Buck: Welcome back to the show everyone and welcome to another episode of Ask Buck. Now before we get started there was a number of questions and I kind of had to weed through them a little bit and the ones that I have skipped if you’re wondering and you submitted something either they were potentially too specific for you know talking about a fund or some questions about it that I didn’t feel like I could necessarily answer them on a podcast or they were too specific to say an episode where I don’t think that I was necessarily the guy to answer the question. Now there’s a couple ways to get those kinds of questions answered. One is you know if it’s about a show or something like that that we did shoot me an email and I can actually connect you, for example I think we had some questions I had a question on the tokenizing of home equity and I thought that was a good question I just didn’t feel like I was qualified necessarily to answer it so I passed on it and but shoot me an email and I’ll just forward that to the guy who did it and you can talk to you know the actual guests that we had on the show that day. The other way that you can get more sort of these insider stuff which I try not to you know say I like something or I don’t like something specifically or what I think of such-and-such generally I won’t do that so much on a general podcast like this because well frankly I don’t want anybody to like try to sue me or send me a cease and desist letter but that is one of the advantages of being in Wealth Formula Network is you know that is sort of open forum you know we have a private community in there and so we can say a lot of things to each other that we believe to be the case sort of the insider information the good, bad and the ugly of what’s going on out there and so that would be another place to consider if you want to get those kinds of questions is to go to WealthFormulaRoadmap.com and sign up for Wealth Formula Network. Now with that, only a couple people actually recorded questions or comments. I wish we’d have more of those because I think they’re more fun but we do have a lot of written questions so we’ll just we’ll kind of go back and forth with the couple here. But let me start out with the first one it’s Alan Francis. Here we go play that one for ya.
Hey Buck leaving you a voicemail because you said you appreciate it. I was out to lunch today with a friend and we got to talking about something called IOTA. I had never heard of it and he was shocked that I had it so do you have some interest in the crypto space. Didn’t know if it’s something that you have researched in the past and thought if you did maybe you could share your thoughts on it on your show. Thanks.
Buck: Yeah thanks Alan did thanks for the question appreciate that. So IOTA. I do know IOTA. You know and it’s one of you know a lot of different projects in the space and basically it is a distributed ledger technology that enables people and machines too to transfer money and data without any transaction fees. And it’s the thing that’s really different about it or what the purpose of it is, is it helps basically to share data that’s the intended use. So in other words it’s a place for sharing of data and a disturbing distributed ledger and it is interesting. I don’t know how big of a project this will end up being I don’t have any predictions on and it’s not something that I’ve really had on my radar so much but I will say there was an interesting news segment about it recently that I caught wind of which was that Jaguar Land Rover is planning to allow helpful car drivers to earn cryptocurrency that’s what the headline was and basically the idea is that the company what it’s going to do is it’s gonna start testing some software that’s gonna allow drivers of its cars to earn this sort of IOTA cryptocurrency as a reward for sharing data so basically feedback you know what’s working what’s not working in the car so they can improve the cars and as a function for allowing you know the company Jaguar and Range Rover to sort of peek at your data you will get cryptocurrency and exchange. So is it a good idea yeah I mean sure I mean I think data sharing crypto currencies are definitely something that I think has a role and you’re starting to see some of this with with what you’re seeing with these guys at Jaguar and Land Rover already. Now do I recommend buying some buying this well I’m not gonna recommend buying anything in particular but certainly it’s a project with promise and you know it wouldn’t be outrageous to have it in your portfolio. But yeah bottom line is it’s a data sharing type of cryptocurrency distributed ledger that I think has some promise and it’s worth looking into.
Next question, Garth Olson is the next question. He says I’m just starting my real estate business and feel a concern it seems to me that the weather is getting more extreme over the years, does climate change affect your real estate decision? Well Garth it’s not just you. Yes indeed I absolutely am totally paranoid about these these types of things in fact I don’t invest in a lot of parts of the country that I think that are particularly at in danger specifically coastal Florida, southeast coast in general I think for me are pretty much off-limits in fact I had a really good opportunity for our group recently in Melbourne, Florida for a self-storage opportunity but turned it down I mean and the only reason I turned that opportunity down was because it was basically you know 15 minutes inland and to me you know especially for some bands a long term old situation whatever it’s just, listen you can invest anywhere anywhere in the country or in the world for that matter. So if if that’s the case why would you necessarily try to force an investment somewhere that has a higher risk you know from the climate. Now you could say that about anything right higher risk of this high risk of that but the reality is listen climate change is real I mean this is real. We’ve got a thousand you know 1000 year floods happening every other year now and so you can deny it all you want but just take a look at the number of natural disasters in the US and Puerto Rico alone over the past couple of years compared to the frequency that we’re supposed to be getting those kinds of storms it’s not even close. So I think it’s actually very practical to to consider weather patterns and you know and one thing you might start doing too is you know weather patterns specifically and will repeat themselves too so you can get a pretty good idea you know if you if you’re wondering you know just because there was hurricane Harvey in Houston does that mean that all of Houston’s off-limits. No, no not really I mean there was plenty of areas in Houston for example that were dry and in fact those areas are particularly valuable now so and in its it’s a booming market outside of you know some of those areas that were significantly hit by the hurricane. So anyway bottom line is the answer is yes.
Joseph Baumgartner is asking ok so I’ve heard you talking about Wealth Formula Banking. I get the idea of accumulating cash flow then borrowing it. Isn’t that pretty much the same thing as using a home equity line of credit to leverage into other investments? So this is a you know it’s a good question and one frankly that I didn’t really understand myself initially, you know whenever used to hear about this kind of thing I used to always hear like people talking about Bank on yourself and you know be the bank and no idea what they were talking about honestly it really didn’t but then one day it hit me what the big difference is and and so I’m gonna give it to you. So you know home equity line of credit what are you doing? Well in a home equity line of credit it’s pretty simple you borrow money you know based on the equity of your house which is a secured debt and you borrow it at a simple rate. Simple, right? Simple rate simple. It’s very simple. In Wealth Formula Banking the magic is really in the complexity of the borrowing feature. So let’s say you have $50,000 cash value in your Wealth Formula Banking account that’s growing at say five you know five and a half percent compounding interest tax-free. Now the compounding interest is the very very important aspect of this right so compounding interest mathematically is incredibly powerful so if you don’t know what that is simply Google simple versus compounding interest and look at a graph and you’ll understand in your Warren Buffett talking about the power of compounding interest and so on that’s what he’s talking about okay? So in your Wealth Formula Banking account you’re growing at a compounding rate. And now say you’ve got all that sum you know you’ve got a bunch of cash sitting in there and you want to borrow it. The beauty of it is that you can borrow it say if you were growing at five five and a half percent compounding you could even borrow that at five five and a half percent and still come out ahead. Why? Because when you borrow it you’re not borrowing it at a compounding rate you are borrowing at a simple interest rate from the insurance company itself. Your money which is in the insurance policy the cash value continues to grow at a compounding rate you don’t touch that money it’s going at a compounding rate and you borrow money from the insurance company that’s collateralized by your cash value at a simple interest rate. So the arbitrage is not the you know maybe maybe there’s a half percent interest between the actual numbers that you’re borrowing at so you mean say maybe you have a five percent and growth and your borrowing at four-and-a-half it’s not that 0.5 that’s the big deal the big deal is the arbitrage between simple and compounding interest which over the course of five six seven years becomes extraordinarily powerful. In other words your money and your insurance account continues to grow at a compounding rate even though you’ve borrowed it and are making money somewhere else. That’s why I call it double dipping. I you know you effectively make money in two places at the same time and who doesn’t like doing that. So that’s why it’s powerful and that’s why and that’s how it’s different from a HELOC. But yeah I mean I think there’s a lot of confusion on that so it’s a good question. Now I will say this. This is such a powerful concept that I wish more people would actually take time to learn it. Forget about what you may have heard about insurance products and stuff because the reality is what you realize is in the pecking order of the wealthy right, you start out you get people buying insurance products that they shouldn’t then they get smart and they don’t buy them and then they get even smarter and realized that if they structure them if they buy products that are structured optimally it’s one of the best most powerful tools you can use and that’s why the wealthiest people in the world use these kinds of of plans. So do yourself a favor, I don’t care I really don’t care if you do this or not but what I think you should do is do yourself a favor and learn about the concept because you don’t want to be one of those people like I was, you learn about it you know five years from now and wish you had done it earlier like again like I had done when I first learned about it. To do that I would highly suggest going to wealthformulabanking.com and there’s some webinars there from Christian Allen and Rod Zabrisky who are our partners on this again that’s wealthformulabanking.com and you can also while you’re there you can also learn about a really interesting concept called Velocity Plus which is basically like investing in the S&P 500 with guardrails but for those of you trying to figure out you know what is your first step you know I get that question a lot as I’m starting to think about investing outside of Wall Street what should I think about, I can honestly say that Wealth Formula Banking would be a very very good step for people to consider it’s not for everybody it is for me that’s for sure and I can honestly say that I don’t know anyone who has pulled a trigger on this concept the way Christian and Rod had structured it and regret their decision so and again just check it out wealthformulabanking.com if nothing else you learned something and at anytime you hear somebody say Oh Bank on yourself or you know be the bank and all that mumbo-jumbo which was pretty much meaningless to me, will actually mean something to you. Okay next question. I think it is pronounced Yuval.
Hi I’ve been listening to your podcast for several months now and I’ve noticed that you playback yourself endorsing AHP servicing fund in almost every podcast. You mentioned that the fund is liquid however when checking their website they specifically mentioned that the investment term is five years. In the FAQ they say that if you want to sell your Class A Shares earlier the company cannot guarantee that you will get your funds back. Why are you saying that the fund is liquid in the podcast? Am I missing something? Thanks.
Yeah I think you are missing something I think when you read the fine print yeah I mean every fund’s gonna say I’m gonna give you disclaimers you know if everybody tried to pull out their money at the same time they’re not gonna be able to do that etc but liquidity is a major feature at AHP servicing. They may not be able to give you your money back the next day but typically if you ask their people it’s not only try to do the best effort to get you your money within 30 to 60 days so by definition that’s liquid. Now I should also point out that as an aside that I talked about AHP believe it or not because I just want to support what they’re doing they are not a paid sponsor of the program anymore and so I’m continuing to talk about them because I think they’re worthwhile and I really do like these guys and and trust them and I don’t have any monetary reward for doing that but it is liquid, I know the team well, Jorge Newberry’s a friend of mine and and so I would go check it out AHPservicing.com.
Jim Seitz. Hello Jim. Let’s see. I know you have referred, a number of times, to ones “wealth thermostat”. I agree with the concept. I’ll admit that I believe my thermostat is lower than I’d like, and lower than it should be. Although, unfortunately, I can’t alter my genes or upbringing, I believe it’s one thing holding me back and I want to work on it. Do you have any recommended books or other information that I could read about elevating/increasing my base line temperature? Any assistance would be helpful.
So what Jim is referring to is I have this concept which I really believe called the Wealth Thermostat in other words you’re pretty much going to make what you think you are worth, right? So say you’re a six-figure guy right say you are like yeah I make $100,000 a year I make a couple hundred thousand dollars a year well that’s what you’re gonna keep making. And you’re gonna you’re gonna find your way back to that you can lose all your money you could you know you could you know be unemployed or start a business or whatever you’ll get you but you always end up at the same wealth level of wealth. You’re a couple hundred thousand dollar guy and then there’s people who are you know poor and no matter what they’re gonna be poor and then there’s people who are gonna be guys who are you know I make a million dollars a year but I can’t seem to make five but then there’s people who are making five 10 15 million dollars per year or there’s billionaires and you look at Donald Trump, I’m not a fan of Donald Trump by the way, but I will say that this guy’s thermostat is off the charts right? Loses everything and then he comes back and he’s wealthier than he ever has been I mean that’s that’s a Wealth thermostat. I mean you you you see this all the time you will be paid by the world as much as you believe you should be paid by the world. And I don’t mean that insert a hocus pocus way, I mean that it’s just a psychological barrier it’s like the four-minute mile you know the Roger Bannister thing. If you just think that’s my cap well that is your cap until somebody can convince you otherwise. So as far as books go you know there’s a lot of books out there but my favorite is Napoleon Hills classic Think and Grow Rich. And the funny thing about this book is that it’s probably the most copied book in history it’s pretty much everything that Tony Robbins says pretty much what all of the sub help self-help gurus say and it’s just repackaged over and over again but it’s a phenomenal book I really think it’s worth reading if you want to unleash this you know inner thermostat and make it go higher. Of course speaking of Unleash, there’s Tony Robbins’ Unleash the Giant Within which is also again people talk about it but it’s really again the same type of thing it’s the ability to accept a new reality and you know also another ripoff of Think and Grow Rich was back in the 90s I think it was there was a movie called The Secret and that movie effectively again was really about manifesting things in your life like you can actually visualize something and make it happen. So as a science guy, how do I possibly believe in this hocus-pocus? Well I actually believe that it’s not hocus-pocus. I believe it’s actually energy in other words you basically you know emit some kind of energy and you know you and it comes back at you right? And that’s what I mean when I say you get what you think you deserve. So if you can believe that you deserve more you’re gonna get it that’s really what I believe and I feel like I’ve actually been able to change my own life by understanding that a little bit. Anyway this secret right this whole concept in this movie that made this lady a bunch of money and that was her like you know manifestation I guess. That whole idea was really actually brought up in Think and Grow Rich they even called it the secret. So anyway that’s what I would recommend.
Michael. Question is: Any cannabis investments Buck? VC funds?
Well I wish I could recommend something but I’m not a raw cannabis guy and I don’t see, I do see I should say pot going mainstream as inevitable I mean to me it’s like witnessing prohibition. The problem is how do you identify Budweiser and an Anheuser Bush? There are a lot of mom-and-pop startups offering high returns but I think they are very risky. I mean that’s just the reality I think it’s a very tough place because the banks are not interested in etc to have a high you know sort of a you know higher level organization so you have a lot of risky propositions with smaller players and a lot of these smaller players in my experience, these folks make the people in oil and gas look like Boy Scouts. They’re not the most trustworthy folks. In fact I will say that one of our investors in this group lost a ton of money with a with with an operator I think last year or maybe it was a year before that and right now is in a federal lawsuit against that group for fraud even though they totally seemed straight-up. The investor that I’m talking about is he’s actually a really smart sophisticated investor and he thought it was a great opportunity and was kind enough to introduce me to the group to consider partnering with them a while back again I think it was about two years ago so I had a conversation with these guys and I can tell you that my impression immediately was that I just didn’t trust them and I didn’t like the deal I mean I the deal just seemed like too dependent on people and the people I didn’t really feel like I trusted very much it just kind of smelled bad the whole deal I guess smelt like pot I don’t like the way pot smells either but the whole deal smell bad to me so I stayed away. Luckily I mean I listen I think there is there stuff out there that’s legitimate I think that there’s gonna be people who make a whole lot of money doing this I just I haven’t found it myself and I have a really hard time in this space because of the players who are involved.
Okay I’m gonna play a recorded question or comment here the other one that I have I only have a couple of these unfortunately like I said. Okay Sonny Holbrook.
Sonny Holbrook: Hey Buck. Sonny Holbrook. Just listened to your podcaster this week and you’re talking about a topic that I’ve been thinking about a lot myself the past three to six months. Why do I actually own gold when real estate seems to offer so many more advantages? I mean I like the thought I just having some it just feels good but I’m thinking exactly the same things you were thinking and I’m glad you talked about this because like you I don’t know the answer yet and I’m not sure what I’m gonna do but I’m probably not gonna end up with as much gold as I have when it’s all said and done because I agree with everything you said. So hey just wanted to drop you a note and let you know I appreciate your thinking outside the box and I’m with you thanks Buck we’ll see you.
Buck: Thanks for that Sonny. As many for those of you been listening to me know I’ve been sort of on as sort of you know coming out of the closet about my being underwhelmed with the idea of owning gold. So I’ve had a bunch of people on the show talking about gold trying to get them to convince me why I’m wrong I still haven’t really really haven’t gotten a good answer on that so Sonny obviously agrees with me however right after that I have a comment, commentary I should say from Chris Barnett which i’m going to read and it’s it’s in in response to my critiques of gold which I think are certainly valid so let’s go through that.
Chris writes: Buck, Thanks for taking the time and effort to put out your podcast to the world. I enjoy your straight-forward, honest, and inquisitive attitudes towards the topics you cover. Thank you for that, Chris. Although I just found out about your podcast recently, I’ve noticed that you’ve had a few concerning investing in gold. I felt that the guests on those podcasts did a good job of talking about some of the advantages of gold, but they missed a couple of things. Since you seem genuinely interested, I figured I’d write you this email. I hope you find value in it. so reasons mentioned by podcast guess he writes: inflation hedge of course and again real estate does that, crisis hedge yeah I guess so I’d be better off with the monster box full of silver coins in my opinion it’s hard too hard to bring an ounce of gold you know to the grocery store, store of value yeah I guess store value also definitely for gold but I could say were the same for real estate and has been used as money for thousands of years which is great you know and I agree with that real estate has also been around for thousands of years. Reasons not mentioned, now this is where Chris is making his points okay so first he says currently not frothy or overvalued. So why do I say it is not this is him reading by the way now so Chris says why do I say it’s not overvalued right now? The first reason is that by most people’s metrics the stock market is overvalued and many agree that the bond market is too. You said yourself that you think the real estate market has become a bit frothy. Some well-known names out there are saying that everything’s in a bubble whether or not you agree with that sentiment an asset is on par with it on par with its value is preferable from an investment standpoint to one that is priced above its par value. I haven’t heard of any metrics that claim gold is overvalued, I agree with that. And then he puts up a bunch of graphs that were helpful but they were hard to describe but basically he says you can see that gold is about in the middle with the stock market and silver is undervalued so basically gold and silver are undervalued compared to other assets. The assertion is also confirmed by the gold silver ratio which you know again the cost of gold the cost of silver it would be interesting to see a similar graph of real estate performance over the past over the same time period but most interesting and related thing I could find was and then there’s a link that shows basically that home prices going up more than gold than that it’s cyclical over time. So let me respond to this part before we move on. First of all yeah I agree that asset prices are high but here’s something to think about. First of all gold hasn’t moved in about a decade. I don’t know if that’s a good thing. I don’t know if it’s a good thing. I mean why I mean if you if you invest in gold 10 years ago and gold’s worth the same amount of money is that a good investment? I don’t know. I mean yeah so it’s you know it hasn’t gone up at all it it blipped for a bit during the financial markets meltdown and then it came back down and it’s been pretty much the same since that time. The other I would say is that in terms of the graphs that you talked about that showed you know that there’s the cyclical pattern, I might be more convinced that this was the case if I only looked at real estate as the value of single-family homes, which I don’t. As a real estate investor specifically in my case is a multi-family real estate investor, I make money not just by the value of the property I also make money through cash flow, I make money through the tax benefits such as depreciation so I’m also saving money, I also hope you know I also look for appreciation but unlike gold I don’t hope for appreciation that’s the key here right? In fact all the multifamily real estate that we do in investor club we don’t hope at all. Hope is not a good approach to investing what we do is we drive in equity through forced appreciation, we do things to actively increase rents and decrease expenses, right? You can’t do that with gold all you can do with gold is hope. Also with real estate we usually have significant leverage. Seventy to eighty percent loan to value so the actual value of the property does not have to increase even that much for you to make a lot of money because a small value small increase in value is basically going to leverage itself up and that leveraged appreciation is going to give you a higher return. So it’s not the bottom line is that if you just looked at the housing market and single-family homes and value, it’s just simply not a good metric to compare gold and multifamily real estate or even single-family real estate for that matter single-family homes. It’s just not a good metric to compare the money-making opportunity between those investments. Now going back to your letter here, he says the second point concerns government regulation of real estate. It’s pretty easy for governments to tax and increase taxes on real estate. He says I remember hearing something awhile back about Italy doubling or tripling their real estate tax but I can’t remember the details except that real estate as the main store of wealth in Italy. Like you I’m a cash flow investor and when it comes to real estate if the government were to increase taxes on the sale of a property it would probably lead to a decrease in the value of the property in addition if they increase the taxation of the cash flow of the property it could drastically decrease the value of the property assuming cap rates stay the same the after-tax NOI would be significantly decreased. While I don’t think any of this is in the pipeline right now it could be in the future. I never would have thought that governments would freeze bank accounts but that’s happened in Europe. Personally i love investing real estate however I’m not as comfortable holding wealth in real estate right now as I was five years ago. There’s a lot more risk now in real estate and in the stock market that just isn’t present in precious metals. When real estate becomes a less beloved and safer less expensive asset I’ll be jumping back in. I hope these points make sense thanks and keep up the good work. So thank you for that by the way I appreciate the comments and let me reply. So again I will say that there’s a lot of things I disagree in with this. First of all I just disagree with the idea that real estate has more governmental risk in general. So listen taxes can go can can go up and down they’ll probably continue to go up but so will rents. One of the things we forget that’s really important to remember in its pure economics here is that if I ask how many people that you know markets have earned a bubble right now in this group probably everybody almost everybody is gonna raise their hand and say yeah real estate markets a little bit of a bubble you get a little bit of bubble on the stock market etc but then if I say how many people think inflation is imminent the same number of hands will go up. Now herein lies the problem. You cannot have like significant inflation and expect asset prices to go down it just doesn’t work that way. If there’s inflation by definition asset prices are going up. So anyway that’s as an aside just let’s go back to the government issue again, I don’t think you can look at banking in small countries in Europe like Italy Greece etc I hear people comparing to what’s going on there to what’s happening in America. The size of the economy is fundamentally different and it’s you know it’s not the same thing for it to happen there, freezing bank accounts in Europe is very different from freezing bank accounts in the US. This is in line with my argument that I do not believe that there is a zombie apocalypse in the forecast anytime soon. Also remember that when it comes to things like commercial real estate, commercial real estate owners are some of the wealthiest people in the world. Now do you think they don’t have any power in the government through lobbying etc of course they do right so you can say this could happen that could happen about just about everything but I’d very much doubt that it happens in the place where the wealthiest people in the world have the majority of their wealth. Now on the contrary to your point on government regulation I would point out that the US government made it illegal to own gold in 1933 and it wasn’t legal again until January 1st 1975. So to your point the government has made owning gold illegal before and the taxation on selling gold is outrageous I don’t even know what the rates are but it’s super high because I don’t own gold so I don’t sell it. But capital gains on on gold it’s basically like ordinary income I mean it’s insane so I mean we don’t have to worry about taxes being a problem for gold it already is. And again going back to the whole notion of the government and its role there, Roosevelt made gold illegal during the Depression so that the Fed could increase the money supply that was the story. See at the time the Fed had to have back because there was a gold standard they had to have 40% gold backing of Federal Reserve notes issued. So they could you know they kinda were up against the wall they needed to print money so what did Roosevelt do he confiscated it he confiscated gold he put it in Fort Knox and they started printing money. Now it helped us get out of the depression but I would say this it has never been nor will it ever be illegal in this country to own real estate okay? Again we have already seen government take the most extreme measure on gold, it isn’t gonna happen on gold anytime soon it’s not going to happen these issues are not going to come up with real estate why? Because a zombie apocalypse is not in the forecast and we’ve got to stick with the fundamentals, right? Buying and hoping is not a very good investment strategy as a general rule. Logic is and so I think though I’m not saying that I’m against owning gold I just you know I’m for me personally I don’t see the role I think gold is for the most part I think of gold as money and you know if you’re hedging the dollar or something like that maybe that’s worthwhile for you but for me again I don’t see the point I don’t carry much I don’t hold much cash I deploy it very very quickly and so for me real estate has all the functions I want on hedging the economy and then all the additional benefits specifically the tax advantages specifically being able to control an asset and drive inequity, those are things that you just can’t do with gold all you can do with gold is hope. And if you’ve been a Gold Bug for the last ten years and that’s been you know you’re gold heavy you basically have seen zero growth in your money in a decade I mean that’s insane to me that’s downright insane. So now the hope is the hope is that of all sudden you’re gonna have a gold bull market. Well I don’t know I’d rather actively pursue my my returns that’s my take. But again I do appreciate the note because I think it’s you know it’s something that I’m you know listen I don’t have to be right these are just my opinions but I do appreciate you taking the time to write all that out. That’s actually it. For questions that I could read aloud on the show and play this week on Ask Buck. But I do want to encourage those of you who had more in-depth stuff about you know specific funds about people about things that I couldn’t really answer, check out Wealth Formula Network because I think that’s where the more inner sort of the insider stuff comes out that’s where you hear about you know who we blacklisted who we want to stay away from and all that kind of good stuff juicy stuffs go to Wealth Formula Roadmap.com and you can check that up anyway let’s take a break and I’ll be right back after these messages