Wealth Formula Podcast

By Buck JoffreyBusiness Investing

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Wealth Formula Podcast episodes

May 19, 2024 429: Taxocracy
Tom Wheelwright, my friend and author of Tax-Free Wealth, describes the US tax code simply as a series of government-sponsored incentives. As someone who hates paying taxes, this fact has made me extraordinarily patriotic. The problem is, that sometimes incentives backfire. Case in point—during the British Raj rule in India, there was a proliferation of venomous cobras in Delhi. To deal with this problem, the colonial government introduced a bounty/reward program where people would be paid a cash amount for every dead cobra they brought to the authorities. Initially, this seemed to work as intended - the cobra population started declining as people hunted and killed the snakes to earn the reward money. However, people soon realized they could exploit this system by breeding and farming cobras specifically to kill them and collect the reward. Driven by the monetary incentive, many started cobra breeding operations. When the British officials discovered this unintended consequence of their bounty program - people were now breeding more cobras than they were killing - they scrapped the reward program altogether. This led to another unintended effect - with no more reward money to be made, the cobra breeders simply released their now-worthless snakes into the wild, causing the cobra population to proliferate even more than before the bounty was introduced. As an American of Indian descent, I would love to tell you that the Colonial British were just a bunch of idiots. But, the reality is that the cobra effect is alive and well in the US tax code. To explain how, this week on Wealth Formula Podcast I interview one of America's leading experts on tax policy. Show Notes: 04:31 What is Taxocracy? 06:11 Tax Codes Are Just Incentives 07:15 Are the Tax Codes Making Americans Disapprove of the Economy? 08:30 The Global Wealth Tax 13:22 President Biden's Proposal on Capital Gain 14:38 The Death Tax 18:17 In Comparison to President Trump's Policy 20:39 The Mansion Tax 23:59 Other Tax Influences 25:46 The Tax Foundation
31 min
May 15, 2024 428: Velerity Wealth Update 5/15/24
My key takeaway from our guest (Ryan Bourne from the Cato Institute) on this week’s episode is that policy mistakes that adversely impact the free markets happen for a variety of reasons:
Misread of data
Poor use of policy tools
Political motivation
National Security interests
Whatever the reason, the consequences of policy mistakes are real for investors.
For example, the FED let inflation run too hot when it thought it was transitory, which probably then created a situation where they had to hike more aggressively than they would have if they caught inflation at the front end. Resulting in a detrimental hit to interest rate-sensitive investments such as real estate and debt securities.
Today, we can see examples of potential fiscal and monetary mistakes unfolding in front of us:
On the monetary policy front: the FED is waiting for data it needs to start cutting rates…but, it’s running into the presidential elections timeframe (RNC convention in July, DNC in August). So, it may decide to not touch the FED rate until end of year…Thus the FED may be forced to make a policy error due to political considerations.
On the fiscal policy front: we see large investments to support US manufacturing; large investments to onshore critical technologies such as semiconductors; trade protectionism including tariffs on imports (new tariffs announced today on Chinese EVs, storage batteries, steel and aluminium products); immigration policy is also at risk of politically motivated policy decisions.

As investors, what can we do?
It’s not possible to predict and factor in the impact of all of these policies.
What we can do is isolate key macro themes that are likely to drive secular trends over the coming decades.
For example:
The Aging population in the US and other developed countries. This will drive growth in health and wellness products and services.
Investment in upgrading the US grid to support huge demand of electricity (data centers, AI driving computing, EVs) and to accommodate new energy sources.
Deployment of AI in key industries such as biotech to accelerate drug discovery.
Historically high level of cash ($6 trillion) is sitting on the sidelines as investors decide to clip 5% interest in money market funds.
As soon as any signal comes from the FED that it is ready to cut rates, or even if it is going to significantly taper its Quantitative Tightening policy, there will be an enormous amount of capital rushing back into investments: equities, bonds, real estate etc.

Investors should already start deploying their capital into investments.
Do not sit on cash and/or money market funds. At 5% money markets may be tempting, but that rate will not last when the FED starts cutting and then you’ll be chasing assets that have already appreciated dramatically.
20 min
May 15, 2024 428: News of the Week 05/15/24
My key takeaway from our guest (Ryan Bourne from the Cato Institute) on this week's episode is that policy mistakes that adversely impact the free markets happen for a variety of reasons: Misread of data Poor use of policy tools Political motivation National Security interests Whatever the reason, the consequences of policy mistakes are real for investors. For example, the FED let inflation run too hot when it thought it was transitory, which probably then created a situation where they had to hike more aggressively than they would have if they caught inflation at the front end. Resulting in a detrimental hit to interest rate-sensitive investments such as real estate and debt securities. Today, we can see examples of potential fiscal and monetary mistakes unfolding in front of us: On the monetary policy front: the FED is waiting for data it needs to start cutting rates...but, it's running into the presidential elections timeframe (RNC convention in July, DNC in August). So, it may decide to not touch the FED rate until end of year...Thus the FED may be forced to make a policy error due to political considerations. On the fiscal policy front: we see large investments to support US manufacturing; large investments to onshore critical technologies such as semiconductors; trade protectionism including tariffs on imports (new tariffs announced today on Chinese EVs, storage batteries, steel and aluminium products); immigration policy is also at risk of politically motivated policy decisions. As investors, what can we do? It's not possible to predict and factor in the impact of all of these policies. What we can do is isolate key macro themes that are likely to drive secular trends over the coming decades. For example: The Aging population in the US and other developed countries. This will drive growth in health and wellness products and services. Investment in upgrading the US grid to support huge demand of electricity (data centers, AI driving computing, EVs) and to accommodate new energy sources. Deployment of AI in key industries such as biotech to accelerate drug discovery. Historically high level of cash ($6 trillion) is sitting on the sidelines as investors decide to clip 5% interest in money market funds. As soon as any signal comes from the FED that it is ready to cut rates, or even if it is going to significantly taper its Quantitative Tightening policy, there will be an enormous amount of capital rushing back into investments: equities, bonds, real estate etc. Investors should already start deploying their capital into investments. Do not sit on cash and/or money market funds. At 5% money markets may be tempting, but that rate will not last when the FED starts cutting and then you'll be chasing assets that have already appreciated dramatically.
19 min
May 12, 2024 427: A Libertarian Perspective on the Market Economy
I have frequently described myself as most aligned with libertarian thought when it comes to my own politics. In terms of the economy, libertarians believe in the concept of a free market. Libertarians argue that a truly free market fosters prosperity, innovation, and individual liberty. But that doesn't really describe the American economy, does it? Over the years, the American economy has seen a proliferation of regulations at the federal, state, and local levels that have significantly constrained economic freedom. In addition, governments constantly intervene in the economy through corporate subsidies, bailouts, and preferential treatment. You don't need to look further than the recent regional bank bailouts to see that. Libertarians would argue that such intervention distorts market incentives and motivations. For example, how are banking practices going to change for the better if the bankers know they are going to get bailed out if things go wrong? Does a truly free market even exist? I don't know of one. And perhaps the ruthless nature of the free market is one that we wouldn't truly find appetizing anyway. However, there is no doubt in my mind that a "freer" market would do the economy some good. My guest on this week's Wealth Formula Podcast is from the libertarian think tank, Cato Institute, and explains how government market intervention has hurt us and how it will continue to do so if policies do not change. Show Notes: 04:29 What is the Cato Institute? 05:32 The Market Prices Are Under Siege 08:00 How Do Market Prices Provide Value For the Economy? 11:45 Inflation VS Price Spikes 16:52 Is the Central Bank Policy Misguided? 19:11 Are We Hitting the Inflation Target Soon? 25:13 What Could We Be Missing That Would Keep Inflation Numbers High? 28:13 How Will the Election Affect Decision in Policy?
33 min
May 08, 2024426: Velerity Wealth Update 5/8/24
Regarding the recent Podcast:
US debt fears overblown
US debt is high, but not unsustainably so (compared to global economies)
A more relevant concern may be focused on the appetite or ability of investors to buy the quantum of debt being issued by the US government.
Foreign investment in US debt has declined
China and other central banks have been buying gold
US treasury auctions are historically large ($125 billion on auction this week)
As investors how do we position our investment portfolios for risks related to spiraling and unsustainable debt levels by our government:
Resulting conditions will likely consist of high inflation, high interest rates, higher taxes, slower economic growth
Real assets tend to perform better. Gold, real estate, aviation assets.
Better to have some leverage
Tax efficient investments (such as real estate and aviation assets)
Current market trends
Latest FED outlook
Interest rate outlook
26 min
May 08, 2024 426: News of the Week 05/08/24
Regarding the recent Podcast: US debt fears overblown US debt is high, but not unsustainably so (compared to global economies) A more relevant concern may be focused on the appetite or ability of investors to buy the quantum of debt being issued by the US government. Foreign investment in US debt has declined China and other central banks have been buying gold US treasury auctions are historically large ($125 billion on auction this week) As investors how do we position our investment portfolios for risks related to spiraling and unsustainable debt levels by our government: Resulting conditions will likely consist of high inflation, high interest rates, higher taxes, slower economic growth Real assets tend to perform better. Gold, real estate, aviation assets. Better to have some leverage Tax efficient investments (such as real estate and aviation assets) Current market trends Latest FED outlook Interest rate outlook
24 min
May 05, 2024 425: The US Government Ponzi scheme?
Is it me or is no one talking about high U.S. debt levels anymore? Conventional wisdom has always been that high debt levels lead to inflation and the destruction of currencies, and money printing conjured up images of wheelbarrows full of worthless bills and economies in freefall. Then one day, the political party that used to care about fiscal responsibility stopped caring and now no one talks about it anymore. After all, doing so would involve cutting things like Medicare and Social Security—not popular political stances. Instead, the concept of Modern Monetary Theory (MMT) has started to creep into popular parlance and, you could argue, is becoming the rule of the land. According to MMT, as long as Uncle Sam holds the keys to the printing press, he can rack up debt without any ramifications. It's a bold new take on economics that's got the traditionalists scratching their heads and the contrarians doing a victory dance. So should we care about debt or not? My guest today on Wealth Formula Podcast is definitely a traditionalist and he is not optimistic about how the story will end if we don't do something about it. Make sure to tune in as he explains why debt is still so important and what, if anything, we can do about it and protect ourselves. Show Notes: 05:37 Why is the U.S. Government a Big Ponzi Scheme? 06:52 Is the U.S. Immune to Bankruptcy? 08:04 How Realistic Is It That the U.S. Economy Would Collapse? 12:01 Political Reform for the Fiscal Policy 19:20 How Can We Protect Ourselves From the Collapse?
26 min
April 28, 2024 424: Richard Duncan: U.S. Strong China in Trouble
I have been asked by many to give my opinion on where the economy is headed and what to do. I have been reluctant to do so because I am not an economist and I do not want to give investment advice. However, I do think I owe it to you to let you know where my head is and what I am doing based on these thoughts. Last week and this week's podcast have convinced me that rates are going to fall significantly over the next 6 months. Why? Because I think that inflation, as measured by CPI is going to fall off of a cliff. I don't even consider this a prediction frankly. I think it's already written in stone. Why? Because 70 percent of CPI is based on rent increases and the variables used to calculate this number are 6 months behind. The recent CPI of 3.1 per cent used 6 per cent rent increases to get to that number. Anyone in the multifamily space will tell you what's wrong. The rents are flat. We see it every day and all of the data available to us real estate operators show flat rent growth. Knowing this, all you need to do is ask yourself what this lagging indicator will show six months from now. Whatever happens between now and then doesn't matter. That lagging indicator will reflect what is the reality today. And if the rents are where I believe they truly are, CPI will be below two. A CPI below two along with a slowing economy will result in a swift response from the Federal Reserve to cut rates to avoid deflation..traditionally the Fed's worst fear. So, if I'm right, rates will come down and anyone making big decisions today based on the assumption that rates will remain stable or go higher is making a mistake. In other words, my opinion is to make sure you are not selling from a position of weakness. Hold on to what you own. This week's interview with Richard Duncan furthered my convictions of the inevitability of falling rates. It also painted a picture of China that looked a lot more like Japan in the 1990s. The economy and the world are changing quickly. Make sure to listen to this week's episode of the Wealth Formula Podcast to keep up! Show Notes: 06:38 What's Been Going On With Inflation and Rates Cut? 11:21 Indicators That the Fed Uses to Measure Inflation 15:27 Will the Fed Become Hawkish now? 21:33 Why the U.S. Economy Has Been So Strong 28:31 The Economic Crisis in China 42:41 What Can China Do to Stabilize Their Economy? 48:17 Implications for the Rest of the World
1 hr 2 min
April 21, 2024 423: Campbell Harvey Says the Fed is WRONG on Inflation and Interest Rates
Even really smart people are wrong on a regular basis. I see this all the time in health and longevity-related issues on my other podcast, Sapio with Buck Joffrey. In case you are wondering…yes, I have become one of those middle-aged California guys trying to stay young at all costs. Not easy. But, I have to admit, the nerdy physician scientist type in me is having lots of fun with the science and enjoying the process of sharing it with my fellow Gen-Xers who are also fighting gravity with me. But getting back to the point of smart people being wrong—we see this a lot in medicine. In the 1960s, a lot smart people created the food pyramid that said we should be eating a lot of carbohydrates and very little fat. That's quite the opposite of what recent science suggests. There was also a period in the 1990s when women were advised not to use hormone replacement because a study was thought to have suggested a link with breast cancer. A generation of doctors gave women bad advice based on what turned out to be a misinterpretation of data. On the economic side, we don't have to go far back to see the Federal Reserve calling inflation "transitory" just before it skyrocketed for real. How could so many smart people be so wrong? And now, the Fed is likely delaying interest rate cuts because of higher-than-expected inflation numbers. Are they missing something here? My guest on this week's Wealth Formula Podcast thinks so and his reasons are compelling. I have to say, this was one of the most interesting conversations I've had in a long time on the Wealth Formula Podcast and I HIGHLY recommend you listen to it. Show Notes: 07:28 How Does the Inverted Yield Curve Predict Recession? 18:53 Stirring the Economy by Misreading the Data
40 min
April 14, 2024 422: Avoiding Ponzi Schemes and Bad Actors
The notion of moving wealth away from Wall Street into the hands of small private operators sounds great. However, it's important to acknowledge some of the challenges of navigating these waters; challenges that many have witnessed first-hand in the podcast ecosystem over the past two years. First and foremost, let's talk about vetting. Investing is hard. With the ideal operator and business plan, you still have economic cycles, inflation and interest rates to worry about. And sometimes, projects just fail. These are investment realities that are always there even before you choose an operator. Of course, not all operators are created equal and the vetting process becomes paramount. How do you ensure that these operators have the acumen, integrity, and diligence to manage your wealth responsibly? You can do background checks, look at resumes and track records. You can ask all the right questions and even get all the right answers. All of this is certainly helpful, but limited to historical data. As the old saying goes, past performance does not indicate future results. So far, all of this applies equally to Wall Street and Main Street. But I would argue that the one variable that is much harder to control on Main Street is the bad actor. You would be correct in pointing out that the most famous of modern-day Ponzi schemes was perpetrated by Bernie Madoff, Wall Street's Godfather. But that just doesn't happen that often with the big boys. Too much red tape, regulation and heavy-hitting due diligence by sophisticated investors to make an outright fraudulent investment work. And the bad actors know that too so they set their sites on easier targets like retail investors. They lurk at our events and make the podcast circuit. It is for these various reasons that I no longer will interview anyone from outside of my own circle actively raising capital. It's also the reason that we now use an SEC-registered broker-dealer to conduct independent due diligence on most of our offerings in Investor Club. How do you identify a bad actor anyway? Sometimes it's quite easy. For example, one fund that was circulating in the podcast ecosystem had a founder and CEO who I couldn't even locate on a Google search despite the fact that he was sold as a major player in the oil and gas industry doing business with some of the world's top companies. Sometimes it's less obvious and you have to know how to look for clues. My guest this week on Wealth Formula Podcast is an expert in identifying fraud, in part, because he once ran a Ponzi scheme himself. Show Notes: 08:45 From Fraudster to Fraud Prevention 17:10 Do Frauds Generally Start with Intention? 19:36 5 Major Red Flags of Fraud 37:40 James' Business
42 min