enough about Steve Oshin a very smart guy. Sometimes he’s too smart, so you have to like ask him questions a few times over.

But, uh, he is a guy who, you know, some of the. These families in, in, in this country actually, um, uh, really rely on and, uh, he’s actually more affordable than a lot of the others out there who are, um, much more sales oriented. Uh, so if you are thinking about doing something like this, I highly, highly recommend, uh, Steve Oshins.

Anyway, that is it for me. This week on Wealth Formula Podcast. This is Buck Joffrey signing off.

I’m not a big stock guy. However, there are some companies out there that you know are just going to change the world, and it would be nice to be able to own part of them—especially before they go public.

That’s why this week on Wealth Formula Podcast we’re diving into a topic that’s been on my mind for quite some time: the world of pre-IPO investing.

If you’ve ever felt like by the time a company finally hits the public market it’s already ballooned in value and you’re basically buying in at a premium, you’re not alone.

I personally had my eye on a company called Circle, which deals in stablecoins. As I’ve talked about on the show before, I think it’s going to be huge globally.

But as soon as Circle went public, the valuation shot up to a point where I felt like it was way too expensive to jump in. If I had access to those shares before the IPO, I would have definitely taken the plunge.

Now, this isn’t just about one company. We’ve seen this story play out with others, and right now there are some major game-changers like SpaceX on the horizon.

SpaceX, one of Elon Musk’s ventures, is one of those companies you just know is going to have a massive impact.

But how do you get access to those deals?

If you’re an accredited investor, I have good news. Getting a piece of the action before these companies go public isn’t just for the ultra-wealthy insiders anymore.

It’s becoming more accessible to accredited investors who want to get in earlier and potentially see greater upside.

That’s the topic of this week’s Wealth Formula Podcast.

Transcript

Disclaimer: This transcript was generated by AI and may not be 100% accurate. If you notice any errors or corrections, please email us at [email protected].

 If you are purely investing in the public markets, in many cases, you’ve missed the majority of a company’s growth cycle.

Welcome everybody. This is Buck Joffrey Wealth Formula Podcast, coming to you from Montecito, California today. Before we begin, as I always do, I will suggest you visit walt formula.com, which is the, um. Primary Home of Wealth Formula podcast, and it’s also where you can get some resources outside of the podcast, including access to our accredited investor club, otherwise known as investor Club.

Uh, that is where you can get, if, if you aren’t an accredited investor, you can get access to opportunities that you would not otherwise see because they are not available to the general public. Um, speaking of. That kind of investment that’s not typically, uh, available to the general public. Uh, that takes us sort of to the topic of today’s show.

That is, um, well, you see, I’m not a big stock guy, as you probably know, if you’ve listened to this show before, I’m not, you know, listen, I’m not anti stock. It’s just not, you know. Generally what I’ve invested in my life. However, there are some companies out there that you just know are going to change the world, and because of that, it’d be nice to potentially be able to own part of them, you know, especially if they, if before they go public.

That’s why this week on Wealth Formula Podcast, we’re gonna dive into a topic that’s sort of been on my mind for some time. The world of what’s called pre IPO investing. Basically investing before a stock goes public. Now, if you’ve ever felt like by the time a company finally hits the public market, it’s already ballooned in value and you’re basically buying at a premium, you’re not alone.

Again, this is not something I do often, but I had, um, as you know from my previous shows, I believe heavily that this whole world of stable coins is going to be enormous. And I had my eye on a company called Circle and then trades with CR Cl, uh, which deals in stable coins, uh, which is a, a really big player in stable coins.

I think this is gonna be huge. Uh, but as soon as Circle went public, the valuation shot up, like just took off where it was kind of ridiculous and. At that point, basically it was just too expensive to jump in. It just didn’t make any sense. Now, if I’d had access to those shares before the IPO, and if it, you know, started where it actually started, I definitely would’ve taken the plunge and I actually would’ve made a lot of money.

But that didn’t happen. Now, this isn’t just about one company. We’ve, you know, seen this happen several times, uh, before people know there’s this big private company that, you know, all the. Insiders are gonna make a bunch of money on IPO comes bang, they all cash in, right? But there are some out there that are in that pre IPO phase right now, such as SpaceX, um, you know, Elon’s, uh, one of Elon Musk’s companies.

Um, you know, they are out there traveling space. They also own starlink, uh, all that kind of stuff. So, you know, that company’s gonna have a huge impact, at least. I mean, you know, I guess you don’t know for sure, but. Shown us one thing before he, he can, uh, he can build extraordinary companies. So that’s something I would be interested in.

But how do you get access to those deals, right? If you’re an accredited investor, as it turns out, I have good news on this show. Getting a piece of the action before these companies go public isn’t actually just for the ultra wealthy Silicon Valley insiders anymore. It’s actually becoming more accessible to accredited investors who want to get in early.

Potentially see greater upside. So that is a topic of this week’s show, and we will have, uh, that conversation right after these messages. Wealth formula banking is an ingenious concept powered by whole life insurance, but instead of acting just as a safety net, the strategy supercharges your investment.

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Turbocharge your investments visit. Wealth Formula banking.com. Again, that’s wealth formula banking.com. Welcome back to the show, everyone. Today my guest, uh, on Wealth Formula podcast. Christine Healey, she’s founder of Healy Pre IPO. Which is a, uh, boutique brokerage firm that gives high net worth investors access to some of the world’s most exclusive pre IPO opportunities.

Companies like SpaceX, open AI and Stripe long before they hit the public markets. Uh, she’s closed over 600 million in private market deals. Previously held leadership roles at firms like Destiny Tech 100 and Forge Global. She’s built a white glove concierge level service for investors who want insider access to vetted late stage private companies without the corporate red tape.

Welcome to the program, Christine. Thank you, buck. Great to be here. Well, um, let’s, let’s kind of start with, so we have a lot of, you know, retail investors, accredited investors. This may not be something, uh, that, that they know much about. So for investors who only know about public markets, uh, those types of stocks, what exactly is the pre IPO market?

How does it work? So I see a lot of high net worth investors that may hold, um, very skilled professional jobs. They might be doctors or lawyers or small business owners, and they see companies like SpaceX constantly in the news with these amazing milestones. Or they might use open AI’s product chat GBT every day in some cases.

But they’re seeing these amazing technological innovations as a bystander. A lot of them are saying, um, I’ve worked hard to build an amass some wealth. I’ve got a high income. I wish there was a way to actually financially participate in these stocks. Sure. So investing pre IPO is essentially a way to invest in these companies while they’re still private companies in a bespoke privately.

Brokered transaction where you might be matched with a private seller, like an early employee, or you might be matched with an early VC that’s looking for liquidity and you can actually get in before the IPO. So we’ve seen a lot of IPOs recently be very choppy, very volatile. Mm-hmm. In many cases, um, a lot of value in a technology company’s lifecycle is accruing purely on the private markets.

Since these tech companies are waiting longer and longer to IPO in a lot of cases. So if you are purely investing in the public markets, in many cases, you’ve missed the majority of a company’s growth cycle. So what I do is help investors, um, that are accredited to get into some of their favorite companies that, that they love, that they believe in.

Mm-hmm. That they’re inspired by. And to navigate the private market, which is very tricky, in some cases, messy and requires a lot of bespoke, um, process. Yeah. And, and I think, um, one of the things that I have noticed sort of, kind of sniffing around this pre IPO space, there’s obviously a few companies who, who do this and um, you know, one of the questions I always have when I’m looking at it as a retail investor is like.

Yeah, this is an interesting company. I hear about, you know, ripple or I hear about like Circle before it happened. Um, and the issue there becomes like, how in the world do you know if it’s a good price? Because, you know, the valuations, um, that these things are being offered at often look significant, right?

They’ll say the, there’s like a, uh, the last valuation was, you know, uh, literally, you know, half or. 25% of what, what the valuation based on the stock price that they’re trying to sell. How do you possibly navigate through that? I personally believe it’s one of those things where you get what you pay for, and if you actually go the extra mile to hire a pre IPO broker that specializes in this space, one of their core jobs is to help you contextualize pricing.

So I. Um, if you’re getting an offer at a certain price, they’ll help you understand how does this relate to the latest, uh, primary round of the company. But not just that, how does this relate to the market right now in that company to recent deals, to recent bids and offers by other buyers and sellers in this space?

So that’s. That’s really like going in with, uh, you know, an army of information and power and, and support by your side versus going in alone as a retail investor. So I believe that makes a lot of difference. Um, in my personal information, there’s more access to pre IPO than there has ever been, but it’s actually a lot of mediocre access, a lot of, um, unreliable parties, a lot of people that are really new to the market and lack the kind of nuance and experience in reps to.

Perform really well for their clients. And so it, it’s kind of foggy out there and a lot of people that are used to purely public investing, um, will have a really negative experience at first because they don’t even know which brokers they can trust or which platforms, or they try and do a deal, it falls through and they’re so discouraged.

Or like you’re saying, they have no way of contextualizing the pricing they’re seeing. Retail investors are really the most vulnerable to price exploitation or fee exploitation when it comes to these very actively traded names. Um, and so I think that’s what separates really a, a good or a great broker from these run of the mill platforms or crowdfunding, uh, you know, websites.

They’re gonna help you go into a negotiation with a seller, armed with information so you know what you’re getting and you can decide yes or no. I think one of the companies you mentioned was, uh, SpaceX. And it makes me think, uh, it’s obviously one of Elon Musk companies, um, believe it or not, despite, uh, how much we hear about Elon, Tesla is really the only public company and everything else is private.

How do we know Elon’s even gonna go private or go public with his stuff? Uh, you know, I think he, he seems to not necessarily think of it as advantageous. Is that one of the inherent risks in investing, you know, in, in a company, uh, like this, that, you know, listen, you may just not wanna go public? It’s a great question and really yes and no.

So yes, there’s an inherent risk in investing in private stocks that they are less liquid. There’s no shying away from that. But the interesting thing is that. Um, I personally don’t think for the average SpaceX investor, it may matter that much, whether SpaceX does exit in five years or in 10 years. Um, Elon is really the poster child of a, a founder, which historically hasn’t seemed to want to go public.

He’s not a huge fan of operating and, and, and reaching moonshot goals in the public eye. Um, but why I say it may not necessarily matter. Is that as the secondary markets grow and as liquidity grows, um, someone investing in SpaceX today could potentially be able to resell on the private market in, in several years to another private buyer.

Now, of course there’s no guarantee that assumes that there’ll be a replacement buyer in the market when you’re looking to sell. Regulations also require you to buy to be a long-term holder. So typically you wanna be holding for at least six months, but ideally longer to kind of have that, that provable intent to have housed long-term.

But in general, there is the possibility of reselling. Even if the IPO is is still further down the road. So I think that’s when it becomes really, really interesting because you can still invest in SpaceX if you believe in its growth, even if you believe that the IPO might be a decade away, let’s say, or, or even more.

Give us an example of how this has worked out positively for a client. Um, you know, from soup to nuts. Like what process? Somebody came in, they were interested in this, they bought that, and. They went to I PPO companies that went to IPO. I mean, there’s, there’s a number, there’s rubric, there’s Unity, there’s Pinterest, um, there’s, um.

There’s a number. Um, there’s also, ’cause I’ve been in this industry for so long, since 2018, you also see some of the companies that are still private and how much their valuations have grown on the private markets during that time. So there was a lot of investor activity around, um, 20 19, 20 20 in SpaceX, for example, where valuations were below.

Below 50 billion, give or take. Um, and now SpaceX just came out with their new tender, uh, priced at roughly a 400 billion valuation. So there you’re seeing, you know, astronomical growth for companies that are still private and still potentially have growth left in them as well. What have you seen on the other side of this?

’cause obviously there’s risk. You know, these aren’t startups we’re talking about SpaceX and, you know, Stripe or whatever. Uh, but. Compare the risk profile of something like, you know, investing in these pre IPOs versus public stock. Yeah, I mean there, there’s certainly risk. You see cases like 23 and Me, which was actively traded when I first started, um, for MA many years really.

Um, 23 and Me is now going through bankruptcy or liquidation and it’s kind of a mess. Um, you also see companies like FDX, which we’re approaching, I believe $40 billion, and of course completely imploded. So there’s also no shying away from the risk in this asset class. It’s not for everybody. How I see investors dealing with the inherent, um.

Risk around liquidity risks around these businesses, even, even existing, um, in the future is, um, either diversification, which is a natural way to, to manage risk or what’s really common in this asset class is, um, a flight to quality type effect or, or hyper concentration where investors are cutting down their lists of names to ones where they have the highest conviction.

So an investor that’s looking for, um, more of a track record of growth and price marks on a regular basis, that investor might be attracted to SpaceX because they’ve had these tenders that, um, have marked up the stock at, you know, incrementally higher valuations roughly every six months, which is really unique for, um, for a private company.

Or you could have, um, you know, a number of other reasons to look to different companies based on your particular thesis and your profile and what you’re looking to see. Mm-hmm. So would you say that this from a portfolio standpoint for, um, you know, somebody who’s, uh, an accredited investor probably should be in their, I don’t know, maybe an asymmetric risk category?

Yes, I would say so. Yeah. What, um, uh, you know, when you, what’s the process of, actually, I know you said this is from like, people who are trying to get, um, liquidity and stuff. Um, what’s the process of actually finding that from your side, like as a broker? Like how do you find these people? So first I figure out what’s the best fit for the investor.

So one of the main things is size, whether you’re investing at a hundred k, whether you’re investing at a couple million, um, whether you’re, you know, accredited or whether you’re a qualified purchaser, which is a higher level or a qualified investor or, or anything in between. So we’ll look at your particular timeline needs.

Profile, et cetera. Um, and then figure out who to match you to. So typically if you are a more retail investor, maybe you’re trying to invest a hundred k. You’ll end up investing in a, in a fund vehicle where you’re pooled together with other investors to together take down a block that could be a million or 5 million or 10 million.

So that’s what you should really expect when you are, um, coming in at say, a hundred k. You’ll go into some sort of. Fund, you know, for the most part. So I have a network of a ton of different counterparties, and if we’re looking for a fund, that’s where I look at, um, maybe family offices, VCs, specialty secondaries funds that already hold stock from previous rounds or from, maybe they’re getting an allocation in an upcoming primary from the company.

Sources like that. Um, and I, I talk to those parties in the network to see if there’s a relevant opportunity for my buyers. Yeah, so talk us a little bit about your due diligence process. Yeah, it’s important that as a broker, I’m not a fiduciary. I don’t hold that type of role. Um, where I come in is really to help source the deals for people, help them understand the structures, contextualize pricing, um, understand the, you know, the terms and the conditions of the vehicles they’re getting into.

Help them negotiate to see if we can cut fees to see if we can optimize, um, the economics, and then to help streamline closing. So, I. I am actually prohibited from giving too strong a view as to you should buy this or you should not buy this. Mm-hmm. But I can help arm my clients with, um, secondary market information and make sure they are really informed about what they want, about, um, how the pricing compares to other opportunities, and then they can make the decision.

So it’s really important regulatory wise that I’m not too pushy or opinionated, um, but I help my clients in a number of other ways to optimize what they’re already seeking. So you’ve, uh, you’ve closed, I guess 600 million, uh, in private deals. So, you know, what patterns have you seen in the most successful pre IPO investments?

I mean, you know, I know you’re not in a role to be advising per se, but just, you know, as, as an individual who’s, uh, observing this happening real time, what lessons, um, could, would you take away as, as somebody who’s investing in this space? Yeah, that’s a great question. I think in recent years we’ve seen hyper concentration.

So there’s been a very small number of companies like SpaceX, OpenAI, Stripe, Andel, which have accounted for the vast majority of activity. So that can make it tricky if you’re trying to sell an asset that’s outside of this, you know, top 10 or top 20. Um, on the other side, it can also be advantageous if you’re a buyer in a company that is less active, you have a bit more leverage with the sellers.

So it does depend on personal preference. You know, if you’re looking for a less active company and you wanna get a great discount, that’s a great, um, en environment and a backdrop to be in. Um, if you’re looking for. A bit more confidence in terms of future saleability. You might look for a more liquid opportunity, um, in a company that’s historically had a, a very active market like SpaceX.

So personal preference always, but I think one thing that’s important to keep in mind is, is that possibility of selling down the road. So if you are going into a deal today, it’s worth, um, speaking to the broker, speaking to the, the selling investment manager whose fund you’re going into. Do you allow resales?

How would that actually work? Will you charge me a fee if I want to resell in future? Or some of those things, um, or even the terms of what you’re buying. How would that play out in a future, uh, resale transaction? So, for example, um, investments that do not have carried interest or management fees on it, which we call zero zero, are much easier to resell in future.

So as with most things, it’s just kind of thinking through all the details, how they will play out and how. How much, um, autonomy you’d have in future if you, if you wanted to, to do something with that asset. So that can, that can really make the difference really, um, in terms of liquidity down the road, even on the private market still, Phil, you know, I know, again, just going back to the fact that you can’t necessarily give advice, like how do people get, I mean, how do people educate themselves then, like at any given particular investment?

Because again, you know, my limited experience on this is just seeing things on platforms. Getting valuations and such. And again, if you’re not really allowed to say, this is a good deal, this is not a good deal, who do we get that information from? Yeah, I mean, I can’t say this is a great deal, you should do it, but I can flag, um, you know, this is a discount to where recent deals are getting done or, um.

If this is roughly in line with the pricing of recent secondaries or some of that data, so you can kind of put two and two together and, and figure out if that qualifies as a good deal in your opinion. Um, and that’s really it. But one of the main challenges for this type of investing is relatively limited information.

Compared to what public market investors are used to getting. So there’s some amazing companies like Klarna, which just put a lot of information out there publicly for anyone to see in terms of their financials and stuff like that. Yeah. But that’s quite uncommon for these pre IPO companies. You have very kind of private companies like, um, SpaceX, like Open ai, like Impossible Foods, which are very protective about their information and almost never release.

Um. Tangible data points around the financials publicly. So, um, I think that’s why a lot of investors, especially institutions, have held off for quite a number of years on going all in, in this asset class, because you don’t have the same underwriting ability, you don’t have the same analysis, um, due to the, the limited information.

But on the other side, you see. Some really interesting success stories, um, in terms of gains and, and the wins. And now a lot of institutions and investors are saying, well, this might be a different process than I’m used to for public investing, but I’m gonna have to figure out a process around these, these private companies because I don’t wanna miss out.

So you can look to, like I mentioned, secondary market data. You can look at what the caliber of, um, institutions that have got involved. You know, do they have, um, tier one VC backers, um, all that kind of stuff. How has their momentum been in terms of funding rounds, in terms of tenders, et cetera, on a number of other data points, which helped.

Create a picture where otherwise we don’t have as much of a a data picture as you’d see with a publicly reporting company. What are some of the most interesting companies out there right now, in your opinion, that are in the space? You mentioned SpaceX. I’m relatively specialized in the sense that, you know, if the market itself is specialized in 10, 15, 20 names, that’s where I’m gonna focus my time as a broker.

So I spend a lot of time in names like Andal, Neuralink, SpaceX, OpenAI, Stripe, anthropic, um, and several others just based on where the demand is coming from my clients or where the sell interest is coming from. My seller clients too. So those are the companies I see as being very interesting. Um, very active right now.

And that’s really where I spend a lot of my time. Whereas some of the, the crowdfunding and the other platforms they talk about, we cover 300 companies or we’ve traded in 400 companies, and I’m saying, well. That means you’re not necessarily an expert in the ones that really matter to. A lot of investors right now are those platforms that we see on the, uh, internet.

Are they trying to do the role that you’re doing, but doing it sort of on mass, because you always see a broker fee on there. So essentially, take the platform away, put the human in. That’s you. Is that. Is that how it works? Yeah, pretty much. I see. You know, this has been such a lucrative industry for a number of years now that you’re seeing.

More new entrants, more new platforms, more new funds. Everyone trying to get a piece of the pie. And for the majority, they’re trying to take over the market. They have grand visions of centralizing everything. Everything’s gonna run through them. They’re gonna be a $10 billion company. And when all these companies are going left, I’m going right.

I’m saying I’m not trying to be a $10 billion company with hundreds of employees. I am trying to stay a small business to spend the majority of my time with my clients and on on the best deal flow possible for them, and really stay disciplined in that. So I’m not optimizing for scale, I’m optimizing for quality and performance.

Um, and I think that’s a differentiator when all these companies are trying to go huge and, you know, hiring like crazy. And some of their agents have only been in the market a year, been in the market two years, and I’m on, you know, seven years or so and counting. Um, and so yeah, you alluded it to as well in terms of scale, but that’s, that’s a huge differentiator and we all intuitively understand the difference between a, a large business and their approach.

Versus the small business approach. Um, I know many of your, your listeners are small business owners as well, so what you’re getting with me is a small business approach backed by years of expertise in this market. Right. Right. Hey, before I forget, and one I was curious about was, um, you know, there was a stock I always following, which was circle Internet.

I mentioned it before, because, because of the, uh, us, uh, US dollar coin, this stable coin. Um, my personal belief that this is, you know, just to, I mean, this is gonna revolutionize everything with the stablecoin world. And I’m curious, so now I’m looking at Circle Internet right now, and it’s priced at, well, it’s actually come way down.

It’s like at $162 right now. It had gone well into the two hundreds, 215 year, 250. Um, do you recall like what that was trading at in the pre IAPO space? Just, just to get some sense of like, you know. The differences, uh, that sometimes these things make in public market? Yeah, I, I don’t recall if there’s been any kind of split or reverse split, um, since they went public.

Maybe you, oh, the IPO was only like, gosh, just a few, like, um, two months ago. So yeah, I’m not a, I’m not aware of any kind of split or anything like that, so hopefully I’m speaking on an apples to apples basis. The market for circle leading up to their IPO was, I would say around $30 per share, give or take.

Yeah. Yeah. So maybe there’s been some split action and we can verify after that. But in the absence of any kind of split, that’s obviously a huge, huge, huge, um, jump from where trades could have gotten done on the private market, even in the months leading up to it. Wow. Yeah. Fascinating. Well, uh, Christine, how do people get ahold of you and your company if they’re, uh, interested?

I’m very active with educational information on LinkedIn under Christine Healey, H-E-A-L-E-Y. You can also find me on my website, healeypreipo.com. And I have a mailing list there too, where I send market insights, occasionally live deals, depending on suitability. Um, and I’m happy to speak to anyone and, and help them learn more.

Great. Thanks so much for being on the program. Thanks so much. We’ll be right back. You make a lot of money but are still worried about retirement. Maybe you didn’t start earning until your thirties and now you’re trying to catch up, and meanwhile you’ve got a mortgage and private school to pay for and you feel like you’re getting farther and farther behind.

Good news. If you need to catch up on retirement, check out a program put out by some of the oldest and most prestigious life insurance companies in the world. It’s called Wealth Accelerator. Can help. You amplify your returns quickly, protect your money from creditors, and provide financial protection to your family if something happens to you.

The concepts here are used by some of the wealthiest families in the world, and there’s no reason why they can’t be used by you. Check it out for yourself by going to wealth formula banking.com. Again, that’s wealth formula banking.com. Welcome back to the show everyone. Hope you enjoyed it. And, uh, again, I mean, listen, this is, uh, uh, again, the same kind of concept as we have in our credit investor club.

Investor club is basically giving you access to stuff that generally you don’t see in public. This is the same thing, except this isn’t like tech companies or other kind of, you know, companies that have. Tremendous value and have not gone public. You can essentially potentially buy stuff as a private investor, get unfair advantage because you’re a credit investor and ride these things up.

So it’s a really interesting concept. I mean, are they all gonna work? I don’t know. I, I’m not in this world right now, but it sure sounds like something to look into if it is of interest to you. And that’s all I have this week on Wealth Formula Podcast. This is Buck Joffrey signing off.

Bitcoin may be breaking records again, but this time it’s not because of retail frenzy. Search trends, social media chatter, and small-investor activity are all far quieter than they were in 2017 or 2021. The people driving this move aren’t hobby traders—they’re the biggest institutions and the wealthiest investors on the planet.

Look at BlackRock. Larry Fink once dismissed Bitcoin as an “index of money laundering.” Now he’s calling it “digital gold,” and his firm’s iShares Bitcoin Trust (IBIT) has become the fastest-growing ETF in history. 

It’s pulled in nearly $90 billion, representing more than 3% of all the Bitcoin that will ever exist. Those billions aren’t coming from TikTok influencers—they’re coming from pensions, hedge funds, and the kind of family offices that have multi-generational plans for capital preservation and growth.

Even Harvard University has made the leap. Back in 2018, its star economist Kenneth Rogoff said Bitcoin was more likely to hit $100 than $100,000. Today, Harvard’s endowment owns more of BlackRock’s IBIT than it does Apple stock in its U.S. equity portfolio. That’s not just a change of heart—it’s a complete reversal in worldview.

And of course, there’s Michael Saylor, whose MicroStrategy now holds close to 3% of the total future Bitcoin supply, turning a business software company into a corporate Bitcoin vault.

This is institutional FOMO. The biggest asset manager on Earth is selling it, elite universities are holding it, corporate treasuries are betting their future on it, and family offices are adding it to the same portfolios that hold their blue-chip stocks and trophy real estate.

But institutions aren’t the only ones making this move. There’s another wave—quieter but just as significant—coming from the ultra-high-net-worth crowd. The centimillionaires. 

The people who can wire $10 million into a position without blinking. I’ve always said: never take financial advice from someone with less money than you. Well, Gary Cardone has a lot more than me—and he’s all in on Bitcoin.

Gary is part of what they call “smart money.” He’s in the same camp as the other ultra-wealthy who aren’t just dabbling in crypto—they’re making conviction bets. 

And when you see people with that kind of capital and that kind of access all moving in the same direction, it’s worth listening to why. That’s exactly why I sat down with him—to hear, straight from someone in that rarefied circle, why Bitcoin has gone from a curiosity to a core holding.

Hey everyone,

If you’ve been following me for any length of time, you already know that I believe real estate is the single greatest wealth-building tool available to everyday investors like you and me. (Although, I’ll admit, Bitcoin is making a strong case to be in that conversation.)

But every once in a while, it’s worth stepping back and asking: Why has real estate created more millionaires than any other asset class—and why do the ultra-wealthy keep buying it, decade after decade?

It comes down to a unique stack of advantages that you simply can’t replicate anywhere else:

Now, here’s where things get truly magical: cost segregation combined with 100% bonus depreciation. These strategies let you front-load those tax deductions, often allowing you to write off a massive portion of your investment in the first year.

For example, let’s say you buy a property for $1 million and put down $300K. With a proper cost segregation study and bonus depreciation, you might receive a K-1 showing a $300K loss that same year. That’s a paper loss offsetting your taxable income—meaning money that would’ve gone to the IRS is now working to build your wealth instead.

And with Congress reinstating 100% bonus depreciation, this playbook for savvy investors is back at full strength. If you think about it, upfront tax savings alone can turbocharge your returns before you’ve even collected your first rent check.

This week on Wealth Formula Podcast, I sit down with Gian Pazzia, chairman and chief strategy officer at KBKG, to pull back the curtain on cost segregation and bonus depreciation. We’ll dig into:

If you’ve ever wondered how sophisticated investors legally shelter huge amounts of income while building massive wealth, this episode gives you the inside track.

P.S. If you want access to the “Do it Yourself” Cost Segregation tool mentioned in this podcast, you can access it HERE. Use the code FORMULAPROMO to get 10% off. 

Last week, we talked about side gigs—smart ways to earn extra income outside your day job. One of the options we touched on was affiliate marketing, a tried-and-true method still relevant today.

But here’s another strategy I’ve personally dabbled in: building websites designed to generate leads. These sites are created with specific search terms in mind—mine were focused on cosmetic surgery—but the model can be applied to nearly any industry.

Once your site is ranking on Google and generating traffic, you rent out that digital space to businesses who want the leads. I had a friend who made millions using this model with smartlipo.com back in the day. It was like owning valuable digital real estate.

But that was then. The landscape has shifted. With the rise of tools like ChatGPT and Perplexity, fewer people are relying on traditional search engines. So the question is:

Is this still a viable side hustle in 2025?

And if it is, how does it work now—and how can you get started?

That’s exactly what we’re diving into on this week’s Wealth Formula Podcast.

My financial journey started after I accidentally picked up one of Robert Kiyosaki’s books. It was the end of my honeymoon in Puerto Vallarta, and my wife (at the time) and I were waiting for our plane back home.

I decided to grab a book from one of the little airport shops, but there weren’t many choices. In fact, I believe there were four, and three of them were romance novels with pictures of muscular men with long blonde hair on them.

The only other option was Robert Kiyosaki’s Cashflow Quadrant. I had no idea who Robert Kiyosaki was, nor did I really care that much about investing and personal finance. But it sounded like a better read than the others, so I bought it.

At the time, I had just finished residency training and was focused on my career ahead. I never really thought much about money beyond the fact that I was finally going to make some after years of indentured servitude as a surgical resident.

But on the flight back from Mexico, everything changed. Reading that book felt like a bolt of lightning, and it changed my mindset forever. This experience, I later found out, has happened to countless people I’ve met since then.

I call it taking the pill (the book is purple).

A world of possibilities suddenly opened up to me. I know it may sound strange, but the idea that I could ever not have a job and, instead, become an entrepreneur had never before occurred to me.

In hindsight, I understand why. I was a very good student. “A students” get addicted to the educational system. When you get As, you are rewarded. You get accolades. Your teachers love you. What’s not to love?

That makes you try even harder. That feeling of success is addictive, and you want more of it. So you aspire to do the things that the smart kids are supposed to do, like going to a fancy college and becoming a lawyer or doctor.

If you succeed in a system, you don’t doubt the system. You don’t look for alternatives. The system I bought into was an educational system created by industrialists a century ago. They didn’t want to train entrepreneurs; they wanted to train a workforce. And I was winning in that system.

C students, on the other hand, have nothing to lose. They search for success in other ways and often end up more successful than those who did better in school. That’s why A students rarely become entrepreneurs. They never have a reason to look outside the system.

The purple book I read on that plane helped me break away from that world. I saw life differently after reading it. Even though I was already a surgeon who had completed residency, I never wanted to work for anyone ever again.

I started my own cosmetic surgery practice, then another medical business, and had a lot of success. I also tried my hand at other businesses that were less successful. I made lots of money and lost lots of money. Living the life of an entrepreneur is not for the faint of heart.

I also believe, to a certain extent, that you are either born an entrepreneur or you are not. I was born an entrepreneur, despite the fact that it took me over 30 years to discover it.

Because of that, I never push anyone to quit their job and go out on their own. That kind of risk is not for everyone. That said, there are certainly ways to dabble in entrepreneurship without risking everything.

People call them side hustles. Side hustles are ways to make a little extra money that you can use to make an extra investment or simply go on a nicer vacation.

One of those side hustles I have engaged in is affiliate marketing. Ten or fifteen years ago, I had websites designed to sell products to people by providing links to things they might be interested in—even Amazon links. If someone decided to buy something after clicking my link, I would get a small commission from the seller. It was not a huge money maker for me, so eventually I decided to focus on other things.

However, opportunities like this still exist. And these days, it doesn’t really take any technical savvy to participate. On this week’s episode of Wealth Formula Podcast, we learn about one option that may be of interest to you.

This one may or may not be a good fit for you, but it will get you thinking. There are a million ways to make money out there. All you have to do is look for them. You can start by listening to this week’s episode of Wealth Formula Podcast.

P.S. I have not used the platform we talked about on the show, nor do I stand to benefit from it financially. It’s purely educational.