Wealth Formula by Buck Joffrey

If you want to be wealthy, do as the wealthy do. The wealthy do not use IRAs and 401Ks to invest in heavy loaded mutual funds. That system is set up to make others wealthy! The ultra-wealthy get a completely different set of options when it comes to investing their money. They often have direct ownerships in businesses and real estate. They may own publicly traded equities, but they are not paying the fees that most people do. The ultra-wealthy also understand the importance of leverage and apply it judiciously whenever possible to increase their returns. They are also keenly aware of tax efficient investment strategies. Perhaps the biggest difference between the typical retail investor and the ultra wealthy is that the latter does not simply hope for the success of their investments: they engineer it! What does that mean? Well, let’s take permanent life insurance as an example. Dave Ramsey and Suze Orman tell you to stay away from it. Yet, the wealthiest families in the world like the Rothschilds and the Romneys have used these products for generations to preserve and build wealth. In fact, the wealthier the family, the more likely it is that they are using some kind of permanent life insurance as part of their wealth building strategy. You see, the affluent do not view permanent life insurance policies as simply assets. They use the elements of permanent life insurance to enhance their other investments. Life insurance, when used properly, is a tool to leverage your other investments. So, again, why would Dave Ramsey and Suze Orman tell you that permanent life insurance is a bad idea? Well… a fool with a tool is still a fool. It’s hard to become wealthy if you are a fool (or at least to maintain your wealth for long). I have been trying to uncover these kinds of secrets of the wealthy for years now. Along the way, I’ve learned a ton and have tried diligently to pass this information on to you. I know there is a lot to absorb. However, I will say this. If you do nothing more than to pay close attention to the concepts of what we call Wealth Formula Banking and Velocity Plus that we discuss on this week’s Wealth Formula Podcast, I truly believe that I will have done you a service. Don’t miss it! Christian Allen, AAMS, AWMA Christian joined the financial services industry in 2004. Over the course of his career to date, he has developed a broad-based knowledge and experience set. He began as a traditional advisor, working with local clients in his home state. In that context, he began a movement of successfully partnering with other professionals, including accountants and attorneys, to assist clients in implementing sound financial strategies. He spent more than five years in management with 2 regional planning firms, during which time he assisted new and seasoned professionals in creating efficient systems and methods to build meaningful practices. Over the last several years, he has expanded to working across the country, teaching financial principles, and working with clients across a broad spectrum, including wealth accumulation, retirement distribution planning, as well as innovative, advanced planning strategies for both high-income and high-net-worth individuals and businesses. He’s a member of AALU, and holds the designations of Accredited Asset Management SpecialistSM and Accredited Wealth Management AdvisorSM Christian is married and has two children, and is an avid sports fan. Rod Zabriskie, MBA Rod has been in financial services since 2009. Prior to going into business for himself, he worked in marketing and finance with several small businesses. He had the opportunity to purchase an existing furniture business in 2007, just prior to the Great Recession. The experience of struggling to stay afloat amid difficult economic conditions inspires Rod every day in his efforts to educate and assist his clients in implementing sound financial strategies. He strongly advocates for establishing a firm foundation, utilizing proven strategies and financial tools to create a strong base upon which we can each build our financial house. In addition to focusing on Wealth Formula Banking and Velocity Plus, he has expertise in retirement income planning. Rod has a bachelor’s degree in Marketing Communications, and an MBA with an emphasis in Entrepreneurship. He and his wife Jodi are the proud parents of 7 wonderful children. As a family they thrive on spending time exploring nature, playing games and doing projects together. He enjoys sports, music and reading. Shownotes: Infinite Banking Indexed Universal Life Why would you not want to have exposure to the market with the guardrails that you get with Velocity Plus? The creative investment strategies some high net worth people are doing.

People are social animals. We aren’t designed to be wearing masks, not touching each other, and quarantining. Yet for the last six months, that’s been our predicament. At the same time, we are increasing our dependence on digital socializing through social media and have significantly increased our collective screen times and subsequent exposure to toxic blue light at all hours of the day and night. The whole scenario is a perfect set-up for individuals already susceptible to depression or other mental health issues. In fact, people who have never experienced any psychological issues in the past are now experiencing it for the first time because of the inorganic nature of our current lifestyles. Divorces, domestic violence, and suicide rates have dramatically increased across the country. Yet, this kind of fall-out from Covid-19 have not been appreciated adequately in the media and recognized as considerations in the big picture of pandemic-era policy. The non-medical, non-economic consequences of the pandemic are real and have had a huge negative impact on many of our lives. To hear about what’s going on out there in this part of human existence, this week’s Wealth Formula Podcast features a conversation with therapist and personal coach, Joel Wade.  If Covid has got you down, make sure to listen to this conversation! Joel F. Wade, Ph.D. is Marriage and Family Therapist and Life Coach, and the author of The Virtue of Happiness, Mastering Happiness, The San People of the Kalahari, and an in-depth online course: A Master’s Course in Happiness, drawing from the increasingly useful research in psychology in general, and positive psychology in particular; and his nearly four decades of working with people professionally. He has written regularly for a variety of publications, including The New Individualist and The Good Men Project; and the Beyond Wealth columns for the Oxford Club. He’s also a world class athlete, having won multiple national and world championships in water polo. Dr. Wade enjoys teaching clear, practical skills and ideas that can be used immediately, inspiring his readers and listeners to take effective steps toward a more rewarding, joyful, and resilient life. As a Life Coach he works with people around the world via phone and Skype, and can be found at www.drjoelwade.com. Shownotes: People are feeling like everything is on pause these days. There are certain habits or things that make depression more likely. How does our mood system help us survive a situation that we are stuck in? Post-traumatic growth https://drjoelwade.com

It is the second week of September—my birthday week. And…as I reflect on the past 12 months, I can’t help but think, “What a shitty year”. The only solace I take in my reflection is knowing how radically things can change over the course of 12 months. The pendulum just needs to move the other way. The good news is that this time next year could, and probably will, look very different. We could be getting on planes to meet up in Dallas for a Wealth Formula meetup. We could be meeting up at the bar, shaking hands, and even hugging each other without masks and disinfectants. We could also be looking at a different economy. Perhaps things will have taken a turn for the worse from pandemic-age repercussions. Or…perhaps the sheer magnitude of pent-up desire for people to go out and have a good time will power GDP to record growth launching us into the roaring 20s. I actually think that could turn out to be an accurate prediction. I know I will be out there spending! The point is that Covid-19 has already happened. I know it’s not over yet but I think it’s wise, and certainly more fun, to think about what happens next. Of course this is an investing program so let’s focus on that subject. If you are in our Accredited Investor Club, you probably know that I have been very clear on my investment thesis in the past couple of years—“keep it boring, stupid”. This is generally good advice for all season but we do need to adapt to new environments and recognize opportunities when they become available. One of the spaces that I am interested in exploring over the next 12 months is the hotel space. Admittedly, my only previous hotel investment has not gone well. In fact, it was a construction project off-shore that has had lots of problems and, as a result, has soured me both on construction and on investing outside of the United States. But I’m not going to throw the baby out with the bathwater. I think there may be a real opportunity in the bread and butter domestic hotel space in the United States and so I’m watching it closely to see if and when it might be a good time to get involved. So, in the spirit of looking ahead at better days and possible investment targets in the post-covid era, I asked an expert in the area to come on the show and share his experience in the space. Make sure you listen to this week’s episode of Wealth Formula Podcast to see if investing hotels might be right for you! TITAN Hospitality was founded by Steve Usher. Prior to starting the company, Mr. Usher was the Pacific Northwest Representative for CB Richard Ellis’ National Lodging & Hospitality Services Group in San Francisco. He serves on the Board of Directors of San Luis Obispo-based Martin Resorts and is a licensed California real estate broker. Shownotes: What is the main difference between investing in hotels and investing in apartments? Steve talks about the different hotel investment classes What are the issues with debt in the hotel space? What is Steve’s advice to potential buyers who are considering investing in hotels? phone: 626-926-0000 email: TitanHospitality1@gmail.com

If you like these “Ask Buck“ shows, you’ve been enjoying the last few weeks. I would love to get some feedback from you as I’m always trying to improve the quality of my content. In the meantime, here is the third and last ask Buck episode of the summer! We will do it again sometime in the fall. Enjoy!

We do a lot of interview based content on Wealth Formula Podcast. However, the feedback I get is that the most learning happens during our “Ask Buck” episodes.   The good news is that we have a bunch of questions lined up so we will do a couple of “Ask Buck” shows in a row for the next few weeks starting with this one! I also encourage you to go back and listen to older “Ask Buck” shows as well. It’s probably the quickest way to get caught up with all of our lingo and the concepts we constantly go back to.   I hope you enjoy it!

“You’re nuts!” That’s what I would say to anyone a year ago who suggested that we would face a global pandemic that would put us in a recession magnitudes greater than 2008 (based on GDP), make all bars and restaurants shut down and cancel professional athletics. I would also think you were nuts if you told me that despite all of this financial destruction, our apartment portfolio would still be performing as well as it is. We truly are living in the Twilight Zone right now. So what happens in the next six months, a year or two years? Yogi Berra put it best, “It’s tough to make predictions, especially about the future”. So, no matter what anyone says right now it is probably akin to throwing darts. That said, let me make a couple of observations. First, apartment buildings are still doing very well. Interest rates will be artificially low for years to come. And there is a ton of money on the sidelines that must be deployed. What if we avoid the much predicted tsunami of defaults altogether and go straight from stable or slightly decreased rent growth for the next few months to massive demand and cap rate compression a year from now?  I would not have said this with a straight face a couple of months ago but now I can actually see that happening and not be surprised by it. Anyway, in the interest of continuously trying to understand the future of real estate investing, I am interviewing yet another economic sage this week. He’s a guy who specializes in apartments and actually spoke at our last Wealth Formula live event which now seems ages ago. His name is Ryan Davis and he’s a very smart guy. Make sure to listen to this week’s Wealth Formula Podcast to see what he has to say! Ryan Davis serves as Chief Operating Officer at Witten Advisors. In this role, Ryan provides fact-based research, analysis and discussion to help clients formulate their apartment market strategies.  This insight informs investment decisions for multifamily development and buy/sell opportunities. Shownotes: The great unknown is the pace of the recovery Can we expect to see a tsunami of defaults before the economy recovers? Is the worst behind us in terms of the economy? How has the current pandemic affected the lending market? wittenadvisors.com

There is a phenomenon in finance that I have witnessed first hand that I find fascinating. The best way to explain it is to tell you about a guy I know out here in California who has been very successful as a fund manager. I asked him once about the expectations of his investors and he quickly replied: “5 percent”. Knowing this guy was pretty savvy and could easily produce more than 5 percent for his investors, I said he must be making them pretty happy by outperforming that expectation on a consistent basis. “No way!” he said. “I’m not about to scare anyone off.” He continued to explain that his investors saw the money he was managing for them as safe money. If they got higher yields, they would start to think of themselves as doing something risky. So, instead of scaring people by giving them bigger returns, this fund manager was kind enough to spare them the scare and pocketed the spread himself. Of course he was not doing anything nefarious at all. The agreement he had with his investors was to deliver 5 percent. As a real estate investor you might be scratching your head right now but this phenomenon is real in the financial services world. Conventional financial wisdom trains us to believe that nothing profitable could be relatively low risk. And, to be clear, there is some truth to that when it comes to traditional bond markets etc. However, I can tell you that we see exceptions to this rule all the time in real estate. If you’ve been to our accredited investor club for long, you’ve seen this play out in apartment buildings over and over again. Is it possible to have a relatively safe asset that makes money in recessionary times and makes even more money when times are good? Well, I happen to know and have partnered with a top 25 operator in a category of real estate that seems to thrive no matter what the economy looks like. Of course all real estate is operator dependent. This particular partner raised net operating income across his portfolio by 9 percent in 2008 during the financial melt down! This operator has also seen an average project level annualized return of 64 percent on all divestments! In other words, during down times he has done very well and during thriving economies he has absolutely crushed it. And to be clear, this is not a mom and pop shop that got lucky. They are the 25th largest operator of self-storage in the country. Want to learn more? Listen to this week’s interview with Lew Pollack. And if you are an accredited investor, I would highly suggest you join our investor club ASAP! Lewis G. Pollack, operates the Reliant Delray Beach, Florida office, and has primary responsibility for equity investor relations. Mr. Pollack, a long-time corporate executive and entrepreneur, has been involved in the development and management of self-storage in excess of 30 years. Mr. Pollack is a graduate of Franklin and Marshall College, Trenton State College, and holds Ph.D. (ABD) from University of California at Los Angeles. Mr. Pollack is a former Trustee and President of the Florida Self-Storage Association. Mr. Pollack is also a Managing Principal of Midgard Self Storage and Store Smart brands. Shownotes: Lew talks about what makes self storage appealing as an investment How has Reliant’s portfolio performed through the current pandemic? What is an A-Class Self Storage facility? Lew talks about the typical value-adds in Self Storage

Back in the early 1990s, I was a freshman at Columbia University in New York. Frankly, I wasn’t very interested in the academic part of college at the time. I was too busy doing what a college kid might do after being dropped into Manhattan after going to private school in the midwest. In fact, I realized that college courses were starting to interfere with my nocturnal lifestyle so I started taking an increasing number of evening courses. The evening courses had a lot of older students in them—many of them graduate students that took their studies pretty seriously. I recall taking a political science class one time where I am quite sure I was the only freshman there. The lecturer was some fancy academic guy who many thought would eventually run for office. The lectures often led to spirited discussions which I found intimidating for multiple reasons—one of which is probably because I rarely came to class having adequately prepared myself with assigned readings, etc. One evening a lecture stirred an interesting idea in me that I wanted to share but, again, felt too intimidated to share in front of this older, intellectually talented class. So, I decided to wait until a break we typically took midway through class and talk about it with the professor one-on-one.  To my delight, the professor called my idea interesting and spoke to me like a colleague rather than the 18-year-old punk that I was. Emboldened by my success, I awaited the next time that I could interject myself in class. On one occasion, the discussion turned towards the Clinton administration stance on gays in the military. There was lively discussion on this hot button issue primarily around the effect on morale. I didn’t get it—why did people care, I thought. So, I raised my hand and, in front of a classroom and stood up. I looked at the packed classroom of intellectual heavyweights and said, “Why do we even ask them if they are gay? Wouldn’t it make sense just not to ask?” There was an odd silence for a minute and then two or three students reminded me that the Clinton administration had just passed the “don’t ask, don’t tell” policy.  After an uncomfortable moment, I quickly sat down about as embarrassed as I had ever been. The class, briefly stunned by my profound ignorance of current events, continued their discussion where it had left off before I interrupted. I never did go back to that class. It wasn’t too late to drop it fortunately. Why did I tell you this story? Well, as you can probably tell from the frequent appearance of economists on my podcast, I really enjoy learning about macroeconomics. That said, with a medical background, trying to follow some of these theories can be kind of humbling. I’ve gotten better over the years but I am sensitive to the fact that you may be a super smart professional in your own field that knows little about how the economy works. Meanwhile, the alternative podcast ecosystem is talking non-stop about the fall-out of Covid-19 and the potential consequences of unprecedented fiscal and monetary policy interventions that we are seeing. One of the theories circulating out there is called the “Dollar Milkshake Theory”. It’s counter to some of the doom and gloom scenarios that are out there right now—at least for the next 2-3 years. It’s not the easiest thing to understand. So, I appreciated the fact that this week’s podcast guest, Brent Johnson, allowed me to dumb his theory down enough so even a surgeon could understand it! Let me know what you think! Brent Johnson brings over twenty years of experience in the financial markets to his position as CEO of Santiago Capital. Brent enjoyed more than nine years as a Managing Director at BakerAvenue, a $1.7Billion Asset Manager and Wealth Management firm, with offices in San Francisco, Dallas and NewYork.  He was the lead advisor for several of the firms largest clients. Before joining BakerAvenue, Brent spent nine years at Credit Suisse in their private client group. He got his start as part of the training program at Donaldson, Lufkin & Jenrette (DLJ) in New York prior to moving to San Francisco. He joined Credit Suisse in the fall of 2000 when the bank purchased DLJ. Earlier in his career, Brent was a financial auditor for Philip Morris Management Company in New York City where he performed audits at the company’s headquarters as well as subsidiaries in Germany, Hong Kong and Richmond, Virginia. Brent regularly gives interviews and speaks at conferences regarding precious metals, currency markets & macro-economic trends. His views have been quoted in numerous print, online and television outlets. He lives in San Francisco with his wife Mary and son Moses. Shownotes: Brent gives us a background on the current economic situation in the country Why does it matter if the dollar is strong or weak? What is the Dollar Milkshake Theory Can the value of gold and the dollar go up simultaneously? What are some of the key concepts to consider in your personal portfolio? Brent talks about asymmetric dollar trades: an opportunity to bet a little in order to make a lot. brent@santiagocapital.com santiagocapital.com @SantiagoAuFund

“Be careful what you wish for…lest it come true!” -Aesop’s Fables I remember back in college going to the mail center daily in hopes of finding and acceptance letter to medical school. Back then, I really romanticized the idea of being one of those heroes in a white coat. Fortunately, I got what I wanted and was very excited. The next August I drove to Chicago from my parents home in Minnesota medical school orientation. On the drive, I heard a famous neurosurgeon on the radio (who is now HUD Secretary oddly enough). He was asked the question of how he knew that he was capable of something so delicate as brain surgery. He replied that he excelled at hand-eye coordination sports like table tennis as a kid. It was then that I knew that I belonged in neurosurgery. After all, I was great at ping pong! And…being a brain surgeon sounded kind of cool. So, I decided then and there that my goal was to get into a neurosurgical residency training program—no small feat in the competitive world of medical school. A few years later, not only did I get there, but I got into the program of my choice with the chairman that I envisioned being my mentor. Along the way, I even realized I liked neuroscience so it wasn’t entirely for my ego. But two years into neurosurgical training, I came to a stark realization. I didn’t like being woken up at night! That was a problem. I was getting woken up every night I was on call with snowmobilers being flown in with brain trauma from the Upper Peninsula of Michigan. And while my fellow neurosurgical residents seemed to get an adrenaline rush out playing superman in the middle of the night, I was just tired and cranky. I wanted to sleep. I wanted a life. That wasn’t going to happen the way I needed to in neurosurgery. So…I quit neurosurgery and decided to switch into a surgical specialty that did not involve the brain. In order to do that, I headed out to San Francisco for a new residency program that left me, frankly, uninspired. I wrote academic papers at a feverish pace for recognition but my heart was not in it. By the time I finished training, I was just going through the motions with no passion at all. Now, if you had told that kid back in college hoping to get an acceptance letter to medical school that he would finish surgical training at UCSF (my prestigious alma mater), he would have been absolutely thrilled. So why wasn’t I? I guess the distant idea of an accomplishment or a kind of lifestyle is usually better than the achievement itself. After all, what you want in life is dynamic. Every time you get to a certain place in life, your desires have already moved on to the next thing. I think it is sort of inevitable to one degree or another for most people. The extent of the dissatisfaction with life varies of course. But the need to grow and be better in one way or another is always there in high performers. You are not alone. I am sort of the extreme example. I stopped practicing 8 years after surgical training. The 16 years of college, medical school, and post-graduate training could not convince me that I had to stay as it does to some of my colleagues. I’ve found a better fit for myself in entrepreneurship and education, but I’m still trying to fill needs all the time. In fact, my latest decision was to get a real estate license in hopes of getting involved with luxury real estate in my town. Why? Well, it’s not for the money. The amount of money I make that is essentially time independent makes just about anything that requires my time to seem like a poor financial decision. For me, it’s about getting out of the house! For the last three years since leaving Chicago, I have barely left my house. My work is online and in the podcast sphere. Sometimes I go a whole week without seeing anyone but my family. In the meantime, I gained weight, I let my beard grow uncontrollably to unabomber levels and I simply didn’t feel energized. What I was missing in my life was interacting with people! When I realized this, the old saying about choosing your profession based on what you do in your free time crossed my mind. Clearly it was a little late for me to get involved materially in the NFL. But I do spend a lot of time on Zillow and Trulia looking at luxury homes. So, putting together luxury homes and interaction with people as a job requirement—it just made sense to get my license and to go to work. Now don’t get me wrong. I am feeling very uncomfortable with this new identity so far. Right now, I’m the new guy who knows very little. It is a humbling experience that I have not felt for over a decade at least.  But sometimes radical change serves as a nice shock to the system and makes you feel alive. Who knows how this decision will play out but I’m excited. Want to buy a house in Santa Barbara? Let me know! Anyway, this idea of feeling restless in your skin is something that is common enough that my friend Michael Bernoff wrote a book about it. It’s called Average Sucks. That’s what we talk about on this week’s Wealth Formula Podcast! Michael is the President and Founder of the Human Communications Institute, a leader in the personal and professional development industry. He works directly with individuals as well as corporate executives who desire to transform their corporate culture in an ever changing marketplace. His passion for his work is limitless and his dedication to positively impacting the world by empowering every individual is uncompromising. During his own journey of self-discovery, Michael studied and modeled effective leaders recognized worldwide. He focused their philosophies, strategies, and techniques that have consistently produced rapid and lasting change. By combining a variety of these proven disciplines and his own strategies, Michael has created his own programs that have enabled both him and his clients to overcome limiting beliefs and achieve a life beyond limits.

Entrepreneurs are just professional problem solvers who keep score by how much money they make. I know this because I am an entrepreneur at my very core. It’s not a choice I made, it’s the way I was born. Entrepreneurship is not usually glamorous as frequently depicted in the movies or on reality shows. Most of us have more failures than we have successes and the failures often create profoundly negative effects for the people around us. It can be a bit of a curse. But the high that an entrepreneur gets when identifying a problem and finding a solution is very strong. Being able to look at an inefficiency and realizing that it can be fixed by creating a business around it is exhilarating. And when is the best time to find inefficiencies in a business model?… When times are bad!  You see, when times are good, profitable businesses usually leave way too much meat on the bone because they are already fat and happy. Few people look at ways of doing things better when they are already making a good profit. Only when the tide goes out do you discover who’s been swimming naked. Profits get tight and businesses have to rely on becoming more efficient to survive. This is the perfect setting for the entrepreneurial mind who sees opportunity where others see crisis. My friend Jorge Newbery is the purest entrepreneur that I know. He is, of course, the founder of AHP Servicing and Debt Cleanse. He has been on Wealth Formula Podcast several times before. This week, we are going to talk about his latest business that stems from the embargo on foreclosures note holders are now facing in many states—specifically those who are trying to foreclose on vacant property. In usual Jorge style, it’s an elegant solution where everyone wins. The good news is that there is an opportunity for you to participate and get your own feet wet as an entrepreneur. Don’t miss this week’s episode of Wealth Formula Podcast as Jorge and I discuss the business he calls Pre-REO. Jorge Newbery is the Chairman and founder of American Homeowner Preservation, LLC, or “AHP.” Jorge was the President of Budget Real Estate Inc. from 1995 to 2008, where he brokered over 1,000 troubled Department of Housing and Urban Development and real estate owned properties and acquired, renovated and operated over 200 distressed multi-family, single-family and commercial properties. Prior to that, Jorge was the co-founder of Sunset Mortgage from 1992 to 1995. Barry is Vice President where he is part of the company’s Executive Committee and leadership team focusing on preREO and REO. Barry brings over 29 years of mortgage servicing and sales experience with a history of providing technology solutions that enable operators to perform at their peak. Barry was previously Vice President of Exceleras LLC and Senior Vice President of Business Development for OrangeGrid Empowering people in progress. Shownotes: What happens when a person defaults on a loan? How does Pre-REO turn dead money assets into monetized assets? Jorge talks about how people can use Pre-REO to acquire properties at a huge discount. Learn more abour PreREO: prereo.com (800) 555-1055