Wealth Formula Podcast

There’s a strange paradox when it comes to wealth. The more you have, the more invisible risk you carry. And most people don’t see it until it’s too late. I’ve seen this play out in a lot of different ways. A physician builds a multi-million dollar net worth over decades—real estate, brokerage accounts, maybe a business or two.  Everything looks solid. Then one lawsuit hits. Or a divorce. Or even just a poorly structured partnership dispute. Suddenly, assets that felt “owned” aren’t really protected at all. On the flip side, I’ve also seen people with less wealth sleep better at night because their structure is airtight. Everything is compartmentalized. Risks are isolated. There’s a system. The difference isn’t intelligence. It isn’t even an investment skill. It’s structure. Most people think trusts are something you set up when you are ultra-wealthy or you’re older… maybe as part of an estate plan. But that’s barely scratching the surface. A well-designed trust isn’t just about passing assets when you die. It’s about: – Who actually controls your assets while you’re alive – What a creditor can (and can’t) touch – And how much of your financial life is exposed vs. insulated In other words, it’s about whether your wealth is fragile… or antifragile. And yet, this is where a lot of people get it wrong. They set up a trust… and then completely ignore the rules that make it work. They treat it like their personal checking account. They mix funds. They sign things incorrectly. And without realizing it, they’ve essentially built a paper shield that disappears the moment it’s tested. So this week, I wanted to dig into this topic with someone who has spent decades designing these structures for high-net-worth individuals. On this week’s episode of Wealth Formula Podcast, I sit down with Mark Pierce, an attorney who specializes in asset protection, trusts, and advanced legal structures. We talk about: – What a trust actually is (and what it isn’t) – The real difference between revocable and irrevocable structures – Why timing matters more than most people realize – How asset protection trusts actually hold up in the real world – And the biggest mistakes people make that completely undermine their own planning If you’ve ever wondered whether your current structure actually protects you… or if it just makes you feel better on paper… this is a conversation worth paying attention to. Watch on YouTube: Listen on Apple Podcasts: Listen on Spotify: Transcript Disclaimer: This transcript was generated by AI and may not be 100% accurate. If you notice any errors or corrections, please email us at phil@wealthformula.com.  There’s a very fa- famous case out of South Dakota where an individual has had a, in California, had a spendthrift trust. She had, the money was funded by her f- her father, a fairly wealthy oil and gas guy. She got married, she had two kids. Her husband divorced her. Husband got a child support order. She took the trust to South Dakota. He went after her in South Dakota to enforcement of that child support order, and South Dakota said, “Yes, we have full faith and credit of, uh, foreign state judgments in South Dakota, but the enforcement mechanism, the right to enforce that judgment in South Dakota, is subject to South Dakota law, and we don’t recognize the child support exemption, so we’re not going to pay it.” Welcome, everybody. This is Buck Joffrey with The Wealth Formula podcast coming to you from Montecito, California. Today, uh, we are going to talk about something that we talk about, um, not infrequently because I think it’s very important, which is, uh, related to trusts. And, um, you know, there’s a strange paradox when it comes to wealth. Uh, the more you have, the more invisible risk you carry, and, and people in, uh, often, uh, unfortunately don’t see it until it’s too late. I’ve seen it play out in lots of different ways. You’ve got a physician working for years, building multimillion dollar net worth over decades, real estate brokerage accounts, business. Everything looks solid, then one lawsuit hits, or a divorce, or even just a poorly structured partner dispute, and suddenly all those assets that were owned, that created all that security, they’re all exposed. On the flip side, you see people with maybe a little bit less wealth even get themselves in some kind of trouble or whatever, lawsuits, et cetera, but they’re airtight and they sleep well at night knowing that whatever the case may be, what they’ve built is protected. And that difference isn’t really about being smart or not. It isn’t even about skill. It’s about structure. Most people think trusts are something you just set up when you’re ultra wealthy or maybe you’re older, maybe it’s part of an estate plan, but it’s really just scratching the surface. A well-designed trust isn’t just about passing assets when you die. It’s about who controls your assets while you, while you’re alive, what a, what a creditor can and can’t touch, and how much of your financial life is exposed versus insulated. In other words, it’s about whether your wealth is fragile or anti-fragile, as they say. And yet, this is where a lot of people get it wrong. They set up a trust. They don’t follow the rules, you know? They treat it like their personal checking account, mix funds, sign things incorrectly. And without realizing it, you’ve got a paper shield that disappears the moment it’s tested. So, what we’re gonna do this week is dig into this topic some more- With another expert. We’ve had Doug Lodmell on there, on here, uh, several times in the past. He, and, uh, and Doug has given us some great insight. He’s my, uh, asset protection attorney, but I wanted to get another perspective as well. So on this week’s, uh, episode of Wealth Formula Podcast, I sit down with a guy by the name of Mark Pierce. He’s an attorney who specializes in asset protection trusts and advanced legal structures. He, he’s worked on the other side, uh, for the other team as well. He used to, uh, enforce bankruptcies, so he can tell you, he can tell when structures are problematic or not. And we, uh, talk a lot about what things are. Like, for example, what exactly is a trust? I mean, there are so many things, uh, so many trusts, right? I mean, uh, if you don’t know now, you should have a living trust and a will. That’s– I don’t care how wealthy or not wealthy you are, it just avoids probate, right? You’re gonna learn about, you know, those differences between revocable and irrevocable structures, why timing matters, uh, like more than people realize, how asset protection trusts actually hold up in the real world, and, and ultimately, the biggest mistakes people make that completely undermine their own planning. So if you’ve ever wondered whether your current structure actually protects you or not, or maybe you don’t even have a structure yet and you need one, uh, this is a conversation worth paying attention to, and we’re gonna have that conversation right after these messages. Hey, everyone. If you haven’t done so, make sure you sign up for Investor Club. Investor Club is Wealth Formula’s private investment community. All you need to do is to go to wealthformula.com and sign up for free. And if you are an accredited investor, you’ll get an opportunity to quickly do some paperwork and meet one-on-one with me and get onboarded. 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It’s a refined strategy used by some of the wealthiest families in history, and it uses century-old, rock-solid insurance companies as its backbone. Turbocharge your investments. Visit wealthformulabanking.com. Again, that’s wealthformulabanking.com. Welcome back to the show, everyone. Today, my guest on Wealth Formula podcast is Mark Pierce. He is a, uh, trust and LLC attorney. Over 40 years of experience in asset protection, tax strategy, and estate planning. Uh, he’s seen it from both sides. He’s also been a former, uh, bankruptcy trustee, spending, uh, years unwinding asset protection structures for, um, uh, for creditors. So, uh, he, he– now he designs plans meant to actually hold up under real legal pressure, uh, often using jurisdictions like Wyoming and Nevada. Mark, welcome to the show. Hey, thank you very much for having me, Buck. Let’s start with this. I mean, people have heard of trusts, and in our group, a lot of people use trusts, but let’s try to create sort of a structure. How should we look at it? Let– Break it down for us. It’s a pretty simple structure, really. It’s, um, it’s a contract. Essentially, you have to have a trustee, you have to have a individual who establishes a trust for the benefit of someone called the beneficiaries, and then you have to set something in the trust that the trustee manages. That’s what a trust is. Let’s dive into that a little bit deeper because we know that there are different kinds of trusts. People have living trusts. Uh, they have revocable and irrevocable trusts. What’s the difference between that? Well, a revocable trust means that the person establishing trust or somebody the person establishing the trust designates can, uh, get rid of the trust. They can revoke it at any point in time. If it’s irrevocable, then there are only certain instances in which the trust can be revoked. And what would you use each one of those for at a high level? Well, essentially the difference is if you have an irrevocable trust, then at the end of the day, the beneficiaries cannot revoke the trust, and they have to live up to the terms and conditions of the trust, and they have to take care of the assets within the trust the way that the person establishing the trust sets. If it’s a revocable trust, you put it in there for some particular purpose, say like a revocable living trust, which is used a lot for estate planning these days. If a revocable living trust, you put your assets into it when you pass away, it goes down to your kids or whomever you designate, but you can revoke it at any time. You can put things in, you can take things out, you can do whatever you want. Typically, in a revocable trust, you put things in, you can’t take them back out. Correct me if I’m wrong, but a revocable trust, things remain in your estate, and so, you know, the issue there is if you’re, you’re trying to do this for some sort of estate planning or, well, I don’t know, even potentially asset protection, it may not be particularly useful. Well, that’s right. A revocable trust has no efficacy in terms of asset protection- Got it … an irrevocable trust does. And they’ve had irrevocable trusts for years. You know, you have what they call a spendthrift trust because your kids just go through money like, uh, it’s not their money and they could care less. So you put a spendthrift trust together so that, uh, your kids have something to provide for them throughout the remainder of their life without spending it all in one or two years. So revocable trust, I think, like, the best example is a living trust where essentially what you’re doing is you’re not getting any asset protection out of there, but you are, you are essentially creating, uh, a situation where you can avoid probate, uh, once you die. And so that’s, you know, just giving you a little bit of a, uh, you know, a way to sort of circumvent some of those issues. Um, is that right? Yeah. A revocable trust, you know, is a recognition by the state legislature that most people can read, write, and take care of themselves, so what do you need a probate court for? Right. You know, maybe 100 years ago, a lot of people couldn’t read or write, so you had to have a mechanism to transfer assets from somebody who was dead over to somebody who’s alive, and that was the will and the last will and testament and all that. Right. But a revocable trust just avoids the probate. So why would you pay 5% to 10% of the gross value of the estate just for, to pay somebody to come and read, write, and distribute assets? People can do that largely for themselves these days. So now we go to irrevocable trusts, and this is where you get potentially a real, uh, opportunity for, uh, asset protection. Is that right? Yes, that’s right. Wyoming and, uh, a number of other states these days, I think there’s 17 states in the United States that recognize within their own uniform trust codes, recognize the ability to establish a trust for their own benefits, called a self-settled trust. Unless you have a statute that specifically allows that, the common law for revocable or, or other trusts does not allow that. So in that situation, you’re creating a trust for which you yourself are the beneficiary, an irrevocable trust? That’s either you- Got it … or you and some other people in your family. These domestic trusts are true asset protections. They’re actually effective. Is that right? Yes. They’re called qualified spendthrift trusts- Mm-hmm because you establish the trust for the benefit of yourself and your family, and you take it out of the hands of your creditors’ estate as a result of doing that. Got it. How strong are these things? Uh, you know, I, I’m, I’m curious about that because I know, I remember, uh, during my own process of setting up trusts, uh, there was some real concern about, you know, d- domestic, uh, asset protection trusts and challenges. Like, for example, you know, I think back then I, I remember hearing about Alaska and, you know, some challenges with regard to, uh, those actually having significant strength in the United States. You know, one of the difficulties you have, difficulties you have with a qualified spendthrift trust, and there are a couple cases out of Alaska. One I thought was very interesting involved two Montana residents taking a piece of Montana real estate, putting it into an Alaska trust when they had an outstanding creditor who was after them for foreclosure, and then saying, “No, no, no. You know, Alaska’s laws doesn’t allow you to come after this piece of real estate in Montana that you have a judgment on because of Alaska trust laws.” And so that wasn’t a very good case. That’s a pretty poor case. So you have what they call the difference between movable assets and those that aren’t movable, so like a bank account, stock account, cash, liquidity. Those sorts of things are movable. You can put them into an LLC, you can domicile the LLC in Wyoming, and you have the address of the stock accounts or the cash accounts in Wyoming. Wyoming’s law is gonna control the jurisdiction as to how judgments are enforced against those assets. But if you have a piece of property in Montana, Wyoming law is not gonna control what happens on a foreclosure process with property in Montana. Yeah, so there just generally tends to be, I think, less protection for non-liquid assets. Is that fair? I mean, I think it seems to me that, um, you know, the– when you get in these situations, unless you, you know, anticipated it, liquidated your property and, and, and, you know, put it into an account, you don’t have that much protection. Well, you know, you’ve got a court at some place in, say, like Missouri, that has a piece of property in Missouri with a Missouri creditor and a, and a person from Missouri on it. Why would Missouri law not apply? And that’s what you generally run into. So what you run into with real estate, Benhamaf, is that you form an LLC, you put the real estate into the LLC, it leases out the real estate, you make money on it. You transfer the excess working capital within that LLC out to, to an LLC in Wyoming, and you domicile the cash in Wyoming. Yeah. So it isn’t as though Wyoming law would control the real estate, but r- Wyoming law would control the cash that was generated by that real estate. Yeah. Uh, one more nuance you often hear about, um, just, you know, just for educational purposes, the difference between a grantor and non-grantor trust. Right. Well, a grantor trust is the grantor maintains liability for the income taxes that come off the trust. Non-grantor trust, the trust maintains the liability for the taxes that come off the trust. That’s a little bit of a misnomer, because in a non-grantor trust, within 60 days after the end of every year, the trust can distribute the income out to the, to the grantor of the trust, and then the grantor would be liable for that income, the tax on that income. But there’s not double taxation, so if the trust pays the tax, the grantor’s not liable for the tax. So let’s say the trust made a million dollars, paid the tax on that, and then distributed it out to the grantor. The grantor wouldn’t have to have a second round of taxation like you do with a corporation. What, what is your, uh, general take on, on these things when you set these up? When would you do, when would you do each one of those? Uh, for, well, for, for a grantor trust, I mean, that’s an ec- It depends on people’s net worth and what they have and what sort of liabilities they have within their estate. When you have people that are part of a high liability profession, like surgeons, um- Mm-hmm … some attorneys, uh, a variety of tech people Um, then you would look at doing a non-grantor trust and establish an asset protection strategy so that if something were to happen to them, they have a way to settle those obligations out or get away from them. For most people, most middle class Americans, a revocable living trust is absolutely fine, ’cause what do they have? They’ve got their house. Yeah. They’ve got their retirement fund, which is exempt from execution. Like in Florida, I, I tell people from Florida, you, you have an immovable asset called your, your, uh, your homestead, and you live there. And, and what is the exemption of Florida on a homestead these days? It’s like $10 million. So why would you need to put that $10 million piece of property into a trust for asset protection purposes? Very few homes are worth more than the $10 million. So the difference is, you know, somebody who’s, someone who’s involved in litigation or potentially involved in a lot of litigation. Yeah. How about just in terms of the grantor and non-grantor parts, though? Like, when, when, when would somebody do a grantor trust versus a non-grantor trust? Yeah, there’s something very interesting. You know, if you’re, if you have an estate that’s worth $10 million or more, and you wanted to move those assets out of your estate and keep them away from you for estate tax planning purposes, you would do something that is, is, is excluded from the standpoint of estate taxation, but included from the standpoint of tax. So let’s say that you’re making a million a year, and you’ve got $10 million worth of assets. You wanna put those exempt assets into a trust to keep them out of your estate. For estate tax purposes, you move them into a non-grantor trust, but you would make it intentionally defective so that you maintain the liability for the taxes on that. That way, when you pay the taxes on the assets as they accrue in that trust, it’s taxed to you, and you continue to get the, uh, uh, you continue to get the dollars out of the tax structure because you’re paying taxes on it, and it depletes your wealth rather than the trust wealth. And it’s not a gift to the trust, so it’s an intentionally defective grantor trust. And then you can also swap assets, low basis assets for high basis assets, to perpetuate the amount of the exempt that you, the exemption that you get within the trust. It’s not so much of an issue right now because a indi- individual has a $15 million estate tax exemption, so a couple would have a $30 million estate tax exemption. So doing a, uh, a non-grantor trust, a defective non-grantor trust, effectively you, you’re doing the same thing as you are with a grantor trust in terms of taxation? Yes, in terms of income tax section. Right. But estate temp- ’cause you’d be excluded it from your estate tax by using your exemption. So let’s say you have $30 million worth of real estate, and you’re in danger of that $30 million becoming worth 60 million. You would put it into a non-grantor trust, use the, the estate and gift tax exemption for the 30 million. That way it’s out of your estate tax, uh, paradigm. And so if you passed away and it was worth $60 million- It’s got– It’s, it’s, it’s exempt. It’s not gonna be subject to estate tax ’cause it’s away from your estate tax. In the meantime, though, you continue to pay taxes on that, so you con-continue to deplete your estate beyond the $30 million exemption, and you do it tax-free. Yeah. So what– in what situation would you actually, you consider doing just a grantor trust? Because it– my understanding is irrevocable grantor trust, I mean, you’re still getting things out of your estate, aren’t you? Well, well, that’s right. Irrevocable grantor trust, you can get them out of your estate. Yeah. Ab-absolutely- Yeah … right. But you’re going to maintain the tax liability because you’re making a significant amount of money- Right … and you would just as soon get rid of that money at your tax level instead of the trust tax level. Because the maximum income tax on a gra- on a trust starts at $12,500, whereas on an individual, I think it’s like 180,000 now on a couple, 230, 240, I forget what it is. So that differential you try to take advantage of by paying the taxes at the grantor’s level rather than trust level. Got it. Um, how useful are these irrevocable trusts in terms of not only, uh, asset protection, but, you know, I mean, for, uh, ultra-high net worth individuals, there’s a– the– a lot of the reason is really for estate taxes, isn’t it? So, uh, is, is that sort of, um, the idea here is that you’re knocking out both asset protection and estate planning at the same time? Yes, very definitely. Um, you know, estate taxation has been in and out of the trust code or the tax code now, what, five or six times in the last 100 years? And, uh, the last time that we had the exemption before it went up to 30 million, it was two and a half, $3 million. So it was a very real issue for a lot of people. It’s not so much of an issue right now. So, you know, but when you look at the deficit in the United States, the borrowing capacity, and all these things, how much longer does it go before it starts being taxed again? I don’t know. So you put it in there to provide for estate tax planning, but you also put it in to provide for asset protection planning. And, you know, not just your own asset protection planning, but for the benefit of your children. ‘Cause let’s say that you have a couple of kids, they get married. You have an asset protection trust, your kids become the beneficiaries. And the kids, kids are married, and then they’re divorced. You die, the kids inherit the money through the asset protection trust. Their spouses are taken care of through the kids, but let, let’s say that the kids get divorced. Those divorced spouses who are outside your family cannot then come in and try to take a piece of your asset protection trust because they’re not beneficiaries of the trust. So it has sort of an inside/outside component to it. What is your own feeling about various types of offshore trusts, bridge trusts, things like that? You know, we, we sell- It depends. Y- y- we sell bridge trusts so that if something were to happen in the United States, it can go to an offshore trust jurisdiction like the Cook Islands or Nevis or whatever you want to pick. Um, my feeling though is that if you pick the right trust, the right strategy, and work it the right way, why would you not want to stay in the United States? Because one of the comments that was made by a, uh, a court that considered one of these offshore trusts was, “Why would you transfer your money into the Cook Islands, which has 17,000 people on a sand spit in the middle of nowhere? Why would you transfer your money to somebody on the Cook Islands who you don’t know, where you’ve never been, and trust them to take care of you?” Makes no sense to the court. The, the problem was resolved otherwise, but that was the, uh, the incredulous approach that the court took to these particular individuals. If you come to Wyoming, Nevada, Alaska, wherever you do that, if you structure the trust and treat the trust as a trust, then the courts are going to have to recognize those trusts in dealing with the assets in them. Because there’s a very fa- famous case out of South Dakota where an individual has had a, in California, had a spendthrift trust. She had, the money was funded by her f- her father, fairly wealthy oil and gas guy. She got married, she had two kids. Her husband divorced her. Husband got a child support order. She took the trust to South Dakota. He went after her in South Dakota to enforcement of that child support order, and South Dakota said, “Yes, we have full faith and credit of, uh, foreign state judgments in South Dakota, but the enforcement mechanism, the right to enforce that judgment in South Dakota is subject to South Dakota law, and we don’t recognize the child support exemption, so we’re not going to pay it.” So you recognize it, but you don’t enforce it. It’s the same way, same way within the state of Wyoming with the Fraudulent Transfer Act. If you transfer assets into a trust, you’re subject usually to usufruct. You didn’t get corresponding value, so if you come to Wyoming, transfer the assets, four months after you do it, the statute of limitations lapse. What you just said is kind of, uh, w- is interesting, and I maybe, um, understand. So if you’re in South Dakota in particular, you, you mentioned fraudulent transfers. Can you tell people what you meant by that, and then I’ll follow up with my question? Sure. And it’s kind of a misnomer, right? They call it a franch- fraudulent transfer, but it’s a voidable transfer. What it’s saying is that you transferred your assets into the trust and you got a beneficial interest. That’s not a corresponding value. So as a result, it falls within our Uniform Voidable Preference or Uniform Fraudulent Transfer Act. We can pull that transfer back unless a certain period of time elapses. So it’s usually two to four years. Wyoming has a four-month statute of limitations. In the context of fraudulent transfers, uh, what I understand that is, for example, somebody sues you, and now you know you got sued, and then you move money into a trust. That’s, that’s what’s considered A fraudulent transfer, correct? Exactly. And so what you’re saying is that in South Dakota, for example, um, that fraudulent transfer may be, that may be the case, but they have a four-month, uh, I guess a, a period of four months where if, if no one calls them on it, then it’s not a– they’re not gonna recognize it as a fraudulent transfer? Yeah, that’s what would happen in Wyoming. I’m not sure what the, what the statute of limitations is in South Dakota. It’s usually- Oh, I thought you… Okay, I thought you said that was in South Dakota, sorry. In Wyoming. Interesting. Um, so why else– So that’s in Wyoming. Uh, you see a lot of activity also in Nevada. Uh, is that similar to Wyoming? Uh, I think Nevada has a one and two-year statute of limitations on, on assets, on the transfer of assets. One, that’s to known creditors, two years is to unknown creditors. So y- you know, if you haven’t initiated your, uh, lawsuit by then, then you can initiate your lawsuit under the sta- statute of limitations on the Fraudulent Transfer Act. You know, fair enough. This would go, the difference between planning and reacting. So if you’re planning something and you articulate what it is that you’re doing and you’ve got all the basis for doing it, the law recognizes that much more readily than if you’re chasing, if there’s a creditor chasing after you and you’re throwing your money into a trust trying to get away from it. Well, it sounds to me like you’re saying if you’re reacting, turn to Wyoming. Yeah, that’s probably about right. Yeah. Yeah. Well, that, that makes sense. Now, um, let’s, um, let’s talk a little big picture here. Who’s, who are these trusts for, really? I mean, at l- what level of wealth do, should people start thinking about, you know, these kinds of trusts? Yeah, if you take a, a look, if you’re $2 million or more exclusive of your house and your retirement funds, and you’re in a high-risk profession or a high-risk business, that’s the type of asset protection planning you’re looking for. Um, I also think that, you know, for family planning, for legacy plan- planning, for articulating yourself into the next generation or the next two generations with a family business, it also works really well for that as well, because it protects you from those outside influences called divorce, divorcing spouses, your kids, your grandkids, that sort of thing, because you don’t want somebody who doesn’t have a relationship to the family to have access to the trust after they’ve severed the relationship with the family. Yeah. You spent time on the other side, basically as a bankruptcy attorney challenging these things, right? Like, to see where they can unravel. Tell us about where they unravel. What are the most common, uh, things that, that happen to make these things unravel and l- you lose your protection? Yeah. You know, when, when, when you transfer all of your assets into the trust or you don’t leave enough assets outside of your trust to live on, you’re gonna have a problem Okay? So you, you transfer everything in. So then if you, if you go down to Wendy’s and have a burger, you’re using your credit card from the trust to pay for your burger. And it just, you know, you, you just see this sort of co-mingling and penny ante stuff all the time. There was a guy out of California who transferred his business into the, into the, into the, uh, trust. He transferred his residence, he transferred his commercial property, and then he lived in his residence rent-free, didn’t even pay the trust for the rent. And then he conducted his business out of the trust, didn’t pay the trust rent. He had his girlfriend living in one of the rental properties, and she didn’t pay rent. And every dime that he took out of the trust was every dime that he spent. And it was just like, you know, but $10, $20, $30, $100, $1,000 all came out of the trust pretending like, you know, this thing’s gonna protect it. So there was just no efficacy to the trust. He didn’t treat it with any respect. So what I tell my clients is, “Leave your house. If you’ve got a, if you’ve got a homestead exemption, leave your house out of the trust. You don’t need to put your house in the trust.” Probably can’t protect it anyway because no f- no court in Florida is gonna recognize an asset protection trust against a creditor in Florida on a homestead. You got a $10 million exemption, leave it there. So, you know, and then keep enough money outside of the trust so that you can live on a day-to-day basis, and you’re not going to the trust every month trying to take something out of it. And those are the cases that generally fall apart. It’s the same with corporations and LLCs. You can use the same analysis. Is it just a fiction that you created for legal purposes, or did you actually treat it respect as a separate entity? So let’s talk about sort of your typical structure, what you like to do for, you know, your run-of-the-mill surgeon who meets these net worth criteria and all that. So, you know, what, what do you like to structure for those people? I’ll put them into– Typically, I put them into a non-grantor trust because they have a tendency to have a lot of upward mobility in terms of the money that they’re making. And so, you know, the max tax level of the individual versus the trust level is not a concern for them. Asset protection is much more of a concern. Uh, and you also look, you know, I, I hate to say it, it seems to me like people in the medical profession that are these high-intensity surgeons and whatnot have a tendency to really have, uh, I would say issues with– They get a lot of divorces, uh, for whatever reason. They seem to be into and out of relationships. I think it, it’s- Sure … I think they’re just on edge, you know. Incredibly intelligent, incredibly driven, very difficult people to deal with, uh, on, on a day-to-day basis. You know, you can be friends with them, you can do that, but, you know, living with them every day is tough. And so, uh, those are the people really that I think for the most part it works really well for. And but, you know, if you structure it before you start getting hit with lawsuits, you’re gonna be way far ahead of it, and you can put your assets in there and generate their wealth And I’ll give you an example. Like New Jersey says they have a strong public policy against asset protection trust, but I represented a doctor and his family out of New Jersey, and they put together a legacy trust involving their three adult kids so that they all put all of their assets into that trust. Well, six years later, she sued for the divorce and said, “I get half of the trust.” And the court looked up and said, “Wait a minute. You voluntarily entered into this trust. You voluntarily transferred these assets into the trust. No one defrauded you. So you’re dealing with your three kids and your husband. You get half. You will get the distributions out of the trust as and when they’re declared. And if they violate the terms and provisions of those trusts, you can sue as a beneficiary. But you entered into that.” So she didn’t get half. She got her distribution out of that trust on a, on a, on a month-to-month, year-to-year basis. But I gotta tell you, you know, if she had taken that money out of that trust and invested herself, she would not have done as well as he did. That’s my opinion. Mm-hmm. And she continued to get her share out of it, so I actually think it worked out really well for her in the long run. Yeah. It’s interesting. Uh, well, first of all, a little anecdote. You know, I started out, uh, I started out as– Well, I am a surgeon, uh, and I, my, uh, background when I first started out in, a- as a neurosurgeon, actually, and, um, I remember, uh, in medical school, my, uh, department of neurosurgery that was there had over 100% divorce rate. When one isn’t enough. Yeah. I think the chairman had married at least two, uh, former Miss Texas, uh, which was, uh, which was kind of funny as well, but, uh- Oh, and then there was Miss Ohio. But it i- it is interesting, though, that, uh… It is interesting that people don’t think about trust in the context of, of divorce, right? I mean, it, it is a, it’s a big one. Oh, it’s huge. I tell these doctors coming out of med school, “You’re, you’re naive to think that you’re not a bit of a target.” Yeah. Yeah, absolutely. One other issue that comes up a lot, um, when people think about trust, when they hear about trust, and they hear about irrevocable trust, is, “Well, I’m gonna lose control.” So how do you control– How do you, how do you, how do you not lose control? Oh, Wyoming’s unique. We have what they call a private family trust company. So you establish an LLC in Wyoming, you domicile it there, and you file a, uh, certain amendments to the trust with the secretary of state that run through the banking commission. And so you’re an unlicensed but registered private family trust company. The private family trust company is recognizable as a trustee of one of these qualified Spender trusts, and you can make the grantor of the trust the manager of the private family trust company. Yeah. And so you hold the interest in that private family trust company through a specialized trust, and the family maintains, through their trusteeship, the control of that PFTC. So that’s how you maintain what happens within that trust. And there’s two aspects to the trust that you, you’ve got to be aware of. One is the investment advisor. You can establish an investment committee within the trust, and they’re in charge of, of investing the monies within the trust and providing for that, takes that responsibility away from the trustee. And that way you can go out and you can hire someone to do that with your oversight, if that’s what you want to do. Put them into brokerage accounts, manage financial accounts, that sort of thing. Takes the onus off of the PFTC. And then you have for distributions, and if you work this correctly, underneath these LLCs with the trust, you can take your compensation for services from those LLCs under the trust. You don’t have to go to the trust for distributions, ’cause that’s– every time you take a look at a trust, any trust attorney who’s attacking a trust will say, “Let me see what went in and what came out.” And if they look at it and said, “You haven’t made a distribution in five years?” And the answer is, “No, we took a management services organization together to manage all these things.” They took their compensation from that in accordance with the trust co- with accordance with the corporation code and the internal revenue code. So you’ve touched all the bases at that point, and you’re not taking any distributions out of the trust. Where are they going to attack you? So that PF- Sure … TC with an independent discretionary distribution committee. So this is the interesting thing. You as the PFTC, managing the PFTC, hire my law firm to act as the DDC, the discretionary distribution committee. I have absolute control as to whether or not I ever make a distribution to somebody who requests one. Now, why would I not? But at the same time, I could. So that’s what differentiates that asset protection trust from anything else, because the creditors can’t force you to make a distribution out to a beneficiary. They have to come to Wyoming and try to force me, and I’ve got a statute from Wyoming that says, “We’re not gonna recognize that lawsuit, and if you come in with a judgment and sue the trustee or t- sue the DDC, we’re not recognizing that either.” So it gets rid of that what they call a squeeze play. So there’s a couple things that people kind of know about in general, too, in the big picture, and obviously you’ve represented, uh, creditors from the bankruptcy side, which is sort of inevitable. You’re gonna be digging into those, uh, financials. But there is also a big picture deterrence element here as well, right? Can you talk a little bit about the role of trusts when people have trusts in terms of deterrence for creditors? Oh, I can give you a specific example. Um, we represented a, a real estate company that was in Ca- based out of Denver, Colorado. And prior to the COVID disaster, they had, um, a s- they had opened up a, a beautiful restaurant on behalf of a guy who was a, a great entrepreneurial chef. Nothing but success. Then COVID hit, so he walked away from the lease. So he had signed, he had put guarantees and whatnot, and my client went in and skip traced him. What does he own? He doesn’t own anything. Well, what do we do? I said, “What, what has he done and what do we do?” So I said, I looked at him and said, “Well, I, I have a pretty good idea what he did, and if you go after him, you’re probably not gonna get much out of him ’cause you’re not gonna find anything you can get to. So you’re best- Right … just writing the thing off and getting on with your life.” So my client said, “Well, no, let’s go exactly, what did he do?” So- Yes … I ended up doing a trust for him, too. So- That’s great … you know, there you go. Yeah. Big sales, big, big, an easy sales pitch. Yeah. Interesting stuff. How can people reach out to you, uh, get in touch with you and, and, you know, understand kind of what their options are if they’re interested? Yeah. Um, I’ve got a website, wyomingtrustattorney.com, and, uh, you go on there, there’s a lot of information, a lot of very good information. I’ve tried to make it easy to understand and easy to read, keep away from all the legal ties. So you go to wyomingtrustattorney.com. There’s a banner there. You can reach out and you can book a consultation with me. Fantastic. Thanks so much for being on the show, Mark. Buck, you’re very welcome. Thank you for having me. You make a lot of money but are still worried about retirement. Maybe you didn’t start earning until your 30s and now you’re trying to catch up. Meanwhile, you’ve got a mortgage, private school to pay for, and you feel like you’re getting further and further behind. Now, good news, if you need to catch up on retirement, check out a program put out by some of the oldest and most prestigious life insurance companies in the world. It’s called Wealth Accelerator, and it can help you amplify your returns quickly, protect your money from creditors, and provide financial protection to your family if something happens to you. The concepts here are used by some of the wealthiest families in the world, and there’s no reason why they can’t be used by you. Check it out for yourself by going to wealthformulabanking.com. Welcome back to the show, everyone. Hope you enjoyed it. Yes, uh, trusts are critically important. They’re, uh… And, and, you know, like, like Mark was saying, it’s not something that’s really only for the ultra wealthy. It’s, you know, if you’re, you’re growing your wealth, that’s the best time to set these things up, and they may seem like overkill, but you know what? If y- if you’ve got, um, if you anticipate that you’re gonna continuously make good money in the next several years, you’ll be amazed at how much net worth you will accumulate, and there are lots of issues to think about, such as protecting it from creditors, divorce. I hate to say it, it’s a, a tricky thing, but trusts will help you there. And also, of course, uh, in, in the case of estate taxes, hopefully you will have that problem sometime when you die. That is it from me this week on Wealth Formula Podcast. This is Buck Joffrey signing off. If you want to learn more, you can now get free access to our in-depth personal finance course featuring industry leaders like Tom Wheelwright and Ken McElroy. Visit wealthformularoadmap.com. The post 557: The Legal Structure That Can Make—or Quietly Destroy—Your Wealth appeared first on Wealth Formula.

When it comes to investing, boring is good. In fact, in most cases, boring is exactly what you want. The fewer moving parts an investment has, the fewer ways it can break. You’re not relying on perfect timing, you’re not depending on some heroic execution, and you’re not sitting there hoping everything lines up just right. It just… works. That’s why a lot of the stuff I like—cash-flowing real estate, simple structures, things with predictable outcomes—tends to look pretty unexciting on the surface. But over time, that’s where wealth is built. But… boring rarely creates outsized wealth. The biggest wins almost always come from things that are the opposite of boring. If you bought Bitcoin ten years ago and held it, that wasn’t a conservative decision. That was a bet. A bet on something with massive uncertainty that most people didn’t understand. Same thing in Silicon Valley. Most startups fail. Everybody knows it. But the ones that work? They don’t just work—they hit so big that they make up for everything else. And then there’s this other category of investments. Investments that you make not just because of the potential return—but because they’re interesting. Because they give you access. Because they give you experiences. Because, frankly, they’re kind of fun. Being able to say you’re a Hollywood film investor and you showed up at the premiere… maybe even made a cameo? That’s a different kind of return. Is it the safest place to put money? Obviously not. But not everything in your portfolio has to be purely clinical either. Know the risk and decide if it’s worth it. That’s what this week’s Wealth Formula Podcast is about. I sat down with Jeff Deverett, and we kept it pretty simple: film investing is high risk. Most of it doesn’t work. But it’s also one of those areas where the upside, the structure, and frankly the experience itself can make it worth understanding—if you go in with your eyes open. If nothing else, it’ll change the way you think about what you’re actually investing in… and why. Watch on YouTube: Listen on Apple Podcasts: Listen on Spotify: Transcript Disclaimer: This transcript was generated by AI and may not be 100% accurate. If you notice any errors or corrections, please email us at phil@wealthformula.com.  You can do, you know, a hundred or a thousand times return on investment. You know, everybody, the, the, the one that everybody talks about in our business is the Blair Witch Project. So that was a horror movie made, I dunno, 35 years ago for $60,000, and it did oh, about $120 million at the box office. Welcome everybody. This is Buck Joffrey with the Wealth Formula Podcast. Coming to you from Montecito, California. Today we’re gonna talk a little bit about something different, which is investing in movies. You know, the thing is, when I think about investing, for the most part, I have a mantra, which is boring is good. In fact, I would say in most cases, that boring. Is sort of ideal. It’s what you want. The fewer moving parts an investment has, uh, the fewer ways it can break. Uh, you’re not relying on perfect timing. You’re not depending on some heroic execution. You’re not sitting there hoping everything lines up just right. It just works. And so the reality is that sometimes people get into, you know, situations where they invest in things. That are, for example, they’re startups or something like that, and they think that, you know, the returns look fantastic, but they don’t really consider the fact that a startup business or any sort of enterprise has substantial risk. That’s just what happens. You big wins, you be losses, but warring is good. And that’s, um, why I like a lot of stuff that I typically like. I’m not saying there’s no risk, but real estate, for example. Multifamily real estate people gotta live somewhere. Self storage people gotta put stuff somewhere that’s not changing with ai, it’s um, just something that people have to do. And that’s why those multiples are capitalization rates on those are lower compared to say, uh, you know, buying a, buying a mom and pop uh, business from somebody. But that’s the idea, is you’re essentially buying a lower low risk. You lower low return. And we lever that up. That’s conceptually what real estate is. And while we do tend to, you know, get better returns, uh, in real estate over a long period of time than say, you know, some of the, uh, other traditional investments, you know, the biggest wins always come from the opposite of boring. Right. Okay. So let’s take for example Bitcoin 10 years ago. Right. Ooh, 2016. This is right before I learned about it. Maybe, um, you know, I think I, I think I was probably around 2017, class of 2017, as they would say in Bitcoin terminology. And at that point you bought Bitcoin. Any, at least any sort of meaningful amounts. It was not a conservative decision, right? It was not a boring decision. That was like an asymmetric type of bet. Bet on something with potentially massive upside, but also massive uncertainty that, you know, most people don’t understand it. But guess what? You know, people who took big bets, uh, in that era ended up with pretty substantially huge returns. Same thing goes for the typical Silicon Valley startup type situation, right? Most of them fail. Everybody knows it. But the ones that work, they don’t just work. They, you know, they kick some serious butt unicorns. They make people excessively wealthy. And that’s why people do that. And that’s, that’s, that’s a different kind of investing where you literally. Investing small amounts and lots and lots of these companies and expect to lose everything on most, and one just pops enormously. So that’s a different kind of thing. It’s asymmetric risk. Asymmetric risk stuff to point out. I don’t even think that Bitcoin at this point is that asymmetric. It’s funny because over 10 years it’s matured into something that is, I mean, what is it? There’s not a lot of moving parts to it. There’s a small amount of it. I mean, ever gonna be 21 million Bitcoin and it’s basically like digital gold. So it’s kinda lost a lot of its, uh, serious risk side. I would say that there is potentially, you know, there’s a huge amount of volatility, but that’s, you know, that’s just something different. I, I don’t think that. Almost anybody who knows about it thinks that Bitcoin could possibly go to zero now. And they thought that in, uh, you know, 10 years ago. Anyway, there’s another category of investing that we don’t really talk about much, but you know, that people don’t invest in just because of the potential return, but because they’re interesting, you know, because you get some access, you get some experiences, they’re kind of fun and. One of those is like, say you are a Hollywood film investor, right? The so-called executive producer, and you get to show up to the premier, uh, maybe make a cameo in the movie. You know, that’s a different kind of return. You know, that’s a quality of life or experiential return. Is it the safest place to put money? Obviously not. It’s not, but not everything in your portfolio has to be clinical. I always say to my kids, if you know the rules, you can break ’em. So you guys just know the rules. In this case, you gotta know the risk and decide if it’s worth it to you. And so that’s what this Week’s Wealth Formula podcast interview is about. I sit down with a guy by the name of Jeff Det, who is, uh, you know, who’s, who’s focuses on this stuff. We keep it pretty simple. We talk about the upside structure, tax benefits, and the experience. It’s not the type of stuff we typically talk about, and that’s why we’re talking about it today. I think if nothing else, you’ll find it interesting and hopefully it gets your wheels turning. We’ll have that conversation right after these messages. Hey everyone, if you haven’t done so, make sure you sign up for Investor Club. Investor Club is Wealth Formula’s private investment community. All you need to do is to go to wealthformula.com and sign up for free. And if you are an accredited investor, you’ll get an opportunity to quickly do some paperwork and meet one-on-one with me and get onboarded. And once you do that, you get access to all sorts of. Potential private deal flow that you can only see if you’re part of the club. So join now. Join Investor club at wealthformula.com. Wealth formula banking is an ingenious concept powered by whole life insurance, but instead of acting just as a safety net, the strategy supercharges your investments. First, you create a personal financial reservoir that grows at a compounding interest rate much higher than any bank savings account. As your money accumulates, you borrow from your own. Bank to invest in other cash flowing investments. Here’s the key. Even though you’ve borrowed money at a simple interest rate, your insurance company keeps paying you compound interest on that money even though you’ve borrowed it. At result, you make money in two places at the same time. That’s why your investments get supercharged. This isn’t a new technique. It’s a refined strategy used by some of the wealthiest families in history, and it uses century old rock solid insurance companies as its backbone. Turbocharge your investments. Visit Wealthformulabanking.com. Again, that’s wealthformulabanking.com. Welcome back to the show everyone. Today my guest on Wealth Formula podcast, Jeff Everett. Jeff started his career and in law before transitioning into the film industry where he is produced multiple independent films and built a reputation for structuring deals that bridge investors and filmmakers. So, uh, what makes this conversation interesting as Jeff approaches film, not just as entertainment obviously, but as a financial asset. Jeff, welcome to the program. Thank you for having me. So, uh, Jeff, let’s, uh, just kind of talk a little bit how you got into this. I started in law with the intention of becoming a movie producer. So. My dad said to me, what do you want to do? I said, I want to be a movie producer. He said, okay, you should go get a law degree or a finance degree, like an MBA. So I said, okay, I’ll do both. So I got a finance degree in undergrad and a law degree in graduate school and with the intention of becoming a film producer because it, you know, he explained it’s all business and finance and legals, um, which was really good advice. And, uh, but I, I did my first year in law, because you have to, I’m from formerly from Canada where you have to do this thing called an articling year, so like an apprenticeship year. Um, and then I transitioned right into the film industry. But, um, I went into distribution and I was doing a lot of film deals. So I was dealing with a lot of financial components in the film business, all the, all the. Financial investment stuff was always in the film business. Got it, got it. Generally speaking, when we, you know, people hear film investing, they assume it’s pretty speculative. What is your sort of overall sort of, um, you know, view on that? Yeah, it’s, well, you know, high risk is the term I use. Um, so as, when I say have my own podcast, in my podcast, I always say, uh, 1% of indie films break even or make money. And the, and I explain it this way, so that makes it very high risk. 1% is super low, you know, rate of return. And so that’s super high risk. But here’s, but I can make that sound a lot better by explaining why 1% is as it is. So let’s say there’s 10,000 films that get made in the United States every year, which is approximately correct narrative features, right? Not shorts, just like feature length, over 70 minutes. 50% of those films are terrible. They’re unwatchable, they’re produced poorly, they’re out of focus, the sound is off. It’s basically people practicing how to make a film, but they made a film so they launch it. And so it counts as a film, but it’s not really entertainment value ’cause nobody’s gonna watch them ’cause they’re not produced well. So right away, 50% of those go, you know, basically don’t get seen by anybody, even if they were for free. Nobody wants to watch ’em ’cause they don’t wanna waste their time. So now we’re down to 5,000. Of those 5,000, 4,000 of those films never get properly distributed. ’cause filmmakers are artists and they’re focused on making the films so they, you know, they make a good film. So those 4,000 are good films. They’re watchable, they’re entertaining. But they don’t know how to navigate the complex world of distribution. They either don’t know how to get a distributor, they don’t know how to negotiate a proper distribution deal, whatever the case may be. They end up not getting distributed. They sit on somebody’s shelf on a hard drive and just collect dust, which is a shame. 4,000 good films never get seen. Not because they’re good, not entertaining, it’s just ’cause they never get distributed. Right? So now we’re down to 1,800 of those films never get pro, they get distributed. So they get put on streaming platforms and you know, they’re accessible to audiences, but they do not get marketed, meaning nobody knows about them. So let’s say your distributor puts you onto, say, a streaming platform like Tubi, which is a very big. A VOD advertising video on demand platform. Very popular, but there’s 60,000 films on that platform. So how’s anybody gonna know about your no name, no star driven, small indie feature? They’re not, unless you do marketing. And no indie filmmaker ever tucks away funds to do marketing. They don’t wanna do marketing. It’s very difficult to do it. It’s expensive, you know, so they don’t do it. And hence their great film, which is available to an audience, got made well, got distributed well, never gets known, so it never gets seen. So those don’t make any money. Now you’re left with 200 films, and of those 200 that were properly made, properly distributed, properly marketed, half of them are successful. So 50% of those, the films that do it properly, 50% of them are successful, which is actually a pretty good mm-hmm. Statistic, 50%. But when you look at the fact that a hundred, which is 50% of 200 overall against 10,000 that got made, you know, that’s 1%. That’s why the statistics are so low. The reason it’s such a high risk business is not because the films don’t get made properly. I mean, half of them don’t. It’s because nobody knows how to navigate the business side of the industry. Filmmakers just are not interested in the distribution and marketing side. It’s too, it’s, it’s, they’re, it’s not the artistic side that they’re excited about. So what is the opportunity for retail investors in this type of, uh, world? Um, so again, I specialize in indie films, which is, I’m gonna say low budget indie films. ’cause there are independent films. You know, at some point you could say Skydance, you know, that now bought Paramount was an indie film company. They were making huge budget, you know, mission impossible films and stuff like that. But when I talking indie films, I’m talking films generally that are less than a million dollars. All right, so. If you’re looking at big budget Hollywood stuff, you’re ba basically you’re buying shares in public companies. You know, you’re buying shares in Amazon or Netflix or Warner Brothers or whatever the case may be. Right. Um, so that’s how you would maybe invest there. Or once in a while, maybe a big investment opportunity comes in an individual film, but I don’t deal with that. I don’t talk, I don’t work in that world at all. That’s big corporate, you know, um, investment banking world that I don’t do. Mm-hmm. Okay. So I specialize in low budget in the film finance, which is the angel world. It’s not even venture cap, it’s angel investing. It’s high risk angel investors who get excited about a project and would want to take a really big risk on financing it. And most of the time what you’re really betting on is the filmmaker, not the film. You’re kind of betting on the jockey, not the horse, because the films are generally, they’re not star driven, so you can’t sell, you know, a star power, um, at that budget level. You can’t afford stars. Mm-hmm. Right. So they’re concept driven and it’s really. You’re betting on the filmmaker knows how to really make, you know, a decent entertaining film and that they know enough about distribution to get at least get it in front of the right people so that it has a shot at getting distributed properly. So for investors who wanna get involved in this world, it’s definitely Angel Capital. I mean, it’s interesting. It’s fine. You’re closer to the action, but it’s super high risk. Especially with filmmakers who don’t know how to navigate the business side. So that’s one of the things I help them with. I basically say, I’ll take care of your business side of your operation. You just focus on the artistic side. Just make a darn good film and then we’ll give it the best shot at getting seen, which mitigates the risk for an investor a little bit. So when I teach film, like when I teach, like I teach film finance in in film school at San Diego State, as a matter of fact, it’s funny that, that we’re having this interview today because today, so I teach an advanced course in film financing, right? And it ends with my students and they’re advanced students. There’s, this semester I only have six of them. You have to like really, really be advanced to take this course. I put them in front of a panel of real investors. So this afternoon in about three hours, they are about to present to six high net worth individuals. Their, their film project. And we, the whole semester we spend building the deck talking about, you know, what to present, how to present it, and 90% of that deck is not the making of the film. It’s the selling of the film. It’s how after we make this great film, how are we who, who’s the audience? How are we gonna connect with that audience? How we’re gonna get it distributed, how we’re gonna make it available, what the revenue forecasts are, what the return on investment’s gonna look like, what the risks are. So like anything, like if you looked at a real estate investment, that’s what you wanna see. You don’t need to know how they’re gonna build the building. You need to know how they’re gonna sell the units, if it’s an, you know, a residential building or, or get the tenants in a, in a, in a warehouse or something. That’s the same with film. They need, the investors need to see how the film is going to get monetized. So that’s what the investment’s all about. Now, ironically, film students really don’t like to talk about that. They like to talk about cinematography and directing and sound and lighting. So when I start talking about ROI, you know, return on investment, their head spin, when I start talking about tax credits, their eyes roll to the back of their head. This is what investors need to hear because they’re putting in their money and they need to know how they’re gonna get it back. So like any business, the film business is a business if you treat it as a business. And that’s what, uh, so, you know, so somebody who wants to invest in this world, they’re probably gonna want to focus on. The monetization side of it. The distribution side, like, okay, we, we generally, a, a film investor, like an angel investor, it’s gonna check the box that the guy can make. The filmmaker can make a good film. If you can’t say that, if you can’t, you don’t have the confidence that the filmmaker’s not gonna make a good film, then it’s over, it’s over before it even starts. All right, so the, the question you really have to ask is, can they sell the good film after they make it? What’s their plan to sell it? What is their plan to get audience attention so that maybe they could go viral on social media, whatever they’re gonna do. That’s what you’re selling to an investor and that’s what an investor needs to focus on. So let’s, you know, I mean, our audience is investors, so let’s, let’s talk a little bit about some of those things that you mentioned in terms of, you know, even the tax benefit. You talked about, you know, some tax credits. You talked about, you know, some, some of the other advantages. Why don’t you tell us a little bit about that. Yeah, so, so a lot of, there’s 28 states in the United States and several other, many countries around the world that, that want to, um, have filmmaking happen in their state or country. Um, there’s, so they incentivize filmmakers to come and shoot in their state. We’ll just, just talk about the United States for, to start. So 28 states will give you an, a financial incentive to bring your production to their state to shoot there. So the reason they do that is like any other tax credit program, is to create employment for the people in their state and, you know, an economic stimulation, you’re spending a lot of money. Now, obviously they want the big films, like they want the $250 million, you know, hail Mary films ’cause that they, they come and spend a t, you know, hundreds of millions of dollars. But they also want the low budget films. So they offer, you know, these programs to low budget indie filmmakers. ’cause it stimulates, you know, a low budget film will hire 30 people for a month and you know, spend seven or $800,000 in the states. So if you get 50 of those, you know, in a year, it’s pretty good money. Right? And it employs a lot of people. So that’s why the states do these programs. The flip side is why would the filmmaker, so generally these programs are tax credits, right? There are other types of programs, but it’s generally a tax credit. And the best type of tax credit for an indie filmmaker is either a refundable one or a rebate where they don’t have to use it to offset their tax payable, right? So they’re just gonna, if they qualify for the program and they spend the money, so basically the way the program works is they say, spend all your money in our state, hire our people, spend, you know. Our hotels, our equipment, our rental cars, our food, everything. Just the more you spend, the more eligible you will be for tax credits. We call those qualified expenditures. So then they’ll say, and we’ll give you back, you know, there’s different programs, but I’ll say 25% of that we will give you back in the form of tax credit on all of the qualified expenditures that you. After you’re finished, you do an audit, make they make sure that you spent it where you said you spent it, that type of thing. Okay, so let’s say you spend a million dollars, right? And it’s a 25% tax credit program. So you’re gonna get $250,000 in a tax credit Now. If you have business in that state and you are generating revenue and you have tax, you know, tax payable in that state, then you can offset your tax payable by that $250,000 tax credit. But chances are you don’t. You’re low budget in filmmaker. So there’s different types of things that can happen. In some states they’re called transferable tax credits, where you can basically sell that credit. To another company that does have tax liability, and they’ll buy that credit at a discount. Usually, you know, six or 7% discount, and you’ll pay a brokerage fee of two or 3%. So let’s say you discount it to 90%, so you’re gonna get 90, you’re gonna sell your credit, get 90% of it back. Some other company’s gonna get, you know, the value of whatever they discounted it and use it to offset their tax. So those are, those are transferable tax credits for indie filmmaker. That’s the worst kind. ’cause now you’re giving up a 10% of your tax credit, right? So there’s also these refundable tax credits where basically if you can’t use it, then the state government will refund it to you in the form of a check. They’ll just basically write, you check for the amount, and then a rebate is basically when they say, you don’t even have to offset it against taxes, but just spend the money and we will. Give you 25% of it back to you. So those are, those are great programs and indie filmmakers need to look at those. ’cause that’s 25% of your budget. Often it can be 30 or 35% depending on how you structure it and how much you spend. But you wanna, you don’t, you don’t wanna leave that money on the table. ’cause that’s like bonus money. Now I treat that a lot of filmmakers, in my estimation, mistakenly treat it as financing to make their films, but it’s not truly financing it’s revenue. After the fact because first you have to finance your film and make your film and then you know, it takes about a year or so to get these credits back. You have to do the audit process, everything and everything. So you’re gonna get the money back, say a year after you’ve made your film. So if you are depending on that money to make your film, you’re gonna run into a huge cash flow issue. Right? But if you’re gonna get it back afterwards. So I basically treat that as revenue. So I say to my investors, the first and safest revenue will be the tax credit. Yeah. Like, we know we’re gonna get back $250,000. The only risk of that is that the state goes bankrupt and it generally doesn’t. All right. So. So as long as the state doesn’t go bankrupt and the program doesn’t fold or whatever, which it won’t, it’s never happened before, then that is guaranteed money from the state, which you’re filming it, right? So I did that, you know, in various states, but, um, and so that you can say to your investors. At the very worst, you know, you guys put in a million dollars. At the very worst case scenario, you’re gonna get back 250,000. ’cause as long as we follow the rules, qualify for the tax credit and do da, da, da, yeah, we get back this money, we’ll give it to you. So now we’ve mitigated the risk to 75%. Yeah. Mm-hmm. Now there’s other things you can do to lower that risk for an investor. So there’s two other things that I do all the time. Number one is I always take the first unit of my investment. So let’s say on a million dollar film, there’s 10 units of a hundred thousand dollars. So I say to my investors, I’ll be the first unit. I will put in the first a hundred thousand to show skin in the game. Good faith, belief, and what I can do is I will, I will subordinate my a hundred thousand dollars to your 900,000. So you guys put in the other 900. If we only earn back 900, I’ll go last. You’ll get your money in first position. I’ll take it in second position. Which shows very good faith on my part. Right? And it also, you know, mitigates the risk a little bit more for them if we’re short on the rece, on the revenue, right? So that’s number two. And then number three is even the worst film. Like even if it’s a disaster and you make a terrible film, as long as you sort of know what you’re doing, then your revenue for, let’s say your revenue forecast on that million dollar film was gonna be $3 million in revenue. That’s like your conservative forecast going into it, right? But disaster strikes and nothing goes right and the film isn’t good and everything like that, as long as you know what you’re doing in distribution, the very worst case scenario in that case would probably be, you’re gonna get. 10% of that, you’re gonna get 10 cents on the dollar. So you’re gonna get $300,000. Like that would be like giving the way of the film away for free, almost as, and there’s places that they’re gonna take these films. Mm-hmm. And viewers are gonna watch ’em even, and unless it’s completely, unless it’s a total disaster. But I’m talking about a viewable film. So there’s $300,000 also offset. So in this scenario, I’m saying. Two 50 in tax credits, 300 in revenue, that’s five 50, a hundred in producer deferral, you know, subordination six 50. So your real risk is only $350,000. And that’s when disaster strikes. That’s what it is. As long as it’s managed properly. You have to have, you know, business people managing it. Those tax credits have to get processed on time and properly, and they’re not hard to do as long as you know what you’re doing. But a lot of filmmakers mess it up. Why? Because they’re not business people. They don’t know how to manage this stuff. So I always say to filmmakers, you focus, you focus on, you know, what you like to do. Writing, directing all the artistic stuff, and then hook up and partner with somebody who likes to focus on the financial stuff and let them take care of it for you, uh, in practice, you know, I’m just curious about your own experience. When you do these things the right way, would you know, as you’ve outlined in distribution. I mean, what kind of track record have you had? Pretty good. I’ve, I, I’ve made nine films. Only two of them have, have, have lost, well, they haven’t lost money yet ’cause one of them is still being distributed. The other one has was tip tricky because I knew it was gonna be tricky ’cause of the subject matter, but it was kind of my opus film and I made it and I only took in two other investors on that one. And I said to them, look, this is gonna be a real high risk film because it’s, the subject matter is a little trickier than the other stuff. Mostly I deal with sports dramas, which are very easy to sell, and I already know who I’m gonna sell to before I make the movies. So I don’t, it used to be in the, when I first started doing this, I would’ve, what we call pre-sales, like I already pre-sold it to a TV station or to a, back then there weren’t even streaming networks when I first started, but you know, now technically you could try to sell it to a streaming network. Like one film I pre-sold to Netflix before I actually made the film. So I knew the revenue stream before I even made it. And that’s obviously mitigates all the risk. Yeah, because it’s a safe deal. Um, but those don’t happen anymore. Presales generally don’t happen anymore. Um, once in a while, maybe for a filmmaker who’s super, super well seasoned and has, you know, great concept and, but, um, for the most part, you’re not gonna get a presale, so you can’t really offset that risk. But I’ve been successful, not because I’m the greatest filmmaker, I think I’m a good filmmaker. I think I have, you know, I’m a creative, I have a good artistic eye. I know how to tell a story well, but I’m gonna say my success rate is because I know distribution. Mm-hmm. That’s really the, the, uh, my advantage is I just know where these films are gonna go. Realistically how much to expect for them, how to collect, how to get the tax credits. So that’s stuff I navigate. I’m very comfortable with the business side. ’cause remember I come to this with a law degree in finance degree. I don’t come with a, with a film degree. Mm-hmm. Like my focus, although I have written and directed five of my feature films. ’cause I enjoy it creatively. My focus always is on the business side. Yeah. What’s uh, what’s been the, you know, the best performing thing that you’ve had? What’s the story behind that? Um, okay, so, ’cause I, the reason I said in terms of money is ’cause audience, you don’t know, like when you sell a, say a film to a big stream platform like Netflix. They could have a hundred million views and you don’t know. You have no idea. ’cause they don’t share the viewership with you. Right. Um, money, I, I’d say the best return was about two and a half, like 250%. Mm-hmm. So two and a half times a 2.5% return. Um, that was a good one. That was a presale to go in with and it was, you know, it was. A very generic sports film, so it, I, it had a real good chance of making its money back and I knew that going into it and y I’m involved in the world of distribution and so I knew where I was gonna sell it internationally. I, I basically, a lot of the films I make, I make them ’cause I know I can sell them. Right. I also make ’em ’cause I like them artistically, but, but I, I, these days I will not make a film if I don’t see the sales path. Yeah. Ahead of time, not after the fact. Ahead of time. It seems like this is like a potentially the type of thing that you may want investors to look in and more is the fund structure rather than. By film? By film. Do you, do you see that a lot in this space? Um, so a lot of indie filmmakers try to do that. They’ll do what we call a slate of films. Mm-hmm. So they’ll do say, you know, put together, say if we finance five, then you know, the odds are that, you know, two will be successful. One will break even, and two will fail. But the successful ones will pay for the other one. Something like that. They sell it that way. Most investors don’t do that unless you’re a super, super well seasoned. Filmmaker with a great track record. I could probably get away with that right now, but most filmmakers are first time filmmakers, so investors usually say to them, okay, I like the idea, it’s a great idea, but why don’t we start with the first one and see how you do. Or the first, you know? And then if we like the first one it does, okay, we’ll try a second one and then maybe we’ll do three more. Something like that, which makes sense to me as, as an investor, I would say the same thing. ’cause remember I said before, you’re betting on the filmmaker more so than the film. Investors don’t know about films, and I’ve never in nine features. I’ve never had an investor read a script, ever. I don’t know how to read a script. A script has no dis description in it. It’s hard to read a script unless you are. A filmmaker who can envision it, right? Scripts actually don’t read that well because it’s mostly dialogue or, you know, action lines or something like that. It’s not like reading a book. So investors, you almost don’t even want them to read the script. It’s a bit of a turnoff. So they’re really focusing on your ability. They’re, they’re gauging you as the filmmaker. Are you credible? Do you have enough experience? Are you artistic enough? Are you gonna make that great film? But mostly are you gonna know what to do with it after you make it? That’s what, that’s what the investment is about, right? In in, in this world, in low budget Indy filmmaking. If you’re an investor and you’re listening to this, you better darn well trust that filmmaker that you’re investing in, because even if they have the greatest film idea, if they can’t execute, it’s worth nothing. Right? You got so bet on the jockey, not the horse in this world. What else do people who may have an interest in this? World of investing, what else should they know about? Um, so most people who, who want to invest in the film business, it’s because they generally, in my, in, in my experience anyways, they generally are interested mm-hmm. In the film business. And they generally secretly wanna make their own film. Yeah. So part of it is, you know, it film is sexy. It’s more sexy than stocks, you know, like, than real estate. Right. Because there’s things you can offer a film investor that you can’t offer, say, in a real estate investment. Right. Like a cameo role. Like they can them or their family, their kids or something like that can maybe have, you know, they can all be in the background in a scene, in the background. And most of my investors usually are, ’cause I do sports films, so they’re always these stadium scenes or cheering scenes or whatever the camera pans by, they get seen, but they’re not doing anything other than cheering. Right. It’s like any. That’s fun. It’s fun to come on set. It’s fun to say I was in a movie. You know, they watch that scene over and over and over again. Sure. That’s what they focus on, so at the very least, they got to be in a movie. Now, if they or their kids, or grandkids, whoever it is, are legitimate actors, then I let them audition for a role. They have to audition ’cause we don’t want bad actors ruining the movie. And I say to them, you’re an investor. You don’t want a bad actor ruining the movie. I mean, there are some low budgeting filmmakers who sell roles to people like, gimme a hundred grand, I’ll let you be in the movie. You know? And you’ll be an investor as well. I would never do that ’cause that would compromise the integrity of the film. All right, so there’s fun. It’s fun. The cameo. As an investor, they get to come on set. So even if they’re not in the movie, they’ll have lunch with the director, the stars, they’ll see the filming being done. It’s cool to go on a film set. You know, a lot of people, you know, have never done it. They really like it a lot. Um, most investors will get some type of credit. It’ll either be a thank you credit or, you know, for a big investor they get an executive producer credit both on screen, on the film, and on IMDB. They can brag about to their friends. Hey, I’m a film producer, you know, I’m an executive producer, blah, blah, blah. They love that type of thing. Um, we usually give them a, like, I usually do crew jackets, you know, for the production. So they’ll get one of those. It’s kind of cool. Um, they can also do, we do always do a premier red carpet screening, like a cast and crew screening, and I invite them, I give them as many tickets as they want, usually 15 to 20 tickets, and they invite their friends and it’s all formal black tie, you know, with, we put out the red carpet and the step and repeat and everything. Take the pictures, make it look real Hollywood. And they get, you know, to show off to their friends that they’re a producer and I thank them on stage and usually have them stand up and people acknowledge them. So these are cool, fun things that they can, you know, and, and also if I, if it’s a film that’ll go into festivals, then I will. If we get accepted to festivals, I’ll, I’ll get them tickets to the festival. I don’t pay for them to go to the festivals. Like if the festivals are all around the country or the world, if they want to go, they can go, but they can, you know, be ambassadors for the film. So these are all what I call the fun things. These are the, these the fun stuff. Yeah. And in some respects, it seems to me that without that, might as well probably not do it because from the standpoint of, you know, risk reward, you probably are, you’ll find other things that might, might do better. But if you’re really. It’s a vanity thing too, right? I mean, it, at the end of the day, it’s, it’s a vanity thing for sure. Yeah, for sure. It’s a vanity thing. Okay. But, but every once in a while in our business, we get something, I call it the Hollywood dream. Some people call it lightning in a bottle. Some people call it winning lottery. All right. Our industry, like most, like, unlike like some industries like tech and say bio. But not, you know, you can do, you know, a hundred or a thousand times return on investment. You know, everybody, the, the, the one that everybody talks about in our business is the Blair Witch Project. So that was a horror movie made, I dunno, 35 years ago for $60,000 and it did, oh, about $120 million at the box office. I mean, that was a gigantic crazy success. So people still talk about that. There’s all kinds of those, those happen every year or two in our business. Like a, Nora was the most recent one, the one that won the Academy Award last year. Film made for 6 million, got picked up, did $50 million in revenue, won the Academy Award. So these things happen in our industry. They don’t happen frequently, but they happen once in a while. So sometimes you can get lucky and you know, the investors hoping that that will happen as the filmmaker is. And you know, there’s things you can do to try to help make it happen. But you can’t, you can’t make something go viral. You can do lots of things to assist it to go viral, but it has to go viral organically. Jeff, um, I wanna thank you so much for being on this show today. Where can people learn more about what you’re doing, potentially get involved? So they, the, the best thing to do is, uh, you can email me. My email is jdeverett@deverettmedia.com. Um, they should watch my podcast, which is Indie Filmmaking Truth and Reality, and it’s on wherever you watch or listen to podcasts or watch on YouTube. Um, but they all can also go to my website, which is called the Indie Film, indie Film Community. That is, that has all the information and consulting and that type of thing. Yeah, so that’s, if somebody’s interested in investing, I mean I can definitely connect them with lots and lots of projects that I have all vetted and or, you know, worked with and I’m usually the executive producer, producer on. Interesting. Thanks so much for being on Jeff and uh, uh, good luck to you. Okay, appreciate. Thank you for inviting me, and, uh, have a good weekend. You make a lot of money, but are still worried about retirement. Maybe you didn’t start earning until your thirties, now you’re trying to catch up. Meanwhile, you’ve got a mortgage, a private school to pay for, and you feel like you’re getting further and further behind. Now, good news, if you need to catch up on retirement, check out a program put off by some of the oldest and most prestigious life insurance companies in the world. It’s called Wealth Accelerator, and it can help you amplify your returns quickly, protect your money from creditors and provide. Financial protection to your family if something happens to you. The concepts here are used by some of the wealthiest families in the world, and there’s no reason why they can’t be used by you. Check it out for yourself by going to wealthformulabanking.com. Welcome back to the show everyone, and, uh, hope you enjoyed it. Yeah, it’s, you know, it’s a different, it’s kind of interesting the way he, the perspective he gave that, yeah, these things almost never work, but a lot of them is operational, right? So if you at least can take out. The risk of, you know, these be people not knowing what they’re doing and not knowing how to market something, uh, then you know, the risk is significantly less. And then obviously the mitigating factors of getting tax credits and all that. So, anyway, fascinating. Uh, area I certainly, uh, personally am not really the type to do this kind of thing ’cause I don’t really care about Mo, you know, being in a movie and being kind of cool and stuff. But, but I don’t begrudge you if you do because you know, hey, why not? I mean, if you get to see yourself in a movie or something, that’s kind of cool. Right? And, um. Hey, why not? Something to brag about. That’s it for me. This week on Wealth Formula Podcast, this is Buck Joffrey sending off. If you wanna learn more, you can now get free access to our in-depth personal finance course featuring industry leaders like Tom Wheel Wright and Ken m. Visit wealthformularoadmap.com. The post 556: Investing in Movies? appeared first on Wealth Formula.

If you want to understand where money is going… don’t listen to what people say. Watch what happens when the system is under stress. Right now, in the Strait of Hormuz—arguably the most important energy chokepoint in the world—Iran has effectively taken control of transit and, in some cases, is demanding payment in bitcoin for passage. Why? Because when you’re operating under heavy sanctions, the traditional system stops working. Payments can be blocked. Assets can be frozen. Transactions can be tracked and shut down. So you move to something that doesn’t rely on permission. In this case, that means digital assets—Bitcoin, stablecoins, anything that allows settlement outside the banking system. This isn’t theoretical anymore. It’s happening in the middle of a real geopolitical conflict—one that has already disrupted a massive portion of global oil flows and pushed prices higher. Now step back for a second. That core idea—avoiding counterparty risk—is not new. That’s exactly why gold has existed as money for thousands of years. No counterparty No issuer No reliance on a system But Bitcoin introduces a different version of that same idea. It’s: digital highly liquid instantly transferable No shipping. No storage. No borders. So now you have two assets solving the same fundamental problem—just in very different ways. Of course, the pushback on Bitcoin is always volatility. “It’s too volatile to be a store of value.” But think about that carefully. Bitcoin is still small relative to gold. It doesn’t take much capital to move it. So is the volatility the problem… or just a reflection of its current market capitalization? And what happens if that changes? Meanwhile, gold—the original hard asset—has quietly been doing exactly what it’s supposed to do. After years of going nowhere, it’s been one of the biggest beneficiaries of everything we’re seeing right now: Geopolitical instability Central bank accumulation A growing lack of trust in the financial system So the question for investors is: Has gold already made its move… or is this just getting started? That’s what we get into on this week’s Wealth Formula Podcast. My guest is David Beahm, President and CEO of Blanchard and Company, one of the oldest precious metals firms in the U.S. We talk about what’s actually driving gold, the debate between physical gold and ETFs, the real-world issues around liquidity and taxes, and how to think about gold in a world where Bitcoin is no longer theoretical—it’s being used in real geopolitical situations. Watch on YouTube: Listen on Apple Podcasts: Listen on Spotify: Transcript Disclaimer: This transcript was generated by AI and may not be 100% accurate. If you notice any errors or corrections, please email us at phil@wealthformula.com.  If you don’t actually physically hold the gold no matter what, there is going to be a counterparty risk associated with it. GLD is a great, a great company, a great ETF. Uh, it’s done wonders for the marketplace, but if you don’t hold it, you don’t own it. Welcome everybody. This is Buck Joffrey with the Wealth Formula Podcast. Coming to from Montecito, California today, let’s talk about something that I think is very interesting, which is Iran, Bitcoin, and gold. Well, we’re really gonna talk about gold when it comes to this interview, but I wanna back up, talk about Iran and Bitcoin as well. ’cause if you wanna understand where the money’s going, don’t listen to what people say. Watch what happens when the system is under stress. And right now in the Straits of Horus, arguably the most important energy choke point in the world. Iran has effectively taken control of transit, and in some cases is demanding payment in Bitcoin for passage. Why? Well, because when you’re operating under heavy sanctions, the traditional system stops working. So you can have block payments, you can have assets frozen. You can have transactions that can be tracked down and shut down. So you have to do something that doesn’t rely on permission. And in this case, that means digital assets, bitcoin, stable coins, anything that allows settlement outside the banking system. When I heard this, I’m thinking to myself, this is not theoretical stuff anymore, right? It’s happening in the middle of a real geopolitical conflict, one that has already disrupted a massive portion of global oil flows and push prices higher. The core idea behind what they’re trying to do there is to avoid counterparty risk, right? That’s what Iran is trying to do, and that’s exactly why gold has existed as. As, as money for thousands a year. There’s no counterparty. There’s no issuer, there’s no reliance on a system. But Bitcoin intrus a different version of that same idea. It’s digital, it’s highly liquid, highly liquid. And uh, you can transfer it instantly. And guess what? Unlike gold, no shipping, no storage, no borders. So now you have two assets solving the same fundamental problem just in a very, very different way. And of course. The pushback on Bitcoin as a digital gold is it’s volatile. It’s highly volatile. It’s too volatile to be a store of value, they say. But think about that for a minute, right? Bitcoin is still very, very small relative to gold in terms of its market capitalization, and so it doesn’t take much to move it. We’re only talking about $2 trillion, right? So is the volatility a, a, a long-term problem? Um, I don’t know. I, it’s hard to imagine a Bitcoin with a, a, a market capitalization of, uh, 15 trillion say, or 20 trillion closer to gold that you would have that kind of volatility. Now, gold itself is, has been actually recently more volatile than Bitcoin, believe it or not, but it has been anyway. When that market capitalization gets higher and volatility goes down, then what happens? What changes, if anything? I think that you’re going to see a true acceptance of digital gold of Bitcoin at that point. But anyway, that’s in the future. I don’t think it’s far away. I think we’re talking about five to 10 years. Meanwhile, gold, gold is the original hard asset, has been doing exactly what it’s supposed to do for a long, long time, for thousands of years. Frankly after years of going nowhere in terms of its price, it’s been one of the biggest beneficiaries of everything we’re seeing right now. You know, with all the geopolitical instability, central bank accumulation, uh, growing, lack of trust in the financial system, while gold is benefiting from that, and it has, the price has gone way up, but has it already made its move? Or is it just getting started? Uh, and that’s kind of what we’re gonna talk about today on this Week’s Wealth Formula podcast. I’m interviewing a guy by the name of David Beam, uh, from one of the oldest precious metal firms in the us and we’re gonna talk about gold. What’s driving gold? Um, the debate between physical gold and ETFs, which, uh, is an interesting one in my opinion. Uh, the real world issues around liquidity in taxes and how to think about gold. Uh, gold in a world where bitcoin’s no longer theoretical. Anyway, we’re gonna have that interview right after these messages. Wealth formula banking is an ingenious concept powered by whole life insurance, but instead of acting just as a safety net. The strategy supercharges your investments. First, you create a personal financial reservoir that grows at a compounding interest rate much higher than any bank savings account. As your money accumulates, you borrow from your own bank to invest in other cash flowing investments. Here’s the key. Even though you borrowed money at a simple interest rate, your insurance company keeps paying you compound interest on that money. Even though you’ve borrowed it net result, you make money in two places at the same time. That’s why your investments get supercharged. This isn’t a new technique. It’s a refined strategy used by some of the wealthiest families in history, and it uses century old rock solid insurance companies as its backbone. Turbocharge your investments. Visit Wealthformulabanking.com. Again, that’s wealthformulabanking.com. Welcome back to the show everyone. Today my guest on Wealth Formula podcast, David Beam. President and CEO of Blanchard, uh, and company, uh, one of the oldest and most established precious metal firms in the United States. Blanchard has been in the business for over 50 years, dating back to when a private gold ownership was re legalized, uh, just back in the 1970s. And he’s helped investors understand the role of physical precious metals in a portfolio ever since. Welcome to the show. Thanks. Thanks for having me, buck. Appreciate it. Well, let’s kinda start out with the sort of a bigger picture situation here. You zoom out globally right now, China, Russia, central banks, they’re clearly shifting towards hard assets. How much of what’s happening with gold right now is really about geopolitics versus traditional drivers like rates and inflation. So I think right now we’re certainly looking at geopolitical risk as the reason why gold’s moving up and down and even slower for that matter. Uh, but over the last year we’ve seen a, a monster return on, on both metals, and that was pre, uh, what was going on in Iran. And so you really just had supply and demand fundamentals. Everybody wants their hands on gold right now. And central banks, as you mentioned, are literally buying up anything that, uh, is hitting the marketplace. Uh, a few weeks ago, the, the Turkish government decided to liquidate a good portion of the. Their holdings to raise cash because they’re worried about having to fund what might be coming their way. Uh, and as soon as the, uh, the metal hit the market, you had plenty of buyers that went out there and, and picked it up. And I really think that the, the, the world knows the benefits about gold, but perhaps people in the United States just don’t realize how valuable gold is to have in a portfolio, the stability and the insurance that it offers. Uh, we just, we’re just lagging behind a little bit with the, with. With the rest of the world and even just a small percentage of, of, uh, United States investors that they got, uh, into gold, you would see a a, a huge move upwards. Yeah. Well, you know, so it’s going back to the central banks that you mentioned. They’ve been aggressive buyers of gold, obviously. What do you think they’re hedging against specifically? Uh, number one, nobody wants to be in dollars. So you’re gonna, you’re gonna start seeing, uh, governments, uh, trade in, in gold as opposed to dollars, which has been the world reserve currency. And I’m certainly not suggesting that the dollar’s gonna go by the wayside, but I think the value of the dollar has certainly, um. Going in the wrong direction. And what, uh, central banks see is that hard assets like gold are, are a place that they can have, um, the value at least maintained. Um, and that’s what you see with central banks, and it’s been like that for a number of years. This isn’t new for central banks. Uh, you know, we, we, uh, we’ve seen it for. You know, literally since the financial crisis, the, uh, central banks are buying gold and, and putting it away and, and hope they never need it. Just like, uh, retail investors hope they never need it, but they have it. Uh, it’s an insurance policy and they’ll be glad they, they do when they need it. Yeah. Well, certainly, you know, the unraveling of the US dollar, uh, is, is, uh, a reserve currency is probably not gonna happen overnight. Um, but it’s, uh, but your, the suggestion here is that the, that the shift towards gold from the central banks, uh, reflects. That sort of, uh, de dollarization globally is kinda what you’re suggesting? Yeah. What, what I’m suggesting is that you see plenty of countries that are trading, uh, with one another and they’re not using dollars anymore. You know, the bricks, uh, the people over nature, they’re, they’re just not using gold for oil. They’re using. Uh, excuse me, dollars for oil. They’re using gold for oil and vice versa. So again, I’m not suggesting that the dollar’s gonna go by the wayside or it’s not gonna stay, maintain the world reserve currency. I’m just suggesting that there’s plenty of, uh, central banks and institutions that are using other forms to, to trade. And I think that’s what investors can get ahead of before it, uh, before it keeps going even further. We’ve seen the US dollar, uh, or the US weaponize the dollar, uh, through sanctions reserve freezes. Do you think that’s, you know. Part of what countries are thinking about? Well, they, they can hold it over our heads as we hold it over their heads. So I do think that it is tough right now for, uh, central banks around the world to, to have that crystal ball, to figure out what can the US do? What are we capable of doing and what’s playing out right now, uh, in a Middle East? You know, we, we certainly. Uh, I think central banks are, are worried about the reserve currency and what the US can do in order to manipulate, uh, people using our dollars. You know, it’s been the reserve currency for a number, number of years and, uh, as people start realizing, wait a minute, I can actually trade this stuff right here for this other stuff and not even have to get the US involved or the dollars involved, I think it’s very important for people to think about right now. So, ironically, right now, sort of the dollar has actually remained relatively strong through this recently and. Historically that a stronger dollar has been a headwind for gold. So why hasn’t that happened this time? What’s different? So you, you, you look at the dollar and gold and it should be an inverse relationship, right? But in reality right now, both are, are performing pretty well. Uh, so one’s gonna have to give at some point, and do you put your. You know, where, what do you back, do you back something that the whole world wants or you back what the United States government wants? And as, as, uh, institutions in central banks start realizing, wait a minute, I would much rather have a hard asset that’s tangible that I can hold in my hand, in my vault, wherever it happens to be. And that’s way more valuable long term. Than the US dollar. And what you’ve seen with the performance of gold in the past year just shows the supply and demand fundamentals are, are, are there. And, you know, we, we’ve had a, a pullback, a little bit of a pullback, but, you know, we’re talking to our, our clients that it’s an, it’s an opportunity, uh, one that you don’t really get very often to see, uh, what’s on the horizon. And expect the price of gold to go back up. And you can, you can hit it down every once in a while, but the trend is gonna be upwards and it’s gonna be up upwards for a long period of time. You talk a lot about counterparty risk. Can you tell people what you’re talking about when it comes to that issue? So when you, so what we sell, and, and this is very basic and it happens to be just what we, we sell, we can go into, into further stuff, but counterparty risk is important because when you actually own gold, we sell physical gold. We, we actually send what we sell to our clients so they can physically hold it. And it’s, there’s no counterparty risk to it. You have it, you own it, you hold it. That’s it. Um, the, there are other proxies of owning gold and there is counterparty risks. You know, you have ETFs, you have mining shares, you have future contracts. And each one of the. Those baskets has its own, um, difficulties when you want to have a true proxy to gold. So let’s take for instance, mining socks. Well, what if the mine collapsed? What if there’s some political unrest in that, in that area where the mine is? What if there’s management issues that, you know, steals money from the company? So all that stuff is, is what I’m talking about when we talk about counterparty risks. There are other things that are out there that can manipulate the price of that asset. Where gold is is gold. You own it. Um, you know, we kind of have that saying when, when, when, when I talk to. To individuals like you almost feel like your Uncle Scrooge when you actually have this gold in your hands. Nobody else has any claim to it. And, and when you open up that box and you take it out, the feeling that you get, it’s like a warm blanket. It’s just security, it’s insurance, and there’s nobody that can, can, can, uh, do anything to that asset, unlike some of the other proxies to, to owning gold. One of the things that, so you’re talking about with counterparty risk, obviously the, you know, the things that you mentioned. Mine, you know, mining operations in somewhere in Africa or who knows? All those kinds of things are, are, you know, that’s a very clear example of counterparty risk and, and that kind of thing. But let’s talk about G-L-D-E-T-F for gold. What’s the real risk to people there? Because I know you have, um, encouraged people to move away from those kinds of, um. Uh, ETFs rather than, you know, and, and, and, and focus more on physical gold. So talk a little bit about that. Sure. So, GLD and the other ETFs are, have been great for the marketplace. They allow people to get in, uh, they can use, uh, you know, their, their brokerage accounts, they can use their stock brokers. It’s truly a way to get in and out of the gold market. Uh, which has been great for supply and demand. You know, GLD is, is a, is a monster. There’s certainly other, uh, ETFs, uh, as well. Um, and, and in our thought process though, uh, our clients are typically a long-term holders, almost generational holders, and so they’re not looking to day trade gold or even weak or month trade gold. Uh, and so with the, the risk that you have with et s and, and again, I’m not. Doing something that they shouldn’t, but you just don’t know. And if you read some of the proxies of these ETFs, they have the ability to loan the gold out, uh, to, to sell the gold. Uh, and then also every single month, they’re gonna take away some of your holdings to pay for, uh, marketing and management costs and storage costs and insurance costs. Um, so you’re, um, you know, you’re, you’re kind of driving it off the lot and immediately it’s worth a little bit less so. Again, I think ATFs has been great for the market overall. If you’re looking to just get in and have a little bit of exposure to gold and let’s say you want to get out by the end of the year or next year, then that’s certainly a great way to be exposed to the, to the price of gold. What our clients want is they wanna physically hold it so there’s nobody that can take it away from ’em. And in the, in the long term, uh, they realize that I want to have this for five, 10, even longer years, uh, hold. And they, you know, as we ship it to ’em, as I mentioned, they put it in safety deposit boxes and bank vaults, uh, under the mattress in the backyard, uh, wherever they put it, they put it. And nobody can come take it away from, with, with, uh, with et. S there’s just a little bit of risk out there. But again, I think ETS has been great from the market. I just, you know, just get onto that a little bit more. It just seems to me thinking about, you know, GLD somehow stealing your funds seems a little bit excessively paranoid. Oh no, I, I certainly don’t think that they’re stealing people’s funds. What, what they have to do though is they have to pay for, right, uh, the fees that are involved. And so that comes off the top. And then they also have the ability to lease the gold to third parties. And then, so if you look at the. Number of ounces that are out there. Mm-hmm. And the number of claims, the ounces, it’s like 35 to one. So e ounce of goals has 35 claims to it because of the leasing and, and not just with ETFs. This also happens to do with institutional, uh, banking as well as government. So. This goes back to your original question is, where’s the counterparty risk? If you don’t actually physically hold the gold, no matter what, there is going to be a counterparty risk associated with it. GLD is a great, a great company, a great ETF, uh, it’s done wonders for the marketplace, but if you don’t hold it, you don’t own it. Talk about the, the cost of owning physical gold because they’re, you know. If you’re gonna do storage and that kind of thing, there’s some costs there too, isn’t there? Definitely, yes, absolutely. And what we advise our clients is you definitely want to want to put it somewhere where it’s safe. Uh, you know, I think a lot of our clients probably do hide it in their, in their backyard or in their, in their underwear drawer. But in reality, I, there is some, some, uh, some costs associated with having a safety deposit box. There is some costs associated with insuring it. But after that, there’s no management costs, there’s no advertising costs, there’s no accounting costs. It purely is a, a low cost asset to have. When you look at the overall cost at some of the other proxies to, uh, to owning gold, there’s, um, another challenge, which is liquidity, right? I mean, like, it’s, it’s not as easy to sell physical gold and the tax implications are different, aren’t they? So it’s not, it’s not difficult to, uh, to sell gold. As a matter of fact, uh, right now we’re, we’re seeing it. Um. Our pilots carry gold with them when they’re flying missions because if they go down, they can actually trade gold for safe patches, food, whatever. And for, for us in the United States, when we, we sell gold, uh, to our clients, we have a buyback guarantee that we’re going to buy the, the gold back at the current market prices at the time of the sale. And it’s pretty easy. All you do is you send it back to us, we liquidate it for you, and we send you a check. So is it overnight? No. Is it fast? Absolutely, well, certainly a lot faster than trying to sell a piece of real estate. Um, so yes, it is, uh, it, it, there is a commitment to us that we full circle the whole transaction and, and we, you know, we’ve been there for 50 years, been there for 50 years, so people don’t have confidence buying stuff from us, and we’re gonna, we’re gonna sell it back. I mean, we’re gonna buy it back from, we’re gonna buy a back at market market price. At the market price. Correct. Right, right. Yeah. You know, you said just keep thinking about like the cost of. Sending, if you’re sending a, you know, brick and all. How much does that cost? You know? So there are costs associated with this stuff. It’s not, there is, so the majority of our, our clients do not pay for shipping on the way to them. They would have to pay shipping on the way back to us. Yeah. Uh, and we help with the insurance. Um, so, um, we do make sure that it’s fully insured and we, uh, we work with the client to, to make that happen. But, uh, but yeah. The cost is nominal. I mean, you’re talking about a couple hundred dollars, uh, to, to, to get that back to us. And, and, uh, and, and again, it’s, it’s one of those assets that because you have it and you own it, you feel comfortable. But yeah, there are some inconveniences of having to ship it back to us. Uh, but when it’s all done, uh, having physical gold, our clients. Don’t mind paying that small fee to, to ship it back to us through the postal system. What do uh, spreads look like when it comes to buying and selling physical gold as opposed to. Gold ETFs. So, so, um, I don’t know what, what, uh, brokers charge to get an outta mining shares or ETFs, but you’re gonna pay 50 basis points when you buy gold, gold from us. Um, so you’re looking at 50 basis points from our cost to, uh. To, to pass on to a client and, uh, you know, nobody’s paying spot. You think about it, spot comes out of the ground, then the, the min manufacturer, and then there’s a wholesaler involved. And so there’s all, you know, there’s three groups of people that, that do make money on this. And, and when we, uh, when we, uh, sell it to our clients, the margins 50 basis points, and that’s basically, and most of the time you get free shipping. Um, so that’s your, that’s your end cost right there. Uh, what do you choose to do with it after that, between the time that you, uh, receive and the time you send it back to us? You know, again, we recommend fully insuring it and putting it somewhere safe. Uh, but you can put it in the back of your closet and not worry about it and have zero, uh, zero, zero costs associated with it. Right. How about the tax treatment, physical gold sales, capital gains? How’s it different from just buying and selling an ETF? So we, um, we kind of have a internal policy that we don’t get involved with, um, with recommending any sort of tax, um, uh, implications. Uh, we know that it is a capital gains tax, but we, uh, we recommend attorneys and, and tax advisors. I mean, I’m just asking code. I’m just asking what the code is. Uh, I mean, it’s, it’s gonna be the 25%, um, Joe. The, the gain on that. Um, now this administration may be a little bit, um, more favorable at some point, but 25, 20 8%, uh, the, the capital gains. Um, and that is, um, you know, a cost that, that is associated with it just like any other, yeah. A gain on an asset like this. Yeah. I’m just looking it up because I mean, if you have a policy, I, I don’t wanna force you to say something, but So if, so, when you’re, when you have physical gold, is it consider, it’s considered a collectible, right? Uh, correct. We also do sell collectibles, but yes. Right. So long-term capital gains is up to 28%. Right. So that’s, I mean, and whereas with long-term capital gains on ETFs, we’re talking about 15 to 20%. Yep. That’s just what we’re saying. So there is a difference. Um, in terms of, in terms of the taxation, I didn’t wanna. I didn’t mean, I’m not trying to put you on the spot, but I Oh, no, it’s fine. That’s when a client, when a client asks us that we, we, the same thing that I just said is what we, we tell our clients that we’re not tax advisors and, uh, we would definitely recommend you talk to, uh, to your team before, uh, before reacting. Yeah. Yeah. Let’s talk a little bit about an interesting thing that’s come up in the gold world, which is the role of bitcoin. Um, a lot of gold bugs are interested in Bitcoin. Now, some of actually the biggest names in gold. How do you think of Bitcoin, uh, when you think of storage? ’cause some of the things that you mentioned, you know, non confiscate, no counterparty risk that I kind of stuff applies to Bitcoin as well. Obviously people have strong opinions of that’s, I’m just curious what you think. Uh, so when Bitcoin came into the marketplace, I guess what. Really, truly came into the marketplace. It, it’s definitely a competitor of gold, no question about it. And the demographics are certainly a lot younger than the demographics that, uh, are typical clients of ours. You know, we we’re looking at more conservative investors that, uh, are looking for, for risk, whereas Bitcoin is more of the, uh. You know, the A MC, GameStop, let’s get rid quick kind of thing. And a lot of people did incredibly well with it, but I mean, to us, uh, we accept Bitcoin as payment, but the moment that the transaction happens, it’s immediately converted to cash because we do not want to have the whipsaw that you’ve seen. And, and, um, you know, we’ve got clients that certainly invest in Bitcoin and um, and I think if you look at charts side by side, it’s kind of hard to argue. That, uh, you, uh, you know it well, it’s, I I don’t understand it enough. Yeah. I think not what I’m, what I’m getting at is not so much the price action. I think one of the things that people talk about is the volatility of Bitcoin, which yeah, look at the market cap. We’re at two, you know, $2 trillion compared to what is right. So if you, if you have any significant buying and selling going on, it’s, it’s gonna. Significantly change the price quickly, but as that market cap goes up, what I’m asking about has more to do, less to do with the price and the nature of the actual, uh, concept of Bitcoin versus the concept of gold. In theory, they’re very similar. They, they definitely are. Uh, uh, again, I think it’s a different investor. Uh, I think it’s a different type of investor, but I think their goals are the same. Um, and, and as this Bitcoin group that’s invest now, I hope that their clients of mine at some point in the future, when they get a little older and they say, you know what, I’m, I don’t like the volatility. What I really want is to be in something a little bit more stable. And look, you look at the, the increase in Bitcoin, you look at the increase in gold. There’s no count, there’s no question that we all wish we could go back 10 years and, and, and buy Bitcoin. Um, but at the same time, the the stomach that you have to have, it’s a, it’s intense. And you know, we, we, like I said, we accept BCA Bitcoin as as payment. We realize there’s a place in portfolios for that. Um, but we still more stability and I think that’s the difference than, than Golden Bitcoin. Well, uh, tell us a little bit more about your business and you know, how people. So we’ve, we’ve got a, uh, a great story that, that I typically lead off with, but we went straight into the central banks. But just to let you know about Blanchard. So 50 years ago, uh, our founder, James Blanchard, uh, he hired a, a, a plane with a banner. You know, the ones that you see on the beach that says, you know all you can eat buffet for $11. Well, his said legalize gold, and he actually flew it. Uh, around, uh, president Nixon’s inaugurate inauguration. So from 1933 to when President Nixon took office, it was a legal own gold, and our, uh, founder, uh, worked really hard to make it so you and I and your listeners can actually own physical gold. So once that banner, I mean, can you imagine. Trying to fly a banner near inauguration now he’d be shot out of the sky. So he, he was able to do it and it made a, a real impact. Um, and so Blanchard was one of the first gold firms out there, if not the first. And then we, uh, we were able to. Become national because we, we put on this conference back in the seventies and we had, you know, Milton Freeman, Margaret Thatcher, Alan Greenspan, Ron Paul, various presidents throughout the years, come speak. And, uh, this entire gold bug group would come and listen to, uh, these speakers at, at this conference. And so now all of a sudden, Blanchard comedy became, uh, a, uh, a national company instead of just a, a company in New Orleans. And that kind of set. Separates us from, from the rest of the group. So we’ve been here for 50 years. We’ll be here for another 50. We make it insanely easy for somebody to, to come on board. You know, we, most people don’t know a lot about gold and they’re hesitant, uh, because it’s, it is a little bit. I’m not gonna say scary, that’s not the right word, but it’s the unknown. And the known is all you do is just like a stockbroker. You, you fund the account, we discuss what your goals are, we put you in the right, uh, fit in terms of the asset class, and then we ship it directly to you. And then you have a, a, a portfolio manager that you work with directly. So you don’t have to, you know, a lot of our competition, they just sell gold and that’s it. You build the relationship with us. And that’s what what I think sets us apart is that we’re, we’re gonna be there when you have questions. We’re gonna be there when you have con concerns. Most importantly, we’re gonna be there when you’re ready to buy. Um, excuse me, when you’re ready to sell the gold back to us and we, we’ll buy it back from you. And that makes, you know, that kind of, uh. Collo dagger of what’s gold? I don’t know what it means. I don’t know what it does. It, it, it really does set us apart and makes people feel more comfortable. And that’s all we’re trying to do. We’re trying to build relationships, we’re trying to make investors comfortable, and we’re trying to make it incredibly easy for them to do business with us so they can feel safe and have that insurance policy. Um, and, and, you know, financial crisis was a, was a great, um, uh. You know, kind of the, the what happened during the financial crisis, the gold is went from 900 to 700 and 700 all the way up to 11, 1200. So it acted like a liquidity asset. So people needed to raise liquidity. They sold gold, they got the cash, and then once the dust started to settle, people started getting back into, into gold because they realized the value that it has in a portfolio. We would never say liquidate all your stocks and bonds and other assets and buy. Nothing but gold. We just say, you know, five, 10%, maybe 15 depending on your appetite. But, uh, but it’s just, it’s something that does well in a portfolio. It balances out a portfolio. And again, hopefully you never need it. When, when you do, your family’s gonna be well, much better off than if you didn’t have it in the portfolio. Got it. Thanks so much for being on the show today. Great. Appreciate it. You make a lot of money, but are still worried about retirement. Maybe you didn’t start earning until your thirties. Now you’re trying to catch up. Meanwhile, you’ve got a mortgage, a private school to pay for, and you feel like you’re getting further and further behind. Now, good news, if you need to catch up on retirement, check out a program put out by some of the oldest and most prestigious life insurance companies in the world. It’s called Wealth Accelerator, and it can help you amplify your returns quickly, protect your money from creditors, and provide financial protection to your family if something. Happens to, the concepts here are used by some of the wealthiest families in the world, and there’s no reason why they can’t be used by you. Check it out for yourself by going to wealthformulabanking.com. Welcome back to the show everyone. Hope you enjoyed it. Again, a very interesting concept. We’ve talked about Golden, um, for many years, many shows on this, uh, topic. And, um, I certainly, uh, certainly have changed my view on it. I mean, I’ve always been sort of not a gold guy at all, and I, I still am a little bit, uh, reticent about it, especially since, I think personally, I think a big, the big move that’s made is probably a major correction from, um, all these years where it did not move, but it’s still probably, uh, it’s still probably something that everyone should have some exposure to. Um, but again. Look for where Bitcoin is headed. ’cause I think that’s, uh, I think that’s digital gold in the future, in my humble opinion. That’s it for me this week on Wealth Formula Podcast. This is Buck Joffrey signing off. If you wanna learn more, you can now get free access to our in-depth personal finance course featuring industry leaders like Tom o Wright and Ken McElroy. Visit wealthformularoadmap.com. The post 555: Iran, Bitcoin, and What It Means for Gold appeared first on Wealth Formula.

If you’ve ever wondered why the U.S. seems to play by a different set of financial rules than the rest of the world… this is it. It all comes down to the U.S. dollar being the world’s reserve currency. Now what does that actually mean? After World War II, at the Bretton Woods conference, the global financial system was essentially rebuilt—with the U.S. at the center. The dollar was tied to gold, and other currencies were tied to the dollar. Even after we went off the gold standard in 1971, something interesting happened… The world didn’t move on. Instead, it doubled down on the dollar. Today, the majority of global trade—oil, commodities, international contracts—is still priced in U.S. dollars. Central banks around the world hold dollars as reserves. When countries do business with each other, even if the U.S. isn’t involved, they often still settle in dollars. That creates an extraordinary dynamic. Because the entire world needs dollars, the U.S. can essentially export its currency—and in doing so, fund its deficits, maintain liquidity, and exert enormous influence over the global financial system. In simple terms: We get to print the money everyone else needs. Now imagine you’re another country. You’re working, producing goods, running trade surpluses… and accumulating dollars that you don’t control. Meanwhile, U.S. monetary policy—interest rates, money printing, sanctions—can directly impact your economy whether you like it or not. That’s why many countries don’t like this system. It’s not just about economics. It’s about control. Over the last decade, we’ve started to see cracks form: Countries exploring trade outside the dollar Central banks increasing gold reserves The rise of digital currencies and blockchain-based systems And geopolitical tensions accelerating the desire for alternatives None of this means the dollar is going away tomorrow. But it does mean the landscape is changing—and if you’re an investor, you need to understand what that actually looks like. Because the next shift in the global monetary system won’t be announced on CNBC ahead of time. It will happen gradually… and then suddenly. That’s exactly what we’re diving into this week. On this episode of Wealth Formula Podcast, I sit down with economist Barry Eichengreen—one of the leading experts on global currencies and financial history—to break down: How the dollar became the world’s reserve currency What that status really means in practice Why other countries are actively looking for alternatives And how technological innovation, geopolitics, and history are shaping what comes next If you care about where the world is headed—and how to position yourself ahead of it—you’ll want to listen to this one. Watch on YouTube: Listen on Apple Podcasts: Listen on Spotify: Transcript Disclaimer: This transcript was generated by AI and may not be 100% accurate. If you notice any errors or corrections, please email us at phil@wealthformula.com.  China has been, uh, working as hard as it can to try to encourage, uh, international use of its currency. China is worried about its dependence on the dollar. What happened to Russia in, uh, 2022 that it was barred from accessing its dollar holdings and, and, and doing business through the US banking system. That in, who knows, a future conflict over Taiwan or something else. They could. Suffer a similar fate, so they’re trying to become more self-sufficient. Welcome everybody. This is Buck Joffrey with the Wealth Formula Podcast. Coming to you from Montecito, California. Today we’re gonna talk about the dollars hidden power and why the world wants out. Here’s the thing, if you’ve ever wondered why the US seems to play by a different set of financial rules than the rest of the world. Well, this is it. It all comes down to the US dollar being the world’s reserve currency. And you’ve heard of that before, but what does it actually mean? After World War II at the Bretton Woods Conference, the global financial system was essentially rebuilt, and the US was at the center. The dollar was tied to gold, and other currencies were tied to the dollar. And after we went off that gold standard in 1971, uh, with President Nixon. Something really interesting happened. The world didn’t move on, they didn’t move on. They didn’t care about the dollar being pegged a goal. Instead, it doubled down on the dollar, and today the majority of global trade. Oil, commodities, international contracts still priced in US dollars. Central banks around the world hold dollars as reserves. When countries do business with each other, even if the US isn’t involved, guess what? They still settle in dollars and that creates an extraordinary dynamic in significant benefit to us. The entire world needs dollars. The US can essentially therefore export its currency, and in doing so, fund deficits. Maintain liquidity and exert enormous influence over the global financial system. Not to mention influence over, uh, countries in general. So in simple terms, we get to print the money everyone else needs. Now for a second, put yourself in another country, maybe one that, you know, we’re at odds with, like Russia or China. You’re working. You’re producing goods, running trade surpluses, and accumulating dollars that you don’t control. Meanwhile, US monetary policy, interest rates, money printing sanctions, can directly impact your economy whether you like it or not, and that’s why countries don’t like this system. Well, one of many reasons they don’t like this system. It’s not just about economics, it’s about control. Now, over the last decade, we’ve started to see cracks form. We’re seeing countries exploring trade outside the dollar, central banks increasing gold reserves, the rise of. Central Bank digital currencies and blockchain based systems and geopolitical tensions accelerating the desire for alternatives. Now, you, you might have heard of this before, right? The, the rest of the world not being as interested in the dollar anymore, and sometimes it gets brought out as some sort of impending zombie apocalypse. I’m here to tell you that’s not really what’s going on. None of this means that the dollar is going away tomorrow, but it does mean that the landscape is gradually changing. And if you’re an investor, you need to understand what exactly that looks like because the next shift in the global monetary system won’t be announced on CNBC ahead of time. It will happen gradually and then maybe it will be suddenly, but. That’s what exactly we’re gonna dive into today. On this week’s podcast episode, we’re gonna talk about how the dollar became the world’s reserve currency. What the status really means in practice, why other countries are actively looking for alternatives, and how technological innovation, geopolitics, and history are shaping what comes next. And we’ll have that for you after these messages. Wealth formula banking is an ingenious concept powered by whole life insurance, but instead of acting just as a safety net. The strategy supercharges your investments. First, you create a personal financial reservoir that grows at a compounding interest rate much higher than any bank savings account. As your money accumulates, you borrow from your own bank to invest in other cash flowing investments. Here’s the key. Even though you borrowed money at a simple interest rate, your insurance company keeps paying you compound interest on that money. Even though you’ve borrowed it, net result, you make money in two places at the same time. That’s why your investments get supercharged. This isn’t a new technique. It’s a refined strategy used by some of the wealthiest families in history, and it uses century old rock solid insurance companies as its backbone. Turbocharge your investments. Visit Wealthformulabanking.com. Again, that’s wealthformulabanking.com. Welcome back to the show, everyone. Today. My guest on Wealth Formula podcast is Barry Eichengreen. He’s one of the leading economic historians in the world, um, professor at uc Berkeley, who specializes in international finance, monetary policy, and uh, financial crises. He spent decades studying how global currency systems evolve, how. Reserve currencies rise and fall and what really drives financial crises behind the scenes. He’s also the author of several influential books, including Exorbitant Privilege, which explores the rise and future of the US dollar, globalizing capital, A deep dive into the history of international monetary systems, all of mirrors, which compares the Great Depression of the Great Recession, and the populous temptation, which looks at political forces that often emerge during economic stress. Welcome, uh, Barry. How are you? I’m good. Thank you. Well let, let’s start off with some, um, something kind of, I guess maybe basic when it comes to, uh, just what people talk about and, you know, how we should perceive it. There’s always a lot of talk these days about the US dollar, uh, losing its power globally. Bottom line, you know, what should the average, you know. Investor or just any person really who’s going about their day, you know, making an income, paying their bills. What, what, what should they think about that? Or how should they think about that? Or is this mostly noise for them? No, I think, uh, the fact that the dollar is not only the currency of the United States, but the currency of the world that it’s traded in 90. 90% of all foreign exchange transactions worldwide that it’s used in half of all cross border payments for, um, merchandise transactions and financial transactions around the world. Even when those transactions don’t involve the United States that matters for people’s every day, everyday lives, it matters because it enables our government to, uh, place its debt securities at lower interest rates. Then would be the case. Otherwise, because banks and governments and central banks around the world hold those treasury securities as the bedrock of their portfolios. And if, uh, interest rates on treasury bonds are lower, that spills over into mortgage markets and other markets, uh, those interest rates are, are, are linked. So people who are taking out a mortgage to buy a house will feel that directly. Um, because there’s that demand out there in the rest of the world for US treasury securities that makes the dollar exchange rate stronger. Than it would be otherwise. And that keeps import prices down. At least it keeps them lower than they would be in the absence of that demand. And finally, um, the dollars global role has been good for financial stability in the United States for many decades. So whenever a bad thing happens in the world economy, when Lehman Brothers failed in. 2008 or when the COVID pandemic broke out in March of 2020, or when a war broke out in the Middle East in uh, February of 2026, funds rushed into US financial markets sent into the dollar because the dollar was regarded as a safe haven. Um, US treasury market is the single largest and most liquid financial market in the world. Easy to get in and out of. So, uh, investors frightened by what’s going on, rush into the dollar, and that supports our markets. We don’t have the suffer from the phenomenon other countries do when in times of turmoil funds rush out of their markets and, uh, and those markets collapse. So right now, the US is running huge deficits piling on debt, and that would normally weaken a currency. Why hasn’t that really happened with the dollar? Because, um, our, our debts have not always been as high as they are now. You know, they are growing by 6% of GDP every year. That’s the size of the budget deficit that, uh, the federal government is running. There’s, in the past there had been no particular reason for global investors to worry. About whether the federal government was gonna make good on its obligations. But now as that debt burden has continued to rise, they have begun to worry. So the dollars safe haven status, uh, is pretty much intact up until now. That doesn’t mean that, uh, this will continue to be the case in the future. The dollar exchange rate. Did weaken against, uh, other currencies by about 10% last year. So that was an indication that, uh, global investors are awake. Uh, awakening to the problem hasn’t happened until now, but that’s no guarantee against problems going forward. So we often hear these days when, uh, you know, in these conversations about the risk to the US as a reserve currency. Dedo d Dollarization, um, countries moving away from the dollar, is that a real trend that we’re seeing right now? Can you tell us a little bit about what we’re seeing that would tell us that that’s really a, really a major concern. So it, um, has been evident in kind of the very slow, even glacial. Erosion of the dollars global dominance over the last quarter century. So the most obvious indicator of that erosion would be the decline in the dollars share of Central Bank Reserve Holdings globally. At the dawn of the 21st century, the dollar accounted for a bit more than 70% of Central Bank foreign exchange holdings around the world. Now that number is down to a bit less than 60. Percent. Another indicator would be the number of countries that peg their currencies to the dollar. That number has declined very gradually over time as well. Uh, and I, I, I think a gradual decline is no disaster. Uh, I think in the same way that, uh, uh, the Global Commons is better off with a diverse. Ecosystem. The global monetary and financial system is better off with a diverse set of sources of, of liquidity. Not only, uh, the Fed and the dollar providing funds to the global economy, but also the Euro area and the European Central Bank and other major central banks. The danger is that this process could. Accelerate in a chaotic way, which would, um, disrupt 21st century globalization. When you talk about the reduction in US dollars in, in, in foreign, uh, central banks, what is it being replaced with? Or is it just diluted with everything else that was there? Is, for example, it seems like gold is being bought up by some central banks. Is that. One of the main replacement, uh, variables. So that is one replacement. No advanced country Central Bank has purchased gold in recent decades. Uh, their gold holdings have become more valuable as the price of gold has gone up. Of course, it’s emerging markets, central banks. That did not inherit gold from the past that have been adding it to their portfolios. So that’s part of the answer to your question. And the other part is that they have been creating their dollars for what you might call non-traditional reserve currencies, uh, of the ground that the dollar has lost, that I described earlier, about a quarter of that has been gained by China’s currency. Ren B and the other three quarters has been gained by the currencies of small, open, well-managed economies. Australia, New Zealand, Canada, South Korea, Singapore, uh, Denmark, Norway, Sweden. Their currencies have been, uh, central banks have been adding their currencies to their reserve portfolios as they trim the share of the dollar. You talk about China a little bit more. Um, the, the situation with their currency is somewhat complicated, uh, with regard to, you know, their, their ability to suppress it. Would you address that a little bit? China has been, uh, working as hard as it can to try to encourage, uh, international use of its currency. China is worried about its dependence on the dollar and whether what happened to Russia in. Uh, 2022 that it was barred from accessing its dollar holdings and, and, and doing business through the US banking system. That in, who knows, a future conflict over Taiwan or something else. They could. Suffer a similar fate. So they’re trying to become more self-sufficient in the sense, uh, of being able to do cross-border business in their own currency just as we in the US can do cross-border business in our own currency. The problem is that they are starting out way behind. Um, the US has been promoting international use of the dollar ever since we established the, the Federal Reserve in 1913, more than a century. Ago, uh, China has been. Embarked on this process for a little more than a decade. So where the dollar is used in, in half of all cross border payments worldwide, the Chinese Renmin B is used in 3%. So even if they grow that number at double digit rates, it will take them a decade or two before they come within hailing distance of the dollar. Uh, they have have two special problems, uh, to address. Or, or, um, to overcome. One is they still have financial restrictions, capital controls on certain inflows and outflows of funds into their. Financial markets. And number two, uh, they have an autocratic political system. Nothing prevents President Xi and the polyp bureau from waking up tomorrow morning and arbitrarily changing the rules of the financial game, and they’re gonna have to convince global investors of their reliability. Before people are willing to park a large share of their funds, their reserves in Shanghai. So, uh, whenever I go to China, I managed to go there twice Last year, I would make this point, every leading global currency in history has been the currency of a political democracy or republic where there are checks and balances, uh, limits on arbitrary action by the king or the emperor. Or the the president, my Chinese audiences listen respectfully. They don’t really respond to the point, but there is a sense in which the tables are turning as well. People are asking questions about checks and balances, division of powers, rule of law in the United States, and the Europeans and others are rethinking their dependence on the dollar on those same grounds. When you think about it historically. Uh, you know, just historical perspective on like, you know, what happens to a country when it loses? Reserve status. Can you give us some examples? So if you go back in history, the Dutch Republic, uh, the Dutch Guilder was the, um, the global currency in the 17th and 18th century. That was the period of the dusty Dutch East India company. And when the Netherlands controlled much of what we were, uh, know today as Indonesia and. And, and, and, and so forth. Uh, their currency rose to global prominence because of strong institutions, strong political institutions, and really the world’s first central bank to backstop, uh, their financial market. And, uh, in Amsterdam, the Bank of Amsterdam established already, uh, early in the 17th century, but. Their economy could not keep pace with larger economies that were beginning to industrialize at the end of the 18th century. The first and foremost, the British, uh, their army couldn’t fend off the army of a larger economy, France. Um, so it was a combination of military defeat at the end of the 18th century and economic decline. I think that basically, um, ended the global brain of their currency. Another example would be Britain in the 19th and first half of the 20th centuries, Britain was the first industrial nation. It was had the largest economy in the world in the first half of the 19th century. It was the largest exporter. Britannia ruled the waves. It had the largest navy to protect those shipping routes. A connection that current events in the Straits of Horus, uh, bring to mind. Uh, but. Britain couldn’t grow its economy successfully. It became the sick man of Europe. It was overtaken by larger economies, the US and Germany, uh, um, excessive debts. As a result of World War I and World War II basically ended Sterling’s global role in 1945. So you see a combination of economic, uh, relative economic decline, geopolitical problems as well, conspiring to, to bring global currencies reign to an end. And when the Sterling lost its reserve status, what, what were the implications? Well, I think the, um. London was overtaken by New York, uh, as the leading global. Financial center, um, the pound sterling then went through a series of chaotic crises because it lost that safe haven status that it had enjoyed. When. Uh, um, Sterling was the leading global currency. So there were a series, uh, uh, of currency crises and financial crises that, uh, in 19 49, 19 67, 19 76, 19 92, um, e Each time there was such a crisis, the currency depreciated sharply that interfered with. The country’s export business. It fed in, in, in, in inflation. It was a long, unhappy story. So can we surmise, um, that, you know, if the dollar stays strong, that helps us with, you know, controlled interest rates going forward and, and conversely, if it weakens, we notice maybe higher inflation, higher interest rates, something else. Yeah, so I think, um, the US derives several benefits from the dollars global role, and we should work to preserve that role. Um, there’s the simple convenience, value to US banks and firms of being able to do business globally in their own native currency. There are those lower interest rates on, on treasury bonds and therefore, uh, other interest rate, downward pressure on other interest rates. There is that. Automatic in, in insurance when there’s turmoil in global markets and funds rush into the United States rather than rushing out. And finally, there’s um, the geopolitical leverage that we get from the dollars global role that, uh, judicious use of financial sanctions. Russia, uh, depended very heavily on the dollar and the US banking system. So it suffered when we, uh. Cut it off from, uh, our, our financial markets and our currency following its attack on, on Ukraine. Uh, if other countries don’t rely on the dollar in as much in the future, our leverage over them financially will be less. So I think all, all of those are dimensions, uh, uh, of the dollars of America’s exorbitant privilege as. People refer to it, the dollar’s global role. And if we do anything to fritter it away, I think Americans will be worse off. How do we protect it? How do we regain status in general? Has that to do with, um, geopolitical issues, political issues in the us? What, what types of things would help? Preserve the US dollar. Well, a strong co economy is obviously the, the first and most central foundation of the dollar’s global role. Um, deep in liquid financial markets, being sure that, uh, we avoid doing anything that could destabilize those financial markets. I worry about steps being taken at the moment to reduce capital requirements on, on big banks as potentially jeopardizing that stability, bringing the public debt under control. So, f. International investors don’t worry about the possibility that politicians will lean on the Fed to buy those bonds, monetize the debt, push up inflation, depreciate the dollar, preserving the independence of the central bank so that it can push back against political pressure. And uh, then, uh uh. Addressing doubts about our politics domestically, uh, reassuring international investors about rule of law, separation of powers. Um. Control of corruption internationally, uh, solidifying our alliances with other countries. So, uh, central banks and governments hold and use the currencies of their alliance partners. Their alliance partners are, are regarded as trustworthy. They’re good stewards of the reserves of other countries. Other countries like to hold and use the currencies of their alliance partners as a show of good faith. As a show of appreciation. So when the dollar came under strain in the 1960s, it was supported by West Germany and Japan because we had boots on the ground in both countries we provided them with, with, uh, their nuclear umbrella. So when, when I hear, uh, talk that in Europe that the US is not a reliable alliance partner, I worry about the dollar. In some ways, you look at Europe and, and I think one of the things maybe we have to rely on is what, where else do they turn? They’re not gonna turn to China, they’re not gonna turn to Russia. Um, but is is that sort of a, a built-in support for us right now in the sense that we may not be doing everything right? We may be, you know, we may be not on a good course, but at the end of the day, there’s not a, not a great. Number of alternatives. So many people, um, uh, refer to that Tina. There is no alternative. But, uh, there, there is the scenario in which confidence in the dollar is lost for any one of the aforementioned reasons. And if international investors liquidate the dollar and all try to pile into gold or something else, there won’t be enough. Uh, finance enough liquidity. To, uh, provide the credit needed for, uh, global imports, exports, capital flows, foreign investment. And that’s, uh, a, a, a scenario where, where globalization, as we know it, the, the trade and cross border capital flows, the global economy runs on, come on, under severe strain because those transactions become. Difficult to finance. Um, you, you mentioned Europe. Uh, the Europeans are, are moving as fast as they can now to become more self, financially, self-reliant by, uh, enhancing the international role of the Euro. So among other things, they’re moving fast now to create, uh, central bank digital currency, the digital euro. We in the United States, the Congress passed a bill prohibiting the Fed. From creating a central bank digital currency, we are betting on privately issued stable coins. The Europeans are betting on central bank issued digital tokens. Uh, I I, I I think they’re betting on the right horse and we’re betting on the wrong one. Could you explain why that’s of significance, the, the digital currencies? Well, because there’s this thing out there called blockchain. Or distributed ledger technology. Sure. It’s a new set of payments rails that can link all the countries in the world to one another, and you can use it to execute transactions, financial transactions quickly at low cost securely, in most cases at low cost. And the question is, what will run on that new set of payments rails? What will. Be moved on blockchain. Will it be stable coins issued by Walmart and Amazon? Will it be uh, uh, central Bank? Currency issued by the European Central Bank and other central banks around the world. Will it be commercial bank deposits that are tokenized and then those tokens can be moved on blockchain as opposed to doing what we do now, which is asking my bank to contact your bank and another country, and that takes a week to move the money. One of those alternatives is coming and I would put my. Chips on Central Bank digital currencies and tokenized bank deposits not. So essentially what you’re saying is maybe what that does is it, um, eliminates a choke point that maybe the US is playing right now. Yeah. That the, that the, in. Legacy financial technology has favored the dollar because most global transactions, uh, a bank in Thailand will contact a US bank to transfer money to a bank in Malaysia. That’s, uh, the choke point, if you will. That’s the advantage the dollar has had for, for more than half a century. This new technology, uh, will provide an alternative and the question is, what will, what will run on those rails? I’m curious since you bring up blockchain, um, you know, as a historian who’s kind of seen things, um, you know, in the big picture, you know, there is, there is, uh, this, there is Bitcoin, which I think has evolved from something that probably we wouldn’t be talking about in this conversation at all 10 years ago to something that. Being widely adopted, certainly in the, in the US financial system. Do you see that evolving into a potential store of value give like gold given its liquidity? I think, um, Bitcoin is too volatile to be a store of value, uh, unit of account, uh, a reliable means of payments. So I’ve just listed the three, uh, things that, uh, define money. Unit of account means a payment store of value. Uh, stable coins are supposed to be a stable store of value. I think their stability is yet to be proven and they, um, don’t, uh, it’s not clear. They will be fungible. By which I mean, will Walmart. Coin, can you use it at Amazon? And will you be able to use Amazon coin at Walmart? I’m not. We know we can use central bank money, the, the dollar bills in our pocket and in the future, central Bank digital currency anywhere. So I think, uh, C BDCs have advantages. The other point I would make is that your general. Focus on, on technology and how it’s changing is really important throughout history. So you were kind enough to mention my earlier books in your intro, but there’s a new one right above my head here. Money Beyond Borders Out last month, one of the themes there is how financial monetary technology is continuously. Evolving and that changes the rules of the monetary game over time. I go all the way back to the advent of coinage in six, in 600 BC in, uh, Anatolia, present day Turkey. Uh, the advent of, uh, fiat currency, not necessarily convertible into gold or silver in Amsterdam in, uh. Uh, 18th century anti, uh, electronic trading of foreign exchange starting in the 1990s all the way up to blockchain. And I think you can understand, uh, the changing role of global currencies partly through that technology lens. So you’ve studied, you know, financial crises going back over a century. So what are you looking at like a day-to-day basis when you read the news? What are the things that you’re focused on or things that you’re, the variables that you look at as potential warning signs that maybe people should be paying attention to? Um, that suggests, you know, some of the problems ahead that we discussed. Well, I look at how, how the dollar exchange rate reacts to immense. Big events. So, a, as I said before, the traditional behavior is that when global volatility spikes, when investors get, uh, um, anxious, the dollar has always strengthened because funds flow into the US and into the dollar as a safe haven. After Liberation day, April 2nd, uh, 2025, when Trump announced his reciprocal tariffs, that didn’t happen. Uh, global measures of global volatility spiked, but the dollar weakened. So that kind of indicated that something had been changing. On March 2nd and third, 2026, the two days after war in the Middle East broke out, the dollar strengthened by 1.5%. Uh, and I’m not yet sure how to interpret that. That was the traditional safe haven behavior. Dollar strengthens when, uh, a big geopolitical event happens, but the historical record would suggest the dollar sort of strengthened by a lot more. Events in the Middle East are, uh, major, the global energy shock that’s coming is a big deal and that the dollar only strengthened by one and a half percent may, may be indicate, indicating that the ground, the financial ground is shifting under us a little bit. One of the, you mentioned that one of the things that, um, can help protect a dollar is a, a very strong economy and. I’m curious, you know, given all that’s happening now in the US with, uh, artificial intelligence and, you know, GDP growth, uh, presumably ahead, um, what does the world look like to you 10 years from now? I mean, does the world still revolve around the US dollar or do you see an, an inevitability, uh, towards something else? Well, I see, uh, an. Inevitable rebalancing away from the dollar over time because I think, uh. Emerging markets and developing countries will continue to emerge and, and, and develop. They have room to catch up, relatively speaking to the United States in terms of living standards and per capita income and so forth. What that implies, if it happens is that the US over time accounts for a gradually declining share of the global. Economy and uh, it follows that the dollar will play a gradually declining role in global. Finance and monetary affairs, if that occurs gradually and smoothly over time, it’ll be a good thing because it’ll make for that more diverse monetary and financial ecosystem that I referred to before. If it occurs abruptly, suddenly, and chaotically, that will be highly disruptive. So my base case is, as you say, one where the dollars global dominance. Declines over time. I can’t tell you whether that will occur gradually and smoothly or abruptly and chaotically. I definitely prefer the first of the two alternatives, but I am not enough of a political sage to know, you know, how the relevant policies domestically and internationally are gonna play out. I guess the last question I would have is, you know, people listening to this, they’re probably thinking well. What do I do with this information? And certainly not looking for, uh, investment advice here at all, but does it, does it suggest that maybe people ought to be looking at, you know, markets globally rather than just US markets? I mean, how, how would you think about that? What, what framework would you use to, to sort of protect your. Yeah, I, I, um, think that the recommendation that flows from that is diversification, both across economies, um, but also across currencies. Um, I, my, um, dissertation advisor in graduate school, James Tobin, won the Nobel Prize in, uh, the early 1980s, and the newspaper reporters asked him, what does. Tell us in a few words, uh, what your famous portfolio theory. Means for the average investor. And he said, don’t put all your eggs in one basket. And I think that old advice is still good advice. I, I wanna thank you for joining us today on Wealth Formula Podcast. Uh, remind us the name of the new book, which unfortunately I had every other book you had, but, uh, I missed the most recent one. Well, the most recent one is the most important one. It’s called Money Beyond Borders Global Currencies from Creases to Crypto. Where CREs was the Lydian king who was responsible for the advent of coins. Thanks so much for being on today. You make a lot of money but are still worried about retirement. Maybe you didn’t start earning until your thirties. Now you’re trying to catch up. Meanwhile, you’ve got a mortgage private school to pay for, and you feel like you’re getting further and. Further behind now. Good news. If you need to catch up on retirement, check out a program put off by some of the oldest and most prestigious life insurance companies in the world. It’s called Wealth Accelerator and it can help you amplify your returns quickly, protect your money from creditors, and provide financial protection to your family if something happens to you. The concepts here are used by some of the wealthiest families in the world, and there’s no reason why they can’t be used by you. Check it out for yourself by going to wealthformulabanking.com. Welcome back to the show everyone. Hope you enjoyed it and again, nothing to panic about, but something to certainly think about as we, uh, move forward, uh, in this really confusing and, uh, shifting geopolitical world. The most you can do as an investor is to make sure that you are on top of this stuff, that you are educating yourself, and that’s what we’re here for at Wealth Formula Podcast. This is Buck Joffrey signing off. If you wanna learn more, you can now get free access to our in-depth personal finance course featuring industry leaders like Tom Wheelwright and Ken McElroy visit wealthformularoadmap.com. The post 554: The Dollar’s Hidden Power (and Why the World Wants Out) appeared first on Wealth Formula.

If you’re paying a ton in taxes right now… It’s because you’re playing the wrong game. Most people think taxes are about income. They’re not. They’re about behavior—more specifically, incentivizing behavior. The government is constantly telling you what it wants through the tax code, and once you stop looking at it emotionally, it’s actually pretty obvious. It wants businesses. It wants jobs. It wants housing. It wants capital deployed in specific areas like energy and infrastructure. And when you do those things, it rewards you with lower taxes. Now contrast that with the high-income W2 professional. You did everything right. You trained forever, built a career, and you’re producing at a high level—often doing a lot of good in the world. But the government doesn’t see working for someone else as something it needs to incentivize. In fact, as a high-earning professional, you often end up paying a higher effective tax rate than almost anyone else. Not because you’re doing something wrong, but because you’re not doing what the system is designed to reward. I know that doesn’t feel fair. But fairness isn’t really the point. The people who seem like they’ve “figured out taxes” aren’t gaming the system. They’ve simply figured out what the government wants and aligned themselves with it. If all your income is W2, you’re largely boxed in. But when you start owning assets—businesses, real estate—you step into a completely different framework. Now you’re not just earning income, you’re creating it. You have expenses, deductions, and depreciation that fundamentally change how that income is recognized. Same economic reality, very different tax outcome. This is one of the biggest advantages of real assets over simply owning stocks and bonds. It’s not just about return—it’s about control over how you’re taxed. And if you really think about it, you should be looking at your financial life like a business. You already have revenue in the form of your paycheck, and you have expenses. But your biggest expense, by far, is your tax bill. If you want to maximize your “profit,” you have to figure out how to reduce that expense. And the only real way to do that is to change your facts—change how you earn, what you own, and how your income shows up. That shift—from focusing on how much you make to focusing on what you keep—is really what this whole conversation is about. It’s also exactly where this week’s podcast goes. I had a conversation with Steven M. Sheffrin that digs into how tax systems actually work in the real world. Not in theory, but in terms of how people respond to them—psychologically and behaviorally—and why so many well-intended policies fail because they ignore that. If you want a better mental model for thinking about taxes—and how to position yourself within the system—it’s worth a listen. Watch on YouTube: Listen on Apple Podcasts: Listen on Spotify: Transcript Disclaimer: This transcript was generated by AI and may not be 100% accurate. If you notice any errors or corrections, please email us at phil@wealthformula.com.  Let’s say they give me $10 and the the game is I can either keep the $10 or I could give you some fraction of that dollar. Uh, they find that if you give me $10, I’ll give you on average, like, say. $2 50 cents or $3. But there’s an interesting variant of that experiment, suppose that before I, I got the $10, I had to take a test and then ask how much money should I give you? People tend to give nothing. Welcome everybody. This is Buck Joffrey with the Wealth Formula Podcast coming to you from Montecito, California. So what are we gonna talk about today? We’re gonna talk about taxes, and you’re probably in the mood given the fact that, um, tax stays around the corner. Maybe you’ve extended or something. I certainly always extend anyway, but. It does, uh, remind you that there’s this whole tax world that you have to deal with at least once a year. The thing is, if you’re paying a ton of taxes right now, it’s probably because you’re playing the wrong game, okay? Most people think about taxes in terms of just their income. You make more money, you pay more taxes, but the reality is that’s not true. Taxes really are about behavior. More specifically, incentivizing behavior. The government is constantly telling you what it wants through the tax code, and once you stop looking at it emotionally, it’s actually pretty obvious. It wants businesses, it wants jobs, it wants housing, it wants capital deployed in specific areas like energy and infrastructure these days. And when you do those things, you get rewarded with lower taxes. Now, unfortunately. Many of you are high income W2 professionals, and listen, there’s nothing wrong with that. You did everything right. You trained forever, you built a career. You’re producing at a high level, doing a lot of good for the world, but the government doesn’t really see that for you, right? What they see is, well, you’re really not doing anything that we want you to do. You’re working for somebody else and well, hey, your employer, we’re gonna give them the incentives. As a result, you end up paying the highest percentage of taxes than anyone else, even more than the billionaires out there. It sucks, but you know, it’s, and it’s not because you’re doing something wrong, but it’s just the way the system is designed to reward. Now there are those people out there and, and you may know some of them that seem to have figured out taxes. They’re playing in a different system as you, they’ve simply figured out. Something that everybody needs to know is that they are going to follow what the government wants and aligns themselves with. Unfortunately, if you are a W2 income and that’s all you are, you’re largely boxed in. But when you start owning assets. Like businesses, real estate, stuff like that, you step into a completely different framework and now you’re not just earning income, you’re actually creating income, and that’s what the government wants. You have expenses, deductions, and depreciation that fundamentally now change how the income is. And you may end up quote unquote making the same amount, but you’re paying a lot less in taxes and you get to keep it. Now, this is one of the biggest, again, one of the biggest advantages of real assets over simply owning stocks, bonds, uh, and mutual funds. You know, it’s not just about the return, it’s how much you get to keep. And if you really think about it, you should be looking at your own financial life, kind of like a business. I mean, you already have revenue in the form of a paycheck. You have expenses, but your biggest expense by far is probably your tax bill. And if you want to maximize your profits, what do you do? You gotta figure out how to reduce those expenses, and the only way to do that is to change your facts. Change how you earn. What you own and how your income shows up. And that shift from focusing on how much you make to focusing on what you keep is really what this whole conversation today is all about. It’s a discussion about how to think about taxes in the big picture, and at the end of the day, understanding how the government taxes, or why the government taxes, why policies are the way they are, is gonna help you kind of put your own financial life into perspective. We’re gonna have that conversation after these messages. But before that, I do wanna remind you that there is a website associated with this podcast that you should check out. It’s at wealthformula.com. Lots of things to do there, including sign up. For our accredited investor group. Okay, that is called Investor club. It’s where you’re gonna see private deal flow and you’re gonna see the types of tax mitigating investments that you can use to, you know, basically do what we’re talking about here. Anyway. We’ll have that interview right after these messages. Wealth Formula banking is an ingenious concept powered by whole life insurance, but instead of acting just as a safety net, the strategy supercharges your investments. First, you create a personal financial reservoir that grows at a compounding interest rate much higher than any bank savings account. As your money accumulates, you borrow from your own. Bank to invest in other cash flowing investments. Here’s the key. Even though you’ve borrowed money at a simple interest rate, your insurance company keeps paying you compound interest on that money even though you’ve borrowed it. At result, you make money in two places at the same time. That’s why your investments get supercharged. This isn’t a new technique. It’s a refined strategy used by some of the wealthiest families in history, and it uses century old rock solid insurance companies as its backbone. Turbocharge your investments. Visit Wealthformulabanking.com. Again, that’s wealthformulabanking.com. Welcome back to the Showy one today. My guest on Wealth Formula podcast is Professor Steven Sherin from Tulane University. He’s leading expert in behavioral economics and tax policy, and a former director at the California Franchise Tax Board. Uh, today we’re gonna dig into how people actually respond to taxes in the real world and what means for, uh, investors and business owners. So, uh, welcome to this show, Steven. How are you? I’m doing fine. Thank you for having me. Yeah. So let’s start with something pretty basic. When we think about taxes, um, you know, people think in, in terms of rates and rules, but from your perspective, how much of tax policy is really about predicting and getting right human behavior? I think quite a bit. I think when you design an actual tax system for it to last and be and work successfully, you really have to. Match, uh, the tax system has to match people’s psychology. Yeah, and there’s a number of different examples of that. Um, you’re in California, so you probably remember many years ago, prop 13 and why that exploded. Right? And it was the case where you had a tax system that didn’t really match people’s psychology. That’s just one example. Maybe you can explain that. ’cause a lot of our listeners are not in California. Sure. Um, before Prop 13, California had a, uh, standard property tax system where the, uh, the property would be assessed and then, um, people would get a bill in the mail, um, and then the money supposedly would go to the government. What happened, there was a period of inflation and people’s property value started rising real quickly. And instead of reducing the rates, uh, appropriately, uh, the government let those rates go up and all of a sudden people’s tax bills went up by. 30, 40, 50%. Uh, and it created a real revolt, but very, people were very unhappy. So they had a referendum and they voted basically to restrict your property tax. You would, you couldn’t allow it to go up by more than 2% a year once you were in your home. Um, and that made sense because if your property bill went up and you didn’t vote on anything, you didn’t have any new spending, there was no connection between what the government was doing and your own taxes being paid. That connection was severed and now at Prop 13, it’s not a perfect system, but there’s definitely a connection between, uh, what’s being spent to some degree and what your tax bill is, or at least your tax bill isn’t going up for, for reasons that you don’t understand. Right, right. Speaking of, um, California, Steve, and I mean, uh, you know, I’m here, uh, in California again, most. Most of the audience is not. Um, but there’s some interesting things going on here. Now, I’d love to get your comments on, for example, you know, we hear a lot about, um, some billionaire, uh, tax issues, taxes on essentially wealth taxes, meaning rather than taxing on income people are the, the thought is that a, at a certain level, that ultra wealthy should be taxed on sort of their net worth. Um, unrealized gains and that kind of thing. Tell us a little bit about that and, you know, potentially, you know, some of the issues that are going along with that, that sort of, uh, reflect, uh, psychology. Sure. Yeah, it’s a really interesting topic. I actually know some of the people, some of the economists who are involved with drafting that. Um. So it’s a onetime, supposedly it’s a onetime 5% tax on people’s net worth, as you said, right? And it only, it applies to billionaires. So it’s a limited, uh, group of people. It applies to, but it applies to all their wealth. And all their wealth consists of, you know, all their assets in including, uh, including shares of stock, for example, uh, in companies, uh, and, uh. It’s just the value of the stock. They actually had, they haven’t sold the stock, they didn’t realize the income. And so in our normal income tax system, in order to be taxed on, on stock, you have to actually either get a dividend from it or you have to actually sell the stock. You have to realize the stock. So this is on unrealized gains. Um, and one of the. Difficulties with unrealized gains is that many times we really don’t know exactly what they are. That’s one difficulty, right? So if you have a private uh, company, we’d have to guess what your unrealized gains are. ’cause there’s no publicly traded assets. The other thing is, even if, even if it’s publicly traded, your stock price could go up for all sorts of reasons, right? Um, suppose interest rates fall. Your company’s not any more profitable. Your earnings are still the same, but all of a sudden interest rates fall. Well, the value of your stock will just go up because the, the present value, if you will, of that, those earnings go up. And so all of a sudden you’ll have a big fluctuations in your, in your, uh, value of your stock. These unrealized gains, uh, for no particular reason related to the profitability of the company. There’s been some psychology studies actually of this, uh, and they ask people, is fair tax unrealized gains or not? And generally, uh, only email 20, 25% of people when they’re asked think it’s okay to tax unrealized gains. Moreover, those people are the ones who don’t own stock. So people who own stock or own property think it’s really patently unfair. And I, I personally think it’s because the, there’s no connection necessarily between the value of the unrealized gains and even your, your welfare in any sense. Because again, as I said, the stock could go up and down just based on other factors. Uh, a rumor about, you know, interest rates about who’s gonna be the Fed chairman could have a, a very profound impact. And so I think that’s, that’s a big issue. The other issue in, in psychology is, is whether. What are the public opinion polls and what do people believe about the merits of taxing the very wealthy? Right? So let’s just take an example. Many years ago, you, you probably remember this, uh, baseball player, Derek Jeter for New York, a piece, right? Mm-hmm. He signed a really big contract now by today’s standard, probably wasn’t that big contract, but back then it was a really big contract and it made him, you know, multi multimillionaire. Um. The question is, did people object to that at all? Did people have any reason to object to that? There was not a peep. Right. Think about Michael Jordan. Yeah, right. Michael Jordan had all the endorsements, all the money, he earned all his shrewd investments over the years. He’s super wealthy, maybe not a billionaire, but he’s, you know, he’s up there in the hundreds of millions, uh, dollars. No one really objects to that PE so people think in fact that it’s okay for that. Um, and so if you look at public opinion polls, what you find is that there are some, if you ask the question very abstractly. Should you, should the, you know, the high income people, a millionaires pay ’em more taxes. You’re gonna get about 50% say yes, but you’re gonna get around 50% say no. Part of the reason is, and this goes back to kind of the Michael Jordan or Derek Cheater, there’s a sense of which they earn that money. Right. And, and in psychology there’s a, um, a notion called equity theory that is, if you earn it, it’s, it’s kind of yours and the government, that is a second part, the second gets a second bite of the apple on this and mm-hmm. Um, that equity theory is very strong. It basically says that people, you know, um, deserve what they get. And if they don’t work. It’s not clear to deserve anything, so, so go back to welfare reform. Back in the old days when Bill Clinton came in and he changed the old welfare system where people just got money to a system where they had the earned income tax credit where when you work, we subsidize your earnings up to a certain point. Well, people like that and they still like it. Republicans like it. Democrats like it because what you’re doing, you’re rewarding work, you’re rewarding effort. So it has this direct connection between the actions you take. Your, your efforts to secure income and the uh, uh, and the dollars you get and when you break that connection, people are very uncomfortable with that. Another example is social security. Right? Social security is not, you have to actually work in order to get social security, the amount you get. Mm-hmm. The amount you get is related, not in any direct, you know, direct one-to-one fashion, but it’s definitely related to how many, how much you put into the system, uh, through your working years. So this connection between effort and reward is very, very basic in psychology. And that limits the extent to which we think the government should tax things away because. If it’s your money, ’cause you earned it, then the government again is a second claimant, not the first claimant. And so that’s a very, that’s like a very profound idea I think, uh, uh, in taxation. And that explains why people are kind of ambivalent. People, you know, do recognize that that rich people have more advantages and others and so forth. But that’s balanced off against this notion of, of equity theory and the notion that, you know, if you earn it, you know, in some sense you’re the first claimant, not the second claimant. You know, um, when you talk about, um, you know, the, the next level of this is sort of behavioral and the impacts of that, um, you know, in California here, um, some of the wealthiest people in the state have moved because of the potential for that 5% tax, and I’m, I’m curious, you know, what impact that has had on, I mean, listen, even if you. Did implement that law. Are you actually gaining anything long term? Because you’ve got some of the biggest, you know, revenue. People leaving the state. Can you, can you comment on that a little bit? Sure. There was a recent study actually was done by, um, economists at Stanford as part of the, as part of a economic study. And he looked at, he first, he looked at, he says, well, since the tax was announced, six. Uh, billionaires have already left California. Now, you could dispute that because as you know, living California, the, the franchise tax board will kind of track it down. There’s all sorts of complicated rules, but he claimed there were probably six people who, six billionaires who left well, that ended up cutting the revenue they could get from the tax itself, just the dollar revenue by about 30%. But then you have to look, well, what’s gonna happen down the road to the income taxes? Those people would pay. Right. And um, if you take that and you say, well, the people leave once and for all right, they leave, they move to Florida, they move to Texas, you’re losing. Their income taxes forever. Right? And so you have to look at the whole stream of income taxes you’re losing and balance that. And when you make that calculation, the amount of money you’re actually gonna get for, uh, outta this wealth tax is gonna be severely diminished. Now you could, you know, quibble with the study. Maybe they, you know, as may, maybe they think that, uh, um. You know, maybe they think that not, not six people left, or maybe they think they, there’s not that much income, uh, taxes will be lost. But the general proposition’s correct. If people do leave, you’re losing just the other day. Um. The governor of New York was pleading for people in Miami to come back home to New York. Uh, had she? Yeah. And she was saying, you know, come, come back, come back, come back. And, and meanwhile, meanwhile, she’s sitting there and the mayor of New York is asking her to raise corporate and, and personal taxes. And inheritance taxes and estate taxes. Uh, and she’s sitting there realize, she’s recognizing that these people are, are moving to New York. People moved out from Chicago and so forth. So I think this is a big behavioral issue. I think, um, you know, there’s not that many billionaires and the universe is small. Uh, but you know, it does get to the point where a combination of higher income taxes on people earning, you know, let’s say the million dollars in California, you get a pretty high rate already, plus housing prices are high. All those are gonna tip in a, in a various direction. And, and I think you could see that, that the flight there. Mark Zuckerberg just recently, uh, it’s not clear he avoided this particular tax that it’s enacted, but he just recently bought another place in Miami, right? And then other people have done that as well. So on the behavioral side, you definitely see, you know this, and this is conventional economics, right? You raise taxes, people are gonna move. Um, and the uh, uh, authors of the proposal, there’s one economist and two tax lawyers and they try to say, oh, you know, that’s not gonna be a big deal. And so forth. Um. In Europe, they had a number of wealth taxes over the years, and what happened is maybe about 10, 15 years ago, about 10 countries, 11 countries had wealth taxes, and now there’s only three countries that have wealth taxes. There’s Norways, Spain and France. And France is only own property. Not on general wealth and, and, uh, and Norways and Spain are pretty low. The reason that, uh, they ended those wealth taxes was that there just was a lot of flight within the eu in particular, and in eu. Yeah, it’s, you, you, you can’t restrict movement. So they, they were doing that. So the authors of this tax. And there’s also a proposals for a worldwide billionaire tax from one of these economists. Um, is the notion, well, the billionaires, we get, you know, there’s, there’s fewer of them. Maybe we can find ways to kind of make, make sure they stay in the state and so forth. But it’s a big behavioral issue and I think it’s a, I think it’s, uh, you know, uh, something that would be very bad for the California environment. The billionaires also are thinking, you know, you do this once and you know. Um, you do this once, then what’s gonna happen next year? Why, why not? Why not come back again? Right. It’s not clear. It’s a credible, it, it’s a credible approach. No country has gotten rich by confiscating money from its wealthy. I think Dan, it’s interesting to me that in general. Not only billionaires, but if you’re taking California in general because of, or New York, uh, where taxes are really high, I think, you know, taxes continue to go up or, you know, there’s policy suggesting, uh, higher taxes like you were talking about in New York. Do you feel like these policy makers are generally underestimating how quickly people can change behavior and simply relocate or, you know, or is there just some sort of political motive of optics? There were. You know, you just want people to see what you’re doing. I mean, is that what’s going on with the mayor of New York? Because like it’s hard to imagine that you can’t see the potential negative impacts of that. I think there are. Ideological reasons, uh, here, and I think that the ideology can blind you. So I, I don’t pretend to be an expert on the psychology of the mayor of New York, but it’s, it’s clear the governor of New York understands this, right? She understands, she hears this from business people all day. It’s not as if these, the governors don’t have friends who are donors and, and so forth and so on. Um, you know, the average person. Who’s making a salary? Um, it’s hard to move, right? There’s, you know, it takes a lot of effort to move and, you know, if you’re working for a firm in New York, it’s not clear you’re gonna easily move somewhere else. Although, you know, a lot of the, the, I think one of the big, um, financial firms has more people in Texas than they do now in New York. I can’t remember which one, but, um, you know, it’s hard. Unless, unless your firm moves, right. But if you’re, if you’re someone who’s managing a hedge fund. You know, you’re very, very mobile and so I, I think ideology blinds people. I think sometimes they, they extrapolate from what the middle class person having difficulty moving to. They’re very wealthy, but they’re very wealthy can move. There’s another issue too that’s important. Suppose you’re thinking of starting a company right? Where would, where would you wanna start it? Right? Let’s say you graduate from Stanford, right? And you have all these connections. Well, it’s helpful to be around, but before I actually started my company, I would say, Hey, let’s go down to Austin, right? And let, let’s go down there and, and we’ll move, we’ll move our people, all my classmates from Stanford Business School and you know, in, in Stanford engineering, we’ll move down to Austin. And so what happens is the companies don’t get started in California. And it’ll get, yeah, it’ll get started in New York. Well, and and there’s been a big flight as well, right? Right. Big companies leaving California, which is also this sort of secondary and tertiary, uh, effects of that. To the economy. Absolutely. And right. And so, you know, and there’s some people who aren’t gonna move, like people who own, who own just large, who are just wealthy from entertainment and bought property, you know, all over in the rich parts of California, you know, in LA and Santa Barbara. And, you know, in, in the. In, in San Francisco Bay area, they’re just living on their estate. So they’re not gonna move. They have their money’s already made. But if you’re looking to see, well, where’s the new money gonna come from and where’s the new companies are gonna come from? That start the jobs, right. That create the engine. Right. Um, you know, you have, you have, you do have some. You know, some major schools like Stanford and Berkeley that churn out good people. And, uh, and there’s again, really good potential in California. But, um, you know, when you’re, you’re thinking about starting your company, you’re gonna think twice. You’re gonna say, well, I’m maybe not gonna start it here. I’m gonna move to a place where the environment is, uh, is just a lot better. And if you can get enough people there, then the new agglomeration, if you will, starts there. It is a, it is a, uh, you know, I think a, I think a serious issue, and I think California’s always, you know, itself has always relied heavily on, uh, their tax revenue from the very top. They, they rely a lot on the capital gains of people from Silicon Valley. The income tax in, in, in California is one of the most, uh. You know, uh, bizarre in terms of they get so much money from capital gains, uh, and is very volatile for that reason. Over the years, they’ve had a number of financial, financial issues early two thousands, other times 2008, when all of a sudden the capital gains go down and, um, but they’re, they’re, they’re in fact very fragile like that. And so I think in the long run it’s very dangerous to do that. And, uh, a broader base tax. Is this a lot more stable and you wanna attract the entrepreneurs in, you want ’em to stay put, you don’t want ’em to leave and just move out to Texas or Florida or wherever. Just to, from an intuitive standpoint, people think higher tax rate, higher tax rates lead to higher revenue. But is that true or is there some sort of tipping point or calibration point that. That ends up being the case. Oh, there’s definitely a calibration point. I’ll just take one example, which has actually been quite well studied. Let’s just take regular capital gains, not un, just regular capital gains, right. So, uh, right now the, the Brookings Institute, which is kind of liberal, the, uh, congressional Budget office, uh. Uh, just, you know, the government organization, other organizations, they estimate that if you raise capital gain rates above 28% or 29%, you’ll actually get less money in the long run. Right. So, you know, if, if I told you, for example, next year the capital gains rate’s gonna go up, you would sell a bunch of stock today and, and the the money would come in, but then you would lose that money going forward in the future. But if you, let’s say we just maintain a, a capital gains rate of, of like 28 or 29%, that’s the maximum you could get. So if I go above that. If I go above that, then I’m gonna actually gonna lose money. And so what happens is people will stop selling their stock, right? And in the US of course, we have the rule, which is you, um, if you hold it on till you die, then you, you could, you, it’s not taxed upon death, right? So, you know, you basically, you decide, well, I’m not gonna sell this stock. I’ll, I’ll put it in my estate. I’ll sell, I’ll sell other things, right? I won’t sell the stock. And so, in fact, you reached a limit there. Now, uh, from, for taxes on wages, it’s a little tougher, right? On taxes. On wages, you can probably get up to, you know, over 50, 55% before you see. Before you see the, the base fall, no. No matter it’s still true that when you raise the rate, you get, there’s less income that’s subject to tax, but when you raise the rate for a while, you’ll get more revenue. But what, but once you raise it, you get less. So for, for, for like labor or wage income, it’s probably around 55%. And if you think about. The federal taxes and state taxes right. In California and the fact now that the state taxes aren’t deductible, you know, in California, if you’re in the million, do you’re, you’re over a million dollars. You’re paying a, a marginal tax rate over 50%. Uh, we’re getting close to that point, right? Uh, and so, you know, if, if, for example, a, uh. Uh, the Democratic US president was elected and they raised the, let’s say the income tax rate from 37% up to 45%, and California kept where it was. You’d be almost at the breaking point. Right. Yeah. Now people will dispute this. You, you know, there’s, there’s some debate about how high that is. But for the capital gains tax, there’s no question that 20 28, 20 9% would be the massive one. Now, you could change that if you want, if you got rid of the, um, if you got rid of the, uh, rule that’s saying that, that you’re not taxed at death. That is, if, if capital gains were tax to death, then you could probably raise the capital gains rate a little bit higher because people have fewer alternatives. Right. But, uh, unless you change that, there’s no way you could, you could raise the rate. So there are these limits about what you could do if you compare the, um, there’s a limit to what you could do with income taxes. And in the US we’re facing, the US is facing a real DA real dilemma. We know that our. Government spending is, you know, unsustainable given our current tax base. And it’s not necessarily just military, it’s, it’s not even, it’s not even basic welfare. It’s, it’s largely, you know, healthcare, social security, all those things. Right? And, and we know we’re running larger deficits than we could sing the long run. Um, and. Unless we cut those, which are hard to do, we’re gonna have to come up with some more revenue going forward. And there are two strategies that basically have been advocated over time. The first strategy is the the billionaire income tax strategy, right? Where you just go for the very wealthy, um. We’ll call it the, uh, the wealth tax AMI strategy, right? You just go through the wealthy. Yeah. You think that they can solve all your problems by raising rates like that. We’ve already talked here now about the, the limits of that approach and, um, so that’s gonna be difficult to do. The other approach is, uh, a more diversified tax base. So if you compare us to Europe. The one difference between Europe and the United States, obviously they have higher, higher revenues as a percentage, GDP, but their income tax aren’t all, and most places aren’t all that different. Their top rates. Some, some places are higher, some places are not. The bracket start earlier. They do get more money from the income tax, but the main thing they do is they get a lot more money from the value out of tax. And so they’re getting more money from consumption taxes and Right. That’s easily, that’s easier to sustain. Uh, not, uh, a number of reasons. One, you’re, you’re choosing a different base, um, and people don’t recognize the VAT as much, right? So they don’t, they don’t see it. If you’re thinking about working another hour, if the income tax rate’s 70%, you go, oh my God, I can’t do that. But if you, if you’re working another hour and you’re, that’s high, you don’t necessarily make the connection between your earnings and the amount you’re gonna, the amount of tax you spend when you buy some goods. So, you know, other countries with very low income tax rates, like Hungary has like, you know, a 10 or 12% income tax rate, but they have like a 27% vap. Uh, great Britain has a 20% vap and their income tax rates aren’t that much higher than ours. Um, so we’re kind of, we’re at the limit, I think what we can do with the income tax. And so, uh, the approach would be to more diversify it, I think. From a psychology point of view, people don’t necessarily connect the sales taxes, uh, or the value added taxes to their earnings as much. In fact, if you look to see which taxes are the most popular by public opinion polls, the worst, the least popular tax, the property tax doesn’t bear any connection to your efforts on a day-to-day basis, income tax is kind of, kind of next. People don’t like them just ’cause it kind of hurts the work connection. And the last part, the, the more favored taxes are taxes on, um, um, our taxes or sales taxes. Sales taxes are actually fairly prop, uh, probably, uh, uh, you know, popular. That’s why, you know, taxes, California can get away. Uh. Florida, all of ’em get away with probably high sales taxes. Uh, it just like, it doesn’t make the same connection ’cause it doesn’t affect your perception of your, of your work, if you will. Do you think that in some regard, the Trump administration sees tariffs as a way of increasing consumption, taxes, and essentially doing what you’re saying right now? Um, some economists have had, uh, had kind of wishful thinking about that, that, that, that they thought, well, Trump’s tariff policy was the secret way to get to a, a consumption tax for the us. Um. Again, I’m not a study of the psychology of Trump, but I actually think he believes in tariffs. He believes there’s a sense that that, um, um, you know, when we’re, we’re, um, uh, uh, these people are ripping offs off when we have trade deficits, right? So he wants to kind of stop that. Uh, I think his views are inconsistent and of course I, I dis disagree with them, but, um. Some people have argued that now, uh, court, it raise quite a bit of revenue though. It does bring, it does bring a revenue. It could, it would be a little less than that. We’ll see. We’ll see. Now after the Supreme Court case, what happens, and it’s also uneven, right? It’s only bringing revenue on certain goods. Right? If you compare, compare, compare a tariff to a, a general consumption tax, like the vet. So let’s, let’s compare it to a European value. What would be the difference? The first difference would be the, the, the a tariff, its attacks on consumption, but only on good you import, right? So if you, if you consume a good is produced domestically, it’s not tax, it’s not taxed. So that’s one difference, right? The other difference is that in, in a VAT system, when you export. Um, when you export goods, you get a vat rebate. You don’t pay VAT on the good, you export, right? And so, uh, we have just as a, a tax on just imported goods and that, and, and economists don’t like that. Presumably ’cause it distorts the, your consumption patterns. It makes, you know, and, and that of course is Trump’s purpose. He wants you to consume domestic goods. And there, there are certain circumstances when that’s okay, but it’s still quite a distance from a, from a general consumption tax. So, and um, there have been proposals in Congress, uh, for. Moving, taking this tariff approach and moving it more in a direction of a, a general consumption tax. And, uh, there have been a few bills from time to time that come up. Um, there have been a number of, uh, politicians who, who, who had proposals, which had the equivalent effect of that. Uh, I think when Ted Cruz ran for president 2016, he had a proposal, which looked like a corporate tax, but really was like a disguise consumption tax, which would have the same features as a. Like a vat. So it, it’s still, it’s still a bit of ways, but I, I think your insight about tars is good in, in a sense that, um. The professoriate and the newspapers all complained about the tariffs, but you didn’t hear too much from the average person about the tariffs. Uh, part of it is they, people felt that they had the option, right? Like in general with sales taxes, there’s, there’s an option. You don’t have to buy a good, that’s, you don’t have to buy the goods, right? You could buy some other goods that maybe aren’t taxed, and in the case of a tariff, you don’t have to buy the imported goods, right? So we, we put a tariff on wine. And, um, um, in import French wine. Well, you can buy, you can buy some other wine. If the tariff is higher on French wine than Australian wine, New Zealand wine, you’ll buy that wine. Otherwise, you could buy, you know, US wine. You could buy it from Sonoma, Napa or wherever. You know, uh, you could buy domestically produced goods. So when you have that escape valve, uh, that reduces the psychological pressure for people. And so I think that’s why. The tariffs didn’t create as much anxiety, you know, uh, among the public. It did create a lot of anxiety among the editorial writers. It created a lot of anxiety among the, um, uh, you know, among the, the economists and, and the professors. But I don’t think it created a lot of anxiety among the average person again, ’cause they had this escape valve. Going back a little bit to psychology, uh, you know, policy is ultimately. Uh, in any given state gonna be the result of, uh, the, the people who elected those officials? In California, you often, or in with the Democrats, uh, in general. A lot of times you hear, um, you know, especially those, uh, more on the left say, we just, the rich just need to pay their fair share. Mm-hmm. This is interesting to me because what I heard you say earlier is that people don’t necessarily think that you know, people you know don’t deserve to be rich. So where does this notion where in California you’re already paying 50% or more? That they’re not paying their fair share. Where does that come from? I mean, and is that legitimate or is that just politicians speak? I well, there are a number of different kind of. Psychology principles that kinda work across purposes of one another. So, uh, I’ll give you an example there. There’s a, something called a, in psychology, they do something called a dictator game where I, um, let’s say they give me $10 and, and, and the, the game is I can either keep the $10 or I could give you some fraction of that dollar. Of that money now the money’s just given to me. I can give it. And so what, what do people do? Well, when they run this experiment a number of times, right? Uh, they find that, um, that if you give me $10, I’ll give you on average, like say, uh, $2 50 cents or $3. There’s a sense in which I do wanna have some altruism I do want to share. Right? And so that’s where, that’s kind of where the fair share come, comes, comes into the, into play a little bit. Sometimes some people, if you give ’em the $10 and they say, well, share it with your compatriot over there, they’ll give you, you know, they’ll um, they’ll actually give, you know, $5 they’ll give more. So there is some of that kind of sharing, but there’s an interesting variant of that experiment. Suppose that before I, I got the $10 I had to take a test and if I, and in order to get $10, I had to get like all 10 questions right on that test. So in some sense I earned the money. If you run experiment that way, where you have to take a test ahead of time and then ask how much money should I give you? People tend to give nothing because yeah, they feel they earned it and they don’t really feel, but have to give it. So, uh, there is, so I, I take from that. Two things going on. One, there is a sense of fairness and if, if, if people, if politicians can, can, you know, play on people’s emotions saying maybe the rich aren’t sharing enough, right? So that, that’s where they get that rhetoric from. It’s not, it’s not. From nowhere because people do share, they share with their family, they’ll share with even with strangers, like in this particular game. But it’s also the case that when you, once you bring in work and effort and entitlement into it, the fact that you earn, you know, you have a, you have a, some connection to the money that you have, there’s less of an obligation to share. And so that cut, that’s what’s cuts the other way. Uh, so I call this my own work. I call this qualified furious. We qualify it by the entitlements you have on your earnings. And so Republicans tend to estimate, they tend to emphasize the qualified part, and Democrats tend to emphasize just the, the kind of the fairness part. Um, you know, I think if you look at it, there’s another argument that people make. Uh, which is that the extra dollar to the rich person isn’t worth as much as the extra dollar to the poor person that goes back. That’s an idea that goes back hundreds and hundreds of years. Right? And the economists call this the margin of utility that your margin of utility of an extra dollar. Elon Musk gets $10, doesn’t mean anything to him. Person, you know, who, who needs a cup of coffee? $10 needs a lot. Right. So there’s that sense too. Um, but I, I, I think, you know, that underestimates the, that underestimates the scope to which people get accustomed to their, to their consumption level. You take someone who’s leading an upper middle class life, they have certain. Uh, expectations about what they can do. He takes some funds away from them and all of a sudden they feel, they feel this is very important to them doing things they can’t do. Now they’re not doing the same things that the, the, the person with low money can do, but it’s still very important to them. But there’s that psychology idea that kind of plays in as well. And, you know, if, if you dut value. The extra consumption of someone who’s making say a million dollars, then that’s another reason to try to take that away. Um, but if you ask people who are making just a million dollars, right? Uh, is the last a hundred thousand you made important to you? They would say, yeah, I, I’m able to do this. I’m able to do that. I’m able to enjoy the life I want to do. And so, um, it’s that agency I think that matters to those people and that agency is valuable. And so, um. When you, when you’re redistributing money, you’re taking away people’s agency at all different levels. It’s not just physical. It’s not just enjoyment of a, of, you know, of a, a candy bar. It’s actually the ability to conduct your life in the way you would like it. And that, and that’s the psychology of people who are, you know, in the upper middle class who are working hard, but feel that they’re under that big tax burden. Now, I’ll say another thing too, which is that, um. The people who are actually taxed the highest as a percent of their income are the people are not the billionaires. Right. You know, a lot of the billion, the billionaires have ways to get around this. Right. So Warren Buffet, you know, famously said, I’m paying, uh, I’m paying, you know, a higher, uh, lower tax than my secretary. Well. And the thing about Warren Buffet, if you look at it, all the income he really earned, he earned his company, earned lots of money. He just didn’t pay any dividends and he took very few di he just, he, he sold very few stocks. So he cashed very little outta his company. He paid income tax on that, but as a fraction of his net worth, he paid very, very little. Uh, and other, you know, Larry Ellison for example, you know, one. Richest people in the world has, you know, uh, lines of credit, hundreds and hundreds of millions of dollars. And when you borrow money, you don’t pay taxes on the borrow money. So they, so they’re very, very rich, have found ways to get around, you know, paying income taxes. And the nugget of truth in that, in the California wealth tax is that the very, the billionaires had done a good job of avoiding regular income taxes, right? Um, now the person who’s making, let’s say, let’s say you’re a, uh, a successful executive making, let’s say $4 million, you know, for a company. Okay. Uh, mm-hmm. A lot of your, what you’re getting is some of the SOC options, a lot of you’re getting is salary. That salary is gonna be taxed very high, right? And so, right. You end up paying a lot of tax. And so, you know, it really depends on your frame. There are a few people, the very highest billionaires who do find ways around this, but if you look at the, the bulk of the rich people. The bulk of the rich people are actually paying a lot of tax. And so I think that’s, it’s a very unfair accusation to say that the rich are paying the, you can always find people who are finding ways around that, you know, if you live on inheritance and you’re not, you’re not, you’re just borrowing against your, your, your assets right? Then you know that that is, that is an advantage and there, there are ways we could try to get around that. Um, the, you know, traditionally that’s been the estate and, uh, the estate tax, although we’ve kind of made that with so many loopholes, that’s very difficult for that to work. So there is this issue there, there is an issue out there that you can find a small group of people who probably aren’t paying anything proportionate to the same proportion that you’re hardworking. Your CEO is paying or your hardworking salary worker or your professor, or your software engineer, or your real estate broker, right? They’re pay, they’re paying a lot, a lot in tax. And so there is a little resentment when people, um, get around loopholes, just like people who are tax innovators, right? And, and are blatant tax evasion, um, you know, uh, are not very popular. You remember Leona Helmsley, you know, who was the, uh, um. A big real estate owner in New York owning little people, ta paid taxes, right? People didn’t like that. Uh, they, they didn’t like her, they didn’t like Bernie Madoff. They don’t like people who cheat the system, right? So to the extent that you associate people at the billionaire level who are cheating the system, and I don’t, but to the extent that you make that association, you can make the argument they don’t pay the fair tax. But you’ve had real, obviously, a lot of real world experience. Uh, you run, uh, involved with the California, uh, franchise tax board, um, and, and you’ve, you’ve seen. A lot of what we’ve been talking about in real time migration, um, more tax planning, more use of, you know, entities and exotic things to, to, uh, to get away from ta. What is, what would be the ideal system in your mind based on, you know, what you know from the academic side and from practical, real world vision. Like what would, what makes sense, right. So if I had my druthers, there’s, uh, uh, I, I would, I would first, the, the one, the one tax reform I would make, which would deal with the, with the very wealthy, what I would, I would actually tax untaxed capital gains at. So, uh, uh, and I, you know, you could, you could build this in so you could, you know, stretch it out for family farms or for businesses and so forth. You, you don’t have to liquidate all at once. But I would say at death, you, your capital gains, which you didn’t pay over your lifetime should be due. Right. Um, that would accomplish as, that would be easier to do than any type of wealth tax. Uh, people’s a wealth tax, if you do it on a yearly basis, you have to value assets all the time. Uh. Even if you had a private business and you died, you could take a few years to figure out what that’s worth and you could, you have tax on that and you could stretch out, uh, over time. That would deal with a very, that would deal with a very, very, very rich people, and that would deal with one element of unfairness. The other thing I would do with, I would couple that though with a more broad-based consumption tax, and there are various ways to, to structure broad-based consumption taxes. One way is just like a, a European style of that. Another way is, is basically to have a, have a system where. It would parallel your income tax system, so you would have a consumption tax, which would be parallel to your income tax system. But if you put your money, if you don’t consume it as if you save, you put money into your account and don’t pull it out, then you’re not, then you’re not taxed. So it just like in real estate investment, like if you, if you like the 10 31 exchanges, right? Right, right. So if you are reinvesting your money back in, in real property, you’re not, you’re, you’re preserving your basis and you’re not, um, you’re not, um, um, you’re not being taxed right away. You could set up a system like that, I think for the average person so they could build up funds tax free. Right. But when they pull the money out, it’s taxed. Right, right. But if, but if they save and put the money back in, then they don’t, they postpone that tax until much later. And so a system like that, um. It’s a kind of a, well, it’s kind of a, it’s a consumption tax, not like a vat, but it, it would, it would definitely encourage people to say, so, you know, it’s very much like our 401k systems, you know, our ira, stuff like that, except you’d be able to pull the money out anytime you want, but you pull out, it’s taxed with no penalty. So you could set that up parallel, if you will. That’s one possibility, set it up parallel to our basic income tax system. Now this hasn’t really been tried, but it, it’s something I think it’s worth exploring. Or if you don’t wanna do that, would you, would you reduce the income tax at the same time though? Or would, or would you add Yes. Yeah. Reduce the income tax. Right. Um, this actually was proposed during, during World War ii, uh, for different reasons. Uh, one of Roosevelt’s advisors thought people were consuming too much and there was a shortage of goods and so forth. He proposed attacks like this, where it was only for the very wealthy. Uh, and, um, but if they reinvested their money, it wouldn’t, it wouldn’t be a tax. Um, and, um. But if you pulled your money out, it would be taxed. And, and they did that during World War ii ’cause they needed more money. But you could lo lower the income tax and have this ta have this run parallel to it. Right? Or you could even combine it, combine these in the same way. So you know, it, it’s a little more complicated in a sense. You’d have to set up accounts where you measure the money going in, the money going out. Uh, but you know, these days our accounts are all, you know, between Vanguard and Fidelity and, you know, and t Ray or price. They know where all your money is, right? So you can operate something like that. But it would reward saving, right? It would tax consumption. So I think if you tried to tax consumption both for the average person, also for the rich, rich people, and you got rid of that so-called loophole at death, right? The angel and death where you, you avoid capital gains, that would go quite a bit away. That would raise some money, but it would also quite a bit away to deal with the un, with the perceived unfairness in the system. Right now it is, it is, you know, difficult because, you know, people who want, like will point to these in couple individuals and say, well, these individuals, well, even like Warren Buffet, bill Gates, right? Well, they might give money to charity and so forth, but they’re not paying. They’re not paying in tax. I also personally think that we’re a little too generous with, with any estate tax, with money going to to charity. Uh, now on, on the individual, when you pay your income tax, you’re limited on the amount of tax deductions that you can take for charitable contributions, depending on the type of property. But like, let’s say it’s a 50% limitation, you can’t reduce your income but below 50% by giving charitable contributions. But for the estate tax, there’s no limit, right? So if Bill Gates wants to avoid all estate tax, he just puts it all in his private foundation, he controls the foundation. Right foundation’s not, not personally going back pay to him, but he controls what he does with it. So he’s still maintaining control of the money. It’s not going for the general purpose. And I, I think we could be a little tougher on that. We could put limits on the amount of, uh, charitable contribution deduction from the estate tax. Um, that way, you know, at least some money, either you give money to your heirs or some money would be in taxed by the government, uh, in that way. Yeah. So I think, I think those are things which I would do, which I think would improve the tax fairness, but wouldn’t disrupt it. I think what you don’t want to do is start raising taxes on your upper middle class people, your middle class people, because that’s gonna be very pernicious. Dinky taxes, like the, like the wealth tax in California are probably the worst of all possible words. Difficult to administer on a very narrow group of people, uh, based on envy and like ideas like that, right? Professor Steven Sherin, uh, from Tulane University. Uh, Steven. How, where can people learn more? A little bit about the types of topics we’re talking about, uh, in your work. I do have a book, it’s called Tax Fairness and Folk Justice, and it’s by, published by Cambridge Press and it’s available on kind. Um, and so that’s, um, that’s, that’s the book where, where the psychology is. I think that’s probably the one best source to go to. And if you Google me, you could find some various articles. I have a couple talks I’ve given, um, about Talk Tax Fairness. If you Google me, you come up with these, with these talks as well. But again, the book is Tax Fairness and Folk Justice, uh, by Cambridge Press, and it has all these ideas in it and plus some, some other case studies and some other ideas as well. Thanks so much for being on the show today. Thank you very much. I, I enjoyed it. You make a lot of money, but are still worried about retirement. Maybe you didn’t start earning until your thirties. Now you’re trying to catch up. Meanwhile, you’ve got a mortgage private school to pay for and you feel like you’re getting further and further behind. A good news. If you need to catch up on retirement, check out a program put off by some of the oldest and most prestigious life insurance companies in the world. It’s called Wealth Accelerator, and it can help you amplify your returns quickly, protect your money from creditors. And provide financial protection to your family if something happens to you. The concepts here are used by some of the wealthiest families in the world, and there’s no reason why they can’t be used by you. Check it out for yourself by going to wealthformulabanking.com. The post 553: How To Think about Taxes appeared first on Wealth Formula.

This week, you’re going to start hearing a familiar narrative again… “Inflation is back.” And on the surface, it’s going to look true. The next CPI print is very likely to come in hotter than expected. We’re already seeing it in real-time data like Truflation. Energy prices have surged, and because energy feeds directly into headline CPI, it’s going to push that number up—fast. But here’s the problem… That’s not the whole story. Energy is notoriously volatile, which is why the Fed focuses more on core inflation—stripping out food and energy. But even core isn’t immune here. Petroleum touches nearly everything in the economy—transportation, manufacturing, packaging—so some of that pressure will bleed through. So yes, in the short term, inflation is going to look worse. But step back for a second. This spike is being driven largely by geopolitical tension—specifically the situation with Iran. And unlike past conflicts, this is not shaping up to be a multi-year war like Iraq or Afghanistan. In fact, the current administration is already signaling that this could be resolved relatively quickly. Whether it’s weeks or a few months, the key point is this: This is a temporary shock, not a structural shift. And when that shock fades, energy prices will likely come back down… bringing headline inflation with it. Meanwhile, underneath the surface, something very different is happening. Core inflation—particularly housing—is already decelerating. Housing makes up roughly 30% of CPI, and here’s the kicker: The way it’s measured is lagged by about six months. In other words, the official data you’re seeing today is reflecting what rents were doing half a year ago. But in the real world, rents have already been cooling. That’s why the most important question right now isn’t: “What does CPI say?” It’s: “What’s actually happening in real time?” That’s exactly what we explore in this week’s episode of Wealth Formula Podcast. Our guest, Edward Coulson, is one of the leading experts in housing data. He uses alternative models that track real-time rental trends—and more importantly, he’s been consistently ahead of the curve in predicting the direction of core inflation. Even before this recent energy spike, his data has been showing a clear trend: Inflation has been overstated—and it’s been slowing for months. So while the headlines may soon scream “inflation is back,” the reality may be the opposite. This is one of those moments where understanding the components of inflation—and the timing behind them—matters more than ever. Listen to this week’s Wealth Formula Podcast to get the full picture. Because if you’re making decisions based only on headline numbers, you’re likely to get this one completely wrong. Watch on YouTube: Listen on Apple Podcasts: Listen on Spotify: Transcript Disclaimer: This transcript was generated by AI and may not be 100% accurate. If you notice any errors or corrections, please email us at phil@wealthformula.com. Welcome everybody. This is Buck Joffrey with the Wealth Formula Podcast. Coming to you from Montecito, California. And today, uh, before I begin, I want to as always remind you that there are other resources associated with this podcast, specifically the website, wealthformula.com. Lots of opportunities to get more involved with the community there, including the chance to join our free accredited investor group. Investor club, and all you do is you go to wealthformula.com and sign up for that. Get onboarded. Just a few questions to respond to, and then you talk to me one-on-one and, uh, you’re then part of the group and you get an option to, uh, potentially participate in a number of uh, deals. So really easy to do. Go to wealthformula.com. Sign up today. Uh, I’ll talk to you there soon. Now, as for today, uh, let’s, uh, talk a little bit about something kind of going on in the news, right? Because we’ve got the whole Iranian kerfuffle, and with that unfortunate event, you’re going to hear something of a familiar narrative. Again, that is, that inflation is back. And on the surface, it’s gonna be true, it’s gonna look true. The next CPI print is very likely to come in hotter than expected. Uh, we’re already seeing it in real time data like reflation energy, prices of surge. And because energy feeds directly into headline CPI, it’s going to push that number up. Fast and we can all feel it. I mean, you could feel it at the gas pumps, right? But here’s the problem. It’s not the whole story. The thing is that energy is notoriously volatile, which is why the Federal Reserve focuses more on something called core inflation. Which strips out food and energy, but even core isn’t immune here from the war and the price of oil petroleum touches nearly everything in the economy, transportation, manufacturing, packaging. So some of that pressure will bleed through for sure. So yes, in the short term, inflation is going to look worse. I would urge you to step back for a second because the spike is being driven largely by a geopolitical issue, specifically the situation with Iran, and unlike past conflicts, this is not shaping up to be a multi-year war like Iraq or Afghanistan. In fact, Trump is already signaling as could be resolved. Relatively quickly, and maybe it’s not as quickly as he says it is. Maybe it’s not a few days or weeks, but maybe it’s a few months. But there is a key point here in that this is a temporary shock, not a structural shift. And when that shock fades, energy prices are gonna come back down and that’s gonna bring down inflation with it. Meanwhile, underneath the surface, something very different is happening. Core inflation, particularly housing. Has been decelerating for a long time, and housing makes up roughly 30% of CPI and the way it’s measured lag by about six months. In other words, the official data you see today typically reflects what rents we’re doing, um, you know, six months or more ago. But in the real world, rents have been cooling in real time. And that is, uh, something we see on the rental market too, right? We’re waiting for this. Um, thing to turn around a little bit and it will, well, the most important question, therefore isn’t necessarily what CPI is gonna say. It’s actually what’s happening in real time, and that’s what we’re gonna explore in this week’s episode of Wealth Formula Podcast. So my guest, Edward Colson, he’s one of the leading experts in housing data, and he uses alternative models that, uh, track real-time rental trends. And more importantly, he’s been consistently out of the curve in predicting the direction of core inflation. Now interestingly, even before this recent energy spike, his data has been showing a very clear trend that inflation has been overstated and that it’s been slowing for months. So while the headlines may scream soon, that inflation’s back and that it’s gonna be a big problem, this is one of those moments where I think understanding the components of inflation and the timing behind them matters more than ever. Anyway, we will have that conversation for you right after these messages. Wealth formula banking is an ingenious concept powered by whole life insurance, but instead of acting just as a safety net, the strategy supercharges your investments. First, you create a personal financial reservoir that grows at a compounding interest rate much higher than any bank savings account. As your money accumulates, you borrow from your own. Bank to invest in other cash flowing investments. Here’s the key. Even though you’ve borrowed money at a simple interest rate, your insurance company keeps paying you compound interest on that money even though you’ve borrowed it. At result, you make money in two places at the same time. That’s why your investments get supercharged. This isn’t a new technique. It’s a refined strategy used by some of the wealthiest families in history, and it uses century old rock solid insurance companies as its backbone. Turbocharge your investments. Visit Wealthformulabanking.com. Again, that’s wealthformulabanking.com. Welcome back to Sure, everyone. Today, um, we are going to talk about housing, but not in the way most, uh, most of the time that we do. Uh, because the numbers we rely on, home prices, rent, inflation, they’re not as straightforward as they seem, and in fact, some of the most important data driving markets and interest rates may be. And it distorted. And if that’s, uh, true, it has massive implications for investors. My guest today is, uh, professor, uh, Edward Colson from uc, Irvine. He spent decades studying housing markets, mortgage finance, and how these numbers actually con are constructed. And so today we’re gonna break down, uh, a little bit about what’s right and what’s wrong with that, uh, way of doing things. So, uh, welcome to the show. Oh, thank you for having me. Pleasure to be here. Well, let’s start with this. So most investors think, you know, housing prices and rent data are pretty straightforward, just numbers. So at a high level, how much of the data is actually real versus constructed? Well, I, you we’re talking about rent data, um, what you said is correct that, um, the CPI, which is used for. Uh, a wide variety of things including, uh, guiding monetary policy. Um, the biggest component of that is, is, is rent. And that rent data goes into the CPI in multiple forms, both as a representation of renter costs, which are of course part of the CPI and as, as a way of computing housing costs for people who owner or occupy. That’s a very difficult. Topic, uh, because we don’t actually see rent for owner occupied housing. So that’s a, that’s a particularly problematic part of the CPI. Um, and the Bureau of Labor Statistics, which is the one that compiles the, the, all the price data that goes into the construction of the CPI, they, they have a particular way of doing this, which, which may be familiar to people, uh, which is if the, if you’re so, so what is the CPI first? Let’s talk about that. It’s a basket of goods. That, you know, people purchase on a monthly basis and that basket is more or less held. Constant basket changes every once in a while, but mostly it’s held constant. And people from the Bureau of Labor Statistics go out and sample prices from across the country and online. And, um. Uh, calculate the pad, the, the, the price, the total price of that market basket. So that’s all familiar. So if you, so, so bananas are an input to the consumer price index. And so they check the price of bananas each month by going to the store and actually looking at the price. But rent is not done like that. Uh, rent is done in an entirely different way. Uh, the, the bureau has. A set of six, uh, samples of households, panels, if you will. And each month they go to one of these panels and they ask, what’s your rent? This, this month? And in the next month they’ll go to the second panel, and in the third month they’ll go to the third panel and they’ll do that for six months. Who’s, who’s on the panels? What’s, what’s the panels? Oh, just, it’s a sample of households. I actually don’t know how that panel is put together, but it’s ordinary folks. Um. You know, you might, you, you might be a part of that panel someday. I don’t, I don’t know. It’s not, it’s not that big. I don’t know, but it’s, they think it’s representative and I actually have no reason for thinking. It’s not representative in terms of the people that they, that they survey for this, the problem is this, that when you, uh, ask somebody what is your rent? Well, you know, you asked that question six months ago and the answer’s probably the same. Yeah. Because you’re still on the same rent lease that you signed up to 12 months ago, and so there’s, and so it’s not capturing the current state of the housing market, right? Mm-hmm. Um, so. So that’s been the bulk of our research on this topic is to, is to note first of all that this, this way of measuring. So they’re taking the people that they interview this month and they’re comparing ’em to the rents they had six months ago. And that’s the rental component of the CPI, how much those rents got bumped up. For most of those people, the answer is zero because they’re still on the same lease that they were six months ago. And then they do the same for the six successive panels that form their, their rental survey. I say the problem with that is that that is not going to reflect the state of the current housing market. That’s gonna reflect, right? So it’s lagging probably at least six months at that point. It’s, it’s sluggish. Uh, so it doesn’t change as rapidly as the actual housing market does. It’s lagged because it’s reflecting the state of the housing market, as you say, on average it, it, it should be six months, it turns out. Probably a little bit more than that, um, uh, six months ago. And this is fine for most uses of the CPI. That’s fine. Because what is the CPI meant to do? It’s meant to reflect the cost of living. And for people whose rent hasn’t gone up, you know, the cost of living hasn’t gone up. That’s fine. That’s that’s perfect. That’s what the CPI was originally meant to do, but it doesn’t really give you a trajectory. It doesn’t really give you a trajectory of the housing market. And if you’re gonna use the CPI for setting monetary policy, setting interest rates, um, then it’s going to not reflect the current state of the housing market like it should. It’s not gonna reflect the current kind of macro economy. So just, just the problem, just for a moment for if we could go back and think about what actually happened in the last, you know, five years or so. Mm-hmm. Every year we had pretty massive increases in rents nationally. Mm-hmm. And then over the last, uh, tell unless a couple years rents have been pretty flat. Mm-hmm. It’s interesting because I’ve had someone tell me about this before, an economist who came on before and he was convinced. That CPI was going to, you know, was gonna collapse because of, of the way that there was that time gap. But it, it didn’t really happen. I mean, it, it, it kind of went down. I mean, it definitely went down CPI went down. But how, how do we look at those numbers right now? Like, y you’re right. Yeah. Um, we have an alternative, uh, rental index. You know, indicator, which we feel is more contemporaneous measured than the CPI is. And so we track that and we track, uh, the actual CPI and we compare them. And as a general rule, you, you would expect that after six months, the actual CPI, the rental CPI would catch up to our CPI and it does. You can look at the graphics on our website and you can see that there’s, that there’s this six to eight month lag between the actual and our, uh, rental inflation indexes. But it doesn’t collapse in the way that you might think because you’re right currently, um, our measure of rents, and you have to believe us, you can look at Zillow and you can look at, um, other. Data sources would show that rental inflation right now is basically zero. And yet the CPII didn’t look at the latest one, the one that came out a couple days ago. But up till now, the rental inflation, uh, that, that the BLS is measuring is about 3%. It’s about the same as the actual overall CPI and we’re. But we feel like that’s an overstatement of the inflation, that that leads to an overstatement of the inflation rate. That, um, because the actual rental inflation by our measure buys those, measure by other data sources, measures is, as I say, basically flat. It’s zero. So one thing to to emphasize there too, um, as, as CPI is calculated. Rent plays a pretty significant component of that CPI. What percentage of CPI approximately is that? Yeah, you, um, it depends on which measure you’re using. There’s, there’s both the. The, uh, consumer price index, and there’s also the, uh, personal consumption deflator, which is an alternative measure. And then it depends also on whether you’re talking about core inflation or overall inflation. Core inflation, as you may know, takes out food and energy because they’re too seasonal and too volatile, and they depend on things that you know, aren’t. You know, tied to the macro economy as much, right? Well, well, yeah. So let’s more, because like, I understand and if, correct me if I’m wrong, but that’s the big one that the, the Fed’s looking at when it’s deciding on monetary policy. And so the answer to your, uh, question is that it can be up to the high thirties percentage. Yeah, up to 40 depending on, so it’s between 30 and 40%, basically. So it’s the biggest single item. If you put the both of the rent and the owner, uh, equivalent rent into the calculation, it’s between 30 and 40%. So that could, that could drop, that could drop the core by a full percent percentage point. Yeah. Yeah, that’s right. So if, yeah, it’s not, you know, three point something, it’s two point something, which obviously Yeah. That level. Yeah. So we, so we’ve generally found that, you know, the. The, the, the federal government CPI is not as volatile as true rental CPI when, when the economy’s going great and rents are going up, the Fed doesn’t see that as much. And we originally got to this point by looking at, at actual rents during the great financial crisis, which were going down during the great financial crisis because there was a recession on, but the Fed never, the Fed obvious. I say the Fed, the BBL S index never saw that they never had rents going down. At least not by very much during the, during the GFC, during the Great recession. That’s when we first noticed that this was kind of an issue. But ever since then, we’ve seen that when rents go down, they don’t, they don’t see it as much. And when rents go up, they don’t see it as much as it is. So, so basically it’s not as, not as sensitive to current conditions as contemporaneous rents. Measurements would be. So if you’re an investor and you’re relying on housing data to make decisions, I mean, what, what are your other options to look at? Well, you can go to our website. Okay. It’s, uh, a, you just type in a CY inflation. A CY are the three researchers on the C in that, um, uh, the, uh, a CY inflation index or something like that. You’ll, you’ll come up, it’s housed at Penn State, which is, uh, the university used to be at, and my two colleagues are still there. How do you, how do you guys get that number? Well, we, oh, well, how do we get our inflation number? Yeah, our rent number, we do something, well, we do something like this. There’s a bit of technical stuff to this, but basically we take, um, real Capital Analytics has data on, um, have an index for, uh. Multi-family buildings. That’s a price index for that tracks sales of multi-family buildings so we can see the value of buildings and we also have a capric. If you, basically, if you multiply a cap rate by, or divide cap rate by, I forget which one, by building price. You get a rental series, you have to adjust that for a bunch of stuff. But that’s very contemporaneously measured. And um, we get that rental series out of that, and then we take that rental series properly on massaged. And we go to the, the inflation data that the, that the bureau labor statistics puts out. We pull out their rent, we plug in our rent, and we get an alternative inflation measure. And what is that right now? Oh, well, lemme take a look. So for Core CPI, it’s a little less than 2%. Yeah. Which, which doesn’t mean, you know, it doesn’t, I mean, we talk about the 2% measure. Um, uh, 2% threshold as being something that the Fed is looking for, you know, but they’re, they’re comparing it on their own past data. And just because our says 2% doesn’t mean that, you know, any kind of threshold has been reached. But we do think that this mis measurement of rent is something that should be taken into account so that we have a better historical measure. I mean, we’ve been under 2% basically since, according to our measure. Since basically about, I’m trying to feed the data here, certainly since, um, 2000, mid 2024, it looks like. Wow. And yeah. Are we pretty stable, uh, in those numbers? Yeah. It’s been like, like the actual CPI, our measure has been coming down. From, uh, from, mm-hmm. For us in two, mid, mid to early 2024 has been coming down from 3% down to about one point mm 8% right now, at the same time that the feds has been coming down from 4% to basically, yeah, 3%. Yeah. Shifting gears a little bit, um, there’s another. Something, uh, that, that’s used that’s called the owner’s equivalent rent. Can you mm-hmm. Tell us what that is? Yeah. I wish I knew that better. Yeah. Um, they’re, they, um, used to do it separately, but I guess it, I guess it got too expensive, but the owner’s equivalent rent, as I said before, but something that tried to get at housing cost. For owner occupiers, we can’t observe rent. So what we do is we kind of, they kind of figure out the opportunity cost of, of your, the house that you live in and apply to that. Something called owner’s equivalent rent. And it’s, but it’s basically, I don’t wanna get into the weeds here ’cause I’m not sure of the weeds, but it’s basically using the same data that I described before. In, in both cases, you’re basically looking at numbers are, are kind of falling. What does the song mean for Federal Reserve decisions on interest rates, basically, that that rates could be higher than they should be right now. Would that, is that a fair conclusion from what you’re finding? Uh, well, it would depend on how you view our alternative measure. Um, we’ve seen. That our, in our inflation rate with our index, um, uh, replacing the S’S rent index in the calculation of CPI, we have seen a fall in that two something, well, less than two per 2%. I’m looking at the chart here and it looks like it’s about 1.8% and. That is a percent, as you pointed out before, that’s a percent less Yeah. Than what the CPI officially shows. And if you fought that, chairman Powell should, um. Lower inflation, sorry. Lower interest rates when they’re, when inflation is below 2%, our contention is, is that true inflation is below 2%, but that would be unfair to him because he’s, that 2% number comes from a historical tracking of his inflation rate, which for years and years. Was at two 2%, give or take, you know, 0.2 or 0.3 percentage choice right. Now, what we could potentially extrapolate from this, correct me if I’m wrong, because if you’re looking at, like you said, contemporaneous data, that this should be predictive of the direction of core. Yes, yes. If you looked at our inflation rate and their inflation rate, there is, we’ve done kind of the, the time series analytics of this. Generally speaking, our inflation measure leads the, um, CPI inflation measure, whether it’s core, not core personal consumption, uh, expenditure index or the CPI by, you know, some number of months, six months, eight months. And again, looking at the data, you can kind of see that this is true. So, um, is that, would that, is it leading it with actual numbers or is it leading with just directionality? Just directionality. Uh, that’s because they’re, there’s a different basis that these things are kind of working off of. There’s different steady states for both of them. Uh, yeah. You would expect, um, the CPI to follow our measure and it kind of does, it’s not as dramatic as. Um, just following it in lockstep six, you know, six months later. But there is a general tendency for them to move together with this lead lag relationship. Right, right. So, but, but again, it’s not just like right now, I, I’m just trying to think of how to think of it. So, in a way, what your numbers are showing us are the directionality of what we. Should expect six months from now on core. Right. That is that fair. We’re seeing and we’re seeing that, I mean, again, I’m looking at the data. You can go to the website. I’m not trying to advertise the website at all. No, I get it. It’s just, and then when it’s just that when inflation was going up, were you capturing those higher numbers? Quicker than the Fed. Yes. Than, than core wise. Absolutely. Talk a little bit about that. Yeah. So again, looking at the, looking at the data, um, looking at my, our, my handy chart here, uh, there was a peak in rental inflation, you know, starting with the pandemic of course. And that’s an interesting subject in itself. You know, why did rents peak right after the pandemic? But we saw rents rising. For several months and reaching an eight or 9% inflation rate, you know, in 2022. Whereas the c the, at the same time, what was core showing at that? The core was showing, uh, their peak reached, uh, it looks about three or four months later, maybe six months later. And their peak was at six, uh, six and a half, 7%. Yeah. And so, and then we saw a dramatic decline. Over the next six months, and then you see after that you see the CPI rent declining from its 6% teeth down to about 3%. Why do you think the Fed doesn’t use some of these sort of numbers that reflect maybe more current data? I know a lot of people in, uh, companies and and institutions are starting to use, for example, they’re using that reflation number. As well. Right. Um, I know people don’t necessarily know what FL is, and maybe, maybe you could just comment on some of these things. Yeah, so there’s plenty of, uh, privately run inflation. There’s a billion prices project, which generally finds the same inflation as what the CPI does for goods and services. Um, I actually don’t know what their, their rental index looks like. But if you’re just talking about rent, then you can look at, as I said before, Zillow. Um, apartments.com has an index. Um, other CoreLogic has an in, they’re not called CoreLogic anymore. Totalities Index is also available and they all show what we are showing, um, basically zero, uh, index. Um, yeah. So there was another question in there. I, well, the other question is, why do you think the, oh, yeah. Policy makers aren’t using, I mean, if there’s, because of the technology that’s, you know, being utilized here and, and, and the, it seems like there’s some pretty good data showing this data that this. These numbers are leading indicators for what the core is going to be like. Why? Why wouldn’t they lean more on this? Well, finally there’s been action taken. We were pleased that Chairman Powell in, I think it was fall of 24, acknowledged the problem with rental data. Uh, and I believe that was, that comment was generated by the fact that the economists at the Cleveland Branch. Of the Federal Reserve, which has some very fine scholars finally turned their attention to this problem, did a systematic study where they found that if they used their own panels at, you know, the panels that I talked about at the beginning of the, of the podcast, if they took that data and treated it like we treat ours, and basically only look at members of the panel who had signed a new lease. Better they’d sign a new lease with a new landlord. That’s the best kind of data to reflect current market conditions. That they get numbers which are very close to the kind of numbers that we get. Yeah. So they are paying attention and they can now, they’ve now recognized that they can do something similar to what we, and, you know, the other data providers, um, have by just using their own data in a different way. And, um, we’ll, uh, maybe we’ll see some progress along those lines in the coming couple of years. Uh, slightly different topic, but related, uh, valuations. Um, how reliable are residential appraisals, uh, in actually reflecting true market value right now? That’s a great question. So, um, there’s two, there’s two different types of appraisals. Right? Mm-hmm. There, there are appraisals for transactions. In other words, you go to the bank and you borrow, borrow money, the bank’s gonna send an appraiser. But what that appraiser almost always very often comes out with is just an appraisal that reflects the transaction price, which is already been proposed. And that’s, you know, kind of what everybody wants. Um. Those kind of appraisals are kind of not very good because they’re not really reflecting any independent valuation of the market. Is this, is this answering your question? Is this the thing you were asking about? Yeah, I mean, I guess the question is of, you know, how accurate is it is and is there issues with methodology or incentives or Yeah. You know, or looking at backward looking comps, that kind of thing. Yeah, so, so the other kind of appraisals, a refi. There, the appraiser actually has a real job. The appraiser needs to come up with an accurate valuation because there’s no transaction on which that app, that appraisal can get anchored. And generally, I think these are okay. Um, the issue that comes out of a, we’ve noticed. Comes out of a study that we’ve just completed, some of the same authors from the, from the rental index stuff, um, which is that, uh, the appraisal can depend a little bit on the appraiser and very much on the, uh, borrower. And so there’s an issue with like racial, uh, I won’t say bias, but racial. Undervaluation for minority owned households. That’s, that is definitely seems to be an issue. And our study about that indicates that that’s an issue regardless of whether the appraiser is black, white, Hispanic, or, or Asian or whatever, that the, that the undervaluation that is received by minority homeowners can be one to 4% less than. What we think that the market value of, and we have to calculate that, but we, we think the market value of the, of that property is it’s, it’s one to 4% less than comparable homes, which are being refied by white households. There was a spate of newspaper articles about this problem around the time of the pandemic, and we thought, well, we better, let’s, let’s look into this. And we found, yeah, there’s, there’s some. There’s some issues there. So, so that level, so the accuracy is not what it might be, um, for those households, but generally I think that they do reflect market value. Where do you think the, uh, real estate markets may be most mispriced? I mean, if you like geography or anything like that right now? I mean, the answer to your question, I think is that there isn’t a lot of mispricing the way there was in the great housing boom of the nineties. Yeah. ’cause the, you know, the, um. The, the, the, uh, boom in housing prices that occurred around the time of the pandemic and afterwards, that was based on fundamentals. Rents were rising at the same time that those prices were bumping up. And it had to do with changes in the housing market that occurred at the time of the pandemic. Um, there was just a big new demand for housing that wasn’t there before. Um, there are a lot of new households created. During the pandemic because people thought it better to not have roommates to live alone, move out from mom, dad, that kind of thing. So there was a lot of new households created and a lot of shifting of housing demand. And that created a lot of price acceleration in the years of, and immediately following the pandemic now and that, and so it was reflected in rents too, so it wasn’t really mispricing. Um, but things have leveled out now. Think people have, I guess, moved to where they wanna go. And so we’ve seen kind of a settling down of house prices as well. So I don’t see a lot of kind of aggregate mispricing out there. I, I, it’s, it’s possible that some, some places that were refuges for California residents when the pandemic hit places like boys here or Salt Lake City, I suppose they were mispriced. Around that time. But again, yeah, pretty much everywhere settled down. What are you seeing as sort of, um, particularly I guess with interest rates and if, if indeed those core numbers come down, monetary policy shifts a little bit, uh, and you know, bond yields go down, uh, do you anticipate sort of a recovery of this, uh, rental market anytime soon or what, do you have any thoughts on that? The rental markets in equal seems like it’s kind of an equilibrium. I mean, the question is what if you, I think the, the, uh, a different question, which I thought you were, this is where you were going, is house prices. Are we gonna see any acceleration there? Because we’re eventually Not tomorrow. Not today, we’re gonna see mortgage rates come down. It’s not happening yet, and I would’ve actually. Thought we’d see a bit of that, but we’re not, um, I guess we’re up at about 6%, which seems, which seems high and it’s not. Well, it’s, it’s still probably, it’s still twice as much as people were buying. Yeah. I mean, and that’s during COVID, you know, and, and so a lot of people just aren’t gonna sell if they don’t have to. Right. No, that’s, there’s a lot of mortgage lock, which as you just alluded to, it’s people who bought at very low interest rates and not wanting to sell because they’d have to bring in a higher, uh, mortgage rate. And that’s keeping a lot of property off the market. And that’s, you know, there certainly has been and continues to be a slowdown in the number of housing transactions that occur. I get it. And if it weren’t for builders, um. Some of whom are kind of lending to their buyers at lower than market rates. And we’ll see if they regret that at some point. But, but if it weren’t for them, there’d be hardly any home buying at all. Yeah. And so we’ll see. I at some point, interest rates and mortgage rates are gonna come down and that should unleash a lot of more transactions. But yeah. Yeah, we’ll see. Right. Well, good stuff. I appreciate your time today. Uh, Dr. Colson, um, we, we, can you tell us a little bit again about the website that people can go to or how they can learn more about your work? Yeah, it’s a, um, the, the website is sites, SITE s.psu.edu/inflation. And that will show you all the data that we have combined in both graphic and, you know, kind of excel downloadable form. And we show there the, uh, the rent data, um, and its, uh, impact on. Four different, I’m looking at it right now, four different inflation rates combined with the, uh, actual BLS, uh, data. So you can look at that and, and if people want to read the scholarly work on that, just look up there. The sites, uh, for those scholarly works are actually on that website, so you can take a look at all that stuff. Thanks so much for joining us. I appreciate it. Thanks for the opportunity. You make a lot of money, but are still worried about retirement. Maybe you didn’t start earning until your thirties. Now you’re trying to catch up. Meanwhile, you’ve got a mortgage, a private school to pay for, and you feel like you’re getting further and further behind. Now, good news, if you need to catch up on retirement, check out a program put off by some of the oldest and most prestigious life insurance companies in the world. It’s called Wealth Accelerator, and it can help you amplify your returns quickly, protect your money from creditors, and provide financial protection to your family. Something happens to you. The concepts here are used by some of the wealthiest families in the world, and there’s no reason why they can’t be used by you. Check it out for yourself by going to wealthformulabanking.com. Welcome back to the show again. Again, I would just urge people to think about what’s going on right now in the Middle East as temporary, and if it’s temporary, that means the price of oil is not gonna stay high forever. And when that all resolves itself, we could end up with a situation where oil prices and energy prices are even lower than they were before. And then you have all of this housing data catching up, and that could result in a pretty significant drop in core. Uh, inflation. But, uh, anyway, I think that’s important to think in context because if you just listen to the next CPI number and you say, oh my gosh, inflation’s back, well, that’s not really the whole story. So it’s important to get the big picture. Anyway, that’s it for me. This week on Wealth Formula Podcast. This is Buck Joffrey signing off. If you wanna learn more, you can now get free access to our in-depth personal finance course featuring industry leaders like Tom Wheel Wright and Ken McElroy. Visit wealthformularoadmap.com. The post The Inflation Spike Everyone Will Misread appeared first on Wealth Formula.

Most people assume a high income leads to wealth. Sometimes it does. But more often, it leads to a very comfortable lifestyle that depends on getting paid dollars for hours. There’s nothing wrong with that. For many people, the best path is to keep doing what they do well and invest their income into real estate and other real assets. That alone can create significant wealth over time. But if you look at the people who build outsized wealth, there’s usually another element involved—they own something that scales. The key difference isn’t how hard they work. It’s what they own that has leverage. And that leverage typically comes from systems. If a business runs because you’re there every day, it can be profitable, but it’s still tied closely to your time. When systems are in place, the business can grow beyond you. That’s when it starts to become a true asset—something with enterprise value that could eventually be sold. For high-income professionals, this creates a bit of a dilemma. You’re already doing well. Walking away from that to pursue something uncertain doesn’t make much sense, and I don’t recommend it (even though I did it myself). A more practical approach is to build something alongside what you’re already doing—something that has the potential to become scalable over time. There are a few ways to approach that. Starting a business from scratch can work. I’ve done it multiple times. Some turned out very well, others didn’t. Candidly, being a startup entrepreneur requires a certain kind of personality—one that’s comfortable with a lot of risk. You have to have the stomach for it and, if you don’t, it’s better to recognize that early and stay away! Buying a business is another option, but most businesses in the price range of a typical high-income professional aren’t that large. Smaller acquisitions often come with hidden risks—key personnel, operational quirks, and issues the seller understands far better than you do (and may be part of the reason they’re selling). Then there are franchises. What makes franchises interesting is that they provide a structured roadmap. If you were an A student—someone who is good at following a curriculum and executing—this model can fit your wiring well. Franchise ownership is about learning a system and applying it consistently. You don’t have to invent the model. You’re executing one that has already been proven. Of course, there are trade-offs. Franchise fees can be significant. Upfront capital requirements can be high. And the advisory landscape isn’t always objective. So the real challenge is figuring out how to evaluate opportunities in this space with a clear, unbiased perspective. That’s what we cover in this week’s episode of Wealth Formula Podcast. My guest breaks down how to think about franchises, where they fit into an overall wealth strategy, and how to approach them in a way that actually makes sense for high-income professionals. If you’ve been curious about building something beyond your primary career—but want a more structured path—this is a conversation worth listening to. Watch on YouTube: Listen on Apple Podcasts: Listen on Spotify: Transcript Disclaimer: This transcript was generated by AI and may not be 100% accurate. If you notice any errors or corrections, please email us at phil@wealthformula.com.  Welcome everybody. This is Buck Joffrey coming to you from Montecito, California. And, uh, before I begin today, I wanna remind you once again, as I always do that there is a website associated with this program. It’s at wealthformula.com, and that’s where you go. If you’re interested in participating in this ecosystem beyond simply listening and, and watching, or whatever you do. Lots of resources there on the website. In addition to that, I draw your attention to the Accredited Investor Club. Again, this is in a group of accredited investors. It’s basically a way to get access to private deal flow. If you are an investor, which you don’t have to go to school for, you just have to make enough money, $300,000 per year if you’re filing jointly, or a million dollars. Net worth outside of your personal home and you are an accredited investor, go ahead and sign up for the Wealth Formula Investor Club because who doesn’t wanna join a club? The price is right because, uh, well, it’s free. All you have to do is get onboarded and the rest is just sit back and look at the deal flow and if nothing else, you’ll learn something. Let’s talk today a little bit about how you can make some more money to invest because you know, most people assume. That high income leads to wealth. Sometimes it does, but I gotta tell you, more often than not, it leads to a comfortable, current lifestyle. Uh, that depends on getting paid dollars for hours. And listen, there’s nothing wrong with that. There really isn’t. And I don’t criticize that. I don’t encourage people to do things that are out of their comfort zone For most people, the best, best path is really to keep on doing what you do well and invest your income in the real estate and other assets, and use that as your growth mechanism for wealth. Uh, and that alone. It can create significant wealth over time. But if you look at people with outsized wealth, there’s usually another element involved, and that is that they own businesses, uh, they own something that can scale, and the key difference isn’t how hard they work, it’s what they own as leverage. And what do I mean by that? Well. In this case, the leverage comes from systems, right? If a business runs, because you are there every day and you get paid for that amount of time that you are there, it’s, it can be profitable, but it’s, it’s got a upward limit, right? But when you get some systems in place, the business can grow beyond you and you might be ending up, you know, working the same amount of time or even less, but profitability goes up. And that’s when it really becomes a true asset, something that actually has enterprise value that you can actually sell to somebody. Now, for high income professionals, you know, that creates a little bit of a problem, like how in the world are you gonna do that? If you’re working a full-time job as a physician, for example, it’s not like you have a ton of extra time and you’re already doing well, and walking away from that to pursue something uncertain doesn’t make a lot of sense and frankly. For almost anybody. I don’t recommend it, although I did that myself. Now, a more practical approach is probably to build something alongside what you’re already doing. Yeah, it’ll be a little extra work, but it’ll be worth it. Something that has the potential to become scalable over time. Now, there’s a few approaches to that. And the first one is what I have done multiple times, but just starting a business from scratch, and that can work. As I said, I’ve done it multiple times. Sometimes it turned out very well. Others didn’t turn out very well at all. But you know what, candidly, being a startup entrepreneur, it requires a certain kind of personality. One that’s comfortable with a lot of risk, you have to have the coronary arteries for it. And if you don’t, it’s probably better to recognize that early and stay away not only for your own good, but for the good of your family and everyone around you. Now buying a business is another option. And I think, you know, you think about something that’s been there, it’s already proven its way, it makes money, it’s just less risky, right? But most businesses in the price range that can be afforded by someone with a, you know, high income, a high income professional, that is, they aren’t that big. The businesses themselves, and the problem with smaller acquisitions often come with hidden risks. There’s key personnel that you don’t know about our operational quirks, uh, issues as the seller understands way better than you do, and may in fact be part of the reason they’re selling. Now, that’s not always the case. It certainly isn’t, but those are some of the things that do come up when you’re buying a business that. Is not that big from somebody else right now. The next option is franchises. We’ve talked about this on the show a few times and I keep coming back to it because what makes franchises interesting, in my opinion to people like us is they provide us structured roadmap. Now, when I say people like us, a lot of you were a students, right? You doctors and lawyers and professionals, whatever, and what you were good at in school. Following a curriculum and executing right, that’s what you were really good at. You had a model that you can, you can follow and do it really, really well. Franchise ownership is about learning a system that’s worked in the past that’s worked for others, and applying it consistently. Now, you don’t have to invent the model like. For me, as a startup guy, I had to kind of invent the model, and that’s very risky. Um, I was younger and stupider, and it was, it was, it, it, it paid off. But, you know, in your fifties and you’re already established, it may not be right. So in a franchise, you don’t have to invent the model all again. All you’re doing is you’re executing one that has already been proven. Now, of course, there are also trade-offs in franchises as well. I’ve been down this road before, and you’re gonna hear a little bit about my story there. I never actually bought a franchise, but I thought about it. First of all, I, I noticed that franchise fees, well, they can be pretty significant. I, I started wondering, well, hey, how, you know, how am I gonna get any bottom line with this stuff? Um, upfront capital requirements, they’re, they’re, they can be pretty high. Right? And again, even though it’s not a startup in the sense that it’s a new business concept, you still have sort of this. Upfront capital requirements, sometimes build outs and stuff like that. And then finally, the thing that, uh, I would say has been my experience is that the LA advisory landscape isn’t always objective and it’s difficult to find out. And it’s not just about objectivity, it’s about like, you know, the getting to try type of information you want in your initial search. So the real challenge, uh, in this space is figuring out how to evaluate opportunities. Um, getting an unbiased perspective, really digging down, and that’s what we’re going to cover in this Week’s Wealth Formula podcast. Yes, it is another franchise podcast, but this one is different, is with the starter, uh, founder and CEO of Franzi, which is kind of like the Zillow for franchises. I think it’s a really interesting concept. We talk a lot about the challenges of franchising, why it might make sense still for many people. And then kind of go into what they’re doing over at Franzi, which again, I think is pretty interesting. You may want to check out, I’ll have that interview for you right after these messages. Wealth Formula banking is an ingenious concept powered by whole life insurance, but instead of acting just as a safety net. The strategy supercharges your investments. First, you create a personal financial reservoir that grows at a compounding interest rate much higher than any bank savings account. As your money accumulates, you borrow from your own bank to invest in other cash flowing investments. Here’s the key. Even though you borrowed money at a simple interest rate, your insurance company keeps paying you compound interest. On that money, even though you’ve borrowed it at result, you make money in two places at the same time. That’s why your investments get supercharged. This isn’t a new technique. It’s a refined strategy used by some of the wealthiest families in history, and it uses century old rock solid insurance companies as its backbone. Turbocharge your investments. Visit Wealthformulabanking.com. Again, that’s wealth formula banking.com. Welcome back to the show everyone. Today. My guest on Wealth Formula podcast is Alex Snick. He’s the co-founder and CEO of Franzi, a platform that helps people discover and evaluate franchise opportunities using data and technology. He previously co-founded two U Laund and Lauro lab skilling, uh, the concept into a national franchise network with more than a hundred licensed sold. Uh, and today he’s focusing in helping aspiring entrepreneurs understand the landscape of franchising and really to identify opportunities across a wide range of industries. So we’re gonna, uh, explore what that franchise world really looks like in 2026. Uh, Alex, welcome to the show. Buck, thanks for having me. Excited to talk about what I think is the most overlooked path to wealth creation in America, and that’s the franchise business model. So thanks for having me on. Yeah, you got it. And so let’s, let’s start with this. How, how did you, you know, how did you get into the franchise business yourself? Were you, did you buy a franchise or what’d you do? Yeah, so I’ve, I’ve been a serial entrepreneur ever since college. I did a, a laundry and dry cleaning delivery business my freshman year at Wake Forest, uh, down here in North Carolina. Uh, learned more doing that than any class I took at Wake Forest. I was hooked on problem solving and doing the marketing and the contracts and operations, and started a venture backed. Laundry and dry cleaning delivery business in 2016. Raised $33 million in in venture capital for it over an eight year period. And it was through that business that I got into franchising because we eventually started franchising part of that business. We started franchising the physical laundromats that we were building to handle all of the delivery volume, and I knew nothing about franchising before that. So we got a crash course on. What is an FDDA Franchise disclosure document? How do you structure it? What should the royalties be? What should the territory rights be? How will people finance this? What’s the average build out cost mean? All the things that went into it. And then in 2021 started franchising. We sold 118 locations in our first year. Um, saw the good, the bad, and the ugly of how people buy and discover franchises and thought. Hey, this is a really good model, but the way that people access the data do di uh, do due diligence, finance, these things, find the right fit, et cetera, is pretty opaque and not super transparent. And so that’s what’s led us to, you know, focus on franzi and what we’re building now, which is essentially the Zillow for the franchise marketplace. Cool. Well, let’s talk a little bit about franchises in general. It’s not just fast food. How would you sort of. Put out the main categories of franchising out there today. Yeah. So that, that was one of the surprises for me was that I, I think like a lot of people, I thought, oh, it’s McDonald’s, it’s Subway and it’s all food and you need to have millions of dollars to get into it, otherwise you can’t do it. Or it’s these like emerging concepts that are very risky and not proven out and, you know, I don’t know if I wanna do that. The reality is, is there’s a very. Dense middle as well. And there’s everything in between. There’s home services franchises, there’s health and wellness, there’s hospitality, there’s early childhood development. If you really pay attention the next time you’re driving around in a car or using a home services business, I’d say eight or nine times outta 10, it’s a franchise system. Um, franchising represents 8% of our country’s GDP. Uh, it’s a huge part of our economy. Um, and there are options for. Everyone on that spectrum, either you’re the, yeah, you’re more affluent, you know, you wanna be a restaurant operator to, Hey, I’ve got 20 grand in cash saved up and I want to get started. There’s franchises under 150, a hundred k to get into that can do seven figures in revenue. Um, you know, once you get into them. So there really is something for everyone if you want to become an entrepreneur and if you wanna become a business owner, but you don’t know where to start. Yeah. So of the categories in general, like which sectors do you think are sort of growing the fastest race right now? Why? Yeah. So food’s declining a little bit because I think it’s, you know, it’s saturated. There’s a ton of concepts, there’s a lot of new concepts. Replacing some of the old, um, home services is seeing a really big boom right now. I think it. There’s a departure from people you know, worried about losing their jobs to ai. A lot of people wanting to invest in themselves and home services is something that AI is not going to touch or be, you know, replacing anytime soon, maybe in the future, but. Those tools when they do come out, will benefit the owners of those businesses. So home services is really big. Um, health. When you say home services, is that like cleaning services and stuff or what? It’s, it could be gutter cleaning, roofing. Um, there’s one that is a, it’s, it’s window boxes actually. They go install these custom window boxes on your home, and then there’s a subscription where they come and they fill new flowers, you know, once a month. And they even do themes like around Easter. They’ll do like Easter decorated window boxes around Christmas. They’ll do Christmas themed window boxes, and you know, the average revenue of those franchisees is, is over $1.2 million and it’s window boxes. And so you, you have a lot of, of, of businesses and business models that I think you wouldn’t typically think of or would overlook that are quietly very boring, but cash flowing and cash printing, uh, concepts. When you, when you think about, like, you know, and, and you’ve been, I guess mostly on the selling side of the franchise, not so much buying or is that, how, how do you, what’s your experience on the buying side? So I’m a franchisee as well. Um, one in a, uh, uh, a, a golf simulator concept. Um, you know, so it’s no employees, no inventory. They’re private bays. So I have five of those locations in Minnesota. And then starting to develop a food and beverage concept. Now that’s more of a, you know, snack kind of categories. It’s, uh, bagels, um. Lower investment to build out the location. Less employees, but still high, high AUVs, average unit volumes and high, high revenue still. So I’ve, I’ve seen both sides. When you’re looking at something as a buyer, because obviously you know this audience you’re talking to right now, they’re not gonna be selling them, uh, is you’re buying them. Like, what are the key metrics that you’re looking at to determine whether a model works? Yeah, so I, I almost start with the individual and their preferences first. So some people say, well, I just want the one that’s gonna make me the most money. And that might seem obvious, but a lot of people get into this for a number of reasons. It’s, they hate their job and they just wanna replace their income. Some people want Empire Build. They’re going for 10, 20, 30 plus units over a 10 to 15 year period, and they really wanna build this massive wealth generating and creation, you know, creating machine. Others don’t have that aspiration. And so I always, when we work with individuals, I look for four things from them first before we even go look at businesses. And that’s Buck. Are you, you know, you know, risk seeking or risk neutral or, or risk averse of understanding people’s risk profile because there is something on every part of that spectrum, a Chick-fil-A or essentially buying yourself a job. It’s almost guaranteed. You can only do one of them though, all the way up to, you know, white space, brand new concept with promising, you know, economics and a promising team. You could buy the whole market and develop 15 of them in your, you know, home city. Much more risk seeking though. So risk is the first thing we, we, we get to, you know, get a handle on the second is bucks, you know, financial readiness, you know, is this a huge bet for you? Is this part of your portfolio? You already have real estate, uh, and you know, equity investments and other, you know, things there, and this is just. An add-on to the portfolio, or is this you betting the bank and you’re, you know, again, you’re, you’re, you’re stretching a little bit. So financial readiness. Third is operational ability. What’s. Past experience. Are you really good at sales? Are you, have you managed teams of people before? Um, what is your personality like there operationally as well? And then the last one is ultimately, what are your goals and interests? Are you doing this for legacy for your kids and you wanna build a business with your family? Are you doing this to replace a W2 income? Are you doing this to, you know, to generate somewhat passive, you know, cash flow as part of your other portfolio? Or are you empire building and this is gonna be a 10 to 15 year, you know, time horizon and you’re gonna go build out. 50 to 60 plus locations or acquire 50 to 60 plus locations over time. So we start there and get a sense of the whole person, and then we use this ai, uh, algorithm that we’ve built to go scan the 4,000 brands that are out there. So we have every brand that you can possibly imagine on our platform, and we have things like AUVs, average unit volumes of revenues, the cost to get into them, how many units do they have opened or closed to determine, again, risk, uh, what’s available in the markets you’re after. We have all the lenders that you need to, to, to get this going operationally. What do you need to be good at for this business to be successful? Is this a, uh, you know, owner operator model, an executive model, a semi-absentee model? We factor all of these hundreds of different factors into a. Calculus to then come back to you buck with your top 10. And then it’s iterative from there. What do you like, what do you not like? What resonates with you? What fits your goals? And we can just get smarter and smarter as we do that exercise with you to ultimately find you the best fit. So long answer, but the goal is fit. You mentioned, uh, lenders. How, how, uh, likely or is it depending on the franchise, is the SBA loan an option for brand new franchise, uh, owners? I almost, I I’d say that, you know, the SBA is built for this. The SBA loves franchising for a number of reasons. One, you have a proven new system or somewhat proven, even if it’s only five units open and it’s a, you know, a, a nascent or an earlier brand, a bank would still rather that than bucket. Alex going off to go build a coffee shop for the first time, at least for part of a system that has playbooks and vendor relationships and a brand and a website and, you know, some of the, the things already figured out. And so the SBA. You know, is the primary financing source for franchising. And a lot of the times you can get 80 per 80 to 90% loan to value. And so for a number of these startup or you know, these franchises you can get into for five to $25,000. If, if, you know, if you’re looking on the lower end of the investment spectrum all the way up to, you can borrow a couple million dollars in USBA, you know, financing for a restaurant or, um, other more expensive co uh, formats or concepts. You mentioned like your own, some of the stuff you owned and. You own ’em in Minnesota? Do you live in Minnesota? I don’t. So that’s the thing is I have a, an operating partner in Minnesota. I’m more of a capital partner. I’ll help with real estate site selection, you know, managing our books strategy. Uh, but my partner in Minnesota, he’s on the ground and he’s more of, you know, managing the team, looking at sites in person. Um, going to see the stores in person. Uh, and that’s what I like about franchising as well, is you can get to a certain size. You can hire operators and, and have a full blown team in multiple lines of defense between you and the, the day-to-day operation of the business. Um, but at first you start out, you know, in the business, then it’s. The thing I’ll say is you have to work. Uh, it’s, I do it, you know, at first, in the early days when you have less than five locations, then it’s, we do it when you start to have managers and GMs and then it’s, they do it once you have, you know, 10, 15 plus locations and you have a whole management team in place, GMs district managers, and they’re effectively running the business for you. Um, and that goes back into fit, you know, what is your ultimate goal and what are you trying to accomplish with the franchise model and how far are you trying to take it? Yeah. Yeah. And I, I was gonna, you know, that, that ends up being a little bit of a challenge for some of, um, you know, my audience because, uh, we typically are, so in some ways the franchise model sounds great, right? Because, you know, I’m, I’m a physician, uh, I make good money. I’m, I’m invested in real estate, and I like the idea of, of doing something else. But, you know, I don’t have. 20 hours, 30 hours a week to devote to this. Is that, I mean, realistically, how big of a hurdle is that for people like, like me? Yep. So that’s where there’s these, and that’s part of our, you know, franzi processes. We’ll go ask you, is this a 10 hour a week thing, 0, 20, 40, full-time, et cetera? And there are. Concepts and brands that fit each of those, those answers, um, or there’s at least solutions. Many people, if they want a brand that has more hands-on requirements, they’ll bring a spouse on board. They’ll have them get involved. They’ll bring a business partner or an operating partner on board with them. Uh, maybe it’s a family member, maybe it’s a son or a daughter. Maybe it’s a neighbor. Maybe it’s someone from. You know, there’s their network that they bring in. So like me as for an example, the golf simulators are very passive. You can do that and keep your full-time job because it’s zero employees, it’s zero inventory and it’s all self-serve. It’s 24 7, kinda like a 24 7 unattended gym, and that kicks off, you know, a hundred to 150 grand in cashflow per location. And it’s like a nice. You know, cash flowing investment, that is an asset that’s also appreciating. Um, and you can exit, you know, multiple years down the road if you want to as well. But it doesn’t require, you know, me to leave what I’m doing full-time to go focus on all the way up. So you’ve got the restaurant where there’s 30 employees and it’s a lot more hands-on. You need an operating partner at that point. If you’re not gonna be involved in the day to day, and there’s tons of great operators that you can find out there to give five to 15% equity to that will treat it like their own. But you’re the capital be behind it. And you know, you’re maybe involved in site selection and some of the more strategic decisions, but outside of that, your operating partner will run, you know, they’ll run the business for you. Um, and so the answer is yes, it’s, it’s, it’s possible, uh, just depending on. Do you wanna partner or not? Or do you want something truly passive? Um, and there’s solutions for both. So I wanna um, tell you a little bit about my experience so far. ’cause you know, I mentioned to you before, Alex, I’ve had a couple people on the show regarding franchises. First with regard to the franchises, uh, themselves, the one thing that I was having a real hard time with is a lot of the times that the commissions were. The franchise commission or whatever you call that, they were pretty high. I mean, they’d be like eight or 10%. And that’s off revenue. And you know, I’ve, I’ve started, uh, you know, three businesses in my life and I think about like what that would mean for the bottom line. And it was really hard for me to figure out. The, the risk profile on that is really tricky, right? ’cause you’re, yeah, you’re giving 10% or 8% and you know, you’ve got a, say you’ve got a million dollar revenue. Um, that’s fine. But, you know, if, if you’re starting out, how do you, how do you navigate that? I mean, because that’s, that’s a big part, especially in startups where, you know, 10% of gross revenue could take you from being profitable, you know, to being underwater entirely So. How’s that? What? What are your thoughts on that? So you, for franchising, you know, one of the first questions I’d tell people to ask themselves is, what will the brand do for you in five years that justify, you know, six to eight, sometime 10 is the high, I mean, that’s the highest, and you’ll see, but six to 8%, you know, royalty. What will the brand do for you five years from now? ’cause a lot of the value front is definitely there. They’re training you, they’re helping you find the right site. They’re giving you all these playbooks, materials, marketing tactics, and support. Technology, I mean, all this stuff that is valuable the first few years, but five years from now and you now understand the business, you become somewhat of an expert. What justifies you paying multiple thousands of dollars, you know, a month or a year to be a part of their brand? And there needs to be an answer there. And so that’s things like, oh, well they have some sort of access to national accounts that I would’ve a hard time getting on my own because of the scale we’re getting, you know, these national partnerships that’s generating my location revenue and that is worth giving up, you know, six to 8% for or in, you know, food, for example. Buck on his own can go buy burger meat for a dollar a pound, but I’m getting it for 20 cents from McDonald’s. And like that alone makes up for the six to 8%, you know, tenfold, you know, to do. And so like, there’s clear obvious answers. Some franchises don’t have a great answer. And that’s when you need to really ask yourself, am I better off doing this on my own or investing somewhere else? And so I start, there is, what are they gonna do for me five years from now? And the math should always equate, it should always make sense that the 6% you’re putting in, you’re getting at least that, if not some multiple of it back. In the form of learnings, revenue, supply chain efficiency, technology efficiency, like you and I as a, you know, as an independent gym, might not go invest half a million or a million dollars into technology and wearables. But Orangetheory has done that. They have whole wearables that they sell to their members. They generate additional revenue off that they all this additional data. Um, you and I as independent operators just wouldn’t, you know, just wouldn’t do that. And so we make up for the royalty and investments like that. So you have to ask that question first. The second thing I look at too is franchising is a, it’s another asset class. It’s, it’s, it’s business ownership, which could be independent or franchise base, but I look at it as a, you know, return on investment decision and franchising. You know, listeners can go look this up historically has a, you know, 15 to 35% cash on cash return. Where else are you gonna produce that type of outcome? Yes, there’s more work and there’s more. In some cases risk involved, but you are generating a substantially higher return on capital than you would in an equity, you know, where the average is eight to 11%, granted, way more passive. Um, but you al you also don’t have this, uh, you know, ownership piece. Uh, and, and a and a business that’s, that’s cash flowing underneath it. And then with real estate, you know, real estate investors I think would jump up and down at a, you know, 13, 14% IRR 15 to 16% IRR. We’re talking double that. Franchising or in business ownership in general, whether it’s a franchise or not, and that’s, that’s inclusive of that royalty. And so from a peer return perspective, I think franchising still presents one of the best performing assets there are. You just need to pick the right one and make sure it fits your, again, risk tolerance lifestyle, what you’re good at operationally and, and what your goals are. Yeah, I, I think that’s an important thing to point out because the profit margin typically on any operating business, I mean, it should be. Hopefully 20% you should be able to get a 20% IRR. And um, people look at that and they’re like, well, why am I doing real estate? Well, the reality is it’s a little different, right? Because if you’re in real estate, it’s not as much of an operating business. I say that with one caveat as when, you know, for example, we buy. 200 unit buildings, that’s a business, right. But yeah. Um, but there is, but there is a stability because people have to live somewhere. It is a big piece of, you know, concrete and all that stuff. So you are getting a higher return, uh, presumably if it works. However, you do have to understand that it’s actually work. It’s a, it’s more work, right? You’re gonna have to pay more attention to it. You’re gonna have more, probably more fluctuations and stuff like that. That’s not to deter from it. I think it’s something that, you know, I as a, you know, guys started businesses like you, I mean, we, we know the value of that business when it starts cranking and, you know, and, and my strategy has always been take that income and then invest in the more. Quote unquote stable asset in real estate. So, um, um, one, okay. Let, let me ask you something else, Alex, because this, this is actually kind of, uh, interesting to me because again, I’ve had an opportunity to go through this process before and obviously haven’t pulled the trigger. And the other thing I found frustrating for me is the, a little bit on the, the broker relationship. And that is that he, my process is basically we, you know. And, and, and, and this is not to put down any brokers, but you know, uh, I think like when you’re talking about busy professionals, right? You, you kind of need somebody to really kind of really guide you. And what, I had a, a few experience where you would sit, spend 30 minutes or so going through a lot of the questions that you just, you know, you talked about with me. Then you get just sort of a, you know, 10, uh, a list of literally 10 companies to look at and like, well. What are, what do you think of these? Well, I don’t know. I, I don’t know. Tell me about them. Tell me about ’em. I mean, you want me to go and, you know, I can just read about them and say, yeah, that sounds interesting, but I have no idea because what I’m looking at are metrics. Like, how’s, how likely is this to be successful? Um, you know, what, you know, where, why, why is this a good idea? Um, you, you know, those kinds of things where you really dig into it. When people are thinking about this from. For me, it’s a lot about, you know, risk mitigation. I, I wanted to do something, I wanted to do something that was, you know, it doesn’t have to hit it outta the park. It doesn’t have to be a 40, 50% cash on cash, but I wanted it to be a, uh, something that I felt like there’s, you know, higher risk of success and okay, if I’m getting, you know, 15 to 18% cash on cash, I, I’m cool with that. Um, instead of the 30. So I, I, I, I go, I, I’m, I guess my big question is how do you, uh, I don’t know how, what your process is and if it’s any different, but I find that it’s, there’s also a motivational element that I, I can’t say for sure that, uh, is true, but I get the sense that there’s certain ones that kind of get pushed at you and you’re not really sure why, but you kind of feel like there’s probably some. Economic incentive behind it, you know, because it doesn’t really make sense why they’re pushing one so hard. Um, so, so, so tell me about that conversation, and again, I have no experience with your business folks know that I’m just talking to Alex for the first time. How, how are you different if you’re different? Yeah. I’m glad you’re bringing this up too. And I’ll all. I’ll, I’ll let everyone in on a little secret on how the brokerage world works. And this is, you know, my main motivation and driver why I started Franzi and the platform that we’ve built is as a franchisor, I saw it firsthand. A lot of franchisees take their 4 0 1 ks, you know, use half of it. ’cause you can do what’s called a Rob’s rollover. Um. Which is essentially accessing early retirement assets without penalty to invest in a business. The IIRS allows you to do that. A lot of people don’t realize you can do that, and so I saw people Is a tax free thing, is it? Is it tax free? It’s tax free. Tax free. No penalty. Okay. Wow. Okay. So many people don’t realize. I think the government figures, Hey, if we’re allowing you to use retirement assets to invest in publicly traded companies, why wouldn’t we let you invest in yourself if you wanted to start a business or you know, buy into a franchise? So it’s called a Rob’s rollover. So I saw this happen and I saw brokers pushing these concepts, and as I learned more and more about how this works, I realized these brokers take a 60% commission on the franchise. He’s six zero. My dad was in sales for 35 years. My brother’s been in sales for 20 years. I’ve never heard of a commission. That high in anything else. And so the incentive is. Very much there for these brokers to make sure that you buy a business, even if it’s not the best decision for you. And so I saw that and thought, one, this needs to be regulated. I’m not usually a big proponent of regulation, but this is like the wild west. There’s no licensure requirements, there’s no disclosure requirements for brokers. So boom, buck, you and I can both be brokers in this very moment on this call. There’s no coursework like there is a real estate, you know, agent. There’s no disclosures like a real estate agent has, et cetera. And so high commissions. Little to no reg, you know, regulation on disclosure or licensure. And so you get reached by all these people that you think are in your corner, and when you brought up, Hey, it seems like they’re pushing these same concepts over and over. You’re exactly right. It’s because those brands have maybe cut unique deals to say, Hey, we’ll pay you 70% instead of 60 or 80%. And so they’re gonna try to push that concept. So at Franzi, what we’re doing is the same thing Zillow did to the real estate discovery and research processes. We’re democratizing access to all of the data we have. Every brand you can imagine, all the cost data, all the revenue data, how many are, you know, being litigated right now, how much bankruptcy has been claimed, how many locations have shut down. So you’re seeing very transparently what is happening with this brand and in the system. And we’re leveraging ai. To curate that list for you. So there’s actually reason and logic behind it versus Alex saying, fuck, here’s your top five that I just made up, because they pay me the most money in the background. Yeah. Um, so that’s the first thing we do differently. And then the second is our fee structure is we get a flat dollar amount from every brand that we help someone, you know, identify and match with. And. It’s the same across each branch. So we have no incentive to promote one concept over another. It’s truly what is the best fit for Buck. And then we monetize other, other areas, lending referrals. We get paid, you know, basis points on loans we originate. Sure. But again, very objectively, I think no one expects, you know, people I don’t, brokers or people who are facilitating things not to get paid. I mean, that’s their. You know, that’s what they do, that’s their job. But I think just alignment is really important. And I didn’t sense that there was always alignment because it seemed like there’s some that I’m like, why are you so into this one? It, you know what I mean? Like it, so, so I, I was sort of, um, not, uh, not as, uh, I, I was turned off by that. Whole thing because I just felt like we’re not really, I don’t, I don’t feel like I’m really know what’s going on here and I’m not, it’s, I’m, I’m just gonna turn it off. So that’s, that, that’s what happened to me. I, I’ve had the same experience. I’ve talked to no, a number, you know, hundreds of others. I’ve had the same experience. And something that I think is also unique about buying into a franchise is if you, if you think about a traditional broker, whether it’s real estate, a car. Uh, you know, an existing independent business. There’s, there’s, there’s a seller and there’s a buyer, and you’re gonna have some sort of negotiation. You’re gonna shake hands and you’re likely move on in your life and never interact again. If you’re developing a franchise business or a, you know, series of territories, maybe you have five that you’re developing over four years with this brand, you’re gonna, it’s a marriage. You’re gonna be working with that brand for the next 10 years, at least. And so I look at the franchise brokers, they shouldn’t be brokers. They’re more matchmakers. It’s more buck. I’m here to guide you, educate you on what questions to ask, what to look out for, how to identify the right fit, how to find the right lenders, how to get your entity formed. It’s these types of tactical things, but also matchmaking because. It’s not a buyer versus seller relationship. It’s a buyer and a brand who are going to now be in a marriage for the next 10 years. And it’s our job to make sure it’s a good marriage and a good fit. Um, and so even the idea of it being a broker I disagree with and, you know, the relationship and what the purpose of what we do and what a broker does in franchising should be looked at and done very differently. So, so you’re, but once you, you describe it as sort of a Zillow process where you’re basically kind of doing a search and you’re, things are coming up once you decide. Um, well, so, so on that end, it’s sort of a do it yourself kind of situation. We, we have a, a little bit of each, like for, for the very, like data analytics, self-driven, self-motivated people. You can go all the way on our platform without talking to someone. You can get, you can find a lender, you can find the right brand, you can do it all on your, on your own, di you know, DIY. But then we do have access to expert coaches. They have been or are franchisees themselves for decades. They play that coach, that matchmaker. They’re there to be on the phone with you whenever you want. It’s all free for you because again, when we place someone into the right fit brand or the right lender, we generate revenue and that’s what covers the ability to have those. Expert resources at your disposal for free. Some people come to us and they’re like, look, I’m a real estate investor. I’ve been curious about this. I’m gonna take two or three calls with you just to educate myself and I’m likely not to do it. Great. We, you know, we’re there for that. If you’re coming and saying, Hey, I ca I hate my job. Mm-hmm. Or I’m the same real estate investor and I just wanna add you an operating business to some of my commercial sites, great. We can, you know, we can help you find the exact right fit based on that market, the demographics, the complimentary businesses, et cetera. Um, and all of that is free too. The prospective buyer, do some franchises not want to participate in Franzi for any, for any reason. We launched about a year and a half ago, and we’ve had one brand say no to us. They all look at it as, Hey, this is like us showing up on Google. We need to be out there. We need to be shown. And the value of a really good franchisee is worth so much to them because it’s a new location, it’s new revenue, it’s new royalties over a 10 year period. And so the cost that we charge is so low and so minimal. It’s almost cheaper than a brand acquiring a new franchisee on their own, um, through traditional marketing, you know, methods. So brands are very aligned. Buyers are very aligned. We’re really just creating that, you know, what, what it was typically asymmetric information. We’re making it symmetrical and fair and open and honest. And, uh, the process and the, you know, end result is just a lot more aligned and, and better. What’s the secondary market on franchises? Like, so obviously people, maybe they accumulate. Maybe they only have one franchise, but they want to eventually sell it, whatever. Uh, what does that market look like? And, and. To me, it sounds like it’s a very difficult market to penetrate. Yeah, so that’s when I mentioned the 20 to 35% cash on cash return earlier, that did not include the terminal value or the exit potential by owning one of these businesses. Many people don’t realize if you and I own, you know, a Dunking Donuts versus Bucking AL’S coffee shop, we’re gonna get a multiple that’s one to two turns higher than you and I would’ve gotten as an inde independent shop because. Investors, banks, et cetera, look at it as de-risked. You’re part of a system, you have a national brand, and so they put a premium on that. So your exit value’s a lot higher. Now, the liquidity that you asked about, you know, resales and what about people that you know own 10 units and they wanna sell to? What typically happens is it’s hard for you and I as an outsider to get into these deals because Yeah, as a 10, 10 unit dunking owner, I might sell to the other Dunking guy down the road or the town over the other town. Over. Or the other town over. Yeah. And that’s great, but part of what we’re doing at Franzi is again creating more access to that as well. Me as that seller. While the brand might like me to sell to another Dunking operator, ’cause it’s, you know, no, no training for them. They already know what they’re doing. They’re already in the system. It’s great for the Dunking, the brand, me as the seller. If my potential pool of buyers is just other Dunking operators, how competitive is that process? And am I really getting the best price? And so Franzi is creating liquidity. As well in the resale markets. We do have resale opportunities on our platform so that me as the Dunking owner, I can go shop it to the Dunking, the existing Dunk Dunking franchisees, but I can also shop it to the Dave’s Hot Chicken franchisees, the private equity group that’s starting to get interested, the wealthy family office that wants to get into, you know, franchising. And now I’ve got competition and I’m getting an additional half an X to one and a half X turns on my ebitda. And, you know, that can be meaningful, especially if I’m selling 2, 3, 4, 5 units in a, in a portfolio. This could be the difference of millions of dollars by having more prospective buyers. Lots of, uh, lots of good stuff here, Alex. So what, what have I not asked that you think is probably a good idea for, you know, an audience like mine? Yeah, something that I like, I’m on the path for right now is like, you know, Franzi is a tech company. It’s a much more risky thing than a lot of other things I could be doing. But I also own, you know, cash flowing. Physical brick and mortar businesses, which is my hedge against ai. Like I, I see how fast technology is moving. I see how many people are being displaced from their work, and I think that owning an asset, whether it’s real estate or a, a cash flowing business. It’s paramount right now. It’s like, to me it’s this hedge that I need to have and I, you know, implore others to take it seriously. Again, whether it’s a franchise or not, this isn’t me, you know, promoting franzy. It’s just go, go own, own something so that you can have that hedge. And again, I think there is a wider range out there than people realize. Whether that’s the one independent or franchise location or. A brand that has three, 400 plus open, there really is something for everyone. Um, and I do think there’s this mentality of, you know, you can go as small as you want and one unit can replace your income, or you can go after multiple units and it can change your life. I, I have a, a, a guest that came on our podcast. He started seven years ago in 20, uh, it was 2018. So, I guess eight years ago now, um, he had zero locations. He started out with a butcher shop that wasn’t franchised, did okay with that. Then he bought one, uh, Orangetheory Fitness franchise. Did really well with the one, bought a second, bought a third. He’s now to 120 franchise locations across Dave’s Hot Chicken Marco’s Pizza. And a few other brands That business does around $600 million in revenue a year. And seven years ago, he had none of ’em. He was a former finance guy, uh, worked in banking. And my point with that is there really is the ability to chase the American dream in this like guard, railed way. There’s playbooks, there’s a team, there’s peers. You don’t need to go start Uber or Facebook or some tech company to have these types of outcomes and you don’t need to go. Have some crazy original idea. It’s if you’re a good operator and you know how to put deals together and structure capital. Franchising, to me, is the most viable and again, overlooked path to significant wealth creation in our country. Yeah. Uh, so how do we learn more about franzy franzy.com or. So the website, it’s the above my head here. This is how it’s spelled F-R-A-N-Z y.com. And then we put out a ton of educational content. We have a podcast called How I Franchise This, where we tell stories of everyday people and their backgrounds and what they did to get to one unit all the way up to, you know, a hundred, a hundred plus units. And then I’m on LinkedIn, Instagram, TikTok, Twitter X, et cetera, as Alex from Franzi. Fantastic. Thanks so much for being on the show today, Alex. Thanks for having me buck. You make a lot of money, but are still worried about retirement. Maybe you didn’t start earning until your thirties. Now you’re trying to catch up. Meanwhile, you’ve got a mortgage, a private school to pay for, and you feel like you’re getting further and further behind. A good news. If you need to catch up on retirement, check out a program put out by some of the oldest and most prestigious life insurance companies in the world. It’s called Wealth Accelerator, and it can help you amplify your returns quickly, protect your money from creditors, and provide financial protection to your family if something happens. The concepts here are used by some of the wealthiest families in the world, and there’s no reason why they can’t be used by you. Check it out for yourself by going to wealthformulabanking.com. Welcome back to the show everyone. Hope you enjoyed it. Franchises are a great idea to consider, and um, again, it’s one of these things that I’ve been thinking about for a while. I’m gonna myself check out this Franzi site. I’ll let you know how it goes and, uh, and you should let me know how it goes as well. If you’re doing some franchises, I’d love to know about your experiences, what you’ve done. What kinds of franchises you’ve actually, uh, been a part of and what, what your successes and, and failures were all about. So shoot me an email at Buck@wealthformula.com. That’s it for me though, this week. This is Buck Joffrey signing up. If you wanna learn more, you can now get free access to our in-depth personal finance course featuring industry leaders like Tom Wheelwright and Ken m visit wealthformularoadmap.com. The post 551: Entrepreneurship Built for A Students? appeared first on Wealth Formula.

If you spend enough time listening to economists, you’ll notice something interesting. They rarely agree. Over the years on the Wealth Formula Podcast, I’ve interviewed economists from across the spectrum—Keynesians, Austrians, monetarists, market practitioners, academics. Some are bullish about the next decade. Others are extremely pessimistic. But there’s one thing that almost all of them have agreed on in private conversations. The entire economic outlook changes if artificial intelligence dramatically boosts productivity. And that possibility is no longer theoretical. The Latest Jobs Report Was Weak Last week’s employment report came in significantly weaker than expected. Instead of adding jobs, the U.S. economy lost about 92,000 jobs in February, when economists had expected modest growth. The unemployment rate ticked up to 4.4%, and several sectors showed surprising weakness. Even healthcare, which has been one of the most reliable job creators in the entire economy for years, actually lost roughly 28,000 jobs last month. There are explanations floating around for this. Some point to strikes and temporary disruptions. Others point to geopolitical issues or policy changes. But there’s a bigger question worth asking: Is this the very early sign of something structural? In other words—are we already starting to see the early effects of AI-driven productivity changes? The Wild Card That Changes Everything Every economic model—every single one—is based on assumptions about productivity. If productivity grows slowly, you get one set of outcomes. If productivity suddenly accelerates dramatically, you get something entirely different: • Faster economic growth • Lower production costs • Strong deflationary pressures • Potential disruption to labor markets And that’s exactly what AI could bring. Some economists believe the next decade could look sluggish because of demographics and debt. Others think inflation and fiscal pressures will dominate. But almost all of them admit the same thing: If AI dramatically increases productivity, their forecasts could be completely wrong. The Fed’s Risk There’s another implication here that matters for investors. If AI is already starting to push productivity higher and costs lower, the Federal Reserve could easily misread the signals—just like they did during the inflation surge a few years ago. Central banks tend to react to data after the fact.Technology moves much faster. If policymakers underestimate the economic impact of AI, they could once again find themselves behind the curve. Fortunately, it appears increasingly likely that Kevin Warsh may become the next Federal Reserve chair, and he is widely viewed as someone who takes technological change and productivity dynamics seriously. That could matter a lot. This Week’s Episode This week on the Wealth Formula Podcast, I interview another economist—one who leans heavily toward the Austrian school of economics. On many issues, his outlook is quite skeptical about the future of monetary policy and debt. But what was fascinating is how the conversation evolved toward the end. Even he acknowledged that his entire outlook depends on what happens with AI. In other words, even the skeptics recognize that this technology could fundamentally reshape the economy. And if that happens, many of the assumptions investors rely on today will need to be reconsidered. Listen to the full episode now. The only forecasts that matter right now are the ones that understand how profoundly AI could change the economic landscape. And that story is just beginning. Listen on Apple Podcasts: Listen on Spotify: Watch on YouTube: Transcript Disclaimer: This transcript was generated by AI and may not be 100% accurate. If you notice any errors or corrections, please email us at phil@wealthformula.com.  Now some people are worried about AI causing a demand side deflation. Uh, actually there are a couple of essays in recent weeks that went viral warning that, you know, AI is gonna eliminate a bunch of white collar jobs. Consumers are gonna be out of a job, they’re not gonna spend that much. And, you know, down goes aggregate demand. That’s not gonna happen. I can confidently say that’s not gonna happen. Welcome everybody. This is Buck Joffrey with the Wealth Formula Podcast. Coming to you from Montecito, California today. Before we begin, I wanna remind you that there is a website associated with this podcast. It’s wealthformula.com. That’s where you want to go. If you are interested in participating, uh, in this community beyond just listening. That’s where we have lots of different links and, uh, opportunities including the accredited investor club. All you gotta do there is click and sign up and you’ll be part of the club. You gotta do a little onboarding. Once you do that, you get access to all sorts of, um, private deals, private deal flow costs, you nothing. So get on board. Go to wealthformula.com. Sign up for the investor club now, as for today. We’re gonna talk, uh uh, in this interview with yet another economist. Right now, if you spend enough time listening to economists, you’ll notice something interesting, which is they rarely disagree, right? Which is a little unnerving, and I guess that’s why it’s a social science rather than a science. Over the years, we’ve had lots of them, right? We’ve interviewed economists like. Ians Austrian, Monets, market practitioners, academics. Some are bullish about the next decade. Others extremely pessimistic. But the thing is, there’s one thing that almost all of them have agreed on, at least in their little private conversations they have with being were not on air, which is the entire economic outlook changes. If artificial intelligence dramatically boosts productivity. The reality is that’s not really a theoretical thing anymore. Let’s talk a little bit about, uh, the latest jobs report. So, uh, as I’m recording this, this would be last week, maybe a few days before that, but the employment report came in significantly weaker than expected. Instead of adding jobs, the US economy actually lost about 92,000 jobs in February. And, uh, of course, economists had expected modest growth. Unemployment rate ticked up to 4.4%. Still not terrible, uh, but higher. Several sectors have showed surprising weakness, though even healthcare, which has sort of been the darling of the unemployment space. You know, very reliable creator of, of jobs, uh, in the economy for years. Actually lost 28,000 jobs last, last month. Now there are explanations floating around for this. Some people are pointing out strikes, temporary disruptions, geopolitical issues, policy changes, whatever. But there is a bigger question worth asking, and I’m gonna keep pounding on this ’cause I keep talking about this nonstop. Is this the very early signs of something structural? In other words, are we already starting to see the early effects of AI driven productivity changes? Now, every economic model, I mean, every single one is based on assumptions about productivity. And if productivity grows slowly, you know, you get one set of outcomes. But if productivity suddenly accelerates dramatically, which. Many predict with ai, you get something entirely different. You get faster economic growth, lower production costs, strong deflationary pressures, and then potential disruption of the labor markets. And that’s exactly what AI could bring in my opinion will bring. Some economists believe the next decade could look sluggish because of demographics and debt. Remember, we had ITR economics and those guys talk about the depression in the 2030s. Others are are still talking about inflation and fiscal pressures will dominate, but again, almost all of them admit the same thing. The AI issue that dramatically increases productivity. If that indeed happens, your forecast could be completely wrong. Now there’s another implication here that matters for investors now, and that is if AI is already starting to push productivity higher and cost lower, the Federal Reserve could easily misread the signals just like they did during the inflation surge a few years ago. You know, central banks tend to react to data after the fact, but the thing is that technology actually moves a lot faster, and if policy makers underestimate the economic impact of ai. Guess what? They could once again find themselves behind the curve, and that wouldn’t be surprising. But fortunately, it appears likely that Kevin Warsh the, uh, president Trump’s choice for the next, uh, fed chair is gonna be, uh, you know, he’s, he’s hopefully gonna get nominated. And the good news about him is he’s widely viewed as someone who takes that AI issue very, very seriously and is concerned about unemployment and deflationary pressures. This week what we’re gonna do is we’re gonna talk to another, uh, economist. This one leans, uh, more heavily towards sort of the Austrian School of Economics, hard money, that kind of thing. And on many issues, his outlook is quite skeptical about the future of monetary policy and debt. But I think what gets really fascinating is the divergence of that conversation, um, towards the end of this, you know, podcast. Even he acknowledges that his outlook really depends on what happens with ai. In other words, even skeptics recognize that this technology could fundamentally reshape the economy. And if that happens, many of the assumptions investors rely on today, well, we’ll need to be reconsidered. Anyway, that is going to be the show today. I think it’s a very interesting topic. We’ll have that for you right after these messages. Wealth Formula banking is an ingenious concept powered by whole life insurance, but instead of acting just as a safety net, the strategy supercharges your investments. First, you create a personal financial reservoir that grows at a compounding interest rate much higher than any bank savings account. As your money accumulates, you borrow from your own. Bank to invest in other cash flowing investments. Here’s the key. Even though you’ve borrowed money at a simple interest rate, your insurance company keeps paying you compound interest on that money even though you’ve borrowed it. At result, you make money in two places at the same time. That’s why your investments get supercharged. This isn’t a new technique. It’s a refined strategy used by some of the wealthiest families in history, and it uses century old rock solid insurance companies as its backbone. Turbocharge your investments. Visit Wealthformulabanking.com. Again, that’s wealthformulabanking.com. Welcome back to the show everyone. Today. My guest on Wealth Formula podcast is Professor Alexander Salter. He’s a Georgie g Snyder, professor of economics at Texas Tech University’s Royals College of Business, and a comparative economics research fellow at the Free Market Institute. His work focuses on monetary economics, political economy, and institutional analysis, and he’s the author of Money and the Rule of Law and the Political Economy of Distributism. Distributism. Is that a word? That is a word. Although not what most people know. Good job getting it right the first time. Very good. Very good. Well, thanks for joining us. I’m really happy to be here. It’s gonna be a fun conversation. Yeah. So, you know, you, you’ve written about money and the rule of law, obviously that’s what your book, one of ’em is called. In plain English, what does that mean and, and why should investors care whether our monetary system is governed by clear rules versus, you know, discretion of policy makers? Great place to start. Rule of law basically means that public policy is conducted according to clear, general and predictable rules. This is not radical at all. This is exactly what we expect from all organs of public policy and democracies, especially constitutional democracies. But if you look at how monetary policy in the United States work as it’s conducted by the Federal Reserve, this is not how it works. Monetary policy is conducted on a discretionary basis by top bureaucrats with minimal accountability to the public, and they really do try to surprise markets because it’s when you can surprise markets that monetary policy has its greatest effects. So I and my co-authors in money on the rule of law think that this is fundamentally misguided. We should not want to do monetary policy by discretion. We should want to put it on a firm, rule based framework. Markets know what to expect and investors can have some credibility and security, especially earning, for example, the purchasing power of money gen, uh, long-term contracts and long-term capital allocation scenarios becomes very important. Yeah, so. The government plays sort of a, I don’t know, sort of a, a surprise you to change the market’s kind of role, right? They’re, you know, they’re, they’re trying to dictate that role rather than giving a roadmap and letting people do, you know, what, what they think is, uh, the right thing under a certain circumstances. Yeah, I think that’s right. I think monetary policy makers have exceeded their role as a referee of the financial or commercial game. They wanna be a player of the game, especially in the post 2008 monetary policy operating framework. They really are involved. Credit picking winners and losers, and this is very different. A monetary policy that is general predictable and non-discriminatory. Really, monetary policy should be boring. Central banking should be very straightforward, credibly commit to what you’re going to do with total spending in the economy, where you’re going to feed dollar purchasing power, how it’s gonna behave over time. The Central Bank has almost complete control over those two variables. If you could credibly specify a path for those variables that would provide a lot of economic certainty, which households, businesses, civil society organizations, everyone could use to form the basis of rational economic planning. Instead, you have forward guidance about interest rate rates, which is not really something that the central bank can control in the long run anyway. Again, there’s a lot that they’re trying to keep under wraps. They don’t want to be out guessed by the market, but of course, that’s exactly why a Fed watching is such a lucrative market segment. Right, right. You know, you mentioned debt. Of course, we’re running very large deficits even, uh, during periods of economic growth. Um, at what point is the government debt really begin to influence the Federal Reserve? Because, you know, we hear. Obviously the Fed is independent, right? The Fed is independent, and in the meantime we’ve got, we’ve got some serious problems, uh, on the fiscal side of things. So is it, is it truly independent? Can it continue to be independent? Great question. So in terms of legal independence, a lot of people don’t realize this, but the Fed is among the world’s least independent central banks. The Fed was created by Congress. The 1913 Federal Reserve Act, Congress has since modified that act, I think about 200 times, and it could do so again if it chooses. So compared to many other central banks, we’ve deliberately less political installation in terms of central bank oversight under the very basic theory, which is correct in my view. Even institutions that are run by experts have to have democratic accountability at some point. Now in practice, legislators have not been very willing to hold central banker to account. I think that that’s a problem, and I would like to see that change, especially when we’re talking about factor factors pertaining to the government debt. Because as you pointed out, the debt is already a problem for the Federal Reserve. If you look at the extraordinary money printing. The Fed engaged in starting in 2020, the COVID years, right, trying to stabilize markets as they were rocked by the Coronavirus pandemic. A lot of that went into purchasing, newly issued government debt. The Treasury would auction off new debt, sell it to private buyers. The Federal Reserve would then turn around and buy that debt from the private buyers and ultimately put it on its balance sheet. Ultimately, over 50%, about 55% of the new debt that was created between 2020 and 2022 ended up on the Federal Reserve’s balance sheet that is financing the deficit By printing money, it doesn’t matter that it’s roundabout. It is running the printing press to meet the treasury’s obligations. And quite frankly, it is uncomfortably close to Banana Republic territory, and I think that we really need some deep institutional reforms to not get caught in a fiscal monetary spiral that could create either crippling inflation or you’d be in the uncomfortable position where the government simply can’t service its debts. And given that the entire world currently views treasury debt as a safe asset. If the value of that asset, which underpins all major portfolios across the world, becomes called into question, we’re gonna have some serious problems. I’m curious what you think the right thing to do is, because, you know, I think about like the new, the, the incoming fed, uh, president of war. He seems to be, I mean obviously he’s a smart guy, but he also seems to be a guy who is in general agreement with the Trump administration about directionality of rates and that kind of thing. And I’m just curious on your thoughts on that, because I mean, a lot of people are looking at this as a, you know, political appointment. Well, it’s always a political appointment, right? That’s right. That’s right. But in reality. Do you see this as a, a different type of marriage between, uh, uh, a fiscal and monetary policy? Potentially. A lot of people are worried that this appointment, if it goes through. We’ll Mark a turning point, a phase change in the relationship between the Fed chair and the presidency. Now, presidents have always, always tried to pressure fed chairs for the president’s preferred monetary policy. Uh, LBJ famously took the fed chair at the time to his private ranch and pushed him up against the wall and basically said, you’re gonna do what I say you’re gonna do. Of course there was the relationship between President Nixon and Arthur Burns on the eve of the 1972 presidential election. Even President Reagan wanted to pressure Volcker for accommodative monetary policy when he thought it was in his political interests. What we’re seeing here is the potential for influence on fed chairs by the executive branch, by the president, to be overt and constant. Now Wars has said that he wants short rates to come down, but he also wants to shrink the Fed’s balance sheet. Return to something more like the pre 2008 operating framework when the Fed’s balance sheet was comparatively sh small and reserves were more or less scarce. Whether or not you can do both of those two things at the same time is an open question that’s gonna require some complex financial engineering, and it’s probably going to require the Fed share to get more involved with yield curve manipulation. Then really the central bank should be involved in that’s messing with relative prices. Ask any economist what monetary policy should not do. It should not skew relative prices, but wars seems committed to trying to normalize monetary policy by doing exactly that. It’s dangerous. There might be a payoff. Of course, the risk is in trying to do the right thing, you’re going to make things worse, and even if you get there, you have looming pressure from President Trump or whoever succeeds him in 2028. For my money, I would much rather see Congress rather than the presidency take the lead on reforming the Fed. I wanna see actual substantive legislative changes to the Fed’s mandate. Specifically, I want everything off the Fed’s plate except stabilizing the purchasing power of the dollar. We don’t need the full employment mandate. It’s redundant at best, dangerous at worse. We don’t need the moderate long run interest rates plank of the fed’s mandate. Redundant at best, dangerous, at worse. The one thing the Fed can control and can do a pretty good job at is controlling the price level, the general expensiveness of goods and services. So let’s focus on that. And leave other organs of public policy to make, for example, allocated decisions. You mentioned that WARS is talking about bringing short, short-term rates down and trimming the balance sheet. Explain to people who are not economists why that’s a challenging thing to do and what the pitfalls are. The difficulty is you really ultimately have to bring short rates down while allowing long rates to rise. If you’re gonna shrink the bed’s balance sheet, there’s no way to do that other than normalizing monetary policy, engaging in what’s called quantitative tightening. You’re either gonna have to sell assets or what’s more likely is you’re just going to allow those assets on your balance sheet to mature and not continue purchasing. Just don’t roll them over In the short run that is going to raise long-term yields on the long-term securities that disproportionately occupy the Fed’s balance sheet. Now at the same time, war says that he wants to use monetary policy to bring short rates down so you can sort of see that’s operating at both ends of the yield curve. You’re compressing it, so to speak, and that’s very difficult to do, especially because when markets become wise to what you’re doing and wars is said publicly that this is his goal. So it’s not exactly a surprise. Structural economic forces. Have a way of forcing interest rates, yields on capital to go to levels consistent with their supply and demand fundamentals, regardless of what policy makers want them to do. That’s gonna be the tough thing here. Uh, you also have to worry, of course, about whether war gets the job in the first place. Taking a half step back here, current chairman, Jerome Powell, his term is up in May. But he does not rotate off the Board of Governors. He simply stops being fed Chair. Now, traditionally fed chairs resign from the Board of Governors when their terms are up, but given the bad blood that exists between Powell and Trump, he might simply relinquish his chair as he has to do under law, but still keep his seat under the Board of Governors. And if he does that, there will be no open seat for President Trump to appoint Warsh two. So that could open up a whole new front in the war over the control of the Federal Reserve. And again, the danger with this is partisan politicization of monetary policy. I think that we should distinguish that from basic politically induced reform to defense mandate from Congress, which I view as good. I don’t wanna see the president metal and monetary policy. I think that we have pretty good evidence that that’s going to create some bad outcomes for financial markets. So how should we think when you, you talked about, uh. If war is able to trim the balance sheet, how should we think about the bond markets responding, uh, to all this? I mean, obviously we have, my audience here is a lot of investors and they’ll look at things like mortgage rates that are and, and on, on bond markets. So at what point mm-hmm. You know, do investors start demanding a higher risk premium because they’re unsure about, you know, long-term fiscal path? Well, the Fed stops rolling over the Fed’s balance sheet, continuing to renew purchases of similar assets. Uh, yields are gonna have to go up at least in the short run. And so in terms of all long-term assets, right? Capital markets are connected by prices. By interest rates, you can’t affect one long-term asset rate in isolation. So I would expect long-term treasuries to go up. I would expect mortgage rates to go up too. I think that wars has been very clear that that’s what he wants to happen, at least in the short run. In so far as that’s driven by a lack of public demand that’s forcing up all prices. Private buyers who is willingness to pay for capital to rent capital is unchanged, are probably gonna get pinched by higher capital prices in the short run. So, and I can understand that they’re probably not too wild about this. Yeah, I mean, I also can’t imagine why, uh, that the Trump administration would be crazy about this because if, if bond yields go up. I don’t think that’d be a particularly popular political maneuver. Am I missing something there? Right. So there are have been some noises from the Trump administration that they want to, it’s not really refinancing, but I can’t think of a better concept to describe it. So we’ll call it that. They want to change the maturity structure of US government debt. There’s a lot of stuff maturing, short run. They wanna try and roll that over and turn that into long run debt. Because until pretty recently, long run rates made that a pretty attractive proposition. Uh, you could make the argument that 10, 15 years ago, whoever was running the treasury back then, I think it was Janet Yellen. If I’m remembering correctly, uh, made an error in not taking the steps necessary to lengthen the maturity on average of US government debt to take advantage of those more comparatively beneficial interest rates, which would’ve been a real boon to the taxpayer. Basically means that interest costs in the debt would be much lower today than they otherwise would have been, but now that there’s already pressure on long-term rates to rise, now that we have war saying that he wants to shrink the balance sheet, now that we have turmoil in global, uh, capital markets, given the recent events in the Middle East, which I fully expect to increase investor uncertainty for the foreseeable future. That’s gonna make government borrowing pinch more than it otherwise would. Now, the gamble that you’re making is that if wars can ultimately pull this off, that’s gonna give you breathing room on the short rate market, which is eventually going to reverberate in a lower risk premium in the long term market. But that requires a lot of things to go right in order for that plan to succeed. That seems pretty complicated. You’re counting on a lot of things that are all hard to do, each going off flawlessly. Can it be done? Sure. Should you count on that? Not in government work, I don’t think. Going back to the idea of, you know, fiscal pressure shaping monetary policy and that situation, like who loses savers? Borrowers, asset owners. Wage earners. Who, who loses? Yeah. Basically anybody who’s stuck into a long rate. If we get what economists call fiscal dominance of monetary policy, that basically means the central bank is going to be indirectly financing deficits by printing money. You can talk about all the complicated policies and trades that people will make. At the end of the day, it’s running the printing presses to cover Uncle Sam’s obligations. We know what the results of that are gonna be. Prices are gonna go up faster, inflation’s gonna go up faster. So anybody on a fixed income, anybody who’s locked into a long-term debt contract, right? Long-term creditors, on that side of the arrangement, they’re not gonna be too happy with this. They’re going to see their rate of return really eaten into by a much weaker dollar than they expected when they actually executed that contract. Of course, you’re gonna have corresponding beneficiaries on the sides of people who are borrowing. People who are in financial contracts that might have an adjustable rate, they probably won’t be off too bad. But what really scares me about this going forward is not if it’s probably going to be the case, that inflation is going to be higher for the foreseeable future, but also the variance in the inflation rate is going to be higher for the foreseeable future. A lot of people forget, at the beginning of the 20th century, it was not uncommon for large corporations to issue 100 year bonds, 100 year government debt. Nobody does that anymore. 30 years is pretty much the longest you can expect. Why? Because a hundred years ago, well, more than a hundred years ago now, at the beginning of the 20th century, we were on the gold standard. You can print paper, but you can’t print gold, and so that anchors the long run price level. If you’re on a gold standard, that pins down the dollars purchasing power, so you can afford to engage in those very long-term contracts, which is really good for promoting capital allocation, right? That’s a strong source of economic growth. If you can give people that kind of certainty. You can’t have that anymore. And if anything, that certainty is going to become less feasible if the variance of the inflation rate starts moving around because the central bank is forced, because the treasury is running too much debt to use its monetary operations to pay Uncle Sam’s ongoing fiscal obligations. You know, in all these scenarios you talked about, is there any scenario in which you don’t see the dollar being debased? Any scenario in which the dollar is not debased, I think the best that you can hope for is steady and predictable inflation. The best case scenario is that we get back to something like one and a half to 2% inflation every year for the foreseeable future. Note, though that we’re not there yet, we still haven’t won the post pandemic war on inflation, right? If you go and look at the recent price index releases. The consumer price index is looking more or less favorable, but the one that the Fed uses called this P-C-E-P-I, personal Consumption Expenditures Price Index, which is a just a different way of keeping track, uh, calculating the expensiveness of consumer goods and services. Inflation, by that measure is still running at close to 3%. So we’re talking about undertaking all these radical monetary policy changes. We haven’t even won the last war. What are we talking about? Opening up a front of the New War. I think that we should really focus on one thing at a time. In the meantime though, that like the tenure was down, you know, down pretty well. Was it just over four? Why is that? Why? Why did that happen? At least so far, you must expect that investors have muted expectations about the demand for government debt. That probably reflects some combination of lower inflation expectations, some combination in confidence in Uncle Sam’s ability to continue to repay. That can happen in the short run. In the long run, you have to worry still because the fundamental structural obligations have not been fixed. Interest costs on the debt are still, is still one of the single largest items in the federal budget costs more than the Department of Defense. That’s crazy. Long-term Social security, Medicare, Medicaid. We know that that’s going to be trillions of dollars of expenditures every year that we just don’t have the money for. So the money’s gonna have to come from somewhere, gotta have to raise taxes, lower spending or print money, some combination of all three of those things. And ultimately, I think that if we don’t fix our fiscal problems, the only feasible trajectory. For interest costs on the debt and interest prices themselves is upward. You know, a lot of people talk these days about the potential issues with credibility of, uh, the dollar. Yeah. Um, if Congress ultimately ends up getting more influence or the president gets more influence over the dollar, uh, what does that mean for long-term monetary credibility? If Congress actually gives its act together? Enacts beneficial reform to the Fed’s mandate. I think that that will increase public confidence in the dollar. Right now, the Fed has a triple mandate, stable prices, full employment, moderate long run interest rates. Suppose we do what I advocate be done, and we get rid of two of those planks stabilizing the dollars. Purchasing power. That’s the sole responsibility of the Fed. If you get that enacted in legislation. That can be really durable. ’cause executive orders change depending on, you know, what party holds the oval. But legislation is durable. That probably would be incredibly hard to appeal if it were actually enacted. So I think that that would be really good for credibility about the dollar, future purchasing power. But if we’re just playing presidential football between Republicans and Democrats, between what we want fed chairs to do, that’s the opposite. You can’t have any long-term insurance about what the dollar’s gonna do. If Republicans wanna do one thing every four years, and Democrats wanna fundamentally take things in a different direction the next four years, you can’t have partisan fortunes determining the course of monetary policy and continue to expect a robust foundation for financial markets. That’s a recipe for disaster. So you hear all this and you’re an investor at home and you think, I’m trying to make decisions 10 to 20 years out. What framework can people use in this, um, in this current situation? Um, not suggesting, you know, financial advice, but rather how do you, how do you approach this as somebody who’s looking at your own investments? Mm-hmm. And you know what to do about long-term financial planning. At a certain level, the market will ultimately force fiscal discipline of some kind. Uncle Sam, simply because you’re not gonna be able to make all those unfunded liability payments and continue to sustainably pay, uh, bond holders more than we’re paying for the national defense. Well, it can’t go on forever. Won’t go on forever. And so I think that over the very long run, 10 years plus, there’s still a reasonable case that you want to be long on securities, on equities. Uh, I myself have a very simple investing strategy. I have very, very low index, uh, very, very low fee, broad-based index funds. I have zero confidence that I’m gonna be able to beat the market. A lot of people think that they’re going to be able to time the purchase of inflation hedges, right? You’re gonna be able to get into crypto at the right time, get into gold or silver at the right time. I don’t think that you can do that predictably, if you think you can more power to you, maybe I should take some advice from you. But even given all the problems that we have. Given that there has to be a course correction at some point, I think that any of those course corrections make broad-based index funds the best long run purchase that you can continue to make if we get our act together. Financial markets are gonna do pretty good. If we don’t get our act together, everything is gonna be terrible. But my guess is just a broad portfolio that tracks the market as a whole is going to perform less poorly than everything else. It’s interesting. Uh, one of the, uh, things I read, um, about wars is, is one of the, uh, things that he sees happening over the next decade is, you know, he’s, he really believes that the AI revolution is going to be extraordinarily, uh, deflationary hit these, right? It would that balance off some of the potential risks that you’re talking about? Potentially, depending on why it’s deflationary. A lot of economists are afraid of all kinds of deflation, but that’s wrong. What’s really damaging to an economy is demand side deflation a sudden and unanticipated collapse in what we call aggregate demand, total dollar spending on goods and services. That was the cause of the Great Depression. That was why the 2008 financial crisis lasted as long as it did, and why the hangover was as long as it was. There’s another kind of deflation that we experienced for most of the second half of the 19th century in the United States, and that is supply side deflation. If we get better at making goods and services across the board because there’s general technological improvement, because we discover new natural resources, whatever, that’s actually salutary, that has a good effect. We’re actually using up fewer resources to make the goods and services that we can consume. Prices should reflect that in a market economy, and in fact, prices will reflect that in a market economy. So what we might refer to as that secular deflation caused by supply side improvements, that’s something that we should welcome. It’s something that we should not try and use monetary policy to fight against. Now, will AI give us that? If AI results in broad-based productivity improvements all across the economy, yes, I think that you could make a case that the rate of growth of prices will either slow down and could even turn potentially slightly negative. That’s a supply side deflation, and I welcome it. Now some people are worried about AI causing a demand side deflation. Uh, actually there are a couple of essays in recent weeks that went viral worrying that, you know, AI is gonna eliminate a bunch of white collar jobs. Consumers are gonna be out of a job, they’re not gonna spend that much. And, you know, down goes aggregate demand. That’s not gonna happen. I can confidently say that’s not gonna happen. ’cause it doesn’t even make sense in an accounting sense, let alone an economic one. Suppose that that actually happens. Suppose that AI does automate a bunch of white collar jobs and unemployment goes up because of it? Well, that means that a bunch of business firms that were previously paying wages now have a pot of money left over. What are they gonna do to that? It’s gonna go into profits, and when it goes into profits, it gets paid out to investors, holders of capital. So it’s gonna get channeled into investment. So demand as a whole does not decline. Its composition changes. You’ll see a fall in consumer spending, but a rise in investment. And so the overall level of total, total spending in the economy should remain more or less unchanged. Now, that doesn’t mean that we shouldn’t worry about AI for moral or political reasons, right? If a bunch of people are suddenly out of a job, that could be a political problem and we should have compassion from those. Who suddenly find their human capital worthless because of technological developments. That’s hard. We might wanna find ways to help them retrain to relocate. That’s a valid public policy conversation, but it is not a macroeconomic catastrophe. We’re not looking at a second grade depression here. I’m telling you right now. That is not in the cards. Well, it’s interesting ’cause it sounds like. Depression for some, a boom for others, right? And so that means that in the aggregate, it’s a wash. And so you should focus your public policy response on helping the losers. But that’s not about preventing a depression. That’s about just helping people retrain and redevelop human capital that can continue, allow them to compete in the 21st century economy. The language of e uh, economics, it’s a distributional concern. You’re worried about who has what slices of the economic pie, but it’s not like the overall economic pie is contracting. In fact, it’s growing still. So you could have 10% unemployment and. Booming in a booming economy, you could actually have both of these things. Yes, we have never seen that. And the reason that I think that we’ve never seen that is because we’ve never actually had macroeconomic institutions that are doing the demand side stabilization work that you would need. I think the Federal Reserve for all of its faults knows how to get the basics of that right. And another reason that you’ve never seen it before is that the political process simply would never allow it. Right. Mass unemployment of that kind would be so politically catastrophic that the political system for electoral reasons would never allow the economic system to unfold in that direction. It, it’s a sort of a weird thing, you know, it’s a fascinating thing to think about because you do, you know, you do point out that you would get this incredible production and investors would do well, but. There has to be, there has to be people out there. There have to be a lot of people who can spend. Right, so what, so what? That wouldn’t create an imbalance at that point, or is it just I don’t think so. No. You do have some economists who argue something like, um, white collar workers, those who are well off, but not necessarily wealthy. Their propensity to consume. Is higher than the very wealthy who save a lot of that. And so if you lay off people who are doing more consuming than saving, that could potentially have a detrimental effect on demand. But again, that’s only looking at half the ledger. The whole point of the financial system is to take savings and channel them into productive capital. You usually don’t see money just sitting in bank vaults unused. The whole point of banks is to take that capital that’s pooled and put it into investments. If that’s not happening, there’s something wrong in the background with the financial system, with the money and banking system, and so that rather than AI is your ultimate problem. Again, that’s something that did happen in the early days of the Great Depression and also in the 2007, 2008 Great Recession. You could absolutely have financial sector problems. For other reasons, uh, such that banks and financial allocators are not doing their job at allocating capital, but AI won’t be the reason they’re not allocating capital. It’ll be something else. They could potentially happen at the same time, but they’re conceptually distinct problems. What do you think’s gonna happen over the next decade? Just curious when, I mean, it’s a very complex world and you’ve, you know, you’ve outlined some of the, I guess, more traditional. Macro macroeconomic perspectives on this, but when you overlay what we just talked about, it becomes extraordinarily complicated. I think AI is gradually going to eliminate some jobs that right now have people doing what you might call white collar algorithms. Tasks that at least right now do require an advanced education, a college degree in some business relevant discipline, perhaps. Uh, putting together balance sheets, discounting cash flows, right? Making a marketing slide deck about consumer psychology and consumer demand. I could see AI replacing a lot of that, but not all of it because you’re still going to need people to decide. What assumptions do you make that the AM model is training on? What are the likely scenarios to which you apply that model? And so while I do think that there will be some sectoral imbalances that’s not fundamentally different from other significant technological improvements that we’ve seen in the past, right? The internal combustion engine, electricity, the internet spreadsheet software, I think AI could potentially be at least as big. As all of these things, but I don’t think it’s going to eat the world, so to speak. I think it’s going to cause a bumpy transition for some, and we’re gonna need to retool, especially in college business programs. But I think that on the whole, I’m cautiously optimistic about ai. But in terms of your, your previous discussion, how, you know, just in terms of the, the market forces and, uh, fiscal monetary. Uh, issues the, the, the, the deficit. How does it impact all that? If, if it ends up being as big as everybody seems to think it’s, that’s an interesting question because those potentially could run in opposite directions. If we do get a boost to growth from ai, that’s additional economic activity that when it’s taxed, can help address the deficit problem. So in that sense, uh, the degree which AI transformative and might cause like job problems also lessens the deficit and debt problems. To the extent that I is just another technological improvement, we might get a little bit more growth and that will help a little bit in terms of generating the tax revenue that we need to pay our bills. But it’s not gonna fundamentally solve the problem. If you push me on my sentence prediction, I think that on the fiscal side we’re going to some restructuring of entitlement programs such that people who have claims are not gonna get all the money they think they are. They’re gonna get something like. 95, 90 cents on the dollar, there’s going to be some reduction in the growth path of discretionary federal expenditures, and there’s probably gonna be some more money printing to try and smooth things over. So I foresee a slightly higher inflation rate over the next five to 10 years to try and deal with those difficulties at the same time. You know, that’s inconvenient. It’s not what we would want, but it’s not catastrophic. And if it coincides with a. Moderate, but not earth shattering productivity boost that we get from AI and similar technologies. I think that on the whole, we are in a sustainable place because the great thing about being Uncle Sam is that you never actually do have to pay all your bills. As long as the growth rate of debt gets slower than the growth rate of the economy. That’s fundamentally sustainable. Households have to pay back their debt. Governments don’t, right? If you’re trustworthy, you can just roll it over forever. That’s exactly why Uncle Sam hasn’t had a debt crisis in the past, right? Free market. Guys like me have predicted, you know, nine out of the last zero fiscal crises. We’re always saying that one is just around the corner, and it hasn’t been because we’ve underestimated the borrowing capacity of Uncle Sam. I think based on what we’ve learned, there is a possibility for a soft landing, but that soft landing is comparative. It’s going to come with faster dollar depreciate. Which is going to bite harder for people on the lower end of the socioeconomic spectrum, but it’s also going to come amidst significant change in terms of what entry level jobs especially look like in the white collar sectors. Fascinating stuff, Alex, uh, really do appreciate you being on, um, again, uh, the, the books, uh, money and the Rule of Law and the Political Economy of Distributism. Thanks. Yes, thank you very much. You make a lot of money, but are still worried about retirement. Maybe you didn’t start earning until your thirties. Now you’re trying to catch up. Meanwhile, you’ve got a mortgage, a private school to pay for, and you feel like you’re getting further and further behind. A good news. If you need to catch up on retirement, check out a program put out by some of the oldest and most prestigious life insurance companies in the world. It’s called Wealth Accelerator, and it can help you amplify your returns quickly, protect your money from creditors, and provide financial protection to your family. Something happens to you. The concepts here are used by some of the wealthiest families in the world, and there’s no reason why they can’t be used by you. Check it out for yourself by going to wealthformulabanking.com. Welcome back to Show everyone. Hope you enjoyed it. And uh, again, I think this is a, we live in very interesting times, uh, which I think is actually a Chinese curse, right? It’s like, may you live in interesting times. But yeah, we live in very interesting times and it’s hard to know. What is gonna happen? However, uh, in my opinion, this issue with AI is this is inevitable, right? Inevitable. Certainly in productivity gains. I’m not exactly sure how it’ll affect the labor, labor markets, and how quickly. I think a lot of that is gonna depend on how quickly people adapt to all this stuff. Anyway, hope you enjoyed it. And that’s it for me. This week on Wealth Formula Podcast. This is Buck Joffrey signing off. If you wanna learn more, you can now get free access to our in-depth personal finance course featuring industry leaders like Tom Wheel Wright and Ken m. Visit wealthformularoadmap.com. The post 550: The Only Economists Worth Listening to Right Now appeared first on Wealth Formula.

I recently had a long conversation with a very successful professional. He’s 58 years old. Highly educated. Respected in his field. Financially sophisticated — in fact, his job depends on understanding money. If you looked at his résumé, you would assume he was completely set for life. He wasn’t. A couple of bad investments. Some concentration risk. A few decisions that looked reasonable at the time. And suddenly he’s essentially back at ground zero — trying to start a new business at 58. This story is far more common than people realize. The Dangerous Assumption is that many successful professionals assume they’ll be fine. Doctors. Lawyers. Executives. Entrepreneurs. They make high incomes. They understand finance. They know about markets and interest rates and diversification. They focus on their career. They focus on income. They even focus on investing. What they don’t focus on is their own financial future with the same intensity they focus on their profession. There’s a difference. Being financially literate is not the same thing as being financially intentional. Especially when you assume you always have more time. The Good News at 58 is that he still has time. A lot of time. For entrepreneurs especially, it doesn’t take 25 years to rebuild. It can take five. There’s a quote often attributed to Bill Gates: “Most people overestimate what they can accomplish in one year and underestimate what they can accomplish in five.” That quote is brutally accurate. In one year, starting a business feels overwhelming. Progress feels slow. Revenue is inconsistent. Doubt creeps in. But five years? Five years of focused effort, smart strategy, capital discipline, and experience compounded? That can change your entire financial trajectory. I’ve Seen This Movie Before. I have a very good friend who was worth over $40 million in his early 30s during the real estate boom. Then 2008 happened. The real estate debacle didn’t just dent him — it wiped him out. For years, he struggled. Pride gone. Lifestyle reset. Just trying to survive. Most people would have mentally retired at that point. They would have blamed the market, blamed the system, blamed bad luck. But about six or seven years ago, he found his rhythm again. New strategy. New focus. New discipline. Today, he’s worth over $60 million. I get that’s not normal. But it proves something important. It Doesn’t Take a Lifetime. The examples I just gave are extreme. Most people don’t lose $40 million. Most people aren’t rebuilding at 58. But the principle is universal: It doesn’t take a lifetime to secure your future. It takes a focused season. A defined period where you are intensely clear about your objective. A stretch where: • You work harder than you’re comfortable with • You manage risk better than you used to • You stop assuming income equals security • You align your decisions with a specific financial target for the future There’s another quote I love: “The harder you work, the luckier you get.” Luck isn’t random. It compounds around preparation, visibility, and persistence. When you are laser-focused on a financial goal, you start seeing opportunities others miss. You make better introductions. You ask sharper questions. You move faster when something makes sense. And over time, it looks like “luck.” The story of the 58-year-old professional isn’t a warning about markets. It’s a warning about complacency. Success in your profession does not automatically translate into security in your future. Income is not wealth. Financial literacy is not financial strategy. And intelligence does not eliminate risk. But here’s the good news. If you’re in your 40s or 50s and feel behind — you’re not done. If you made a bad investment — you’re not finished. If you took a hit — that’s not your final chapter. You may just be at the beginning of your five-year season. The key is focus. Direct yourself to a destination you can visualize. That’s the only way you will get there. Because in the end, securing your future rarely requires a lifetime of perfection. It requires a concentrated period of intensity. And the sooner you decide to enter that season — the sooner your next five years will start compounding in your favor. There is no one who knows this reality more than this week’s guest on Wealth Formula, Rod Khleif . Watch on YouTube: Listen on Apple Podcasts: Listen on Spotify: Transcript Disclaimer: This transcript was generated by AI and may not be 100% accurate. If you notice any errors or corrections, please email us at phil@wealthformula.com.  welcome everybody. This is Buck Joffrey with Dwell Formula Podcast. Coming to you from Montecito, California, I wanna remind you that there is a website associated with this podcast called wealthformula.com. That’s where you go if you wanna. Become, uh, more, uh, involved with this community, including our accredited investor club, AKA investor club, uh, very easy to join. It’s free. All you do is you get onboarded and you see lots of, uh, potential deal flow that you wouldn’t otherwise see again, that is wealthformula.com. Simply click on investor club and get onboarded. Now, as for today’s show, I had a, uh, a long conversation with a very successful professional, recently 58, highly educated, respected, financially sophisticated, in fact, in the money business. Uh, and if you look at his resume, you would assume he was completely set for life, but he wasn’t. A couple of bad investments, some concentration risk. A few decisions that looked reasonable at the time, and suddenly he’s back pretty much to ground zero trying to figure out what to do, and he’s thinking about starting a new business or maybe buying a business. Well, that got me thinking because the reality is this story is far more common than people realize, and I actually hear it fair amount. Right? Many successful professionals assume they’re gonna be fine. Doctors, lawyers, executives, entrepreneurs, making high incomes. Maybe they understand finance, they know about markets, interest rates and diversification in theory. But here’s the trap. You focus on your career. You focus on income. What they don’t focus on is their own financial future with the same intensity. They focus on the profession, and that’s. The difference, right? The issue is that being financially literate is not the same thing as being financially intentional. Now, I actually hate that word because it’s a very, uh, uh, neo agey word intentional. But in this case, I will use it because that it’s very, it’s very appropriate. But here’s the good news, even at 58, right, you still have time. You have a lot of time for, especially for entrepreneurs, it doesn’t take 25 years to rebuild. It can take five. And there’s this quote, um, it’s often attributed to Bill Gates, who, who’s been in the news lately for a lot of other stuff, but this is a good quote. He says, most people overestimate what they can accomplish in one year and underestimate what they can accomplish in five. And that quote is so true. I will, it’s incredibly powerful and it’s very, very useful to think about and. Put in the back of your mind because in a year, like you’re saying, you’re starting a business, it’s gonna feel overwhelming. You may lose money, you know, slow progress, revenue, inconsistent five years, you know, with focused effort and you know, good strategy and discipline. The financial trajectory of your life could completely change over that five years. In fact, I will say that with my first business that I ever started, that is absolutely what happened. I was just pretty much outta residency, didn’t have any money, and within five years I was rocking and rolling. You know, it was a, it was, you know, it wasn’t worth, you know, hundreds of millions of dollars. But I, I, I was, I was doing way better. If you look over five years, it’s an incredible trajectory. And it’s not just me. I mean, there’s guys who’ve done it more extreme ways. I talk about this friend, a lot of times he was worth like 30 or $40 million in his early thirties, and then 2008 happened. It didn’t just kinda dent him, it wiped him out, and for years he struggled. Lifestyle kind of reset a little bit, just trying to survive. You know, there’s this saying in business that the key to su success in business is to stick around long enough until you get lucky again. Well, sometimes that’s true. And a lot of people might have, uh, kind of mentally retired at that point. But the reality is he stuck with it. He rebuilt about six or seven years. He was kind of sideways, then another six or seven years, new focus, new discipline, and today worth 60 million bucks. Now, that’s not normal, right? But it does provide, uh, it does, it does kind of provide an important point. It doesn’t take a lifetime always. Now most people don’t lose $40 million, and most people aren’t rebuilding necessarily from zero at 58, but the principle really is universal. It doesn’t take a lifetime to secure your future. It takes a focus season to find period where you’re intensely clear about your objective. It’s a stretch where you work harder than you’re comfortable with, and maybe it’s not fun to do that in your fifties or sixties. You manage risk better than you used to. You stop assuming income equals security. You align your decisions with a specific financial target. You know what, there’s a another line I love, another quote, and I don’t know where this one comes. I, I, I think it was some hockey coach of mine way back. It’s that the harder you work, the luckier you get. The thing is that luck isn’t random, right? It compounds. Around preparation and visibility and persistence. And when you’re laser focused on a financial goal, you’re gonna start seeing opportunities that are out there that others might miss. You’re gonna make, you know, better introductions, ask sharp questions. You move faster when something makes sense, and over time it starts to look like luck. I think the real lesson, um, about the situation that people get into, like this person I was talking about is. That it, it’s not a warning about markets per se, although markets have a lot to do with it. It’s a warning about complacency. You know, success in your profession does not automatically translate into security in your future. You know, income as you know, is not really wealth and financial literacy is not financial strategy. Although literacy is really, really important. You gotta have a strategy. And you can be really, really smart and not eliminate, you know, or mitigate risk enough. So if you’re in your forties or fifties and feel behind, you’re not done. Okay? You made a bad investment, you’re not finished. If you took a hit, I’ve taken plenty of heads, especially the last few years. It’s not your final chapter. You may just be looking at the beginning of your next five year season. And the key is focus clear goals, define targets, discipline, action. The sooner you decide to enter that season, the sooner your next five years will start compounding in your favor. Man, I gotta tell you, this is a, an ongoing story I hear a lot about, so again, think about that Bill Gates quote, you, you know, people tend to way overestimate what they can do in a year. Grossly underestimate what they could do in five. Anyway. There’s no one who knows this better than my guest on this week’s Wealth Formula podcast. Rod Cleef. Many of you already know him. We’ll have that conversation right after these messages. Wealth Formula banking is an ingenious concept powered by whole life insurance, but instead of acting just as a safety net, the strategy supercharges your investments. First, you create a personal financial reservoir that grows at a compounding interest rate much higher than any bank savings account as your money accumulates. You borrow from your own bank to invest in other cash flowing investments. Here’s the key. Even though you’ve borrowed money at a simple interest rate, your insurance company keeps paying you compound interest on that money even though you’ve borrowed it. At result, you make money in two places at the same time. That’s why your investment. Get supercharged. This isn’t a new technique. It’s a refined strategy used by some of the wealthiest families in history, and it uses century old rock solid insurance companies as its backbone. Turbocharge your investments. Visit wealthformulabanking.com. Again, that’s wealthformulabanking.com. Welcome back to the show everyone. Today my guest on Wealth Formula podcast is Rod Thief. He’s a real estate investor, author, and mentor with decades of experience in multifamily investing. Uh, he’s built and sold hundreds of millions, uh, in, in apartment assets and teaches thousands of investors through coaching masterclasses and his life. Uh, lifetime Cash Flow Academy. Uh, rod, how you doing? Good, brother. Good to see you, my friend. Let’s review, but you know a little bit about you, your background. Sure. You know, uh, sure. We have an interesting story. Okay, well I’m a Dutch immigrant, you know, think wooden shoes and windmills. I immigrated to this country, uh, when I was six years old with my brother Albert, my mother’s cia. Um, and we ended up in Denver, Colorado. Uh, struggled initially. Really struggled actually. And, and I remember, uh, wearing hand me down clothes all the way through junior high school until I finally lied about my age when I was 14 ’cause I was tall and said I was 15 so I could flip burgers at Burger King. You know, and I’m sure you’ve got listeners that had it harder than I did, but I knew I wanted more. And luckily my mom had an incredible work ethic and so she babysat kids so we’d have enough money to eat. And with her babysitting money, she was an entrepreneur and invested in real estate. Um, and her first real estate acquisition was the house right across the street from us. When I was 14, she paid about $30,000. And then when I was 17, she told me she’d made $20,000 in her sleep. It had gone up in value. And I’m like, what? Forget college. I’m getting into real estate. So I. Went and got my real estate broker’s license right when I turned 18, which you could do back then with education. Now they got, they got smart you, they need some, you need some experience. But, uh, I was a broker. I was smart enough to go work for a broker. But, um, you know, my first year in real estate I made about eight grand. My second year, maybe 10 grand, but my third year I made over a hundred thousand dollars, which back in 1980 was some pretty decent money. And so what happened between year two and year three? Uh, the 10 x my income was what? What happens? I met a, a guy, he was a broker. I was working for actually, it taught me about the importance of mindset and psychology and how really 80 to 90% of your success in anything is just that your mindset and psychology. So fast forward to today, I’ve, I’ve owned over 2000 houses that I’ve rented long term. I own thousands of apartments now, and I’m also buying senior housing now, which I’m excited about. And you know, in 2006, my net worth went up $17 million while I slept. And you might say, wow. I said, wow, I got a head so big I could barely fit it through a door. And I thought I was a real estate God. And you know, when that happens, God of the universe will give you a nice little SmackDown. Well, that was 2008. I conservatively lost $50 million in 2008 and nine. What I’m known for talking about on my podcast, which I’m blessed to say at this point’s, the largest, uh, commercial real estate podcast really in the world at this point is, and, and the reason being is I spend time talking about mindset. You know, people don’t remember what you said, but they remember how you make him feel. And I do little clips every week called Own Your Power, their motivational clips. And, and I think that’s the reason it’s been so well received. But, uh, you know, I’m known for talking about the. Mindset it took to have 50 million to lose in the first place. And you know, maybe more importantly, the mindset it took to recover from losing it. But, uh, you know, I’d love to, we can chat about that if you like, or I’d love to talk about the state. Yeah. Whatever you It’s a, it’s, I think it’s appropriate to talk about that right now, rod. I mean, I think Okay. You know, in this, in this market with what we had, you know, um, you know, there’s been a, there’s been a lot of pain in multifamily and Yeah. You know, it’s, you know, you and I have talked about this before where. Part of success is, is trying to recognize particular situations. Um, you know, you talk about Warren Buffet and how Warren Buffet says be greedy, when others are fearful and all that, that’s great, but it’s really hard to do. Right? And so help us understand like, sure. You know, uh, how, how do you, how do you do that? Sure. How did you go and how bad did it get? Well, I lost 50 million. I lost $50 million, so it got pretty freaking bad. Okay. I call ’em seminars. That was an expensive seminar. Yeah. Yeah. And very little, uh, so it was, it was ugly. It was ugly, but. It was, it’s, I, I’ll be, I’ll be candid. The strategies I’ll share very briefly here, the strategies, I’ll share the same strategies you would use to get started. Okay. You know, if, if you know you need to do something, and we talked about this, uh, uh, before we started recording, you know, the. With ai, a lot of jobs are going away. You know, if you heard of Elon Musk on, on Joe Rogan’s last epi episode, or the last interview he did with Joe Rogan, you know, he said any job in front of a computer is pretty much gonna be gone like lightning, like a year or two. I mean that fast. It’s crazy. And so, you know, and even, you know, surgeons are, are, are, are gonna be replaced by robotics and, and on and on and you know, and I think there’s gonna be it professionals, uh, you know, there’s gonna be a lot of. Pain for the people that don’t proactively, you know, reinvent themselves, start thinking about what they’re gonna do to reinvent themselves. Maybe it’s an ai, maybe you’ll learn ai, but, but you better think about it now or if you’re in one of these positions. So when the shoe drops, you’re ready because. Uh, there’s a lot of opportunity. I mean, there’s 10,000 people a day turning 65 in this country. You could buy businesses, um, you know, uh, I’m in, I’m, I’m excited about senior housing. They need beds, you know, and, and there’s a huge shortage of beds, but, so there’s a lot of opportunity, but you better pick something if you’re in one of these fields and get busy starting to study it and learn it, and do it on the side so that when the shoe drops, you’re ready. That’s, I don’t wanna scare you, but I just wanna open your eyes. To that fact. But so how, how I recovered from losing $50 million again, is the same strategy I would tell you to use to get started. And it’s first thing, it starts with goals. You gotta figure out what it is you want. ’cause how do you get anything if you don’t know what it is? Because with the goals you create a burning desire or a hunger and you’ve gotta have that to push through fear and limiting beliefs and so on and so forth. And, um. You know, I, I, that’s, if you come to one of my bootcamps, I do a virtual bootcamp every couple of months. It’s two days. I don’t sell anything there. And I’ll tell you later how you can come for 47 bucks. So it’s no excuse. But, but the first thing we do is goal setting on steroids, uh, because you’ve got, again, you’ve gotta create that hunger. Now, I’ll, I’ll say this to you, if you have no interest in, in, uh, learning what I teach. At my link tree, I did my goal setting workshop. It’s an hour. There’s a guide you can download if you go to rodslinks.com or text the word links if you’re driving, uh, to 7, 2, 3, 4, 5 at the bottom. My, is my goal setting workshop. And you know, here’s the thing, buck, people spend more time planning a freaking birthday party than they do designing their lives. Doing your goals is designing your life. So you know, if, if, uh, if you haven’t done ’em in a while, go to Rods, links, go at the bottom. There’s my workshop, there’s a guide. You can download ’em. Not gonna try to sell you anything. Spend an hour with me. Have your spouse do it. Have your kids do it if they’re over 10 years old, and design their lives. So again, it starts with goals. So that’s the first thing I did was reassociate with my goals. Then the second piece is you gotta make a decision. And I don’t mean dip your toe in the water. I don’t mean one foot in, one foot out. I mean, you decide it’s done. Okay. The Latin root for the word decision means to cut off. If you’re gonna attack the island, you burn your ships ’cause you’re taking their ships home. That’s a decision. And, and that’s what I did. I said, okay, enough, quit feeling sorry for yourself. Pick yourself up and go make something happen. And that’s, that’s what I did back then when I lost everything. But it’s the same thing again. If you’re, if you’re in a job and you’re. You’re just not where you want to be. So we make that decision and then you gotta take the first step, uh, you know, buck. And that’s, that’s pretty much it. You know, Dr. Martin Luther King said, you take that first step in faith, the next step will be revealed. And you know, LA Sue said the journey of a thousand miles begins with a single step. But, you know, in our business and, and, and the investors that we deal with and, and the, you know. Uh, active investors and, and, and passive both, as many of ’em are very analytical and you know who you are. If that’s you and I love you, you’re some of the most successful students that I have and successful people in our businesses. However, I also know how you have to check off every single box before you make a move, and you can’t do that here. Okay? You’ve got to, you’ve got to recognize that you’ve gotta have enough faith. To get started, you know, you can go all the way across the United States at night with your headlight only seeing 50 feet in front of you. And, you know, you can make it, you know, other people have done it before you, you know, there’s a, there’s a, there’s a, a road. And, uh, it’s the same way. You may have some obstacles, but, uh, it’s the same way with this business or really any business. But you, you, you’ve got to take that first step. And, you know, a, a lot of people fear failure, and I’m gonna tell you, don’t fear failure. Fear being in the same place you are right now, a year or two from now, unless you absolutely freak. Love where you are right now. Fear, fear, regret. That’s what I would fear if I were you. I, I, there was this nurse in Australia, a hospice nurse, uh, and her name was Bronny Ware. She asked patients when, who were about to die, if they had any regrets, and she wrote a book about it as a national bestseller. Something like The Five Regrets of Dying. You know what the number on regret was? It was Living the, not Living the Life I could have lived living someone else’s life, not doing what I know. I’m capable of fear that don’t fear failure, you know? Well, the next piece is fear and limiting beliefs. So fear, you know, every successful person have has fear. Now we, we, we, entrepreneurs call it stress, but it’s fear. And, you know, action mitigates fear. You wanna mitigate fear, take action. Go do something. If I’m, if I’m laying in bed at night, it’s three in the clock in the freaking morning and something stresses me out again, stress is fear. That’s what we achievers call stress. Uh, it’s fear. Uh, and, and, um. If something wakes me up and I’m stressed about it, I literally will get outta bed and just go write down some notes. I used to have a pen with an electrical pen that drove my ex-wife crazy and I’d, I’d write notes sometimes fill up pages of notes in bed so that I’m taking some action so I can go back to sleep. So there’s a, there’s a very simple example of it, but anytime that I am fearful about something, I take massive action towards it. Just, just taking steps, doing things. That will mitigate it. And it’s just how it works. So, I mean, it’s, it’s, it’s as simple as that buck. I mean, you just have to do some things. Towards that fear now. Now, the other thing is, if you don’t take action, the fear expands. So that’s the, uh, uh, that’s the antithesis there. So, so you, you need to take action because that’ll, that’ll mitigate it. The, the next piece really is limiting beliefs. You know, when I immigrated this country, I didn’t speak English. I got thrown into school, found out what bullies were for the first time. So I got my butt kicked occasionally, hadn’t learned how to fight back, and then my mom, this is the prop, sent me to school in these wooden shoes. And these are the actual wooden shoes. We found them. When we put her in senior house, senior living in, and these leather shorts, the Germans wear for October Fest, I had to wear that to school. And of course that was crack cocaine for the fricking bully. So I got my ass kicked again. And don’t wooden shoes, rod Or, or those, yeah. Yeah. Wooden shoes. Wooden shoes. Yeah. These are from Holland, man. That’s where I was born. Yeah. My mom. Proud Dutch woman. Yeah. This is, they’re wood. They’re real wood. The farmers still wear these things, uh, ’cause they’re good to go through mud, but they’re crack cocaine for bullies. Okay? And so, yeah, you know, uh, I, I, I got my butt kicked again and, and I came up with this belief system that I wasn’t good enough. I used to ask myself, how can I show them I’m good enough? And a lot of people have these limiting belief systems. I’m not good enough. I’m not courageous enough. I’m not strong enough. I’m not old enough. I’m not young enough. Here’s the thing to remember. There’s a reason the acronym for Belief Systems is BS because 99% of them are bs, but we believe they’re real. I mean, I used to be afraid to raise my hand in front of 10 kids in a classroom, and because of fear of rejection, now I speak in front of thousands of people a year, usually in flip-flops. Okay, so you know, you can mitigate this. So if you’re aware of one of these. Limiting beliefs, BS belief systems, drag it out into the daylight. Look at it with your adult rational mind. You’ll recognize that it’s BS and it will dissipate. But you gotta, you gotta think about it consciously and it’ll, it’ll go away. Um, the, the next piece is focus. Um, you know, focus really is power and whatever we focus on gets bigger, both positive or negative. Okay? So it’s very important that you focus on what you want, not what you don’t want. I’ll get, people call me and say, how do I get outta my student loan debt? I’m like, wrong question. How do you make so much money? The debt’s irrelevant, is the question you need to be asking. They asked Mother Theresa if she was anti-war. She said, no, I’m pro peace. I mean, you get it, right? And, and so, and in fact, I’ll give you another example. So I, I, my podcast is over, I believe, over 30 million downloads, which doesn’t sound like a lot in our social media world, but in, in the podcasting space, it’s not bad. But I listened to two podcasts, Joe Rogan and Tim Ferris. I try to get both sides of the aisle. I’m definitely on, on one side. Uh, but, but, um. They get, and the reason I bring that up is they get about 30 million a week, you know, but that big podcast. But, but, um, on, on Tim Ferriss’ show, he interviews the best of the best in the world. You know, the best athletes like Michael Phelps, NFL players and NFL players, NBA players, actors like Hugh Jackman, ed Norton, Jamie Fox, Arnold billionaires like Ray Dalio, heads of the biggest companies on the planet like Zuckerberg. And he deconstructs their success. It’s very intelligent conversation. I mean, I, I love listening to it. I started to hear a pattern, uh, they almost all meditate. What does meditation enhance? Focus, right? So focus is a really important piece of, of, of success. And just a couple more. One is playing, the next one is playing to your strengths. You know, when, when you, when you go to reinvent yourself or if you’re struggling, you know, or, or gonna start something. Play to your strengths and hire a align or partner for your weaknesses. Like in our world, you know, there’s lots of different hats you can wear. It’s a team sport. You could be the person that finds the deals and analyzes them. If you’re analytical, you could be the mouthpiece like me or you, and you’re, you know, raising money, talking to brokers and, and getting the word out. You could be the. You know, the um, asset manager, if you’ve got some project management experience, construction experience, there’s lots of different hats you can wear, but you wanna play to your strengths. Your strengths are your greatest assets. Don’t try to maximize your fears. You’re gonna get much further. Like I said, if you hire aligner partner for your weaknesses, you know, some of the most successful. Um, partnerships I see in the business are an analytical, introverted person with an extroverted, outgoing person. I mean, that’s a match made in heaven in our business. ’cause our business is primarily empirical. You ask the right questions, uh, and, and you get the numbers right. You know, it’s kind of hard to make a big mistake. Um, and so. You know, just make sure you’re playing to your strengths and when you’re playing to your strengths, you’re gonna have passion and passion’s required to influence people. Right? ’cause you love what you do, so you’re passionate about it. So again, real heavy duty argument to play to your strengths. Yeah, I think the last piece, the last piece is, is peer group. Um, you know, who you hang out with is who you become. You’ve heard it, you’ve heard it before. So if you’re gonna get into something, get around people that are doing it. Like my Warrior Coaching program, I’m, I’m gonna brag. I, I, like I said, they own 300,000 multifamily units that we know of. I’m, I, it’s, we’re counting, uh, we know it’s close to 300,000. We’re at like 275,000 or something. I know there’s a lot we’re missing. And, you know, tons of senior housing, tons of self storage, tons of industrial flex space, um, retail mixed use, you name it. Uh, mobile home parks, and. Almost all of those deals were done between warriors, between my students. So you know, ha, who you hang out with is who you become. You know, if you show me your three best friends, I’ll show you who you are in your relationships, your happiness, your health, and definitely your finances. But see, so many people default to a peer group they went to school with or they work with, and those people with their own fears or limiting beliefs might hold you back, you know, afraid of losing you, afraid of feeling less than if you succeed. And sometimes it’s family. I’m gonna tell you, love your family, but proactively choose your peers. Right? You know, and when I was losing everything in 2008 and oh nine, I was in Tony Robbins Platinum Partnership and there were people there that were killing it in that crash, uh, you know, thriving. And they’re like, get up, you puss. 50 million Schmill. Go make something happen. That’s who you wanna be around, not only while you’re building, but certainly when the proverbial stuff hits the fan, right? Uh, so anyway. I, that those are, those are some of the big pieces. Yeah. Well, that, I mean, that’s, let, let’s talk a little bit about the, the business that you’re in. Um, you know, you’re, you’re heavily involved with real estate. Obviously these, uh, mindset things are a great place to start. Now you go out there, let’s talk about where the market actually is and what you’re seeing in this market right now. Does your represent opportunity to you? There’s a ton of opportunity because there’s a ton of people in trouble, sadly. Right. Okay. A lot, a lot of people got adjustable bridge debt. You know, these rates have gone through the moon. I’ll give you a small example. We were looking at a small asset in San Antonio where I’ve got some assets and I. And there, the lender reserve payment that this guy had to pay to prepare for a refinance went from 8,000 a month to 80,000 a month. Do you think that’s painful? Right. And you know, and, and when you’ve got a multi tens of millions of dollar loan on a property and the interest rates adjust several points, you’re done. And, and so that’s just on the interest rate piece. Uh, mentioning my SEC attorney had six foreclosures in one day, apartment complexes, uh, clients, new clients that came to him, he told me like three weeks ago. So who knows how many since then. But you know, there’s a lot of deals and trouble and it’s sad. It’s very sad. But, uh, that’s just one piece is the loans. Uh, the expenses have gone through the thick and roof. I mean, I’ve got maintenance supervisor that’s making $40 an hour at this point, which is crazy. Uh, you know, I, I teach at my bootcamps. Uh, I used to teach a 50% expense ratio. That’s what you want to have. Now I teach 60% ’cause they’ve gone up that much. And so, you know, there’s a lot of pain in the market. But with crisis comes opportunity. There’s incredible deals. I’ve got a a, a 200 unit asset in San Antonio. Um. That is on a lake, and right next door is a 300 unit, 300 plus unit asset. Um, it’s sold the 300 units sold for 43 million in 21 or 22. It’s, it’s with the bank, it’s down to 28 million now. And I’m not even interested unless it gets to 24, unless the rates drop significantly. And so 43 to 24. So that’s what’s out there right now. And di I think you just bought a, a deal at like a 40% discount, didn’t you? Yeah. Yeah. Yeah. And here’s the thing, which is what I wanted to get into as well, and I I just bring, bring people’s attention to it, is that these times in history don’t happen that frequently. Right? Right. And it, and it’s interesting what the, the last multiple, uh, opportunities we’ve, we’ve, we’ve capitalized on, they have been all these situations where it’s a debt problem, right? It’s, it’s an asset that’s performing fine. But someone’s got a month, uh, to go and they just need to get out. They’re gonna lose all their equity, their debts due. Um, yeah, their debts do, there’s like this, this wall of debt, like, I think it’s like a trillion dollars of debt due by the end of this year. So what we’re seeing is, you know, the last several opportunities, 30 to 40% discounts on basis, uh, compared to just two or three years ago. And I think the challenges for investors is that like. In the background, those of us who’ve been through the pain are still feeling the pain and you feel very gun shy about it, right? Yeah. Yeah. Um, and you also start thinking, well, 30 to 40% discounts. Uh, you know, this, this is, this sounds very scary, but in, in reality, I, I’m trying to get people to understand that, that those discounts only last for so long, right? I mean, that if you look at like the, the debt. That’s out there. Most of that really bad debt washes away at the end of this year. At 2026. Yeah. After that, like those 30 to 40% discounts that like people are hearing so often, they’re not gonna be there anymore. No, that’s, and what I, and what I hate to see is people wait two or three years from now and all of a sudden there’s a frothy market and everybody’s jumping on the bwa. ’cause that’s what they always do. That’s not, you wanna be a net seller in that market. That’s right. And, and you know, it’s like you mentioned Warren Buffet’s famous quote, be greedy when others are fearful and fearful when they’re greedy. And, and so right now they’re fearful, which is making harder to raise money. And I’m, I’m having the same conversations. It’s like, Hey, if there was ever a time, it’s right now and now. Now the key, now the key. Differentiator or key factor is it’s all about cash flow. You know, like I said, that that deal at 43 is down to 28. 28 still doesn’t make sense for me. So it’s all about cash flow. And so, you know, I wrote a bestselling book. I’ll brag about, hang on, I’ll show it here. It’s called How to Create Lifetime Cash Flow through Multifamily Properties. The reason I bring this up is the subtitle is The New Rules of Real Estate Investing IE The new rules is it’s all about cash flow. I don’t, you know, I can brag about what you, you know, the discounts you can buy a property for, but it, it’s all about the numbers. It’s got a pencil, it, so cash flow is king. Um, so would you agree with that? Oh, a hundred percent. No. The interesting thing is though, that like, that’s a, that’s actually in real estate. That’s a principle I think a lot of people had, and I think what ends up happening is when the market gets frothy, you kind of skip that step, right? Because then what you’re, then what happens is that the market becomes so competitive that you’re trying to project, okay, I can get this from here to here and I can make it cash flow pretty quickly. And that’s when it gets dangerous, right? Yeah, yeah. Because listen, when Mark, when, when, when rates were, were as low as they were, you could do that. Now what? As soon as they started accelerating, well then you just got behind and, and you, you couldn’t catch up. And that’s kind of what happened. No, that’s it. And the expenses. Yeah. Yeah. They, the business about this market though, and maybe you can get some perspective on this, is what happens. You’ve experienced multiple real estate cycles and one of the opportunities that real estate investors have had throughout the decades is investing in a market where interest rates start to fall. What happens? Well, what happens is, is, is, is, is values As values go up, you know, and here’s the other thing, you know, uh, uh, with inflation, inflation’s not going away. And when you buy a property, the debt’s locked unless you do the adjustable rate thing. But if, if you get a normal, a normal mortgage. The, the rent, the debt is locked, but your, your interest, your rents are gonna continue to climb here. They’re going up, they’re gonna keep going up. And, you know, and, and of course the value of, of what we do is based on a multiple of the net income, the NOI, the net operating income. So any increase of the rents is gonna go to the bottom line. And, and so your values are gonna go up. So again, incredible opportunity to get into this real estate now. With the debasement of the US currency, with with, with all the money they’re printing and everything else, you’re, you’re seeing incredible rises in, in hard assets like gold, silver, of course, we saw a crash in Bitcoin ’cause it’s ethereal, it’s air, but, but real estate, uh, is, is you look at it over, over, you know, 50 years and, and it only goes one direction. It has some dips, but it continues to go one direction. And, and so, you know, I, I love real estate. I always have and. And, and always will. And so, you know, that’s why I teach it, you know, I do, I teach multi and I now teach multiple asset classes. I just taught multifamily for a long time, but now I teach pretty much every asset class and I’m, yeah. So what’s, uh, housing too? Yeah. Tell us a little bit about senior housing and um, yeah, what you’re doing there. I, I, I’ve only purchased one assisted living facility so far, but my students, my God, I can’t even count how many assisted living facilities and memory care units they have. But I, I’m, I’m gearing up. I have a whole team doing it. Uh, we’re cold calling and, and, and the, the, the out, the goal is. Is, uh, uh, 12 units in the next 18, I’m sorry, 12 separate facilities in the next 18 months. And we’re growing up to do that. Uh, we’ve got a ton of interest. And here’s the, here’s the reason why they call it the silver tsunami. There’s, there’s six, 10,000 people a day turning 65, and it goes forever. And it seems like forever. I mean like literally a over a decade and. And again, um, you know, those people. Uh, so there’s a lot of opportunity with that. There’s an opportunity to buy businesses as well. A lot of ’em wanna retire and own businesses, so there’s an opportunity there. But, but, um, in senior housing, there’s, there’s a huge shortage of beds. And, and I’m quite candidly, I’m not sure we’re gonna be able to match the need in the shortage of beds, but there’s a huge shortage of beds and, and so, um, you know, and to build new. The about the least you can build a place for is $200,000 a bed. Well, there are facilities that got crushed by COVID where you can buy. Facilities for sub a hundred dollars a bed. So there’s, there’s a, there’s an opportunity there that we’re capitalizing on. It’s very exciting. Uh, that won’t be around there a lot of, is there a lot of competition from, you know, big money institutions, that kind of thing in this space that are sort of pushing prices up? Because I would think if they would have to, yeah. Yeah. I would think they would have the same sort of thesis overall. So the larger facilities, yes. The, you know, I, I’m not doing the, the 200 bed facilities, you know, I’m in the 50 to a hundred range, you know, uh, kind of the mom and pop range as it were. Uh, and. So, at least to start, I mean, at some point I’ll compete with the larger ones, but we’re starting there and, and there’s just an incredible opportunity to, to get to, and the returns are fantastic. I mean, we’re seeing 15% cash on cash, 25% IRR, realistically not BS returns. And so, you know, it’s very exciting, honestly. And, and, and, and, and again, it’s got legs. It’s not going anywhere. It’s not like one of these things that’s cyclical. There’s, there’s the, these people are retiring. They’ve impacted everything from Pampers diapers to suburbia, and they’re gonna impact, you know, senior housing in a big way. So, um, you know, it’s, it’s that, that’s exciting. Yeah. I got crushed by that wave in 2008. I got crushed by that wave. I’m surfing this wave. Yeah, yeah. Yeah. Good for you. So tell us, you know, a little bit more about how people can get involved. It sounds like you got a lot going on there. So tell us about Well, I, I, I teach, you know, I teach this stuff. I have, I’ve had, I dunno, upwards of 20,000 people attend my bootcamps by the way. Really never had a complaint except that the breaks are too short. ’cause I, I packed three days into two days, but I teach this business and soup to nuts, how to find deals, how to pick a market, how to pick a team, how to underwrite them, how to finance them, how to raise all the money for them, on and on. And so if you go to Rods. links.com. That’s my link tree. That’s where my goal setting workshop is. If you want to do your goals, do it there. But, uh, if you come to my bootcamp, that’s the first thing we do. Uh, ’cause I, I need to have you get very focused on what you want. But, um, you know, it’s two days of training. I don’t sell anything and you can come for $47. So tell me your excuse. Okay? And the bonus, the bonuses are thousands of dollars. You get my deal evaluator software, my document library. You get all this stuff. And you know, and candidly, if you come to the bootcamp and. On Monday, you decide it wasn’t worth it, you didn’t love it. I don’t mean like it, I mean, love it. I’ll give you your 47 bucks back. It’s never happened, but it’s first time for everything. So, yeah, no, I, I, I love what I do. It comes out and what I do, and I, I spend time on mindset too, because again, that’s 80 to 90% of it. That’s why my students are so freaking successful. They actually do it. Um, and so. I, I, I really love it, and that’s where I’ll continue to do it. So I’m, I’m doing one of these virtual events pretty much every month and a half. I’ve got one coming up, I don’t know when this’ll air. I’ve got one coming up in March, March 7th and eighth, and there’ll be one, you know, 60, 45, 60 days after that. So, yeah. Fantastic. Rod, thanks so much for being on the show today. Oh, I appreciate it. I appreciate it. Uh, thank you. And, and again, it’s Rod’s links or text links to 7 2 3 4 5. Matt, thanks. Thanks for having me on. Buck, it’s great to see you again. You make a lot of money, but are still worried about retirement. Maybe you didn’t start earning until your thirties, now you’re trying to catch up. Meanwhile, you’ve got a mortgage private school to pay for and you feel like you’re getting further and further behind. Now, good news, if you need to catch up on retirement, check out a program put off by some of the oldest and most prestigious life insurance companies in the world. It’s. Called Wealth Accelerator and it can help you amplify your returns quickly, protect your money from creditors, and provide financial protection to your family if something happens to you. The concepts here are used by some of the wealthiest families in the world, and there’s no reason why they can’t be used by you. Check it out for yourself by going to wealthformulabanking.com. Welcome back to the show everyone. Hope you enjoyed it. We talked about a lot of things, but I think the mindset step is really important. So if you’re one of those people. Who is worried about, you know, a time in your life right now, or that that things aren’t going well? Things can turn around really quickly. You just gotta have some, you know, you gotta have the right mindset. You gotta have the right goals. That’s it for me this week on Wealth Formula Podcast. This is Buck Joffrey sign now. If you wanna learn more, you can now get free access to our in-depth personal finance course featuring industry leaders like Tom Wheel Wright and Ken McElroy. Visit wealthformularoadmap.com. The post 549: You’re Successful… Until You’re Not — with Rod Khleif appeared first on Wealth Formula.

There is one truth that has followed every major technological revolution in human history. Energy demand always rises to meet technological capability. When we industrialized, coal consumption exploded. When we built the modern transportation system, oil demand reshaped global geopolitics. When we entered the digital age, electricity quietly became the backbone of the global economy. And now we are entering the AI era. What most people don’t appreciate is that AI is not just a software revolution. It is an electricity revolution. Training a single advanced AI model can consume as much electricity as tens of thousands of homes use in an entire year. And once trained, these models continue to run inside data centers filled with specialized hardware operating 24 hours a day. A single large AI data center can require over 1 gigawatt of power. To put that into perspective, that’s enough electricity to power roughly 700,000 homes. One building consuming the equivalent of a major city. Now consider that companies like Microsoft, Google, Meta, and Amazon are planning dozens of these facilities. Suddenly, you begin to see the scale of what’s happening. Even individual AI queries consume more power than traditional computing tasks meaningfully. One estimate suggests an AI query can use roughly 10 times the electricity of a traditional search query. That difference seems trivial until you multiply it by billions of interactions per day. This is why, for the first time in decades, electricity demand in the United States is accelerating again. For nearly 20 years, electricity demand was relatively flat. Efficiency gains offset economic growth. But AI, electrification of transportation, and domestic manufacturing are reversing that trend. And here’s where the story becomes even more interesting. China understands this. China is building power infrastructure at a pace that is difficult to comprehend. They are adding entire national-scale power capacity every few years. In 2023 alone, China added more new coal power capacity than the rest of the world combined. At the same time, they are installing solar and wind at record rates, becoming the global leader in renewable deployment. They are not choosing one energy source. They are choosing all of them. Because they understand that energy availability determines technological leadership. Meanwhile, in the United States, building new power plants and transmission infrastructure can take a decade or more due to regulatory hurdles, permitting delays, and political resistance. This creates a very real risk. The country that can generate the most reliable, scalable energy will have a structural advantage in AI, manufacturing, and economic growth. Energy is becoming the limiting factor. And whenever something becomes a bottleneck, investment opportunities emerge. We are entering a period where trillions of dollars will be spent on power generation, grid modernization, nuclear energy, solar, battery storage, geothermal, and technologies that most people have never even heard of. Some of the biggest fortunes of the next decade will likely be tied directly or indirectly to solving this energy constraint. In today’s episode, we explore alternative energy sources, the challenges we face, and the technologies that may power the future. Because understanding energy is no longer optional if you want to understand where the world is going. And as investors, those who see these shifts early have the opportunity to position themselves ahead of the crowd. Watch on YouTube: Listen on Apple Podcasts: Listen on Spotify: https://open.spotify.com/episode/5l4674hFIJPWkz0spMq4YL Transcript Disclaimer: This transcript was generated by AI and may not be 100% accurate. If you notice any errors or corrections, please email us at phil@wealthformula.com.  Welcome everybody. This is Buck Joffery, the Wealth Formula podcast. And today, before we begin, I wanna remind you as always, there is a website associated with this podcast, wealthformula.com. That’s where you want to go. If you have, uh, an interest in uh, ing more in the community in particular, there is a, a credit investor club. AKA investor club, which you need to sign up for. Uh, go to wealthformula.com and see some private deal flow at, uh, no cost to you, uh, that, uh, you might have an interest in. Uh, let’s talk about today’s show. It’s a little bit about, uh, something. You know, that is, uh, on I think, a, a major issue, uh, going into the next decade. Um, you know, there’s one truth that’s followed. Every major technological revolution in human history. Energy demand is always rise, uh, to meet technological capability. You know, when we industrialize, uh, coal consumption exploded, obviously when we built modern transportation system oil. Demand, uh, reshaped global geopolitics. And when he entered the digital age, electricity became the backbone of the global economy, and now we’re entering the era of artificial intelligence. Now, what most people don’t appreciate is that AI is not just a software revolution, it’s an electricity revolution. Uh, training a single advanced AI model can consume as much electricity as literally tens of thousands of homes in an entire year. And once trained, these models continue to run inside data centers filled with specialized hardware operating 24 hours a day. A single large AI data center can require what’s called a entire one gigawatt of power. Now, what’s a gigawatt? Well, to put this all into perspective, that’s enough electricity to power. Roughly 700,000 homes, one building consuming the equivalent of a major city. Now, consider that companies like Microsoft, Google Meta, Amazon, they’re applying to build dozens of these facilities, and suddenly you begin to see the scale of what’s happening. Uh, even individual AI queries when you do them, they consume a lot more power than traditional computing tasks. Um, there’s an estimate that suggests that an AI query. Can use roughly 10 times the electricity of a traditional, uh, search query. The difference seems trivial until you multiply that by like billions of these interactions per day. And that is why for the first time in decades, electricity demand in the United States is accelerating again and doing so quickly. Now you might ask, well, you know, what’s been happening for the last 20 years? Well, electricity demand was actually relatively. Flat. And a lot of that is because of efficiency gains, offsetting economic growth, but ai, electrification of transportation, domestic manufacturing, they’re all gonna reverse that trend. And, and here’s where the story becomes even more interesting, because we know that China already understands this. China’s building power infrastructure at a pace that’s difficult to really even comprehend. They’re adding entire national skill, power, capacity every few years. In 2023 alone, China added more new coal power capacity than the rest of the world combined. And at the same time, they’re installing solar, wind, all these things at record rates becoming really the global leader in re renewable deployment. So you don’t think of China is that way, but they are. They’re not choosing one energy source. They’re choosing all of them. And because they understand that energy availability will determine technological leadership. Meanwhile, in the US things are kind of slower. Building a, a new power plant and transmissions infrastructure can take a decade or more. We got lots of regulatory hurdles and permitting delays in political resistance that the Chinese don’t have, and that creates a lot of risk. The country that can generate the most reliable, scalable energy, we’ll have a structural advantage in AI manufacturing and economic growth. And that is a big, big deal because energy at the end of the day is becoming. The limiting factor for growth, and whenever something becomes a bottleneck, you also get investment opportunities that emerge. So we’re entering a period where trillions of dollars will be spent on power generation, grid modernization, nuclear energy, solar battery, geothermal, you name it. And a lot of those things you’ve never heard of. Some of the biggest fortunes of the next decades will be tied directly or indirectly to solving these energy constraints. That is why in today’s episodes we’re gonna explore these alternative energy sources, kind of get an idea of what’s going on with them. I know it doesn’t sound super exciting or sexy, but understanding energy right now is, is not optional. If you wanna understand where the world is going, and as investors, those who see these shifts early are gonna have an opportunity to position themselves ahead of the crowd, and we’re gonna have. A conversation to highlight all of that right after these messages. Wealth formula banking is an ingenious concept powered by whole life insurance, but instead of acting just as a safety net, the strategy supercharges your investments. First, you create a personal financial reservoir that grows at a compounding interest rate much higher than any bank savings account. As your money accumulates, you borrow from your own. Bank to invest in other cash flowing investments. Here’s the key. Even though you’ve borrowed money at a simple interest rate, your insurance company keeps paying. You compound interest on that money even though you’ve borrowed it at result, you make money in two places at the same time. That’s why your investments get supercharged. This isn’t a new technique, it’s a refined strategy used by some of the wealthiest families in history, and it uses century old rock solid insurance companies as its back. Turbocharge your investments. Visit wealthformulabanking.com. Again, that’s wealthformulabanking.com. Welcome back to the short rewind, uh, energy demand is, uh, rising, not just from ai but from electrification. Population growth, economic activity itself. At the same time, we’re trying to transition how energy’s produced, which creates, uh, real trade-offs around cost, reliability, and scale. Today’s conversation isn’t about, uh, ideology necessarily, but it’s about the economics of energy and what’s realistic as demand continues to grow. And to help us think this through. I’m joined by Dr. Ga Hockman, professor of Environmental and Resource Economics, with the PhD from Columbia University Gall. Welcome to the show. Good morning. So let’s just start very basic here. In your view, why does economic growth almost always translate into higher energy demand? Because production is very dependent on energy. And so whenever you wanna expand production, you wanna expand food, you need more energy. And this is actually what we’re trying to decouple, to create production processes that are less energy intensive. So as we grow, as we become happier, more viable, we don’t necessarily need more energy. So, uh, setting, uh, ai, artificial intelligence aside for a second, are we already in a path where electricity demand has to rise, you know, meaningfully over the next decade? I mean, what, what kind of projections do we look at there? We need to decouple growth from energy. We didn’t do that yet. As long as we don’t do it. Uh, growth will be associated with an increase in energy demand, not as much as AI has been introducing. And that is, uh, uh, uh, jumping to a higher step. Right. Now, you’ve mentioned this a couple times in the decoupling idea how in the big picture, like how do you do that? Uh, does the low hanging fruit that the US implemented from the 1980s, 1990s, and that is energy efficiency. It, which creates a win-win. Uh, it just changed the light bulbs in your, in your house. You save electricity, but you also save money ’cause these bulbs last much longer. Assuming their cost is not high enough. Is not too high. Uh, industry is the same thing. Introducing more efficient processes. Can result endless need for energy, but we need to go a step further to make it more meaningful and to introduce production processes that simply depend less on energy or depend less on energy that is polluting. Give us another example. I mean, the light bulb is an easy one, but, um, I mean, what are some large scale ideas for that energy efficiency issue? That you’ll think about when you think about these kind of decoupling ideas. Uh, another thing, just, uh, the appliances at home, uh, you want them to, uh, be more energy efficient and the windows you put on your houses, you want it to be double blast, maybe even triple in some cases that blocks the sun and helps I, uh, isolate the house better so you don’t need to heat it as much. Insulation is very important. Uh, very similar things exist in the commercial sector. Uh, if you look at the big retail stores, they’re using a lot of light bulbs. They’re using a lot of insulation to reduce their, uh, heating costs. If they are wanting to become more energy efficient. So these are not very complicated things that can really make a change in residential, in commercial. And you can then expand it further into production process in the manufacturing. And there are different examples also there. There’s also this big driver of energy in the next couple of decades, uh, which, you know, people talk about how many more terabytes we’re gonna need just to support the artificial intelligence revolution. Do you think it’s realistic, you know, just to focus on these efficient levels? Is that enough for, for how much energy we need? No, no. And we need to expand the energy. Uh, it’s important to expand it in ways that is cleaner energy, so it does not create harm. So you don’t create a good with a bad, uh, you wanna introduce energy that is cleaner so you don’t increase, uh, pollution. Uh, impact greenhouse gases. Um, so it is also the fuel mix that you’re using. The fuel sources. Will you use solar? Will you use hydro? Will you use, uh, wind, uh, bio bioenergy, same thing. Bioenergy crops. So you wanna exp expand, you wanna. Introduce a more diverse set of feedstocks that many of them are much more, uh, cleaner than the existing one. Uh, so the movement to renewable is important. Uh, and again, you don’t need to decrease the existing infrastructure, but the new infrastructure at least needs to come from a cleaner sources. You need to improve our use of batteries. Yeah. Let, let’s break down some of the things that you’ve talked about. So, solar, okay. Um, what did, what does solar do well and where does it struggle? Solar, people forget, in 2005 it was $10. Now it’s below $1. So we need to understand that there is a transition in the transition. Many times costly, but we need to learn and bring it down that. Learning came in terms of installation. The installation became much more efficient, uh, much less costly, much faster, and that brought the price of solar down. Uh, solar has been performing very well in many places. Uh, eh, solar today is cheaper than many of the most polluting, uh, infrastructure for power in the world. If I remember correctly, the number, it’s around 500 gigawatts, which is a big number. Uh, they can, that solar can outcompete the existing, uh, energy sources. Uh, where it’s struggling is that, um. Silicon will be is is in high demand and that is a creating a floor that prevents solar from going even lower, but it can also create a constraint in the future as you expand it further. Can you explain for, for us just the silicon issue? ’cause is that. So it’s just a, a silicon is a major component and we don’t have enough, is that what you’re saying? Yes. Yes, exactly. And then doesn’t that drive up the price of silicon? Yes, but we, we didn’t hit that. We, we we’re, we’re, uh, but there are actually various entities working on alternatives. From MIT to companies, uh, that are offering interesting solutions. Yes. You mentioned storage as well. Um, energy storage. Um, how close are we to storage being really viable at scale? I mean, this is, um, you know, we certainly, battery technology has improved, but, you know, how, how, how close are we to it? Becoming something that is, is really, really helping the issues. Uh, it’s challenging ’cause right now it makes it more expensive. But if the more we use it, the more we learn, the more we understand, the more, uh, efficient and cost efficient we can introduce it. Cost will go down. So it’s like the, how do you push it forward? How do you adopt these technologies? Now, we should always remember that there are, in some places, it is already very viable. But it demands certain, uh, uh, circumstances. For example, uh, the Southwest has a location where it has, uh, underground water and solar. The solar heats the underground water. So the underground water becomes the storage that, uh, then the steam becomes the electricity in the night. And that is a very viable process. Hydro with wind goes also very well, and again, uh, they manage to store, uh, use the wind to bring water upstream, and then when there’s no wind, the water flows downstream and through hydro creates electricity. Batteries, it’s technology. Uh, will a breakthrough come one day? I believe so, but again, I, I can’t predict it. Um, we can talk about, um, you know, natural gas, right? I mean, natural gas doesn’t get much attention, uh, in the transition narrative, but how important is it today in maintaining grid stability in supporting renewables? Reliability is more important than prices to many of us. No one likes blackout and if you talk with the, those that monitor and and manage the electricity markets, that’s their top priority, not the price. Uh, we don’t like it when we don’t have electricity. We we’re very dependent on it. So reliability is definitely be, uh, uh, uh, a must before you even move towards renewables. Absolutely. Before prices even, uh, uh, for anyone in the us. Um, so NA Gas has the potential, uh, it has less. CO2. The problem with NA gas is that the infrastructure is leaking. That means that the pipeline are emitting and methane because of leaks. Uh, I believe that needs to be addressed. Uh, uh, natural gas has the potential to be used, but. You need to not use it with an infrastructure that is, uh, resulting in more damage than good. It kind of defeats the purpose of it. What would do you look at natural gas as a short term bridge or something that, you know, the, the system may rely on, you know, in, in a much longer, uh, timeframe, even with other renewables. I would be careful in creating a bridge because that this infrastructure is very expensive. Once you put the amount of money needed to create infrastructure, it’s very hard to change it. Having said that, you will have solutions that will use fossil fuels, which includes natural gas, even in the long run, simply because the cost and the benefits will add up in a way that. It won’t make any sense moving away from fossils. In my opinion, not everyone will agree with me. Yeah, but, and, and you do have technologies that can make fossil fuels much, much cleaner. Like carbon capture used in storage. Uh, that technology has a huge potential. You can recycle the hydrogen and recycle other components in the refinery process that results in a cleaner fuel. But it’s something that we need to incentivize the companies to do. Uh, a company will not do it independently ’cause it’s more costly and that’s important. How about nuclear? I mean, nuclear. Offers reliable carbon free, you know, power. Yet it hasn’t scaled the way many people expected. Um. Why is that people are afraid of nuclear. Look at the three Mile Island and, and look at Fukushima and Chernobyl for that matter. People remember those stories and that really resonates with them badly. And there’s also a problem in the accounting of nuclear. Even the most safest countries in the world like Japan will everyone considered super safe. Even they have an accounting problem. So there is the concern that. Even small amounts get leaked out to the wrong hands. That can be a very bad outcome. Eh? Having said that, there is, I don’t know. I don’t follow it too much, but I do know there is a drive to create small nuclear plants, mobile plants, eh, from my recollection for two, three years ago, the company that I heard of was very successful at that. Eh, Japan went back to nuclear different than Germany. By the way. Germany did not try to, uh, divest from nuclear. So there are some places that nuclear becomes very important. I think it’s also becomes important in some areas that work in ai. So it has been introduced as a source of electricity. Can you tell us a little bit about small modular reactors? There’s a lot of buzz about that. What, what exactly are they? I mean, how small are they? You know, safety wise, uh, they’re mobile, they’re not very big. And, uh, that makes them, uh, much more easier to manage and control as opposed to the very big nuclear plans. Nuclear is a base load. So you use it, you, once you turn it on, you don’t want to turn it off. It’s too expensive. The on and off, it takes it a long time to, to uh, ramp up. Uh, and, uh, mobile, uh, nuclear plants are addressing many of these concerns that exist with the big plants. So they are solving it in, in what I saw pretty well in some circumstances. How small are they? I mean, are they, so would you. Would a, you know, one of these AI data centers, or what would they just, would they have one small modular react or they’ll need more than that? They’ll need more than that. Oh, they need more, more than one. Yeah. Yeah, yeah. So they’re, they’re pretty small or they like, you know, the size of a car or they. How, how small are these things? No, they’re bigger than the car, but they’re not too big. If you know of a nuclear plant, the old one, you see these big round, uh, domes, uh, they’re, they’re not that big. They’re, they’re much smaller, but they’re not as small as a car. Yeah. And so you could run maybe, uh, a, an AI center with a couple of those or something like that. Is that the idea? They have, you can see some of them. There are examples in Texas where you have the, the center basically is surrounded by small units. Are they generally safer to use, and if so, why is that? Uh, I’m not a nuclear guy. I’m not a physic. I should be careful in it, but I, I, what I understood, they’re safer to use. Also, the material i, i I is not reaching, uh, levels that safer levels than you would need for, for example, for bumps and, and stuff like that. So they’re keeping everything at a safer level. When you step back and look at the whole system and think about. What’s gonna happen in the future? Do you think it’s more likely to be dominated by one energy source or like a diversified mix as we’ve been going through? I believe a diversified mix. I also believe that in some places you will always have fossil fuels. In some places you’ll have a very quick transition to renewables. Uh. Uh, we need to look at the system view. In some places it’s easier to clean the dirty fuel. In some places it’s just easier to introduce the, the clean fuel. Uh, some places I do believe you see, for example, developing world does not have the capacity to electrify. We talk about electrification and some people are very enthusiastic about it. You don’t see it in the development world. They don’t, they lack even the US And there is a study in Princeton that came, I think three years ago. Um, if you electrify the whole US today, you need to almost triple the grid capacity. Just understand what the magnitude of money that needs to be invested to get there. Is huge. Now developing countries definitely don’t have it. Even the US doesn’t have that capacity. So, uh, developing countries, I think you might see a lot more biofuels, a lot more, uh, other, uh, substitutes that exist that are easier for them to manage. And then a system view or a more complete view is needed ’cause it’s not. What is the most efficient process? Is what process fits best in a certain area, and, and that will create a lot of heterogeneity, I think. Do you have a sense in the us I mean, what, what do you think ends up being? There’s gotta probably be one, you know, dominant source that it will, will kind of come to friction based on our own. Economics in our own situation. Do you think that’s in the, in the near future? Is that solar, you think? I mean, what, what dominates in the future here? I don’t think you’ll dominate, even in the us you won’t dominate, uh uh. You have regions in the US that are very, uh, windy. Wind farms will be the optimal path. There are places that don’t have any clouds, 350 days a YA year. So solar is perfect there. Solar also creates employment and live view for certain communities so that the employment component is an important part. So you create. Income and, and, and, uh, in, in, in life, in, in economic variability in regions with the renewables, there are other regions that have, uh, a lot of supply of, uh, excess biomass or the capacity to produce a lot of biomass, and that creates them an alternative to use biomass ’cause that’s what brings them. Again, income, which is always important, but it also brings them a feedstock that might be of a, a lot of benefits. Um, and you will have regions that are heavily so heavily invested in fossils that it will never make sense to move away from fossils, but it will make sense to create cleaner fossils through carbon capture and storage in other ways. So I don’t think the US will move into one place or another. Yeah. Um, you know, you often hear discussions about, in the US about, um, our grid being outdated. Tell us sort of at, at a high level, if you wouldn’t mind explaining the issues with the grid and, you know, what, what kind of issues that brings up as we need more energy sources. Just look at the power plants. They were, look at their ages, the age of power plants. Look at and, and then there are a few that were supposed to be retired and now have been extended, but just. That by itself is sufficient to create problems whenever you encounter a natural, uh, extreme event that, uh, stresses the system. Uh, we saw with Sandy in the northeast. The northeast was, a lot of the infrastructure was outdated. Sandy came, the system collapsed. They fixed it now, so they upgraded it. There is, uh, uh. Some of the utility. Again, I’m not, I’m following anecdotal evidence and news, not beyond that, but some of the companies are striving to improve their grid and they are trying to, uh, introduce a more sustainable and reliable system again, ’cause reliability is so important. What does, what does it mean really to even update the grid? I mean, just for people who are not in this space, what does that even mean to upgrade it? You, you, you change the equipment, you upgrade the equipment, you better manage the inter, uh, interaction of trees and, and, and the electricity lines. Uh, you bring electricity lines underground. You also improve a lot of the infrastructure, uh, of the power plants and how they distribute the energy. So this whole infrastructure is being upgraded so it can support. For example, the ai. And that actually is something that the AI might bring as a very positive thing. So it will force the system to, uh, upgrade, to introduce more efficient processes, uh, distribution mechanisms that are more resilient, which I think is important. I hear we’re kind of behind when it comes to this, when you compare it to China. Can you talk a little bit about that? China has a different structure of, or economic structure. So a lot of the, uh, driver, the driver in China is the government and money that the government allocates to these alternative technologies, and that creates a very strong drive for renewables. Eh, China is also a big driver in coal in China, so. It’s basically where the government decides to put the money, and that’s where you see the industry flourish. If you look at the numbers, the investment numbers, China outpaces any country in the world in terms of the value invested per year in the recent years, and, and they’re producing a lot more, a lot more energy than us too. Isn’t that correct? I mean, I, I’ve just been, just in terms of following the AI news, I keep hearing about it. China has no. So many more terabytes than us, uh, of energy, uh, ability. Is is that true? Uh, that I don’t know. I don’t know exactly ’cause, uh, I know they’re producing a lot. I know they are expanding a lot, and I know that in the solar space, for example, they dominate because of that. They’re already, they’re also starting to dominate in the electric vehicle space. Uh, they’re becoming to leaders in those areas. Yes. Um, big picture, I think if you wanted to sort of sum up some of the, you know, major issues that you think that, you know, people like us who are. Investors or you know, just people wanna know what’s happening in the future. Like what, what’s, what’s the message for, for people? I would, I would try to make my house more efficient. I would try to, uh, and it’s important to understand this is not only about, it is about greenhouse gases, but it’s also about if your house is more efficient, you are also paying less money. And that has a lot of benefits to it. Similar logic can follow to the industries and how they work, how, and, and conserving energy is not necessarily coming at the cost of being more or less productive. That’s what we need to understand. You can conserve energy and still produce more. You can become more efficient and you can still, and you can reduce your dependencies on, uh, energy, which I think is important. Dr. Ga Hoffman, thank you so much for being on Wealth Formula Podcast today. Thank you for inviting me. You make a lot of money but are still worried about retirement. Maybe you didn’t start earning until your thirties. Now you’re trying to catch up. Meanwhile, you’ve got a mortgage private school to pay for, and you feel like you’re getting further and further behind. A good news. If you need to catch up on retirement, check out a program put off by some of the oldest and most prestigious life insurance companies in the world. It’s called Wealth Accelerator, and it can help you amplify your returns quickly, protect your. And money from creditors and provide financial protection to your family if something happens to you. The concepts here are used by some of the wealthiest families in the world, and there’s no reason why they can’t be used by you. Check it out for yourself by going to wealthformulabanking.com. Welcome back to the show everyone. Hope you enjoyed it. And, uh, yeah, again, you know, the goal of this show is really to give you, you know, a, a macro look at what’s going on in the world and one of the things that is. Clearly an issue for the United States is energy production. And so, um, you know, stay on top of this stuff. This is, you know, this is where the puck is headed, right? Um, ai, all these things that are, are really, uh, driving the next decade of growth. Really depend on it. Anyway, that is it for me. This week on Wealth Formula Podcast. This is Buck Joffrey signing off. If you wanna learn more, you can now get free access to our in-depth personal finance course featuring industry leaders like Tom Wheel Wright and Ken McElroy. Visit wealthformularoadmap.com. The post AI Is About to Trigger an Energy Crisis Most People Don’t See Coming appeared first on Wealth Formula.

For most of my career, I’ve been focused on two things: Operating businesses and Multifamily real estate. The strategy has been pretty simple. Take money generated from higher-risk, active businesses… and move it into more stable, long-term assets like apartment buildings. That shift—from risk to stability—is how I’ve tried to build durability over time. Now, to be fair, the sharp rise in interest rates a few years ago put a dent in that model. But zooming out, it’s still worked well for me overall. So I’m sticking with it. That said, there are other ways to think about real estate. In some cases, the real opportunity is when you combine real estate with an operating business. We’ve done that before in the Wealth Formula Investor Club (Hyperlink) with self-storage, and the results were excellent. Storage is operationally simple, relatively boring—and that’s exactly why it works. But there’s another category that sits at the opposite end of the spectrum. Hotels. They’re sexier. They’re more volatile. And yes—they’re riskier. But the upside can be dramatically higher. One of my closest friends here in Montecito has quietly built a fortune doing boutique hotels over the past few years. He started with a no-frills hotel in Texas serving the oil drilling industry. Over time, he combined his operational experience with his talent as a designer—and eventually created some of the highest-rated boutique hotels in the world. He’s absolutely crushing it. Of course, most of us aren’t world-class designers or architects. I’m certainly not. Still, his success made me curious. Hotels have been on my radar for a while now—not because I understand the business, but because I don’t. When I asked him how he learned the hotel industry, his answer was honest: “I figured it out on the fly—starting with my first acquisition and a great broker.” That’s usually how real learning happens. So this week on the Wealth Formula Podcast, I brought on an expert in hospitality investing to educate both of us. We cover the basics: How hotel investing actually works Where the real risks are (and where they aren’t) How returns differ from multifamily And what someone should understand before ever touching their first hotel deal If you’ve ever thought about buying or investing in hotels—but didn’t know where to start—welcome to the club. You don’t have to jump in tomorrow. But you do have to start somewhere. This episode is a good starting point. Listen on Apple Podcasts: Listen on Spotify: Watch on YouTube: Transcript Disclaimer: This transcript was generated by AI and may not be 100% accurate. If you notice any errors or corrections, please email us at phil@wealthformula.com. Welcome everybody. This is Buck Joffrey with the Wealth Formula Podcast coming to you from Montecito, California. Before we begin today, I wanna remind you, if you’ve not done so and you are an accredited investor, go to wealthformula.com, sign up for our investor club. Uh, the opportunity there is really to see private deal flow that you wouldn’t otherwise see because it can’t be advertised. And, uh, only available to those people who are deemed accredited. And then what does accredited mean as a reminder? Well, if you’re married, you make $300,000 per year combined for at least two years with a reasonable expectation, continue to do so, or you have a net worth of a million dollars outside of your personal residence. Or if you’re single like me, $200,000 per year or a million dollars net worth. Anyway, that’s probably, uh, most of you. So all you gotta do is go to wealth formula.com, sign up for investor club because hey, who doesn’t wanna be part of a club? And, uh, by the way, it’s a great price. It’s free. So join it. Just get onboarded and all you gotta do is just wait for deal flow. What a deal. Now let’s talk about different kinds of things to invest in. For most of my career, I, I have really focused on two things I’ve focused on. Either operating businesses, uh, in my case, those operating businesses largely have been medical and multifamily real estate. Uh, the strategy itself, theoretically the way I think about it, take money from sort of these active businesses, a higher risk, move them into more stable long-term assets like apartment buildings. Okay? The idea is that’s how you build some durability over time. Now, to be fair, okay, to be fair. Sharp rise in interest rates a few years ago. Put a little bit of a dent in that model. But here’s the thing is that you can’t throw out the, uh, baby with the bath water. ’cause when I zoom out, still worked well for me overall. So I’m sticking with it and, uh, that’s my story. I’m sticking with it. That said, there are always other ways to think about real estate, right? Real estate is not just multifamily. Um, in some cases, the real opportunity is when you combine real estate and operating businesses. So. We’ve actually done that before in our wealth formula investor club. Um, and we’ve done that through self-storage, for example, and the results were really good. Storage is operationally, generally pretty simple. Probably not that simple, but you know, but more so than other things, relatively boring. Boring is good, and that’s exactly why it works. There’s another category that sits at the opposite end of the spectrum of boring, and it’s sexier and it’s more volatile and it’s riskier. And uh, that is the area of hotels, right, like leisure, that kind of thing. But the upside in those things can be dramatically higher. You know, one of my closest friends here. Montecito, I talk about him all the time. He’s a, he is a little bit of an inspiration to me, although I wouldn’t tell that to in space. He’s built a fortune doing boutique hotels over the past few years and the way he started, you know, and I think it was only about a decade ago because he bought like this no frills hotel in Texas that was serving the oil industry. There was a bunch of guys, you know, drilling needed a place to say, and you know, he had this and he actually. I don’t know that I would recommend this, but he, he told me he bought it sight unseen just based on the numbers. Ah, man, I gotta tell you, I don’t think I’m that lucky. If I bought something sight unseen, it would not work great for me, but it did work great for him. But over time, what he did is he, he combined his operational experience with his talent as he’s like a designer, like designs, homes, an architect, uh, of sorts, although more than that. Um, and he, he used to build houses for like famous people in Hollywood. Anyway, he took that skill and so he combined it with hotels and he created some of the highest rated boutique hotels in the world. And he’s absolutely crushing it. Just crushing it. Of course, the reality is that most of us aren’t world-class designers or architects. I’m certainly not. I’m not artistic at all. Still, um, you know, the fact that he’s had so much success in this space and that he loves hotels. What got me curious? So, hotels have been on my radar for a while, not because I understand the business, but actually because I don’t. And when I asked him how he learned, uh, about the hotel industry, he just said, you know, I figured out on the fly and, uh, you know, started with my first acquisition, had a great broker who taught me everything I, you know, needed to know at the beginning and. That’s a great story. I mean, and ideally that’s how things happen. As you can tell, this guy is, uh, seems to just hit on everything. So good for him. So this week on Wealth Formula Podcast, I wanted to get a little bit of a hotel investing 1 0 1. So I brought on an expert in hospitality investing that could educate both you and me. So we’re gonna cover some of the basics, how hotel actually works, you know, what are the risks returns. Like, what should people do if they even consider, you know, buying their first hotel or investing in one? So if you’ve ever thought about investing, uh, in hotels, or maybe that’s the first time you’re hearing about it and you’re curious, uh, welcome to the club and uh, we will have a great interview for you right after these messages. Wealth formula banking is an ingenious concept powered by whole life insurance, but instead of acting just as a safety net, the strategy supercharges your investments. First, you create a personal financial reservoir that grows at a compounding interest rate much higher than any bank savings account. As your money accumulates, you borrow from your own. Bank to invest in other cash flowing investments. Here’s the key. Even though you’ve borrowed money at a simple interest rate, your insurance company keeps paying you compound interest on that money even though you’ve borrowed it. At result, you make money in two places at the same time. That’s why your investments get supercharged. This isn’t a new technique. It’s a refined strategy used by some of the wealthiest families in history, and it uses century old rock solid insurance companies as its backbone. Turbocharge your investments. Visit Wealth formula banking.com. Again, that’s wealth formula banking.com. Welcome back to the show, everyone. Today. My guest on Wealth Farm I podcast is, uh, John O’Neill. He’s a, a professor of hospitality management and director of the Hospitality Real Estate Strategy Group at Pennsylvania State University. Uh, he spent decades studying hotel valuation performance, Cabo flows and economic cycles in in the lodging industry. John, thanks for, uh, joining us. You’re welcome. So, you know, we’re talking offline. You’ve been in the hotel business for a long time. We’re trying to figure out how to frame this thing because you know, I mean there are, I know there are certainly people in. Uh, who in, in my group and my listeners, my community who are in the hotel space, but a lot of ’em aren’t. And you know, they’ve been thinking about, well, you know, we do a lot of apartment buildings, that kind of thing. Um, you know, what else should we be thinking about? And so, you know, when we hear, uh, hotel, um, they’re thinking of hospitality. But from an investor’s perspective, I guess the first question ask is what kind of real estate asset is a hotel? And, and may, may maybe just sort of fundamentally how different it is. From apartments office or retail? Yeah, that’s a great question because hotels are fundamentally different. But what I’ve seen over the past few years as well is hotels have increasingly been considered to be a component of commercial real estate. So we’ve always thought about office and retail and residential and industrial as being components of commercial real estate, but increasingly. Investors are thinking about hotels that way as well, because some of the high risk aspects of hotels have been moderated a little bit. So they are still considered to be a high risk and potentially high reward category, but they’re much more cyclical than those other types of businesses. So if we look at apartment leases, maybe being a year or two. Office leases may be being three to five years and retail leases could be five or 10 years. The leases in hotels are one or two nights, so there’s upside, but there’s risk involved in that as well. So when there’s pressure in a market to increase rates, like here where I am in University Park, Pennsylvania, when we have a home football game. We can see hotels with average daily rates of maybe a hundred to $200 a night charging seven, eight, $900 per night, and filling up on those rates. You can’t do that in an office building or in a retail center. And so there’s great opportunity when demand increases to push up rates and to greatly benefit from that. The flip side of courses on Sunday night when all those guests leave. You might be back to a hundred dollars a night and running 20 or 30% occupancy. Do hotels kind of follow the rest of real estate in terms of market cycles though? Yeah, it depends. I, I would say in many cases they’re actually leaders, which again, double-edged sword there. So for, yeah, when we plummeted in 2020 because of COVID hotels were probably the first category really to see it. Demand dried up overnight, and you go back to September 11th, 2001 on September 12th, 2001, a lot of hotels were empty and that wasn’t the case with office buildings and retail centers. The flip side, of course, is when the economy started improving, hotel operators could start pushing their rates very quickly. And so other categories of commercial real estate didn’t receive those benefits. Yeah, I mean, obviously there’s certainly gonna be. Real estate that’s often used that that’s often using debt and, you know, probably has the same sort of, uh, issues with regard to cap rate compression or decompression based on interest rates as well. Right, right. So, um, where are we? Right? What would you say right now, like, I mean, we know that. Our, we’ve been following very closely on the multifamily side. You know, prices are depressed. I mean, from 2022, we’re looking at probably 30% to 40%. Most, most, uh, large apartment complexes are not moving because people don’t wanna sell into a down market. But when they are, they’re being sold at 30, 40% discounts compared to 2022. Where is the, where is the hotel? Market at right now? It it, it’s challenged because right now we’re seeing discrepancies between where buyers wanna buy and sellers wanna sell. We’ve started to see some movement because some sellers have come down a bit in pricing because of what we’ve seen in 2025, the market really did soften as far as the hotel business is concerned. So in 2025. We really saw no increase in occupancy and in many markets we saw some decreases in occupancy. We are still seeing average daily rates going up a little bit, so yeah. Might be worth maybe a quick step backward that the two key indicators in terms of hotel lodging performance would be occupancy and average daily rate. With occupancy being the extent to which the guest rooms are occupied and average daily rate being the average price somebody is paying. We can talk about the mathematics of those, but, um, just I think conceptually, hopefully that makes sense. But, so, you know, at this point what we’re seeing is average daily rates are still going up a little bit, and the forecasts for 2026 are. Pretty much more of the same, where we’re not expected to see great occupancy increases, but we are anticipating that the average daily rates might go up a little bit. Uh, and, and in fact we might see occupancies decline slightly. And, uh, we might see, uh, average daily rates still possibly going up a little bit. That’s usually an indicator of being late in the cycle, you know, being somewhere near the peak and, and, you know, if the trough was 2020. Which was a pretty deep trough. 2021, we started seeing improvements and we saw great improvements in 22, 23, and 24, and so it’s looking like the end of a cycle. The thing we don’t really know for sure is, is there some reason that we’re going to really go into a substantial down period or are we actually in a situation where we’re going to have another upcycle? Yeah. You know, the other thing I was curious about too, like when you talk about these cycles for hotels, even within hotels, there are certainly, you know, different types of hotels. You know, there’s the boutiquey ones that are pe really pure tourism versus the ones that, okay, well maybe they are, you know, good for football games or. There’s others that are people use for, for, for work frequently, right? They’re, they’re just passing through for, for work trips. Do you, is there, um, is that difficult to extricate those types of different economies running at the same time? It’s not, I, I don’t know that it’s that difficult, you know, just to give you a little bit about my background, I’ve been a professor for some time, but prior to being a professor I worked for. Three of the four major hospitality organizations, namely Marriott, IHG, and Hyatt. Uh, and so going back into the 1980s when I was doing feasibility studies for proposed Marriott hotels, we, in most markets, analyzed three markets segments. And, and you essentially said what they are commercial business, which are your business travelers, leisure business, which are your pleasure travelers, and then groups, which includes conventions and, and those are still the three major market segments in most markets. In, in some markets. For example, if you’re approximate to a major international airport, there’s usually a fourth segment, which is that fourth segment is airline crew business, which is, is very different than the other three because. Whereas the other three go up and down throughout, not just the year, but throughout the week. Airline crew business tends to be stable throughout the year, so it, it, it’s in your hotel 365 nights outta the year. So it’s, it’s a very low risk, but also a very low rated market segment. So it, I don’t know if that’s that complicated, but it just needs to be broken out as you delineated it, which is that there’s. Three or four market segments in any market. And in terms of studying a hotel for development or for investment, it’s necessary to understand not just what’s going on on the supply side, in other words what’s going on in the hotels, but what’s going on in the demand side as well. So give you an example. I recently did a feasibility study in a market, which is a big pharmaceutical market. So I actually spent time with major pharmaceutical people talking about, where are you staying now? Why are you staying there? Are you a member of the Frequent traveler program? How does your business vary throughout the year? What rates are you paying? What facilities and amenities are you seeking? And things like that. So to really understand the demand because that demand segment. So important in that market. So it is ultimately a street corner business and what’s going on in a specific market in terms of the mix of commercial, leisure and group business and possibly other market segments. Really is something that we have to study in depth when we conduct a feasibility study or an appraisal for hotel. I, I don’t know if I mentioned, I’m a licensed real estate appraiser too, and although my licenses allow me to appraise any type of property, I only appraise hotels. Got it. Businesses fundamentally changed pre COVID and post COVID. I would assume that there’s probably less travel. Are you seeing impact? On those types of hotels from that kind of, you know, less travel, more zoom type activity. Yeah. And, and that’s a great, that’s a great follow up because with those market segments, although the segments are the same. The demand from each of those segments really has different, and, and as you said, it really changed substantially in COVID. It, it, it’s fascinating how once we were forced to use Zoom and, and other, you know, Microsoft teams and other technology like that, you know, we, we kind of did a kicking and screaming. But once we figured it out, we realized we didn’t get a lot done. Uh, now I spent last week in Los Angeles at America’s Lodging Investment Summit, and I go to this. Function every year, because I see many of the same people year after year, and the business cards might change, but it’s the same people involved in the hotel business, whether they’re brokers or investors or asset managers or consultants or appraisers. But in between. Each year I do a lot on Zoom with these people and you know, we can keep those relationships going. So it hasn’t eliminated, you know, in my personal case, my need to travel, but it has substantially reduced it. And I think a lot of other business people have seen the same thing. So if we look at the recovery since COVID, it was fascinating because the first market segment that recovered and recovered really strongly was leisure business and people, people see it as their right. To have a vacation and, and people were paying high rates, particularly in, in, in mountain locations and in beach locations. And so those rates came up really quickly. And then the group business followed. If people do wanna go to group functions like I did last week in la what has not recovered to the level of 2019 though is the business travel. Right. Interesting. So I, that’s probably a, uh, you know, and he, I can’t really see a particularly promising future for that Subsect either. Right. I think, in fact, bill Gates said it’s never going to be back to the, you know, he, he’s an investor in Four Seasons hotels, and he said it’ll never be back to the way it was in 2019. I don’t know if he’s right. I mean, because I, I still feel like we get a lot of things done. Face-to-face, person to person that we really can’t do in Zoom. I don’t think Zoom is great for establishing relationships. I, I still think that we need face-to-face, uh, personal contact. But, you know, that might be just my perspective because I’ve been working in hotels since I was a teenager and I’m really far from being a teenager now. And, you know, I, I’ve been indoctrinated in this philosophy of the importance of face-to-face contact. But yeah, you know, that might be generational. You with a younger generation. Yeah. Yeah, absolutely. Um, you know, just kind of going back to the difference differences, uh, with compared to other real estate hotels, ultimately the, one of the big differences, they’re operating businesses, right? I mean, they’re not that large. Apartment buildings aren’t, but they’re is I think, a specific sort of operational execution that matters a lot in hotels. So, you know, in invest, when investors are kinda looking at that, I mean, they, they should probably be not looking at it as nearly as passive as other real estate investments. Is that fair? I, I think that’s very fair because I think, you know, it, it shows what’s happened in terms of the market with real estate investment trust. Because I’ve sold my entire position in hotel real estate investment trust and, and as you probably know, if we look at real estate investment trust. Different categories in, in commercial real estate, hotels lag, which is fascinating because everything else we’ve been talking about explains why hotel returns tend to outperform other classes of commercial real estate. More volatility, but higher returns on average. If you can withstand the long period, uh, that you need to be an investor. On real estate investment trust, it’s the opposite. Hotels actually lag and, and I think it really is because of exactly what you’re talking about, which is that they really are like an operating business where there’s also real estate as opposed to a real estate play where it’s almost like there’s an annuity of rent that is very easily projected, uh, in hotels. You know, we, we. Project all the time how they’re going to perform. But you know, you know, I hope my projections are very good, but there’s always things that can COVID. For example, you know, now there’s a virus in, in India that you know might be coming and, you know, we don’t know, will this be substantial or will it be really minor in the Americas? We really don’t know. Uh, that won’t have a big effect on, on other classes of real estate investment trust, but. It could have a big effect in hotels, so, so the unknowns in hotels are very high. And then when you combine that with the fact that they are an operating business, which are very labor intensive and wage rates are going up. So the cost structure and the management of that cost structure becomes. Very important and the expertise of the hotel managers becomes very important. And so, yeah, like you say, other classes of commercial real estate or, or institutional real estate investments have an operational component. It’s much greater when it comes to hotels. So I actually have a friend who’s an, um, owns, uh, a few boutique hotels here in, in California, and he was telling me one of the things that he’s kind of worried about is, um, you know, they, they’re, they have some, um. Some mandates coming up with regard to, you know, minimum wage and, and all these things that, uh, hotel workers have to get, uh, give you just outta curiosity. I mean, most of my audience is not in California. I am, but have you heard about this? Can you tell us a little bit about those pressures? Yeah, I have heard about it. And there’s, there’s forces on the other side as well, namely the American Hotel and Lodging Association, which represents hotel owners, managers, and franchisers. And so they have a voice in these things as well. But the, the, the forest, particularly in places like California and, and in the west coast in general, we’ve seen it in Seattle as well. Um, you know, in, in terms of increasing minimum wages to rates that, that are shocking to me. Um, you know, that’s, that’s a big issue. You know, you don’t see it as much in the middle of the country, but you do see it on the coast and particularly in the, on the West Coast. So, you know, if we’re looking at projections, say into 2026 and, and perhaps beyond, we expect in many cases to be seeing higher growth in wage expenses than we expect to see growth in RevPAR, which is room revenue, preoccupied room, which is just occupancy times average daily rate. So the, the overall revenue is expected, at least in the short term, to grow more slowly. Than expenses and, and wages are really driving a lot of it. And then anything that’s affected by wages, so insurance, for example, property taxes, other expenses are really growing at this stage more than what we’ve seen in terms of revenue growth. So that’s, that’s a challenge right now. The, the question I think really then is how much will AI affect that and to what extent will guests become more comfortable with checking in? On an iPad type of a situation as opposed to seeing a person face to face, and there’s probably generational differences there. What it is forcing hotel operators to do is the same kinds of things that restaurant operators have been forced to do, which is find ways to use technology and actually have the guests face the technology and get the guests comfortable with that. In terms of things like check in and check out, you know, but still in hotels the rooms have to be cleaned and, and although there’s robots that. You know, they’re nowhere near what, where they need to be to actually clean Hotel guestroom jet, at least in any sort of economically viable way. But, you know, the long-term question is to what extent will the industry be adopting AI and other technology in order to address that issue? Because that’s what’s going to happen. It’s, it’s, you know, it’s not just going to be a situation where. The operators will accept paying higher wages and have the same number of employees in each hotel. Right. Um, branding, you know, sort of confusing to a lot of people. Not in the space, but you know, what role do hotel brands actually kind of play in, in protecting revenue and value? Um, and I guess when does a brand help an owner versus become a constraint? Yeah. You know, brands have been very important and, and I, I forget if I mentioned but of the, the big brand companies I’ve worked for three of them and, um. You know, they, they, they typically started as management companies. So originally companies like Hilton and Marriott primarily generated revenue through management fees. And so they own some of the real estate, although they’ve become asset light over the years and own very little, if any, anymore. Uh, but they do still manage hotels. So one thing that the brand companies do have is expertise in terms of management. That’s one of the fees that a branded hotel and a non-branded hotel would have as well, would be a management fee, which is usually expressed as a percentage of revenue. And sometimes there’s an incentive structure in there as well. But then there’s a franchise fee, which is just paying for the brand, and, and that’s usually as a percentage of total revenue, higher than the management fee. But what it does is it, it, it. Puts the property in a global distribution system, so the global distribution systems that brands like Marriott and Hilton and IHG and, and HIA have, uh, they. Generate heads and beds. You know, that’s, that’s the term we always, when I worked at Hyatt and Merritt, we always talked about heads and beds. Every night you’re trying to, trying to get people in the rooms. The brands do a lot to put heads and beds, you know, in a typical hotel with a good brand affiliation. Somewhere between probably a third and two thirds of the occupy rooms actually came in through the brand global distribution system, which historically was a toll free reservation system. And although the, you know, those still exist now, it’s really more of a focus on the online system and, and, and sometimes toll-free reservations and direct reservations. But, but that’s what the brand does. It, it, it ultimately is a generator of. So kind of just focusing on somebody who’s potentially thinking about hotels as an investment. So far, what I gleaned from you, and, and correct me if I’m wrong, is that timing probably isn’t perfect right now. We’re probably, you know, we’re probably in a, you know, a peak and you generally not a great idea to buy in peaks. Um. I personally, from what I understand, would stay outta California. You know, uh, you know, like my friend was saying that it was gonna make it very difficult for a lot of hotels to have their, you know, hotel restaurants even. And so he foresees like a lot of them having to close those down. Um, and then the, the next thing I think is, gosh, you really have to be cognizant of the, of the fact that, you know, work patterns are changing. And so maybe that’s not a good. Way to go, either. What other, what are some other big picture things that you think people ought to be thinking about as they evaluate the space? Yeah. Well, I think there’s a couple of things. One of which is. That is a street corner business. So it really depends on what street corner you’re in. Uh, I’ve done some research just on how hotels perform in university towns versus other locations because, for example, there are brands now called graduate hotels, which eventually was acquired by Hilton, uh, and, uh, scholar Hotels and, and these properties are university town hotels. They’re doing okay. You know, they’re, they’re doing okay. If you look at how universities operate, we’ve seen some Ivy League schools pay 60, $80 million or more just to make sure they keep that billion dollars a year coming in from the federal government that they, they get for research grants and, and we’ve seen, you know, look at what’s going on with NIL now in terms of, of university sports. Universities clearly are willing to. You gen willing to spend a lot of money to keep doing what they do, which is, you know, they, they generate a lot of research and I’m talking about. Big universities now, uh, you know, a lot of research and, and there’s a sporting business aspect to universities as well. So university towns are okay, and, and what I ultimately found in my research is they’re much less cyclical than the average. So, you know, we talk about the risk of hotels as things go up and things go down and things go up and down. That doesn’t happen as much in university towns. You know, big universities don’t close and, and don’t even substantially change their business model. So it really depends on, on where you’re located. And then there’s certain cities as well, you know, people, you know, I, I don’t have to go into detail about my last visit to San Francisco and how weird it was, and I was with students and, and told my female students don’t go out at night alone. I mean, it was, it was, it was really freaky, but. San Francisco now might be a place to invest. Now San Francisco probably has bottomed out. Uh, and the same might be true with New York. So, you know, it really depends on where you’re going. I, I think in general, yeah, you know, there’s, there’s concerns, but even so, you know, I think it’s still might be a good time to invest in. Good quality hotel companies, just, you know, in terms of the stock market and, and equity in, in businesses like Marriott and, and Hilton because their franchise fees and their management fees are a percentage of total revenue. So hotels that are not profitable, that are a member of those brand affiliations are still paying. Into those systems and you know, hopefully the goal is that these properties become profitable, but even while they’re not profitable, they owe franchise fees and in some cases management fees as well. So I think there are a lot of ways to still invest in the hotel business. It’s just what vehicles are being used and where. So, you know, it sounds a little overwhelming, um, for someone who, again, who’s new to the space. Any suggestions on how somebody might just learn more about this ecosystem and, you know, start to go down this path of potentially becoming, you know, a hotel investor? Yeah. Well, first thing is, you know, we talked about ai. AI is pretty good for helping people to learn. So if you wanna learn about the hotel business, you can go and have a really good conversation with chat GPT about what makes it click and where could the opportunities lie today. Uh, you know, I’ve gone over the past year from essentially not using AI at all to using it essentially every day. And so that’s a great way because that’ll access a lot of, there, there’s trade journals, for example, but it’ll access those things. Uh, the conference, like I went to last week, the America’s Lodging Investment Summit, which is in LA every year is a. Is a great place to learn as well. There’s, there’s wonderful sessions and that conference is attended by everybody from Anthony Capano, who’s the CEO of Marriott, down to people involved in real estate and investments in the hotels and, and who essentially make their living. Off of those as brokers, appraisers, consultants, asset managers and things like that. So, so there’s ways online to do it and there’s ways to do it actually by attending conferences as well. Yeah. A good broker as well. Right. I mean, you know, going back to my, my friend who, who’s become a very successful hotelier, the first one he bought, he threw a broker and he said he learned everything about hotels that he knows from that guy. Um. So that’s probably, it probably tells you something as well. Yeah. And, and there are some excellent hotel brokers. There’s some who are national in scope and some who are local in scope. So again, it depends on where you’re thinking you might wanna be investing. Uh, but, but there’s some great local brokers, but then there’s national firms like JLL and CBRE and Hunter, uh, that, you know, they have really good people who are very knowledgeable about the hotel business. Yeah. John, thanks so much for, uh, joining us here on Wealth Formula Podcast and giving us sort of an overview of the, uh, um, hotel, uh, real estate, uh, uh, asset class. You bet you make a lot of money, but are still worried about retirement. Maybe you didn’t start earning until your thirties. Now you’re trying to catch up. Meanwhile, you’ve got a mortgage, a private school to pay for, and you feel like you’re getting further and further behind. Now, good news, if you need to catch up on retirement, check out a program put out by some of the oldest and most prestigious life insurance companies in the world. It’s called Wealth Accelerator, and it can help you amplify your returns quickly, protect your money from creditors, and provide financial protection to your family if something happens to. The concepts here are used by some of the wealthiest families in the world, and there’s no reason why they can’t be used by you. Check it out for yourself by going to wealth formula banking.com. Welcome back to the show everyone. Hope you enjoyed and again, uh, hey hotels. Think about it. I guess. Uh, I continue. I will continue to do so, uh, especially given my buddy’s success in this space. Um. Although, I will tell you, I probably am not a boutique hotel guy. Um, you know, I don’t, I don’t know that I could make it super fancy, you know? And then on the other hand, you hear about these, uh, hotels that are. For the people traveling through and they’re not doing this so great. So maybe wait till that we hit that, um, that trough that he was talking about, he said we’re kind of at a peak right now. Anyway, that’s it for me. Uh, this week on Wealth Formula Podcast. This is Buck Joffrey signing off. If you wanna learn more, you can now get free access to our in-depth personal finance course featuring industry leaders like Tom Wheel Wright and Ken McElroy. Visit well formula roadmap.com. The post 545: Should You Invest in Hotels? appeared first on Wealth Formula.

This week’s episode of Wealth Formula features an interview with Claudia Sahm, and I want to share a quick takeaway before you listen — because she’s often misunderstood in the headlines. First, a quick explanation of the Sahm Rule, in plain English. The rule looks at unemployment and asks a very simple question: Has the unemployment rate started rising meaningfully from its recent low? Specifically, if the three-month average unemployment rate rises by 0.5% or more above its lowest level over the past year, the Sahm Rule is triggered. Historically, that has happened early in every U.S. recession since World War II. That’s why it gets cited so much. And to be clear — it’s cited a lot. The Sahm Rule is tracked by the Federal Reserve, Treasury economists, Wall Street banks, macro funds, and economic research shops globally. When it triggers, it shows up everywhere. That’s not by accident. Claudia built one of the cleanest early-warning indicators we have. But here’s the part that often gets lost. The Sahm Rule is not a market-timing tool and it’s not a prediction machine. Claudia emphasized this repeatedly. It was designed as a policy signal — a way to say, “Hey, if unemployment is rising this fast, waiting too long to respond makes things worse.” In other words, it’s a call to action for policymakers, not a command for investors to panic. What makes this cycle unusual — and why talking to Claudia directly was so helpful — is what’s actually driving the data. We’re not seeing mass layoffs. Layoffs remain low by historical standards. What we’re seeing instead is very weak hiring. Companies aren’t firing people — they’re just not expanding. That distinction matters. And this is where I think the big picture comes in — not just for understanding the economy, but for investing in general. When you step back, the big picture includes a government with massive debt loads that needs interest rates to come down over time. It includes fiscal pressures that make prolonged high rates politically and economically painful. And it includes the reality that if the current Fed leadership won’t ease fast enough, future leadership will. History tells us that governments eventually get the monetary conditions they need — even if it takes time, even if it takes new appointments, and even if it takes a shift toward a more dovish Federal Reserve. That doesn’t mean reckless money printing tomorrow. But it does mean that structurally high rates are unlikely to be permanent. And when you combine that with investing, the question becomes less about this month’s headline and more about what’s positioned to benefit when the environment normalizes. That’s why I continue to focus on real assets that are already deeply discounted — things like multifamily real estate — assets that were repriced brutally during the rate shock, but still sit at the center of a growing, rent-dependent economy. This conversation with Claudia reinforced something I’ve been talking about for a long time: The biggest investing mistakes usually happen when people zoom in too far and forget to zoom back out. I’ve made this mistake myself. If you want a thoughtful, non-sensational, data-driven discussion about where we actually are in this cycle — and what the indicators really mean — I think you’ll get a lot out of this episode. Transcript Disclaimer: This transcript was generated by AI and may not be 100% accurate. If you notice any errors or corrections, please email us at phil@wealthformula.com. Welcome everybody. This is Buck Joffrey with the Well Formula Podcast coming to you from Montecito, California. Before we begin today, I wanna remind you, uh, listen, we’re back in, uh, back in the saddle in here in, uh, 2026. I know it’s takes some time to get used to it, but we’re, gosh, we’re at the end of the month actually by the time this plays. I think we’re in February. It’s time again to start thinking about investing. And so if you are interested in potentially using this year, which I believe and which many believe to potentially be the last year, uh, big discounts, uh, in real estate and, uh, various other types of offerings. Make sure. To sign up for the Accredit Investor group, our investor club, as we call it wealthformula.com. You do need to be an accredit investor and then you get onboarded. An accredit investor is just defined by who you are. If you make over $300,000 per year filing jointly, or 200 by yourself, every reasonable expectation to do so in the future. Or you have a net worth of a million dollars outta your personal, outside of your personal residence, you’re an accredit investor. Congratulations. Join the club wealthformula.com. Interesting podcast. Today we have, uh, Claudia Sahm She’s a Big Deal, Claudia Sahm. You may recognize that last name som, for this som rule. And what is a som rule in plain English. You actually have heard of the som rule multiple times from other economists who’ve been on the show. The som rule looks at unemployment. And asks a very simple question. Now, has the unemployment rate started rising meaningfully from its recent low? So specifically, if the three month average unemployment rate rises 0.5% or more above its lowest level, over the past year, this som rule is triggered. Now, historically, that has happened early in every US recession since the World War ii. That’s why it gets cited so much. It gets cited a lot. By the way, the sum rule is tracked by the Fed treasury economists, wall Street Banks, macro funds, economic research shops globally, and when it triggers, it shows up everywhere, and that’s not by accident. Uh, Claudia has built one of the cleanest early warning indicators we have, but here’s the part that often gets lost. The som rule is not a market timing tool, and it’s not a prediction machine. Claudia, uh, emphasized that repeatedly. It was designed as a policy signal, a way to say, Hey, if unemployment’s rising this fast, wait, waiting too long to respond makes things worse. In other words, it’s call to action for policy makers, not a command for investors to panic per se. So what makes this cycle unusual and why talking to Claudia directly was so helpful? Well, it’s what’s actually driving the data. We’re not seeing mass layoffs. Layoffs remain low by historical standards. Um, what we’re seeing instead is very weak. Hiring companies aren’t firing people, they’re just not expanding, and that distinction matters. This is where the big picture comes in, not just for understanding the economy. For investing in general and when you step back, the big picture includes a government with massive debt loads that need interest rates to come down over time. It includes fiscal pressures that make prolonged high rates politically and economically painful. I’ve mentioned this before and it includes the reality that have to fed, fed, uh, if the current Fed leadership won’t ease fast enough. I am likely the case that future leadership appointed by. Donald Trump himself, uh, will, so history tells us that governments eventually get the monetary conditions they need, even if it takes time, even if it takes new appointments. And even if it takes a shift towards a more dovish federal reserve. Uh, that doesn’t mean, uh, reckless money printing tomorrow, but it does mean that structurally. High interest rates are unlikely to be permanent. Okay? And when you combine that with investing, the question becomes less about this month’s headline and more about what’s positioned to benefit when the environment normalizes. Okay? That’s really, really important, and that’s why I continue to focus on things like real estate, right? Real estate is currently. Not for long, in my opinion, but deeply discounted things like multifamily real estate, um, that were repriced brutally during the rate shot, uh, but are still at the center of a growing and, and rent dependent economy. And again, uh, this conversation with Claudia reinforced something that I’ve been talking about a long time, which is the biggest investing mistakes usually happen when people zoom in too far and forget to zoom back out. I’ve made that mistake myself. I am not immune. I have made lots of mistakes, and that’s one of them. So this is a great conversation. Hopefully you’ll enjoy it, especially if you want a thoughtful, nons sensational data-driven discussion. Where we are actually at in this cycle and what these indicators really mean. I think you’ll get a lot of this episode and we will have this conversation for you right after these messages. Wealth formula banking is an ingenious concept powered by whole life insurance, but instead of acting just as a safety net. The strategy supercharges your investments. First, you create a personal financial reservoir that grows at a compounding interest rate much higher than any bank savings account. As your money accumulates, you borrow from your own bank to invest in other cash flowing investments. Here’s the key. Even though you borrowed money at a simple interest rate, your insurance company keeps. Paying you compound interest on that money even though you’ve borrowed it at result, you make money in two places at the same time. That’s why your investments get supercharged. This isn’t a new technique. It’s a refined strategy used by some of the wealthiest families in history, and it uses century old rock solid insurance companies as its backbone. Turbocharge your investments. Visit Wealthformulabanking.com. Again, that’s wealth formula banking.com. Welcome back to the show, everyone. Today my guest on Wealth Formula podcast is Dr. Claudia Sahm. Uh, she’s an American, uh, macroeconomic expert, uh, known for her work, uh, on monetary and fiscal policy and real-time economic indicators. She developed this som rule, which I think, uh, people have mentioned on this show before, so this is a great opportunity to talk to her about that. Uh, it’s a widely, uh, followed recession signal based on unemployment. She’s also a former Federal Reserve economist and senior policy advisor in government. Um, so welcome, uh, Dr. Sahm. Great. Happy to be here. Thank you. Well, let’s, let’s kind of start out with this som rule because, uh, you know, it’s funny, we, we have had a few different people, uh, at various times bring up the SOM rule, and I think one had actually said that it was triggered, but I don’t don’t think it was at any rate, let’s, let’s start with that. What is the som rule? Lemme start with why is there a som rule, and then we’ll then we’ll get to specifically what the, what the rule is itself. So when I started out on the project, it wasn’t so much about. Calling a recession, like there are some really fancy technical ways that economists like look at the tea leaves and the data and either try to forecast a recession, which is incredibly hard, or even just say we’re in a recession in real time. So like that’s a useful endeavor. But what actually was behind the development of my recession indicator was more of a call to action. How do we develop policies that, that the Congress can put into place very quickly if a recession comes? So these kind of what are referred to as automatic stabilizers, so they’re decided upon ahead of time, but then you do need a trigger that says a recession is here. So now that enhance the unemployment benefits, send out the stimulus checks, whatever it is that we kind of have as our typical tools that are used in recessions, we could have those ready to go as kind of guardrails. Then like you, you turn the policy on. So that was really my emphasis was on how do we do better policy and recessions, get the support out quickly. ’cause that’s the best chance of kind of stabilizing the situation. And then it’s like, well it was in a, it was in a policy volume that they asked for, like a really concrete proposal. So if I’m gonna say an automatic stabilizer, I need to have a proposal for what a trigger could be. So that’s really where the som rule came. So I think it is important. It’s definitely important to me to, I always remember like what the kind of reason for it’s sure. Now that also guided what the indicator itself looks like. So again, it was gonna be in, in fiscal policy. It needs to be simple, it needs to be something that we track it and it needs to, I felt it was important that it capture the reason that we. Fight recessions, why there’s such a bad, uh, you know, outcome. And so it looks at the, the unemployment rate. I use the national unemployment rate, take a three month average. ’cause we wanna smooth out, like there’s bumps and wiggles in the data from month to month. So you kind of, you know, three month average. One way to smooth it out. So you take that series of three month averages, you look at the current value, you compare to the lowest value over the prior 12 months, if you’ve seen an increase of a half, a percentage point or more. Which is really pretty modest, but half a percentage point or more. Historically, we have been in the early months of a recession, so it’s not a forecast. It’s supposed to be like we’re in it. Let’s go. It’s an empirical pattern. It’s one that’s worked in the United States. It reflects kind of our labor market institutions, the way unemployment rate moves and recessions. It historically is the case that once you get past a certain threshold of increased unemployment rate, it tends to build on itself. And in a typical recession, we see increases of. Two, three or more percentage points in the unemployment rate. Uh, so that’s, that’s what the summer rule is. And in fact, it did trigger in the summer of 2024. At that time I had said like, look around, we are not in a recession. GP is still expanding. Job creation is still happening. We don’t see the other hallmarks of a recession. And pointed to the fact that we’d had a very disrupted labor market after the pandemic in particular. You know, there had been a lot of immigration at that point. The unemployment rate is the total number of unemployed. So people who don’t have a job but are actively looking for one out of the labor force, right? And so these people that have to either be employed or looking for jobs, and so we actually saw from the pandemic. Both with the pandemic and then later with the surge and now the reversal in immigration. We’ve seen a lot of movement in the, in the labor force, which makes unemployment rate a little tricky to interpret. And then I’d also argue, we saw early in the pandemic, the unemployment rate dropped very rapidly. We even had labor shortages. So in some ways unemployment rate rising and it has risen over. I mean, it continued to rise last year in 2025. A lot of that’s also normalization. We’d had a very low unemployment rate. So I think the, the pandemic recession has a lot of features that were very unusual. We’ll talk probably more about the labor market continued to be kind of unusual. So the, you know, the somal was not the only recession indicator to fall flat on its face in the cycle. Um, but I think it’s still a useful, useful guide and I, and. You know, even if it’s not a recession, the, the unemployment rate is a full percentage point above, its low in 2023. So, I mean, that, that could, that could be a reason for policymakers to respond, even if it’s not responding to a recession. Right. That was the first time that it, that triggered and, and actually didn’t. End up in a recession, right? There’s some back in the 1950s, earlier, but it’s, it’s the first time where there’ve been some false positives in the past or, or near false positives. Like in 2003. It was kind of close, uh, is like the unemployment rate rises a little bit and then it falls back down. What we saw after it triggered in 2024 is it stabilized. Then last year it continued to rise. So this the pattern that we’ve seen since the pandemic of rapid recovery dropping unemployment rate and then it’s like gradually rising and yet has risen a full percentage point that you go all the way back in the post World War II period. We don’t see anything that looks like that. So that is a very unusual. Paris. So something’s more is going on in the labor market than just our typical business cycle, boom, bust, recession type dynamics. So what is that? What is the thing that’s happening that’s unusual right now in the labor market? Right? So the thing that is driving the unemployment rate up, I think this is a good lesson, a reminder to all of us. It’s not about layoffs. The rate of layoffs in the United States is really quite low. You look at unemployment insurance claims, they’re also quite low. What’s been pushing the unemployment rate up over the last two and a half years has been a very low rate of hiring and, and it’s, and it is something that over time will at least gradually put upward pressure on the unemployment rate and frankly. Until hiring picks up and we really don’t have many signs of it. Even as we enter 2026 unemployment rate’s gonna probably keep drifting up ’cause we’re not keeping job creation’s, not keeping up with, you know, people coming into the, into the labor market and, and that what’s, I think the puzzle right now is that hiring has been very low. But what we’ve seen in terms of consumer spending, business investment, so the kind of the big pieces of GDP, they’ve really held up pretty well, so. Business. It’s not, again, not that recession of the customers have disappeared. And so we’re not hiring, or we may even be firing workers. The customers are there for the businesses, but they’re choosing in this environment not to add, uh, to their payrolls. And that’s slowly pushing up down point rate. Yeah. Um, you know, it, it’s interesting what you’re, you’re talking about, but essentially you’re, people aren’t getting fired. They’re just, when they retire or leave, they’re just not replacing those. Individuals, you know, makes me think a little bit about what’s going on in the big, you know, in the tech push with artificial intelligence and that kind of thing, and increased in efficiency. Certainly you see that in the larger companies like Amazon and all that, where they’re just becoming massively more productive and cutting expenses essentially by, you know, using tech. Do you think that this is sort of an early indication, potentially of that kind of movement? So it. It’s possible, but I think we’re at the very front end of AI disrupting the labor market. This low hiring rate that we’ve talked about. You see this across all kinds of industries, including ones that don’t show high levels of AI adoption, and frankly, a AI adoption is pretty low. I mean, there are some sectors like tech and increasingly finance and some professional services have higher adoption rates. Uh, but in terms of it being able to explain the low hiring. I think it’s pretty tough ’cause the low hiring is such a, such a broad based, um, phenomenon. Now, AI might be, I think, indirectly contributing in that one of, one of the hypotheses about why, um, businesses have been, uh, not hiring despite, you know, economic activity. Continuing to push ahead could be that there’s a lot of uncertainty. Now there is a long list that we could draw of, of factors that might be causing businesses to be uncertain and hesitant to add to their payrolls. Uh, a lot of times you talk about things with tariffs or, you know, economic policy, regulations changing, you know, so there’s a lot going on there. But it could also be, there’s a lot of uncertainty about what this technology means for the future. Maybe you don’t need to bring on more workers because your ability to kind of use and adapt this technologies coming online. And so like that could be part of it. I think there’s another piece, you know, we have a lot of discussion about ai, but I do think that there’s, there could be a, a technology angle to this that’s, that is. Not in the AI technologies, but maybe just some of the more basic kind of automation is again, right after, you know, the, the pandemic recession as we came out of a, you know, very rapid recovery, uh, there was, there was a lot of hiring or that, ’cause businesses had done a lot of firing and they needed to bring back workers really rapidly and we actually had a period of labor shortages. There were workers moving around a lot and there were, that also put a lot of pressure on some employers, particularly in service sector, to automate more ’cause they just couldn’t get the workers, so they needed to bring technology. Online to help, you know, fill the gap. And over time, you know, businesses though, they haven’t done as much hiring, they have been firing. So the workers, they have longer tenures, have more experience, they’re probably more productive. So maybe businesses can kind of, you know, get away with not doing more hiring. ’cause the people they have there can kind of keep up with it. Um, and they’ve done some more automation. I don’t think those are sustainable. I think we’re going to need to see hiring pickup in terms of, of staying with, um, you know, as expanding, uh, demand from customers. But I won’t pretend to know what AI means for the future of the labor force. Right. So like there could be, I think that’s a big conversation about we’re headed, where we’re headed. I think it’s probably a pretty small slice of explaining. Where we’re at right now. You know, it’s interesting because obviously there was a lot of concerns about rising inflation, and particularly in the context of, you know, tariffs and, and among those types of things that were, were, um, coming down the pipe. And as it turns out, inflation seems to be coming down. How do you explain that from where you sit? Because it, it, it seems sort of to contradict a lot of what, you know, many economists believe to be likely. So when thinking about the effects of tariffs on inflation and this, this idea that it didn’t end up being as much of a factors we had really feared, uh, you know, a year ago. I think there’s a few things to keep in mind. One, the announced tariffs, uh. Didn’t come to pass fully. Right? So there’s a big difference between some of the, the, the initial announcements, whether it was on Liberation Day, April 2nd, or the initial kind of retaliation tit for tat with China, where we ended up with some triple digit, uh, tariff numbers. Those didn’t end up being where we, we ended now tariff, the effect of tariff rate. Is much higher than it was before. Right. Uh, president Trump came into office for the second time, so like, I don’t wanna minimize the, the, the increase in tariffs and the US government collected about $200 billion last year in, in additional tariffs. But there is a, there’s a good bit of daylight between what was announced and where we actually ended up. Businesses also proved very capable of trying to avoid those tariffs and not in like a. Illegal kind of way of avoiding them, but, but using inventories like trying to get ahead of them. We know the tariffs are tariffs. There’s been some evidence that, that it’s businesses are gonna start passing on the tariff cost increase when it’s actually tied to the inventories that they’re putting out in front of customers. And for some of our goods, like say apparel or things that have long seasons or come from, you know, all across the world, it actually takes quite a bit of time from the inventories being what actually shows up in front of customers. So there’s been the ability to. Kind of get around the tariffs ’cause they were rolling in. And so do be smart in terms of your inventories. And then it just takes time for those inventories to be, you know, um, to come down. Mm-hmm. By, there’s been several studies at this place, at this point that, that demonstrate that the, the tariffs, the cost of the tariffs is coming into the us. So the, it’s always the importer that pays the tariff, like literally writes the check to the US government. But it’s possible that the foreign producer could say, reduce their prices on what they’re, you know, paying or what they’re asking to be paid for that, uh, imported good. And then that would be a way of the foreign producer sharing the cost of the tariff. But everything that we see from the M Court data suggests that a very small fraction, probably less than 10%. Of the total tariff burden is being born by, at least at this point, born by the foreign producers. So it’s coming into the us. It’s sitting with either US businesses that are importing the goods or have the goods at some point in their, you know, in their supply chains and, and with us customers, the consumers we have, we’ve seen. I think you can really look at the inflation data. You can see the goods prices, which often are kind of a drag on inflation that they did turn around. They’re, they’re putting upward pressure on inflation. It’s not massive. It doesn’t explain all of these, you know, 200 billion in tariff costs, but then it is, it’s sitting with businesses. The effects still, it’s still just not that long enough to really understand. You know what, what the implications. It’s possible. I, I think that’s true with any, with any big policy change. Like it doesn’t happen overnight. I think that’s one thing that a lot of, a lot of economic models that, like, they’re, they’re very sensitive, right? Like as soon as a policy change happens, the models will kind of tell us something pretty dramatic in terms of adjustments. But this last year was a reminder, like when there’s, when there’s a big cost, there’s gonna be a lot of attempts to adjust around it to try to minimize that cost and then. It takes time, like in the real world, like the interactions are much more complex. You know, inventory lags all of the, like, it takes time to move its way through. So I think we’re not done with the pass through. I think we’ll probably still see more come to consumers, but businesses could decide to bear that cost. They, they could, you know, with profit margins. I mean some of, some of the inflationary environment in the pandemic did allow. There were very broad base increases in prices. You did see some companies be profitable from that because it was, there was a, you know, some of the costs were more targeted, but the, you know, the, the price increases were broad. So it could be a time where businesses see that, you know, consumers are more price sensitive now than they were in 21, 20 21, 20 22, so they’re not passing as much on it. Could be that that’s part of where. Like the cost businesses are dealing with that cost by maybe doing less hiring as opposed to passing it on to consumers. Uh, you know, they could be taking a hit with their profits. They, you know, so like, it doesn’t have to go all the way through to consumers. There are different levers that can be pulled. I do think we’ll still see some pass through in the, in probably the first half of this year, and that’s assuming that our whole tariff regime. Sit still, right? It looks like once again we might be, uh, increasing those tariffs, but, um, so yeah, I think it’s just tracing, you know, the tariffs through the system is really complicated. And one last thing I’ll say about the tariffs is they’re not just tariffs on goods that go to consumers. These tariffs have been broad enough that we’re also taring imported goods that are used by our manufacturers used for our, by our businesses in their production. So then it can take a really long time for that to end up with the, you know, the end customer could be a business to start with, and then it moves its way down. So I think these are just, you know, the costs are real. We can see the tariffs have been collected, the costs are there. We can see in the import data, there haven’t been import price data, there haven’t been a lot of adjustments by the foreign suppliers. So then it’s just a question of, we have these costs. Where did the cost go? I believe the last GEP was 4.3% and, uh, inflation was around 2.6, 2.7, or at least core. You’ve obviously, uh, worked at the Fed. Um, give us a sense of the situation that the Fed is trying to figure out here. Like what do they do with these numbers and, you know, all of the issues that surround them. The work at the Fed, I mean, it, it’s laser focused on the, the response, the mandates that the Fed has. So with maximum employment and price stability and with maximum employment, that’s not something that can be easily defined. It’s not like it’s a particular unemployment rate, it’s not a particular payroll number. But I mean, broadly speaking, it’s, you know, do, are, you know, the people who wanna work, are they working? In such a way that it’s not putting pressure on inflation, right? Like labor shortages that end up with wage increases that just, you know, end up with inflation. Like that would be a situation where the Fed would actually want to kind of help restrain some of the. Uh, employment growth. And we, we saw that in this cycle. I mean, the Fed raised rates a lot in 2022 and 2023. Uh, so that’s the maximum employment on the stable prices. The Fed has set a target of the 2%, uh, year over year PCE inflation. So a little different than the CPI inflation, but very much related. And, and it’s one, I mean, that’s, that’s the goal, right? And it, uh. So it starts with those two pieces and, and what’s been, I think what’s been challenging in say the last year as the Fed was, you know, trying to figure out what it was gonna do with interest rates was the fact that it, there was pressure on both sides of the mandate. Mm-hmm. Um, and not necessarily the, well, I mean, inflation itself has, was above the 2%. It continues to be above the 2%. Target has been. Since 2021. Now the Fed’s policy doesn’t have a look back, but I mean, they do worry that the longer inflation stays closer to three than two businesses. Consumers are gonna start to kind of embed three into their actions, their expectations. Then you kind of get stuck there. So like that, that both, you know, they were missing on the inflation mandate and there were, there were concerns that the, that we might see inflation get stuck above the mandate and the way you dislodge it if it gets stuck. Could end up risking a recession, right? So the Fed doesn’t want that to happen. So that’s a real concern. But then on the employment side, you know, we started out talking about the small rule, the rising unemployment rate. We’ve seen the unemployment rate rising. And then last year in particular, it wasn’t just the unemployment rate rising, we saw job creation just really take a leg down. Um. Some of that probably is less immigration population aging, so less supply of workers, which isn’t something the Fed would react to. ’cause that, I mean, if you don’t have as many people that wanna work, you don’t need to create as many jobs. But the unemployment rate was rising, so it’s clear, like there just wasn’t, there wasn’t enough job creation to keep up with, um, the workers who were there, uh, to work. And, and there was a concern that this could, could spiral out. Those small increased unemployment rate that, that very low level of job creation. And frankly, if you look at, I mean the, I mean, we have multiple months and probably more after revisions of declines in payroll employment. Mm-hmm. Like if you looked at the labor market data, you’d be like, aren’t we in a recession or like on the edge of one? Again, that’s not where we’re at, but it, it certainly gave that, that risk. Things could be slowing down. And, and the, the last piece that was really important in the Fed’s decisions was where, where’s the federal funds rate? Where are the interest rate, the policy interest rate they control? And it was still relatively high. For, for recent history, right. Not in the long history of the Fed, but mm-hmm. And so, like the Fed had raised, they’d raised interest rates quite aggressively to fight the inflation in 2022. They’d very gradually lowered it. Some was taken out in 2023 because made some pro, made quite a bit of progress on inflation in, or in 2024, they lowered the rates in 2025, the 75 basis points of cuts that the Fed did. It was out of concern. Of the labor market unraveling a risk, not a, not saying, hey, the labor market is unraveling, but saying the risk that the downside risk to employment are larger and more worrisome than the upside risk to inflation. So this inflation getting stuck, is that still the case as a going into 2026 here? So, you know, even, even last year we saw, we listened to Fed officials, there’s quite a bit of disagreement. Because it was a tough situation to read. There are some Fed officials that were more focused on inflation, some that were more focused on the employment side. Uh, and it really was just a matter of kind of reading the economy and trying to figure out this, a very unusual situation, like where, where was this headed? What did the Fed need to do? In the end, the consensus on the Fed was to do the rate cuts, kind of front load them. They talked a lot about it as insurance. They’re taking out insurance against the labor market deteriorating. And I think with that approach, in all likelihood, and there’s been certainly signaling of this, that when they meet at the end of January, it’ll, they’re unlikely to move again. That this is, this will be an opportunity to hold steady, be patient the Fed has, has taken out their restriction. So they don’t have the higher rates, so they’ve pulled rates down. We also know that early this year there’s various kinds of fiscal support that are coming online or tax cuts to households and to businesses that should give a little extra lift, uh, to the economy. So I think it’s a period of the Fed waiting to see what the effects of their policy changes are, seeing what the effects of the fiscal policy with the expectation this will be enough to stabilize the labor market. Even help get it back on track and really what the Fed would like. I mean, we’ll see what they get, but they’d really like the next cut to be a good news cut. Like inflation. Oh look, it’s moving back down again. We’re making clear progress back to 2%. I think that’s probably gonna take maybe even till the middle of this year to build that case. A strong case for the disinflation. Mm-hmm. But that’s, that’s what they would, would like to do. But they’re gonna keep an eye on the labor market. But nothing we’ve seen in the most recent data suggests that they gotta get moving like that. There’s some, you know, real pressure building. Um, in fact, the labor market looks a little bit better probably than when they met in December and inflation. Showing some signs of progress, but it, it’s pretty bumpy in terms of, there’s a lot of noise in the data at the moment. You mentioned, um, the Fed’s mandate and you know, certainly that’s something, um, that, uh, you know, that, that we know the Fed looks at these unemployment numbers that look at inflation. I’m curious though, that there’s, you know, there is this push and pull with the treasury. In particular, you know, looking at the amount of, of, of, of bonds that need to be refinanced, that kind of thing. I mean, presumably that’s one of the reasons why the Trump administration is pushing so hard, uh, on the Fed to reduce, um, you know, to reduce rates so that you know, this sovereign debt can be refinanced at a, something a little bit more palatable. How much of that actually. I know it’s not supposed to play a part in the Federal Reserve’s actions, but in reality is there, is there that kind of, you know, thinking that, you know, they have to, they, they may try to play ball a little bit with the, with the situation, with the debt. Yeah. There, the, the Fed is not playing ball right now with the administration. Uh, but, but there have been, there have been times in our past. So during World War II, there was an explicit cooperation between the Fed and the Treasury. The Fed kept interest rates low. Both the federal funds rates, so the short term interest rates, they also did, uh, some purchases of longer term to help keep longer term rates down. Right. So I mean, the, the Fed really, they, their policy was oriented exactly on this objective, keeping the borrowing cost of the US government low because it was financing the war effort. So, so there have been times where the Fed has cooperated with treasury. Now, when they came out of World War ii. What happened is, you know, treasury wants to keep interest rates low. This is good for, you know, the economy, good for growth, but it was, it really was creating a lot of inflationary pressures and it took until the early 1950s for the Fed to kind of regain its kind of operational independence from treasury and then go back to pursuing, you know, inflation as a key goal. And then also in the late seventies and maximum employment was added as an explicit goal. So we’re in a place now where. It’s employment, it’s inflation, it, there was quite, um, I mean, president Trump and some other officials have been, you know, very open about saying rates should be low to help with the deficit, with funding the gov. So like, it’s, it’s been in the discussion in the air. But that’s not, that’s not a mandate that Congress has given the Fed. That’s not what they’re pursuing. It does, you know, but things can change at the Fed. We’re gonna see a change in leadership this year with a new Fed chair. Um, the Fed always, I mean, Congress created the Federal Reserve. It’s changed its abilities, its responsibilities over time. I don’t wanna say that we’ll never get back to a place where the Fed thinks about. Its effect on the deficit. I mean, they’re watching it, they know, right? They’re tracking all these aspects of the economy. But in terms of what’s driving the Fed’s decisions about what the, the federal funds rate should be, that’s not part of the calculus right now. Yeah. Um, you know, another, just another question is for clarity. You know, the, the, um, officially right now there’s, there’s no quantitative easing. However, there is. Uh, you know, I’ve been reading, uh, about even, I think even today, there was a, a fair amount of liquidity, uh, being injected in by the Fed. Can you, for people who don’t understand the mechanics of this and what the difference in terminology is, can you explain to us maybe what the difference is between quantitative easing and what’s being done right now? So just as for context, where quantitative easing even came from. So if we go back to the global financial crisis in 2008, the Federal Reserve, in response to that recession, pulled the federal funds rate all the way to zero. Cut rates to zero And as sure many of us remember that that recession was a very deep and long recession. So, and the unemployment rate was, you know, 10% and inflation was not a problem. So the, the Fed would want in that environment to do more to support the economy. But when the federal funds rate is at zero, that’s, its, that has been its primary tool. Well, that’s, that’s. Stepped out. So then as a question of, well, what else could we do to help support the economy? And, and there, there were. Different possibilities. Uh, some European central banks looked at, you know, they actually did negative interest rates or tried to pull their policy rates, and that’s not what the US did. What was done was to do purchases of, uh, treasuries. Uh, there’s also been purchases of mortgage backed securities, and this is where the Fed is. I mean, and, and they’re creating reserves. So the fed, I guess, secretary, uh. Treasury doesn’t refer to it as magic money. Um, you know, they create reserves and then they’re going out and they’re buying tr so they’re pushing that liquidity, that demand into markets. And if you’re, if there’s a lot more demand for treasuries, well, the price of the treasuries will go up. The yield comes down. Interest rates go down. Yep. Interest rates go down. So they. They were, the Fed wanted to support the economy more. That was the tool that they used to do it. So when, when the Fed talks about quantitative easing, it’s not just the tool, the asset purchases, it’s also the intent, right? They wouldn’t do quantitative easing right now. ’cause if the Fed thought they really need to stimulate the economy more, they’ve still got like. More than three percentage points they could cut from the federal funds rate. Like if the issue were right now, we need to like get the economy going, they’re gonna like cut the funds rate and do it that way. They wouldn’t be pur like purchasing assets, purchasing treasuries to do that. But what what happened is between the global financial crisis, the Great recession, so all the asset purchases done then. There was some, some runoff of the balance sheet, but then again, in the pandemic there were a lot of asset purchases. Uh, the Fed has a really big balance sheet, and it has, uh, it, it kind of changes the way that the Fed can even just move around the federal funds rate. Like, I don’t wanna get too much into the, the technicals, but it’s, it’s just, you know, when the Fed says, well, we wanna lower the, the funds rate to 3.5%. In the old days, they could kind of do, you know, with the bank reserves and they could like, make these small purchases and it would, it would make that stick. Now with, there’s, uh, banks have a lot of reserves, so they’re not as responsive. And so just to kind of, there’s like the, the technical, the tools, the Fed has to just make it happen. In terms of operationally, it means that they have to do some purchases now and then they call their, I mean the new name they have for these are reserve management. Purchases. So it’s really about operations. It’s not about, but it does mean they’re purchasing assets. So if you’re just focused on like the Fed’s purchasing assets, they’re putting liquidity into the system. Yes, they are doing that, but it’s not with the intent to kind of push the economy to run harder. It’s just enough liquidity to keep. The federal funds rate stable at the level that they wanted to be at, to just make sure that all these operations are short in the very short term lending markets amongst banks, that it’s all kind of working as mm-hmm. As it should be. So it’s more about operations and it’s about stimulus policy. Right. A lot of our, um, a lot of our listeners are real estate owners, investors, and they’re, you know, they think about, um. Mortgage rates and that kind of thing. There was recently a, a pretty significant, well, I don’t know how significant it really was. I think it was about, was it maybe $250 billion worth of mortgage backed securities purchased by Fannie Mae. Um, that ca can you talk about the purpose of that and really the, you know, what kind of effect that would actually, we could actually expect from that. It’s certainly been, I mean it’s, it is clear. You know, we talked about one reason that the administration would want interest rates down. It’d be like financing the deficit. Right. Another reason that very much pulls into kind of the affordability debate is we want interest rates lower, one of them lower for consumers. Now the White House has put a lot of pressure on the Fed for them to lower rates even faster than they have. Has not played ball with that. But then the Fed has lowered its rates. The Feds rates are very short term rates, and the federal funds rate is like an overnight rate with between banks. Right. So it, and it has an effect on, you know. Credit card rates, short term rates, but it’s not one, it, it has an effect, but it’s really not like driving necessarily 30 year mortgage rates or you know, some of the longer term rates. There’s a lot of other factors that go into that, and so in this kind of, you know, push for lower mortgage rates. Pushing on the Fed is not the only lever to pull, right? The administration has other levers that they could potentially pull, um, in trying to influence mortgage rates. Now, there, I’d argue the administration’s tools here, like the, the $200 billion, Fannie and Freddie purchase that you mentioned. That really is about trying to reduce the spread. Between mortgages and treasuries. So in some ways it sounds similar, like, oh, fed and Franny, which are, you know, GSEs. So part, part of the, you know, government right now, at least they were privatized during the global financial crisis. You think, oh, they’re going out and purchasing this Sounds a lot like the Fed going out and purchasing. There are there, there’s some parallels, but we need to remember, Fannie and Freddie don’t create money. The Fed, when they start, when they start the process of their quantitative easing, they’re creating reserves like they’re actually creating liquidity and money supply. Fannie and Freddie have authorization to be able to make these purchases, but they’re not like the fed. They’re not creating reserves, but they can, so I don’t wanna think about them like bringing down the whole set of interest rates, but they can affect this spread between mortgages and say treasuries. Right? And so, because again, if you’re, if the. If the GSEs are going out, they’re purchasing mortgage backed securities, well that’s increasing demand for those, and that can push down the rates, that can like squeeze that spread. And, and while the announcement has been made, you know, I mean they’re, they’re in the early stages of putting that in place, but we even on the announcements, saw a response in financial markets and you’re seeing some movement down, uh, in mortgage rates now. It was. Pretty modest, right? And, and 200 billion while, you know, not nothing, uh, really pales in comparison to like the scale of say, the quantitative easing that the Fed did. Um, and there are probably other, but the, you know, the administration’s not done. It doesn’t necessarily have to be that Fannie and Freddie do more purchases. The the spread between mortgage rates and treasuries is pretty substantial. There’s other places where, you know, the fees that go into getting a mortgage are quite a bit larger than they were before the, the global financial crisis. So maybe they go in and try to chip away at the fees and, you know, so there’s, there’s different levers. And I fully expect, and I think we’re gonna get some announcements here again soon on the White Houses. Housing affordability agenda. So there may be other, other ways that they’re trying to, uh, influence, uh, the mortgage spreads. But that’s, that’s what that is all about. And it, it should have, and it looks like, you know, it’s having some effect in terms of bringing rates down, but it likely, it’d be modest, like in the 10 basis points, maybe 20 if they ramp up the program some. But like, it, you know, it’s, it, it, you know, every, every bit counts. But this is not a. Uh, this won’t be enough to, you know, move rates down, dramatic mortgage rates down dramatically, uh, when you, when you look at the economy. Um, and I, I, I think just, you know, one last question. I mean, I just in terms of, you know, the people listening to this are. They’re, they’re people, you know, with jobs and who are trying to invest their money, and they’re trying to, you know, build long-term wealth, but they’re, you know, everybody’s worried about what’s happening with the economy. What, what, what do you think, like, just as, um, um, you know, perspective for people to understand or try to have some framework for how to look at what’s going on in the economy. How they should judge it. Like what would you suggest, like just for mom and pop investors trying to, what is happening with the economy? I’m not an economist. What, what are the, what are the things that you think they should consider studying up on, looking into a little bit? One challenge for a lot of investors, I mean, frankly, it’s, it’s been a challenge that I try to deal with too. Uh, we’re, we’re in an environment where there’s just. There’s so much news coming out of DC uh, with the White House and policies and the Fed, and you know, I mean, like, there’s just, there’s a lot. The headlines are big. And like I talked about with the tariffs, we had like really big tariff announcements. The really scary numbers were, and then it like dialed back and then we pushed through it and it’s like, and it’s this remembering that, um. There’s always a tendency to have this idea that the, the president really runs the economy. I mean, that’s not just about this administration. That’s like a longstanding, you know, the president gets, uh, blame or credit for the economy when really, right. Like we have a over 33, $30 trillion economy, hundreds of millions of workers, tens of millions of businesses. Like this is not about one administration. And so we always need to be careful about. Putting too much weight on the policies coming out of dc. Uh, and you know, last year if you really just listened to all the, you know, we’re cutting immigration, we’re raising tariffs, we’re doing, you know, all, there’s a lot of uncertainty in Doge. Well then you might have missed, like, there’s a bunch of AI investment happening and we’ve got a lot of growth in the economy and while consumers are still pretty resilient, so you, it’s kind of like. Tuning down the volume, some coming out of Washington, especially the like every twist and turn. Uh, and then kind of focusing in on the fundamentals. I will say, you know, you don’t wanna turn down DC too far because we, we do have some like big picture events that could play out over many years. Right. So kind of keeping an eye on it, but for the long game. As opposed to reacting to every twist and turn, every policy announcement, because a lot of this clearly is more of a negotiation than it is like, we’re gonna actually do this. So, you know, as investors, you don’t wanna get whipped around by the latest headline, but you also can’t put your head in the sand. Like you gotta kind of try and find a way to pull the signal out of the noise. And it is really. It’s really hard. Yeah. Like this has been a challenging time and the, the US economy’s been doing things that are not typical. We talked about some of the things with the labor market and we are running some policy experiments that haven’t been run in a long time, so things could change pretty dramatically. But I think it’s just trying to absorb the information, not get too wound up about it, but like also keep an eye on like what’s good for long-term growth. Yeah. Because it’s good for long-term productivity. Thank you so much Dr. Sahm. It’s uh, it’s been a pleasure talking to you on, uh, wealth Formula Podcast today. Great. Thank you so much. You make a lot of money but are still worried about retirement. Maybe you didn’t start earning until your thirties. Now you’re trying to catch up. Meanwhile, you’ve got a mortgage, a private school to pay for, and you feel like you’re getting further and further behind. Now, good news, if you need to catch up on retirement, check out a program put out by some of the oldest and most prestigious life insurance companies in the world. It’s called Wealth Accelerator, and it can help you amplify your returns quickly, protect your money from creditors, and provide financial protection to your family if something happens to you. The concept. Here are used by some of the wealthiest families in the world, and there’s no reason why they can’t be used by you. Check it out for yourself by going to wealthformulabanking.com. Welcome back to the show everyone. Hope you enjoyed it. It was Claudia Sahm. She is, uh, she’s a very, very smart lady. And, uh, just a reminder, if you have not done so, uh, I, I don’t frequently ask to do, do this, but, uh, make sure you give the show. Five stars and a positive review because that’s how we’re getting, you know, really high quality people like Claudia on the show, I’ve been around for a long time. It helps that the show is, you know, like over a decade old and all that stuff too. But, uh, anything you can do to support would be very helpful. And also one more reminder, uh, if you have not done so and you weren’t a credit investor, make sure you sign up for that investor club. At Wealth formula.com. That’s it for me. This week on Wealth Formula Podcast. This is about Joffrey signing out. If you wanna learn more, you can now get free access to our in-depth personal finance course featuring industry leaders like Tom Wheelwright and Ken m. Visit wealthformularoadmap.com. The post 544: Why the Sahm Rule Matters — and Why the Big Picture Matters More appeared first on Wealth Formula.

One of the biggest risks people face when trying to understand the economy, investing, or personal finance isn’t a lack of information. It’s the illusion of being informed—while quietly limiting the sources that shape your thinking. We live in a world where information is everywhere. Podcasts, X threads, YouTube clips, newsletters, reels. But abundance doesn’t equal diversity. In fact, the algorithms behind social media are designed to do the opposite: they show you more of what you already agree with. Over time, your worldview narrows—not because you chose it to, but because it was curated for you. I noticed this years ago when I started listening to alternative asset podcasts.  At first, it felt refreshing—new ideas, new language, new opportunities outside the mainstream. But after a while, something became obvious. Many of these shows were operating inside an echo chamber. Different hosts. Same conclusions. Same narratives. Same villains. Same heroes. It was as if they were all listening to one another and simply regurgitating the same ideas, reinforcing them in a closed loop until they felt like truth. And to be fair—knowing many of these hosts personally—that’s often the business model. Audience reinforcement is rewarded. Dissent is not.  Ever since then, I’ve made a conscious effort to study people I don’t naturally agree with. Not because I want to adopt their views—but because I want to stress-test my own. This matters more now than ever because social media accelerates groupthink at scale. When an idea gains traction online, disagreement quickly becomes social friction. It’s easier to conform, retweet, and nod along than to pause and ask, “What if this is wrong?” I once had a conversation with Robert Kiyosaki where he told me he actually gets worried when everyone in the room agrees about the economy. When viewpoints converge too neatly, it’s usually a sign that critical thinking has been replaced by consensus comfort—and that’s exactly where blindsides are born. If your goal is to get closer to the truth, you must seek out opinions that challenge your own. That includes people you disagree with—especially people you disagree with. Truth doesn’t emerge from unanimity. It emerges from tension. And that applies to me as well. Daon’t let me—or anyone else—be your sole source of information. No matter how much you trust someone, outsourcing your thinking is always a risk. I can tell you from personal experience that in economics and personal finance, narrow perspectives lead to surprises you only recognize in hindsight. Those are the moments people regret most—not because they lacked intelligence, but because they lacked perspective. Financial education is critical. But a real curriculum doesn’t just confirm what you already believe. It exposes you to competing frameworks, conflicting data, and uncomfortable questions—and forces you to think for yourself. That’s how you build conviction that actually holds up when the world changes. This week’s episode of Wealth Formula Podcast examines this groupthink problem on a broader scale throughout society with an author who wrote a bestseller on our inherent appetite for misinformation.  It’s a fascinating conversation that will surely get you thinking about the way you view the world. Transcript Disclaimer: This transcript was generated by AI and may not be 100% accurate. If you notice any errors or corrections, please email us at phil@wealthformula.com.  You can imagine people who are conflict avoidant, probably not so likely to post online, as opposed to people who are conflict approaching who love a fight, right? If that’s, if those are the folks who are more likely to post, that’s gonna shape our information space in really, really important ways. Welcome everybody. This is Buck Joffrey with the Wealth Formula Podcast. Coming to you from Montecito, California today. Uh, wanna remind you before we begin, there is a website associated with this podcast called wealthformula.com. That’s where you go if you wanna get more involved with, uh, the show, with the community, uh, specifically, um, if you are interested. There is a sign up there for something called investor club, which if you aren’t a credit investor, you sign up basically, uh, you, uh, get onboarded and then you can see potential deal flow that’s not available to the public. And, uh, lots of things going on in there. Real estate, we’ve had stuff in the aircraft spaced, um, interesting stuff. You should check it out for sure. If you are, uh, enter credit investor. And again, that is wealthformula.com. Just click on investor Club. Now today, let’s talk a little bit of, you know, just let’s talk a little bit about one of the biggest risks that people face when trying to understand the economy of investing personal finance. It’s not lack of information, right? These days, there’s an enormous amount of information. It’s just the illusion of being informed while quietly limiting the sources that shape your thinking in the first place. So we live in this world. I live in this world too, where information is everywhere. You got podcasts, you got X, you got YouTube newsletters, reels, random emails. Abundance of information doesn’t really equal diversity. In fact, the algorithms behind social media are designed to do the opposite. They just show you more of what you already agree with, and that is a little bit of a problem because over time your worldview really starts to narrow. And not because you chose to narrow it necessarily, but because it was curated for you. You know, I noticed this myself, uh, several years ago when I started listening to podcasts like my own. Even before I started my podcast. And what happens is that you get, initially you get kind of interested ’cause the stuff resonates with you. You get some ideas, you get new language, new opportunities outside the mainstream. But after a while you start to realize, or I start to realize that, you know, these shows were sort of operating inside of an echo chamber. They’re saying the same thing, different house, same conclusions, same narratives, villain. Same heroes, you know, it was as, again, it was as if they were all listening to one another and, and simply regurgitating the same ideas and reinforcing them, uh, in a, in a closed loop. Um, and when you do that, it starts to feel like truth. And to be fair, knowing many of these hosts personally, that is kind of the business model. You know, audience reinforcement is rewarded, descent is not so ever since then. You know, I’ve actually made a conscious effort to study people. I don’t, uh, naturally agree with. I actually don’t listen to any other personal finance podcasts, uh, that are sort of in this alternative space because I already know kind of what our narratives are. I wanna know what others think. I wanna, uh, I, it’s not necessarily that I’m looking to adopt their views, but because I wanna kind of, you know, challenge my own and this matters more now than ever. Again, because of social media. How that accelerates group think at scale. You know, when an idea gains traction online, um, you know, disagreement quickly becomes social friction. Now I think the thing to do is, you know, always be questioning yourself and asking the question really, what if I’m wrong? What if this narrative is wrong? And it reminds me actually once, uh, you know, I’ve had a chance to spend a little time with Robert Kiyosaki. Period, uh, different, different times, and I still. Kind of consider him a mentor. And I remember being at a table with him, a bunch of people talking about, you know, where the, where the economy was, what’s going on. And he looked at me and he says, this is what gets me nervous. I said, what, what gets you nervous? And he says, everyone here, everyone here, even people who normally disagree with one another, are agreeing with each other. Uh, the point is that when some of these, you know, viewpoints converge too neatly. Uh, it’s usually a sign, uh, that, you know, that critical thinking has kind of been replaced, and that’s exactly where you start to get blindside and where, you know, there’s a danger there that there’s something that no one’s, no one else has really even mentioning anymore. So if your goal is to get closer to the truth, you actually have to seek out opinions that challenge your own, and that includes. People you disagree with, especially people you disagree with. Because you know, truth doesn’t really emerge from unanimous thought. It emerges from sort of that tension and challenging, and that applies to me as well. You know, if I’m the only personal finance podcast you listen to, you probably shouldn’t be because I have, you know, made my own conclusions based on what I’m thinking and what I’m listening to. I try to get people. Um, you know, from different spaces talking about stuff, but the reality is that, you know, everyone’s biased. I’m biased too. So, um, you know, I can tell you from personal experience, uh, that in economics and in personal finance, the problem is that when you have these narrow perspectives, um, they often lead to. To prizes. Uh, you can’t, you know, they only recognize in hindsight, and those, uh, those are the moments that most people, I think, regret more than anything. Not because they lacked intelligence necessarily, but they lacked perspective, right? Listen, financial education is critical and we, we know that that’s the point of doing the show in the first place, but, you know, any real curriculum is, isn’t there, just to confirm what you already believe. I, I, if you, it should expose some competing frameworks. And, you know, different questions or different takes on things and, and that’s how you know, if you listen to those and you listen to those arguments, that’s how you can really build conviction that you can stand behind. And even if you’re wrong, you say, yeah, you know, I heard the other argument too. I didn’t buy it, but I guess I was wrong. Believe me, I’ve been wrong, uh, more than once myself. So the reason I bring that all up is because this week’s, uh, episode of Wealth Formula podcast really examines. Greater than just the idea of, you know, personal finance and macro economics and that type of thinking, but a greater problem, which is group think in general on a broader scale throughout society. And my, uh, my guest is a, a woman who wrote a best seller on this topic. It’s fascinating stuff. I think it’ll get you think. Make sure to listen in and we’ll have that interview right after these messages. Wealth Formula banking is an ingenious concept powered by whole life insurance, but instead of acting just as a safety net, the strategy supercharges your investments. First, you create a personal financial reservoir that grows at a compounding interest rate much higher than any bank savings account. As your money accumulates, you borrow from your own. Bank to invest in other cash flowing investments. Here’s the key. Even though you’ve borrowed money at a simple interest rate, your insurance company keeps paying you compound interest on that money even though you’ve borrowed it. At result, you make money in two places at the same time. That’s why your investments get supercharged. This isn’t a new technique. It’s a refined strategy used by some of the wealthiest families in history, and it uses century old rock solid insurance companies as its backbone. Turbocharge your investments. Visit Wealth formula banking.com. Again, that’s wealthformulabanking.com. Welcome back to the show everyone. Uh, today my guest on Wealth Formula podcast is Professor Dana Young, who’s a professor of communication and political science at the University of Delaware, where her research explores how media psychology and identity shape belief systems she’s the author of Wrong, how media politics and Identity drive our appetite for misinformation and examines why people clinging to false narratives, and how understanding identity can improve persuasion. Our work helps decode the emotional and cognitive forces behind how we process risk, truth, and decision making. Welcome, professor Young. Great. Thanks so much for having me. Thanks for that intro. Someone has done their homework. I like that. Well, I try to, uh, well, let’s start with this. You know, one of the central arguments, uh, that you have is that people often believe things, not because they’re true, but because those beliefs serve as an identity function. Interesting concept, which I can kind of see in, uh, when you watch TV these days, can you, can you talk a little bit about that? Sure. And, and realize this is not happening at a conscious level. This isn’t something that we are thinking about. We’re not thinking, I wanna believe things that are untrue, but make me feel like I’m a part of my team. It doesn’t work that way. It is the, the truth, value of the things that we perceive is contingent on how those beliefs serve our team. Mm-hmm. So if there are things that our team believes. Those are the things that sort of historically, based on evolutionary psychology, those are the belief systems that would’ve made us probably really good members of our, of our tribe. Mm-hmm. That would’ve, um, if we had embraced those beliefs that would have. Give an indication to the shared members of our team that we are a good team member and therefore they should protect us. They should protect me, I will protect them. There’s a reciprocity there. So that belief sharing with our teammates is something that historically has served us well. And when it comes to survival, we really prioritize our social motivations above all else, because that is such a huge predictor of what allows us to survive and thrive. Is being a part of a community. And so, yeah. So the empirical validity of those claims is a little bit beside the point. The obvious, uh, the, the things that I think about there, I guess the, the sort of analogy there is like, you know, being a a, like I’m a big football fan, right? So I’ve been a big fan of the Minnesota Vikings for my entire life, although I’ve not lived there in from, you know, three quarters of my life. I grew up as a kid and that was my team. People come in, right? People go out. They’re people who, you know, were never there at the beginning, but I still root for them. Yeah. Yeah. And I still believe in them. And so, yeah, it, it reminds me of the sort of a, uh, you know, this tribal thing you’re talking about. The other place you see it, uh, is, is in politics. Uh, you know, when I, when I think about like, the way the parties have changed without getting political at all here. The, the, there’s some very, very significant changes that have happened in the ideologies, uh, or maybe not in the ideologies, but in the actuality of these parties and what they believe. They’ve changed so much in the last 30 or 40 years, yet the same people believed, uh, or identify as those party members. Is that kind of what you’re getting at? Yes, and, and because I’m a political scientist and political communication scholar, a lot of my interest in this area was born out of my concerns about our political, the political moment that we’re in, and how we really lack. A shared reality that’s necessary for democratic governance. Um, we, and we are seeing that literally there are dozens of examples every single day of different perceptions of reality across the left and the right. And so, so that was sort of why I tried to understand this, um, in the first place. But the. What you can glean from these theoretical dynamics, um, extend far beyond politics, right? To, as you were saying, and everything from economics to health, to the environment. Um, but because the shift that I think has been most impactful in this area regarding political identity is that in the United States, the. How the parties, what the parties are made up of, who the parties are made up of has changed dramatically over the last half century. And so rather than being these sort of loose coalitions of interest groups that would kind of come together and perhaps share a platform on specific policies, the way that the parties have shifted, especially sort of after the Civil Rights Movement made it that. Individuals began to identify with political parties based on like fundamental characteristics of who they are. Things like race, religion, geography, and, and fundamental aspects of culture. And so you have two political parties that actually look very different from one another in their racial and ethnic and religious and geographic sort of composition that is not good for democracy. Because we actually do not want our political parties to map onto such primal aspects of identity. ’cause it creates sectarianism and opens the door for dehumanization and violence, all kinds of bad stuff. But it also really tends to fuel some of these identity-based processes that we’re talking about because when you look around and everyone on your, in your political party. Lives like you do. They look like you do they worship like you do? They have the same hobbies as you. They drive the same kind of car. You know, those kinds of things. Like there’s a lot of that overlap that really makes your political identity take on a life of its own, and that life is increasingly. Um, unrelated to policy and more about kind of culture and aesthetics. So all of these caricatures that we think about of the left and the right, the, there’s. Stereotypes for a reason. They exist for a reason and they are so exaggerated through as a result of this political party shift over time. And, um, uh, as I talk about in the book, these differences are also exploited by our media environment. It’s really good for targeting and target marketing to have these kinds of divisions, uh, not great for democracy. Um, but they, these identities become further exacerbated. The more media we consume that tends to play into these identities. Yeah. It, it’s interesting to me, I think sometimes when you, when you think about what people believe mm-hmm. And then, you know, and then. Identifying those beliefs with like a, a political party or something like that. It’s interesting to think of the actual identification of the party coming first. Yeah. And then the beliefs following. Based on the identification. So that’s almost like religion, right? Exactly. Exactly. Right. And that’s a lot of the, the metaphors that we’ve been drawing from in political science. A lot of political scientists have been writing about this, really drawing upon the sociology of religiosity and how it operates because it, it, you’ll notice there’s another similarity too, that people will. Have this large identity as like a Catholic, right? Like I was raised Catholic. It’s, it’s part of who I am. Now. Do I believe everything that they say at church? No, but my identity as a Catholic is still very big. I, I, I will let it drive certain things, but I’m gonna write off other things as like. Not as important as my overarching identity. In the same way that we will find people who have a Democrat or Republican identity, and they live like a Democrat. They live like a Republican. However, when it comes to their actual policy positions. They don’t necessarily agree with their party platform. And that actually is where I get a little more optimistic because even though these caricatures seem so distinct when you drill down to actual policy positions, Americans have a lot in common. Those divides are not as giant as we think they are. I’m curious in terms of understanding the United States versus other countries, um, we, we seem to have a certain polarity which. It’s relatively new. I would say that, you know, even compared to, um, being a kid in, in the eighties, um, feeling like, you know, there was these two parties, but they seemed to get along pretty well. Mm-hmm. And for the most part, they were both kind of near the center. Yeah. And, um, but there’s this, there’s a much bigger division now. Um. What, I guess what drives the, the changes and when you look at different countries, like if you can compare and contrast like Sure. Are there certain specific variables Yes. That about our culture that that makes us who we are. Yes. Yeah. So that first question, um, I, I think that what’s really important is that when you think about how our political parties used to operate, um, in the aftermath of the Civil War, the two parties. We’re kind of in agreement when it came to racial issues in a way that was not good for African Americans in this country. Once the great migration happened and you had blacks from, from former slave states moving north and west, there was real pressure on leaders in those cities to advance or civil rights. Platforms, civil rights legislation, and to advance the rights of African Americans. That really put pressure on the parties in such a way that then it was the Democratic Party who became the party of championing civil rights. Then there was a response from the Republican party that was framed in terms, right, in terms of. State’s rights. That really drove the sorting of different kinds of people into the parties. It’s also fascinating to look at how religiosity and religion. Play a role here because during this very moment under the Nixon administration, there were efforts to revoke the tax exempt status of certain Christian schools that were sort of defacto segregated schools that were in violation of the policy at the time, which was to integrate those, the school system well. Those Christian parents were very unhappy with this, you know, revoking their tax exempt status. And there was a man named Paul Wyrick who came in and said, you know what, this is a moment to really bring together these two issues regarding race and religion. And he mobilized and created a grassroots movement out of this effort to sort of like protect our schools. And that actually became the conservative group, the Heritage Foundation. So that, that bringing together sort of the, the project of evangelical Christianity with this sort of move in opposition to integration that has a long history in our country. To your second piece though, about why the United States is, is. Special. Um, one, we have our, our history of slavery is not fundamentally unique, right? There are many countries that also practice slavery. I think the role that slavery already p played in the founding of our nation was important to keep in mind in terms of how the, the issue of race played into these shifts across political parties. And two, probably the biggest thing of all is that we have a. Two party system in countries that are dealing with some of these same pressures related to race and ethnicity, immigration, right? Where you see some of this polarization happening on ideology and a lot of those places they have multi-party systems. Which play a real amazing role at buffering some of these dynamics. So it’s not black or white, yes or no left, left or right. Uh, so we are uniquely positioned to have a hell of a time with polarization. When I, um, uh, I, you already sort of referenced, um, media. Mm-hmm. Um, you know, like when you think about polarization or you think about like. Re um, sort of constantly, um, emphasizing the things that you already suggest that you believe, uh, social media in particular is, I mean, is just pounding away at that, right? Yeah. I mean, sure. I just think about like my own feed, the things that I Yeah. You know, respond to or the things that I, you know, show affirmative, uh, reactions to the next thing. You know, like on x, you know, on Twitter, which I’ve been in. You know, doing more of, that’s all I get. Right? Sure. And it’s interesting because the next thing you know, you feel like. Everybody agrees with you. Sure, sure. And you’re like, oh, this is, this is amazing. I’m so Right. Right. No one has, right. No one believes the opposite of me. Right. Yeah. And it feels amazing. What role is that playing? Uh, I guess in, in your view? Social media dynamics are, are really fascinating because let’s, let’s realize, talk for a second about why it is that a lot of the content that we’re exposed to on social media is so divisive and identity evoking. Um. The reason that that happens is because the algorithms really just want us to be more and more engaged, obviously, because the only way that they’re able to, to micro target us with ads, et cetera, is by making use of the data points, the breadcrumbs that we have left behind. The only time that we leave those data points that we leave those breadcrumbs is when we do things. So if we’re just lurkers, we are not serving them at all. If we’re just hanging out looking at stuff, if we are actively liking or doing an angry thing, or writing or sharing, that’s what they need. So the algorithm is going to prioritize the content that is sort of outrage inducing, especially because negative emotions are exceptionally sticky. And there’s been some amazing work by um, uh, Jay Van Beil and his team who studied the sort of virality of different kinds of content online. And they found that the kind of content that is especially suited to virality is content that is both moral. Emotional that makes claims about what ought to be and what ought not to be, but is also like really emotionally and effectively evocative. And the kinds of content that tends to check those boxes is the content that is identity activated. Us versus them. They are doing this awful thing to us. Our way of life is under threat. Um, they are the bad guys. We are the good guys. So that’s how that happens, right? So that’s the kind of content that tends to be privileged across these platforms. That’s a piece of the puzzle. Another piece of the puzzle is that the kinds of people who tend to produce the most content online. Are weird, uh, as someone who posts online, uh, I, I just offended myself, but that’s fine. Um, the people who post a lot online tend to be more ideologically extreme. They also tend to have certain kinds of personality traits that maybe aren’t great is some of my work is looking at the, the trait of conflict orientation. You can imagine people who are conflict avoidant. Probably not so likely to post online as opposed to people who are conflict approaching who love a fight, right? If that’s, if those are the folks who are more likely to post, that’s gonna shape our information space in really, really important ways. Well then you get responses that are much more aggressive too, right? Like sure. In either direction. Sure. Something that’s kind of lukewarm. No one really cares to respond to it. Right. That’s exactly right. And then, and then those, those particular posts are rewarded by the media companies themselves because they’re getting all sorts of attention rising the top and those influencers who getting paid for that. So yeah, I mean, that’s the thing that really, that’s where I, I, I get to the point sometimes with this work where I, I’ve, I do feel a bit demoralized because I don’t necessarily see. Where there are really empowered agents to who can work within the system, we have to try to dismantle the incentive structure. So you know, if there are entrepreneurs out there who can think about ways to incentivize different kinds of content, I applaud that kind of development there. There are some, of course, who, who do the sort of, um. Positivity posts, you know, posts for good and viral videos about people help helping other people, and there is some indication that those also, they’re people love those. Those do go viral, but they don’t have the immediacy of the outrage, I guess, that when you think about, you know. The implications of this is really just, you know, I guess polarization, maybe some misinformation. Even misinformation is difficult because Sure. You don’t even actually know what is real information anymore. You don’t have like, sure. You know, when I was a, again, going back to being a kid in the eighties, it’s like you had one set of. Set of facts, you know? That’s right. But now that’s, there’s lots of different sets of facts, and in reality it’s hard to know what’s real. You just, you know, you just, you, you believe something and the next thing you know, something comes out and it, boy, that wasn’t real at all. Um, yeah. And, and let’s just, I’ll pause you for a second because, you know, as someone who studies misinformation, I, I have been through quite a journey with how I’ve thought about digital technologies, right? Yeah. Whereas. When I first started in this field 20, 25 years ago, I really lamented the fact that there were these voices on high at the news organizations who got to gatekeeper. They were the ones who decided what was true and what was not. And because of the way that they produced the news, that tended to reinforce certain kinds of official narratives. You know, there were times when conspiracies were exposed later on, when we learned that Wow. They did not tell us the truth, right? So early on I thought, oh wow, digital technologies are gonna be revolutionary, citizen journalists and iPhones. Mm-hmm. And in 2011, we saw the Arab Spring and we watched all these, these, you know, dictatorships. Topple. And then we saw the real tide shift with misinformation, with and disinformation deliberate efforts to exploit those. The lack of gatekeepers to exploit the, the lack of professional, quote unquote truth tellers, and really just make hay of our information space. And now sometimes it’s amazing, right? Because sometimes. The official account is not true, and other times the official account not only is true, but belief in the official account is necessary for us to sort of make progress as a society, right? So. The trouble is we don’t know which time is which. Well, well that, that’s, that’s what I was gonna say. I mean, I, I used to actually kind of in my own rein, have this narrative that, you know, certain sources were true and certain not, but even, yeah. You know, even after, you know, things that happened during COVID, for example. Yeah. Um, um, you know, the Wuhan Laboratories and, and things like that, that, you know, everybody looked at as a. A conspiracy theory and all this stuff, right? A tinfoil hat theory, a tinfoil hat, and you brought it up and you were crazy and everybody, you know, and, and the next thing you know, that’s the truth. That’s what happened. Yeah. So it, I think you’d even take people, um, it, it makes people who, uh, believe in the system, not believe in the system anymore. And, and I think that’s kind of where a lot of people are headed. That’s where the huge danger is. Yeah. And, and I think one area of research that is so. That is empowering and is hopeful. I have a, a doctoral student who is doing her dissertation on this. It’s a, it’s a concept called intellectual humility, which is just the extent to which we acknowledge that our beliefs and our perceptions of the world could be wrong. And what happens is when you operate in an intellectually humble way when you have beliefs, but you also are open to the fact that new information could come in at any moment, that could tell you that the things that you thought were true are not true. When you live that way, you tend to. Be closer to empirical truth than the people who are intellectually arrogant because the people who are intellectually arrogant, they’re so sure they’re right and they’re never looking to update their views. Yeah. You know, curiously on that too, like what, what does a research show about like highly educated or quote unquote intelligent people? Are they just as vulnerable? Are they more vulnerable? Because of this. And you know, in some ways I would think they’re almost more vulnerable. Yeah. And, and I think that it depends. So when we look at individual level factors and how they interact with susceptibility to MIS and disinformation, all of these different, so there’ll be psychological traits that interact with education level, that interact with what kinds of things you then are exposed to. So it is complicated. It’s complicated. So it tends to be the case that people who are. Perhaps more educated are more likely to seek out information from more like legacy journalistic sources. Yeah, yeah. Right. Yeah. Right. So, and on average, those sources tend to have more things that are empirically true than if you’re just sort of like looking on the internet for whatever you can find. Um, in fact, there’s also some research that shows that the people who report, um, quote unquote doing their own research. They are statistically more likely to believe misinformation, which actually makes sense because when you think you’re doing your own research, you’re actually doing what we call selecting on the dependent variable, which is you are looking for the information that confirms what you think is true. That is just what we tend to do. Unless you’re doing a controlled experiment. Yeah. You’re not actually looking for information that contradicts your beliefs. So, you know, we do this, this is, uh, a lot of times, um, you know, we talk about, uh, personal finance and mm-hmm. And macroeconomics and stuff. How does this translate over to like, beliefs about. Economy, the, you know, ’cause these are, these are important things that, again, there is incredibly different, uh, views on. Sure. You know, um, an example now, uh, an example is that everyone, you know, whether, whatever you believe the pol policy or not, that, that, that, that tariffs were going to drive inflation, a hundred percent inflation was gonna skyrocket. The last CPI number comes under like under three right? 2.7%. Yeah. Like what, what, tell me how this all applies to that kind of news, that information. Yeah, so, so I, I’m going to make a, a couple points that I think will, will get to your question. Yeah. Because, you know, a, a lot of what I have landed on is this role of social identity, right? In shaping belief systems and. One thing that I’m sure you’re familiar with is that when the party in the White House switches overnight from Democrat to Republican, people’s perception of how the economy is doing as a function of political party flips over. So when the White House went from Biden to Trump in January, 2025, overnight, Republicans went from thinking the economy was in the trash to thinking the economy was doing excellent, and Democrats did the opposite. So is that an actual empirical observation of the world, or is that an expression of their. Perception that their team is in charge. Therefore, things must be better. Or now my team is no longer in charge, so now things must be worse. Right. That’s the big one. We see that. You know, I’m. Every election back to who, however long this has been tracked, we see this. Um, another thing that I think is interesting is in terms of people’s perceptions of whether or not the economy is good or bad, that is very much shaped by who we’re talking to and what information we’re exposed to. So this, this in invites a whole host of questions about how should elites talk about. Economic health, right? You had under Biden, Biden trying to tell people, the economy is doing really well, the economy is doing great. Look at all these metrics. The economy is doing great. And so you have Democrats saying, oh yeah, the economy is doing well, and Republicans saying, I am looking at how much things cost. I am looking at, you know, various things in my bank account. I’m gonna say the economy is not doing well. I also think that Biden is not a great president, so I tend to think that things aren’t going well when the other party’s in charge. And then you look now under Trump. Trump is in a bit of a pickle, right? Because he is saying the economy is doing well. He’s saying, look at these metrics, look at these numbers, and you have this sort of. Viral perception among people that we are in a stagnant economy. I even heard my 15-year-old, we were at Costco and we got, you know, their pizza slices are like $2. We got pizza slices and she said, well. You can get a whole dinner for $8 in this economy, Rick. I was like, what? Economy? But, but those perceptions are so, and it, it’s also very, very difficult to figure out where did that perception come from? Yeah, yeah. How do we isolate the source of that perception that this economy is, is not good. Yeah. Well then certainly like behaviors follow, right. And yeah. So I guess, yeah. I guess that’s like, I mean, I’m sure that’s a completely different thing. Like, I mean, how do, how do these, you know, different perceptions. Party based perceptions Sure. Ultimately influence the economy because of the way people think of the economy. Exactly. Right. And how, how do mm-hmm. When it comes to what have tariffs done, right? Mm-hmm. Like I’m not an economist. I do not know what tariffs have done. My understanding from my media exposure is that there are, on some certain kinds of items, prices have gone up a bit, but that some of the other. Like at the grocery store, for example, some of the price increases that we see there are not the result of tariffs. So then what are they the result of when it comes to how we attribute responsibility and blame, that is also very much shaped by our social identity. So if it helps me to think my grapes are expensive because of Donald Trump, then that’s what I’m going to think. Give us your sort of final thought here. Mm-hmm. Just in terms of, you know, what’s, what’s the learning. Here and how can we apply this to our own thinking? So, so I, I like to leave things on, on a kind of positive note because there is a lot to be concerned about in such a fractured information space. Um. One of the things that has been bringing me some, some hope that I think we could carry with us into how we think about what it is that people yearn for, what it is that people want. Even in this, this very splintered environment, I am convinced that even though all of our technology is creating atomized spaces for us to become our most exaggerated version of our self. I think what we really crave as human beings are shared experiences, opportunities for us to share experiences together, whether that be media content that we then want to talk about, whether those be events. There is a reason why football is still such a successful, um. Kind of entertainment. Right? And there’s also a reason why when there are cultural stories that allow us to all talk about them, like the couple at the cold play concert that was outed or whatever, there are reasons why those moments just catch fire. And I think it is because despite the fact that our technology platforms are trying to give us. Atomized, individualized, discreet spaces. At the end of the day, we really do want to share things with one another. Good stuff. Uh, professor Young, uh, uh, Dana Young, it, the book again is Wrong. How Media, politics and Identity Drive Our Appetite for Misinformation. Thank you so much for being on Wealth Formula Podcast. Great. Thanks so much. It was fun. We’ll be right back. You make a lot of money, but are still worried about retirement. Maybe you didn’t start earning until your thirties. Now you’re trying to catch up. Meanwhile, you’ve got a mortgage, a private school to pay for, and you feel like you’re getting further and further behind. Now, good news, if you need to catch up on retirement, check out a program put out by some of the oldest and most prestigious life insurance companies in the world. It’s called Wealth Accelerator, and it can help you amplify your returns quickly, protect your money from creditors, and provide financial protection to your family if something happens to you. The concepts here are used by some of the wealthiest families in the world, and there’s no reason why they can’t be used by you. Check it out for yourself by going to wealthformulabanking.com. Welcome back to the show everyone. Hope you enjoyed it. Again, just make sure that you are getting multiple sources of information. Whether that comes to, you know, this show really is about personal finance and macroeconomics and only politics and all that is not what I’m into, but the point is. That, uh, when it comes to, uh, when it comes to anything including personal finance and microeconomics, make sure you have multiple sources of information. Listen to the arguments and, uh, you know, make a decision that you can live with, whether you’re right or wrong. That’s it for me this week on Wealth Formula Podcast. This is Buck Joffrey signing up. If you wanna learn more, you can now get free access to our in-depth personal finance course featuring industry leaders like Tom Wheel Wright and Ken McElroy. Visit wealthformularoadmap.com. The post 543: Avoiding Misinformation in the Era of Fake News appeared first on Wealth Formula.

The Wealth Formula Podcast is one of the longest-running personal finance podcasts still standing. For more than a decade, I’ve shown up every single week to talk about investing, markets, and the forces shaping the economy. What’s interesting is how much my own thinking has evolved over that time. Early on, I was more rigid. I was—and still am—a real estate guy. But back then, I didn’t give much thought to ideas outside that lane. I was dogmatic, and I didn’t always challenge my own beliefs. Time has a way of doing that for you. I’ve now lived through multiple market cycles. I’ve watched the stock market melt up to valuations that felt absurd—and then keep going. I’ve seen gold go from flat for a decade to parabolic over a year. I’ve seen interest rates sit near zero for a decade and then snap higher at the fastest pace in modern history. And I’ve learned, sometimes the hard way, that diversification is about survival and that every asset class has its day. One lesson I learned that I am thinking a lot about these days is: ignore major technological shifts at your own peril. Back in 2014, I first started hearing people talk seriously about Bitcoin. At the time, I dismissed it. I listened to the critics, was convinced it was a scam, and didn’t take the time to truly understand it.  That was a mistake—not because everyone should have bought Bitcoin, but because I ignored a structural change happening right in front of me. Bitcoin went from a cypherpunk expression of freedom to the largest ETF owned by BlackRock. Today, the dominant story is artificial intelligence. And whether you love stocks, hate stocks, prefer real estate, or focus exclusively on cash flow, you cannot afford to ignore AI.  This isn’t a fad. It’s a general-purpose technology—on the scale of electricity, the internet, or the industrial revolution itself. That doesn’t mean it’s easy to invest in. It’s hard to look at headline names trading at massive valuations and feel good about buying them today.  But investing in AI isn’t about chasing a single company. It’s about understanding second- and third-order effects: energy demand, data centers, productivity gains, labor displacement, capital flows, and how blockchain and decentralized systems intersect with all of it. What experience has taught me is this: you don’t need to be first to invest—but you do need to be early in understanding. If you wait until something feels obvious, most of the opportunity is already gone. This week’s episode of the Wealth Formula Podcast is focused squarely on AI and blockchain—what’s real, what’s noise, and where the long-term implications may lie. Listen to this episode. You’ll come away smarter. And years from now, you may look back and realize this was one of those moments where paying attention really mattered. Transcript Disclaimer: This transcript was generated by AI and may not be 100% accurate. If you notice any errors or corrections, please email us at phil@wealthformula.com.  Welcome everybody. This is Buck Joffrey with the Wealth Formula Podcast. Coming to you from Montecito, California. Today we wanna start with a reminder. We are in a new year and we are already doing deals, uh, through the Wealth Formula Accredit Investor Club. You can go and sign up for that for free. Uh, wealth formula.com just hit investor club and you just get on there and, and you’ll get onboarded. And from there, all you gotta do is wait for deal flow and webinars coming to your inbox. And, um, you know, if nothing else, you learn something. So go check it out. Uh, go to. Wealth formula.com and sign up for Investor Club now onto today’s show. Uh, the, it is interesting. I don’t know if you are aware it’s a listener, but we are, wealth Formula is, uh, probably I would say one of the, certainly in the one of the top longest running personal finance podcasts still. Standing. Uh, I’ve been around, well, I think the first episode was on like 2014, so it was a long time, but in earnest, you know, at least for over a decade. And, you know, during that time, I’ve shown up every week, every single week. Don’t Ms. Weeks, but none, none. Isn’t that incredible? I’ve shown up, uh, talked about investing and talked about very way markets are working, forces, shaping the economy, all that kind of stuff. But you know, as you can imagine, as a. As a younger individual versus, um, my crusty self. Now, you know, a lot of my own thinking has evolved over that time, you know, back then. And I, you know, I think this appealed to some people, but, um, you know, I was really dogmatic. I’m a real estate guy, right? And I still am a real estate guy, but back then I wouldn’t give anything else the time of day to even think about, you know, and, and, uh, I, I, you know. I was dogmatic and didn’t always challenge my own belief systems. Um, I’m different now, right? I’ve softened And time is a way of, of changing all of that dogmatic stuff for you. You know, I’ve lived through multiple market cycles. I’ve watched, well, I’ve watched the stock market, which I, which I always maligned, you know, melt up to valuations. Uh, that felt absurd. And then keep going higher. I’ve seen gold, which was kind of ridiculous for the longest time. I watched it for like a decade, just pretty much flat, and then it goes parabolic. Over the last year, I’ve seen interest rates sit near zero for a decade and then snap higher. Uh, not even as time, just launch higher at the fastest space in modern history. And I’ve learned sometimes I guess, the hard way that diversification is about survival and that every class, every asset class has its day. Just like every dog has its day. And um, you know, one other lesson that I learned that I’m thinking a lot about these days is ignore major technological shifts at your own peril. So what am I talking about? Well. It’s kind of a, it is a technological shift, whether you think it about not, but Bitcoin. Okay. Back in 2014, I first started hearing people talk seriously about Bitcoin, and at that time I dismissed it. I was, uh, I was listening to critics beater Schiff that constantly called it a scam, said it was going to zero and so on. I didn’t, I didn’t take the time to truly understand it, to try to understand it the way I understand it now, that makes me a believer in Bitcoin. That, of course was a big mistake, not because, you know, everyone should have bought Bitcoin and, uh, back then, well, they, you know, would’ve been nice if they did, but because fundamentally I ignored something that was a structural change happening right in front of me. And since then, Bitcoin went from a cipher punk expression of freedom to the large CTF owned by BlackRock today. The dominant story is actually artificial intelligence. Now, whether you love stocks, hate stocks, prefer real estate focused exclusively on cab, whatever, you cannot afford to ignore ai. It’s not a fad. It’s a general purpose technology and a technology shift, and the scale of electricity. The internet bigger than the internet, bigger than the industrial revolution. Now, that doesn’t mean it’s easy to invest in. I mean, I’m gonna go invest in AI and make a bunch of money because I mean, what does that even mean? It’s hard to look at headline names, trading at massive valuations like Nvidia and all that right now, and saying, oh, I’m gonna go buy that. Who knows? That’s gonna work out. When I talk about investing in AI isn’t really just investing in stocks or any individual company or data centers or whatever. It’s about understanding. The second and third order effects, energy demand. You know, as I mentioned, data centers, productivity gains, labor displacement, capital flows, and how blockchain and decentralized systems intersect with all of that. It is very, very complicated. Um, but it’s really important to start to try to understand, you know, an experience that stop me is this. You don’t need to be the first to invest, but you do need to be early in understanding. If you wait until something feels obvious, usually the opportunity’s gone by then. And you know, the thing about AI is even if you think it’s obvious now. The reality is that most people haven’t really caught on. Maybe they played with chat GPT, but I don’t think they’re understanding what this whole, you know, this thing is gonna do to our world. Um, anyway, so that is what this week’s episode of Wealth Formula Podcast, uh, is about. It’s about AI and also, um, a little bit about, you know, bitcoin and blockchain and that kind of thing. Um, we’re gonna talk about what’s noise, uh, you know, where the long, what the long-term, uh, implications are all of this stuff. This is a show that, uh, I really enjoy doing really, really good stuff. Um, so make sure you listen in. We’ll have that interview for you right after these messages. Wealth Formula banking is an ingenious concept powered by whole life insurance, but instead of acting just as a safety net. The strategy supercharges your investments. First, you create a personal financial reservoir that grows at a compounding interest rate much higher than any bank savings account. As your money accumulates, you borrow from your own bank to invest in other cash flowing investments. Here’s the key. Even though you borrowed money at a simple interest rate, your insurance company keeps paying you compound interest. On that money, even though you’ve borrowed it, that result, you make money in two places at the same time. That’s why your investments get supercharged. This isn’t a new technique. It’s a refined strategy used by some of the wealthiest families in history, and it uses century old rock solid insurance companies as its backbone. Turbocharge your investments. Visit Wealth formula banking.com. Again, that’s wealth formula banking.com. Welcome back to the show, everyone. Today. My guest on Wealth Formula podcast is Jim Thorne, chief Market strategist at Wellington. L is private wealth with more than 25 years of experience in capital markets. He’s previously served as chief capital market strategist, senior portfolio manager, chief economist, and CIO. Uh, equities at major investment firms and has also taught economics and finance at the university level. Uh, Jim is known for translating complex economic, political, and market dynamics into clear actionable insights to help investors and advisors navigate long-term capital decisions. Uh, Jim, welcome with the program. Thanks for having me Buck. Well, um, Tim, I, I, I, uh, had been following a little bit of, uh, what you discuss on, uh, on X and, um, one of the things that caught my eye is, you know, your, your narrative on, on ai, a lot of people are tend to be still sort of skeptical of AI and what’s going on, uh, with the markets. Um, uh, but at the same time, uh, there’s this. Sense. I think that ignoring AI altogether as an investor is, is, is downright potentially dangerous. So, uh, at the highest level, why is AI something people simply can’t dismiss? Well, we live in an, uh, uh, you know, many other people have coined this term, but we live, we’re living in an exponential age of, of technological innovation. And, you know, AI and I’ll just add into their, uh, blockchain is just the normal evolutionary process that, you know, for me started when I left graduate school and came into the business in the nineties where everybody had this high degree of skepticism of the computer and the, the, the phone, the, the. And the internet. And so, you know, what we do is we go through these cycles and there are periods of time where the stars align. And we have a period of time where we have what I would call an intense period of innovation where I would suggest to you that. People are skeptical. Skeptical, and yet at the same point in time, they very early on in the, in the, in the trade, call it a bubble when it’s not. And so I think it comes from the position of ignorance. One, I think two, fear, and then three. If you think about if you are an active manager, I in a 40 ACT fund, um, you know, and you’re sitting there with, uh, you know, mi. Uh, Nvidia at, you know, eight or 9% of your index. And that’s a big chunk that you’ve gotta put into your fund, uh, just to be market neutral. So there’s a lot of people that hate this rally. There’s a lot of people that are can, going to continue to hate this rally. But the thing I anchor my hat on are a couple of things. Look at if this is no different than the railroad. Canals, any major technological innovation, will it become a bubble? Yes. Just not now. So, so let’s follow up on that, because a lot of people think, or are talking about the, do you know the.com bubble, uh, comparisons, and you’ve argued that that sort of misses the real story. So, so where are we getting it wrong right now? Are those people getting it wrong? In the nineties buck, you’d walk into a bar and there wouldn’t be ESPN on there’d be CNBC on people were getting their jobs to become day traders. Folks didn’t go to the go to university because they were basically getting their white papers financed. You had companies that were trading off of clicks. So I lived that. Anybody who is of a younger generation has no idea what a bubble is, and it’s specious and pedantic for them to use that term when they have no clue about what they’re talking about. But you did mention that it could become a bubble. How do we know when it does become a bubble? Oh, it’ll become a bubble. Well, when, when, when you know, the, what, what I am looking for is, you know, when we, when the good investment opportunities start to dry up, when liquidity starts to dry up. So what I, it’s not about valuation, to me it’s about liquidity. So in 2000, what, and I’m roughly speaking, what went down was you had all these companies that were trading at Strat catastrophic valuation, this stupid valuations, and you walked in one day and they didn’t get financing. And if you read the prospectus or you followed the company, you knew that they were not going to be free cash flow positive for another two or three rounds of financing. All of a sudden you walked in and everybody goes, oh my God, this thing, you know, trading at 250 times sales. And everybody went, yeah, of course. And so what it was is, was when does liquidity dry up? So I’ll give you a date, um, you know, with Trump’s big beautiful bill act. 100% tax deductibility of CapEx and that goes until Jan 1, 20 31. So to me, that’s a very motivating factor for people to, um, invest. The last thing I would say to you in more of a game theoretic context book is, look, if you are a big tech company and you don’t invest in ai. You are ensuring your death. Yahoo, Hela Packard. I can go through the list of companies that cease to invest, so they’re looking. If it was you and I when we were running this company, I would say, dude, we gotta invest because if we don’t have a poll position in this next platform, whatever it is, we’re done. We’re toast. And I think that’s why you’re seeing all these hyperscalers spending as much money as they are. ’cause they get this, they saw it. So, you know, you framed ai not necessarily as a a tech trade, but as a capital expenditure cycle. Can you explain that to people? Well, what we need to do is we need to build out the infrastructure of ai. Then, and that’s the phase that we’re in right now. So it’s more like we’re building out all of the railroads, the railway tracks and the railway stations across the United States back in the 18 hundreds. And then we’re gonna go through that building phase. And then as that building phase goes, some companies, some towns, are going to basically realize and recognize what’s happening and start to basically take ai. Bring it into their business model, into enhanced margins. Right. So right now we’re building it out. I mean, you know, we all focus on the hyperscalers, but the majority of companies, pardon me, governments. Individuals, they haven’t used AI and, and what is interesting about this is back in the nineties, they were talking about how the internet had to evolve to be much more. You know, uh, have critical thinking in, in, in it. And it was more explained when you went to these conferences, as you know, you know, think about this. You’re hearing this in 99, okay? Not today. You go in and you ask Google or dog pile at the same time, or excite, okay? You would say, I wanna go to Florida in the third week of March and I wanna stay here and I wanna spend this amount of money and I wanna rent a car. Plan it for me. And they would come back and they would tell you that it would come back and it would, it would, everything would be there. And you would have your over here and all you would have to do is drop your money and you had your thing planned. So none of this is as, it’s aspirational, but we’ve heard it before. And in technology, what happens is it’s not like it’s new. We’ve been talking to, I did machine learning in in graduate school. Ai, you know, I did neural networks and I’m a terrible Ian. This isn’t, you know, Claude Shannon wrote about this in 1937, right? But it’s about when does it hit, and so it was chat GBT. Can we argue, was that right? As an investor, it’s stop arguing, start investing. Then what you’ve gotta figure out, which is the question you ask, is when does the music stop? I think it goes until the end of the decade. You know, one of the things that, uh, is interesting about this, uh, AI investment, uh, it’s, it’s unfolding in a higher interest rate environment. Why is that detail so important? Understanding its significance? Well, it’s the cost of capital, right? And so this phase that we have right now. It’s funny you say that, right? ’cause our reference point is zero interest rates, right? Yeah, yeah. Right. That’s right. So, you know, you know, so, so think about this, what it happens right now. Now we’re in the phase where you’ve got these hyperscalers that instead of taking all their free cash flow and buying bonds and buying back stock, are increasing CapEx because there’s a great tax deduction on it. So you get a lot of, so we’re in this phase where, for where, where a lot of the money is, you know, was. Was, let me, let me be clear, was a hundred free cashflow. Now we’re getting these guys, these companies like Oracle and what have you, you know, starting to issue debt and look at debt isn’t bad as long as the rate of return on debt is higher than the interest rates. And so, you know, you know, I, I would say historically speaking, for a lot of these high quality names, the interest rates are not, uh, at levels that will stop them from investing. Right. Right. You know, you’ve written that, um, productivity is ultimately the real story behind ai. So why does productivity matter more than the technology headlines themselves? Well, let me just put it this way, right? So we’ve grown, I grew up, I, I joined, I’m up here in Toronto, right? So I’m gonna give it to you in Canadian dollars, right? So I joined, I joined here. You know, I grew up here, went to the states, came back home. Growing this company I joined when we’re about three and a half billion. We’re getting close to 50 billion, and we’re the fastest growing independent platform in the country. I’m a one man band, right? I use three ai. In the old days, I’d have four research assistants. Where’s the margin in that? And so I, that’s how I see it. And let me be clear, it’s, you know, this isn’t we’re, it’s not perfect. But if I wanted to say, instead of you, but hey, write me a 2000 word essay on the counterfactual of what happened with railroads up until 1894 when the, when the bubble popped, give me a f, you know, a a thousand word essay and, and just a general overview. I can get that in less than five minutes. Michael Sailor is writing product on ai, which, which, which you would take, which you would take. He’s in his presentation, say it would take a hundred lawyers. So it’s gonna be more about those. And it’s, it’s no different than Internet of things or, you know, it was, uh, Kasparov that talked about this. Gary Kasparov talking about the melding of, of technology in humans. He would ran, run this chess tournament called freestyle. You could use a computer, you could use, you know, grand Masters. You could use whatever you wanted to compete. And who won? Well, who won it Was that those teams that were generalists that had a little bit of that, the knowledge of the computer and the knowledge of the test. Uh, o of chess, right? That’s what’s gonna happen. So this isn’t we’re, as far as I’m concerned, we’re not, yes, there’s going to be some d some jobs that are going to be replaced, but that is always the case in technology. I’m not a Luddite, okay? I am not Luddite. But the same point in time. I, I would suggest to you that it, it is just a really, for me, it’s a, helps me. Do research no different than when I was an undergrad and they went from cue cards in the, the library at the university to actually having a dummy terminal and I could ask questions in queue. You know, it stalked me from having to go to the basement of the library and going to microfiche. Right. Have helping that way. Now can it, can, will it do other things? I’m sure it is, and I’ll lead that to Elon Musk and the crew. You know, that’s above my pay grade. But for me, I see it as a very helpful way of, you know, allowing me to process and delineate. Much more information a a and not have me waste so much time trying to figure out what got went on in the past or, you know, QMF. Right. You know, summarize me the talk five, you know, academic papers in this area, what are they saying? And then they gimme the papers. Right. It just speeds the process up. Yeah. You know, um, one of the things that I’ve been sort of talking about and thinking about. Is that it’s hard to not see AI as a very, very strong deflationary force. Um, how do you think about that? Yeah. Technology is deflationary, right? Doubt about it. And so I look at it this way, Ray. Um, so I work at the financial services industry, okay. You know, Mr. Diamond of JP Morgan is talking about how they are starting to embrace blockchain and ai. They are going to cut out the back end of that in the, the margins in that, in that company by the end of the cycle are going to be fantastic. People just do not get in. You know, the financial services industry is built on a platform. Of the 1960s, dude. I mean, they’re still running Fortran, cobalt. So you know what I, how I look at this is much more as a margin type story, and there’s going to be a lot of displacement. But at the same point in time, I look at Tesla and automation and ai. And you know, people look at Tesla as a car company. I look at Tesla as an advanced manufacturing company. Elon Musk could basically go into any industry and disrupt it if it wanted to. Right. So that’s how I look at it. And so, you know, the hard part is going to be, you know. Nothing. If we get back to where we were, it’s not going to be perfect, right? Because here’s, here’s where the counter is, here’s where the counter is. Right? If you, if, if you think about, and we’re, I’m gonna take Trump outta the equation and ent outta the equation right now, but if we just went back to the way things were before COVID, we would have strong deflationary forces. Okay. Just with demographics, just with excessive levels of debt. Just with, you know, pushing on a string in terms of, in terms we couldn’t get the growth up, you know, and, you know, and the overregulation of financial institutions. Trump and descent are basically applying what’s called supply side economics, and they’re deregulating. It’s says law, which is John Batiste, that says basically supply creates his own demand and it’s non-inflationary. But really what they’re going to try to do is they’re going to try to run the economy hot and they’re gonna try to pull this way out of the debt. And if you do that and you deregulate the banks. And allow the banks to get back to where they were before the financial crisis. Okay. You know, and, and the Fed takes its interest rates down to neutral, expands the balance sheet. Then I don’t think we’re gonna go back to the zero bound in deflation. I think this thing’s gonna run hot for a long time. And I think it, the real question is, is, is is 2 75 in the United States the neutral rate? I think it is. Uh, but as, as, as Scott be says, and, and, and, and, and let’s be clear, buck, the guy’s a superstar. Okay. Guy is a legend. Just you sit there, just shut up and listen to him. Okay. They keep up, right? Well, so they’re gonna run it hot, but where we are is, in his words, mine, not mine. We’re still in this detox period, you know what I mean? We still got the Biden era. We still got, you know, a over a decade of excessive ca of Central Bank intermediation. That needs to get, you know, go away. So what I say, and what I’ve been writing about is 26 is going to be the year that the baton is passed back to the private sector. Let’s get rates down to 2 75. That’s, I mean, I’m going off the New York Fed model. That says real fed funds, the real, the real neutral rate is 75 to 78 basis points. I think inflation’s at two. That that gets you 2 75. Get the rates there and then get the balance sheet of the Fed to the level so that overnight lending isn’t loose or tight. It’s just normal. And then step back, go away and let Wall Street and the private sector create credit. Create economic growth and let’s get back to the business cycle. And if we do that, we’re gonna have non-inflationary growth. It’s gonna be strong, but we’re not going back to the zero bound and we’re gonna grow our way out of this. And so that’s where I get really excited about. This is a very unique time in history. A very, very, very unique time in history where, and I don’t know how long it’s going to last because of the compression that we have now because of the, you know, we live in such a digital world, but let’s say it’s five years demographic says it’s to 33, 32 to 33. That’s, you know, that’s how long this run is. And, and to me, uh, AI is a massive play. I, I, to me, blockchain is a massive play and to me it’s to those countries and companies that get it is, whereas investors, we wanna think, start thinking about investing. Yeah. You mentioned, um, non non-inflationary growth. Can you drill down on that a little bit just so people understand a little bit where. Usually you think of an economy running super hot, you, you think automatically there’s an, you know, an inflationary growth. So I want you to think in your mind into your list as think in your mind. Go back to economics 1 0 1 with the demand curve. In the supply curve, okay? And there are an equilibrium. And at that equilibrium we have a price at an equilibrium, and we have an output as an equilibrium. Okay? Now what I want you to do is I want you to keep the demand curves stagnant or, or, or anchored. Then I want you to shift the supply curve out. Prices go down, output goes out. We can talk all this esoteric stuff, you know, you know Ronald Reagan and, and Robert Mandel and supply side economics. But it’s really your shift in the supply curve out, and that’s what, and that’s what BeIN’s doing. I mean, this is a w would just sit down and be quiet. He’s talking about, you know, what is deregulation? He’s pushing the supply provider. Oh, hold on. My phone. My, my thing. And what did, since the two thousands, what did, what was the policy? It was kingian, it was all focused on the demand curve. Everything was focused on demand. And so all we’re doing is we’re, we’re getting the keynesians out. I use 2000 ’cause that’s when Ben Bernanke really came in and was very influential. Let me just say he’s a very smart, I learned so much from reading. Smart, smart, smart, smart guy. But his whole thing was Kasan. He came from MIT, his thesis supervisor was Stanley Fisher, right? We’re going back to, you know, Mario Dragons thesis supervisors, Stanley Fisher, all these guys came from MIT, Larry, M-I-T-M-I-T, Yale, and Princeton. Whereas previously it was the University of Chicago. It was Milton Friedman. It was, it was supply side economics. We’re going back, they’re going back to supply side economics and right now we need it. We need balance. But my god, what did we end off with? We ended off with four years of mono modern monetary theory. Deficits matter. That’s insanity. You had mentioned a little bit, uh, you, you’ve talked about blockchain a few times here. Talk about the significance. I mean, it’s sort of, you know, blockchain was a thing that everybody was, everybody was talking about it, you know, three, four years ago, but now it’s all about ai. But you know, now you’ve got, um, but in, but in the background, blockchain has grown, uh, adoption has grown. Uh, tell us what’s going on there, and if you could tie it into the significance of, of where we’re at today. Yeah. Um, uh, Jeff Bezos gave a wonderful speech, I think in two thou, early two thousands, where he basically talked about the fact that, you know, once this innovation is led out of the genie’s, led out of the bottle, whether or not, you know, buck and Jim, like it as an investment, the innovation continues. And so after the internet bubble pop, right? Really smart guys like Jeff Bezos, uh, Zuckerberg, you, you, the whole cast of characters, right? Basically built it out. Okay. And it wasn’t perfect and everybody knew it wasn’t perfect. I mean, that was the whole thing that was so bizarre. But they knew it wasn’t perfect and they knew that they needed to solve some problems. Right. And you know, it was a double spend problem. I mean, the internet that we were dealing with right now was developed in the 1950s and so on and so forth. And so, you know, that always stuck with me. Right. A couple of things stuck with me because I’ve lived through a couple of these cycles. The first one is Buck. When the, when Wall Street coalesces around something just shut up and buy it, right? I mean, I, I spent too much of my life arguing about whether dog pile and Ask Gees was better than Google. Wall Street said Google was the best. Shut up. Invest, right? And so, so look, blockchain solved the double spend problem. Blockchain solved all the problems that the original iteration of the internet could solve, and everybody knew it was coming along okay. So it’s a decentral, it’s decentralized, right? Uh, does, does not need to be reconciled. So no. Not only do you have another iteration of the internet. You have basically introduced into society the biggest innovation in accounting or recordkeeping since double entry. Bookkeeping accounting was introduced in Florence, Italy centuries ago by the Medicis and, and buck. All this is out there like, so this is a profound, right? So think about you’re in an accounting department and you don’t have to reconcile, right? So look. The first use cakes was Bitcoin. And what was the, what was the beautiful thing about it? Well, first off, it grew up by itself. And secondly, it’s got perfect scarcity, right? And so let’s just full stop. And I mean, yes, gold and silver had the run that they should have had decades. So I had been waiting and listening to people, gold bugs, talking about this type of run since the nineties. Okay. Um, but look, you know, and the problem with fi money, right? I mean, this is, this goes back decades. It’s an old argument. The way you solve it is, is Bitcoin. That’s the solution. I mean, forget about it. I mean, if they’re gonna whip it around and do all this stuff, fine. But the other thing that people miss and Sailor hasn’t, and Sailor is brilliant, is look. Bitcoin is pristine collateral in 2008, in September. What caused the, the system to stop was the counter. We could not identify counterparty risk for near cash. It was a settlement problem. Anybody you talk to Buck that says it was, you know, the subprime this and it, yeah, that was crap. I get that. But when the system shut down is you had a $750 million near cash instrument with X, Y, Z, wall Street firm, and you did this for three extra beeps and it was no longer cash. Guess. And guess what? Your institutional money market fund broke the buck. That’s when the system blew sky high. When the money market broke the buck and it was a settlement problem, blockchain and Bitcoin solved that. Sailor knows that, look where Wall Street’s gonna go. They understand now that. Bitcoin is pristine, collateral and capital that is 100% transparent. Let’s lend against it, and that’s what Sadler’s doing. That’s why Wall Street hates the guy so much, right? Think about that. Think of where is he going after he’s going after all the stranded capital on Wall Street. And, and the whole point is he’s sitting there going, I’m too busy for this. And you’ve got all these other people that are gonna live off of other people’s ignorance. Meanwhile, Jing Diamond knows exactly what he’s talking about. We can identify, if I hear one more person on me in, in the meeting say, I don’t know. You know, you know, uh, micro strategies balance sheet is so complicated. Really. Compared to JP Morgans, I mean, you know what his capital is. It says Bitcoin, like, what are you guys talking about? But hey, fucking in this business, people make generational wealth on ignorance of people who think they know what they don’t know. So, you know, just going back to Jamie Diamond, you know, he spent, I don’t know how long. Throwing every insult, uh, he could towards Bitcoin. And now they’ve really kind of, they haven’t backtracked. I think he’s, he’s, you know, his, his, um, I think the way he phrases is the blockchain’s a real thing. He never seems to really say the word Bitcoin, uh, in this regard. Um, banks in general, where do you think they’re headed with this stuff? I mean, I, you know, right now, again, you can kind of see even. Um, I think, you know, some of the big advisory firms suddenly recommending one to, you know, one to 4% of people’s portfolios in Bitcoin. I mean, this is all, I mean, gosh, I, I’ve, you know, been talking about Bitcoin since 2017. This is in unbelievable transformation in less than a decade. Where do you see this going in the next five to 10 years? It’s called the, it’s called, what is it? It’s called, I’m gonna call it the Evolution of Jim. Me, you know, in my business and, and, and, and you know, the thing I have book is I’ve survived and I’ve gone through a lot of cycles. I’ve done a lot, you know, and you ask yourself, you scratch your head a lot and you’re, and you, but you’re continually doing objective research and you’re this, if you, this is why I love this game so much. Right? So let’s just go stop for a second. Let’s get some context. Right. My first summer job, one of my first summer jobs, I worked in the basement of a bank in the in, in downtown Toronto, right up the street from the Toronto Stock Exchange. And my job was to let guys in with beak, briefcases into the cage, into the big vault, to basically bring in certificates. Okay. And, and what? Stock certificates. And so remember, you know, and I remember my grandfather when we, when he died, look at, we couldn’t sell the house because he didn’t believe in the banks. And we were finding certificates all over the house in the walls. Okay? Right. So in the 1960s it was bare based. The whole industry was bare based. And there was the volume in Wall Street started to pick up to the point where they couldn’t handle the volume. There was a paper crisis where almost a third of the companies went down bankrupt because of the cage. The cage. Okay. So basically what happened was, to make a long story short, they came out with, they came, Hey, why don’t we get two computers At one point in time, they said, okay, crisis. Let’s solve it. Well, why don’t we get these two computers and we can solve, or we can sell trades among, amongst each other. Okay. And then we don’t need to have guys riding around Wall Street with bicycles and big briefcases. Okay. And then what we did was, what we did was we sat there and said, well, why don’t we have a centralized clearing, and we’re gonna call it DTC or CDS, depending on what country you’re in. And what we’re gonna do is we’re gonna offer paper, we’re gonna, we’re gonna issue paper rights to the underlying stock that was developed in the early 1970s. That’s the system that we’re on right now. There are a lot of faults with that. Let me give you, when you’ve talked about the GameStop a MC situation, when you have a company that’s basically have more shares outstanding short, sorry, more shares short than outstanding, that shows you that the old system doesn’t work. It’s called ation. The paper writes to the underlying assets, it, it doesn’t match up. There have been guys that make a career outta this and write books about this, right? Dole Pineapple. They had a corporate, a corporate event, right? Hostile takeover. 64,000 for 64 million shares, voted, I think, and there was only 3,200 on. We all know this, so this has to be solved. The way you solve it is you tokenize assets, and this was talked about a decade ago, and they know about it and true tofor, they, and if you’re thinking about it, it’s totally logical, right? But if we allow this innovation to go full stream ahead, we’re wiped out, right? So what did they do? They delayed. They delayed. And as you know, you could talk about, it’s called Operation choke 0.2 0.0. Right. You know, the Fed overreached their bounds, they de banked people. I mean, this is why, why Best it’s going after them. They, yet they stepped over their constitutional mandate. Right. The federal, the Fed Act is not, uh, does not supersede the US Constitution. Elizabeth warned the whole thing. They did it. Okay, so let’s not complain about it. So now Atkins is gonna, we’re gonna have the Clarity Act come out and they’re gonna basically deregulate New York Stock Exchange already there. They’re gonna put everything on the blockchain and when you put everything on the blockchain, trade a settlement. There’s no hypo. Immediate settlement. Immediate, which is a benefit if you can get your act together because it, you know, for Wall Street firms you need less capital, right? So it’s a natural evolutionary process. And then you sit there and go back in history, if you and I were writing it, we’d sit there and go, well, should we be surprised that the incumbents right, the status quo pushed back on innovation? No, there was a guy, there was a prophet, um. At, at Harvard, his name was Clay Christensen, and he wrote this wonderful book called The Innovator’s Dilemma. You know, why does, why don’t companies evolve, or why do they go bankrupt? It’s because they cease to evolve and the status quo doesn’t allow the evolution of the companies to take place. Right? Well, that’s what happened in RA. We’re gonna complain about it. No, it, it is what it is. It’s water under the bridge. And so what I think is happening is, you know, Mr. Diamond is basically saying. He’s pragmatic, he’s a realist. And now he’s saying, we gotta evolve. And hey, by the way, now I’ve gotten to the point where I think I can make a tunnel. Think about that. Yeah. Think about his own stable coins, right? So his own stable coins. And, uh, well think about this. If you trade like internal meetings, right? And I’m hyped this hypothetical, right? I go, fuck, don’t screw this up this time. And you’re gonna go, Jim, what are you talking about? I go. We want a nice bread between bid and ask in these financial price. We don’t wanna go down to pennies. Okay? Can we go back to the old days when we were, you know, trading in quarters and sixteenths and so we can make some skin in the game? I think you’ve got the deregulation of the banking industry where the banks are gonna, they’re fit. It’s gonna be baby steps. But what’s gonna happen is they’re gonna basically say, stop taking all that capital that’s sitting at the Fed, making four or fed funds rate overnights wherever it’s four half, 3 75 right now. And you can now trade it. Go back to prop trading, which is what they did. And they’re gonna start off, they will start off with, its only treasuries. Eventually they’ll be able to expand throughout our lifetime. So the old way you gotta look at it is, you know. We’re bringing the ba, you know, we’re putting the band back together, man. Right. And the banks are gonna deregulate, they’re gonna deregulate the banks, they’re going to innovate, they’re gonna be able to use the capital, their earnings profile going out into the end of the decade. It’s, it’s gonna be monstrous, it’s gonna be, you know, it, it’s, it’s, and, and that’s how I get, you know, when people say, where do you think the s and p goes? You know, I say, you know, 14,000, you know, double from here by the end of the decade. And he goes, well, what about ai? I go, well, they’re gonna, that’s important, but it’s the banks. I think the banks are gonna have a renaissance. Yeah. Yeah. Um, one thing just to get your thoughts on, so when you look at the banks, you talked about sort of the inevitability of tokenization. Um, the stock exchange, uh, we talked about stable coins. I mean, another great way for banks to make money. Uh, essentially where does that, how, how does that help or hurt Bitcoin adoption? Because Bitcoin is a sort of a separate, separate, you’re not, you’re not building on Bitcoin as much as you are, say, Ethereum, Mar Solana or, you know, some of the, some of the blockchain things. So, so is it just that. Is it just a, an adoption issue? Because you live in a, in a different world. You live in a world of blockchain and Bitcoin is, its currency. It’s weird, right? Because I, I’m writing this feed like, so Buck, where are you right now? Where, where, where are you located? I’m in Santa Barbara. You’re in California. So, yeah, so I’m in Toronto, right? Uh, you know, I lived in, worked in the States for, you know, a decade, a couple of decades, and I’m back home and it’s like, man, they don’t get it. Right, and, and, and, and what am I talking about? Well, well, this, this is the, the thing that you’ve gotta understand is this, right. Ethereum was invented by Vladi Butrin in this town, Joe Alozo, who’s the head of one of the largest Ethereum groups. Father is a dentist at Bathurst and Spadina. We’re up here and people are saying, oh, you know, president Trump don’t talk about being a 51st state. We act like a colony, duke. We are a, you know, we forget about calling us one. We are. So, look, it, look, there is no doubt in my mind that Ethereum is going to have a place and, and we’re going to use it. Seems like we’re going to use Ethereum and that’s the smart contract, you know? Um. And that’s fine. Um, you know, but going back in time. But, but remember, there’s not per, there’s not perfect scarcity there. So I like Ethereum, don’t get me wrong, but I look at Bitcoin and I look at the, I look at the scarcity, and I also look at the fact of, you know, what sa, what Sailor, if you sailor did a presentation in the middle of next year and all hell broke loose. What he did, and it’s, you know, and of course I’m hypothesizing. He basically went to New York and said, I am going to create fixed income products and I am going to give yields. On those products, and I’m coming after the stranded capital that sits on Wall Street that you guys have been ripping on for years. In the middle of last year, staler went public and declared war. Okay. Are we surprised that Jim Shane Oaks came out and everybody came out basically guns a blazing. Are we surprised? But what he, what Sailor did and put and slammed on the table is it’s pristine capital, it’s transparent capital. And what are you willing to pay for that? And now you GARP banks trading at. We have no idea what their capital structure really is. Honestly, we have an idea, but it’s very opaque, right? You know, the high quality names are trading at two, two to, you know, two times tangible book. You’ve got fintech’s companies trading at four to five times, right book, and you know, what’s Sailor doing right now? Diluting his stock so he can buy as much Bitcoin as he wants because he sees the next game. He says the hell with what you guys think the next game is going to be. Wall Street’s going to realize that Bitcoin is pristine capital and there’s only 21 million of it. What do you and, and what just happened today? What did Morgan Stanley just file a treasury company. So everything you and I are talking about, they know they’re smart guys, right? They’re real, they’re not. That’s, this is the whole point. They’re really, really, really smart. Okay. They see they’ve gone through the history. They know. Okay, so you’re sitting there, you get around the room, you say, so wait a minute. Wait. Whoa, sailor’s over here. And he’s basically saying he’s gonna give you a a pref that’s basically backed by Bitcoin charging 10%. And he’s going after our corporate clients. I mean, and what’s the pitch Buck? You’ve got a hundred million dollars. Okay, you got a hundred million dollars in the kitty. Okay, buck. What happens is you need $10 million a year for working capital, which is in cash, which means you’ve got $90 million sitting there idle. Hey, buck, I can give you 10% on that. You go to Jamie, he’s giving you two. What are you gonna do? Yeah. I think one of the issues right now is I the, the perceived risk profile of that. Right. Uh, you know. I tend to agree with you about the, uh, pristine nature of Bitcoin s collateral, but just in general, the perception. I don’t know that, that that’s. That’s the case. Well, you gotta go back to the fact that, do you think Bitcoin’s going to zero or not? No, of course not. Yeah. ‘ cause the Bitcoin doesn’t go to zero. There’s no, then, then that are, there’s Bitcoin could go to zero. There’s no, I mean, I don’t think, I mean, non-zero probability, of course, right? I don’t think it is. And if that has been, if it has been selected and now you have Wall Street coalescing it, I haven’t even mentioned the president of the United States or his family. Right. Uh, or the Commerce Secretary and his family, right? Or if you go to New York, wall Street, right, they’re all talking about it, right? So, I, I, you know, to me, I, I, the question about micro strategy, to me it’s not. That it’s a treasury company and it’s got a pile of Bitcoin. What does he do with it? Does he become a bank? Like why does it, this is me. I’m pitching him. Right. Hey, Mike, why don’t you just become a FinTech, say you’re like a FinTech company and you’ll get, and you, you’re gonna instantaneously trade it five to six times book. Why don’t you, why are you, you’re talking like you’re attacking them, but you’re still, you’re still a software company with a, with a big whack of Bitcoin that you are writing pres. Right? So, and, and so that’s, that’s how I look at it. I think the wave is too big. We are going to digitize. And the other thing that we didn’t really touch on with respect to AI and blockchain, and I’m gonna paraphrase the president. Right. Um, Mr. Trump is, look, um, it’s a matter of national security, duke, and when I hear that, I go back to the nineties in the eighties when I was in late eighties when I was an undergrad. Right. And it wasn’t China, it was Japan. And, and you know, what happened was, you know, it, it’s funny, Al Gore did deregulate so that. The internet could become for-profit. We all stood around and said, you know what the hell could, how do we make money on this? That’s, you know, what do we do? And then what did we do? We, we, we threw a ton of money at it and the United States controlled it. And what did we get out of it? We got out, we got, you know, all those companies. Right. The last thing I would say to you, and this is much more of a personal story, is I, when I was younger, I was in New York and it was 2000 and I was at the Grand Hyatt, and it was a tech, it was a tech conference and, uh, Larry Ellison Oracle was there and he gave a, he gave a, he gave a a, a fireside chat. Then, um, we go to a breakout room and, you know, in a break, I don’t know about if you’ve been to one, but you go to a breakout room, it’s a smaller room at the hotel, and you know, sometimes you got 25 people, sometimes you got 50 people, right. And, you know, I went to the, I went to the breakout with Mr. Allison ’cause of Oracle and I went in there and it was absolutely jammed and I was sweating and he just looked at us and he just ripped us. He AP Soly, just, I still have the scars today. I’m talking to you about it. Okay. He called it a bubble. He called it a bubble. He, he was early in calling it a bubble. I never forgot that. And then you sit there and see what he’s doing right now. Where he’s levering up the balance sheet. Now, to me, having survived in this game for such a long period of time, and I call it a game, it’s a game of strategy, whatever, you know, how does that not, you know, I would say to you, we were, your office was next to mine. Fuck. I remember New York, he’s loading the goose loaded in. He go in, he’s borrowing money from his grandmother. He’s, you know, what is going on. And he’s really stinking smart. You know, he’s, he, Larry Allenson just doesn’t do, and people, oh, he’s in, you know, he’s, no, he’s not, he’s, he’s like the mentor of all of these guys. You know what I mean? So there’s a, to me, there’s a discontinuity that these need to believe that we’re still early on because you know, what, if Larry’s, what do we take when Larry or Mr. Ellison is leveraging up to me, it’s profound because I’m anchoring off of my bias to the New York, the New York high at, at the Tech Co. I think it was, I think it was at Bear Stearn. I couldn’t remember Bear Stearns or Lehman. But you know, one of those I carry that experience on with the rest of my life. I do. It’s like, what is Larry thinking? Right? So he’s leveraging up buck. That’s all I know. He’s a priest or guy. Well, that’s probably a good place for us to stop, Jim, uh, chief, uh, market strategist at Wellington Elta Private Wealth. Thank you so much for joining me. Thanks so much and be safe. You make a lot of money but are still worried about retirement. Maybe you didn’t start earning until your thirties. Now you’re trying to catch up. Meanwhile, you’ve got a mortgage, a private school to pay for, and you feel like you’re getting further and further behind. Now, good news, if you need to catch up on retirement, check out a program put out by some of the oldest and most prestigious life insurance companies in the world. It’s called Wealth Accelerator, and it can help you amplify your returns quickly, protect your money from creditors, and provide financial protection to your family if something happens. The concepts here are used by some of the wealthiest families in the world, and there’s no reason why they can’t be used by you. Check it out for yourself by going to wealth formula banking.com. Welcome back to the show everyone. Hope you enjoyed it. Uh, and, uh, as I said before, do not ignore ai. This is something that you need to start using. Have your kids start using it. Uh, make sure that they, you know. They use it every day because this whole world is turning AI and it’s gonna happen. You know, it’s gonna happen in, in a blink of an, uh, blink of an eye. And the world is gonna change and there are gonna be real winners out there. And the winners are gonna be people who knew where there was, was going and kind of used it in their mind’s eye as they looked on navigating how. You know how to allocate their money. Anyway, that is it for me. This week on Wealth Formula Podcast. This is Buck JJoffrey signing off. If you wanna learn more, you can now get free access to our in-depth personal finance course featuring industry leaders like Tom Wheel Wright and Ken McElroy. Visit wealth formula roadmap.com. The post 542: Why Investors CANNOT Ignore AI and Blockchain appeared first on Wealth Formula.

We all love winners. We love hearing about the big wins and the perfect track records. It feels good. It feels safe. It instills us with a sense of trust. But I’ve been in business long enough to know that virtually all individuals who are long-term winners have had profound moments of failure from which they learned invaluable lessons. Those are the people I really want to hear from. They have the kind of knowledge we all need as we navigate through life. It’s called wisdom. Surgeons have a saying: “If you’ve never had a complication, you haven’t done enough surgery.” In my surgeon days, I had a handful of complications. Let me tell you—they are no fun. You stay up at night replaying things in your mind, trying to figure out how you could have done things differently—how you could have had a better outcome. Even when unavoidable, those complications teach you something you’ll never get from textbooks. It’s been no different for me when it comes to business and investing. But I take comfort in knowing that even the greatest investors of all time had their moments of failure and rose from the ashes stronger and wiser. Warren Buffett. Ray Dalio. Every big winner has a story of failure. And while it may be cliché to say that we learn best from mistakes, I truly believe it. The good news is that those mistakes don’t have to be our own. Learning from other people’s mistakes can be just as effective. This week’s episode of the Wealth Formula Podcast is with Russell Gray—a guy many of you already know from his podcasting and radio career. Russ lived through 2008 up close. He took a beating, and he talks openly about what went wrong. But that period also changed the way he sees the world—in a good way. It changed how he thinks about risk, leverage, and what actually matters when things stop going up. That mindset is a big reason he’s been successful since then. It’s a conversation worth your time. Transcript Disclaimer: This transcript was generated by AI and may not be 100% accurate. If you notice any errors or corrections, please email us at phil@wealthformula.com.  If you let the debt run, at some point you fall into a debt trap where the interest on the outstanding debt consumes all of the available discretionary income, and then you’re borrowing just to service the debt. Welcome everybody. This is Buck Joffrey with the Wealth Formula Podcast coming to you from Montecito, California. Before we begin today, I wanna remind you there’s website associated with this. Podcast called wealthformula.com. It’s where you will go if you would like to, uh, become more, uh, ingrained with the community, including getting on some of our lists such as the Accredit Investor Club. Of course, it is a new year and there are new deal flows coming through. Lots of opportunities that you won’t see anywhere else if you are a, an accredit investor, which means you. Make at least $200,000 per year for the last couple years with a reasonable expectation of doing so in the future. That’s 300,000 if you’re filing jointly or you have a million dollars of net worth outside of your personal residence. If you, uh, meet those criteria, you are an accredited investor. Congratulations. You don’t have to apply for anything, whatever, but you do need to go to wealthformula.com. Sign up for the Accredited Investor Club, get onboarded. And all you do at that point is look at deal flow, and if nothing else, you’ll learn something. So check it out. And who doesn’t want to be part of a club? Now let’s talk, uh, a little bit about today’s show. You know, um, we all love winners, right? We love hearing about big wins, the perfect track record. It feels good. It feels safe, gives us a sense of trust. But the thing is, I’ve been in business long enough to know that virtually all individuals who are, what you would call long-term winners, have had profound moments of failure from which they learned, um, invaluable lessons. So those are the people that I really like to hear from. You know, they have the kind of knowledge we all need that as we navigate through all of life, and it’s called wisdom. Um, surgeons, as you know, I’m an ex surgeon. Have a saying, if you’ve never had a complication, you haven’t done enough surgery. Uh, in my surgery days, I certainly, you know, had a handful of complications just like anyone else who did a lot of surgery. And, and lemme tell you, there, there are no fun, right? So you stay up at night replying things in your mind, trying to figure out how you could have done things differently, how you could have had a better outcome. And sometimes you realize that those mistakes were unavoidable, but. You still learn something from them. And in these cases, you always learn something that you’re not gonna get from the textbooks, just from reading something. And you know what, it’s been no different for me when it comes to business and, and investing, but I, I take comfort in the fact, uh, that even the greatest investors of all time had their moments of failure and arose from the ashes stronger and wiser. All you have to do is look up stories of Warren Buffet and Ray Dalio. And Ray Dalio basically lost everything at one point, uh, because he, you know, he had a macro prediction that went completely south. But listen, uh, the, the point I’m trying to make here is that every big winner, every big winner I know of as a story of failure. And while it may be cliche to say, you know what we learned best from our mistakes, I, I truly believe that. But the good news is that those mistakes don’t have to be our own, right? So you can learn from other people’s mistakes as well, and that can be just as effective. Uh, so this week’s episode of Well, formula Podcast is featuring a guy that you may know. His name is Russell Gray. Russ, uh, has been around a long time, uh, in the podcasting world. And radio. You know, he talks a lot. He’s talked many times to me at least about living through 2008. And you know what that was like, the beating he took and, you know, what went wrong? Uh, you know, it’s, it’s something that he talks about because, you know, he’s a successful guy and that period in time changed. You know, the way he sees the world, the way in which he behaves in that world. How he thinks about things like risk and leverage and you know, what actually matters when things stop going up. Uh, it’s a mindset thing and it’s important. Um, and we also obviously talk about other things as well, such as, uh, Russ’s current take on the economy. Uh, so anyway, it’s a, a good conversation and it’s one that you’re gonna wanna listen to, and we’ll have that for you right after these messages. 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Welcome back to Show Everyone. Today my guest on Wealth Formula podcast is Russell Gray. He’s a second generation financial strategist and, uh, you may know him from being a, the former co-host of the Real Estate Guy Radio Show, which is one of the longest running, uh, uh, radio shows of its time, uh, in the United States. He’s, he’s a founder of. Raising Capitalist project, which is an initiative focused on helping aspiring investors and entrepreneurs how to better understand how wealth is actually created and how uh, economic systems really work. Uh, he’s best known for his emphasis on real assets, cash flow, economic cycles, and preserving wealth and what he views as an increasingly fragile financial system. Welcome, Ross. How are you? Good buck, happy to be here. And, uh, proud of your success on your show. I remember way back at the beginning you were like, Hey, I wanna start a podcast. Yeah. Yep. You’ve done a great job. Yeah, it was an idea. I was like, here’s the idea. Start a podcast, build a community, all that kind of stuff. But it’s interesting. Uh, well, and let’s talk about what’s going on now. You’ve spent decades teaching people about, you know, real assets and cash flow. But lately your writings feel more focused on systems and and macro forces. So what’s changed? Has something finally become too big to ignore? Well, I think there’s two things you know personally, uh, most people who have heard of me or followed me know that 2008 wasn’t kind to me. I was in the mortgage business. I was very leveraged into real estate all over the place. Had my businesses for cash flow, had the real estate for equity growth. Believed that real estate was hyper resilient and gonna be the beneficiary of inflation. Didn’t understand the dependency on credit markets in both my business and my portfolio. And so that was a big mess, not doing, uh, a real SWOT analysis and understanding. And the third part of that, that was tough, is that I operated the business primarily on credit lines as well. So I had virtually no cash. And so when the credit markets seized up. Canceled my income, it canceled my credit lines and it evaporated my equity. And now all I had was negative cash flow on debt, on real estate. I couldn’t control. And so I looked at that and I said to myself, you know, I’m a pretty smart guy. I. Pride myself on paying attention. So obviously I’m not paying attention to the right thing. So I became obsessed with the macro, uh, picture and, and the financial system, which, you know, to me it’s, it’s the macro economy is what’s going on with, uh. Geopolitics and the energy and, you know, even policy, uh, that affects, uh, how well money can flow through the system. Both monetary policy from the Federal Reserve and fiscal policy from the government now today in the Trump administration trade policy. And so I began to pay attention to all those things, but from the standpoint of not how it was gonna affect the stock market, but how it was gonna affect the bond market and interest rates and the availability of credit, and how it was gonna affect Main Street. Directly and specifically now in terms of jobs and job creation are real wages. And so when I started really looking at all that, um, I, I, I realized that there were some things happening that were gonna be really good, and there were also some things that we needed to pay attention to. And these things move very slowly. So in 2010. I saw that coming outta the financial crisis, the Chinese were very upset with the United States about how much the Fed Balance sheet was expanding, and they were concerned about their very large investment in US dollar denominated. Bonds, and so they began creating bilateral trade agreements with Russia and many other countries to where they could begin this large process of de Dollarizing. Well, that was the first time I’d seen that movie, because it was the same thing that the Europeans did after they saw the Nixon default. Right? They began working on the Euro, which took ’em from 71, 72 when they started, maybe 74 when they started, but it took ’em till 99 to get it done. But you know, once they got it in place, over time, the Euro, the Euro has taken over 20% of global trade. You know, that’s market share from the US dollar. And so I saw this BrickX thing beginning to form. Uh, and then I saw the other thing on the macro that I thought was gonna be really good was in the jobs act, something you’ve benefited from as a syndicator, we. I wrote that report, new law breaks Wall Street Monopoly. And so, uh, even though I, I can’t tell you I was a big fan of Barack Obama, but he signed that legislation that happened on his watch. And I think it was fantastic because now it allowed Main Street syndicators, main Street Capital raisers to advertise for accredited investors and began to really, uh, level that playing field and open up Main Street, uh, to invest directly in Main Street. And so I met you in the syndication program that we put together with the real estate guys to coach real estate investors on how to become capital raisers to, to capitalize on that trend. So that’s, you know, kind of how I kind of became doing what I’m doing. And then when I decided, uh, just about 20 months ago to depart the real estate guys, I wanted to take some of the things that I originally set out to do when I first met Robert Helms way back in the day. And, you know, as relationships go, you know, he has his interest in the things that he wants to do, and I had my interest in things I came to do. And for a long time we were aligned well enough to continue to work together. But it got to a point where, for me, I, I wanted to go off in a different direction, and part of that was driven. By the, the death of my late wife. Uh, you had me on the show right after that happened to me, and I was going through this like, who am I? Why am I here? What am I supposed to do next? What do I really want to get done before I die? And so all of those things kind of informed my personal decisions to, to make a switch. And then of course, what’s going on in the macro. Um, what I saw with Trump 1.0, what I saw in the Biden administration and those policies, and then what I thought would happen in Trump 2.0. And I did a presentation on this at the best ever conference in March of 2025, right after he’d been inaugurated. And, and so, uh, that, that’s kind of has me where I feel like there’s some real opportunity coming. Uh, there’s also some things we need to be aware of on Main Street. Yeah. So you’re bullish on Main Street in general, but you’ve been pretty cautious about the broader financial system. So, uh, what are the things that you’re worried about? Well, I, I think if you understand the way the financial system works, uh, it has a shelf life and that. It’s because it’s, it’s a system that is, depends upon ever increasing debt. Um, people say, I wanna pay the debt off, but if they, if they really understood the system, at least the way I think I understand it, uh, and I’m not alone in this, so it’s not something I just figured out on my own. But, um, you know. I, I don’t want to sit here and pretend like I’m the world’s foremost expert, but the way I understand the way the system works is that it, it requires ever increasing debt, and if we were to pay the debt off, it would collapse the system. So I think you waste a lot of time and energy and from a policy perspective, trying to argue about doing that. And I think that’s why it’s never, ever, no matter what administration, what politician, what mix of congress, what. Pressure there is everywhere globally. The system, the central banking system, the way it works globally, is designed to create ever increasing debt. So the, the flip side of that then is to let the debt run. And if you let the debt run, at some point you fall into a debt trap where the interest on the outstanding debt consumes all of the available discretionary income. And then you’re borrowing just to service the debt. Yeah, that’s about $1 trillion right now, by the way. Which is. Which is, uh, about the, the, the defense, uh, budget. Well, and I think that the bigger thing is when you look at, at the interest on the debt and mandatory spending, there’s virtually no room left after that. So if you’ve got, you’ve got the mandatory spending and you’ve got, um, debt service, you, you have very little room. So it’s not. Feasible either for two reasons. One is there’s just not enough discretionary room to be able to cut expenses enough to, to ever manage the debt. Number two, as I previously mentioned, if we were ever to effectively try to pay down the debt in any appreciable way, it would crash the the system. So the, the way I look at it is it’s, it’s, it’s got to be replaced. There’s going to be a great reset. I think the World Economic Forum was trying to set that up for the world, and they had an agenda. I’m, I’m not particularly fond of. Um, there’s been talk about creating a central bank digital currency, which I think is what, you know, the Federal Reserve and the, what I all call the wizards, uh, or the powers of B would prefer. Uh, but I think if you care about privacy and, and, you know, individual sovereignty, uh, and, and just personal freedom, um, I have a lot of concerns about a central bank digital currency. Um, I think the popularity of Bitcoin, uh, if it was, you know, and who knows what the. True origins were, but let’s just take it at face value. I think a lot of the people, at least that were the early adopters before it had the big price run up, was just a way to escape, uh, the system before it failed. And so you’ve got that. And then you’ve got, again, as I mentioned, the bricks and this global effort to de dollarize, which was I think really kicked off. After the great financial crisis and the massive expansion of the Fed’s balance sheet. And then I think picked up a little steam when we froze Russian assets and people began to see that the US might use the dollar and the dollar system, uh, for political instead of being neutral. And I think that picked up some steam. And, and so there’s, there’s both a geopolitical drive to. Uh, come up with a new system. There is, I think we’re at the end of a shelf life that some type of a new system is gonna have to be, uh, created. Uh, and, and then you look at what Donald Trump is doing and what he’s espousing. You know, let’s get rid of income taxes. Let’s get back to pulling in, uh, revenue from tariffs the way the country was originally founded. Uh, he’s talked about eliminating the IRS and going with an ERS, an external revenue service. There’s people that think that he might beat. Wanting to try to get back on some form of sound money, you know, coming out of, Hey, let’s audit the Fed, let’s audit the gold. I mean, let’s audit the gold. And, um, so, you know, we, you, you never know what what’s really gonna happen, but, but I think what we have to pay attention to are the signs that the system is beginning to break down. And one of those signs that I pay a lot of attention to is monetary, metals, gold and silver. I make a distinction between precious metals, which would also include platinum and palladium, and of course they’re strategic metals, but I just focus on monetary metals, which would be gold and silver, and gold and silver. We’re telling you that people would prefer to be the, the, the safe ha haven asset is no longer us treasuries, but, um, but, but gold and central banks have been driving a lot of it. This isn’t the retail market driving it yet. It, it’s really central banks have been accumulating. And so those are the ultimate insiders when it comes to currency. And if the insiders in the currency markets are repositioning into gold, uh, I’d, I’d call that a clue. Yeah, absolutely. Um. Yeah. You recently commented on the public criticism, president Donald Trump made toward, uh, uh, Peter Schiff. What stood out to you about that exchange? Maybe give us some background people. Not everybody knows who Peter is and, and, uh. And all that. So, yeah. Well, I mean, as you know, I’ve known Peter for 12 or 13 years and, uh, I had read his father’s work way back in the day. He is a very famous in the tax protestor world as somebody who just believed that income taxes were unconstitutional. And he resisted that and ended up going to jail for, died in jail as a matter of fact. And so that was, uh, I think sad. Um. But, but to me it felt like a little bit of being a political prisoner, but be that as it may, that’s how I got to know Peter. And so Peter is a guy that comes from the Austrian School of Economics and he believes in sound money. He believes in gold. He does not like Bitcoin. I’ve sat on panels the last two years with Peter, uh, in between him and Larry Lepard. And you know, Larry is a, a former gold guy. He’s still not opposed to gold, but he’s a hardcore sound money guy. But he likes Bitcoin. Peter hates Bitcoin and they get into it, and I usually sit in between ’em and try to keep things calm. Well, you know, so Peter ended up going on Fox and Friends, uh, I think on whatever it was, Friday the eighth I think it was, or whatever, whatever day that was. And he, he criticized Donald Trump’s spending. And, um, budget deficits and said that it would lead to inflation, and that’s a hot button for Trump. And so Trump, yeah. Uh, responded to him, uh, I think like four 30 in the morning on Saturday morning and called Peter, uh, a. Jerk and a total loser. Well, actually I saw it before Peter did, and so I took a screenshot and I texted it to him. I said, Hey, have you seen this? You know, maybe I’ll press is good press. And I think to a degree, maybe it has been me from, I understand Peter ended up on Tucker Carlson’s show as a result of that. So, but I made a video right after that because I, you know, there was a time when. I’m friends with Peter Schiff and I’m friends with Robert Kiyosaki. As you know, I, we introduced you to both those guys and, and at one point they didn’t like each other very much. They got into it ’cause, you know, and, and so we introduced ’em to each other and found that they had more in common than they, they didn’t. And I, I think that that would be true. Not that I’m in a position to introduce Peter to, to Donald Trump, but I think the way Peter is looking at it is true. Um, but there’s context and I think the context is super important. Now I’ve been studying Donald Trump as a businessman way before he was a presidential candidate or a politician, you know, before he was a polarizing guy, a pariah for some people. He, he was just this real estate guy. He’s good at marketing, he’s a real estate guy, and as you know. We got to know his longtime attorney, George Ross. And so I’ve had a chance to have conversations about what it was like working with Donald Trump, the real estate guy, and when he became a politician, I asked George, is he a crazy man? Does he shoot from the hip? And you know, I got a lot of reassurances that he is a sober sound. Methodical, self-disciplined guy and, and I think he uses the eroticism to keep people off balance as a negotiating tactic. And he writes about that in the art of the deal. So the context that I think that people need to have, and I’m not here to defend Donald Trump, the man. I’m not here to defend Donald Trump, the politician, but I look at the policies and what I think he’s up to in the context of realizing that we have a system that is fundamentally flawed and has to be remodeled. So to use a real estate, uh, metaphor, it would be like we have a hotel building that is very tired. It’s at the end of its life, it’s got to be remodeled, and so you can’t. Completely shut it down because it’s an operating business, so it’s gotta operate during the remodel. And so you begin to, um, reposition things and. You, you, you’re not gonna run optimally, so you’re gonna run some deficits while you’re doing the remodel. You’re gonna go into debt because you got a lot of CapEx to do, and during that period of time, your debt and deficits are gonna be a problem. But real estate guys look at debt and deficits not as a permanent condition. I think Peter is saying, Hey, you’re just running up debt and deficits. Well, in the short term he is. Honestly, I don’t think Trump is concerned about that. I think he’s focused on getting this remodel done, and part of that remodel was showed up in the last jobs report, right? We lost jobs to a degree, but they were government jobs, and what we got was a lot of gains in private sector jobs. Scott descent, his treasury secretary, has come out and overtly said, we are an administration for Main Street, not for Wall Street. So if you’re going to de financialize this economy and turn it back into a productive economy. You’re going to have to have policies that are gonna stimulate Main Street, and that’s, that’s the, the, the new units that you’ve rehabbed in your hotel that you wanna move people into. At the same time, you gotta move them outta the old units, which is people making money, trading claims on wealth instead of producing real goods and services, which is the financial ice economy. So it’s not about banking, it’s not about stocks, it’s not about Wall Street. You know, you need the stock market to stay up. But really what you need to do is you need to create production. And, and, and I think that’s fundamental. I think he understands we’re never gonna pay the debt off by cutting. We’ve got to keep the system running until we can get to some form of sound money. We’re actually paying the debt off as realistic, and then we have to earn so much money that the debt relative to our earnings shrinks. So it’s not paying down the debt, it’s paying down the percentage of GDP by growing GDP. And the presentation I did at best ever in March of 2025 was me explaining why I thought. His policies, were going to allow him to increase velocity and increase wages by cutting taxes, interest regulation, transportation costs, and, and again, that was six weeks into administration. That was theory. I’m gonna do a follow up in March of this year to say, okay, looking back when I gave the speech a year ago, what’s transpired, but I can already tell you a lot of the stuff that I thought he would do. He’s done. And I think that’s muting some of the inflation that his spending and deficits to Peter’s point are causing. And that’s why when this last CPI report came out, it wasn’t as ugly as everybody thought it would be. And, and this is when you don’t look at, when you look at it in the mono, you just look at one thing and Peter’s very fixated on this quantity of money theory. Then the expectation is that you print a bunch of money, you run a bunch of deficits, you’re gonna get inflation. And it’s just a. Equals B or A leads to B. But there are other nuances and I think Trump is looking at more like a real estate developer, which makes sense. ’cause that’s his background. Yeah, yeah, absolutely. It’s, I mean, and then the other just point to, to make there is that there is probably, um, now inflation’s a tricky thing, right? Like on the one hand you don’t want this riding up, but on the other hand, it actually helps with that debt. You’re, you’re basically eroding the debt by letting inflation ride a little bit higher at the same time. And I think the Trump administration knows that it’s a tricky thing to balance, but the goal is to, you know, get GDP pumping at, you know, four or 5%, but it’s gotta be real production buck. And that’s the difference, right? The old way of dealing with the debt was inflation. And, and I think people think that he’s using the old formula, but I don’t think he is. Well, I think it’s, I think, I think it’s definitely geared towards increasing real GDP, but I think in the process there’s probably, they probably care less a little bit. Of inflation riding up a little bit in the meantime. ’cause you’re still gonna have, I think he thinks he can mute it. I think he can mute it with lower taxes, lower interest expense, lower energy costs. And the energy is the economy. And from day one, that was the first policy. He’s, he’s aggressively gone after lowering energy costs because that has a, a, a ripple through, it just affects every area of the economy. And then the regulations in, in the last cabinet meeting. It was reported, the way I understood it, that for every regulation his administration passes, they’ve eliminated 48. So it’s actually, he’s removing the friction. And I think the bigger thing is, and I, and I was on a panel at Limitless, uh, this last summer, and TaRL, Yarborough was moderating the panel, asked the panelists what we were looking at that maybe other people weren’t looking at that. Um. You know, is, is a signal about maybe the direction it was. We, I, I can’t remember. This was a prediction panel and what I said was trade policy because everybody in finance spends all their time looking at the flow of money and trying to get in front of the flow of money. And we’re so used to the money coming from the Fed or coming from the treasury. So they’re gonna come from monetary policy or fiscal policy. And that’s what Peter’s doing. He’s looking at the Fed and he is looking at the treasury. And so what I’m looking at is not just the tariff income, which is relatively minor, but I’m looking at the trade deals, and those are published at the White House and there’s a couple trillion dollars of money that’s FDI, foreign Direct Investments coming right into Main Street. And it’s gonna build infrastructure. It’s gonna build factories. It’s good. And they tell you where it’s gonna be because they, they came back with the opportunity zones, which I thought they would do. Makes sense. It’s the way he thinks. And then taking those opportunity zones, the governors can say where in their state they want that money to go. Well, people on Wall Street don’t think geography ’cause they operate in a commodity world that trades on global exchanges. But real estate people. Geography matters a lot. So if I’m a Main Street person, I live on Main Street and I’m looking for Main Street opportunities, I wanna look where that money is going to be flowing in geographically. And then there may be opportunities in real estate or small businesses in those economies, and you can see it coming, but nobody talks about it. So I created Main Street Capitalist as a show to begin to talk about it. I still do the investor mentoring club, which is, you know. A premium thing where we get together every month and we talk about these things. And the point is, is that if you understand, I think what he’s doing, then you can, you can begin to paddle into position. And I think, again, I am really bullish if he loses inflation. If he loses to inflation, he’s cooked. He knows it. I think that that even the suggestion that Peter made that he was losing to inflation is what flared him up. And so I wasn’t trying to necessarily defend. Peter and I wasn’t trying to defend Trump, I was just trying to reconcile that it is possible that both guys could be right at the same time from their perspective. And so I, you know, I, I had one guy take exception because he felt like I was defending Trump, but for the most part, I got positive feedback on the video. I, I, I, you saw it. So you tell me. Did it make sense? Yeah, yeah, yeah. Absolutely. So when you look at today’s environment, everything going on, where do you think investors are most vulnerable? Um, I, I think that if you are very dependent upon, um, healthy credit markets, we could have a disruption. And that’s what happened to me. If Trump loses the inflation battle even for a little while, little be reflected in interest rates. And the challenge is right now that he is asked the Fed to quote unquote lower rates, but the Fed actually doesn’t like. Set rates, what they do is they set a target and then they manipulate markets to achieve those rates. And if, if people believe the fed, there’s a little bit of front running. So what’ll happen is the Fed will come out and go, oh, we’re gonna lower rates, which means bond prices are gonna go up. So they’re like, that’s great, let’s go buy a bunch of bonds, which drives rates down. So the Fed just by talking. Begins to move the market and then they hope that later on the Fed will buy those bonds from them at a profit to push rates down. Does that make sense? So, so when the last two times the Fed has raised rates in their target, the 10 year has responded in the opposite direction. Which means that the market is like not buying in, and the Fed is gonna have to step in. And when the Fed steps in, they do it by printing money out out of thin air. Now, the concern about that is that when they print the money out of thin air. If they’re replacing bonds on their own balance sheet, that’s kind of a circle and it doesn’t leak out into the economy. If they’re buying new issuance from the the treasury, then that money is gonna work its way through the government to to to main street. Now, the Trump administration can prevent some of that by keeping the money in the Treasury, for example, uh, Trump 1.0 left. The Biden administration with, I think over a trillion dollars in, in the treasury checking account, and Janet Yellen put that into the economy right away during the lockdowns, which immediately created extreme inflation because you muted production at the same time you goose. Uh. Purchasing power, you know? So anybody with like three ounces of economic understanding could have told you that that inflation was gonna come, it was gonna come hard, it was gonna come fast, and it was gonna be stickier than than you thought. ’cause once you let that money out in the economy, it’s out. It’s out and the only way to mute it is either to suck it back, which is very, very difficult, or to outproduce it, and it’s very hard to produce anything when everything’s in lockdown. So I think that, you know, those days are behind us. I think the policies that we’re embracing now are more. Pro productivity. And I think that even if the Fed does have to step in, as long as that money doesn’t leak out into the economy, and part of it is the treasury being able to throttle some of that, and the money that does go into the economy doesn’t go into stimulus, but goes into CapEx and infrastructure, that’ll actually, uh, create. Production. Then I think that, you know, this, this game plan that I think they’re trying to execute has a chance. And so I, I’m, I’m watching for it. And of course, to answer your question, what do we have to worry about that it doesn’t work? Right? If it doesn’t work, then inflation will show up. Interest rates will rise, credit markets will crash, it will take real estate values with it. And the hedge is really gonna be, what I’ve always talked about is gold. I started talking back in 2018 when we were the zero bound with interest rates. Hey, there’s only one way interest rates can go and that’s up. And if they go up fast, then that’s gonna crash bonds. So it would be smart, and that’s gonna take real estate equity with it. So it’d be smart when you have real estate equity and low rates to pull some of that equity out and move it into gold. And I called that my precious equity strategy. If I have a video I did at the Vancouver Resource Investment Conference in January of 2022, explaining that when you could still really execute on that, and I’m not saying that you couldn’t do it today, but it’s harder, but the people who did it back then, I mean, you know, they’ve, they’ve seen their gold almost triple. And at the same time, they were able to lock in interest rates that are, you know, a half what they are today. So when you see those mega trends and you can begin, and that’s the stuff I didn’t know how to do in 2006, 2007. I didn’t understand any of this stuff. The, the, you know, losing everything in 2008 forced me to become a hardcore student and then try to apply that to Main Street strategy. And so I think gold and real estate and debt, they all work really well together depending on where you are in the cycle. Do you think that Main Street investors may actually have some advantages in periods like this? Yes, a ton because I think what’s gonna happen is if we have a, um, a, a, a restructure of the financial system into something more responsible, which I think is either gonna be forced upon us or it’s gonna be done by design, and I hope we do it by design. But when that happens, then the days of just buying low and selling high and riding the inflation wave that goes away. And so now it’s gonna be very, very important to understand how to invest for. Productivity. So I call it, you know, buy low sell high trading as an acronym, B-L-S-H-T you. You can sound it out for yourself phonetically. And then the other one is poo, which is productivity of others. And I think that if people focus on investing in the productivity of others, which is what Main street investors, especially real estate investors, focus on, I think cash flow, real profits on small businesses, not speculating on. Uh, exit price or a company that’s gonna take a company public, everybody trying to tap into this giant flood of money that gets pre created from thin air in the banking system and in Wall Street. If, if, if people on Main Street will just start investing. Kind of what Kenny McElroy was doing going through 2008, just focusing on sound assets and good markets with good fundamentals. That cash flow and, and are run by good managers, whether it’s a business, an apartment building, a mobile home park, a self storage, residential assisted living doesn’t really matter. Invest in real businesses that produce real profits where you’re not overpaying for that production of income and especially where there’s some upside. Not to flipping out of the stock, but to actually growing the market share and growing the income. That’s what investing really should be. Wall Street has perverted it into just placing bets and riding a wave and trying to figure out where the money is gonna flow from the Treasury or for from Fed stimulus. And I think Main Street is gonna pick up on the new game sooner. And the good news is if you get good at playing that game, even if the system stays the same, you’re probably gonna do better off anyway. When you talk about buying, buying or investing into productive businesses, I mean, what, what’s the difference in your mind between investing in a private business versus investing in a, you know, a publicly traded business that’s run off, you know, dividends? Yeah, so I, I, I think that it could be okay if the dividend yield makes sense, but anytime you have a publicly traded security, it’s a highly liquid market, which means it’s gonna be volatile and the stocks become chips in the casinos where professional traders are just gambling all day long. And some of that gambling can create an impact on the stock, and it doesn’t matter to you if you’ve only bought it for production of income. Um. And so, uh, you know, I, I don’t think it’s bad. I’ve, you know, Peter’s always been an advocate of, uh, dividend paying stocks, and I think if you’re gonna be in the stock market, that’s what you want to do. I think the opportunity in a private placement in a small business is the opportunity not to have to pay the high multiples because it’s not a perfect market. It’s, it’s the same reason there’s so much more opportunity in real estate. If real estate could trade on an electronic exchange where. You know, millions of buyers could find it, and you could have perfect price discovery. It’s very difficult to find a deal, right? It’s very difficult. But we, if you buy a private business, you know there’s gonna be considerations. You, you deal with a, a owner. Who cares about his customers, who cares about his team, maybe would be willing to carry back the way you would if you were buying a, a, a piece of property from somebody that cares about their neighbors or whatever. I mean, there’s, there’s, there’s a lot more humanity in it. There’s a lot more room for negotiation in it. And a lot of times there’s a lot more room to have control. So, you know, one of the adages with real estate that real estate investors like is, I’m gonna buy an asset, one that I understand, two that I can control. And so when you buy a stock, like a dividend paying stock, you, you might understand the business, you may not understand completely the. Uh, market dynamics that drive the stock price. But as long as the dividends are there, that can be okay, but you don’t have any control. When you actually go buy a small business, you have a, a degree of control. Now, if you’re a passive investor buying into a syndication, then you still have a little bit more, um. Relationship, you have a little bit more insight. You maybe have a voice. You may know the people that are making the decision and running the company personally. So it’s the same thing. You know, you Buck is a syndicator. When you go do a deal, your investors know you. They have a personal relationship with you. Go buy stuff in the stock market and mutual fund managers and investor. You don’t have a relationship with that fund manager and I think that’s worth something if you have a voice right. So we’ve, we’re talking a little bit about credit markets, um, volatility, you know, interest rates. Are they gonna go down like, you know, Donald Trump would like to see, and you know, we’ve got a new fed share coming, all that kind of thing. How should investors be thinking about leverage and risk right now? I, I think the adage with real estate, uh, I mean, sorry, with leverage is always the same, is, um, you know, manage cash flow. I, if, if you use leverage to speculate, that could be a real problem. And whether you did it. Do it for real estate like I did by having very thin or negative cash flow and making that up someplace else and believing that somehow, you know, rents or appreciation are gonna do it. Or buying a non-income producing asset with borrowed funds hoping it’s gonna go higher. I think that would be dangerous, but I think if you fundamentally use debt as a tool. Based on cash flows and you use conservative cash flows, you know, so the debt service coverage ratio, you know, if you have $10,000 a month going out in debt service, make sure you have at least, you know, $12,000 a month coming in on income or above. Then that’s how you begin to build resiliency into your portfolio. And the other thing is don’t borrow long to invest short, right? So your duration matters a lot. We were talking about this before we hit the record button, and I think what happens is people. Uh, make a mistake when they try to operate like a bank. ’cause banks lend short and invest long. And the only reason they get away with it is because they have the Federal Reserve Bank system backstopping them. But you don’t have that as an individual, so you better to do the opposite. Um, if you can match the durations, that’s perfect, right? ’cause then you know what your interest expense is for the, for the duration of the investment. And once you lock in the spread, then you just have the counterparty risk of the, whoever is responsible for creating that income stream that’s gonna service the debt you use to control the asset. And then it just comes down to underwriting and then recourse. And if you feel comfortable with the underwriting and you feel comfortable with the recourse, and you’ve got spread and you’ve locked in a, a duration. Um, that, that is compatible, then that can be a, a, a fairly safe way to use debt. And if interest rates work against you, then you’re okay. And if interest rates work for you, you might be able to refinance your debt and actually increase your spread, but you don’t need it to happen to be successful. Let’s talk a little bit more about what you’re doing right now. So in the past year, you’ve launched, um, several new initiatives. You had masterminds via platforms. Tell us a little bit about this and, and a little bit more what, what you’re trying to accomplish. Well, you know, after losing my wife, um, you, you go through this. Period of time of like figuring out, okay, life is short. What do I want to get done before I left die myself. And so, um, after thinking about that, I went back to really what I came to do when I first met Robert Helms and got involved in the real estate guys. And so I just kinda went back to home base and. Then the other thing is now I’ve got 17 grandchildren, and so I’m thinking a lot less like a father, more like a, a grandfather, a founding father. And, um, and so I’m thinking about what the world is gonna be like in 40, 50, 60 years, and what can I do to plant a seed that will make that world better for my grandchildren? And so I, I did a couple things. One is, um, after I left the real estate guys, we were going through a merger with Ken McElroy, George Gammon and Jason Hartman to create, um, a mastermind group, which we did. And I, I was CEO of that for the. The year during the merger. And that took up some time. And the second thing I decided to do, uh, ironically, it was after a conversation I had with Charlie Kirk. I had a conversation with Charlie Kirk. I said, Hey, I’ve got this idea to help, uh, K through 12 get involved in, in capitalism by starting businesses or working with businesses. Their parents start, and I explained to him the model. He goes, I love it. I want to help you. And so that encouraged me. And then I had a follow up meeting in January of 20. 24 with Mark Victor Hansen, and he really encouraged me. And so with the strength of those two endorsements, I go, you know, I’m gonna do this. And so, uh, I left the real estate guys in, um. March, late March of 2024, and in the summer of 2024, I, I launched the Raising Capitalists Foundation, and people can learn more about that by going to raising capitalists plural.org. And I, I literally launched it at Freedom Fest on July 13th, 2024 and five minutes before I took the stage, Donald Trump got shot. Always remember where I was and how distracting it was, but I did record that presentation and it’s on the website, and so it explains the model. But in, in short, it’s pairing, um, or it’s, it’s putting parents who are in what Kiyosaki, uh, rich Dad would call the E-Class employees. And, uh. Put them under a mentorship program with experienced entrepreneurs and investors to help them start a business, a side hustle. They need the money and they need a mentor. And so then they, um, it can create a situation where their children can come to work for them in the business. And today, information Society, you know, there’s a lot of things kids can do where they learn real life skills, um, working with their parents. So that’s what the Raising Capitalist Foundation is all about. Then I launched two shows. Uh, in 2025, uh, one is I literally just launched like a week ago, and that’s. That Donald Trump video was really the first one that I put out, the Donald Trump versus Peter Schiff video on YouTube. I haven’t even started the podcast side of it. Um, and in on September 27th, uh, on pray.com, I started, uh, another show that, that one’s called the Main Street Capitalist. So if you go to YouTube and look at the Main Street capitalist, you’ll, you can find me there. And then the other one I created was the Christian capitalist. And I kind of went back to, you know, my, my core roots of realizing when I started looking at. Where the country was at, John Adams said that, um. Our Constitution was designed for a moral and religious people and is really wholly inadequate for any other, and so I thought, you know what? I’m I, I’m going to do that because my experience as a, as a Christian businessman is that I find that sometimes the stuff I get in church is more consumer oriented, and it doesn’t, it’s more employee oriented. I, I don’t. And, and then the other part of that is I created a, a ministry called Fellowship, a Christian capitalist, which is really about helping people put purpose into their business and then, you know, express their faith. Love your neighbor. Through their business. And so I’ve got all these different initiatives going and then I created the Main Street Media Network because I wanting to reach youth. I hired a YouTube coach and I said, look, I want to create content to encourage youth. He goes, that’s great. You can’t do it. You’re too old, he said, so what you need to do is find young people you can mentor and teach them the things that you’ve learned and let them teach it in their own words and they’ll reach their generation better than you. So with Main Street Media Network, I’m I, I’ve got. Two guys that I’m apprenticing right now, but I’m gonna be adding a lot more. Um, one, one young man is 20 years old, the other one is 26 years old. And, uh, I just came back from the Turning Point USA event where we had a broadcast booth and they were conducting interviews and I did the New Orleans Investment Conference. And so these guys are sitting down with Peter Schiff, Robert Kiyosaki, Mike Maloney, Ken McElroy, you know, you, you know what that did for you, buck with your show. You know, you, you met all these people through us and then you. We’re able to build upon that and create a very credible show. So I’m doing that for these guys that are in their twenties with the idea that they will be able to reach a generation of people. Uh, I call it putting Boomer Wisdom in Gen Z mounts. I mean, they get to process it and it gets to be their own. And I’m helping them build financial podcasts that actually make the money and is the foundation of, in this case, they’re both capital raisers of their capital raising business. I got all these different things going, but I’m doing it through leaders, so I’m not trying to do all things myself. Yeah, yeah. Um, but I’m building out an ecosystem to accomplish all these goals and so far so good. It’s a lot. Sounds working like a young man, man, man. I’ll tell you that. I know, I know. Wow. I I thought you were gonna slow down after you. No, I’ve actually, I put my, I put, I put my foot on the gas. I, I’ve probably never worked, uh, harder. Um, but I, I think I’m working smart, you know, so I’m hiring coaches and I’m bringing in, um, leaders and going through all that EOS and organizing to scale stuff. Sounds good. Well, always a pleasure, Russ. Um, make sure not to be a stranger to have you on again, um, you know, in a few months and figure out where you’re going with all this stuff. All the new things that you’ve accomplished, but it’s, uh, it’s great to see you. Well, happy to be here, proud of you. Uh, keep up the good work and keep educating people. Thank you. You make a lot of money, but are still worried about retirement. Maybe you didn’t start earning until your thirties. Now you’re trying to catch up. Meanwhile, you’ve got a mortgage, a private school to pay for, and you feel like you’re getting further and further behind. Now, good news, if you need to catch up on retirement, check out a program put out by some of the oldest and most prestigious life insurance companies in the world. It’s called Wealth Accelerator, and it can help you amplify your returns quickly, protect your money from creditors, and provide financial protection to your family if something happens to you. The concepts here are used by some of the wealthiest families in the world, and there’s no reason why they can’t be used by you. Check it out for yourself by going to wealthformulabanking.com. Welcome back to the show everyone. Hope you enjoyed it. As always, Russ, uh, is, uh, you know, he’s, he’s got a lot of wisdom. He is the guy you really wanna listen to. And I would encourage you to follow his work anyway. Uh, just pivoting back, you know, to where this economy is and all that. I think for me personally, it’s about allocating capital in a market that is a, uh, is certainly losing value in its dollars. And, um, and I think that we’re gonna continue to see that. Speaking of that, make sure if you haven’t, as I mentioned before, sign up for the Accredited Investor Club. Go to wealthformula.com, go to investor club, as we have plenty of those types of things that are hedging against inflation, um, saving taxes in terms of tax mitigation strategies, that kind of thing. Check it out. That’s it for me This week on Well Formula Podcast. This is Buck Joffrey signing off. If you wanna learn more, you can now get free access to our in-depth personal finance course featuring industry leaders like Tom Wheel Wright and Ken McElroy. Visit wealthformularoadmap.com. The post 541: Failure, Success, and the Current Economy with Russell Gray appeared first on Wealth Formula.

First off — Happy New Year. To kick off the year, this week’s episode of the Wealth Formula Podcast is a solo one from me. I spend the episode walking through my outlook for 2026 and sharing a few predictions for how I think this cycle is going to play out. Lately, I keep hearing the same question phrased in different ways. The economy feels tight, but markets are holding up. Growth is coming in stronger than expected, inflation is easing, and yet a lot of the signals people usually rely on just don’t seem to be lining up. That disconnect is really the starting point for this episode. Rather than reacting to headlines or making short-term calls, I wanted to step back and talk through the mechanics of what’s actually driving this environment — and why it looks so different from the cycles most of us learned about. A lot of it comes down to debt, policy constraints, how capital moves today, and the growing influence of technology. When you start looking at those pieces together, some of the things that feel confusing begin to make a lot more sense. This isn’t meant to be alarmist or overly optimistic. It’s simply an attempt to frame the environment clearly so you can think about it more intelligently — especially if you’re deploying capital or deciding whether it makes sense to sit on the sidelines. If you’ve felt like the economy and the markets aren’t really speaking the same language right now, I think you’ll find this episode useful. Transcript Disclaimer: This transcript was generated by AI and may not be 100% accurate. If you notice any errors or corrections, please email us at phil@wealthformula.com.  You need to be out of the dollar and into the investor class because that that widening gap between those who have, who own things, who own assets and those who do not is gonna continue to widen. Welcome everybody. This is Buck Joffrey with the Wealth Formula Podcast, and today I am going to do something a little bit different. I’m gonna kind of give you. My perspective, maybe predictions I dare say about, uh, the upcoming year in 2026, how I look at it, what I think, uh, uh, is likely outcome and why. Not that I am any smarter than any of you on this stuff, but I’ve actually kind of sat down and, and thought about, you know, the things that are going on in the macroeconomic. Side of things and, um, put some stuff together and, uh, hopefully you’ll enjoy it. We’ll have, uh, that right after these messages. Wealth formula banking is an ingenious concept powered by whole life insurance, but instead of acting just as a safety net, the strategy supercharges your investments. First, you create a personal financial reservoir that grows at a compounding interest rate much higher than any bank savings account. As your money accumulates, you borrow from. Your own bank to invest in other cash flowing investments. Here’s the key. Even though you’ve borrowed money at a simple interest rate, your insurance company keeps paying you compound interest on that money even though you’ve borrowed it at result, you make money in two places at the same time. That’s why your invest. Get supercharged. This isn’t a new technique. It’s a refined strategy used by some of the wealthiest families in history, and it uses century old rock solid insurance companies as its backbone. Turbocharge your investments. Visit Wealthformulabanking.com. Again, that’s wealthformulabanking.com. Welcome back everyone, and, uh, happy New Year to you. I forgot to even say that in the intro. How rude of me. Hopefully you had a great holiday, you had a great Christmas, and you’re bringing in the new year with a vision of health and wealth and PO prosperity and all that stuff. So anyway, let’s talk a little bit about, uh, you know what I am. Kinda looking at for 2026. Now, when you think about, well, what are these predictions and what could they be and all that, um, interest rates, inflation markets, you know, uh, let’s set the foundation for how I’m thinking about it, because everything else really kind of builds on it. And the most important thing to understand is that debt. Is really now I think the main character in the economy. I know we, people have been talking about this for a very long time, but I think, I think the debt issue is really, really becoming something that cannot be ignored, and I’ll get into that in a while. Obviously, I’m not saying that inflation and interest rates don’t matter. They matter enormously. Uh, those are the things that people actually feel, right? Higher prices, higher mortgage rates, higher insurance costs. What I’m saying is that the level of debt now determines really how decisions on those things are made from policy makers. You know, how do they respond to inflation and interest rates, recessions market stress. What debt does is it actually kinda limits the range of choices around how policy makers react to all these things. So once you see that, the behavior of the economy starts to, I think, make a lot more sense. So let’s start with. Sovereign debt, and I’m gonna start really basic here because the question is, you know, what exactly is sovereign debt? Okay. And sovereign debt is the money a government owes, okay? In the US it exists because the government consistently spends more than it collects in taxes, and that gap is called the deficit. When that happens year after year, you have an accumulation of debt. Now, when debt is low, it’s, it’s pretty manageable, right? But when debt gets very large, it starts to influence policy decisions, and that’s where we are right now. Uh, here’s the key mechanic that I think most people don’t really think about, right? Governments don’t pay off debt the way you and I, you know, pay off our debt, like mortgage or whatever. They always refinance it, right? So when the US government borrows money, it issues bonds. That’s how it does, those bonds have maturity dates, and when you buy a bond, you’re, you know, you’re loaning the government money. So when a bond matures, the government owes that principle back to you. Right? So that’s, that’s kind of how well we talk about, we talk about debt, but the government doesn’t save money over time to pay off that bond. Like, I mean, that’s the way you would think about it for you and me, right? I mean, at some point you’re like, ah, I really need to pay off this debt. I’m just gonna pay it off with this money that I saved. Instead, what they do is when a bond comes due, it issues a new bond and uses the money from that new bond to pay back the old one. Okay. Now, if that sounds familiar, uh, to you, it’s because it’s pretty much what we would call in plain English refinancing, right? Now imagine though, the government issued a bond a few years ago when interest rates were near zero. That bond matures today, interest rates are much higher, right to pay off the old bond. The government issues a new one at today’s higher rates. So the debt doesn’t disappear, it just becomes more expensive to carry, right? I mean, it’s just like you got a mortgage, you know you had a, a great rate, but you only got it for seven years and all of sudden you gotta refinance it. Gosh, all of a sudden that rate went really higher and your payments are much higher, and the debt payments going up, you know, for the government, what adds to that deficit? It’s a really, really vicious cycle. Now, take that process and multiply it across trillions of dollars of debt. Now you can start seeing why interest rates matter so much in a high debt system. Now, what makes this especially important right now is that for over the last several years, the US issued a very large amount of short-term debt. Short-term debt matures quickly, and that means large portions of government debt. Come due every year and have to be refinanced at whatever the interest rate exists at the time. So even if deficit stock growing tomorrow, which they won’t, the government would still need smooth functioning financial markets just to keep refinancing what it al what already exists now. This is why the economy has become so sensitive to interest rates, liquidity and confidence. Higher interest rates increase the cost of refinancing, right? We’ve mentioned that already. And that pushes deficits higher and forces even more borrowing. So I mentioned liquidity. What is that? Well, liquidity is about how easily money moves through the system. When liquidity is good, bonds are easily absorbed. Banks lend markets function normally, and when liquidity dries up, refinancing becomes fragile. That stress. Stress in the market spreads quickly. And then finally, confidence I mentioned too. Why does confidence matter? Well, confidence matters because investors need to believe that the system is gonna hold together. When confidence weakens, guess what happens? Well, what would happen if you think about it with a loan, a higher risk loan? While investors demand higher yields like refinance, it becomes even more expensive. And problems compound fast. Now, this is why Pol policymakers are extremely uncomfortable with high borrowing costs, reduced lending, falling asset values, and deep recessions. Recessions, by the way, don’t make debt easier to manage. They make it harder by reducing tax revenue and worsening debt ratios. Now that brings me to a, something that I am feeling sort of back and forth with. Um. You know, a listener who sent me some commentary about, you know, the fear of going back to 1970s, eighties style interest rates. But the thing is that I just don’t think that comparison works, and here’s why. Okay, so in the 1970s, the US had far less debt. Interest rates could go very high without threatening the government’s ability to refinance itself. Now today, with debt much larger relative to the economy, very high rates don’t just fight inflation. They stress the entire financial structure, right? You can’t just say, oh, we’re gonna make super high rates because the cost of all that debt the government has is gonna be extraordinarily expensive. Now, that doesn’t mean that rates can’t rise. It means policymakers have far less tolerance for how high and how long rates can stay elevated. It’s a completely different system from the 1970s and eighties. So I think trying to put things into that context is probably not, um, not a, a good way to think about it. So why am I fo focusing on this right now? Uh, instead of a few years ago, because again, we stu we didn’t suddenly become a high debt economy this year. So what changed? Well timing a massive amount of debt that was issued at very low interest rates, as I mentioned before, is now maturing and being refinanced at much higher rates, and that shift is no longer theoretical. It’s happening in real time. Last year, much of that low uh, rate, debt was still in place. Interest costs hadn’t fully reset, but going into 2026, they have no, I, I keep talking about, you know, how much we’re paying an interest, right? Because again, that’s a big difference between now and the 1970s when you could have, you know, you didn’t have as much debt so you could pay more interest on it. Right now, the US is now spending roughly a trillion dollars a year just on interest. Her perspective, right? I mean, what’s a trillion dollars? Uh, what does that even mean for the normal person? Well, for Perce perspective, that’s the defense budget. $1 trillion. It’s more than Medicare, more than most major federal programs. And the thing is that money doesn’t do anything, right. It doesn’t create growth. It just services past borrowing. And this is the point where debt stops being background noise, kind of an annoyance that people just say, well, we’ll kick it to the next generation. It start starts actively shaping, uh, policy decisions because it’s, it’s a thing that you gotta pay for. You gotta keep paying for it. So the takeaway I want you to carry forward is simple. We now live in a system where policymakers don’t have the luxury of letting things break when debt is low. Governments can tolerate deep recessions like you saw in the seventies and eighties and long recoveries. When debt is high, they can’t because even small shocks can just really get outta control quickly. And that’s the framework I think, uh, that I’m using as we move into interest rates, inflation, and what all this means for markets going into 2026. So let’s talk about interest rates. You’ve heard me say that I think that interest rates are gonna come down. Um, they’re gonna continue to tick down a little bit. I don’t think a lot, but I do think there’ll probably be at least one more rate cut. I think, you know, you’re probably gonna have some, um, uh, some lowering in the 10 year and, and the bond market in general. Uh, but interest rates are not gonna go back to 2010, right? They just aren’t. And. The 2010s were not normal. There were a very specific period created by very specific conditions, right? Inflation was persistently low, uh, but just wouldn’t go up. Globalization, uh, push prices down. Capital was abundant. Debt levels, well, they were high, but they’re rising, but they hadn’t become what they are now. And because of that, central banks could hold rates near zero without much consequence. That environment, unfortunately, does not exist now. So today, debt is much higher. Inflation risk is real again, and investors expect to be compensated for lending money long term. So even when rates decline from current levels, they do not return, uh, they will not return to where people, uh, anchor them psychologically. If they’re thinking about the 2000 tens, they’re gonna settle higher. Within the 2000 tens baseline, you see policymakers are kind of stuck if rates, uh, say too high for too long. We mentioned this before. Refinancing government debt becomes increasingly expensive. Interest costs rise, deficits, widen, and then you get that financial stress that’s spreads through the credit markets. But if rates are pushed too low for too long, borrowing accelerates. And that’s. When inflation resurfaces and confidence in the currency weakens, so then that’s the tug of war. So policymakers, uh, you know, they, they can no longer choose between high rates and low rates. They’re gonna be choosing how to manage, uh, the trade-offs, right? So what’s gonna happen is that you’re gonna see that rates are gonna move within a range. Uh, they come down when something breaks, they move back up when inflation pressures recurrent. Um, that’s why volatility matters more than the exact. Level of rates going forward, in my opinion. So we’re, we’re not returning to free money. We are also not headed to a permanent 1970 style high rate world. What we are doing is entering a time where borrowing costs matter. Again, refinancing is not guaranteed, and rate swings are part of the system, and that naturally leads to the question of inflation. So once you understand why rates. You know, don’t go back to the 2010. The next question becomes, uh, well, if policymakers can’t keep rates high for long and they can’t push them back to zero either, then what are they actually trying to ac accomplish? Well, the answer is that, that the goal is kind of shifted for decades. Economic policy was focused on disinflation, um, you know, pushing inflation lower and lower. Over time, uh, and inflation was actually treated as a failure, and that made sense. In a world with lower debt in a high debt world, that logic sort of breaks down, right? Deflation, which is actually falling prices, increases the real value of debt. Think about that for a moment. Like just in terms of. You know, you have a mortgage and you know, sometime, you know, your parents might have like a 30 year mortgage or something like that, that they’ve had for 25 years. They’ve been paying it off and it’s great. But the bigger thing to notice is the amount of money that they borrowed is actually very small in real world dollars because it’s, you know, 25 years later. See, inflation is bad when it’s, you know, you’re dealing with it, but inflation is. Good at one other thing, which is it’s good at eroding debt. It will make, uh, the amount of the value of the, you know, the actual money that you owe on debt lower over time. So that’s why you can’t have deflation, right? You can’t have deflation because that increases the real value of the debt. It discourages spending, slows growth and makes refinancing harder. So in today’s system, deflation is way, way more dangerous than moderate inflation. And so because of that inflation really isn’t something that I think is quite as important that has to be eliminated at all costs. That, you know, you have to be right at 2%, which is, you know, kind of what the, the fed his, his target is, right? Instead, what you gotta do is you gotta manage it. Of course, that doesn’t mean you want runaway inflation. What they wanna do is have enough inflation to keep nominal growth positive and prevent debt burdens from become heavier again. Why? What do I mean by that? You gotta have enough inflation to erode the debt that we have, right? So this is why that 2% inflation target should be understood. As, you know, kind of aspirational, but not absolute because having a little higher inflation, yeah, it hurts people. It’s, uh, it hurts people on a day-to-day basis, but actually helps with that. So even at, uh, you know, inflation sell a bit higher than, than, than the, you know, 2% fed target say it’s 4%, it’s actually eroding, uh, you know, it is eroding purchasing power, but it’s also eroding debt. It’s, it’s stabilizing debt dynamics. From the system’s perspective, of course that’s helpful. But for us, we’re paying for things on a day-to-day basis to see the cost of eggs and all that. It’s, it’s frustrating, right? And that tension between system stability and personal cost, it’s one of the defining features of the economy heading into 2026. So when you see policymakers tolerate inflation, uh, longer. Then you think they should or step in quickly When markets kind of wobble, it’s not confusion or incompetence, it’s actually constraint because debt limits the available choices. Rates are managed within a range. Inflation is guided and not eliminated. Now put those together and you get the environment we’re moving into, which is an economy where markets can look. Resilient, even while people feel stretched, right? I mean, that’s kinda what we’re feeling. Everybody’s like, oh, these markets are doing fantastic, you know? But then, you know, you look at consumer confidence, it goes down. It’s been going down every month. This is an environment where asset prices recover faster than wages, and we’re understanding how policy reacts becomes a real advantage. So that’s kind of my macro setup for 2026. Um, you know, with that framework, we can start looking into the first prediction I’ll make. And again, these are not, you know, crazy predictions. Uh, they are just generalized things that I think you’re gonna see. So, like the first one is that the markets will stop being reliable proxy for the economy. You could argue that’s already happened, right? Markets in the economy kind of stopped correlating. We saw it after the financial crisis, right? We saw it very clearly even during COVID. The decoupling itself is not new. What’s new is that that decoupling is no longer temporary. It’s become the baseline that’s become the new normal. Uh, for most of modern history people had a fairly reliable mental model, right? You probably do. If you grew up in the eighties and nineties, uh, as a kid or whatever, when the economy felt bad, layoffs, we growth falling in con incomes, markets usually reflected the pain. Right. Sometimes there was a gap. Sometimes markets recovered a little earlier, but eventually things kinda re converged. The economy healed. We just caught up in the markets and lived experience kinda lined up. Now that’s the model that most people still have in their heads, and that’s why so many people feel so confused right now. I mean, I feel confused by it. So what’s changed going into 2026? You know, it, it is, it’s structural Now. We’re no longer living in a system where policy intervenes only during emergencies. We are, uh, in a system where policy is always on, debt is permanently high, rates are actively managed, inflation is tolerated rather than eliminated. And as a result of that, markets aren’t really necessarily responding primarily to how. The economy feels to people they’re responding. Uh, you know, it’s responding to refinancing needs. Liquidity management. Uh, confidence preservation. That’s a very different signal. COVID is the clearest example of that ship, but it’s, it’s important to understand it correctly. So in 2020, the economy was literally shut down, right? Unemployment exploded. Uh, small businesses were collapsing, right? Like, this is COVID and yet markets bottom quickly. We saw that and then bam. All time highs, even though life kind of felt terrible for a lot of people. And that wasn’t because the economy was healthy, it was because policy overwhelmed fundamentals. And at the time that felt extraordinary. It felt very different. Like this doesn’t make any sense. What’s different now is that we’re still using the same playbook but with out in obvious crisis. So intervention is no longer reactive. It’s, you know, uh, it’s preventative. So what do I predict for 2026? Well, markets are gonna stop being a reliable proxy for economic health. Uh, you, you people can just stop talking about that. Like it, like it, it means anything anymore. Markets going to increasingly reflect how constrained policymakers are and how much liquidity is in the system, and how aggressively risk is being managed. They’re not gonna, the markets are not gonna tell you. About affordability, wage pressure, or whether life feels easier or harder for people. Right. Those are completely gonna, those are, it’s just a standard thing now that those are uncorrelated and the gap is not, uh, abnormal anymore. It’s. The operating environment. So what do you do with that information? Well, for an individual investor, this environment requires a real mindset shift, right? You can’t rely on your gut anymore. You can’t say, man, I feel like this economy doesn’t feel good. So the market’s gonna look at the, I mean, you, you, you know, a lot of people feel like the economy doesn’t feel good to them because of inflation, because of what happened with interest rates and all that stuff, right? But look it, you’ve got. Record breaking, uh, stock market numbers. You can’t rely on your gut anymore. Your gut is telling you the economy feels bad. For many people, that’s absolutely true. Costs are high. Again, things feel tight, and the instinct is to wait to sit in cash. To assume markets would reflect that pain, but that instinct used to work. And in this system it doesn’t because markets are no longer pricing in how the economy feels. They’re pricing policy response. Liquidity and constraints. So if you wait for the economy to feel good before you act, it’s gonna be way too late. So instead of asking, does the economy feel weak, you need to start asking different questions. You need to ask how constrained policymakers are, how quickly liquidity will return if markets wob on it, and where capital tends to flow first when policy steps sit. In other words. You gotta start really thinking about investing, right? Like you gotta, like right now. Now I’ve talked, I’ve beat this over many times before, but you know, you have, if you’re, if you’re saving money right now and you’re looking and you are wondering what to do, look for things that are on sale now. I spent real estate’s on sale right now. Right? Get your money into the markets one way or another. That’s what I would say. Whatever it is that you want to invest in. Don’t let your money just erode because this lack of correlation is, it’s a really, really important thing and it’s, it’s gonna continue to happen and you know what else is gonna happen Because of that, you’re gonna see an increasing widening up the wealth gap. People whose income is tied primarily to wages are, are gonna experience that inflation directly, right? Their money’s trapped in the real economy where costs rise faster than income. But investors on the other hand, have an opportunity to participate in the markets that are supported by this sort of unnatural infrastructure that I just mentioned, right? As asset prices are gonna continue going up. Now, I’m not here to judge whether that’s a good thing or a bad thing, I’m just telling you how it’s functions. So the investor class increasingly benefits from asset appreciation, right? Early access to liquidity. While lower income groups often can participate in that upside. Even as their cost of living rise, because they’re not in the markets, they’re not, they don’t own assets. So again, you have to stop, you know, using how the economy feels is your primary investing signal. If you wanna protect and grow your wealth in this environment, you need to understand how policy reacts, how you know liquidity moves, how assets behave when the system is under constraint. And in other words, uh, you know. Frankly, you just need to be part of the winning class, which is the investor class. Alright, so that’s kind of, uh, hopefully that made sense to you. Here’s another prediction for you, and this is probably more related to some of the things that we talk about usually, but I’ll say that multifamily and commercial real estate are going to finish their washout, and the window is gonna start to really close again. I’ve talked about this. Before, you’ve probably heard me say this, but let’s talk about multifamily and commercial real estate again, because you know, this audience doesn’t need just theory. You’ve already lived through the pain or the past two years you’ve seen deals blow up, capital calls go out, refinancings fail. So the real question going on in 2026 is not whether real estate breaks. It’s already, it already did. It already did. The real question is how much longer this phase lasts and what replaces it. My view is that 2025 into early 2026, um, represents the final phase of this unwind in the beginning of stabilization. I’m not predicting an immediate boom, not a return to 2021 by any means, but the end of obvious distress. So what’s happened already from 2022 to 2024? Multifamily and commercial real estate absorbed the fastest rate shock in modern history. Many of you lived through that. I lived through that. It’s painful. Debt costs doubled or tripled. Cap rates moved hundreds of basis points. You know, bridge debt structures broke, uh, refinancing assumptions collapsed. Now, a lot of the deals, I mean, I would say most of the deals, uh, uh, that, you know, kind of imploded, uh, shared the same DNA, you know, peaking price, uh, purchases, uh, during peak prices in 2021, early 2022. Uh, you know. Floating rate thin or negative cash flow based on, you know, the rates at the time. Maybe it was positive business plans that were really dependent on refi and rent growth. Um, those deals though, have largely already defaulted, recapitalize, or, you know, they’re being quietly handed back. And that matters because markets don’t keep breaking the same wave forever. If, if you’re seeing right now and if you’re in our investor club, you are. 30% discounts on a regular basis. Right? On a regular basis compared to the peak. Don’t assume that’s gonna last. That this is the key point I wanna make very clearly. If you’re looking at multifamily or commercial deals today that are trade trading at that 30% below where they were a couple years ago, you should not assume that window stays opening. Definitely because the level of discount there, uh, the level of discount exists because. Dried up liquidity, uh, because of that violent rate reset, uh, uncertainty. But here’s the thing, markets don’t stay frozen forever and as soon as pricing stabilizes, even at higher cap rates, which are going to be higher than they were, because you’re not gonna see interest rates down at zero, capital is gonna start to move again. And stabilization doesn’t require rates to go back to zero. It just requires some level of predictability. So here’s the sequence of what happens first, you know, the distress slows, uh, you see less and less defaults, and then slowly but surely cap rates stop expanding, right? That alone brings back buyers. Then as rates drift mo lower and volatility declines, lenders reenter selectively, debt becomes a billable again. It’s not cheap. It’s definitely usable and that brings more liquidity. When I say liquidity, in this context, I’m talking about just more deals getting done. And once liquidity returns, cap rates don’t stay wide forever. They compress, right? It’s competition. And again, when they compress, they’re not gonna go back to 2021 levels, but enough to meaningfully lift asset values from distressed pricing. This can happen faster than people expect, right? People underestimate the fact that there is an enormous amount of capital sitting on the sidelines right now in money market funds, short term treasuries, private capital, waiting for clarity. That capital isn’t, you know, permanent. The moment investors believe that rates of peak, that prices of stabilized downside risks is contained, that money starts to chase yield. When it does the transition from, nobody wants this, everyone wants exposure again, can happen surprisingly fast. In other words, I’m not saying I think this will happen in 26, but the shift from a market that is on sale, which I’ve described it as to a market that is starting to look a little frothy, can really be just a couple of years. And in that situation, I’d rather be a net seller, right? You wanna be accumulating. During this phase of for sale so that you can sell in froth. So what this means is that the market is, you know, uh, is not a market to wait for everything to feel perfect, because by the time it does, the obvious discounts are gonna be gone. And if you wait for perfect clarity, you’re gonna be competing, you competing with institutional capital, with large private funds and, and, and yield hungry money coming outta cash. The opportunity is not assuming distress lasts forever. It is. It’s in recognizing when the market is transitioning from forced selling, which is what is happening even now to price discovery. So ultimately, the prediction is this multifamily and commercial real estate, that that washout is completed in 2026 and the window created by distress really starts to close. Deep discounts don’t persist. Once market stabilized, which I think is what’s gonna happen, and then I think you’re gonna start to see a shift. You’re gonna start to see more deals, more liquidity, and that’s gonna return faster than people expect. In other words, this is gonna be the end of, you know, sort of this bargain basement, you know, panic pricing. And once real assets stabilize and liquidity returns, attention inevitably turns, uh, to the currency, those assets are priced in. Which brings us to the prediction number three. That dollar, okay, the dollar doesn’t collapse, but it does continue to erode. It slowly leak, right? Let’s talk about the dollar, ’cause you hear about this all the time, right? A nausea, you hear the, the weakening of the dollar. Um, this is one of those topics that where people tend to jump to extremes. You know, on one side you hear the dollar is about to collapse. On the other side you hear the dollar’s strong and everything’s fine. I think, um, the truth is somewhere in, in the middle. And my prediction for 2026 is simple. Um, again, the dollar doesn’t really explode. It doesn’t get replaced. It can just continues to erode slowly but surely. And that’s how reserve currencies actually behave when debt gets high. Right. So why no collapse, right? Because you got like people out there, uh, worried about the collapse of the US dollar. The US dollar is gonna remain dominant, not because it’s perfect, but because there’s no real alternative at scale. There just isn’t. Okay? There’s no other currency with markets as deep, as liquid and as widely used for trade debt and collateral. So, you know, reserve currencies, you know, you hear about the, the worry about us being the reserve currency. Well, reserve currencies don’t disappear overnight. They erode gradually, but they don’t disappear overnight. And that erosion shows up not as a crash, but again as persistent inflation, right? It’s rising, you know, real asset prices, which is again, where you wanna be, and a slow loss of purchasing power over time. Again, that brings us back to the whole issue of debt we were talking about, right? So in a highly indebted system, policymakers are not incentivized to aggressively defend the currency at all costs, right? So very high interest rates might strengthen the dollar in the short term, but they also make debt harder to service and financial stress worse, right? So instead of choosing strength or collapse. Um, you know, policy drifts towards tolerance, right? Inflation is allowed to run a little hotter than people expect, because again, it’s gonna erode that debt. The currency weakens slowly, therefore, rather than violently, right? Again, currency weakening. It’s that, it, it’s so entwined with this idea of inflation because debt becomes easier to manage in real terms. And one of the things I hear, and I’ve been sort of in these conversations back and forth with, um. At least one of you out there, uh, in, in emails is that, you know, I hear, uh, that, that, that there’s a, a serious problem for interest rates because of, you know, China, uh, selling US treasuries. And because of that you might get the collapse of the dollar. In fact, in this conversation, it was not only about China, but also Europe. Which, you know, I hadn’t actually heard anybody mention that before, but I guess that’s out there in the ecosystem and some of the newsletters. Now, all that sounds scary, but it really misunderstands how the system actually works. What exactly happens when someone or a country sells treasuries? Well, they don’t dis, they, they don’t just destroy the dollars. What they’re doing is they just swap $1 asset for another, right? The dollars don’t even lead the system. They change hands. So this idea of China selling off all it t trade, well, China’s been, uh, reducing its treasury holdings for years and the dollar hasn’t collapsed. The market absorbed it because treasuries are the deepest, most liquid market in the world. And then this idea of Europe, of of Europe actually dumping treasuries because, you know, they’re not happy with Donald Trump and what he’s doing in Ukraine and all that, that would be an absolute nightmare for, for Europe. That would hurt their own economy. That’s the last thing that an indebted government wants. So foreign selling, yeah, sure it’s gonna move yields, but it, it’s not gonna implode the dollar. But the reality of the, uh, erosion of the dollar is real. I don’t think anybody questions that anymore, and I think that is another reason that you need to be buying. Real assets. You need to be buying equity. You need to be on the side of the investor class. Okay? That’s, that’s how you combat all of this. So the real takeaway here ultimately is that, you know, it isn’t, uh, to abandon the dollar, right? It isn’t. It’s, it’s just to stop pretending that holding cash is neutral. It’s not, it, most of your wall suits and assets that, that can’t adjust. You know, they can’t grow as, you know, as, as asset prices grow, then you’re making a bet on currency stability that literally no one believes is, is going to be the base standard anymore. Everybody knows, every economist, every country, every everywhere knows that these currencies are eroding. You don’t freak out about the dollar, but don’t, don’t, don’t be like heavily in dollars. Start getting into the markets. Alright, well, you know, I’m talking a lot about esoteric macro stuff, but let’s kind of get into some stuff that you might think is fun, more fun maybe. Okay. You, a lot of you are into Bitcoin. Well, I think that, you know, Bitcoin is gonna continue to mature. And the next look, leg up looks like, you know, because of more adoption, not because of hype, which isn’t maybe not as, as, as fast and violent, but it’s, it’s, it’s a lot more predictable. For those of you who are still unfortunately listening to the likes of Peter Schiff about Bitcoin, you gotta stop doing that because Bitcoin is not tulips. Right? A lot of people still talk about it like it’s a fad that could just vanish. We’re long past that phase. Bitcoin is, is, is a $2 trillion asset and in the history of the world, there has never been a $2 trillion asset that went to zero. Is it volatile? Yeah, it is. It can absolutely continue to be wildly volatile, but you’re not going to zero. And my prediction is not overly crazy. It’s just that. Bitcoin is going to continue to increase in price, but it’s not become, not because of speculative, uh, you know, because it’s a speculative trade anymore, right? I think it’s because of adoption. Uh, adoption is going to become the real meaningful driver of market capitalization. So what do I mean by that? It just means more people are seeing it as a real asset, and it has to become, when it becomes a real asset class, everyone has to have some of it. Every major institution has to have some of it because it’s an its own asset class. And when they do that, it just drives up the entire market capitalization of that asset. And when you have an asset that has a finite amount, which in the case of Bitcoin, there will never be more than 21 million Bitcoin. You have constant adoption, constant slow, but persistent growth in market capitalization, the asset has to become more expensive. Now, what do I mean by this adoption? Well, places that you would never think in a million years, a few years ago, that that would be buying Bitcoin or you know, ETFs, B to Bitcoin ETFs are doing. So Harvard. Harvard is a great example. Because it’s not, it’s not crypto influencer, right? It’s actually one of the most conservative, brand sensitive pools of capital in the world. But their endowment management, uh, disclosed roughly 443, uh, million dollars in its position in BlackRock, uh, BlackRock, iShares Bitcoin, Bitcoin Trust, which is ibi for those of you who, who, uh, don’t know, that’s how you can just go to your New York Stock Exchange and, and buy. Bitcoin ETFs with ibit. Now, whether you love this whole Bitcoin idea or hate it or whatever, that’s a signal that is increasingly treated like a portfolio asset. It’s not a fringe experiment, and it’s not only universities. Uh, institutional comfort is it’s just there, right? Um, custody, uh, custody regulated vehicles, positioning, size, risk controls, those kinds of things are all become part of the Bitcoin uh, environment. Many countries are already holding meaningful amounts of Bitcoin. Uh, even the US has, there’s a, there is a formalized Bitcoin reserve. Now we aren’t actively buying it, but here’s an interesting thing with Bitcoin, you can, when it is, uh, the way that the US is accumulating Bitcoin is through seizures. Alright? Bad guy gets caught. His boats, his house and his Bitcoin get, uh, confiscated. So the US will sell the house, they will sell the gold, they will sell the boats, but they will keep the Bitcoin. What does that tell you? You know? And, and there’s a lot of nations that are actually openly holding and, and buying Bitcoin. I mentioned the US China. This always seems to be, uh, you know, anti Bitcoin. Well, they actually own quite a bit the UK, Ukraine, Bhutan, El Salvador. Bottom line is there’s a big change in narrative, right? That this is a real asset. So this is something that, you know, even if it’s 1% of a major, uh, institution’s assets or less than that, or whatever, it’s part of it. And that adoption alone can move prices from, from here. And that’s what I think a lot of people miss because they’re like, well, you already had a big move and you know, instead a hundred, it’s 80 or 90 or a hundred, whatever. It’s, it’s not going much better, bigger than that. Well, Bitcoin is, is actually really small relative to global pools of capital. So at this stage, adoption alone. Not even the crazy mania of the past can make a non-trivial increase in market capitalization and therefore a mark, you know, a non-trivial increase in the actual price of Bitcoin. All it’s gonna take, and you’re gonna see this, you’re gonna see more endowments, you’re gonna see more sovereign wealth pool, pensions, mod model portfolios, all they guys daisy side, when you know, even with a small allocation. It doesn’t take too much to overwhelm the available float because Bitcoin is scarce and a lot of it’s held tightly. So as far as Bitcoin goes, what do I think is gonna happen? I believe all time highs are gonna get challenged. They’re gonna get broken again in 2026, not because again, everyone’s suddenly becoming a crypto maximas, but because adoptions could just gonna continue to grow. The wild card, I should say, is that the US moving from, we hold. What we seized in terms of Bitcoin to actively acquiring reserves could be enormous catalyst. And there is a lot of talk about this right now. Um, if the market ever believes that the US is a consistent buyer, even in a constrained budget neutral way, that changes the psychology fast. And in that scenario, I think 200,000 plus, uh, $200,000 plus Bitcoin by the end of 2026 becomes very plausible. Zooming out. I’ve said this before, you may think I’m crazy, but again, because of adoption, I think that Bitcoin is at a million dollars five to seven years from now. So what does that mean for you? Well, I mean, I think at the end of the day, if you don’t own some, you might want to, I’m not gonna give you financial advice, but again, just like Harvard’s doing it, you know, major, major endowments are saying, well. You know, maybe we’ll just buy, like, you know, 2% of that, 2% of our, our, uh, endowment will be made of something like that, right? Uh, you know, it’s just even a very small amount, but exposure to it makes a lot of sense. So I think that is something to highly consider if you are still on zero when it comes to Bitcoin. All right, now here’s my last, uh, prediction. You may have heard me talking about this before as well, that AI becomes a deflationary force that policy makers finally wake up to. And I think this is actually one of the most important and misunderstood economic developments, um, that is currently already out there. But I think it’s, it’s gonna be really recognized. By the end of 2026. Okay. Artificial intelligence is gonna stop being just a tech story, and it’s gonna become a macroeconomic story. I think that by the end of 2026, artificial intelligence is clearly, uh, you know, it’s clearly, um, going to be boosting corporate earnings while beginning to materially reshape the labor force. Um, and what’s gonna happen is that central banks and policymakers are gonna start treating it. Is a genuinely deflationary force over the next several years, and they’re gonna try to have to figure out what to do about it. And again, going back to our earlier conversation, because deflation is really a real problem for a country with an enormous amount of debt. So let’s get a little bit into the whole deflationary uh, conversation. So artificial intelligence at its core is a productivity machine, right? It allows companies to produce more. Without, with fewer inputs, fewer hours, fewer people, fewer stakes and productivity always shows up in profits before it shows up in everyday life. Right now, lower cost per transaction, faster execution, fewer people doing the same amount of work, widening margins without price increases. That’s the tell. That’s when profits rise without raising prices, something deflationary is happening underneath the surface. The biggest impact there is the labor market, right? It’s gonna be impossible to ignore. And this is where the conversation really shifts because artificial intelligence doesn’t need to eliminate jobs outright to matter. It only needs to reduce the number of people required to do it, right? So you’re thinking the labor markets, you’re gonna see a lot of this. You’re gonna see more slowing in hiring. Um, even while productivity expectations rise, and I think by late 2026, the public conversation is gonna change from will artificial intelligence affects jobs someday to why aren’t companies hiring the way they used to? And of course, that’s when people are gonna start paying attention and they’re gonna notice it’s deflationary because it’s going to be because artificial intelligence is gonna push down the cost. Of services, administration, customer support, research, and eventually decision making itself. That’s why it’s, it’s deflationary, it’s structural, right? Just think of all those things you can do for so much cheaper. That is what deflation is, right? And again, we mentioned before deflation is not something central banks are comfortable with because of debt and because debt heavy systems rely on nominal growth. Deflation makes debt heavier in real terms as opposed to what we said before, which is that inflation actually erodes debt. And that is a, a very, very challenging problem. And by 2026, I think you’re gonna hear a lot about this, you know, policy problem that we have. Which is innovation versus, you know, deflation. You make a lot of money, but are still worried about retirement. Maybe you didn’t start earning until your thirties. Now you’re trying to catch up. Meanwhile, you’ve got a mortgage, a private school to pay for, and you feel like you’re getting further and further behind. Now, good news, if you need to catch up on retirement, check out a program put out by some of the oldest and most prestigious life insurance companies in the world. It’s called Wealth Accelerator, and it can help you amplify your returns quickly, protect your money from creditors, and provide finance. Financial protection to your family if something happens to you. The concepts here are used by some of the wealthiest families in the world and there’s no reason why they can’t be used by you. Check it out for yourself by going to wealthformulabanking.com. Alright, well, so that’s basically it for my, uh, predictions. And I know I’ve kind of. Off on many different tangents, so hopefully it’s useful to you at least to start thinking and doing some of your own research. Bottom line is this, I mean, as, as a investor, what can you do? I think the big story here is understanding that, um, you need to be out of the dollar and into the investor class because that that widening gap between those who have. Who own things, who own assets, and those who do not is gonna continue to widen. And so, you know, my best, uh, won’t call it advice, but my own belief is that it is a, it is a very good time to look around and look for assets that are underpriced because I think everything is going to expand and it’s gonna ex expand. Uh, and you don’t wanna be caught, you know, on the, uh, dollar side of that equation. So. That’s it for me this week on Wealth Formula Podcast. Happy New Year. I’ll see you next week. If you wanna learn more, you can now get free access to our in-depth personal finance course featuring industry leaders like Tom Wheel Wright and Ken McElroy. Visit wealthformularoadmap.com. The post 540: Outlook and Predictions for 2026 appeared first on Wealth Formula.

It’s been another interesting year in the world of personal finance and macroeconomics. As we look ahead to 2026… well, who really knows what’s coming? I’ll be sharing my own take—and making a few predictions—in an upcoming episode. What’s hard to ignore is just how unusual this moment in history is. We’re coming off COVID. We went through a rapid rise in interest rates, and now a pullback. Tariffs are back in the conversation. There are a lot of moving parts, and as usual, the consensus hasn’t exactly nailed it. Almost every expert was convinced tariffs would push inflation higher. I expected at least a temporary bump—some transient inflation while markets adjusted. Then the CPI report came out at 2.7%. That’s a lot closer to the Fed’s 2% target, and nearly half a percentage point lower than expectations. Clearly, something else is going on. At the same time, GDP came in at around 4.3% growth. That’s real strength. Inflation is coming down, growth is strong, and while the labor market is still a little murky, there’s no question there’s underlying momentum in the system. Investors haven’t quite felt it yet. It’s been a sticky environment. But my sense is that we’re getting closer to a shift—more liquidity, more money in the system, and markets that may start moving meaningfully again. Of course, we’ll see how it all plays out. For this episode, my producer Phil pulled together some of the highlights from the show in 2025—a look back at the conversations and ideas that stood out in a year when the data kept surprising just about everyone. I hope you enjoy it. And again, happy holidays. Merry Christmas, and Happy New Year. Transcript Disclaimer: This transcript was generated by AI and may not be 100% accurate. If you notice any errors or corrections, please email us at phil@wealthformula.com.  Welcome everybody. This is Buck Joffrey with D Wealth Formula Podcast, coming to you from Montecito, California and, uh, want to wish you, first of all, a happy holidays. Merry Christmas, happy new Year, all that. And, uh, yeah, it’s been, uh, it’s been another, uh, another interesting year in the world of personal finance and macroeconomics is what, what we talk about on the show. And as we look forward to 2026, gosh, who knows what’s gonna happen, right? Uh, well I’ll give you my take in, uh, show coming up where I’m gonna make some predictions. However, you know, it’s just, it, it, it’s just such an unusual time in, in history. Um, as we kind of look at. Coming off of COVID and having those high interest rates and then coming, uh, coming down and then having Trump elected and now the tariffs and well, gosh, who knows? Right? I mean, just for example, you know, almost every expert was pretty much guaranteeing that inflation would go up because of the tariffs. I mean, even if it was transient, which frankly I thought it was gonna be transient, meaning that there was gonna be a bump in inflation. For a period of time until there was a readjustment after tariffs. Well, TPI comes up most recent CPI is actually 2.7. You know, that’s much closer to the fed target of 2%. And, um, 2.7 was, you know, I think, uh, almost a half, half percentage point less than the expected, uh, CPI, uh, report. So that, that’s obviously something else is going on there. And then. GDP numbers came out and we had a four handle. It was like 4.3, I believe, GDP. So we’ve got incredible growth. We’ve got decreasing inflation. The labor market is still, I know, a little unclear, but it seems like there’s a lot of strength in this market. Of course, it’s really sticky investors. We haven’t quite felt that strength yet, but I do think you need to start anticipating. That markets are gonna come back pretty heavy, uh, with increased liquidity, uh, and a lot of money in the system. But we shall see, uh, this show. What we’re gonna do here is, uh, my, uh, producer Phil put this together, but it’s basically some of the highlights of, uh, the show in, in 2025. So hopefully you enjoy it. Uh, and again, happy holidays. Merry Christmas, new Year. And we’ll be back right after these messages. Wealth Formula banking is an ingenious concept powered by whole life insurance, but instead of acting just as a safety net, the strategy supercharges your investments. First, you create a personal financial reservoir that grows at a compounding interest rate much higher than any bank savings account. As your money accumulates, you borrow from your own. Bank to invest in other cash flowing investments. Here’s the key. Even though you’ve borrowed money at a simple interest rate, your insurance company keeps paying. You compound interest on that money even though you’ve borrowed it at result, you make money in two places at the same time. That’s why your investments get supercharged. This isn’t a new technique, it’s a refined strategy used by some of the wealthiest families in history, and it uses century old rock solid insurance companies as its back. Turbocharge your investments. Visit wealth formula banking.com. Again, that’s wealth formula banking.com. How do you approach the process of identifying stocks that are maybe best suited for consis consistent cash flow? Or do you just pick the stocks that you like and, and create the cash flow? Or are, you know, fundamental metrics that maybe you prioritize? Yeah, the, the, the first thing to determine. I think real estate investors understand this is if I were to invest in real estate, I’m gonna determine whether I’m gonna be a flipper, or I’m gonna try and buy low forced depreciation, sell high. Or if I’m gonna be a cashflow investor where I might invest in syndication, or I am, I’m gonna have tenants in property management. And the same is true with stocks. Most people start off by thinking about price rather than cash flow. They think about buy low, sell high, like a house slipper, and that’s, that’s less tenable in stocks because in real estate, if I buy low and sell high, I can do things to force appreciation. I can renovate, I can get new management, I can put in new appliances. I, there’s things I can do to force appreciation. But once a person buys a stock, there’s absolutely nothing you can do to make the stock price go up. But if you take a a, if you think of it like a real estate investor. You think about it like owning a business where the priority, as you mentioned these metrics, the priority is, Hey, what kind of cashflow will this produce be in terms of dividends and in my case, option premiums. And so some of the key metrics is, you know, if I, I’m basically buying a financial statement, same as real estate. You know, I, I, I, it is just a little different numbers in real estate. I wanna know what the net operating income is. In stocks, I might wanna know what the EBITDA is ’cause they’re essentially looking at the same types of things in real estate. I wanna know what the cap rate is in stocks. I wanna know what the PE ratio is, which is just the same number inverted. They just put the price on the top instead of the bottom. To me, I don’t see a difference between real estate and stocks, uh, in that they’re both a business or they charge someone for a good or a service. And there’s either cashflow there at the end of it or not. If people take a cash flow approach, they can begin to build on their passive income. And that contributes to that blueprint we mentioned earlier to get ’em outta the route race. So if you take a Warren Buffet approach, the most important number in that business is operational cash flow or earnings. Meaning does what they do, their operation. You know, you walk in there, a nice operation you got going here, you know, trucks are moving and you know, products are being built and shipped and, and nice operation. If they’re earning money, that means that’s the life flood of the business. That means it’s got a good moat. That means it’s pretty protected and that allows them to do two things for me. Number one is a dividend, which is exactly the same thing as a distribution in real estate. Uh, there is no difference, uh, in a syndication. I have a whole bunch of investors I’ve joined with where you have a share of this project and when the earnings come out, they distribute the, the distributions among the share shareholders. Same is true with stocks. They take the earnings, uh, we call it a payout ratio, and they take a, a, a significant amount of that money and they pay it in a dividend, same as a distribution. But what I do that’s a little bit unique buck is, uh, is I also have the options market on my side. Where I can use options to control risk, uh, to get guarantees where I can buy and sell, but even more importantly, I can offer, uh, and get paid for making promises to people. This is very much a Warren Buffet deal where it, it brings a significant increase to my monthly cash flow beyond the dividend, up to three, two and three times. Uh, the amount of money, two to 300% more cash flow. By being involved in the options market and that’s, that’s a nice secret sauce. The yield max Tesla option income, ETF, which is TSLY. And basically what it does is. Is it just does a series of longs and shorts and, and then generates what looks like to be kind of a, a ridiculous amount of, uh, dividend, uh, per, per month. So what are we missing here? What, what’s, well, you’re, you’re basically hiring those guys to mow your grass. It’s just like any other mutual fund or any other. They’re doing something you could absolutely do by yourself and not pay them a fee. There’s two cultures. There’s the advice culture and there’s the education culture and the advice culture. People say, look, I don’t wanna learn anything. Just gimme the advice. Well, you’ll pay for that in fees. And the problem with doing that is if you really listen to Warren Buffett, which 1% is enormous. Because in the wealth blueprint that we do for people, we use compounding. We use the compounding calculator to see what we’re gonna need. You drop that 1%, you give up 1% of your compounding powers as an investor over your life, it, it wouldn’t seem like 1%, but Buffet knows the truth. It’s enormous. So yeah, absolutely there are ETFs and there are funds that will do exactly what I do or what I teach people to do, but we have some advantages in doing it yourself because risk is about control. I trust myself more than I trust those guys any day of the week. And like I say, I’m doing this by month, so yeah. But it’s legit. How do you even make predictions? And second of all, I mean presumably you still have some forecasts over the next, uh, 12 to 24 months, and maybe you could tell us a little bit about that. Our methodology lends itself to times of uncertainty like this, and that’s the benefit of really relying on the leading indicators that we have. Now. We do have to take a little bit of a different approach. We have to look at data in a lot higher frequency today. You know, a lot of the data you get from government sources or quarterly data, monthly data, but we’re having to track weekly trends with the ever-changing environment that we find ourselves in. So we’re not surprised by the time any monthly or quarterly data comes out. The level of uncertainty that we’re dealing with is certainly unprecedented. I share an index each day, um, and we are three times more uncertain today than we were at the height of the pandemic. You know, put that in perspective, right? Yeah. So we do have to adjust, um. The, the way that we’re looking at data with higher frequencies, we also have to rerun a lot of these correlation analysis. Every single time we get a new data point to see are these lead times becoming more condensed? Do we have to make adjustments in our models as a result to maybe data reacting quicker than it might have in the past? So those are some of the ways that we’re, we’re continuing to evolve in these interesting times we live in. This relates to our forecast. Our team expected some weakness in the first part of this year, and, and we knew that coming in with the, with the tariffs that were proposed during President Trump’s campaign, we did have a weak first quarter GDP number forecast. Our team was 0.1% off of nailing that first quarter GDP number, so they were right on the money there. Uh, we were very impressed with that, but we do expect a sluggish first half of the year. We call it the recovery phase of the cycle. What we mean by that is our growth rates are still building momentum, but are still negative year over year. You know, ITR. Really known for its emphasis on leading indicators. So which of the leading indicators you guys rely on the most when and, and I guess which are flashing red or green right now? I’ll give you one of each. Uh, yeah. The one we’re in right now, we look at the purchasing managers, index isms, purchasing managers index. Now we look at at on a one 12 basis. What I mean by that is we compare the most recent month, the same month one year ago. The reason we look at it on that basis is it gives us 12 month lead time into the future when you correlate it to the economy. That index was recently rising until we got the most recent month of data, and then it dropped back down. So that is giving us the mixed signal of, hey, we need to be a little bit more concerned about the prospect for growth moving forward. Now the opposite is true when we look at an indicator called capacity utilization. What Capacity utilization measures, it’s about an eight month lead time to the economy. So still a nice view into the future, but what it measures is output over capacity, and that actually continues to improve meaning. And again, really all that means on a simple level is we’re utilizing more of our existing capacity, so we’re getting busier. If we look at the consumer side of inflation that the Fed’s more concerned about in terms of setting policy, we have inflation essentially flat this year from where we are today. Now, if you look at the CPI, it’s at 2.8%. Our projection for the end of the year is 2.8%. We don’t see inflation coming down much at all. As a result of that, that’s why you’re seeing Chairman Powell back off being able to cut rates and is holding these rates steady because he sees these higher inflation risks as well. And so from our perspective, it’s very unlikely you see any meaningful interest rate decline this year. Yeah. Now again, the second quarter, GDP number can have an impact on that. We do see a very weak second quarter chairman Powell alluded just a couple of days ago to some slack in the labor market. Maybe you can get a quarter point if we have a really weak second quarter, quarter point cut, but it just seems very unlikely given how persistent inflation has been. And so we tell all of our clients, prepare for interest rates to be relatively flat this year, and prepare for interest rates to rise through the balance of the second half of the decade. It’s not just tariffs, it’s employment costs, it’s electricity costs, it’s material costs. There’s a lot more driving higher inflation than just tariffs. What macroeconomic trends are you watching right now with regards to how they’re shaping the markets today? I think there’s really three things right over the long run. They’re gonna debase the currency, that’s gonna be a persistent tailwind for all liquid, uh, assets, including stocks. Bitcoin gold and bonds. And then I think that you also are going to have a, uh, very interesting dynamic around all these tariffs, uh, and kind of the administration’s economic policies. And then the third thing is that there is a whole technology, uh, trend to, uh, pay attention to. Uh, obviously innovation is very deflationary. Uh, we’ve got, you know, things from humanoid robots to rockets to gene editing, to uh, to crypto and everything in between. And so I think those three things really tell the story of where, uh, markets potentially go in the future. When I grew up, um. S and P 500 was the benchmark. There’s a risk-free rate in bonds. I believe that my generation and younger sees Bitcoin as the benchmark. And so, uh, it’s very simple. If you can’t beat it, you gotta buy it. And I think that there’s institutions around the country who are realizing they can’t beat the benchmark and therefore they will end up buying it. And really, to me, that is, uh, maybe the most interesting. Part of the entire conversation is that Bitcoin obviously has risen significantly on a percentage basis in appreciation. Bitcoin has kind of infiltrated every corner of finance, but most importantly is it has transitioned from a high risk, you know, kind of asymmetric type asset to now it’s becoming the hurdle rate uhhuh. And if you’re the hurdle rate, you suck up a lot of capital. Yeah. Because there’s not a lot of people who can beat you. And I think that that is a very powerful position for Bitcoin to be in. And that’s how you infiltrate into, uh, the institutional portfolios. Bitcoin will stop going up. When they stop printing money. I don’t think they’re gonna stop printing money, so I don’t think Bitcoin’s gonna stop going up. That’s kind of one huge component of this. The second thing is that Bitcoin is very unique in that the higher the price goes, the less risky it is deemed by the largest pools of capital. Mm-hmm. And so usually, you know, if NVIDIA’s at a $4 trillion market cap, people like, oh, it might be overvalued there. A lot of debate. Right. Bitcoin if it was at a $4 trillion market cap would be way less risky than it when’s at 2 trillion. And so there is a lot of structural advantages, both from the legacy world but also from the Bitcoin market that I think will continue to lead to these large institutional capital pools. Uh, allocating some percentage. And the beauty is right now we have very small adoption in that world. Uh, it’s only gonna get bigger. It’s only gonna get more normalized. And I think that one of the parts people really underestimate when it comes to Bitcoin is how important time passing is. You know, if you think back, uh, there is not anyone under the age of 16 that has lived their life without Bitcoin existing. If you’re keeping large chunks of money in savings account, paying less than 1% or any percent less than inflation, you’re bleeding wealth every single day. It feels safe. It looks safe, right? ’cause the numbers may not be moving nominally but it, but it’s not safe. It’s a bucket with a hole in the bottom and you don’t even notice until it’s almost empty. That’s why the wealthy don’t hoard cash. They own assets. They own assets that inflate with inflation. If you can’t beat ’em, join them. They buy things that grow in value as dollars shrink because they understand the system. They don’t fight it, they ride it. So you’ve said many times that the current monetary system is broken and headed for reckoning. So from your perspective, what are the core flaws in the system right now and how do we get here? Well, probably the largest and most obvious underlying flaw in the monetary system is the fact that the federal government just can’t balance its budget. And so they have to take on debt to cover the deficit that they run and that deficit. Well, you know, over the course of the last 20 years, it’s gone up and down. More recently, it’s gone mostly up and, uh. We just came through a period where, you know, it was reemphasized to everybody. Just what a problem this is. Because as you’ll recall, when Trump was first elected, they were talking about those, the Department of Government Efficiency and cutting expenses and you know, maybe 2 trillion or 1 trillion. Of course, then Elon got frustrated and left and the numbers have come down and you know, Trump and the Freedom Caucus was saying they were gonna try and balance the budget or at least cut expenses. And of course, what we know is that they just passed this big beautiful bill. Which really increases the deficits and they bump the debt, uh, ceiling up by another $5 trillion. So sadly, what do many of us have seen and been saying, which is to say they just can’t stop, kind of continue. Seems to be continuing. And, um, you know, the reason why that, just to close the full circle, the reason why that matters is they, they do this debt, they issue debt to cover these deficits, and then the debt requires interest payments and, you know, there’s not enough money to make the interest payments. And so. They more or less have to print the money, you know, and inflate the money supply to keep the system going. And that’s why it’s so important to hard assets. You know, we need to grow the economy at, you know, 4, 5, 6, 7% a year, which, which we’ve never really done on real terms. Well, I think that is kind of what they’re projecting it might be, but it, it’s gonna be harder than hell to achieve. I mean, it just, where you can’t just snap your fingers and create that growth. Now, don’t get me wrong, if you start to, if you ramp up inflation. If you have 10% inflation, well then the GDP number’s gonna get bigger, fast. And so really the model they’ve used, they call it the R Star model, is that they’ve got to have faster growth. Growth rate has to be higher than interest rates, or else you’re in a debt spiral. And so what’s been happening is, by the way, that’s why Trump wants to take interest rates down so much. You know, he is called for a 300 basis point cut. Imagine right now with inflation running at three plus percent, if they cut rates to one point a half percent or one point a quarter percent, I mean, it would be good for the economy. People would refi their houses. You know, there were all kinds of, you know, growth, right? Huge. But in turn it would be inflationary, very inflationary. That’s the trap. They’re really kind of caught in. It’s a seventies kind of stagflation sort of environment. You know, if they don’t keep rates low, they’re not gonna have any growth. If they want to get growth, they’ve gotta keep rates low. That’s gonna lead to monetary creation, which is gonna lead to inflation. Look how it all resolves is very complicated and none of us know. Yeah, sure. But what I do know with very high certainty, with a lot of confidence is this is going to be an inflationary decade. It’s already been an inflationary decade, and because of the way the math is today is very highly likely to continue to be an inflationary decade until we fix this monetary system. Well, we have less than 3% adoption. Three goes to six fairly easily. You know, human beings underestimate how long change really requires, and then we really underestimate how much change actually occurs. Think the internet like we are moving into a digital planet, right? Robots are not going to use credit cards, man. They’re not gonna use, they don’t need visa. We don’t need middlemen. The cool thing about Bitcoin, unlike the Rolls Royce, is you don’t have to buy the whole Rolls Royce. You can buy a fraction of it. You know, you don’t, maybe you guys partner with each other to do apartment buildings. Well, you’re already doing fractured deals on apartment buildings, so Sure. It’s not really that different. 2%, 3% goes to six. I mean, it does go to six. You have the largest ETF in the history of ETFs, okay? This supersedes the goal. ETF by orders of magnitude. I study markets very, very well, price. Really gets people’s attention. I think price is, uh, 90% of Bitcoin. Like I am truly a supply and demand guy. Oh wow. 21 million. And you guys have lost four. You lost 4 million coins. Oh, how’d you lose the 4 million? You lost the 4 million. I know how you lost it. You mispriced it. Bitcoin has been mispriced every day. Its entire history. Dude. 19 million coins have been issued. The addressable market is 8 billion people. You don’t need ’em all. Yep. You just need a small function of those 8 billion to go, Ooh. 21 million units and and four have been lost. It’s already mispriced. Okay. They’re pricing Bitcoin at one 15 Today, assuming there’s 21 million units, we know there’s not. There’s 17, so the supply shrunk. The market caps at 2 trillion. Hello. The standard deduction for a household is now, uh, what in a low 32,000 range. And it turns out that 60% of the households in the United States cannot take advantage of itemized deductions. That is when they take their mortgage interest, property taxes, charitable deductions, they don’t get that number. And so there’s not as much benefit to home ownership as there used to be in the United States. With our big institutional players, nobody wants their appraised values to be quickly marked down to market, because if your competitors don’t do the same thing and they’re part of the index and benchmark that you compete against, you’re going to underperform. And so we’ve traditionally had a lot. Appraised values for real estate among the institutional players, especially. You don’t get this out of the private market, but you get this from the nare players, the institutional type players, and, um, and everybody’s, uh, uh, fearful of underperforming that index. I would prefer as a private investor just to go ahead, bite the bullet and mark it down. Now take the pain if in fact you’ve seen it go down. Some markets have seen property values go down 30, 35% even in multifamily, but they’ve bottomed out in the transaction market and, and absolutely the, uh, the appraisers are gonna have to bring it down and the owners are gonna have to ease up that pressure and say, yes, I want a realistic appraisal. But, um, but there is that fear of underperforming the index and that’s. What’s holding up the American appraisal firms in 2008, 9, 10, 11, we saw a lot of deep distress. The the smart money was ready for it. Now, there’s a lot of people with dry powder, as we say. Ready to p on the market hoping for some distress from those who cannot refinance now, whose, whose CMBS loan or other money is, is rolling. A couple points there. One is, I think you’re going to see more loan modifications this cycle than last time because they realize it’s temporary and they realize that not all properties are in trouble. And these tend to be the higher leverage properties. The smart private wealth investors tended to use conservative leverage over the last several years knowing we’d hit a cycle and, and they probably are 65% or less. Leverage some of the, um, greener newer investment managers might have gone up to 80% and might have even used variable rate debt when they shouldn’t have. They’re the ones getting nailed. They’re losing all their equity and that property is distressed. So there’s not that much of it out there. But there’s a little bit, and I would certainly pounce on it if you can find it. There are often a lot of sort of hidden costs associated with buying versus renting. Can you talk about trying to weed through some of that? Sure some of the highest costs that we don’t think about when we own, although we do take cut down on risk. And also I think that’s come back to consumption. I, I is the fact that there’s the opportunity cost. So think about having 50%, a hundred percent of your home paid for. This, it’s the opportunity cost. You’ve actually taken capital out of play at higher returns to put it into something that perhaps, yes, you see it as a form of an investment, but it’s also partly consumption. And I think that’s why many people end up paying for their homes when they can, because there’s an old saying, and that is, you can’t go broke if you don’t owe money on it. Right? So if you, it’s hard for the lender to come get your home and you don’t really care, right? You wanna be able to. Have no debt on your home. It doesn’t make the typical financial sense if we argue at it from leverage and returns and maximization of returns. I think most people this high end level are looking at, you know, I, I, I, I have high net worth. I’m looking at both consumption and the investment side of the component. But very often the consumption wins and the investment is I can be safe and I can own this house. Outright in many states too. Your homeowner, the home that you live in, you are actually, if you’ve homesteaded the home, you’re actually protected against lawsuits and other things that are out there. Divorce cases will protect your position in, in terms of a homestead, so you can protect a significant portion of wealth by having a paid for home. What are some of those markets that are really overpriced versus. I guess underpriced right now. So when we look at the top 10 most overpriced markets in America right now, we look at their prices, where they are and compare them to where they should be statistically modeling them. We’re seeing the most overpriced markets are Detroit at 33.5% and then falling, falling, descending. Order of Cleveland, Ohio. New Haven, Connecticut, Akron, Ohio, Worcester, Massachusetts, Las Vegas, Nevada, Hartford, Connecticut. Rochester, New York, Knoxville, Tennessee, Toledo, Ohio. You’ll notice. And these are overpriced. These are overpriced. These, the overpriced mark. That’s so, that’s sort of counterintuitive, isn’t it? Ab absolutely. But yes. Wow. Okay. And then h how about the, uh, underpriced markets? I’m curious on that too. Sure. So when we then go to the opposite end of the spectrum, and usually now with underpriced comes risk and there’s risk in both of these markets, what you wanna do, both overpriced and underpriced, what you wanna be long term in a housing market. Uh, ’cause you want to be really close to that trend and not have these dramatic swings. It’s just like stock price. We don’t like volatility. Housing, it’s, it’s dangerous for performance. The most underpriced markets. We only have four markets in America right now that are trading at a discount relative to their long-term pricing trend. In other words, statistically, where they historically prices say prices should be today only four cities are underperforming. That that’s Austin, Texas at 3.1% below where they should be, or a discount of 3.1%. San Francisco at a discount of 6.5%. Wow. New Orleans, Louisiana at a discount of 8.7 and Honolulu, Hawaii at a discount of 10.3. Notice I’m not saying these markets are inexpensive. They’re just below where they’ve historically been. These are the best buys right now because they’re below their long-term trend. One of our other indices, we call it our price to rent ratio. It’s really a PE ratio for rents versus home ownership. And then so we can look at that. So if you’re in our a hundred markets, we know the average price, right? So it’s gonna be priced, divided by the annual average rent. So it’s gonna be how many dollars in price do you pay for every $1 and annual rent? And that gives us the relative difference between owning and renting. The higher that ratio. The, the more you should on in general be leaning towards renting, the lower that ratio, the more you should be leaning towards owning. And we used to do an old buy versus rent index for 23 cities. We now do it for 100 cities. And this price to rent ratio produces almost the same exact answer. So when we look at the average price to rent ratio in an area and we just compare, are they above or currently are you above the price to rent ratio? Uh, for Los Angeles, California. Are you below it? If you’re above that average for say the last 10 years, you’re gonna be rent friendly. If you’re below it, you’re gonna be bio friendly. I can do this very quickly. Pick a California market you’d like to know about. Why don’t we try Dallas, Texas. Okay. Dallas, Texas. That one’s in the top 100 in terms of population. So Dallas, Texas, uh, their price to rent ratio is at about a, just below a 6% premium. In other words, that trade off between renting and owning is about 6% above where it should be, so it slightly favors renting. I’ll jump to the next index. If we look at actual prices in Dallas, there’s a slight premium. So it’s, it’s, it’s telling me, Hey, that my price to rent ratio’s high, slightly favoring ownership, but it’s probably because prices are a little high and they might change. Uh, Dallas has had a bit of a. Premium right now. So I will now go look at Dallas rents. My gut feeling is they’re gonna be below average and they are. They’re at about a 4.5% discount. So that’s just market dynamics in motion right there. And we can do that for a hundred cities pretty quickly. Mm-hmm. You make a lot of money, but are still worried about retirement. Maybe you didn’t start earning until your thirties, now you’re trying to catch up. Meanwhile, you’ve got a mortgage, a private school to pay for, and you feel like you’re getting further and further behind. Good news. If you need to catch up on retirement, check out a program. M put off by some of the oldest and most prestigious life insurance companies in the world. It’s called Wealth Accelerator, and it can help you amplify your returns quickly, protect your money from creditors, and provide financial protection to your family if something happens to you. The concepts here are used by some of the wealthiest families in the world, and there’s no reason why they can’t be used by you. Check it out for yourself by going to wealth formula banking.com. Welcome back to the show everyone. Hope you enjoyed it and uh, once again. Thanks again for listening. Uh, I truly appreciate your support. I hope, uh, I hope it’s been entertaining for you and that you’ll learn something along the way and, um, you know, always appreciate your feedback. Shoot me an email, bucket wealth formula.com. Let me know if there’s things that you want me to do. Let me know if there’s things you wanna hear more about. Uh, but hopefully it’s gonna be a good year and we’re gonna keep plugging away talking about the, you know, try to get educated myself and pass along information to you on Wealth Formula Podcast. That’s it for me this week on Wealth Formula Podcast. This is Buck Joffrey. If you wanna learn more, you can now get free access to our in-depth personal finance course featuring industry leaders like Tom Wheel Wright and Ken McElroy. Visit well formula roadmap.com. The post 539: Best of 2025 Holiday Special appeared first on Wealth Formula.

For years, gold was the asset nobody wanted to talk about. It sat there quietly while stocks and real estate continued to rip. Gold was for pessimists. For doomsayers and perma-bears. And then suddenly… gold didn’t just wake up. It launched. As of mid-December 2025, spot gold is trading around $4,300–$4,400 an ounce, depending on the market, marking a gain of roughly 60% over the past year and pushing decisively into record territory. The obvious question is: why now? The short answer is that gold isn’t reacting to one thing. It’s responding to a stacking of pressures that have been quietly building for years and are now impossible to ignore. Start with central banks. For the better part of the last decade, central banks were net sellers or indifferent holders of gold. That changed dramatically after 2022. According to the World Gold Council, central banks have been buying gold at more than double the pace of the pre-COVID years, and 2025 continues that trend, with hundreds of tonnes added to reserves year-to-date. These aren’t hedge funds chasing momentum. These are monetary authorities making deliberate, strategic decisions about what they trust to hold value. Why would central banks suddenly want more gold? Because geopolitics has re-entered the chat. We now live in a world where reserves can be frozen, payment systems can be weaponized, and “risk-free” assets depend heavily on political alignment. The World Bank has been explicit that rising geopolitical tensions and global uncertainty are key drivers of gold’s surge this year. When trust in the global order erodes, gold benefits. At the same time, the U.S. dollar devaluation thesis is no longer fringe thinking. It is reality. Gold is priced in dollars, and when real yields fall and the dollar weakens, gold historically performs well. That dynamic is playing out again. Reuters has repeatedly pointed to a softer dollar and declining Treasury yields as near-term tailwinds for gold’s rally . Bank of America’s research echoes this relationship, emphasizing gold’s inverse correlation to the dollar and the growing desire among nations to diversify away from dollar-centric reserves . In other words, gold isn’t just going up because people are scared. It’s going up because confidence in fiat discipline is eroding, slowly but persistently. So…Is gold still a buy or did we miss it? The truth is, both answers can be correct. Yes, gold is expensive relative to where it was a year ago. You don’t go up 60% without pulling future returns forward. But what makes this cycle different is that many of the buyers driving demand are price-insensitive. Central banks don’t care if gold is up 20% or down 10% in a quarter. They care about long-term reserve integrity. That’s why major institutions aren’t dismissing the move as a blow-off. Goldman Sachs has cited sustained central-bank demand and the potential for further ETF inflows as supportive of higher prices. J.P. Morgan continues to frame gold as a beneficiary of geopolitical instability and monetary uncertainty, and Bank of America is projecting prices as high as $5,000 an ounce into 2026. Of course, nothing goes up in a straight line. A shift toward tighter monetary policy or a sudden easing of global tensions could cool enthusiasm. Understand though, that gold’s breakout isn’t just about gold. There is a larger message that should be taken away from all of this. Hard money has come back into favor. Gold is the original hard asset. It’s scarce, politically neutral, and has thousands of years of monetary credibility. But it’s also heavy, difficult to move, and awkward in a digital world. Bitcoin exists on the same philosophical axis. Both gold and Bitcoin are reactions to the same problem: expanding debt, monetary dilution, and declining confidence in centralized control. Gold is the conservative expression of that view. Bitcoin is the aggressive one. Today, Bitcoin trades around $86,000, still volatile, still controversial, still misunderstood. But if gold’s surge is signaling a regime shift toward hard assets, then Bitcoin may simply be earlier in that adoption curve. In other words, gold may be leading the parade. And if history is any guide, when institutions start moving into the oldest form of sound money, they eventually begin exploring the newest. That’s the signal worth paying attention to. So this week, I interview Dana Samuelson, an old friend of the show and an expert in everything gold and hard money. Transcript Disclaimer: This transcript was generated by AI and may not be 100% accurate. If you notice any errors or corrections, please email us at phil@wealthformula.com.  Gold isn’t reacting to one thing, it’s actually responding to a stacking, uh, pressures, uh, that have been quietly building for years and, and really right now are impossible to ignore. Welcome, everybody. This is Buck Joffrey with the Wealth Formula Podcast coming to you. From Montecito, California and today. Uh, before we begin, just a quick reminder. Uh, there is a, uh, website associated with this podcast called wealth formula.com. And, uh, that’s where you go to get deeply more deeply integrated into this community, including our accredited investor club, AKA investor club for you to join. And, uh, once you get onboarded, all you do is you, you have an opportunity to see private deal flow, uh, that, uh, is not available to the general public. If you are an accredited investor, meaning that you have, uh, make $200,000 per year or $300,000 per year, uh, for the last two years with the reasonable expectation of continuing to do so, or you have a million dollars outside of your personal residence, a net worth, then you are an accredited investor and. All you need to do is sign up and join the club. Just go to wealth formula.com and sign up and get onboarded. Now, let’s talk a little bit about something that has been extraordinary this year. It’s gold. You know, for years, gold was the asset that nobody wanted to talk about. I mean, it sat there quietly. Well, stocks and real estate continue to rip. Um. Gold really is really, you know, was for the pessimists. For the doomsayers and the perma bears. I mean, I, I gotta tell you, I kind of am was one of those people, right? And then suddenly gold didn’t just wake up. It, it totally launched, exploded in his mid-December 2025. Spot Gold is trading around, I know, 4300, 4400 an ounce, depending on the market, gaining roughly 60% over the past year. Pushing decisively into record territory. Now the obvious question is why now? Well, the short answer is that gold isn’t reacting to one thing. It’s actually responding to a stacking, uh, pressures, uh, that have been quietly building for years and, and really right now are impossible to ignore. And this is an interesting shift because. The thing is that in the old days, and I’m even talking about 15, 20 years ago, uh, you would look at gold as something that didn’t really go up when the stock market was doing well, right? It was kind of a reaction. It was a fear-based thing. It still is sort of a fear-based thing, but now it’s not just fear of, you know, whether the stock market’s gonna crash. It’s fear of geopolitical concerns. That’s where the central banks come in, right? So for the better part of the last decade, central banks were net sellers. Or really indifferent of holders of, of gold, and that changed dramatically after 2022. So according to World Gold Council, central banks have been buying gold at more than double the pace of the pre COVID years. And 2025 continued that trend with hundreds of tons, uh, added to reserves year to date Now. These are central banks. They’re not hedge funds chasing momentum, right? They’re monetary authorities and they’re making deliberate strategic decisions about what they trust to hold value. And why would central banks suddenly want more gold? Well, because again, geopolitics has reentered that chat. We live in a world now where reserves can be frozen, right? Payment systems can be weaponized. Risk-free assets depend heavily on political alignment. Now of course, I’m talking about the United States when I’m mentioning all those things, right? Uh, how we can kind of just freeze assets of Russia and that kind of thing. I’m not, uh, pro-Russia, I’m just pointing out the fact that. Countries don’t like it when you freeze their assets. Right? The World Bank, uh, has been explicit that rising geopolitical tensions and global uncertainty are the key drivers of gold surges this year. And when trust in the global Ory roads, of course that is now when gold benefits and at the same time, the US dollar devaluation thesis is no longer just kind of fringe thinking. It’s reality. No one, no one even bothers to pretend that that’s not happening. So gold is, uh, of course, priced in dollars and when real yields fall, uh, and the dollar weakens gold historically performs well so that that dynamic is playing out again as well. In fact, Reuters has repeatedly pointed to a softer dollar and declining treasury yields as near term tailwinds for Gold’s Rally Bank of America. Uh, their research shows, uh, this relationship emphasizing gold’s inverse correlation to the dollar and the growing desire among nations to diversify away from the dollar centric reserves. In other words, gold isn’t just going up because people are scared. It’s going up because confidence in the fiat discipline is eroding altogether slowly. Persistently. So the question is, is gold still a buyer? Did we miss it? I mean, I just mentioned that it just went up by like 60%, right? So that’s a tricky question. It really is. I could certainly see some volatility there. But here’s the thing. I mentioned that central banks were big buyer, right? Central banks don’t care if gold is up 20% or down 10% in a quarter. They care about long-term reserve integrity. So they’re a price insensitive buyer. Um, and that’s why major, major institutions aren’t dismissing the move, as you know, just a big blow off. Uh, Goldman Sachs cited sustain central bank demand, and the potential for further ETF inflows is supportive of higher prices. Banks, uh, like JP Morgan and um, and, and Bank of America. I mean, they’re continuously talking about how gold is a beneficiary of this geopolitical instability. Bank of America is projecting prices high as $5,000 a ounce in 2026. So that’s still a big move, right? Of course, nothing goes up in a straight line. So shift toward tighter monetary policy or sudden easing of global tensions. Well, I, I could, they could cool enthusiasm, right? The less fear in the world. Well, that isn’t. That’s not good for gold. I understand though that gold’s breakout isn’t just about gold. There’s a larger message that should be taken away from all of this, and that is that hard money, real assets have come back into favoring, and gold is the original hard asset. It’s scarce, it’s politically neutral, tens of thousands of years of monetary credibility, but it’s also heavy, difficult to move and awkward in a digital world. Now, of course you know where I’m going with that. I don’t wanna make every gold conversation conversation about Bitcoin, but just as a reminder, Bitcoin exists on that same philosophical access, right? Both gold and Bitcoin are reactions to the same problem. Expanding debt, monetary dilution, declining confidence and centralized control. Gold is the conservative, you know, version of that, the expression of that Bitcoin is the crazy youngster, the aggressive one. They’re, they’re following the same rails. And today Bitcoin trades around $86,000. It’s still volatile, still controversial, still misunderstood, and really, listen, the market cap is 2 trillion bucks. Um, you know, no asset that has ever reached $2 trillion. Market cap has ever gotten to zero. But on the other hand, there’s it, it’s pretty small, and you could still move those markets really quickly, and that’s why you’ve got volatility. But if gold surge is signaling a, a, a shift towards hard assets, it’s really hard to not see that. Uh, Bitcoin may simply be, uh, you know, early in that adoption curve. In other words, gold may be leading the parade. And if history is any guide, uh, when institutions start moving into that, you know, oldest form of sound money, they eventually begin exploring the newest. And that’s, that’s a signal. Worth paying attention to. Anyway, this week what we’re gonna really focus on though is gold and hard money. We’ll talk a little bit about Bitcoin as well. My guest is Dana Samuelson, who is. An old friend of the show, and we will have that conversation right after these messages. Wealth Formula banking is an ingenious concept powered by whole life insurance, but instead of acting just as a safety net, the strategy supercharges your investments. First, you create a personal financial reservoir that grows at a compounding interest rate much higher than any bank savings account. As your money accumulates, you borrow from your own. Bank to invest in other cash flowing investments. Here’s the key. Even though you’ve borrowed money at a simple interest rate, your insurance company keeps paying. You compound interest on that money even though you’ve borrowed it at result, you make money in two places at the same time. That’s why your investments get supercharged. This isn’t a new technique, it’s a refined strategy used by some of the wealthiest families in history, and it uses century old rock solid insurance companies as its back. Turbo charge your investments. Visit wealth formula banking.com. Again, that’s wealth formula banking.com. Welcome back to the show everyone. Today my guest on Wealth Formula podcast ad Samuelson. He is been on the show before. He’s friend of the show. He is a professional. How do we see this numismatist since, uh, 1980. Working with some of the most influential, precious metals trading companies in the country. Before founding his own American Gold Exchange Incorporated in 1998. Uh, for nearly a decade, he was a personal protege of James U. Blanchard ii, one of the true giants of the industry, and the individual most responsible for re legalizing the private ownership of gold in the us. American Gold Exchange Inc. Is a national mail order, precious metals and rare coin dealership that makes competitive buy and sell markets in mainstream, modern, gold, silver, platinum, palladium, bullion coins and bars and classic pre 1933 US Gold and silver coins and World War ii European Gold coins. I don’t know if I left anything out, but welcome Dana. How are you doing? I’m doing great, buck. Thanks for having me back. I really appreciate it. Well, it was funny, we had a little conversation, uh, just before we started and I said, well, gosh, you know, uh, we’ve had you on the show before, maybe once, maybe twice. And, you know, and, and you, um, I think Apley described the gold market as watching paint dry. And I, I think that’s, I think that’s pretty adequate. Um, I mean, for, I mean, the last decade or so before this all happened. So, so let’s start talking about it. So, gold gold’s moved into price territory that, you know, very few people would’ve predicted even a couple years ago. So what, from your perspective, having lived lived through multiple gold cycles, what feels fundamentally different about this move? Uh, this market is a globally driven market and it’s focused on physical. There’s been a move into gold this year, and silver now platinum two. To a degree palladium, uh, in a physical level that we haven’t seen since the late seventies when we had the last really, you know, red hot market driven by fears over debt inflation. Geopolitics. Uh, you’ve got the bricks, nations that are trying to divorce themselves of the dollar, but they really can’t do it easily because there’s not a good viable alternative except for gold. And that’s been one of the leading drivers of this gold price surge that has really, you know, almost doubled in price since, uh, two years ago. A lot of it is, you know, underpinned by Central Bank Gold buying, you know, between 1950 and 2010, after the dollar became the world’s reserve currency backed by gold. And even after we un pegged the dollar to gold in the 1970s, 1971, central bankers had had gold on their, physically in their vaults from pre-World War ii when gold was money, uh, they shed that. From the 1950 all the way to 2010, they became net buyers after the great financial crisis due to the global debt explosion and primarily quantitative easing printing money outta thin air. But they were buy, they were modest buyers, you know, 500 tons a year until Russia invaded the Ukraine in 2022. And we sanctioned Russia and weaponized the dollar. The last four years, they bought, you know, almost a thousand tons of gold year or double. That really became material last year in price as the cumulative effects of their continually buying about a fifth of what the mines make every year started to really impact supplies and price movement. And now we’ve got President Trump this year, you know, throwing a monkey wrench into the World Trade order with his tariffs. And I think that that’s created a lot of uncertainty, some fear. And of course the debt just continues to go higher and higher. And now interest payments on our debt are over a trillion dollars for the first time ever. So debt servicing is starting to become problematic. The cumulative effects of all this have caused the, the people around the world, including central governments to buy gold at record rates. Um, but it’s not the phenomenon that’s happening in the United States. ’cause we don’t have a gold culture in our country, like almost every other country does. It’s interesting. Um, so what, you know, you’ve been talking about really is central banks around the world have it really been accumulating gold at levels we haven’t really seen in modern times. Right. And, and, uh, why do you think the US Central Bank. It doesn’t do the same because is it an admission of the debasement of the dollar? Because really the gold, gold is the anti dollar. I’ve always viewed it as the anti dollar maybe. Maybe that’s not the, you know, you may not agree with that a hundred percent, but I’ve always viewed it that way, and so why wouldn’t the US hedge and accumulate more? Well, we’re the world’s reserve currency. That Right. That’s, that’s created a paper culture in our, in our world. It’s now three generations old, right? Since 1945, when the dollar became the world’s reserve currency and we, the world went to a paper money standard instead of a gold money standard, which was the world’s standard from ancient times all the way till the 1930s. You know, the, our monetary system when the country was founded in 1793 was based on gold and silver coins. A copper penny was the size of a half dollar because that’s what one penny’s worth of copper was worth in 1793. Right. Um, you know, after World War ii, we had a couple things that the rest of the world didn’t have. We had a manufacturing, uh, industries that were, uh, unaffected by the, physically by the war. And we had, you know, the ability for markets to work properly, which should allow the dollar to become the world’s reserve currency. Backed by, you know, 8,200 some odd tons of gold, the biggest pile of gold that any country had. Actually, at that time it was more like 20,000 tons of gold. Uh, but by the time we got to the seventies and we un pegged from gold, we were down to about 8,000 tons. That’s still more than anybody else is supposed to have. I do think China could have more gold than that. Now they’re just not telling us they do. You know, officially they’ve got about 2,400 tons of gold, uh, and the second and third are, you know, 3000 tons of gold. So we, we still have a lot of gold. And there’s talk about auditing Fort Knox and monetizing it, but it only gets us about a trillion dollars. It’s not enough to really, you affect the 38 trillion, maybe pay the debt off for a year, or, you know, for six months. Six months, yeah. Something like that. Our, our debt is starting to matter too. You know, it’s doubled twice in the last 20 years. It gonna double again in the next 10 to 70 trillion, 78 trillion. People hear about the, the whole, uh, the bricks phenomena, right? And part of, part of what you were just discussing in the, uh, accumulation of gold. Explain that, explain what’s going on over there for people who aren’t paying attention, and you know how that is, how that is playing into all of this. Well, when we sanctioned Russia after they invaded the Ukraine. And seized their assets and threw them off of the Swift International Bank Transfer Payment System. We forced countries that were concerned that if they ran politically afoul of us, we could do the same to them. They forced them into thinking, oh, how do we get some independence from that vulnerability? Potential vulnerability? It’s not easy to replace the dollar. What they’ve, what they’ve been doing is replacing the Swift Bank transfer payment system with a payment transfer system of their own right so they can move money amongst themselves outside of the SWIFT system, number one. And since there isn’t a good viable alternative to the dollar, really the only other asset that makes sense is gold. Gold is a neutral asset. It’s not like you need it for oil or grain or steel. Nobody really needs gold, right? But it’s universally trusted. It’s immediately liquid, and it’s got a couple other things going for it that are unique. Number one, it has no counterparty risk. It’s one of the only assets. It isn’t simultaneously someone else’s liability. And number two, uh, gold in a vault can’t be seized or sanctioned. Right, so they’ve been going to gold, like they’ve been going to gold for, for centuries. It’s just, it hasn’t been that way since after World War ii. It’s a, it’s kinda like a back to the past kind of a situation. It’s sort of back to the future. It’s back to the past. That’s the allure for gold and the reason why they’re accumulating. In fact, they just launched their own currency unit called the unit. 40% backed by gold. The bricks nations have now it’s in its infancy and it’ll take a while for it to really, you know, work. But they’ve been building the components and the infrastructure to get to this point, creating the transfer of payment systems and all the components to go along with that so that they could announce something that they could use as a, as a settlement vehicle for trade, which is really what this is all about. And they’re backing at 40% by gold. Which is material and it’ll become bigger as time passes. Let’s, let’s try talk a little bit about that price movement. Huge. Um, is 60% in the last couple years, is that about right? This year alone, gold’s up 67% on a 12 month rolling basis, 67%. I mean, those are like bitcoin num, you know, type movements in the past. Right. They’re kind of crazy. So a lot of people are looking at those prices today and they’re thinking, well, I’m late to the party. Uh, are they late to the party? How do you, uh, what, what do you think’s going on there? I think the party’s about halfway through. We haven’t got to the late innings yet. I, I really do think this, and this is why this is the fourth major bull run in gold we’ve seen since we went off the gold standard in 1971. We had a a 20 to one run for gold in the seventies that was built on two oil shocks. 18% inflation and a crisis of confidence in the US then for the next 30 years. You know, 25 years a good part of my career. You know, watching gold was like watching paint dry. It traded routinely between three and $500 an ounce until we got into war, uh, following the nine 11 attacks, Iraq and I, Afghanistan, and we went into deficit spending. Then we had a second financial crisis when the great financial crisis hit another bull bull market in gold. Then we had COVID economic closures, another bull market in gold. Now we’ve got a fourth, but it’s lacking what the first three had, which was fear in the US over either economics or geopolitical events. So this gold price has essentially doubled since March or April of 2024. With no fear and a lot of complacency in the US markets. So my, my thinking is what happens if the economy slows down and, you know, the Fed’s gonna lower rates anyway. We know that’s coming with a new Fed chairman in the next five months, six months, number one, that’s good for gold. What happens if we go into a real economic slowdown and the Fed really has to drop rates, or God forbid, go to QE again, right? Or inflation rears its ugly head because the fed’s too accommodative in it. Situation where, you know, supplies are kind of tight still because of the monkey wrench, president Trump has thrown into the World Trade Order. You know, if we get fear in the US that’s when gold could go from 4,000 to, you know, 8,000. And I’m not saying that’s gonna happen, but I do think the trends have driven gold higher are not gonna change anytime soon. One of the things that you’re mentioning is those trends and like even. You know, in the last 15 years ago when I’ve been sort of involved in the investor world, the, the things that we talk about with trends with with gold have changed. I mean, usually you don’t see AI stocks going up with gold, right? Like, I mean, not that AI was around, but the point is tech stocks, that kind of thing. How is that thesis fundamentally changed? Um, I’m not quite sure I understand your question. Well, what I mean is like if gold was, gold used to be, I think it’s, you know, something again that people would buy when they were afraid of, of what’s going on in the equity markets. Right. Uh, that’s clearly not the case now. No, no, not at all. Right. Talk about that change. When did that change happen? How did it happen? This is a globally driven market. It’s not a US-centric market. This is fear around the world. You know, central banks started to underpin this market in 2022 when they stepped up their buying and doubled it. But this year, because of the uncertainty, uh, and some of the fear that President Trump’s tariffs and the way they’ve been deployed, kind of knee jerky, um, and inconsistently. Certainly not diplomatically, right? You know, it’s caused a lot of concern around the world. And for example, in April when President Trump announced the reciprocal tariffs on April 2nd, what happened? The bond market went into the complete dislocation, yields spiked from 4% to 4.5% in a week. The bond values tumble because investors started pulling money out of the, and taking it back home. Money that’d come in from Europe and Asia started to go back. So what did President Trump do? He pulled back the reciprocal tariffs on every country, but China and China said, well, we’re not gonna drop tariffs on you. And he said, well, we’ll ramp ’em up on you. So we went toe to toe with him. Until a week later, we were at 145% tariffs on China, and they were 125% on us. Well, if you’re a Chinese investor and you have real estate or stocks to invest in, and both of which have done badly since COVID or gold, what are you gonna do when your best customer suddenly says, Hey, we really don’t want your products, because that’s what 145% tariffs say to the Chinese. We don’t want your products. You can’t sell ’em here. You gotta go sell ’em somewhere else, but we’re their best customer. So they bought gold. They bought gold handover fist, and they drove the gold price up $500 by themselves during that month. That’s what I mean by fear outside of the us. Yeah. We don’t get it inside. Well, and and that’s fear outside of the markets too, right? I think that’s, that’s the fundamental shift I was trying to get at is true. It used to be that gold was, uh, gold would react on fear of the markets, but now there’s another level of fear, which is geopolitical. And it doesn’t seem like there’s any time soon that that’s gonna end. No, no. I, I, I’ve called it like a run on the bank only. It’s not a run on the bank of like George Bailey’s run on the bank and it’s a wonderful life. This is a run on the gold market, the physical gold and silver and platinum markets. That’s really what this is, and it’s a global rush to buy. And it’s not just central banks, it’s the public as well. Due to uncertainty, part of it’s fear of missing out now that we’ve had a big run in prices too. That’s FOMO in there too. That’s what I’m trying to, that’s part of what I was wondering too though, is like, you know, again, there’s people out there now who, um, are, are looking at this and they might even be listening to us going, gosh, yeah, it really makes sense and I happen to have no gold. What do I do? You know, what do I do now? Do I buy now? And, and I’ll, you know, and, and the next thing you know. I find out this was a frothy market and, and I’m down 20% for the next three years. I mean, that kind of thing. So I, I think it’s a, it is a tricky time, but, so that sort of, I guess, brings up when you think of gold, um, in a portfolio. I mean, you say, you’ve said in the past, it’s not about getting rich. Well, some people really did get rich this time. Uh, you said it’s about preserving wealth, right? So how should investors think about Gold’s role alongside stocks, real estate, and other assets right now? Well, even I think JP Morgan Chase has said this year, you know, instead of a 60 40 portfolio, you should have a 60 20 20 portfolio with 20% bonds and 20% precious metals. Gold in particular, because of what’s been happening. And now we don’t have a gold culture in our country, like most every other country does. So most Americans don’t get it. And that’s part of. We’ve ingrained because the dollar is the world’s reserve currency and it insulates us from currency shocks in commodity pricing primarily. Uh, without that insulation, you know, they might think things a little bit differently, but you know, any good financial planner will say you should have a little bit of precious metals as part of your portfolio, uh, as a hedge against financial uncertainty. And it certainly worked perfectly well during the great financial crisis. And when COVID hit because. Gold tends to counter cyclically, perform in price against stocks and bonds, and it’s always liquid. Now, you’re a real estate investor, you understand real estate. What couldn’t you get in 2009 alone? Right? Bankers wouldn’t give anybody money, right? But if you had gold, you could get liquidity, right? And gold, you know, almost doubled between 2008 and 2011 at the same time when most assets were dropping 50%. That’s an insurance policy for the rest of your money. That’s why I said, look, it’s a way to preserve wealth and have a hedge against financial uncertainty. But in the market that we’re in now, you know, having more than just the, the minimum, which is five to 10% of assets as a, you know, potentially an investment instead of just an insurance policy. That makes sense. But you’re right, you could buy and you could, you know, tie up money that won’t produce anything for a couple years, maybe longer. You also have an insurance policy in case the wheels do come off like they did during the great financial crisis or during COVID. Yeah. Yeah. I was listening to, uh, another podcast. I listened to the, these, uh, guys, the All In podcast, and, uh, Tucker Carlson was on there, and apparently he’s a, you know, huge, uh, physical gold guy. And, and he said, and I, I think he was serious. He said he buries it in his backyard and then he spreads a bunch of, um. Uh, a bunch of, you know, silver beads, uh, out there too, like, just in case no one can like, use a medical metal detector and find it is gold. Uh, let’s talk about that nuance of, of physical gold versus, you know, buying ETFs and all that stuff. What’s your take? I mean, what, what do you tell people when they say, well, gosh, you know, uh, it might be hard for me to store that gold and, and why shouldn’t I just get an ETF and, and talk a little bit about that? Well, I trade ETFs in my IRA account. When I think the, when I think I can harness price movement, that’s what I use ETFs for. You know, they’re a paper representation of gold, uh, that you can trade at the click of a button, physical gold. Is valuable. It’s, you have to find a place to store it. It’s pretty inert, so you can, you can bury it in your backyard, keep the elements out of it, but then there’s some risk there because it could be found, it could be stolen, so you do have to store it somewhere. You can put it in a bank safe deposit box, but I don’t really recommend that because what happens if there’s a banking holiday and you can’t get to it? So having a home safe or maybe, you know, maybe bearing it in the backyard. Is an option if that’s what you wanna do. Or there are independent professionally run storage facilities. There’s a few of ’em around the country that are run by precious metals dealers that are, you know, big entities. Uh uh. So I think they’re trustworthy and they certainly have the ability to service and aren’t properly insured. So that if something happens, you know your value is protected. And that’s primarily what you pay for as a storage fee is a percentage of value. Not so much number ounces that you have there, but the value percentage, because it is an insurance, uh, related value, right? The value goes up, they’ve gotta get more insurance so they get a higher storage fee for that same amount of metal if the value increases, which is unlike other assets. So I do have a couple of those I recommend that are run by professional. Companies that have been in business for years that we know would trust and have performed perfectly. If you wanna store, um, physical metal now gold is compact. You know, a hundred ounces is smaller than a paperback novel and it’s $450,000 worth of value today. You could, I could literally have one bar in each one of my coat pockets and be walking around with almost a million bucks in my pockets, and no one would know. Silver. You know, silver creates a bigger problem because it takes 70 ounces of silver to equal an ounce of gold. So there’s a lot more volume involved and a lot more weight, which is why sometimes these facilities make more sense if you wanna store something that’s more bulky like silver. But if you’re gonna store gold somewhere, that’s not easy to find. You wanna make sure somebody you trust behind you knows where it’s just in case something happens to you. Right? Yeah. Um. What, um, how difficult is it, uh, Dana, for someone to, I guess, say they wanna sell, say maybe they need to sell one of those bricks in your pocket there? Uh, and, and, um, is that a, um, a process that, I mean, it’s, you know, it’s not as easy as clicking a button at that point, right? But to make sure that you get the best possible price for your gold and all that, I mean, you’re not gonna go to a pawn shop and. Oh, that, so like, I, I’m just curious on the mechanics of that. ’cause I’ve, you know, I’ve, I’ve never sold, you know, physical gold for anything. So, so our, our company’s a physical dealer. We’re a hybrid between Amazon and a financial institution. And that, uh, we sell something online or over the telephone. The price is always changing on a minute by minute basis, but it’s like you’re buying shoes. It’s just, you know, you don’t quite know what the price is gonna be. So we physically, you know, figure out which product you should purchase, what’s best for you, and then we ship it to you if you want to sell it, it’s just the reverse of the transaction. You have to present it for delivery, which means you have to ship it back to, uh, your dealer, or, you know, physically deliver to them, and you get paid immediately upon delivery. So, um, you know, we, we do business like a financial institution. You can call us up, place a transaction over the phone. Uh, if it’s a smaller transaction, we’ll do that without deposit funds. If it’s a bigger transaction, we don’t know, you will want funds first, but once we lock in, that’s the price. Just like when you buy stock and then you pay the balance or, or we ship you the merchandise, whichever comes first. Um. You get it, inspect it, make sure you, you got what you’re supposed to get. In fact, it, you know, in the last two years with this gold price just climbing higher and higher, we’ve got a lot of clients that are complacent. They like the stock market that’s been hitting record highs, uh, and they’ve been shedding gold. We’ve actually bought more gold as an industry, not just our company, but as an industry in the last year than we’ve bought in a single year in 20 years. So it’s very easy to reverse the transaction. But what I would tell you. For your listeners is, and this is important, you should buy sovereign minted products, gold ounces, silver ounces, one ounce gold coins. They’re really just round bars made by the US Mint, the Royal Canadian Mint, the British Royal Mint. The Austrian Mint instead of refinery made. One ounce bars or 10 ounce bars or kilo bars of gold because we have a modest but growing problem with Chinese counterfeits. The Chinese can take tungsten and plate it with gold and pass it off as reel, and they can do that much better with refinery made bars that have plain design pictures stamped onto them. They can replicate those very well, but they cannot replicate the intricate pictures. The US Mint or the Canadian Mint, or the Austrian mint, British royal mint stamp onto that one ounce gold coin. We call it a coin. It’s just a round bar made by a mint that struck with dyes like a coin. And all of the mints around the world have introduced minute anti-counterfeiting design elements into the picture that they stamp on their coins to deter Chinese counterfeits. And it’s working. So the most important thing is, you know, do business with a reputable dealer that’s been around a long time, that has a good reputation, not a, not some new entity, right? You wanna find a, a trusted member of the community and develop a relationship that makes buying again or selling very easy. Once you have a relationship with a dealer, and we know the product you’ve purchased, we’ll take it back very easily. Uh, silver is, you know, people talk a lot about it in the context of, you know, the lump it with gold but has very different characteristics. Um, how do you think about silver today? I love silver today. Uh, it’s, it’s a metal at times as hard to love because every time it makes a big gain, it can give it up pretty easily. It’s more volatile than gold, but gold’s about 90% monetary metal in 10%. Commodity metal silver’s about 50 50, but what silver has going for it is, uh, a couple of unique characteristics that virtually no other metal comes, uh, as close to, which is conductivity of heat and electricity. Silver is amazing in that it’s the best at conducting both heat and electricity. I’ve got a one ounce silver coin on my desk here, and if you take this coin and hold it between your fingers and take an ice cube. You can literally cut that ice cube in half in about 6, 7, 8 seconds with a pure silver coin because the heat from your fingers gets transmitted to the coin and goes right through the ice cube. That’s just a simple example of how conductive silver is for temperature, and we have a structural supply deficit in the silver market that we’ve had for about five years now, where the industry. Is consuming more silver than comes out of the ground on an annual basis. So we’re eating into the above ground supply. Uh, so fundamentally that’s the supply and demand equation favor silver. Uh, plus because gold is moved up so much in price, silver is getting a rotation into it because it’s underperformed relative to gold until just recently where it’s played catch pretty sharply in just the last three or four months. If you measure. How many ounces of gold, uh, how many ounces of silver it takes to equal an ounce of gold, the gold to silver ratio back in April. That was a hundred to one, you know, which was an extreme. Today that ratio is a, is a little under 70 to one. It’s 67, 68 to one. So silver has played up in ketchup in price. Where is that historically? Uh, well. Normally it’s between about 40 to one and 80 to one with about 60 to one as the, as the pivot point where it’s in, they’re in equilibrium. But in the last four or five years with gold leading and silver lagging, we’ve routinely been in the 85 to 90 to one range. Uh, and we actually hit a hundred to one in April of this year, uh, which was the highest it’s been, um, except for when we had a kind of a knee jerk in the medals during COVID, which was an anomaly. Uh, didn’t last. So, but anyway. Silver is playing ketchup because it’s been undervalued relative to gold. Um, and we’ve seen, you know, people that wanna be in the metals, but think gold’s a little expensive. They’ve rotated out of gold, and we’ve seen some of that money move into silver and also into platinum. Now, platinum was under a thousand dollars this time of year ago, and it’s almost $1,900 announced today. So it’s almost platinum’s up, uh, almost a hundred percent now. This year where silver’s up 120% this year and a lot of this demand is driven globally. We’ve seen huge demand in silver in India this year because gold is so, has become so expensive, and that’s what I mean by a global run on the, on the bank. It’s not just China, Japan, it’s India too, and Europe as well. Physical buying and et f buying ETFs are available around the world in precious metals now that really haven’t been very impactful until this year. Um, but that’s what the world’s doing, you know? No discussion these days on gold is complete without at least mentioning Bitcoin. Uh, you know, and, and it’s, it’s interesting because, um, you know, even within the, uh, uh, gold world, I mean, there’s, there’s some prominent people who are really bought in to Bitcoin. Like I, Lawrence Lepert has been on the show multiple times now, and Larry’s all in. Um, just curious as a, you know, as a gold person, what do you see where, what do you see the role or do you not believe in this thing? Do you believe it is a, a parallel? Um, I, there’s so many things that you say about gold. That I’m like, yeah, you can say that about Bitcoin too and carry, you know, millions of dollars in your pocket. You can, you know, it’s, uh, there’s a very little amount of it. Um, obviously it’s new, right? Gold has been around for, since the beginning of time and, and now we’ve got 2009 for Bitcoin. What is your view? How are you seeing it? May, how are your colleagues seeing it in the gold space? Well, a couple different points to make here. Um, you know, when, when Bitcoin came out in 20 10, 20 11, you know, one of my friends in the, in the precious metals business told me I should buy it when it was 20 bucks and I didn’t get it. So I didn’t do it, and that was a big mistake on my part. But Bitcoin has one advantage that no other currency or gold has, which you can move serious money over borders easily. You’re right, you can carry it around in your pocket, in your wallet and, um, you know, you carry a lot of value around and transfer it at the, you know, click of a button. And no co counterparty risk, just like you said with gold, right? Yeah. Well, there’s some modest counterparty risk with, with bitcoin that you, you have counterparty risk with gold and theft as well. Um. Bitcoin is volatile. It’s, you know, it’s, it’s very volatile. It’s still the speculative investment. I mean, it was 124,000, you know, four months ago, and now it’s about 85,000, 90,000. So there’s volatility there that gold doesn’t have. But more importantly, what I’ve seen in my career is a generational divide. The older, older people, you know, 45 and older, like gold and silver. Younger people that grew up with phones in their hands like Bitcoin. The volatility in Bitcoin that we’ve seen in these two big selloff cycles in Bitcoin have not the first one, but the second one have helped to bring some of those younger people into the stability of gold, especially in the year when gold is doing pretty well. ’cause it then it kind of has a little bit of that Bitcoin allure, which is, you know, get rich quick. But, um. Bitcoin’s volatile, but it’s here to stay and it is now the most respected cryptocurrency. Like I almost bought Ethereum, you know, 10 years ago when one of my friends was explaining both to me and said that Ethereum basically had better fundamentals. But you know, it’s kind of inventing, it’s kinda like investing in a. What, uh, beta, beta max instead of VHS back in the day. Some of the older people remember that. You bet on the wrong horse, you know? Yeah, exactly. Well, you’ve, uh, you know, you built this, uh, firm on transparency, integrity, uh, in an industry that doesn’t always have the best reputation. Right? So for investors who decide that precious metals belong in their portfolio. Uh, how can they get a hold of you? Well, our website is, uh, A-M-E-R-G-O-L d.com. Uh, we don’t have, you know, 10,000 items on our website. We have a, we have a small listing of what available products are because we stick with mainstream items, products that are primarily easy to sell, uh, competitively priced, widely traded, and easily understood. Um, uh. Uh, email address is info I nfo@amggold.com. Uh, we have a toll, toll free number 806 1 3 9 3 2 3. Uh, we’re consultative in nature. We’ll, we’ll answer any questions. Happily, gladly, uh, no transactions too small or too large. What we really wanna do, uh, is help people because if we do that, we help ourselves. And when you treat people right, it, it comes back. And our industry does have a chair of bad actors. And, um, you, you wanna make sure that you do business with someone reputable that’s been in the industry a long time. And I understand some people may wanna do this locally where they can actually walk into a place of business. Do this instead of over the phone. So look for dealers that have, you know, longstanding, uh, businesses and good reputations. If you see a reputation that, uh, has some complaints, you know, there are other choices for you. But, um, we just try and help people buck. That’s really what we try and do. We certainly have the reputation for it. Dana. So thank you so much for being on Wellfor podcast. Well, thanks for having me. It’s great to see you again, and I wish you a great success in 2026 and a happy holiday season. You too. You make a lot of money, but are still worried about retirement. Maybe you didn’t start earning until your thirties. Now you’re trying to catch up. Meanwhile, you’ve got a mortgage, a private school to pay for, and you feel like you’re getting further and further behind. Now, good news, if you need to catch up on retirement, check out a program put out by some of the oldest and most prestigious life insurance companies in the world. It’s called Wealth Accelerator, and it can help you amplify your returns quickly, protect your money from creditors, and provide financial protection to your family if something happens to you. The concepts here are used by some of the wealthiest families in the world, and there’s no reason why they can’t be used by you. Check it out for yourself by going to wealth formula banking.com. Welcome back to Show England. Hope you enjoyed it and, uh, I will. Uh, I should admit though, that if you go back and you listen on my, uh, past shows, this is one that I was wrong on. I, I’ve never been a gold bug. My biggest issue with gold. Um, has always been, you know, from an investment thesis that it doesn’t really do anything, doesn’t yield anything, and what’s the point of owning it rather than owning, uh, real estate. And actually, if you just look at what I said, it’s, it’s still, it’s still, it’s still kind of true, right? I mean, you can argue, well, yeah, the real estate markets really did, uh, did struggle over the last couple years. But listen, at the end of the day. The real estate market struggled because of leverage, right? Gold. There’s no leverage, no one’s borrowing, buying gold on leverage, and so it can go up and down and it doesn’t really hurt anybody. If you take the last couple decades and you know how much people made from, uh, real estate versus Bitcoin, even though there’s this huge, uh, huge uptick in Bitcoin now it’s, it’s probably the case that they come out pretty close. If not, uh, you know, real estate still being the winner. But anyway, uh, I do want to say and admit that I was wrong. That, uh, that the gold wasn’t really worth, uh, owning. I think, uh, you know, I wish I had owned some, just like a lot of people wish they’d own Bitcoin at $6,000, right? Um, in fact, I will say that one of the things in hindsight that I think of is gold in many ways for the last several years was on sale. And I haven’t really been talking about this as much, but I’ve been reflecting on this a great deal about making sure that as an investor you wake yourself up once in a while and ask, okay, well, what’s on sale? Well, gold was on sale for a while. Silver was definitely on sale. Right? Um, doesn’t mean you have to go in, have, you know, 50% of your portfolio in something like that, but when something’s on sale, it’s not a bad idea to look around. And maybe get, you know, get a little bit of exposure. I do think that real estate is there right now. I think real estate, you know, if you’re in the credit investor group, you’re seeing on a routine basis 30%, uh, discounted offerings from just a couple years ago. And I do think that’s on sale right now. But there are other things as well, arguably. I mean, I, I actually think that Bitcoin is, uh, uh, sort of on sale right now. I mean, sitting at 86,000, anybody who thinks it’s not gonna go to a hundred thousand at some point in the next, you know, 12 months is, I mean, I think it’s highly unlikely that it doesn’t go to a hundred thousand, right? So think about that right now. That’s like a 14% gain right then and there. Anyway, sometimes it’s good to just look around and see what’s on sale. Uh, that’s my message for this week. Uh, this is Buck Joffrey with Wealth Formula Podcast signing off. If you wanna learn more, you can now get free access to our in-depth personal finance course featuring industry leaders like Tom Wheel Wright and Ken McElroy. Visit wealthformularoadmap.com. The post 538: Is Gold Still a Buy? appeared first on Wealth Formula.

You know, the longer I’ve been an investor, the more I realize this simple truth: the biggest threat to your wealth isn’t the market… it’s your own brain. We’re all wired the same way—with instincts that were fantastic for avoiding saber-toothed tigers but are absolutely terrible for making good financial decisions. Take something simple like a marathon. If I asked you to predict next year’s top finishers, you’d look at last year’s results. That works. Human performance doesn’t flip upside down in twelve months. The best runners tend to stay the best runners. There aren’t that many variables to consider. When we try to apply that same logic to investing, it often blows up in our faces. There are way too many variables to consider when it comes to market behavior to make simple assumptions. Entire sectors rotate from darling to disaster in a heartbeat. Yet our brains keep telling us, “Hey, this worked last year, surely it’ll work again.”  In my view, nowhere is that psychological mismatch more obvious than in real estate right now. A few years ago, when real estate was on fire—cheap debt, rising rents, deals getting snapped up before lunch—everybody wanted in.  Fast-forward to today. We’ve had a rate shock. Values have reset. Properties are selling at steep discounts. And Construction starts have fallen off a cliff. Real estate got slaughtered. But look around now. The market has reset. Assets are selling 30 percent below where they did just after Covid. Jobs and population growth in places like the Carolinas, Texas, and Arizona look fantastic, and interest rates are falling quickly. Every macro indicator you can name is pointing to a major buying opportunity—one of the best in the last 15 years. So naturally… few people are paying attention. Markets that are bottomed out are not sexy. If it’s not frothy, it’s not newsworthy. This is human nature in a nutshell. When assets are expensive and risk is quietly rising, people feel brave. When assets are attractively priced, and future returns look great, people get scared. It’s recency bias: assuming whatever just happened will keep happening. It’s loss aversion: we fear losing a buck more than we enjoy making one. It’s herd behavior: we’d rather be wrong with the crowd than right by ourselves. And of course, it’s confirmation bias—where people seek out whatever headlines validate the emotions they’re already feeling. It’s not logical. It’s not strategic. But it is human. And that’s why this week’s guest on Wealth Formula Podcast is of value to listen to. He’s one of the leading experts in the world on investor psychology—someone who can explain, with real data, why even intelligent investors consistently jump into markets late, bail out early, misread risk, and miss the best opportunities… especially the ones sitting right in front of them. If you’ve ever wondered why you sometimes make brilliant decisions and other times do the financial equivalent of touching a hot stove twice, this conversation is going to hit home. The post 537: Markets Do Not Behave Like Saber-Toothed Tigers appeared first on Wealth Formula.

Homeownership has been baked into the American Dream for nearly a century. Politicians, parents, and banks all tell you the same thing: “Buy a house as soon as you can. It’s your biggest asset.” But as a real estate guy who actually understands how wealth is created… I’m not convinced it makes sense for everyone—especially early in your career. Let me explain. Say you finally start making some real money—maybe you’re a doctor fresh out of residency. The cultural script kicks in immediately: Buy a house. Build equity. Feel responsible. But here’s the part most people forget: your primary home is not an asset. As Robert Kiyosaki puts it, if something takes money out of your pocket, it’s not an asset—it’s a liability. According to Bankrate and the Census Bureau, U.S. homeowners spend around $17,000 per year just to maintain and operate their homes—and that’s before you make a single mortgage payment.  That’s property taxes, insurance, utilities, landscaping, repair bills, HOA fees… the list goes on. If your house is worth $1.5M, even the bare-minimum 1% annual maintenance rule hits you with $15,000 a year just to keep the place from deteriorating. Add insurance, taxes, utilities, and everything else, and you’re looking at $30,000–$40,000 per year in unavoidable, non-negotiable carrying costs. And that still doesn’t cover the roof that fails, the appliances that die, or the curveballs Mother Nature throws at you. None of that feels like an “asset” to me. Now, to be fair, people don’t usually buy homes as investments. They buy them for stability, a place to raise kids, a sense of being “settled.” It’s emotional. It’s psychological. And it’s real. But if you’re young—and especially if you haven’t hit your first million—it’s worth asking yourself a tough question: Is buying a home right now the best financial move… or just the most familiar one? Because historically, U.S. home prices appreciate around 4.3% a year (Case-Shiller). Meanwhile, the S&P 500 averages closer to 10%. And if you’re in real estate investing? A solid multifamily value-add deal often targets 16–20% IRR—plus tax advantages your primary home will never give you. So if you’re just getting started, it might make sense to delay that home purchase. Invest first. Build your passive income. Let your assets—not your salary—pay for your lifestyle.  Then when you do buy a home, you’ll be doing it from a position of strength, not strain. The irony is this: waiting often gets you to the dream home faster because your capital compounds instead of being trapped in drywall, windows, and a backyard you barely have time to enjoy. This Week on Wealth Formula Podcast, I interview expert Dr. Ken Johnson, who digs even deeper into this question—and lays out why homeownership isn’t the golden ticket people think it is, especially for high earners early in their wealth-building years. Linked mentioned: Beracha and Johnson Housing Ranking Index: https://www.ares.org/page/beracha-johnson-housing-ranking-index Waller, Weeks and Johnson Rental Index: https://www.ares.org/page/waller-weeks-johnson-rental-index Price-to-Rent Ratio Report: Price-to-Rent Ratios Top 100 Housing Markets – Inflation Adjusted: Top 100 U.S. Housing Markets Learn more about Dr. Ken Johnson: https://olemiss.edu/profiles/khjohns3 The post 536: Should You Own a Home? appeared first on Wealth Formula.