Wealth Formula by Buck Joffrey

The Baby Boomer generation (born 1946-1964) was historically the largest, peaking at around 78.8 million in 1999 when they were in their prime working years. However, the current Baby Boomer population in the U.S. as of 2019 is estimated to be 71.6 million, having declined due to mortality exceeding births as this generation ages. The Millennial generation (born 1981-1996) has now surpassed the Baby Boomers to become the largest living adult generation in the U.S. As of 2019, there were 72.1 million Millennials. The Millennial population is projected to continue growing, partly due to immigration, and peak around 2033 at 74.9 million before declining as mortality rises]. Following the Millennials is Generation X (born 1965-1980), with 65.2 million members in the U.S. as of 2019. Gen X is expected to outnumber the declining Baby Boomer population by 2028. The youngest major generation, Generation Z (born 1997-2012), is also a massive cohort. Gen Z makes up around 20% of the current U.S. population. The Gen Z population in the U.S. is expected to grow from immigration as well, similar to Millennials. The sheer size of the Millennial and Gen Z generations presents both opportunities and challenges for the U.S. economy. A larger working-age population can drive economic growth through increased productivity, consumption, and tax contributions. However, it also puts pressure on job markets, housing, infrastructure, and social services. A recognized major emerging problem is the challenge of supporting the aging Baby Boomer population as they continue retiring in large numbers. The burden of funding Social Security, Medicare, and other retirement programs will fall primarily on the Millennial and Gen Z generations. This will almost certainly strain public finances and some economists have even predicted a major national depression around 2030 because of this. All of these problems have been previously covered to some extent on Wealth Formula Podcast episodes in the past. This week, however, we cover another less appreciated problem…the transfer of massive amounts of wealth to a generation with different political views and values. My guest on this week’s Wealth Formula Podcast believes this is a major underappreciated issue that needs to be addressed as soon as possible. Find out why. Show Notes: 00:00 Intro 05:54 The 100 Trillion Dollar Wealth Transfer 08:25 The Mindset Difference between Baby Boomers and Millennials 10:32 The Risk of the Wealth Transfer 14:59 Monetizing Influence 16:39 Where is Gen-X in All of This? 18:36 The Positive Outcomes 21:12 Where Does the Discourse Take Place? 23:10 The Worst Case Scenario

Buck Joffrey is joined by Rod Zabriskie and colleagues of Wealth Formula Banking to discuss this powerful financial tool that leverages your savings to invest the same money at two places at the same time.

Takeaways Tax policies can have a significant impact on businesses and individuals, and it’s important to plan and adapt accordingly. The depletion of social security funds is a concern, and solutions need to be implemented to address this issue. The stock market has been performing well, with the Dow Jones hitting all-time highs and the S&P and NASDAQ showing significant gains. Diversification is key in managing investments and mitigating risks. Having a strong financial team, including tax specialists and estate planning experts, is crucial for navigating the complexities of the current market.

Tom Wheelwright, author of Tax-Free Wealth, discusses the unintended consequences of tax incentives using the example of the cobra bounty in India. The podcast explores tax policies, wealth taxation, President Trump's tariff proposals, and the impact of mansion taxes in Los Angeles on property ownership. It advocates for a neutral tax system and highlights the complexities of taxes in investments and social media presence.

My key takeaway from our guest (Ryan Bourne from the Cato Institute) on this week’s episode is that policy mistakes that adversely impact the free markets happen for a variety of reasons:Misread of dataPoor use of policy toolsPolitical motivationNational Security interests Whatever the reason, the consequences of policy mistakes are real for investors.  For example, the FED let inflation run too hot when it thought it was transitory, which probably then created a situation where they had to hike more aggressively than they would have if they caught inflation at the front end.  Resulting in a detrimental hit to interest rate-sensitive investments such as real estate and debt securities.   Today, we can see examples of potential fiscal and monetary mistakes unfolding in front of us: On the monetary policy front: the FED is waiting for data it needs to start cutting rates…but, it’s running into the presidential elections timeframe (RNC convention in July, DNC in August).  So, it may decide to not touch the FED rate until end of year…Thus the FED may be forced to make a policy error due to political considerations. On the fiscal policy front: we see large investments to support US manufacturing; large investments to onshore critical technologies such as semiconductors; trade protectionism including tariffs on imports (new tariffs announced today on Chinese EVs, storage batteries, steel and aluminium products); immigration policy is also at risk of politically motivated policy decisions.  As investors, what can we do? It’s not possible to predict and factor in the impact of all of these policies. What we can do is isolate key macro themes that are likely to drive secular trends over the coming decades. For example:The Aging population in the US and other developed countries.  This will drive growth in health and wellness products and services.  Investment in upgrading the US grid to support huge demand of electricity (data centers, AI driving computing, EVs) and to accommodate new energy sources. Deployment of AI in key industries such as biotech to accelerate drug discovery. Historically high level of cash ($6 trillion) is sitting on the sidelines as investors decide to clip 5% interest in money market funds. As soon as any signal comes from the FED that it is ready to cut rates, or even if it is going to significantly taper its Quantitative Tightening policy, there will be an enormous amount of capital rushing back into investments: equities, bonds, real estate etc. Investors should already start deploying their capital into investments. Do not sit on cash and/or money market funds.  At 5% money markets may be tempting, but that rate will not last when the FED starts cutting and then you’ll be chasing assets that have already appreciated dramatically.

I have frequently described myself as most aligned with libertarian thought when it comes to my own politics. In terms of the economy, libertarians believe in the concept of a free market. Libertarians argue that a truly free market fosters prosperity, innovation, and individual liberty. But that doesn’t really describe the American economy, does it? Over the years, the American economy has seen a proliferation of regulations at the federal, state, and local levels that have significantly constrained economic freedom. In addition, governments constantly intervene in the economy through corporate subsidies, bailouts, and preferential treatment. You don’t need to look further than the recent regional bank bailouts to see that.  Libertarians would argue that such intervention distorts market incentives and motivations. For example, how are banking practices going to change for the better if the bankers know they are going to get bailed out if things go wrong? Does a truly free market even exist? I don’t know of one. And perhaps the ruthless nature of the free market is one that we wouldn’t truly find appetizing anyway. However, there is no doubt in my mind that a “freer” market would do the economy some good. My guest on this week’s Wealth Formula Podcast is from the libertarian think tank, Cato Institute, and explains how government market intervention has hurt us and how it will continue to do so if policies do not change. Show Notes: 04:29 What is the Cato Institute? 05:32 The Market Prices Are Under Siege 08:00 How Do Market Prices Provide Value For the Economy? 11:45 Inflation VS Price Spikes 16:52 Is the Central Bank Policy Misguided? 19:11 Are We Hitting the Inflation Target Soon? 25:13 What Could We Be Missing That Would Keep Inflation Numbers High? 28:13 How Will the Election Affect Decision in Policy?

US debt fears overblown but appetite of investors to buy US debt questioned. Foreign investment decline, central banks buying gold. Position portfolios with real assets, leverage, tax-efficient investments. Current market trends: Latest FED outlook, interest rate trends.

Is it me or is no one talking about high U.S. debt levels anymore? Conventional wisdom has always been that high debt levels lead to inflation and the destruction of currencies, and money printing conjured up images of wheelbarrows full of worthless bills and economies in freefall. Then one day, the political party that used to care about fiscal responsibility stopped caring and now no one talks about it anymore. After all, doing so would involve cutting things like Medicare and Social Security—not popular political stances. Instead, the concept of Modern Monetary Theory (MMT) has started to creep into popular parlance and, you could argue, is becoming the rule of the land.  According to MMT, as long as Uncle Sam holds the keys to the printing press, he can rack up debt without any ramifications. It’s a bold new take on economics that’s got the traditionalists scratching their heads and the contrarians doing a victory dance. So should we care about debt or not? My guest today on Wealth Formula Podcast is definitely a traditionalist and he is not optimistic about how the story will end if we don’t do something about it. Make sure to tune in as he explains why debt is still so important and what, if anything, we can do about it and protect ourselves. Show Notes: 05:37 Why is the U.S. Government a Big Ponzi Scheme? 06:52 Is the U.S. Immune to Bankruptcy?  08:04 How Realistic Is It That the U.S. Economy Would Collapse? 12:01 Political Reform for the Fiscal Policy 19:20 How Can We Protect Ourselves From the Collapse?

I have been asked by many to give my opinion on where the economy is headed and what to do. I have been reluctant to do so because I am not an economist and I do not want to give investment advice. However, I do think I owe it to you to let you know where my head is and what I am doing based on these thoughts. Last week and this week’s podcast have convinced me that rates are going to fall significantly over the next 6 months. Why? Because I think that inflation, as measured by CPI is going to fall off of a cliff. I don’t even consider this a prediction frankly. I think it’s already written in stone. Why? Because 70 percent of CPI is based on rent increases and the variables used to calculate this number are 6 months behind. The recent CPI of 3.1 per cent used 6 per cent rent increases to get to that number. Anyone in the multifamily space will tell you what’s wrong. The rents are flat. We see it every day and all of the data available to us real estate operators show flat rent growth. Knowing this, all you need to do is ask yourself what this lagging indicator will show six months from now. Whatever happens between now and then doesn’t matter. That lagging indicator will reflect what is the reality today. And if the rents are where I believe they truly are, CPI will be below two. A CPI below two along with a slowing economy will result in a swift response from the Federal Reserve to cut rates to avoid deflation..traditionally the Fed’s worst fear. So, if I’m right, rates will come down and anyone making big decisions today based on the assumption that rates will remain stable or go higher is making a mistake. In other words, my opinion is to make sure you are not selling from a position of weakness. Hold on to what you own. This week’s interview with Richard Duncan furthered my convictions of the inevitability of falling rates. It also painted a picture of China that looked a lot more like Japan in the 1990s. The economy and the world are changing quickly. Make sure to listen to this week’s episode of the Wealth Formula Podcast to keep up! Show Notes: 06:38 What’s Been Going On With Inflation and Rates Cut? 11:21 Indicators That the Fed Uses to Measure Inflation 15:27 Will the Fed Become Hawkish now? 21:33 Why the U.S. Economy Has Been So Strong 28:31 The Economic Crisis in China 42:41 What Can China Do to Stabilize Their Economy? 48:17 Implications for the Rest of the World

Even really smart people are wrong on a regular basis. I see this all the time in health and longevity-related issues on my other podcast, Sapio with Buck Joffrey. In case you are wondering…yes, I have become one of those middle-aged California guys trying to stay young at all costs. Not easy. But, I have to admit, the nerdy physician scientist type in me is having lots of fun with the science and enjoying the process of sharing it with my fellow Gen-Xers who are also fighting gravity with me. But getting back to the point of smart people being wrong—we see this a lot in medicine. In the 1960s, a lot smart people created the food pyramid that said we should be eating a lot of carbohydrates and very little fat. That’s quite the opposite of what recent science suggests. There was also a period in the 1990s when women were advised not to use hormone replacement because a study was thought to have suggested a link with breast cancer. A generation of doctors gave women bad advice based on what turned out to be a misinterpretation of data. On the economic side, we don’t have to go far back to see the Federal Reserve calling inflation “transitory” just before it skyrocketed for real. How could so many smart people be so wrong? And now, the Fed is likely delaying interest rate cuts because of higher-than-expected inflation numbers. Are they missing something here? My guest on this week’s Wealth Formula Podcast thinks so and his reasons are compelling. I have to say, this was one of the most interesting conversations I’ve had in a long time on the Wealth Formula Podcast and I HIGHLY recommend you listen to it. Show Notes: 07:28 How Does the Inverted Yield Curve Predict Recession? 18:53 Stirring the Economy by Misreading the Data