Wealth Formula Podcast

By Buck JoffreyBusiness Investing

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Wealth Formula Podcast episodes

May 21, 2023 369: Big Government Craziness in a Troubled Economy
I was a surgical resident for years. I started out as a neurosurgeon, moved over to Otolaryngology Head and Neck Surgery then ended up in cosmetics. During my training, it didn't matter how much I worked. I would always get the same paycheck. I wasn't lazy but I certainly didn't enjoy working for what amounted to minimum wage. And I was not about to volunteer for any more work than I was assigned. Eventually I did finish training and I was hired by a facelift company. I know it sounds kind of weird but they would recruit patients with questionable marketing tactics and hired an army of young surgeons to do the work. I got paid about 15 percent on revenue I generated for the company. They didn't charge as much as your typical facelift surgeon, but because I was doing 3-4 facelifts a day, it turned out to be really good money. For reference, my most recent job was as a chief resident in San Francisco for which I was paid $50K per year (that's poverty in SF). The day I became a capitalist was the day I got my first real paycheck. In two weeks, I made more than I did in my entire surgical internship year. It blew my mind. Suddenly I realized that the harder I worked the more money I could make. And that made me work really hard! Suddenly, I was more than happy to put in long hours. I enjoyed doing the procedures and I was good at it. But I also liked the idea that my work was getting proportionally rewarded with dollars. There was a noticeable change in my spirit. Even though I didn't own the place, I cared about the office and wanted to make sure we were doing a good job. I took ownership and that mattered. After all, in the history of the world, no one ever took a rental car to the car wash. Of course, like all entrepreneurs, I eventually realized that there was an even better way to make money than getting paid for the amount of work I did for the business—own your own business. I went on to start multiple businesses and the rest is history. But the moral of the story is that opportunity for those who have talent and work hard is endless in our country and getting paid for the first time gave me my first taste of that. Anything that threatens that reward system threatens the very core spirit of who we are. Of course not everyone shares my views—especially these days. And it's not always as simple as perhaps I make it sound. We still need to take care of people in need and we still need to provide opportunity for the underprivileged. This became even more evident during Covid when people simply couldn't work. But I fear some of the remedies of a difficult time have permanently altered our culture. After all, it is difficult to take things away from people after you give it to them. My guest on Wealth Formula Podcast today was right in the middle of policy making during the Covid crisis and was making decisions like what to do about people who couldn't pay their rent. What makes his perspective interesting is that he is a libertarian who works for a libertarian think tank. Find out how a small government guy navigated the biggest government intervention in American history on today's economy on this week's Wealth Formula Podcast!
47 min
May 14, 2023 368: Your Bank Probably Owes You Money
When I was a kid, my dad deposited $1,000 for me and my two siblings at a local bank. I'm not exactly sure why he did that, but what I do recall is that my older siblings showed me that I could go into the bank every couple of months and ask for "interest." I remember being about 7-8 years old and riding my BMX bike to the local bank with my bank passbook in hand. For those of you who remember, the passbook was kind of like a passport with your bank information. Every time you made a deposit or withdrawal, they would put the record in there. This was the early 1980s, and interest rates were exceeding 15 percent. Now I don't know exactly what my rate was, but I do remember coming out of that bank with serious dough—like 20 bucks at a time. To celebrate, I'd cross the street and get myself a 99-cent McDonald's cheeseburger. Times have changed. No more passbooks, and I doubt the bank would let my 8-year-old daughter walk in and ask for the interest on her account. In fact, they would probably laugh at her and tell her that banks don't pay interest anymore. But wait…should they be? Back in those high-interest days, people were getting 10 percent interest on their money and living off of it. Of course, for the last several years, we have been accustomed to near-zero interest rates. It was great for taking out loans but not great for deposits. The thing is that now interest rates have risen back to levels more consistent with historical levels, and banks really ought to be paying us more interest. They know that. But as my buddy Peter Arts recently pointed out to me, they aren't going to offer it to you unless you ask. Pete's my old neighbor in Chicago and knows the banking system as much as anyone else. He's getting over 5 percent on his money sitting in the bank, and he says we should be too. Simple tweaks to make you thousands of dollars per year sounded like a great reason to interview him for this week's Wealth Formula Podcast. Not listening to this podcast could literally cost you tens of thousands of dollars, so make sure to tune in!
33 min
May 07, 2023367: Is Buying Gold a Good Idea or Not?
When new listeners of Wealth Formula Podcast tell me they started from the beginning to catch up, I cringe a little bit.
It’s not that the original material was bad. For me, it’s just like looking at pictures of guys in the 80s with feathered hair (Think Dukes of Hazard). Or guys with perms.
At the time it seemed like a good idea but it isn’t anymore. But then again, maybe it will be back in vogue again in the future. (P.S. PLEASE MOM JEANS BE A THING OF THE PAST!)
Like hairstyles through the decades, my views on personal finance have changed with time and some have gone full circle.
Was I wrong before and right now? Not really. My perspective is just different. And, I suspect 5 years from now I will, again, cringe at some of the things I am saying today.
Like many guys approaching 50, I am becoming a little bit less dogmatic about my opinions than before— a little more open-minded.
For example, I no longer look down on people who invest in stocks and bonds. In fact, it might not be a bad idea to grab a Vanguard index or two while the markets are in the toilet.
That said, I’m still deeply dedicated to the alternative asset space. At my core, I’m a real estate guy but I’ve even opened up to other alternative assets lately.
My opinions on gold as an alternative asset have been the most dynamic throughout the years. I started out telling people to buy gold and to load up on silver dollars.
I was telling people to buy monster boxes of American Eagles in preparation for the Zombie Apocalypse—because everyone knows Zombies only accept silver coins as tender.
Then one day I became violently against buying precious metals. I didn’t see the point. What do precious metals do that real estate does not? Both are physical inflation hedges but real estate cash flows and has tremendous tax advantages. The IRS code for gold profits is downright punitive. And where would I bury it?
Then some banks started failing and I started to see a glimpse of the doomsday perspective again and it started to make more sense to own some gold. To be clear, I still don’t own any gold now. I just have that monster box of silver coins sitting somewhere in a nuclear bunker.
So now, I’m back in the camp of “maybe I should buy some gold”.
But… I’m still not sure. I’m listening and reading to a lot of people on this topic. One of the more respected gold bugs out there is Brien Lundin. Brien is a very rational guy on the topic and has a great newsletter to boot.
This week on Wealth Formula Podcast, I pick Brien’s brain on the whole topic of gold again. It’s a conversation worth listening to.
Listen NOW!
With a career spanning four decades in the investment markets, Brien Lundin serves as president and CEO of Jefferson Financial, Inc., a highly regarded producer of investment-oriented events and publisher of investment newsletters and special reports. Under the Jefferson Financial umbrella, Mr. Lundin serves as publisher and editor of Gold Newsletter, the publication that has been the cornerstone of precious metals advisories since 1971, and as the host of the annual New Orleans Investment Conference, the oldest and most respected investment event of its kind.
As editor of Gold Newsletter, Mr. Lundin covers not only resource stocks, but also the entire world of investing, from small-caps of every type to macroeconomics and geopolitical issues that ultimately affect every investor. As host of the New Orleans Investment Conference, Mr. Lundin has annually brought the giants of investing, economics and geopolitics together in intimate presentations with many of today’s most sophisticated private investors. In all of these endeavors, Mr. Lundin has striven to burnish the brilliant legacy of the late James U. Blanchard III, his great friend and the founder of both Gold Newsletter and the New Orleans Investment Conference.
Shownotes:
What gives gold its value?
Physical gold versus gold stocks
The New Orleans Investment Conference
Why should you consider owning more inflationary-hedged assets like gold and real estate?
49 min
April 30, 2023 366: Book Club: Die with Zero
I used to be a guy who prided myself on being a minimalist. Despite doing pretty well for myself financially, I drove the same 2007 Prius I bought the day after residency until just a couple of years ago. My clothes often didn't fit and I never shaved. Oh yeah—I was about 25 pounds heavier because I didn't really care how I looked. I also didn't really spend much on vacations or special events— I used to just blame that one on parenthood. It's funny because I sort of took pride in my rejection of material possessions and my frumpy looks. I was sort of giving society the finger. Then all hell broke loose: namely the beginning of Covid lockdown and the end of my marriage. They kind of happened at the same time so it was a little rough. Confused and disoriented, I didn't know what to do so I just began to hike the beautiful mountains in Montecito. It reminds me of the movie, Forrest Gump, where Forrest just decides to run one day and keeps going back and forth across the country until he seemed to figure something out. I hiked so much during those days that I pretty quickly shed most of my extra weight. Meditating on my life through those gorgeous trails every day made me see myself for what I had become: kind of repulsive. Ok, so maybe that sounds a little harsh but that's the way I saw the old me. I needed to update my self-image for myself. It started out with the material things. I bought that Italian sports car I always wanted. I bought clothes that actually fit me and that were younger than my children and I started to take my health seriously. Oh… and I started shaving every day. They say the Chinese word for crisis is the same as the word for opportunity. Well, I took this crisis as an opportunity to overhaul my life and to start over. In starting over, I became acutely aware of the time I had wasted not living the life I want: material or otherwise. I just didn't want to spend the money. But why wasn't I spending any of this money that I was working so hard to make? After all, I can't take the money with me after I'm gone. I'd already done a good job of setting my kids up with assets and insurance. Why not spend on me? Well, that's what I started doing! And I have to tell you it's a lot more fun than the alternative. And maybe I'm spending too much now, but I also have a lot of time to make up for. So now I'm buying the stuff I want and also living a life full of new experiences. The funny thing is that this was supposed to be about me, but I found that this change has also been great for my daughters as we now travel more and go to a lot of cool events. So why do I bring this up? Well, a couple of months ago, a friend and WF listener texted me and suggested I read a book by Bill Perkins called Die with Zero and it seemed to encapsulate so much of my new ethos that I wanted to share my thoughts on it with you. So I grabbed a couple of familiar faces to do a little book club on this week's Wealth Formula Podcast. Make sure to tune in!
54 min
April 23, 2023 365: Crisis=Opportunity for Governments to Seize Control
Government is a funny thing. It is an organization that makes and enforces rules and regulations. The more rules and regulations it makes, the bigger it gets. It's a monster. Government is also a significant employer that doesn't seem to care much about being lean and profitable. Instead, it thrives on making itself even bigger and creating more things to control. But as the government starts to infringe on people's perceived personal space, people start to push back and that is the only force that resists this monster's thirst for power. Make no mistake, during these times when governments are held in check by their people, the monster's appetite for power and growth does not go away. It lurks in the background waiting for its opportunity to pounce. That opportunity comes when people are at their most vulnerable—in times of crisis. When things go south, people are willing to give up more of their freedoms in exchange for stability. Governments are more than happy to oblige. Just think about some of the crises in recent history and the government response to those events: The Terrorist attack of 9/11, the 2008 financial crisis, Covid, and the Silicon Valley Bank failure. In each situation, the government found an opportunity to change the rules and obtain more control. This playbook isn't just a conspiracy theory. It's just how things work. Mainstream government figures will tell you the same as you'll find out in this week's episode of Wealth Formula Podcast. Listen Now!
42 min
April 16, 2023 364: Death Without Taxes
You know the old saying coined by Ben Franklin, "Nothing is certain except death and taxes". Longevity science might eventually prove that death is not inevitable but for the time being it is. As for taxes? Well, I've spent a lot of episodes talking about tax mitigation while you live and I know for a fact that a number of you are legally not paying income tax. (HINT: REP) But there's another kind of punitive tax called the estate tax (aka death tax) that kicks in when you die. The death tax is sometimes also referred to as the "stupid tax" because it has been creatively dealt with by savvy estate attorneys for years. They would tell you if you died with a ton of money without this kind of planning you might have been kind of stupid. All of this stuff might seem a bit too sophisticated for your situation if you are not in the ultra high net worth crowd. After all, doesn't that estate tax thing kick in at $25 million if you're a married couple? Well…for now, yes. But various tax laws are changing and that amount gets cut in half in just a couple of years. Do you think you are likely to have an estate of greater than $12.5 million ($6 million if single) by the time you die? If you listen to my podcast then there is a good chance the answer is yes. In other words, don't think that the world of irrevocable trusts and gifting does not apply to you because you aren't worth that much today. It's probably a pretty good idea for you to at least know your options. Even if you believe you will never get that wealthy, there are some things that pretty much everyone should do when it comes to estate planning. These things are inexpensive and only have to be done once. Whichever camp you fall in, this week's episode of Wealth Formula Podcast will be of interest to you as I interview my own estate planning attorney, Joe Longo. This topic might not sound sexy but I'm quite sure you will find this interview to be extremely useful and pragmatic. Make sure to tune in!
40 min
April 09, 2023 363: Know, Like and Trust is Not Enough
I have been at this alternate investment game since I finished surgical residency in 2009. Luckily, since then my wins have significantly outnumbered my losses and I have made a lot more money than I ever did as a physician. But It hasn't always been smooth sailing. The first apartment building I bought for myself in 2010 was a big flop. Why? Well, I knew how to do real estate from reading lots of books and crunching numbers, but I didn't really know how to not get bamboozled. Let's just say the seller in that first deal was creative with his financials and I didn't anticipate blatant fraud while I was doing my due diligence. I should have known better than to buy in a D-class South Side Chicago neighborhood anyways. I lost $300K when I sold that building but it was a tremendous relief to get it off my hands. Sound horrible, I know. But frankly, the amount I learned by experiencing my own personal real estate horror story was priceless. Since then, I've never lost money on any apartment building. When I started investing in assets as a limited partner, the skill set for success was different. Early on, I was given some reasonable advice: Only invest with those who you know, like and trust. That's not terrible advice but what I've realized over the years is that it is incomplete. There is a lot more to investing than to know, like and trust the operator. For example, you may know, like and trust your brother-in-law who is starting out in real estate syndication. But that doesn't mean he knows how to operate a multimillion-dollar asset. He may give it his best shot but that doesn't make him competent and certainly does not put your investment in good hands. Know, like and trust is only useful to the extent that it should give you some confidence that someone is not trying to rob you (on purpose). After that, you have to do your own research. Ronald Reagan used to say, "Trust…but verify". You can trust the operator but you still need to verify their competence. Ask a lot of questions. Look at the qualifications of the team to carry out the business plan put forth and be cognizant of the operator's track record. If you do all of these things, you will minimize your risk of disappointment. I say minimize because there are no guarantees in the world of investing. In competent hands, real estate will provide a profitable outcome most of the time. But not always. So what is an alternative investor to do? The task of vetting where you deploy your assets may seem both critically important and daunting. So, what are your options? Well, you could give up and invest in Vanguard ETFs. If you do that, you might be able to preserve your wealth but you aren't going to get wealthy. Alternatives create wealth on a regular basis. So what else can you do to maximize your chances of success? I have said this before but will say it again—there is great power in collective intelligence—especially if people bring different skill sets to the table. At the very least, creating such a tribe of like-minded individuals will help to pool the right questions to ask about any opportunity. So how do you put together a tribe? After all, chances are that your friends and family are not into this stuff. If they are, you are all set. Otherwise, you may need to go to some in-person meetings like our Wealth Formula Events and network with others of like mind. The concept of tribe is really important in alternative investing. My guest on this week's Wealth Formula Podcast created a business to help various tribes to deploy capital in an efficient way. Make sure to listen in for some ideas on how you and your tribe could use these tools!
37 min
April 02, 2023 362: Multifamily Real Estate is STILL the Place to Be
I am going to keep this brief because I have a cold and I don't want to subject you to Sudafed altered commentary. This week's Wealth Formula Podcast features an interview with Jay Parsons who is Chief Economist at RealPage. He is an authority on topics affecting multifamily apartments which, of course, is of significant interest to us all. The picture that he presents is one of transition. The short term is consistent with what we are already experiencing…pain. But as I said last week, there seems to be an undercurrent of optimism for the near future given the significant interest from big money to invest in apartment buildings. I was encouraged to hear what Jay had to say and I think you will be too. Let me know what you think!
30 min
March 26, 2023 361: The Calm Before the Storm with Harry Dent
The Fed just raised rates another 25 basis points despite global banking instability and investor angst. This wasn't a surprise. Curtailing inflation continues to be their primary motivation. How long will the Fed continue to raise rates? Well, inflation has to be clearly under control and/or there must be something else that happens that threatens the global economy. Isolated bank failures remedied by corporate takeovers do not appear to be threatening enough. So what is it going to take to get inflation really under control? I hate to say it but it's hard to see inflation getting under control without increasing unemployment. You see, the economic pain is shaping up to be a top-down phenomenon. Every day people have not felt the pain yet so they have not curtailed spending. When people either lose their jobs or start worrying about losing their jobs, inflation will finally be curtailed. Until this happens, expect more of the same. The investor class is going to feel more pain. But as I've been emphasizing in recent podcasts, with pain comes opportunity and I continue to believe that is what we will see in the latter half of this year. In this week and next week's podcasts, you will hear a similar theme that should make you feel somewhat reassured if you invest in multifamily real estate. The common theme is that multifamily assets are favorable in down economies and that these assets have become a darling for large investors and institutions alike. On this week's Wealth Formula podcast, I interview Harry Dent. Harry is a really interesting guy. In recent years, he has been pretty pessimistic about the economy. And now, he's raising even more red flags. But again, pay attention to what Harry thinks is going to happen with the economy as a whole and also his take on multifamily real estate. Harry is also famous for his economic forecasts based on demographics which I find fascinating. It's definitely worth a listen. Tune in now!
44 min
March 19, 2023 360: Real Estate Update with Jorge Newbery
Oh what a mess this economy is! Helicopter money during Covid and supply chain issues brought on inflation like we haven't seen in decades. To respond to this self-inflicted predicament, the Federal Reserve began raising interest rates at an alarming pace. Never have we seen interest rates rise at this steep of a slope—even in good old Paul Volker's days. Inflation has been going down for several months although the most recent CPI figure is still 6 percent. That is well above the 2 percent target the Fed has had for years. That's why Jerome Powell was so hawkish last week about continuing to raise interest rates aggressively. They could do that without worry if nothing bad happened. But in the last week, something broke. Specifically, we saw bank failures of two regional banks. They weren't doing anything nefarious. In fact, they seemed to be doing what they were supposed to do—investing in conservative bonds that became worthless as interest rates rose. Things are moving quickly now. By the time I release this podcast a week from now, things could get a lot worse. So now, the Fed is in a pickle. Usually, when something "breaks" like it did, that is a signal for the Fed to back off its hawkish stance. But with inflation still at 6 percent, that isn't exactly an easy decision. So what do I think is going to happen? Well, whether or not rates go up at the next meeting is irrelevant. Unless there are other signs of systemic weakness too hard to ignore, the Fed will continue to raise rates until inflation is tamed. That is going to result in a lot more destruction to the economy than we see now. We are hearing all about banks right now but the real estate market is also about to see a reckoning. I do believe within the next few months, there will be the proverbial blood in the streets. In that process, it is quite possible that you will lose some money. However, the most important thing is to keep a level head. You see, it is in times like these that the most money is made. Those who are paralyzed with fear will lose out. Those who act rationally will win big. A buyer's market in real estate will be here shortly. This week on Wealth Formula Podcast, I speak with Jorge Newbery about the real estate and debt markets. Make sure to tune in!
46 min