Wealth Formula Podcast

Happy New Year! I don't know about you, but I am looking forward to another profitable year in the roaring 20s. If you have been investing in real estate for the last several years, you are obviously doing very well. The big question on everyone's mind seems to be whether or not the market is too hot to continue investing. There is no one right answer to this. In fact, when we talk about the "real estate market", we aren't even talking about one market. Real Estate investing takes many forms. Investing in single-family homes in Oklahoma is quite different than investing in apartment buildings in Dallas. And neither of these is anything like investing in non-performing notes. Each sub-sector of real estate is quite different. And, when market cycles change, they react differently. Some have more exposure to recessionary environments. For example, if you are investing in re-performing notes, that's pretty risky for an economy that you think might go south. Most recessions are not catastrophic and do not necessarily hurt more stable assets nearly as much. As I've said to you before, my real estate strategy is not changing in 2022. First of all, I do believe we have a few years of significant runway for profit in this decade. Next, we have significant inflation which makes the risk of not investing very high. And finally, the investments we are making in strong markets in apartment buildings have been traditionally more resilient than other real estate classes. That being said, there are other opinions out there and you need to make your own decisions. Often those opinions are based on what the specifics of the individuals investing strategy are. Jorge Newbery, for example, has made a career out of investing in pools of non-performing notes. The major strategy he has used over the years involves negotiating with people who have defaulted to create re-performing notes. These can also be sold off for a profit if successful. But, as you can imagine, if someone has defaulted on a note once, then the risk of doing it again will probably be higher. Anyway, the point I'm trying to make is that the approach each investor makes should be based on the specifics of their business model. As you will see in this week's interview with Jorge Newbery, he's doing what he can for risk mitigation in uncertain times. Make sure to tune in to get Jorge's perspective on what's going on today with real estate. LISTEN HERE.

Technology is great but the burdens of technology are significant. Think of all your accounts and all your passwords. You may have cryptocurrency and might be trading on cryptic DeFi platforms. What if something happened to you today? How much of your money would be a giant mess to the family you left behind? There's a New Year's resolution for you. Make sure your house is in order! Meanwhile, while we want to make sure we don't lock our loved ones out of the things we want them to have when we are gone, we need to be vigilant in keeping hackers from taking our money and data now! Most people are way too laissez-faire about cybersecurity thinking that it will never happen to them. But this year alone, I know two people within our Wealth Formula Community that had major identity theft that left them in a world of hurt for some time. The good news is that with a few basic steps, we can avoid the vast majority of cyberattacks on us as individuals. And, while I know it's not the sexiest topic, this week's podcast will give you the basics of what you need to know. Now, it is the holidays and I want to make sure you get some additional entertainment, so I will also answer a few questions from you at the end of this week's episode of Wealth Formula Podcast! Listen HERE!

Inflation is running at about 6-7 percent right now. That is significant. In fact, we haven't seen those numbers in about 4 decades. On this week's show, we will talk to an economist to explain what this means at the macro level and what may potentially be the long-term outcome. I'm not an economist. I am a professional investor and the way I see things right now is at that level. Let me tell you that, if you are investing in real estate with leverage, inflation is not really a bad thing. What is inflation in the first place? It means that the value of the dollar is going down. It has less buying power. And for those of you who are afraid to invest in this kind of environment let me emphasize that, if inflation is running at 6-7 percent per year and you are in cash, you have essentially guaranteed losing 6-7 percent per year by sitting on the sidelines. On the other hand, if you are investing in leveraged real estate, the debt on those assets is also losing value. In other words, inflation rewards debtors by making that debt worth less. Think about that for a moment as it is critically important to understanding how leveraged real estate is such a tremendous hedge against inflation in the right hands. You're raising rents to keep up with inflation and the money you owe is diminishing in value. What a great deal! Obviously, there are other implications to inflation that may not be such a good thing. And if inflation gets too out of control, there are other ramifications as well. However, most experts don't seem to think double-digit inflation is likely. So, without sounding flippant, let me say to all of you real estate investors: enjoy the ride! Now back to the macro level, this week's podcast features an interview with a brilliant professor of economics, Dr. John Horn, to talk about inflation from a different, more global perspective. Understanding this stuff is really important so I urge you to listen to this podcast and figure out what you are going to do with all of this inflation!

A number of people told me that they really enjoyed last week's podcast interview with William Green, who spoke about what we can learn from the greatest investors of all time. One line that still haunts me is Sir John Templeton saying that the four most dangerous words for an investor are "This time it's different". Why does it haunt me? Listen, the economy is in a massive boom right now. There is no doubt about that. Should you invest in a booming economy? What is the alternative? Right now inflation is running at about 6 percent. That means doing nothing guarantees that your money is losing 6 percent per year. As Robert Kiyosaki says, "Savers are losers." Nevertheless, it is important for you to think about what is happening and what you should do with your own money. To do that, you really need a framework. Macroeconomics does provide us a type of framework that shows how business cycles work and how they affect the investor. However, we must also understand that historical macroeconomic data is not necessarily predictive in the new world order of easy money and pandemics. I am not here to give you financial advice but I will urge you not to act out of fear. Just look around to see how many doomsayers have been sitting on the sidelines for 5-6 years now and how much money they have lost by doing nothing. So what am I doing differently in this economy? Personally, I'm not doing much differently at all. I continue to invest in high quality real estate through our Investor Club that is already cash flowing, but has significant value-add elements to create equity. My reasoning is that, in doing so, with the wind at my back I might average 35-40 percent annualized returns or better like I have been lately. But even if things tighten up, my assets are of high quality and are very likely to weather the storm better than most other investments. But again, that's my philosophy. To create your own, learn as much as you can and think for yourself. This week's interview with retired Professor and former libertarian senate candidate, Murray Sabrin, would be a great start to educating yourself on the business cycle. Listen HERE

Asset prices are booming. We have more than doubled price per door costs on acquisitions made in some markets just two years ago. That's just what our investor club has seen in real estate. To look at rising asset prices on steroids, just look to the crypto markets. A guy who works out at the place I work out bought $400K of gala token under 1 cent and is now sitting on a couple hundred million bucks. When you see that kind of stuff, it's hard not to get FOMO. To be clear, I still truly believe we have significant runway in real estate given the level of inflation we have seen and pure supply and demand issues in the markets we invest in. However, as a general rule, it is wise to remember Sir John Templeton's four most dangerous words in the investment world, "This time it's different". On this point, I go back to cryptocurrency as it seems to teach lessons at a pace magnitudes faster than other markets. In the winter of 2017, it looked like anyone could get rich on crypto and you would be foolish not to buy. Later that year, we were deep in crypto winter. As we have seen, however, the reports of cryptocurrency's death was, as at one time Mark Twain's death was, greatly exaggerated. When people should have been buying like crazy, they were scared away thinking this was the final knockout punch to bitcoin (which had been served several knockout punches already). Now, at the top of the crypto market or possibly somewhere near, I hear myself once again telling myself that this time, it might be different. It may be a runaway train. I'm not saying I have the answers to what happens next. However, I do think it is critically important to examine the thoughts you have on a daily basis with regard to investing. This is personal finance. You shouldn't be listening to me or anyone else to tell you what you should do. You should be listening to us to help you make sure that you are thinking. You want to have lots of opinions to consider. And, it is particularly helpful to hear the voices of those individuals that have extraordinary success in this arena. William Green is a financial author that has spent most of his life talking to and writing about the greatest investors of our lifetimes and has written a book about what he's learned from that process. And this week, he was kind enough to join me for an interview on Wealth Formula Podcast to share some of that wisdom. DO NOT MISS THIS EPISODE!!!

When you are trying to figure out how to become more successful in life, don't try to re-recreate the wheel. Success stories aren't all the same, but they often rhyme. My first two successful businesses were nothing other than me ripping off other successful business models and giving them a twist of my own. I knew the concepts already worked in other markets and there was, in my view, no reason why they wouldn't work in mine. I was right. I now live in a place surrounded by entrepreneurs like me. What I discovered was that I wasn't the only one who took a former employment situation to learn a trade and turn it into a profitable business. MOST successful entrepreneurs that I know did exactly that. And guess what? When a young person asks me how to become an entrepreneur, I tell them to take some jobs at businesses they think are interesting and learn everything they can. Never see a job as just a paycheck. It's a chance to learn skill sets and perhaps even an entire business model that you can take for yourself and set up shop. No one told me to do that. I just got lucky and discovered this path the way many others did: by accident. But if someone did give me this advice, I might have done things a little differently. Maybe I would have taken a job in private equity as a young man instead of practicing medicine. Who knows? But at least I would have approached life a little differently. The larger point I'm trying to make here is that finding successful people, especially those that are willing to share their experience, is gold. Sometimes you hear them say things that are so simple but fundamentally change the trajectory of your life. Books and podcasts make finding these people pretty easy these days. Sure you can't ask them questions but there is plenty of life-changing content out there. I've talked many times about the paradigm shift I had after reading Robert Kiyosaki's Cash Flow Quadrant—an experience I call "taking the purple pill". Dave Liu is one of those guys worth listening to. He is a highly successful guy who made it as both an employee on Wall Street and as an investor. This week's episode of Wealth Formula Podcast is jam-packed with nuggets to help you succeed at your job, as an entrepreneur and as an investor. Don't miss it. LISTEN HERE!

It's been 2 years since Covid-19 first became the major global topic. I must admit, if you told me back then that we'd still be wearing masks and living our lives with Covid-19 precautions every day, I would have never believed you. So much about this period in time is extraordinary. It's hard to really appreciate that as we continue to live in the moment while this chapter in history continues to unfold. We continue to see new variants pop up, we see ongoing restrictions to everyday life, and we are starting to see the economic impact of unprecedented monetary and fiscal stimulus including inflation rates not seen in over three decades. Eventually the events during these years will take up a lot of chapters in a lot of history books. And through the lens of history we will decide what we did right and what we should have done differently. Certainly, there were many mistakes made along the way but we also had a lot of successes. One of the most underappreciated accomplishments throughout this period was the extraordinarily fast development of an effective vaccine through the combined efforts of the public and private sectors. New York Times bestselling author, Gregory Zuckerman, provides an inside story of this miraculous success in his new book A Shot to Save the World. I had a chance to interview him about the book for this week's episode of Wealth Formula Podcast. Don't miss it!

At the core of every individual's subconscious there is a wealth thermostat. What sets the temperature is a combination of nature and nurture. Once it's set, it's difficult to change it. But if you know you have a thermostat, it's a lot easier to change your mindset. What do I mean by this? Well, think about yourself for a moment. Are you $200K/year type? $500K or a million/year type? Now, try to imagine yourself with either one more or one less zero behind your yearly income. Does that fit with your image of yourself? I'm sure it doesn't. If you are a $500K/year type, it's good that you don't see yourself as a $50K type because it's what keeps you from becoming that person again (not that it's a bad thing). But that limited image of yourself is also what will keep you from becoming a $5 million/year person. I know this sounds like a lot of psychobabble but I truly believe it. The money thermostat exists. I have recognized it in myself and manipulated it several times in my life already. Now the question is why we would limit ourselves to a certain amount of money. Certainly you can understand not wanting to be poor, but why would you create mental blocks from becoming a great deal wealthier than you are? Well, maybe part of you doesn't want to be rich. Maybe you grew up believing that rich people only got there because they took advantage of the poor. Maybe you believe that there is a finite amount of wealth out there and to take more than your share is greedy. After all, we live in a Judeo-Christian society. The Bible says that money is the root of all evil. What was once considered "usury", arguably is the basis of our economy now! Our cultural baggage on money is deep and would require years of national therapy to unravel. But its effects are not hard to see in the modern, guilt-laden financial politics of progressive left today. The truth is that money is a tool and a fool with a tool…is still a fool. But it can also do so much good. It can take away hunger and alleviate pain. It can and has raised the standard of living for the entire world. Wealth is not bad. Wealth is a gift to us created by capitalism. All you need to corroborate that statement is to look at world history through the lens of economics. Yet, politicians cannot escape what my guest on this week's Wealth Formula Podcast, James Otteson, calls the 7 Deadly Economic Sins, that continue to mislead people and misdirect policy. Make sure to tune in to this week's show to make sure you don't fall into these mental traps!

Last week I did an emergency podcast to make sure everyone is aware of an upcoming change related to the whole life policies we use inside of Wealth Formula Banking. It all revolves around recent changes made to IRC Section 7702, with is the IRS code that dictates how life insurance policies are taxed. Since the 1980's, the code mandated insurance companies who offer whole life to offer a 4% guaranteed interest rate on the cash value. Well, as you know, interest rates have come a long way since then. In essence, the change allows the insurance companies to choose the minimum rate they'll offer on their products, putting it somewhere between 2.0–3.75%. The companies who have already released their new product have come in at a 3% guarantee. To be clear, anyone who has one of these policies will continue to get your 4%. And, it isn't as if the total return in these policies will all of a sudden drop dramatically. The change really only impacts things if the total return including the dividend, which is currently between 5–6%, drops to a level where we start bumping into the guaranteed rates. With that being said, if you are someone who is planning on or even considering using Wealth Formula Banking to increase investment profits and would like to lock in the 4% guarantee, you'll want to get the process started ASAP in order to make sure we hit the end-of-year deadline. The underwriting process typically takes 4–6 weeks to complete, and we expect to see a large surge of new business as we get closer to the deadline of January 1, so the sooner we act, the better chance we have of getting it done before the deadline! If you'd like to review this option for yourself, send a message to [email protected] to discuss and decide the best course of action. Now, in the spirit of Life Insurance Related Strategies, I am releasing a bonus podcast shortly about charitable strategies that involve life insurance. The interesting thing about these strategies, as you will see, is that they are win-win-win propositions. And for the high net worth individuals who can implement them can end up giving a ton of money but receiving even more. It's real and it's perfectly legal. Listen to the podcast HERE.

I began talking about cryptocurrency on Wealth Formula Podcast in 2017. Many joined the crypto world after that and have made a significant amount of money. If you are one of those people…you're welcome! Those who stayed on the sidelines often felt, for good reason, that cryptocurrency was just a big digital fad and that it would probably die out like tulips of the past. Well, there was a deep frost that did kill many projects between then and now, but one thing is now very clear. Cryptocurrency is here to stay. Now learning about cryptocurrency is a little challenging because, in my humble opinion, it is actually more than one thing. Let me summarize how I see the cryptosphere today. There is bitcoin which has established itself, even at the level of governments, as a digital asset with intrinsic value—a type of digital gold. Then, there are cryptocurrencies that are not bitcoin. These are known as alternative coins or altcoins. To me, each of these altcoin projects are essentially a tech start-up. Bitcoin purists like calling altcoins "shit coins" and promise that they will all eventually fade away. I don't personally believe that prophecy. Let's riff off of this idea that each altcoin is a tech start-up. Back in the dot com era there were companies like Amazon, Google and Apple that became legends in the tech sector. There were also companies like pets.com that went belly up in flames. That's what I think is going to happen with the alt space in cryptocurrency. Most of these tokens will be losers but there will be a handful of projects that will become household names or will simply become part of the fabric of daily life. Today, you certainly see that some are less risky than others. Ethereum is a pretty safe bet to be in that future successful crew. It's likely to be worth a lot more in 10 years than it is today. As far as crypto goes, this would be a blue-chip stock. Others will be more risky bets, but the gains could dwarf those that will be seen by Ethererum investors. You could go down the line and make an argument about a number of decentralized protocols, a potential long-term success or failure. I look at them the same way I would look at startup companies and invest in them with my asymmetric portfolio accordingly. But getting back to bitcoin—it's totally different from the alts. Bitcoin is not a tech company. Bitcoin's closest comparison in today's financial world is gold. And as Wall Street and various governments start to adopt bitcoin, you can see it make its way into the future of money. Nik Bhatia sees this economic history unfolding in real time and will explain it to all of us in this week's episode of Wealth Formula Podcast. Listen HERE.