Wealth Formula Podcast

I have a lot of people in Investor Club who lend to flippers. These notes pay pretty well--I hear over 12-15 percent on a regular basis. These investors ask why they would ever invest in anything with less return. It's a fair question but there is a very good answer. When you lend to people who flip homes, you are investing in a business NOT in an asset. Investing in businesses is inherently riskier than investing in an asset such as real estate. As a guy who starts businesses, I know that instinctively. I have had businesses that threw off 7 figures of profits one year then were in the red the following year. The multiple variables involved with businesses such as markets, competition, and management make it a much more volatile endeavor than investing in an apartment building where people have to live--hopefully you can see the difference. It is also from my experience as a guy who starts businesses that I have noted that there is often hidden variables within a business that dictate their success that people from the outside cannot necessarily identify. With some of my businesses, this relates to my own instincts as a marketer and directing our marketing initiatives. If I sell a business that relies heavily on my special skill set, the person buying it has to be able to make up for that special skill set or they may not see the same results. Suffice it to say that that knowledge has kept me from purchasing businesses as investments. My conclusion is that I am better off starting businesses from scratch. The exception to this thought process is buying a larger business. For example, a business with a $50 million revenue with management in place sold by a passive owner might be appealing. The problem is that a business like this might have a yearly profit of $10 million and therefore might cost me $50 million to purchase. I don't have that kind of money--yet. It might be something we do as a syndication in investor club at some point however. If you're a savvy investor, you probably noticed that I used a multiple of 5X times profits to determine the cost of this theoretical business. For businesses, that would not be out of the ordinary. Is that high or low compared to real estate? Well, D class apartment buildings (no money no credit crowd) might be trading at around 10X profits AKA a cap rate of 10--so that building with a net operating income of $10 million might be worth $100 million or more compared to the $50 million you paid for a solid business. In other words, if you know what you are doing, buying businesses can potentially be very profitable. It is something that I have not done but almost certainly will do in the future. My guest on Wealth Formula Podcast this week, Victor Menasce, has a lot of experience in this area. I invited him on the show to tell us a little bit more about buying businesses. Make sure to tune in--you never know when you might learn about your true calling as an investor!

In 1789 Benjamin Franklin wrote, "Our new constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes." Well, if you have paid attention to any of my emails and posts in the last couple weeks urging you to download a report and watch a webinar from my friend, Tom Wheelwright, then you know that statement from Ben Franklin may only be partially true. Tom Wheelwright, who also happens to be Robert Kiyosaki's CPA has shown how it is quite possible to legally NOT pay taxes. If you did not take advantage of this information, then that's your loss. But I can tell you from personal experience that what Tom Wheelwright is TRUE! On the other hand, as of 2017, DEATH IS STILL GUARANTEED. I can tell you this with some confidence, because I am a physician :) And if you think that life expectancy always increases, you are wrong. For the first time since the 1990s, Americans are dying at a faster rate, and they are dying younger. Americans are also sicker compared to people in other "rich" countries and in some states, progress on chronic diseases like diabetes has actually reversed. I have my theories on why this is happening but suffice it to say that it is. Now, when we think about investing, we often like to know what the "guarantee" is. What is the investment secured by? We don't want our investments to be unsecured. That's why it's nice to invest in something that is correlated with something real, like real estate, on which we can hang our hats. Now, what if you could invest in something that was backed by something guaranteed more so than any real estate or other tangible asset--something that was guaranteed in all economies, good and bad and regardless of the equity or real estate markets? Well, it is possible to do that. You just have to invest in something that is guaranteed by death. That may sound morbid to some of you, but the richest people in the world have been using a technique for decades unknown to the rest of the 99.99 percent of us that might be the ultimate investment hedge--it's an asset class called life settlements. Sound interesting? Then, listen to this week's Wealth Formula Podcast, and become one of the very few people on the planet to know about this unique asset class!

The other day, I was speaking with a member of investor club and he said that it was very hard for him to look around and see funds (like AHP) that were offering double digit returns and take them seriously. He was comparing them to the low single digits of dividends in the equity markets. If double digits were available to people outside of the markets, why in the world would people buy bonds, he wondered. I actually hear this more often then you might think. Why? Because we have been brainwashed by Wall Street! They want you to think that getting returns higher than 4-5 percent is associated with only HIGH RISK INVESTMENTS. I know fund managers that could and would pay out double digits to their investors but don't because they do not want their funds to be perceived as "too risky"! Folks--you are getting ripped off and you need to wake up. How do I know that you can make high returns with low risk? I OWN ZERO STOCKS, BONDS, AND MUTUAL FUNDS and I'm doing pretty well! But don't listen to me. Listen to Richard Wilson on this week's Wealth Formula Podcast. Richard is the founder of Family Office Club and works with $100 million plus net worth families. When you listen to what he has to say, compare it to my message and come to your own conclusion.

Last week, my wife and I took our daughters to a town fair. We stayed until the end and as we were walking out were offered free cases of blueberry yogurt drinks and bottled ice coffees--whatever was left over from what they couldn't sell at the fair. At my urging, my eight year old daughter Camilla accepted all the free inventory and decided to put up a stand outside the house selling the stuff--instead of a lemonade stand she was going to sell kafir and bottled coffee. Next, she needed staff so she hired her little sisters (4 and 2) and mom as contractors for $1 a piece (I negotiated the contracts for her). At this point, she knew that she would need to sell at least $3 worth of drinks to break even. While it seemed daunting at first, she began to see the potential upside and got very excited. She almost gave up after the first hour with no customers but I had to remind her that she would still be on the hook to pay her employees. Pretty soon, her luck started to change and by the next hour she had broken even. Then there was another grueling 30 minutes of waiting and she started to get a little nervous. Maybe it was all a big big waste. Maybe she should have taken that dollar as an employee since it was "guaranteed" and let her 4 year old sister be the entrepreneur. But as I often say, the key to business is sticking around long enough until the next time you get lucky. My daughter saw that for herself when 4 of the neighbor kids came out of no where and raided her inventory. Before she knew it, she had now collected $20 in total and she was super excited. In fact, we decided to call it a day and quit while we were ahead. However, before that, she had to pay her sisters and her mom so she was down to $17. Then I told her she had to pay me half of that in taxes. That's a very quick way to teach a child about taxes! Anyway, she actually did learn a lot from this exercise and I am now thinking about a future in which rather then giving her an allowance, I buy her inventory and make her sell it. What do you think of that? Inventory could mean anything obviously--I would let her figure out what she could sell and buy that for her. After all, that's real life. If you want to be successful in business, you have to figure out what people want or what they need. A successful business comes down to either providing something that solves a problem or pain OR entertainment. We usually don't talk much about entertainment as an asset, but it is indeed a very powerful and potentially lucrative asset class to consider. My guest on Wealth Formula Podcast this week has a very elegant business that focuses on this. Make sure to tune in this week to find out how you can collect royalties by owning songs.

I keep reading about how the equity markets are bracing because of all of the things going on in the news--senate hearings on Trump and Russia, the referendum in the UK, and the fed about to raise rates again. People are worried about how these national and global events will affect their retirement money. Never mind the fundamentals and that price to earning ratios are at record highs for no apparent reason. Instead, the markets are bracing for commentary on events that have nothing to do with your stocks in apple and GE. By definition, that is irrational. The equity markets, my friends, are irrational. By the way, my apartment buildings don't seem to care about any of this. I guess they lack feeling. In the meantime I recently saw an article from a "thought leader" on physician finance who I have interviewed on this show write about how you need to keep dumping money in the markets because you are going to get a 7 percent yield with the goal of retiring with 1/4 of your current income--he called that "financial freedom". His philosophy is typical of conventional wealth management--just do it! Invest and it will grow. That is not how you get wealthy folks. That's a great strategy for nike, but not a wealth strategy you should rely on. That is how you will end up dying broke. For all of you doctors dentists and other healthcare professionals out there, I need your help spreading our message. Send my book to your friends and coworkers. Invite me to talk to your colleagues. I'll come. This is my mission ladies and gentlemen. Listen, I'm not a permabear. I don't think the sky is falling all the time. In fact, there is always something to invest in any economic cycle. Just don't be a lemming! Educate yourself and use reason. Now, my guest on Wealth Formula Podcast this week has built significant wealth on betting against the economy. He is a former economic policy advisor to Ron Paul and is probably best known for his prediction of the housing meltdown in 2008. Make sure to listen to my interview with Peter Schiff. Buck

I used to be a neurosurgery resident--at least for a couple years before I realized that brain surgery did not suit my lifestyle. Actually, brain surgery was not really compatible with having a lifestyle at all! Anyway, I moved on but I sure did love neuroscience and the brain. When you operate on the brain, it gives you a little bit of a different perspective on what it is to be alive. You realize how life is, indeed, quite fragile and you wonder how most of us make as far as we do. You also start to see how all of our thoughts and movements are quite mechanical in nature and driven by electrical impulses. It's a rather depressing way to think about it, but it is true. No where is that more clear during awake brain surgery. Sometimes with brain tumors that are near speech centers or vision centers, it is important to stimulate brain around the area to do your best to avoid cutting out. For example, stimulation near a vision center may cause some sort of visual hallucination--avoid it if possible. Freaky right? Anyway, all this electrical activity happens as we develop and in many cases is learned. Electrical pathways strengthen with certain behaviors. When a right handed person breaks their fingers and needs to use his or her left hand more for a while, we can see brain activity change through modern imaging. Other activity is less learned and more primordial. Your pupils dilating while you run away from a tiger, for example, is not learned--nor is perspiration. We are the product of innate and learned behaviors. To a certain degree everything we do and think is based on some sort of reflex. The way we behave in personal finance is no different. Find out how on this week's episode of Wealth Formula Podcast!

I'm writing this the day after Memorial day. First of all, I want to take this chance to thank all of you veterans out there for putting your life on the line so that we can live the relatively carefree life that we do. Compared to the rest of the World, we've got a pretty darn good. In my view, we are still the greatest country in the world and I don't see that changing anytime soon. There is no other place in the history of the world that provides as much opportunity for those who are willing to take life by the horns then the United States of America. I speak as the child of immigrants who came to this country broke and went on to live the American dream as affluent citizens of this great country. I know there are a lot of people in our niche that are extremely pessimistic about the future of the United States. There is no doubt we are in a bit of an economic pickle and that we might see some tough times in the next 10 years. But let me remind you that we are indeed the heart of the global economy. If we go down, the rest of the world goes down. If the global economy implodes, do you really think you are safer in South or Central America or Puerto Rico? If you do, you haven't spent enough time in the undeveloped world. If all hell breaks loose, there is no other place I would rather be than the United States of America. And for as much as we may have some tough times on the horizon, I do not see the fall of an empire. Instead, I see a new era of greatness. 20 years from now, we will look back to this era much the way we look back at the 70s. We will see that times were tough-- but boy did we come out of that even stronger. I believe that American ingenuity and entrepreneurship will prevail. The many problems that we have will be solved by technology and other creative measures. I still believe in the greatness of our country and our untapped potential. And I can't wait to prove all of the doomsday people wrong. America will prevail. A lot of times, we get too negative on the show and I want to make sure that we have a better balance. There are plenty of people out there who are very positive and see a lot of good things in the future for our country and our world. Let's focus on what we can do right now. Let's focus on opportunity rather than looking for all the negatives. Let's start that off by listening to this week's podcast! Jordan Goodman has been a financial journalist for over 3 decades. Think this guy has seen a few cycles? Well, he is also very entertaining and full of interesting personal finance tips and tricks. Enjoy the show! My guess today has seen it all. He is a world-famous financial journalist who is been added for greater than 30 years so nothing surprises him. When we come back, we will speak with Jordan Buck

It is route important to remember that when I have people on the show, it is purely for educational purposes. I want to expose you to asset classes and hopefully open up a new way of thinking. However, I want to make sure you understand that it does not mean I am endorsing those particular offerings. To be clear, I do my best to only allow people on the show who I have vetted to some degree. Either I know them or someone that I trust knows them. However, even if I personally trust someone, and they are trustworthy, it doesn't mean that I like the deal. If you are in my investor club, I am glad to give you my personal opinion. However, that's really just my opinion, and again, not and endorsement. Over the years, I have found the hardest part about investing is trying to figure out who to trust. I have come to the conclusion that for me, investing works best when it is network based. What I mean by that is that the sponsor of the particular offering is within my network. You see, No investment opportunity is without risk. However, if you can, to the best of your ability, eliminate bad players, that is about 75% of the battle. I steer away from not only people who I think are prone to nefarious activity, but also those who I believe do not have their priorities right. Sometimes you can read between the lines and understand what people's intentions are. Just listen to what they say. Are they trying to do the right thing? Do they focus on investor returns and building a long-term company with happy clients or do they talk about how big they want to get themselves? The latter is an alarming thing for me. That's not because I think it is bad to be big and successful. Of course not, you're looking at someone who owns businesses that are big and successful. However, big does not necessarily mean good. I could say that I want to build a $1 billion real estate empire. If I start with that goal in mind, what do I need to achieve it? I need to buy a lot of real estate with a lot of investor money. Even in markets like we have today, I might stretch a little bit to make sure that I keep buying properties to keep pace with my goal. Do you think that's good for investors? I don't. Rich dad advisor Ken McElroy has been out of the real estate market for over a year. As much as he continues to make offers, the deals that he knows will make his investors happy aren't there. People are paying too much. I know this personally because my team is getting outbid routinely as well. Now, that doesn't mean I'll stop trying. Hopefully something will come to fruition soon enough. When it does, I will bring it to my investors and feel good about letting them participate. Don't be impressed by people who are doing ALOT of deals right now. Be concerned. That doesn't mean there are no deals in the market, but they are limited for sure. On the other hand, try not to get the chicken little syndrome either. If you see a deal and it's a good deal and you know what you are doing, don't be afraid to buy. There is no such thing as a risk free investment. But with hard assets, it's kind of nice because they usually come with some financials. Numbers like net operating income over the past two years, don't lie. In this market, the confident but conservative will prevail. If you sit on your hands and don't even try, you might also miss some opportunities. The real estate market, in particular, is confusing the heck out of sophisticated investors these days because of the unusual state of the economy. So, who better to speak to about this than Fannie Mae Chief Economist, Doug Duncan? Tune into this week's episode of Wealth Formula Podcast and listen to our conversation now!

It is route important to remember that when I have people on the show, it is purely for educational purposes. I want to expose you to asset classes and hopefully open up a new way of thinking. However, I want to make sure you understand that it does not mean I am endorsing those particular […]