Wealth Formula by Buck Joffrey

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?

A number of people told me that they really enjoyed last week’s podcast interview with William Green, who spoke about what we can learn from the greatest investors of all time. One line that still haunts me is Sir John Templeton saying that the four most dangerous words for an investor are “This time it’s different”. Why does it haunt me? Listen, the economy is in a massive boom right now. There is no doubt about that. Should you invest in a booming economy? What is the alternative? Right now inflation is running at about 6 percent. That means doing nothing guarantees that your money is losing 6 percent per year. As Robert Kiyosaki says, “Savers are losers.” Nevertheless, it is important for you to think about what is happening and what you should do with your own money. To do that, you really need a framework. Macroeconomics does provide us a type of framework that shows how business cycles work and how they affect the investor. However, we must also understand that historical macroeconomic data is not necessarily predictive in the new world order of easy money and pandemics. I am not here to give you financial advice but I will urge you not to act out of fear. Just look around to see how many dooms layers have been sitting on the sidelines for 5-6 years now and how much money they have lost by doing nothing. So what am I doing differently in this economy? Personally, I’m not doing much differently at all. I continue to invest in high quality real estate through our Investor Club that is already cash flowing, but has significant value-add elements to create equity. My reasoning is that, in doing so, with the wind at my back I might average 35-40 percent annualized returns or better like I have been lately. But even if things tighten up, my assets are of high quality and are very likely to whether the storm better than most other investments. But again, that’s my philosophy. To create your own, learn as much as you can and think for yourself. This week’s interview with retired Professor and former libertarian senate candidate, Murray Sabrin, would be a great start to educating yourself on the business cycle. Listen HERE Murray Sabrin arrived in America from West Germany with his parents and older brother on August 6, 1949. His parents were the only members of their respective families to survive the Holocaust. In 1959 at age 12, Sabrin became a U.S. citizen and graduated from the Bronx High School of Science in 1964. He has a B.A. in history, geography and social studies education from Hunter College, an M.A. in social studies education from Lehman College and a Ph.D. in economic geography from Rutgers University.    Dr. Sabrin joined the faculty of Ramapo College of New Jersey in 1985 and retired on July 1, 2020, where he was Professor of Finance in the Anisfield School of Business.  He taught Financial History of the US among other courses. In 2007 he and his wife, Florence, made a $250,000 gift to Ramapo College to establish the Sabrin Center for Free Enterprise in the Anisfield School of Business (www.ramapo.edu/sabrincenter). In January 2021, the Board of Trustees awarded Dr. Sabrin Emeritus status for his scholarly contributions during his 35-year career at Ramapo College.  Sabrin is the author of Tax Free 2000:  The Rebirth of American Liberty, a blueprint on how to create a tax-free America in the 21st century, and Why the Federal Reserve Sucks:  It Causes, Inflation, Recessions, Bubbles and Enriches the One Percent, which is available on Amazon.   His two latest books were published in 2021, Universal Medical Care from Conception to End of Life:  The Case for a Single-Payer System.  The single payer system, in Sabrin’s proposal, is the individual or family, not the government. Sabrin’s other book, Navigating the Boom/Bust Cycle:  An Entrepreneur’s Survival Guide, was published last October.   In 1997 Sabrin was the New Jersey Libertarian Party’s nominee for governor and made political history, when he raised sufficient funds to participate in the state’s matching funds program, which required him to participate in three debates with the two major party candidates.  He also has sought the Republican nomination for the U.S. Senate in the Garden State. Shownotes: What is the Yield Curve Inversion? What kind of signals should we be looking for that might suggest a change in the business cycle? How have some of the economic rules have changed recently Dr. Sabrin’s book Navigating the Boom/Bust Cycle: An Entrepreneur’s Survival Guide

Asset prices are booming. We have more than doubled price per door costs on acquisitions made in some markets just two years ago. That’s just what our investor club has seen in real estate. To look at rising asset prices on steroids, just look to the crypto markets. A guy who works out at the place I work out bought $400K of gala token under 1 cent and is now sitting on a couple hundred million bucks. When you see that kind of stuff, it’s hard not to get FOMO. To be clear, I still truly believe we have significant runway in real estate given the level of inflation we have seen and pure supply and demand issues in the markets we invest in. However, as a general rule, it is wise to remember Sir John Templeton’s four most dangerous words in the investment world, “This time it’s different”. On this point, I go back to cryptocurrency as it seems to teach lessons at a pace magnitudes faster than other markets. In the winter of 2017, it looked like anyone could get rich on crypto and you would be foolish not to buy. Later that year, we were deep in crypto winter. As we have seen, however, the reports of cryptocurrency’s death was, as at one time Mark Twain’s death was, greatly exaggerated.  When people should have been buying like crazy, they were scared away thinking this was the final knockout punch to bitcoin (which had been served several knockout punches already). Now, at the top of the crypto market or possibly somewhere near, I hear myself once again telling myself that this time, it might be different. It may be a runaway train. I’m not saying I have the answers to what happens next. However, I do think it is critically important to examine the thoughts you have on a daily basis with regard to investing. This is personal finance. You shouldn’t be listening to me or anyone else to tell you what you should do. You should be listening to us to help you make sure that you are thinking. You want to have lots of opinions to consider. And, it is particularly helpful to hear the voices of those individuals that have extraordinary success in this arena. William Green is a financial author that has spent most of his life talking to and writing about the greatest investors of our lifetimes and has written a book about what he’s learned from that process. And this week, he was kind enough to join me for an interview on Wealth Formula Podcast to share some of that wisdom. DO NOT MISS THIS EPISODE!!! William Green is the author of Richer, Wiser, Happier: How the World’s Greatest Investors Win in Markets and Life (Scribner/Simon & Schuster, April 2021). Over the last quarter of a century, he has interviewed many of the world’s best investors, exploring in depth the question of what qualities and insights enable them to achieve enduring success. He’s written extensively about investing for many publications and has been interviewed about the greatest investors for magazines, newspapers, podcasts, radio, and television. He has also given many talks about the lessons we can learn from the most successful investors, not only about how to invest but about how to improve our thinking. Green has written for many leading publications in the US and Europe, including The New Yorker, Time, Fortune, Forbes, Barron’s, Fast Company, Money, Worth, Bloomberg Markets, The Los Angeles Times, The Boston Globe Magazine, The New York Observer, The (London) Spectator, The (London) Independent Magazine, and The Economist. He has reported in places as diverse as China, India, Japan, the Philippines, Bangladesh, Saudi Arabia, South Africa, the US, Mexico, England, France, Monaco, Poland, Italy, and Russia. He has interviewed presidents and prime ministers, inventors, criminals, prize-winning authors, the CEOs of some of the world’s largest companies, and countless billionaires. While living in London, Green edited the European, Middle Eastern, and African editions of Time. Before that, he lived in Hong Kong, where he edited the Asian edition of Time during a period in which it won many awards. Green has collaborated on several books as a ghostwriter, co-author, or editor. One of them became a #1 New York Times and #1 Wall Street Journal bestseller in 2017. He also worked closely with a renowned hedge fund manager, Guy Spier, helping him to write his much-praised 2014 memoir, The Education of a Value Investor: My Transformative Quest for Wealth, Wisdom, and Enlightenment. Green also wrote and edited The Great Minds of Investing, which features short profiles of 33 renowned investors, along with stunning portraits created by Michael O’Brien, one of America’s preeminent photographers. Born and raised in London, Green was educated at Eton College, studied English literature at Oxford University, and received a Master’s degree from Columbia University’s Graduate School of Journalism. He lives in New York with his wife, Lauren, and their children, Henry and Madeleine. Shownotes: Some examples of how successful people created their own success Are there any parallels between successful investors and happiness? Is it possible to clone the ways of successful people? The investing principles of successful individuals

When you are trying to figure out how to become more successful in life, don’t try to re-recreate the wheel. Success stories aren’t all the same, but they often rhyme. My first two successful businesses were nothing other than me ripping off other successful business models and giving them a twist of my own. I knew the concepts already worked in other markets and there was, in my view, no reason why they wouldn’t work in mine. I was right. I now live in a place surrounded by entrepreneurs like me. What I discovered was that I wasn’t the only one who took a former employment situation to learn a trade and turn it into a profitable business. MOST successful entrepreneurs that I know did exactly that. And guess what? When a young person asks me how to become an entrepreneur, I tell them to take some jobs at businesses they think are interesting and learn everything they can. Never see a job as just a paycheck. It’s a chance to learn skill sets and perhaps even an entire business model that you can take for yourself and set up shop. No one told me to do that. I just got lucky and discovered this path the way many others did: by accident. But if someone did give me this advice, I might have done things a little differently. Maybe I would have taken a job in private equity as a young man instead of practicing medicine. Who knows? But at least I would have approached life a little differently. The larger point I’m trying to make here is that finding successful people, especially those that are willing to share their experience, is gold. Sometimes you hear them say things that are so simple but fundamentally change the trajectory of your life. Books and podcasts make finding these people pretty easy these days. Sure you can’t ask them questions but there is plenty of life-changing content out there. I’ve talked many times about the paradigm shift I had after reading Robert Kiyosaki’s Cash Flow Quadrant—an experience I call “taking the purple pill”. Dave Liu is one of those guys worth listening to. He is a highly successful guy who made it as both an employee on Wall Street and as an investor. This week’s episode of Wealth Formula Podcast is jam-packed with nuggets to help you succeed at your job, as an entrepreneur and as an investor. Don’t miss it. LISTEN HERE! Dave is a 30-Year Veteran of Wall Street and Silicon Valley. He’s an entrepreneur who has started multiple companies, advisor who has raised over $15 billion for hundreds of companies, and investor in multiple billion dollar exits. He is passionate about advancing new ideas in technology and entertainment, and supporting philanthropic causes for disadvantaged groups. He’s a creator who enjoys writing books and drawing cartoons. He invites you to reach out. Shownotes: How to determine what companies would do if approached with an opportunity What are the opportunities to consider in the post-pandemic era? How do you invest in everything and get exposure to everything? The Way of the Wall Street Warrior

It’s been 2 years since Covid-19 first became the major global topic. I must admit, if you told me back then that we’d still be wearing masks and living our lives with Covid-19 precautions every day, I would have never believed you. So much about this period in time is extraordinary. It’s hard to really appreciate that as we continue to live in the moment while this chapter in history continues to unfold. We continue to see new variants pop up, we see ongoing restrictions to everyday life, and we are starting to see the economic impact of unprecedented monetary and fiscal stimulus including inflation rates not seen in over three decades. Eventually the events during these years will take up a lot of chapters in a lot of history books. And through the lens of history we will decide what we did right and what we should have done differently. Certainly, there were many mistakes made along the way but we also had a lot of successes. One of the most underappreciated accomplishments throughout this period was the extraordinarily fast development of an effective vaccine through the combined efforts of the public and private sectors. New York Times bestselling author, Gregory Zuckerman, provides an inside story of this miraculous success in his new book A Shot to Save the World. I had a chance to interview him about the book for this week’s episode of Wealth Formula Podcast. Don’t miss it! Gregory Zuckerman is a Special Writer at The Wall Street Journal. He is an investigative reporter who writes about various investing and business topics. Greg is the author of A Shot to Save the World: A Shot to Save the World: The Inside Story of the Life-or-Death Race for a COVID-19 Vaccine, published by PenguinRandomHouse’s Portfolio division October 2021. Greg is also the author of The Man Who Solved the Market: How Jim Simons Launched a Quant Revolution, a New York Times and Wall Street Journal bestseller. The book, which is being translated into 17 languages, was shortlisted by the Financial Times/McKinsey and the Society for Advancing Business Editing and Writing as one of the best business books of 2019. Greg also is the author of The Frackers: The Outrageous Inside Story of the New Billionaire Wildcatters, a national bestseller published October 2014 that describes how several unlikely individuals created an American energy renaissance that has brought OPEC to its knees. The Frackers was named among 2014’s best books by The Financial Times and Forbes Magazine. Previously, Greg wrote The Greatest Trade Ever: The Behind-the-Scenes Story of How John Paulson Defied Wall Street and Made Financial History, a New York Times and Wall Street Journal best seller published December 2010. Greg and his two sons wrote Rising Above: How 11 Athletes Overcame Challenges in their Youth to Become Stars and Rising Above-Inspiring Women in Sports, books that are aimed at inspiring young readers with stories of how stars in various sports overcame imposing setbacks in their youth. The books were chosen by Scholastic Teacher magazine as top picks in 2016 and 2017. Greg is a three-time winner of the Gerald Loeb award, the highest honor in business journalism. He won the Loeb Award in 2015 for a series of stories revealing discord between Bill Gross, founder of bond powerhouse Pimco, and others at the firm, stories that led to his departure. In 2012, Greg broke news about huge, disastrous trades by the J.P. Morgan trader nicknamed the “London Whale,” trades that resulted in $6.2 billion losses for the bank. Greg appears regularly on CNBC, Fox Business and other networks and he makes appearances on radio stations around the globe. Greg joined the Journal in 1996 after writing about media companies for the New York Post. He graduated from Brandeis University in 1988. Greg lives with his wife and two sons in West Orange, N.J., where they enjoy the New York Yankees in the summer, root for the Giants in the fall, and reminisce about Linsanity in the winter. Shownotes: The incredible success story of Moderna What is Operation Warp Speed? Why use mRNA for vaccines? The Moderna vaccine patent issue What lessons can we learn from the way we dealt with the current Covid crisis?