Wealth Formula

Wealth Formula

By Buck JoffreyBusinessInvesting
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Wealth Formula episodes

  • 143: Who Cares About Poverty and Equality?
    It’s so strange to think of the way our politics have evolved even in my lifetime. The first president I remember (barely) is Jimmy Carter. Most of grade school for me were the Reagan years.
    After a bumpy start, the 1980s became the roaring 80s. It was a decade remembered for wealth and excess. Remember Wall Street with Michael Douglas and Michael J. Fox as the Alex P. Keaton on Family Ties?
    The Republican party, at the time, was clearly the party of the rich and made little effort to concern itself with poverty and equality. Ideologically, it was a different mind sent. The appealing nature of the 80s was that it was aspirational. It was indeed Morning in America. After the hopelessness of the Carter economy, everyone seemed optimistic.
    That’s why even the middle class, the traditionally democratic bastion of unions and the democratic party, defected. They became Reagan democrats.
    The good times continued through the 90s into the Clinton years. In fact, Clinton represented a new kind of democrat who embraced Wall Street and free trade. The old democratic party seemed dead and the difference between Democrats and Republicans was minimal. Rising tides raise all ships—even if some ships are rising more than others.
    A recent Brookings Institute analysis found that out of the last five presidents the largest annual income gains in the middle class occurred during the Reagan and Clinton years. In general, these were good times in America. People were generally pretty happy and optimistic.
    Now to be clear, there is a ton of data showing that it makes virtually no statistical difference to the economic performance of the country whether there is a Republican or Democrat in the White House. In fact, I hate to say it, but there is a very slight advantage to the democrats.
    What I’m getting at here is that when times were good economically for the middle class, there was less divisiveness in the country.
    It is no coincidence that over the last 2 decades, median household incomes have barely budged, wages are declining and that this corresponds to the rise of political and demographic divisiveness and demagoguery.
    Almost 80 percent of Americans believe that today’s children will grow up worse-off than their parents. Think about that. That isn’t Morning in America. That’s downright depressing.
    Now what happens when people are not doing well and are worried about the future? Well, it starts with blaming everyone else for our problems. Maybe that’s why anti-semitism and white nationalism is on the rise?
    People become more tribal and insular. They stick with their own and look for scapegoats. The worst example of this in recent history was, of course Nazi Germany which followed a horrific economic period of hyperinflation following the first world war as it was paying reparations.
    That was extreme but we now see a lot more divisiveness in our politics and both parties are pandering to our worst instincts. I really hate that my kids are growing up in this kind of polarized country.
    Now most of us are doing pretty well and we’ve made a lot of economic gains over the past several years after the great recession so it’s easy to not recognize what is underlying all this strife. But that’s a mistake. Why? Because eventually when enough people are hurting, they will come for us with pitchforks. Whether that’s with literal civil unrest or 70 percent tax brackets suggested by the likes of Alexandria Ocasio-Cortez—it’s time to take this seriously.
    There are a lot of smart people who you might not expect to care that recognize what is going on and who have spoken about it extensively. Robert Kiyosaki, Billionaire Charles Koch, CEO of Koch industries, and even libertarians who most people consider insensitive to the poor recognize this. Now, how to deal with the problem is another issue entirely.
    This week, we speak with a libertarian from the Cato Institute, Mike Tanner, who shares some common sense strategies that are more nuanced than
    36 min
  • 143: Who Cares About Poverty and Equality?
    It’s so strange to think of the way our politics have evolved even in my lifetime. The first president I remember (barely) is Jimmy Carter. Most of grade school for me were the Reagan years.
    After a bumpy start, the 1980s became the roaring 80s. It was a decade remembered for wealth and excess. Remember Wall Street with Michael Douglas and Michael J. Fox as the Alex P. Keaton on Family Ties?
    The Republican party, at the time, was clearly the party of the rich and made little effort to concern itself with poverty and equality. Ideologically, it was a different mind sent. The appealing nature of the 80s was that it was aspirational. It was indeed Morning in America. After the hopelessness of the Carter economy, everyone seemed optimistic.
    That’s why even the middle class, the traditionally democratic bastion of unions and the democratic party, defected. They became Reagan democrats.
    The good times continued through the 90s into the Clinton years. In fact, Clinton represented a new kind of democrat who embraced Wall Street and free trade. The old democratic party seemed dead and the difference between Democrats and Republicans was minimal. Rising tides raise all ships—even if some ships are rising more than others.
    A recent Brookings Institute analysis found that out of the last five presidents the largest annual income gains in the middle class occurred during the Reagan and Clinton years. In general, these were good times in America. People were generally pretty happy and optimistic.
    Now to be clear, there is a ton of data showing that it makes virtually no statistical difference to the economic performance of the country whether there is a Republican or Democrat in the White House. In fact, I hate to say it, but there is a very slight advantage to the democrats.
    What I’m getting at here is that when times were good economically for the middle class, there was less divisiveness in the country.
    It is no coincidence that over the last 2 decades, median household incomes have barely budged, wages are declining and that this corresponds to the rise of political and demographic divisiveness and demagoguery.
    Almost 80 percent of Americans believe that today’s children will grow up worse-off than their parents. Think about that. That isn’t Morning in America. That’s downright depressing.
    Now what happens when people are not doing well and are worried about the future? Well, it starts with blaming everyone else for our problems. Maybe that’s why anti-semitism and white nationalism is on the rise?
    People become more tribal and insular. They stick with their own and look for scapegoats. The worst example of this in recent history was, of course Nazi Germany which followed a horrific economic period of hyperinflation following the first world war as it was paying reparations.
    That was extreme but we now see a lot more divisiveness in our politics and both parties are pandering to our worst instincts. I really hate that my kids are growing up in this kind of polarized country.
    Now most of us are doing pretty well and we’ve made a lot of economic gains over the past several years after the great recession so it’s easy to not recognize what is underlying all this strife. But that’s a mistake. Why? Because eventually when enough people are hurting, they will come for us with pitchforks. Whether that’s with literal civil unrest or 70 percent tax brackets suggested by the likes of Alexandria Ocasio-Cortez—it’s time to take this seriously.
    There are a lot of smart people who you might not expect to care that recognize what is going on and who have spoken about it extensively. Robert Kiyosaki, Billionaire Charles Koch, CEO of Koch industries, and even libertarians who most people consider insensitive to the poor recognize this. Now, how to deal with the problem is another issue entirely.
    This week, we speak with a libertarian from the Cato Institute, Mike Tanner, who shares some common sense strategies that are more nuanced than si
    36 min
  • 142: Gold: To Buy or Not to Buy? That is the Question
    Now some of you know that I have been thinking controversial thoughts even within the “alternative” investing space lately. It’s funny because I’m even a little uneasy about saying this but…I will come out of the closet. I no longer own gold.
    I know, I know. Some of you are disowning me as we speak. My own hero Robert Kiyosaki loves gold and, if he heard me say that I don’t believe in it any more, he would never come on my show again.
    Fortunately, I’m quite confident he doesn’t listen to my show so that shouldn’t be a problem. I’ll just wait a little while before I ask him to come back on again.
    For those of you who have not heard me explain my stance on gold—well, I just don’t understand why I wouldn’t just own more real estate instead. After all, the reason to buy gold is as an anti-dollar. Gold goes us as the dollar goes down. In other words, it’s an inflationary hedge.
    But so is real estate. In fact, real estate also throws off cash flow and can be leveraged. It is no more volatile than gold and it has tax advantages up the wazoo. Taxes on the sale of gold, on the other hand, are worse than capital gains.
    Ok, so all that said, I’m still trying to keep an open mind. I’m talking to people and letting them try to convince me why I should own gold. And my guest this week makes some pretty compelling points.
    So, if you are trying to figure out whether or not you should own gold, listen to this week’s episode of Wealth Formula Podcast. It may help you make the decision once and for all.
    46 min
  • 142: Gold: To Buy or Not to Buy? That is the Question
    Now some of you know that I have been thinking controversial thoughts even within the “alternative” investing space lately. It’s funny because I’m even a little uneasy about saying this but…I will come out of the closet. I no longer own gold.
    I know, I know. Some of you are disowning me as we speak. My own hero Robert Kiyosaki loves gold and, if he heard me say that I don’t believe in it any more, he would never come on my show again.
    Fortunately, I’m quite confident he doesn’t listen to my show so that shouldn’t be a problem. I’ll just wait a little while before I ask him to come back on again.
    For those of you who have not heard me explain my stance on gold—well, I just don’t understand why I wouldn’t just own more real estate instead. After all, the reason to buy gold is as an anti-dollar. Gold goes us as the dollar goes down. In other words, it’s an inflationary hedge.
    But so is real estate. In fact, real estate also throws off cash flow and can be leveraged. It is no more volatile than gold and it has tax advantages up the wazoo. Taxes on the sale of gold, on the other hand, are worse than capital gains.
    Ok, so all that said, I’m still trying to keep an open mind. I’m talking to people and letting them try to convince me why I should own gold. And my guest this week makes some pretty compelling points.
    So, if you are trying to figure out whether or not you should own gold, listen to this week’s episode of Wealth Formula Podcast. It may help you make the decision once and for all.
    46 min
  • 141: Tokenizing Real Estate with Mathew Sullivan
    we are starting to see blockchain projects creep their way into real estate. It’s just a matter of time that title searches and escrow companies become as useful as syphilis doctors.
    The challenge, in my opinion, is identifying what projects are actually useful. What projects actually need a blockchain or create some additional value that is not already there.
    After all, it is well documented that a number of companies simply added blockchain to their name to seem more desirable in 2017. In fact, some publicly traded companies saw appreciable differences in their stock price after changing their names to include “blockchain”.
    So, as much as I am a student of distributed ledger technology, I am also skeptical of many of the applications that I am seeing out there.
    In order for a project to be worth investing in, it has to create value that is not currently available. My guest today makes the case for the tokenization of real estate—specifically extracting equity from your personal residence through security tokenization instead of a home equity line of credit.
    He also speaks to the many other possible applications of blockchain to real estate investing. I thoroughly enjoyed this discussion with Mathew Sullivan from QuantmRE and, even if you don’t care about cryptocurrency, you will find this interview interesting and useful. This brave new world of blockchain is here before us. You won’t be able to ignore it.
    50 min
  • 141: Tokenizing Real Estate with Mathew Sullivan
    we are starting to see blockchain projects creep their way into real estate. It’s just a matter of time that title searches and escrow companies become as useful as syphilis doctors.
    The challenge, in my opinion, is identifying what projects are actually useful. What projects actually need a blockchain or create some additional value that is not already there.
    After all, it is well documented that a number of companies simply added blockchain to their name to seem more desirable in 2017. In fact, some publicly traded companies saw appreciable differences in their stock price after changing their names to include “blockchain”.
    So, as much as I am a student of distributed ledger technology, I am also skeptical of many of the applications that I am seeing out there.
    In order for a project to be worth investing in, it has to create value that is not currently available. My guest today makes the case for the tokenization of real estate—specifically extracting equity from your personal residence through security tokenization instead of a home equity line of credit.
    He also speaks to the many other possible applications of blockchain to real estate investing. I thoroughly enjoyed this discussion with Mathew Sullivan from QuantmRE and, even if you don’t care about cryptocurrency, you will find this interview interesting and useful. This brave new world of blockchain is here before us. You won’t be able to ignore it.
    50 min
  • 140: Multifamily Mastery and Infinite Returns with Janet LePage
    I remember being in medical school thinking that I wanted to be a surgeon. The idea of it appealed to me very much. I certainly had the personality of a surgeon. But there was something about which I felt very insecure.
    You see, growing up, my dad was about as white collar as they get. I didn’t learn anything about cars and never put up any shelves. The only reason to think I was any good with my hands at all was the fact that I excelled in hand-eye-coordination sports like ice hockey and table tennis (aka ping-pong).
    So as much as I loved the idea of being a surgeon, I had this big fear that I would be horrible at it. And, in the beginning, I kind of was!
    In medical school, all of the guys I liked were orthopedic surgeons. They were all into sports like me. The problem was that they were all carpenters at heart and I was NOT. I remember an orthopedic surgery resident handing me a saw to amputate a guy’s leg at the VA. Having that tool in my hands wasn’t pretty. Fortunately, the leg was suppose to come off anyway.
    Eventually, I realized that I was better at soft tissue surgery (no bones). I felt that I was better with fine movements than using power tools. That’s one of the reasons I decided to operate on brains.
    In fact, the first time I ever used a drill, it was in medical school drilling through someone’s skull on my neurosurgery rotation. I got pretty good with that drill after a while. It was the only power tool I liked.
    I remember getting confident enough practicing on people’s skulls that I bought a drill at the hardware store to put up some shelves in my apartment for the first time.
    Okay…so all of this sounds a little messed up I know. But it’s true. The good news for me was that there was a little bit of a learning curve getting my hands wet but pretty soon, I became a pretty darn good surgeon.
    In hindsight, the fear and anxiety of not being good at surgery was silly. As it turned out, becoming a good surgeon was really no different than becoming good at anything else in life—it took practice.
    In the case of most surgical procedures, you sort of do the same maneuvers every case. After my neurosurgery stint (which I left because of the hours), I spent some time doing cosmetic surgery. I watched the masters do hundreds of operations.
    There was one guy I watched that was particularly interesting to me because his results were so good and so consistent. What I noticed when I watched him carefully was that he did everything the same every single time. In fact, I counted about 6 discreet maneuvers that he did for every patient and wrote them down.
    When I started doing my own cases, I did those six steps and, from the very first case, my results were outstanding. During my career I did several hundred facelifts and did them exactly the same way every time.
    I got faster, more precise, and there were fewer and fewer wasted movements. My patients thought I was an artist. But the truth was that I was more of a robot than an artist. I am the least artistic person I know.
    This experience of mastery was profound for me. I felt like I had discovered a larger secret in the process of being a good facelift surgeon. The secret was that you could master just about anything if you cracked the code and did it over and over again the same way every time. That’s all that mastery really is.
    My guest on this week’s Wealth Formula Podcast is special. At a relatively young age, she has become a master at her craft and has shown the same kind of consistency with her financial outcomes as I did at my peak with surgical outcomes.
    Her name is Janet LePage and she is computer scientist who has cracked the code to successful multifamily real estate investing. In this episode, we will learn how she did it.
    Buck
    P.S. Don’t forget to sign up for our upcoming Wealth Formula Investor Meetup in Scottsdale, AZ.
    51 min
  • 139: Ask Buck New Year’s Edition!
    You know it’s been a hell of a year in terms of market volatility right? Now, in cryptocurrency, we expect that. It is a speculative asset class with binary outcomes. That’s why we only invest money in money that we can lose. In 2018, we definitely lost it (who knows about 2019).
    But the equity markets are supposed to be where you put your retirement money! Whats up with the volatility? December has been the worst month in the stock market since 2008 and could very well be the worst December since 1932 during the Great Depression.
    Why? Because the fed raised rates by one quarter of one percent? Because there is a government shut down over a border wall? Why do these seemingly unrelated circumstances affect your publicly traded equities?
    The answer…your wealth in the stock market is not real. When people get nervous and there is a sell off in the market, your wealth vanishes. Investing in the stock market is not conservative as conventional financial wisdom has led you to believe. It gives you exposure to systemic risk that you cannot control.
    Now I know some of you skeptics out there will say yeah Buck the real estate market is not an uncorrelated asset either. That’s absolutely true but here is the difference.
    You see, the money I have tied up in real estate is real. How do I know that? Well, I can see, touch, and feel an apartment building. And people have to live somewhere so they keep paying if they need a roof over their head. People sell stocks so they can pay their rent.
    As for the value of the building. Maybe it will go down in value for a period of time but if I’m making money from the asset now, why do I even care? I’ll just cash flow for a few years and when the value goes back up, maybe I’ll sell (or maybe not).
    These are not new concepts for this show but worth repeating because I am sensing panic out there with stock market investors and I am getting a lot of questions about where to invest or where to hold cash.
    Rather than be foolish and give you financial advice, let me point out that my own strategy continues to be to buy moderately leveraged real estate with value add opportunities in high growth markets (Dallas, Houston, Phoenix, Atlanta). If you are an accredited investor and you want to know exactly what I’m up to, join investor club ASAP and you can decide if you want to do the same.
    As for where to keep cash, I’ll say it again. There is only one vehicle that I know that continued to provide solid positive compounding growth and liquidity through the Civil War, the Great Depression, and the Great Recession. It’s called Wealth Formula Banking and, in my opinion, this is the best risk adjusted long term investment ever.
    If you are tired of feeling queasy not knowing which way the market is turning, it may be time to really take a look at this option. 
    I think we are in for some serious volatility in the next year. That said, I do not believe that we are headed for another 2008 right now. The biggest problem we have right now is that rates are normalizing (although mortgage rates remain low) and there is a tremendous amount of political uncertainty. The markets hate uncertainty.
    Sitting on cash in an almost certain inflationary environment may not be in your best interests either. That guarantees you lose money as inflation exceeds the nominal interest you are earning at the bank.
    Markets go up and down even though in good times we never seem to remember that. It doesn’t mean we freeze. It means we make decisions based on what is in front of us. In this week’s episode of Ask Buck, we touch on these topics and more.
    Start out the year with some Wealth Formula Wisdom. Don’t miss this episode.
    46 min

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The Wealth Formula - by Buck Joffrey