Well, Hi everyone, and welcome to another wise money tools video. Glad you could join me this week. You know, I love when new economic news comes out. It's so funny how you they get the viewpoints that are totally opposite from one another. They'll have a couple different guests on their each one talking about their particular point of view. You know, economists and weather forecasters are the only jobs that you can have and be 90% wrong all the time. And you still get to keep your job. It's really interesting. Economists are just as bad as weatherman, there's one economist that I started following way back in the late 80s. He had written a book and on some of his past forecasts, and they had been right.

So obviously, when an economist gets it right a few times, you tend to pay a little attention. And in the book he talked about he sees the future and when we could expect a major downfall in the economy. And what was supposed to happen in the late 90s, early 2000. Well, sad to say, since that book of the 80s, he's pretty much been wrong. Yet, I still see. He's out there selling newsletters, he's written another couple books. And I just don't get how they stay in business and be so wrong so often. Anyway, you know, I remember when I was a teenager, as a long time ago. By the way, my mom worked for a guy who, I don't think it was an economist, but he was some sort of a forecaster. And man, he had a huge following. And this is pre internet, of course, but his book was a about the coming crash that was just gonna rock the world for decades.

The forecasted crash was supposed to happen in the mid to late 80s. And I remember 1987, I was a kind of a maybe within the first couple years as being a financial advisor. And if you know what happened in 1987, we had this thing called Black Monday is still the worst one day loss in the stock market history. So this is happening. I'm sitting there live watching this in my office and thinking, Oh, man, here comes this guy was right. And smart is gonna tank and we've got decades of gloom and doom. Well, unfortunately for him and his followers, the market recovered, literally within a few days. And by the end of the year, it was even positive, it pretty much didn't even look back from that day till 2000. Then, of course, you saw what would have we remember what happened in the late 90s, with the dot-com boom. And then we finally did have a really decent set back in 2000-2001.

Anyway, all of his followers, I mean, these guys were really doom and gloomers. They were prepared, They had bunkers, and food storage, and all this kind of stuff totally missed out on everything. So anyway, going back to this current economist, I don't really want to mention his name, he's kind of popular. But anyway, his forecast was by 2005 things were gonna look so bleak, the baby boomers, were gonna be pulling all their money out of the market. And because that segment, the baby boomers was such a huge part of the population, that the markets are just gonna tank. And we're gonna see Bedlam for the next 20 to 30 years. Well, as you know, 2005 came in when 2010, 2015. And now we're pushing into 2020. And still nothing like that has even remotely come close, and couldn't happen. Of course, I don't know if, if it's totally off the table now. Of course, anything can happen.

But people gave so much credence to these guys like him. And like I said, they can always be wrong and never be right and still be on the top of the news channels when it comes to news. Alright. So it's kind of those stock newsletters that you get, you know, they all start out saying something like. And so predicted that Google would be a winner. And now he has another stock for you that could make you rich, I'm sure you've seen those. I read through a lot of them get a laugh, because they all have that same format. It's either gloom and doom, and you better subscribe to my newsletter. So that can tell you exactly what to do before the economy crashes and you lose everything. Or it's you need to get my newsletter so I can make you millions with my next stock tip, because what I will show you is a secret that no one else knows.

And you know, it's funny about the secrets that you know, the statement about this is a secret. Well, if you know anything about the markets, the only way a stock goes up in value is it becomes a very high demand stock. The more people want it, the higher the price goes. So if it's a little known secret, and no one knows about it, then there can't be much demand and this stock is not gonna go up. Right? It's all about demand. Of course, they want you to think that you're getting in early before everyone knows about it. Look, we live in a technology age where information is spread to millions and millions of people and literally seconds. There aren't many secrets out there certainly not secrets that come from a newsletter that was printed three months ago. Okay, so what's the news of the day sorry, all the backstory there. We've seen two sides of the spectrum regarding the economy and a potential recession.

One side says that we've got this inverted yield curve. And we talked about that a few weeks ago. And they point out the recession is on the way, nothing we can do about it. The other side says that the fundamentals of the economy, like spending and housing, they're doing really well. And we're not gonna see a recession for at least two years. Not sure where they come up with two years, since they can't predict next week. But that's the two stories, both opposing views. One makes you a bit uneasy, and maybe scared. Got a run for the hills, the other encourages you to keep spending and investing. Now, I believe the 2008 crash was preventable. If you recall, the crash was spurred on by the mortgage debacle, over $2 trillion dollars was essentially rode off by banks and lenders, which in turn, you know, beg the government for intervention and what they quoted or what they called quantitative easing. That's how that came into play. I love the names of the government programs, quantitative easing and other words bailout, right.

The feds print money, then loans that fabricated money to the government than the government makes the banks whole or at least flush based on banking rules. And we the people get to pay $2 trillion back to the feds, all right? Don't you love it. However, none of this really had to happen. The real reason for the debacle or one of them, I should say, was the rule that's called mark to market. What that means is a bank has to mark the value of its assets or its loans to the current market price. So if a bank loan $250,000 on a home for example, and the homeowner got a little behind in payments and his home maybe after the devaluation was worth $150,000, let's say, well, the bank and they're wonderful rules, mark the asset worth less than its original loan amount. And by bank rules had to foreclose and sell the property.

This is where the term a short sale comes in. Because there's a shortfall, which means they're selling the home for less than the loan amount. The hundred thousand dollars that was essentially evaporated in this example, was covered by the government by the feds printing money. The reason I say the entire crash was unnecessary, is had banks eased up on their lending practices and wrote out the tough times with the homeowner, they'd have been made whole. And then some years later, had they not played the mark to market came and just said, Hey, we're in this with you, we know things are gonna recover at some point. And as long as you can keep up with your mortgage payments, we're gonna make this thing work.

However, what happened is that banks became well, banks wrote off this $2 trillion. But then they were made whole immediately, that let them become extremely profitable almost overnight. And they've made boatloads of money because they never had to pay these loans back. Banks had little skin in this game. And basically use this the short sales to get rid of the assets that weren't marked to market at the price that they are that the lending the value, and then were made whole. Now, on the other hand, those with money and knew we wouldn't be down forever, we're able to pick up properties for pennies on these short sales. And have been just rewarded handsomely. We've probably made more millionaires by the banks and the government faulting on this thing than an almost any other event in our history. All thanks to us, the taxpayers, the millionaires thrived.

So had they simply eased up on the mark to market rules we'd be in much less debt is a country. And many thousands of families that lost their homes and their businesses would still be living in those homes today. So we don't have to always go into a recession and feel like it's gonna turn us all upside down. If the industry, the banks, the markets were just smart and work with sound principles. And know that these recessions and corrections are just part of the natural phase of the market. I think we could prevent a lot of debacle from happening. There's more, I like to talk about, you know, the the depression and how it was actually longer than it needed to be. Some of the things that the government has done during these correction periods have actually turned it out or turned out to be worse.

Anyway. So when you're thinking about what's gonna happen over the next couple years. And you see two opposing views, it's hard Believe me, it's hard to know which one to you know to believe, just know that probably both of them are wrong. Both of them have been wrong for many many other predictions. And probably not panic to just be smart. I would say this is a time to be a saver, save save save a mass capital, because we are gonna see a recession at some point. And those that have capital are gonna be able to capitalize on that market.

Well if you have any questions, send it to questions at wise money tools.com make sure you subscribe. If you'd like to have a strategy session, click on the time trade link below. Have a quick conversation. See what's going on in your life and how we can improve your situation. In the meantime, again subscribe, stay tuned. Hopefully these things are informative love doing them for you. Until next week. Take care.

Hi everybody, welcome to another wise money tools video. Glad to have you with me today. So I had a really interesting conversation the other day was, and it may fit some of your situations. You know, I know a couple of you still have some teenagers at home, maybe you're in your, I don't know, early 40s, late 40s, who knows. But this couple very similar situation had a couple teenagers at home. He's got a really good job pays well has a 401k. And he's funding it to the max. So that's pretty common for a lot of people. They have a fairly good size home, and along with it a really good size mortgages. And this is kind of where our conversation started. They're worried about retirement, and having that mortgage payment hanging over their heads for years and years into retirement.

So we were just kind of casually asked me, you know, should I take the money out of my 401k and pay off my house? And I got to thinking about that, you know, there's so many variables in answering this question that I thought might be a good conversation for us to have. Because some of you might have a very similar, you know, Outlook or trying to figure some things out like that. So let's look at each of these assets, if you will individually. Let's first take a look at the 401k. Now, there's a couple things to note about the 401k. As you know, it's most likely invested in the stock market. And we've had a really good 10 years in the stock market. In fact, I was thinking the other day I was thinking Man if somebody was in their, you know, mid 20s, got their first job started funding their 401k. They really have no idea what it's like to have some kind of a recession or a bear market.

In fact about the worst year we had was right at the end of last year in 2018. The market tumbled and basically lost all the earnings throughout the year kind of turned out to be a breakeven year but still nothing all that devastating. So for a good decade, we've seen this market pretty much be on a decent projector. Okay, so one of the question was, you know, how long is that gonna last I mean is are we gonna be in this situation where the market is just gonna keep on going keep on going for years and years to come? Well, who knows, we may have another year to we may be coming to the end, I don't know. But recessions you know, and bear markets are really a normal part of the economy, we have to expect them at some point.

And they're actually kind of good, we're gonna see a typical recession hit at some point. It's probably gonna take a decent chunk of returns and earnings from a lot of people's 401ks. It's possible when a recession hits that somewhere between two and five years, sometimes even more of all the growth that you had over those years can be wiped out. When that market finally takes a breather and falls back into we'll call it normal territory. And what I mean by normal territory, I kind of look at that Shiller P/E ratio as a good overview, kind of a 30,000 foot overview of where we're at. And currently that Shiller P/E is still over 29, which means investors right now are paying $29 for every dollar of earnings. So as an example, let's just pick a company, let's say Walmart, as our example, let's say they make $1 on a share stock well invested right now are paying $29 for that $1.

Now to again, for perspective the median P/E the median price earnings ratio is closer to 14 or 16 times earnings. So in other words, dollar earned investors pay somewhere between 14 and 16 times as a median. Now let's contrast that to Amazon. Amazon's price earnings ratio is 93 times earnings. Okay, and apples is right around 8. So you can see there's a lot of variance in the different companies out there. But as a whole, the market is looking at a P/E ratio about 29. And that again, is much higher than it's probably gonna be at some point. So when this market does take a fall, it's gonna be who knows, it could be a year or two might even be just a short time. But what often happens is a market over corrects and drives these P/E ratio is even lower than they should be. That's when buying opportunities are plentiful. And that's when we like to become investors.

Okay, so now we look at this 401k. It's probably done very well over the last, you know, 10 years, like we said. When the market finally resets, he's probably gonna take a who knows 15, 20, 30, 50% hit on his account value? How much will that be hard to say. But it wouldn't be far fetched to think that it's gonna have at least a 20 to 30% hit. So let's just say he's got half a million dollars in his 401k. Over these years. He might expect to lose $100,000 or more. Now in 2008, a $500,000 401k dropped to 250,000, or even less, we affectionately called the 401k a 201k because they were literally cut in half for so many people. Okay, so that's the 401k dilemma and what we're looking at, and you know, what's our best move there. Now let's look at the house, he says that they are kind of house poor, in that the mortgage takes up a significant part of their income.

Now, let's not beat up on them too much. But as they probably realize, now they would have been much better off getting into a home that wasn't so burdensome as far as the mortgage payments. Now on the flip side, they live in an area where real estate's been doing well and their home value is growing the promise someday, when they retire, unless they have other investment income, they're probably gonna need to access the equity in their home, just to get through retirement. This might require them to either sell the home to get the equity out, or maybe even do a reverse mortgage to supplement their income. Who knows. Now they may have looked out, and they've got more house and they should have bought but the equity appreciation is building capital and again cash that someday they may be able to use. Now on the downside, if we go back to 2008, this type of home little higher end home is are the types of homes that fell dramatically some lost 50% of their value.

So that could potentially wipe out a lot of their equity that they've had over the years. Now have to understand one concept about equity. If I were to ask you what rate of return is equity get? So many of you would likely answer that it grows about the rate of home values in your area. And that would make sense, right? But if you live in an area, let's just say where home prices are rising by 3% a year, you might say that equity grows at 3% a year. However, it's really wrong. Okay. Equity gets a 0% rate of return every year, every week, every day forever. You say hi, well, how can that'd be my house goes up? Well, let me prove it to you this way. Let's suppose we have two families, they both buy a home for $300,000 on the same day, same neighborhood, same values, okay. One pays cash.

So he has no mortgage, he put the entire purchase price $300,000 into his home. He technically has $300,000 in equity right? Now the other one finances his home 100%. And I know you really can't do that these days. But it's this is just kind of a show my point. So this family technically has no equity as they put no money into the home. Now, in this case, on a $300,000 home this fame, this family's gonna have about a 1500 dollar a month house payment. And then as include taxes insurance, but both families have to pay those costs no matter what. So let's just say that in five years, both homes grow at a average rate of 3% per year. And so now there were $350,000. So both families have increased their net worth, if you will by $50,000. More than obviously they paid for the home. But here's what I want you to see, the equity in their homes actually grew at 0%.

You see the family that paid cash for their home, has a home where $350,000 they grew by $50,000. The family who had no equity in their home also grew by $50,000. You see the amount of equity in their home, or the amount of money they put into it had no bearing on the growth of the home's value, the market price of the home is what drove the equity. The point is own your home free and clear or have a mortgage is really not going to have a bearing on the price or the value of your home. Now, you could say that this family that put $300,000 cash into their home had a rate of return over those five years of 16% total, or about 3% a year. The exact Return of the homes market appreciation, the other families paid 1500 dollars per month for five years. That's a total of $90,000 that they've put into payments.

Now it's difficult to come up with the exact return because the $90,000 was put in over 60 months, not just from day one at 1500 dollars per month. However, the return on investment would be close to 55% or about 11% a year. So the leverage of using OPM, that's other people's money. In other words, having a mortgage actually enhance the return for this family. Now, here's one thing that I'm adamant about. When it comes to paying off your mortgage, I will never tell someone not to pay off their home, no matter how much better it could be by carrying a mortgage. I'm simply pointing out that there are two sides to the story and you have to do what's best for you and your family. Now, going back to our family in this situation, what they did is they might be regretting having such a stifling mortgage payment. What they may find at the other end, though, is that they've built much more equity and a better return on investment by having a mortgage.

So there's always trade offs. I'd prefer to have a low to moderate mortgage, be able to save more money and use your capital to increase your net worth by investing in other opportunities. Which is why we love our banking system, it's a place you can save tax free gives you access to that capital for their investments along the way, when assets or investments go on sale. Okay, so now we have to separate the two assets, we get the 401k, we've got the home, the question comes to me again from this family. Should we take the money out of the 401k to pay off the home and free up the monthly income that they then could save? I think the only way we'll know the perfect answer to this question is to have a crystal ball and see the future. See if the market is going to tank and his 401k is going to lose $100,000 then of course, it'd be really good idea to take that money out now at the peak right?

Even after paying taxes, you'd be better off to have his home paid for with money that he pulled out of this 401k. On the flip side, if he pays off his home, and dumps all that money into his home and then his home value drops. He may never be able to sell it and recover his investment. It's also possible that he's been living in the home long enough that even if it dropped by 20% in market price. His mortgage payoff would be low enough that he could recover what he's put in. For instance, maybe bought his home for $500,000 homes now worth 800. He owes $100,000 on a mortgage, he pulls it out of his 401k and pays it off. So he pays off his home. And then let's say his home dropped to $600,000. Well, he can still recover that hundred thousand dollars that he put in to pay off his mortgage.

Ultimately, he has to determine which scenario poses the most risk for them. If he pays off his mortgage, have a mortgage payment to save each month. That is if he will, sadly, many people soak up that extra money now that they don't have a house payment and put it into their lifestyle. They end up spending more and buying more stuff, which would make the situation even worse. Now, if the market keeps going up, and the home values keep increasing, he's probably better off doing what he's doing. Now, remember, equity gets a 0% return every single year. If the market tanks, they may wish they had pulled money out at the peak and paid off their house. And now they have a mortgage payment that they were making each month freed up again so that they could invest it and hopefully buy things at lower prices.

He and his wife may have this deep down desire to pay off their home no matter what the calculation say. And again, that's a matter of principle and a lifetime goal. There's really nothing wrong with that many people to that even if it's better financially, to have a mortgage. Again, I'll never tell somebody not to do that. The alternative, like I said, is to have a banking system where you can build up your capital thing, you've got options, you have the option to pay off your house, you have the option to be the bank, you have the option to sit on the sidelines when markets are high, then get involved and buy when they go on sell. You have safety liquidity tax advantages, which can add up to more peace of mind and the investing principles that work. Ok. So now see what was posed to me.

By the way, this was at a wedding reception, and we had about 10 minutes to talk, which is why I don't know all the details and specifics. But I wanted to throw this out to you and get your take on it. What would you do? What are your values when it comes to your home and retirement savings? It's a great discussion to have because thousands of families are probably facing a similar circumstance, maybe even you. I think we could come up with a good plan with more if we had more specifics. But the best plan of all is to buy a home with a moderate mortgage, save, save, save, build capital and become an educated investor. Then wait for opportunities to come along. And when you can buy $10 bills for $5. But you have to have a process to build your capital, which again, is why the banking system can work for so many people.

Okay, so that's it. I'm anxious to hear your comments and your question. If you have direct questions, send them to questions at wise money tools.com. I'll try to answer them just as quick as I can. If you want to just get into the conversation, feel free to leave a comment as well and give an idea of what you would do. If you would like a strategy session where we could talk about your specific situation. You can sign up at the time trade link below. Always subscribe and we love to hear from you. That's it till next time. Thanks for joining me. Take care.

Well, Hi everyone, and welcome to another wise money tools video or podcast depending on how you contact with us. So in this video, I want to talk about something that may not be so easy to talk about. You know, one of the hardest things when it comes to money and finances is kind of talking about debt. Right. Now all that, before you click away, I want you to hear me out, this isn't gonna make you feel more stress or guilt. But I want to offer you a potential solution. Okay. So money and finances is one of the leading causes for arguments in a marriage. And sadly, it's one of the leading causes of divorce to as part of our that argument, it's always about spending in debt. You know, debt can really Weigh Down a marriage.

This is a topic, you'd better figure out pretty quickly. If for no other reason, just have one less thing to argue about with your spouse. That can cause stress. Simple as that in life is hard enough. When you add to it the financial stress and debt, it just gives you a potential power cake. Now debts such an easy thing to get into and such a hard thing to get out of. But banks and credit card companies, they love it, when you shackle your income to paying them for as long as they can keep you coming back. You got to learn how to break those ties, and at the very least, you become the bank. So here's how you may think about it. You know, what if you could get out of debt, on average in 9 years or less, including your home without changing your lifestyle or budget.

Okay, now hang on there for a second. See getting out of debt, it's kind of like dieting or losing weight. There's plenty of fad diets out there, all of which I'm sure work for some people. But the only diet that really works long term is the one you can incorporate in your lifestyle and enjoy it. I remember the water diet where you drink gallons of waters every day risk of drowning just to shed some weight. The problem is you just can't live like that. Well long term Anyway, after 15 or 20 days and your eyeballs are up to here with water. It's just not sustainable. Then there are fasting diets, you know where you fast, like 18 hours every day. Again, you may shed some weight, but it's the thought that you have to live this way the rest of your life and starve every single day.

It's just unpleasant and you end up giving up. There's thousands of diets just like that. It's very similar to getting out of debt. There are a bunch of theories and ways you can get out of debt. But the ones that require you to change everything about your lifestyle. And the debt programs that are gonna make you suffer if you will just don't work long term. Now Dave Ramsey has a great way to get out of debt. For some it works. The problem is Dave's is kind of like an army drill sergeant. He's bent on making your life miserable and break you any way he can. Doesn't make it pleasant. And it seems like he's almost sadistic trying to make you miserable just to get out of debt. I call it the rice and beans diet. You live on rice and beans never go out for entertainment, no vacations, no life, and put every penny half towards your debt. And sometime in the future, you're going to finally be out of debt.

Now this may work not saying it doesn't. But for so many, it's just not sustainable. It's so miserable, that you begin to wonder why even go to work at all, all your income goes to the banks and credit cards and you're eating rice and beans for the 30th, 90th, 200th day. There's no enjoyment in life, but things happy as he watches you suffer every day. For those who can do it great. We had a debt, however, for the vast majority are probably gonna fail. There'll be so miserable and frustrated that it won't take long to fall back into the bad spending habits again. Just to get a decent meal might drive you off the plan.

So what you need is to have a debt elimination program that can let you basically keep your lifestyle with some minor adjustments. But it's livable. Like dieting, if you have a program that lets you enjoy life, enjoy food, maybe add a little exercise, curbs some of the most harmful foods and incorporate some healthier foods. You're probably gonna feel better, you're going to look better. And it's a sustainable and enjoyable lifestyle. That's the only way a diet works long term. Because it's not a diet, there's not a time frame or a way cull, it simply becomes your way of life. Getting out of debt doesn't have to be all that misery and pain either. It's about small and simple lifestyle change is that can last. Now it's a really easy approach. It's kind of a step by step approach. And it goes something like this.

First, you got to formulate your game plan, a plan that you can live with that doesn't stop your heart. Think of your income, as if it's filling a bucket, and the bucket is full of money. That's like having holes at the bottom of the bucket. And it's all seeping out. Every time you put money in, it pours out of your hands and goes to the bank and credit card companies. The next step is to see if we can find where you might be losing some of your income, oftentimes, unnecessarily or unknowingly. Then what we want to do is redirect money that may not be doing as well for you, as maybe getting the debt paid off would. As an example, Sometimes a retirement plan and other savings plans are giving you a lower return on your money than paying your debt off would be.

Once we have figured that out. Then we set up a business banking system where eventually you will control the capital and spending without the need for banks. But what you need is a step by step plan on how to save what debt to pay off first, when to pay off the next one, and so forth. Once you get the second one, the third one, obviously, you're at some point going to be completely out of debt. And it's not as hard as you think. And it doesn't have to be drudgery either. You don't have to go on some crazy fad diet to lose weight, and you don't have the rice and beans to get out of debt. Look, I know some of you may seem like a steep mountain to climb, I get it. But if you have a desire to get rid of it, it can be done. And again, without changing your lifestyle dramatically.

There's some peace of mind even some power that comes when you control your money instead of it controlling you. You don't have to go on a starvation program and load up on rice and beans for the next five years either. In fact, you don't have to dramatically change your lifestyle at all. There's a much greater chance your debt elimination program is gonna work and be successful if it becomes part of your lifestyle. So you have to think about getting out of debt, and not necessarily all the sacrifice that goes with it. Let's see if we can't make it really easy for you. If you'd like to have a strategy session and see how this might work for you, just click on the time trade link below. Grab a time that works for you. And we'll have a quick little discussion. And as always, if you have any questions, shoot them at questions at wise money tools.com. I'll answer them just as quick as I can. If you have any comments or thoughts, put them down below and I'll try to respond to those as well.

So I hope this has been informative. I'm excited for those of you who are really committed to getting out of debt, but doing it without drastically changing your lifestyle. And again, I asked the question, if you could see a way to get out of debt in 9 years or less, without dramatically changing your lifestyle with that be of interest to you. Would that help you in your financial situation? That's it. Well, good to have you. I'll see you next week. And until then, take care.

Hi everyone, and welcome to another wise money tools video. Glad you could join me today. Maybe you're on the podcast driving, glad to have you as well. So we're gonna talk about trade wars. I mean, this has been a big deal, it's dropped this stock market. Today is the fifth of August and we've had a 1700 point drop in the last a week or so. So there's a lot of people scared wondering what these trade wars with China gonna do. Basically what happened was, Trump said that if you guys don't start playing by the rules, we're gonna increase our trade tariffs on you by 10%. come September first, on our agriculture was like $300 billion worth of goods.

And so rather than China backing down, they played that. They played hardball. And they said, Okay, well, then we're gonna quit buying so much goods. And then they really played the, quote unquote, trump card, and they devalued their currency. Now from a world global, kind of working together perspective, they weren't supposed to do that. In fact, the Fed should be all over them for doing that. So should all the other countries, because when they devalue their currency, what happens is when Well, first off, if you're in China, and now you want to go buy American goods, or really goods from any anywhere in the world, your currencies just been devalued.

So now it costs you more to buy goods from other countries. How that can be good if you're in China, because it's going to persuade you, if you will, to buy more Chinese goods. What it does to Americans, is it with that devalued currency? Now we literally can go in and buy more goods from China cost us less money. The question is, will are, will we do that, and that's where this whole trade Ward is trade war is gonna take us is who's going to who's going to flinch first, who's going to back down first. Now, I'm not trying to say trade wars are good or bad or indifferent.

But I kind of get the idea we've been kind of kicked around pushed around in our country and the trade imbalances with many countries for decades. And it is kind of nice to see that we're finally standing up for ourselves and saying, Hey, you know what, this just isn't fair. It's not fair to our manufacturers. It's not those fair to those who like to import export good. So let's get more on an equal playing field. Not to mention, China does a really good job of stealing our intellectual property, and taking advantage of patents and so forth over in their country that are theoretically internationally patented. So there's some reasoning behind trying to get this all back on good footing.

However, in the meantime, it can sure cause some turmoil. We've talked about this before, the stock market loves predictability, reliability. And anytime there's any kind of a shake up. Yeah, the jitters go through. And you can see what happens. I mean, just even today, part of that 1700 point decline today was over 700, just in and of itself. So the markets do not like it when they can't predict what the future is going to look like. And we can't right now, we do know that agriculture is gonna get hurt, to some extent, because China is going to back off buying some of our agricultural products.

And again, with the devalued currency that they've will, as they devalued their currency, it's gonna affect our import export, as well. So it's interesting, I don't know how it's all going to turn out. But one question that was asked to me from a really good friend, is this the time to buy a house or wait for houses, they that this person was told that housing was gonna drop dramatically because of the trade war? I don't see that correlation, because most of the materials that we use to build houses are American, they're here. We don't import a lot of stuff, especially from China, when it comes to building houses is really not going to affect land prices much.

So I don't see that as a big issue. But they were really concerned, hey, if I buy a house, or should I wait for housing to take a massive correction. That's probably not something that we have to worry about to this point. But we do have to worry about technology, computers, those kinds of things, because that could definitely be affected by these trade wars. So just a little update, not sure where this is gonna go. Not going to not sure who's going to flinch. First. I do hope that sooner or later, cooler heads prevail, and we get back on a fair trade and a balanced system throughout the country. That can be good for everybody both in China, America, anywhere else that we import and export goods.

Alright, that's about it. You have any questions, shoot them to questions at wise money tools.com. Be happy to answer them as quick as I can. If you have any comments or thoughts, have some ideas on how this might turn out. Feel free to express those as well below. And until next week. Talk to you soon. Take care.

Hey everyone, welcome to another wise money tools video. Glad you could join me today. So I got something kind of fun to talk about let's see if this is kind of interesting to you. So what if politicians were stocks? Now the question is, would anyone want to own them? One thing about Wall Street is they like predictability, and very little change. In fact when news hits the street, and there's even the slightest change in perception of the near future, markets get jittery, and you see a sell off. We saw recently with the threat of tariffs being upon China, and that trade war. It didn't take much to create a sell off in the market. And this can happen when earnings are lower than expected.

A company like Boeing has an airplane problem. It can happen when interest rates rise, or even threatened to rise and hundred other threats to the stability of the markets. Wall Street wants a stable market and outcomes as predictable as possible. So again, here's an interesting thought. What if our politicians or even political issues were traded like stocks? So let's play a little financial game, we're gonna pretend that you can invest in politicians or a political issue as if it were a stock. How often are politicians right or a political issue as good or as bad as portrayed? Let's take a broad look at one particular issue that seems to be on the tip of tongue and has been going on for many many decades now. And this is our global climate change.

So now you've got a chance to be a stockholder in climate change issues. How do you think those who are pushing this narrative would survive as a stock company? Remember investors want honesty, real numbers, solid productivity, predictability, and reliability? Well, let's go back a few years. In fact, let's go back to my high school years. I know as a long time ago, quoting from an article that was just printed a few months ago, Tom Harris, who's the executive director of the international climate science coalition, wrote this and it reads, Time magazine's January 31 1977 cover feature how to story how to survive the coming Ice Age. Did you hear that the coming Ice Age, it included facts, such as scientists predicting that the Earth's so called average temperature could drop by 20 degrees Fahrenheit due to man made global cooling.

Dr. Murray Mitchell of the National Oceanic and Atmospheric Administration warned readers that the drop in temperature between 1945 and 1968 had taken as one sixth of the way to the next Ice Age temperature. Now I distinctly remember when I was in high school, we kept hearing about global cooling, and how crops in the very near future would freeze, and we'd all starve to death. Well, the article goes on global cooling gain considerable traction with the general public. But then, instead of cooling, as along predicted by manmade climate change advocates, the planet started warming again. Now something had to be done to rescue the climate change agenda from utter disaster into the quote. This is about the time that Al Gore entered the scene to his dad was a senator and helped out get elected.

So let's pretend you're an investor in this political position of global cooling. First off, like a good investor, you'd want to see some solid data to prove the upcoming Ice Age. At the time, there was a consensus of science, that all signed off on this event. Sound familiar? There always seems to be a consensus. And now they're another term thrown about in addition to consensus, it's settled science. Okay, it's 1977. We have a stock investment decision to be made based on global cooling. You've got some honest politicians and scientists and consensus that cooling is inevitable unless we do something fast. So you bet on global cooling, that is going to happen? How could you go wrong. So you buy in you now own stock in global cooling?

So you sit on your stock watching for temperatures, they get cooler. One day it rains really hard, even starts to sleep and you think, Oh, good, it's coming. Then you see snow, maybe three or four weeks earlier than normal. You get excited, you're gonna make a killing, then something happens, something that the consensus did not see or predict, the planet starts to warm. Oh, no. What are you going to do? Should you sell? Is it just a warm front? Are you about to panic? So you hold on believing the politicians and scientists would lie. You saw that the day to yourself and you done some homework. However, the stock you bought ultimately turns out to be a disaster. Seems It was a big hoax and a bunch of lies, trying to get rich off global cooling.

The global cooling stock would have made Enron look like a bunch of honest guys. Well, turns out, as you know, is a huge scam promising that global cooling was on the way and there was no way to stop it without a massive changes. The data, the consensus the settle science all was just a big scam. So the same politicians needed a new face a new story. And this is where how Gore comes into play. He had new data, new science, new consensus, he showed through his science and evidence that the Earth was not cooling. It was warming. Oh, what a bummer you think. It was actually warming. I was sold on this cooling garbage.

However, now we've got a new stock to invest in the opposite of cooling is now warming. So al brings in the science his scientists has so much credibility that he even wins a Nobel Prize. How even got President Clinton to fund and authorize the President's Council on sustainable development. Wow, that must have all the credibility needed to make this stock a no brainer. It's got to be a winner. Forget the science on global cooling. That was irrefutable. And certainly without dramatic lifestyle changes would come to pass. Now we got the President on board. This stock has to be a good one. Look at all the resources time to buy in, right.

I mean, we've got a bunch of honest guys who've proven science Nobel Prize winner, and Al Gore even has some movies to show what's gonna happen when the earth warms, seas will rise. Glaciers will melt. You're really convinced that this stock is got to be a sure winner. I mean, what else do you need to know? So millions just like you buy in a stock source. For years the face of global warming Al Gore preaches his sermons and more people in politicians buy in. The stock is a high flyer. The numbers look great. Global warming is a foregone conclusion. Then something happens again. The earth quits warming. Oh, no. What's going on? We go from Sure, no doubt global cooling stock that built billions from investors as a big lie. And now we've got invest your fears that global warming could be another scam.

A few years later, it's confirmed. Global warming didn't happen. It was a scam. Your stock goes into the dumpster and you lose again. How gore and his movies fade away. And if you watch one now you'll notice something really interesting. We're living in the exact time frame that the sea should be covering parts of Florida and California Glaciers gone. Oceans should be several feet higher. Some city should now be scuba diving sites. Miami should be underwater. But guess what they're building in Miami. It's the largest mall in the United States. And it will have a massive indoor waterpark ice rink 6 million square feet costing 4 billion dollars. It's being built right in the area where the ocean should have swallowed up the land according to global warming scientists.

The global warming stock like the global cooling stock. Once again, loses investors billions of dollars and investors lose it all. Those investors who thought the stock would be their future retirement and bet on Al Gore and now they're just basically greeters at Walmart. Millions lost. They trusted Allen, the science invested their heart and money, have nothing to show for it except a movie ticket stub from one of his movies. You can keep the ticket stuff for your scrapbook. So one day you can show your kids and grandkids, how dumb it is to invest in politicians and political scares. So who profited? Did you know The Al Gore is worth 150 million dollars now. Not bad. So the politicians and global scams never panned out.

Bernie Madoff is beside himself wondering how these crooks get away with it. And then they go retire in their mansions and fly around in their private jets. Well, since cooling didn't work and warming didn't work, another issue arises. And politicians grasp it like bees to honey, the politicians and scientists get together to form another stock company. This time, let's not be so specific. Let's issue stock and just call it climate change. This way, we don't care if it gets warmer, cooler, or simply natural Earth changes we win. Will issue this stock based on data consensus and best of all settled science. We get a bunch of politicians to push it and the stock will soar will build some scare tactics. In fact, we can get some newbies in Congress to say that we only have 12 years if we don't get this huge investment fast. If we don't scare people, now they might not invest. If people ask where 12 years come from, we'll try to avoid the specifics.

We should also add that planes need to quit flying air conditioners need to be replaced in every building. Cars need to be electric, politicians will need to raise trillions of dollars needed. But they'll be set, they'll be able to run the entire country, this stock can't fail. There's not an argument that can be made as long as we can show some kind of global change. And since this has occurred ever since the earth was formed, has to be a winner, a big time winner. So here you are, you may be old enough to have gone through both the global cooling and global warming hoax like I have, are you going to invest in the climate change hoax as well. They're counting on your money, your tax money that is without it, the earth won't make it. And it's got just a little more than a decade. It's all about the money. It's the greediest system that has been corrupted by scam artists and line politicians for years now.

So now getting back to my original question, if politicians and issues they push were actual stocks, so would you invest in the current politicians? Even some of the new ones on the scene? Are they worth investing in? Do you think they're promoting truth that you can rely on? How about those running for president in a few months? You know, some of the names? I gonna say them here. But if you looked at them as a stock, you looked at their history, their honesty? Do they change their position? Are they pushing lies and scare tactics? Are they on a climate change bandwagon?

Have you seen enough money lost in these issues in your lifetime? Who would you invest your money in? Or would you see these politicians have little to no accountability? They can flip-flop on issues when it suits them to change their side. They can literally lie to us and deceive us and scare us. They tear down what has made America the best country ever. And then ask for you to buy stock in them. If you really analyze their stock, like Wall Street investors who want reliability, honesty, predictability, who is worth investing in? Okay, since we don't invest anything, but our votes in these guys, all I can say is I hope you invest your vote in the right place.

I hope you enjoyed this conceptual view of politicians and politics. If they were like stock, I'm not sure any of them could get us to invest. What do you think? I'd love to hear your comments below. And as always, if you have any questions, tune to questions at wise money tools.com. If you want to do a strategy session, click on the link choose a time we'll have a little conversation. Don't forget to subscribe. And until next time, take care.

How big are you thinking when it comes to your money?

Are you prepared to take the next step in investing?

Picking up from where we left off.

Everyone, welcome to another wise money tools video. Last week, we kind of dove in a little deep on some numbers for real estate investing, and we want to pick it up from there. So what we're gonna do is talk about how to use the banking system as part of your real estate investing. Okay, so now let's do something kind of interesting. So we've looked at an all cash buyer. And we've looked at a buyer who's using bank leverage. But if you recall, when we started this, we were talking about an investor who basically had $250,000 in cash right now. So what a more aggressive investor might do is take the 250, and actually buy 5 homes, leveraged with bank money. And let's see what that looks like.

So now they take basically 50,000 per home down payment, get a bank financing. Now their annual rental income is just about $90,000 a year, expenses of $4,500, the mortgage just about $79,500. And so now they've got a net operating income of $5,700. And if we look at the total appreciation from that, and net income, it's basically the same as buying one home 15.29%. Okay. But now if we have a future sell here, and we've got an appreciated value, let's just say that home goes, I don't know how many years in the future this is, but it goes from 240,000 to 350,000. Maybe it's the next 10 years, seven years, 12 years, who knows.

But that means there's equity appreciation of $110,000 per house. So an all cash return on investment would be about 45%. So what that means is if I walked in, and you put $240,000, down on the house owner free and clear, and then it grew to 350,000, my equity would be 110,000. And that rate of return or return on investment ROI, about 45%. Okay, but if I leverage that, and again, I'm buying five houses. And now my leveraged ROI is over 200%. This is where using leverage and multiple homes starts to really make a meaningful difference in your wealth. So now we've got over $550,000 in equity between the 5 homes, and our ROI or return on investment on the multiple Homes is over 229%.

So the moral of the story is, once you determine what kind of investor you want to be, that might give you a sense of how it aggressive you should be with your capital, and whether or not you should use leverage or not.The shorter this duration, the worse if you will, you're going to find financing, the longer the duration, the more probability that you're going to have some pretty significant returns to accumulate your wealth. Okay, so that is a quick down and dirty 30,000 foot overview. But I was really interesting to go through these numbers the other day with this client of mine. Because I know they really wanted the property but we wanted to make sure we assessed it right, they ended up the property got bid up.

And so basically what would happen if they wanted this property what they would have had to pay even more, which would have brought their ROI down their cap rates down. And they probably ended up dodged a bullet on this one. But what I hope they and all of you get a sense of is whether or not you should use leverage or not. Now the next video we're going to do we're going to take kind of this same scenario, but we're going to plug it into whether or not we should use the banking system as part of this process. And whether we should use our banking system financing availability to pay cash, or just use the down payment and see how that all works out.

Okay, in the meantime, if you have any questions, shoot them to questions at wise money tools.com will answer this as quick as I can. Make sure you subscribe. If you ever want a strategy session, just click on the link below and set up a few minutes where we can have a conversation together. And the meantime you have a great week and I will see you next week. Until then, take care.

Hi everyone, and welcome to another wise money tools video. I've been thinking about doing this real estate video for quite some time now. But a few things happened over this past week or so that has really kind of spurred this. And I kind of want to get this out there because I think it's really critical, a lot of you might be interested in investing in real estate. So it's, one of those things that's going to help you at least, kind of figure out the kind of real estate buyer, you want to be the risk maybe that you're willing to take, and then how all the numbers work out.

So I'm going to be going back and forth here with my Excel spreadsheet. As we start talking about some numbers, so don't get dizzy. This is just a 30,000 foot overview. These numbers aren't you know, perfectly in order just to give you kind of a sense of what you're looking at, and maybe some rate of return and cap rates and all that good stuff. The first thing I think critical is you got to identify the type of investor you want to be. And by the way, I've got some notes here because I want to make sure I hit everything. So forgive me as I'm looking down here. But there's basically two types of investors if you will, the first one is just a cash buyer, you've got cash sitting on the sidelines, you want to buy a piece of real estate or rental property. And so you basically just invest all your cash, no mortgage, you own the property free and clear. And then you just have expenses, taxes, insurance, and so forth.

Then we've got to calculate what that means in terms of a rate of return or what's commonly called a cap rate in the real estate world. cap rates also in stocks, you know, when you're buying companies, capitalization rate is really what it stands for, but it's called cap rate, or a lot of people just refer to it as cap rate. So there's your cash buyer, then you have what's called a leveraged buyer. This is where you're using banks or some sort of financing, in addition to what down payment you might have to put. So this is where you're trying to put in the least amount of cash that you have to and get the most amount of financing for leverage, if you will, so that your rate of return can potentially be enhanced. Okay. So let's go over just a couple things you've got to have a good handle on when it comes to real estate, let's first talk about equity.

Now, equity is the difference between if you have a mortgage anyway, the difference between what you owe what it could sell for, okay, equity is always the value that you're going to get if you sold the home. So if you own the house free and clear, and you paid $200,000 for it, now it's worth 220,000, you have equity of 220,000. But here's the important thing to understand about equity. Equity gets a zero percent rate of return every day, weekend and week out year after year, forever and ever. Okay, now, let me kind of give you a sense of how that actually works. A home's value has no bearing on the mortgage that you carry, the only way you get any equity out of a home is what the market is willing to bear.

So if you have a $200,000 house, and you have a $200,000 mortgage, you basically have zero equity. If that house appreciates in value $20,000 now you have 20,000 in equity, but it didn't matter if you own that house free and clear. Or if you had a mortgage up to the eyebrows. Equity was only produced by market value. So I'm probably getting a little in the weeds here. The point is, is that the only thing is going to create the equity is the market appreciation or if you do have a mortgage pain down your mortgage, but the home itself, its market value has no bearing on how much mortgage or no mortgage that you have asked Hello. Little more than then I wanted to do on this quick little thing. But anyway, okay. Now there's some factors that you got to consider about money. OK, so the mortgage, this is often called OPM or other people's money.

This is the lien or the cost that it's going to take for you to use someone else's money, the down payment, often referred to as the skin in the game. So most mortgages this today, if it's a conventional mortgage, you're going to need about a 20% down payment to buy a home by a half million dollar home, you need $100,000, okay, then we got to factor in if this is a rental with a rental or lease rate is going to be for your income. And then we want to factor in expenses. So all those things go into this bucket, if you will. And we've got to figure out is this a worthwhile investment. Once we know what we're paying, what the rent or lease income will be, what our expenses will be, if we're going to carry a mortgage or not, then we can start to compute and figure out cap rates or our rate of return, or our rate of on investment. Okay.

So what I think is good idea is to look at real estate, no different than you would look at a stock for instance. So using Warren Buffett as our example, because we love the way he invest. When he looks at a business. He looks at it based on cap rates rate of return, what we also call payback time, he does the same thing with real estate. Now, just because he has cash, this is what's really critical, especially right now in our current economy, just because he has cash does not mean he's going to be an investor. Okay, he's still a very patient investor, waiting for prices to meet his criteria, if you will. So one of the first things you want to assess is this a good time to even be buying into real estate. Are you getting paid for the quote unquote, risk that you're taking? And if not, then maybe the best thing to do is to still sit on the side lines.

So again, just because you have cash, doesn't mean it's going to be working for you better if you happen to be buying into a high priced economy, and then it adjusts. Okay. So using really strict rules of rate of return or payback time, is just absolutely critical. So what are your investing rules? What is it that would intrigue you to invest your money, what rate of return seems reasonable for the risk, and again, assessing where you are in your particular area, in terms of what the market is willing to bear See, right? Like right now Canada is out of control, you'd be lucky to get a two or 3% cap rate there. And what that means is, if you invested $100,000, you'd be lucky to get 2 or 3%, or 2 or $3,000, in return on that hundred thousand dollars, so that cap rates are just ridiculous.

Now, just for those of you who may not understand where a normal cap rate is, or you'll find that most investors like real estate at about a 10 cap, which just basically means again, $100,000 invested, these are getting $10,000 a year off of that investment. That's a good rule of thumb, maybe you'll take a little less, maybe you want a little bit more kind of just depends again, on what's going on in the markets and so forth. Okay, so oftentimes, when markets get peeking out like they are, you'll hear analysts talk about the new norm. And I remember this back in the 90s, with the.com, boom, and people were paying huge price earnings ratios.

Basically, a lot of times like Yahoo at one time was, you were paying 2,600% in more than the earnings were actually they didn't have any earnings, they just had to pick some kind of number, but basically 2600 times earnings. So in other words, if Yahoo was making a buck a share, people were paying 20 $600 for that share, and at a buck a share over it would take 2600 years to get your money back. So obviously, they were counting on some appreciation there. Anyway, the idea is, we want to definitely be looking at what's normal. And if we're getting convinced that the new normal is worth buying into. And I don't again, I don't know what it's like in your area. But in real estate that can happen often where people are saying, well, we used to be able to get 10 or 11% cap rate. But now the new norm is 5 or 6% cap rate, that's where it gets a little iffy, because we're convincing ourselves to buy into investments or real estate.

In a situation, that's not all that productive for us in the long run. And when eventually things come back to the mean, that's what can hurt us. And that's what happened to those who were buying.com, those who were buying a lot of real estate, and subprime mortgages in 2006, 2007 it all came back to the mean, and there's a lot of people who got hurt. So don't let a new norm for you. Because oftentimes, there really isn't a new norm, it's just got to adjust back to the mean, hats at some point. Okay, so let's jump into a few numbers here, just so you can kind of see what I'm talking about. So we're going to assume you've got quarter million dollars to invest, and it's sitting there in cash. And again, the first thing you have to determine is, are you going to be an all cash buyer use no bank financing? Or are you going use bank financing and leverage your cash.

So thisjust actually happened with a client of mine, they sent me an email and said, Hey, we're looking at this piece of property, it's a rental property, can you kind of give me your opinion. And one thing I always tell our clients is we're happy to help them look at and look through these numbers, we don't want to tell you what to do. But we definitely want to be if you would like us to be a second set of eyes, just saying, hey, this looks good. Or maybe here's some things to be concerned about. Anyway, so this is a real life situation, they were faced with this rental, that was $240,000. And the monthly rent was $1495. So the annual rents on this would bring in $17,940 a year. And we're just estimating between insurance taxes, maintenance utilities, this is probably a little low, but $1,000 for that.

And again, the older the home, and you might need to be setting aside a lot more for maintenance and so forth. Anyway, so the net operating income or in Oh, I was $16,940. So the cap rate on this, basically, this is just taking your net operating income, and divided into the price you're paying was 7.06. So right off the bat, you could determine Okay, this is a 7% cap rate 7% rate of return, is that worth the risk? Is that worth being called at midnight, because the toilets clogged or the roof, you know, getting a leak in it. So you got to kind of say to yourself, hmm, if the median is where so many investors are at 10%? Is this worth getting into at 7. So now one of the other factors we need to put in there is what could potentially happen on equity appreciation.

So if all this did was never, if all we did was buy this house, take the rents and and have some expenses along the way and earn 7% we'd have to determine if that's worthwhile, but we've got a one other factor and that is homes typically appreciate in value, get this equity appreciation through and 3%. They're just for fun. It's probably about right, some homes around the country or 5%, summer less excusing three, that means that over that year's period of time, we're gonna pick up $7200 in equity appreciation. And if we add that to the net income, then we've got a total appreciation plus net income of about $24,000. Now all of a sudden our return on investment which is cash plus equity is closer to that 10%. But here's the danger, you say okay, I can get 10% between cash and equity, but you're relying on that property to increase in value. And it may or may not.

So that's kind of a risky proposition to assume that that's going to happen year in and year out for as long as you on the property. So now that's a cash buyer. Okay, so what if we became a leveraged buyer, in other words, we're gonna put down a minimum amount to say 20-25%. And we're gonna borrow money from a bank and finance the rest of it. So that would look something like this. So again, we know the numbers, we're going to pay $240,000. But we're this time over here, we're gonna mortgage $192,000 closing costs about $6638. So we're going to bring $54,000 to the table, the mortgage payments going to be $1325, or annually $15900. So now our cap rate on cash invested is 2.11%. Again, equity appreciation is where we're going to get a little bit of leverage, because we've put a lot less money down.

Now all sudden our ROI on cash and equity is over 15%. So we do a little bit worse, because we've got more costs when it comes to financing. But we do a little bit better, because we've got less money in there. And the homes appreciating again, whether we have a mortgage or not the homes going up by that $7200. So if we think we're gonna get some equity appreciation, then leveraging our money into a home can make a lot of sense. Again, if you think that that's going to happen, but that's the risk you take when you're relying strictly or for the most part on equity appreciation, because the numbers just don't look all that great with a mortgage at these mortgage or excuse me at these rent rates. Okay, we went a little long there, but this is good stuff. And what I want to do is continue on the next video, our conversation here.

If you have any questions, make sure you shoot them to questions at wise money tools.com. If you want to do a strategy session, click on the link below and set up a time to have a conversation with me for a few minutes. Never miss a video, so make sure you subscribe. And in the meantime, you have a great week, and I'll talk to you next week. Take care.