Wealth Formula by Buck Joffrey

Disruptive technology always creates casualties. I still remember a few years ago walking in a city with my oldest daughter who was about five or six at the time. We passed an old phone booth and she asked, “Daddy what’s that?”. Think of all the technological dinosaurs that have been forgotten in your lifetime. Records and compact discs? Typewriters? The Yellow Pages? Technological innovation is so powerful that it frequently overwhelms even corporate interests. Kodak was not very successful in blocking the digital camera, was it? In fact, it paid the price for not innovating itself. Could that happen to the New York Stock exchange and the mighty brokers and custodians that profit from it? Could distributed ledger technology disrupt the equity markets and turn our financial institutions into dinosaurs? My guest on this week’s episode of Wealth Formula Podcast thinks that some form of re-organization in the way cryptocurrency and equities are held and traded is inevitable and his company is at the forefront of that evolution. Listen HERE Mr. Douglas Borthwick is our Chief Business Officer. Mr. Borthwick has over 25 years of experience in the finance industry, most recently founding and building the Chapdelaine FX electronic and voice trading business for inter-dealer broker TP-ICAP from 2012 to September 2018. Mr. Borthwick held various roles with Morgan Stanley from 1996 through 2005; managing foreign exchange derivatives trading groups in New York and London, with a strong focus on emerging markets. He then ran the strategic trading desk at Merrill Lynch from 2005 to 2006, and the Latin American FX trading business at Standard Chartered from 2006 to 2009. In 2010, Mr. Borthwick managed trading and research areas for startup foreign exchange agency, Faros Trading, a company that was later sold to FXCM in 2013. Mr. Borthwick holds a bachelors of science in Economics from Carnegie Mellon University and an MBA from Yale University’s School of Management. Shownotes: What is INX? Will governments crack down on digital currency in the future? The BNB Coin Will all assets eventually migrate onto a digital platform?

If you were an alien from another planet visiting who got stuck on earth and had to figure out how to get by you would quickly realize that you would need some money. This would probably lead you to a job which would not be difficult given your extraordinary intelligence. In fact, it might land you a high-paying technical gig with Google or Facebook. You might enjoy the work at first but the long hours and stale routine might start getting on your nerves. You might realize that the only eventual way out of the rat race would be to figure out how to put all that extra money from your paycheck to work for you by investing it. Now here’s the question. If you were an alien from outer space, would your immediate thought be to hire an investment advisor to invest your cash in a balanced portfolio of stocks bonds and mutual funds? Probably not. As a highly intelligent life form you would quickly realize that this would not be the most efficient way to grow your wealth. Unadulterated by conventional wisdom, your attention would likely target tax advantaged real estate and other sources of income. The point I’m making here is that it might not be a bad idea to question conventional wisdom once in a while. Unfortunately, conventional wisdom is often tainted by special interests or, sometimes, just plain wrong (ie. The world is not flat). Approaching personal finance, entrepreneurship and even the way you live your life with a fresh perspective every day without fear of violating societal norms is a very healthy and potentially lucrative way to live. Take it from a guy who left a high-paying surgical gig to become an entrepreneur. In fact, my guest on Wealth Formula Podcast this week believes that a fresh look at your surroundings might even turn you into a flaming entrepreneur. Listen to what he has to say in this week’s Wealth Formula Podcast! Michael Wade helps individuals and organizations respond to the opportunities and threats of digital disruption.Michael Wade is a Professor of Innovation and Strategy at IMD and directs IMD’s Global Center for Digital Business Transformation. He has published works on topics such as digital business transformation, innovation, strategy, and digital leadership, including ten books and more than a hundred case studies and articles. Michael has been named one of the top ten digital thought leaders in Switzerland several times, most recently in 2020, and appears frequently in mainstream media. He obtained Honours BA, MBA and PhD degrees from the Richard Ivey School of Business, University of Western Ontario, Canada. Previously, Michael was the Academic Director of the Kellogg-Schulich Executive MBA Program and has been nominated for teaching awards in MBA, International MBA, and Executive MBA programs. At IMD, Michael directs a number of executive programs related to digital transformation, including Digital Execution, Digital Transformation for Boards, and Digital Disruption. He also founded and directs Europe’s first and largest program for executives on digital, Leading Digital Business Transformation. Michael also directs several custom programs related to strategy and digital business transformation for hundreds of organizations. He provides consulting services, executive education, and expert evaluations to several public and private sector organizations on strategy and digital transformation and sits on a number of corporate boards as an advisor on digitization and business model disruption. Since early 2021, Michael has been working on his new podcast Management under the Microscope where he unpacks business myths through conversations with various experts and business professionals. Shownotes: Is entrepreneurship a learned behavior? How does an entrepreneur recognize new opportunities? Frear of Failure ALIEN Thinking: The Unconventional Path to Breakthrough Ideas

I still remember listening to the Peter Schiff podcast seven years ago when I lived in Chicago. I was at the tail end of my Austrian Economic phase and so I believed in everything Peter had to say. One day I was sitting there at my computer listening to him make fun of something called bitcoin which was making some waves at the time. The way he made it sound made bitcoin seem like a completely ridiculous concept. So, I didn’t take it seriously. Even when I heard others speak of it favorably, I just ignored them as financially unsophisticated. By 2017 I figure out that I was the one who didn’t have a clue. Now don’t get me wrong, I think Peter Schiff is a very smart guy and I don’t blame him for sticking to his guns on something he truly believes. Peter still thinks bitcoin is going to zero! The mistake made was mine. There was a buzz about this bitcoin thing that was selling for about $300 (now $37,000). I just didn’t take the time to learn about it. In fact, if I had been more open to it, I would have noticed that a lot of very smart people were making calculated bets in this area. But I wasn’t paying attention. That was a mistake. Now, I’ve made mistakes as an investor before and I will again. But I won’t let a mistake go by without taking a lesson or two away from it. One of those lessons is simple: pay attention when people get excited about stuff and when there is a buzz about something new. Right now, that buzz is about non-fungible tokens (NFTs). This is an area related to distributed ledgers and cryptocurrency. Many are calling the NFT and metaverse technology the next horizon in cryptocurrency and it really is in its infancy. If you don’t get it. You aren’t alone. This is an unusual area that is somewhat difficult to understand for some of us. But that’s the reason you should be paying attention. After all, for those of you now sold on bitcoin, there was a time when you didn’t understand it either. There is real potential here to make money. I’m certainly no expert in the field so I found one who could explain what this world is all about on this week’s episode of Wealth Formula Podcast. Listen HERE As someone who has founded, built, managed and sold a successful internet company, Matt Fortnow has been in the tech startup trenches. In 1996, he co-founded Commissioner.com, the internet’s first fantasy sports service. In 1999, he and his partners sold the company to CBS SportsLine (currently CBS Sports), which still runs their products today. Previously, as an entertainment lawyer, Matt co-authored the 7th Edition of This Business of Music, the bible of the music industry. He’s represented a variety of musical artists, songwriters, producers and record labels, appeared as a regular featured copyright expert on TV and lectured internationally. Since the sale of Commissioner.com, Matt has been consulting entrepreneurs and been involved in various startups as an investor or advisor. Six years ago he dove into the world of blockchain and has become increasingly enamored by digital art and non-fungible tokens, creating the official NFTs for iconic brands such as The Three Stooges. Shownotes: What are NFTs? What is Metaverse and how popular is it already? The different protocols NFTs are built on Does NFT trading have any negative impact on traditional collectible markets?

People listening to the show for the first time often feel a little overwhelmed by the basic terminology and concepts that we use as the basis of our conversations. We throw words like bonus depreciation and cost segregation analysis around like everyone knows what we are talking about. The Ask Buck shows that we have a great place to build the framework for understanding the Wealth Formula alternative personal investing ethos. This week is no different as we continue to talk about depreciation, tax mitigation strategies, NFTs and more.  Do me a favor though. If you haven’t listened to last week’s podcast, start with that one. This week’s episode assumes some knowledge that we went into pretty deeply during last week’s episode #300. Also, if you like these kinds of discussions, you might be interested in Wealth Formula Network—our private community. Go to WealthformulaRoadmap.com to sign up. In short, this page is where you go in order to sign up for our course. But the course just provides a foundation to maximize our discussions which happen over our Facebook page and over our biweekly live Zoom conference calls.  If you want to get deeper into this personal finance stuff and your spouse and friends have no interest in it, this is the perfect outlet for you! In the meantime, listen to this week’s episode of Ask Buck HERE.

This week’s show marks the 300th episode of the Wealth Formula Podcast. That means about six years’ worth of shows. Wow! How did that happen? What started out as a little time to speak to myself (I had no listeners) has become a show with well over a million downloads and an extraordinary community. When I reflect over the last six years, I’m really encouraged. I see the incredible progress that I have made professionally within the financial space and I see how much smarter I have gotten. I am even more impressed with how powerful this brand has become and the community that we have built together. It’s really amazing. I’m so excited about the years to come. Thank you for being a part of Wealth Formula Nation! So, in honor of the 300th episode, I am doing a special ASK BUCK show this week. We’ll even ask my daughters some questions! Make sure to listen HERE!

Why is it that the rich get richer? Well, for one thing, they have money to invest. Think of how many people out there live paycheck to paycheck. Meanwhile, people with money like you and me are able to invest our money and get it working for us. Remember the mathematical Wealth Formula? Wealth=Leverage(MassXVelocity) Velocity is the rate that you get your invested capital back in your pocket to redeploy. Leverage is good debt. These variables are critical to the Wealth Formula but meaningless without Mass: the amount of money you actually invest. If you are able to invest 90 percent of your income, you’re going to grow your money a lot faster than if you can invest only 10 percent of it. You get the idea. These days, there are variables beyond the Wealth Formula that are helping the investor class to pull away from the pack. The Federal Reserve Bank is fueling the growth in value of those assets in which we invest whether it be equities or real estate. Easy money is rewarding those of us who invest our money by giving those assets a higher price. And of course as real estate investors, we are not only benefiting from the growth in asset prices, but we are also benefitting from inflation that washes away the value of our mortgage debt. If you have a million dollar mortgage and inflation is 6 percent per year, the value of what you owe is decreasing by 6 percent per year as well. Not a bad deal for us, right? But now the Fed is getting a little nervous because inflation is pretty darn high and they don’t want to let it get out of control. Hopefully the eventual improvement in the post covid supply chain will make the supply side more favorable and bring inflation down itself. If not, the Fed will have to figure out how to get itself out of the mess. My guest on Wealth Formula Podcast this week explains how this mess was created in the first place by the Federal Reserve over the past decade or so and what it can potentially do to reverse it. LISTEN HERE! Christopher Leonard is a business reporter whose work has appeared in The Washington Post, The Wall Street Journal, Fortune, and Bloomberg Businessweek. He is the author of The Lords of Easy Money, The Meat Racket and Kochland, which won the J. Anthony Lukas Work-in-Progress Award. Shownotes: How does the Fed escape the money-printing quagmire that it is currently stuck in? Is there a way to soften the economic impact as the Fed pivots away from money-printing? The Lords of Easy Money How does Fed policy result in income inequality?

Okay—let’s talk about debt. I bet at some point in your life, someone has told you that you need to pay it all off. On TV, you see the likes of Suze Orman and Dave Ramsey telling you that you have to get rid of it before anything else. They aren’t entirely wrong. They are just talking to the masses. The masses aren’t a group of sophisticated real estate investors like you, who are distinguishing between different kinds of debt. Robert Kiyosaki famously made this distinction between good debt and bad debt in his writings. He said that good debt is business debt that helps you grow an asset and puts money in your pocket. Bad debt takes money out of your wallet. A mortgage on a cash flowing asset would therefore be considered good debt. Credit card debt to buy a television would be bad debt. Pretty simple right? But what about a mortgage on a personal residence? That’s where it gets a little tricky. A mortgage on a personal residence isn’t putting any money in your pocket is it? On the other hand, paying off your mortgage and having all that money in your house makes it essentially dead money and a target of creditors. It’s not as cut and dry is it? At any rate, what we do know is that personal debt is skyrocketing right now and it is something that tends to be over-shadowed by the behemoth national debt problem. My guest on this week’s podcast, Richard Vague, believes that the real focus should be on personal debt that is now over 160 percent of GDP in the United States—a growing burden that threatens economic calamity if not mitigated in the coming years. LISTEN HERE As the author of A Brief History of Doom (2019) and The Next Economic Disaster (2014), Richard Vague established himself as a clear and independent voice in the ongoing conversation about the role of private sector debt in the global economy. His Illustrated Business History of the United States offers a more general audience a clear-eyed view of 250 years of wealth creation and the people and personalities who drove that growth — and hold it today. And now, Richard’s new book, The Case for a Debt Jubilee, offers a compelling case and policy recommendations for new forms of consumer debt relief. Following a career that has spanned fields as varied as banking and energy, credit, and the arts, Richard has served since 2020 as Secretary of Banking and Securities for the Commonwealth of Pennsylvania. Richard also serves on the University of Pennsylvania Board of Trustees and the Penn Medicine Board of Trustees, and on a number of business boards. He is chair of FringeArts Philadelphia, chair of the University of Pennsylvania Press, and chair of the Innovation Advisory Board of the Abramson Cancer Center. He also serves on the Governing Board of the Institute for New Economic Thinking. Vague is the founder of the economic data service Tychos (tychosgroup.org) and the email newsletter service Delanceyplace.com, which focuses on nonfiction literature. Shownotes: Have savings rates have actually gone up? The breakdown of private debt What kind of warnings are we looking at to say that we’ve got an economic calamity? With the next level intervention from the fed and from the government, have the rules of the economic game have changed?

Happy New Year! I don’t know about you, but I am looking forward to another profitable year in the roaring 20s. If you have been investing in real estate for the last several years, you are obviously doing very well. The big question on everyone’s mind seems to be whether or not the market is too hot to continue investing. There is no one right answer to this. In fact, when we talk about the “real estate market”, we aren’t even talking about one market. Real Estate investing takes many forms. Investing in single-family homes in Oklahoma is quite different than investing in apartment buildings in Dallas. And neither of these is anything like investing in non-performing notes. Each sub-sector of real estate is quite different. And, when market cycles change, they react differently. Some have more exposure to recessionary environments. For example, if you are investing in re-performing notes, that’s pretty risky for an economy that you think might go south. Most recessions are not catastrophic and do not necessarily hurt more stable assets nearly as much. As I’ve said to you before, my real estate strategy is not changing in 2022. First of all, I do believe we have a few years of significant runway for profit in this decade. Next, we have significant inflation which makes the risk of not investing very high. And finally, the investments we are making in strong markets in apartment buildings have been traditionally more resilient than other real estate classes. That being said, there are other opinions out there and you need to make your own decisions. Often those opinions are based on what the specifics of the individuals investing strategy are. Jorge Newbery, for example, has made a career out of investing in pools of non-performing notes. The major strategy he has used over the years involves negotiating with people who have defaulted to create re-performing notes. These can also be sold off for a profit if successful. But, as you can imagine, if someone has defaulted on a note once, then the risk of doing it again will probably be higher. Anyway, the point I’m trying to make is that the approach each investor makes should be based on the specifics of their business model. As you will see in this week’s interview with Jorge Newbery, he’s doing what he can for risk mitigation in uncertain times.  Make sure to tune in to get Jorge’s perspective on what’s going on today with real estate. LISTEN HERE. Jorge P. Newbery Is On A Mission To Help Americans Crushed By Unaffordable Debts. He is the Founder and CEO of Debt Cleanse Group Legal Services, a nationwide legal plan to help consumers and small businesses get out of debt without filing bankruptcy. He is also Chairman of American Homeowner Preservation LLC and AHP Servicing LLC, which crowdfund the purchase of nonperforming mortgages from banks at big discounts, then share the discounts with struggling homeowners. He is also a non-attorney Partner in Activist Legal LLP, a law firm in Washington, D.C.  A 2004 natural disaster triggered the financial collapse of Newbery’s former business, leaving him with $26 million in debts he could not pay. Newbery rebuilt himself through AHP, sharing what he learned from his challenges to help families at risk of foreclosure stay in their homes. In 2018, he founded Debt Cleanse Group Legal Services to assist consumers and small business owners settle all types of debts at big discounts – and not pay some at all, He is also a Board Member of the Group Legal Services Association.  He authored Burn Zones: Playing Life’s Bad Hands; Debt Cleanse: How To Settle Your Unaffordable Debts For Pennies On The Dollar (And Not Pay Some At All); and Stories of the Indebted. Shownotes: The history of American Homeowner Preservation How has the pandemic affected AHP and the housing market? AHP Title and its strategy ahptitle.com

Learn how to protect your finances and personal data from cyber attacks. Hear from a cybersecurity expert about the importance of using multi-factor authentication and keeping devices updated. Discover emerging cyber threats and security measures for organizations. Understand the significance of cybersecurity and financial literacy in investing, and get insights on setting personal goals and investment strategies for the new year.

Inflation is running at about 6-7 percent right now. That is significant. In fact, we haven’t seen those numbers in about 4 decades. On this week’s show, we will talk to an economist to explain what this means at the macro level and what may potentially be the long-term outcome. I’m not an economist. I am a professional investor and the way I see things right now is at that level. Let me tell you that, if you are investing in real estate with leverage, inflation is not really a bad thing. What is inflation in the first place? It means that the value of the dollar is going down. It has less buying power. And for those of you who are afraid to invest in this kind of environment let me emphasize that, if inflation is running at 6-7 percent per year and you are in cash, you have essentially guaranteed losing 6-7 percent per year by sitting on the sidelines. On the other hand, if you are investing in leveraged real estate, the debt on those assets is also losing value. In other words, inflation rewards debtors by making that debt worth less. Think about that for a moment as it is critically important to understanding how leveraged real estate is such a tremendous hedge against inflation in the right hands. You’re raising rents to keep up with inflation and the money you owe is diminishing in value. What a great deal! Obviously, there are other implications to inflation that may not be such a good thing. And if inflation gets too out of control, there are other ramifications as well. However, most experts don’t seem to think double digit inflation is likely. So, without sounding flippant, let me say to all of you real estate investors: enjoy the ride! Now back to the macro level, this week’s podcast features an interview with a brilliant professor of economics, Dr. John Horn, to talk about inflation from a different, more global perspective. Understanding this stuff is really important so I urge you to listen to this podcast and figure out what you are going to do with all of this inflation! John was a Senior Expert in the Strategy Practice of McKinsey & Company, based out of the Washington, DC, office, before joining Olin. He spent most of his 9 years there working with clients on competitive strategy, war gaming workshops and corporate and business unit strategy across a variety of industries and geographies. John helped over 100 clients with war game workshops and developed a set of simulation exercises to help companies understand the challenges of reallocating resources. He was also an adjunct professor at the Robert H. Smith School of Business at the University of Maryland. Prior to joining McKinsey, John assisted major U.S. financial institutions with fair lending compliance as a consultant with Ernst & Young LLP. He also worked as an economic consultant with The Brattle Group, specializing in economic expert testimony in litigation support, including anti-trust and patent infringement cases. Shownotes: Wow will the pandemic affect our economy moving forward? Is Inflation actually good for us? Inflation as a self-fulfilling prophecy How would Inflation affect you as an individual investor?