Wealth Formula by Buck Joffrey

When I was in high school, I used to BLAST Led Zeppelin on my drive to school. My favorite album was Led Zeppelin IV. My music tastes haven’t changed much since then. In fact, my music repertoire pretty much ends 1992–the year I graduated high school. Even ’92 is a bit late for most of my favorite music though. My wife, on the other hand, generally likes the newer stuff. But last month, I converted her. I had her watch a documentary on Led Zeppelin and she was hooked. Our theme song for the month became “Going to California” because of our impending move to Santa Barbara. By the time you get this message, I will already have moved. This is the last Wealth Formula Podcast episode recorded in Chicago. For those of you who have been listening to my show from the beginning, you can hear the seeds planted for this move in episode 14–almost exactly one year from today! This week’s episode of Wealth Formula Podcast is reflective. If you listen to this episode and episode 14, you will see the power of goal setting in action. I feel very strongly in the idea that you must practice what you preach. If I tell you to take action and ask you why you are not living the life you want, I have to ask myself the same thing. That’s exactly what I did and now I am seeing the results of that vision. How about you? What’s your ideal life? How are you going to make it happen? Remember, you have to know where you’re going before you make a plan to get there. Start by listening to this discussion with Zed Williamson. Buck

Several weeks ago, I sent out a “Weekly Wealth Widget” about BASIC estate planning–the stuff you absolutely have to have to protect your family in case you die. I was amazed at the high percentage of people who did not already have this information. That’s downright scary. Listen–no one likes to think about dying much less planning out what happens when you die. Hopefully you live to be 120 but what if you don’t? Do you have young children? What would happen to them without you or without your spouse? Before wealth comes safety and security. Safety and security should be planned with not only the here and now in mind, but also with careful consideration of the worst case scenario. This week’s guest on Wealth Formula Podcast is one of our country’s foremost experts in both estate planning and asset protection: Kevin Day. So, unless you are 100 percent sure you and your family are covered, DO NOT MISS this show!

I have been on a real anti-conventional wisdom kick lately if you haven’t noticed. You see, I think that conventional wisdom in personal finance is a big Wall Street scam! Invest in stocks, bonds, and mutual funds for the long run? Why is that conventional wisdom? Well, who benefits if you continuously dump money into the equity markets? The market MAKERS of course! Make no mistake, conventional wisdom can be manipulated by special interests folks. Just look at the sugar industry. In the 1960s, Harvard Scientists were paid off by special interests of the sugar industry to suppress any link between sugar and heart disease. The result–the food pyramid! The food pyramid showed starchy foods like bread, pasta, and cereal as the BASE of the pyramid–the food you should consume the most. Decades later, this guidance has led to an increase in diabetes, obesity, and coronary artery disease. Like the food pyramid, dependence on the equity markets for the long term will likely have consequences to your financial health–but it will be great for the on going pillage of your money by the market makers. The market makers–ie. Wall Street and their minions, the wealth advisors, make money by taking your money. If you don’t put your money in the market, they can’t do that. That’s why real assets like apartment building investments get labelled “alternative”. Alternative doesn’t sound very safe, does it? It sounds exotic and well…risky. Who wants to invest in risky stuff when your money manager can get you into a diversified portfolio of stocks, bonds, and mutual funds? Doesn’t that sound safer? I could go on all day about this stuff by I will spare you the rant. Instead, I will direct you to this week’s Wealth Formula Podcast interview with G. Edward Griffin, author of The Creature from Jekyll Island. If you have never heard of G. Edward Griffin, you need to listen this podcast. Hint: The United States Federal Reserve Bank is neither a government institution nor a bank! Buck

If you haven’t figured it out yet, I believe strongly that investing is a team sport. Like team sports, it can be fun and rewarding–especially when you win. I talk to investors in Wealth Formula’s Accredited Investor Club all the time and often hear the frustration of those interested in investing outside of the equity markets–they have no idea where to turn. They know they want something different, but they don’t know how to start. Does that sound like you? Well, I have spoken about this in the past, but the key is to find your team–or perhaps better to call it a tribe. You need to be around people who you know, like, and trust and you need to be around people who have different skill sets than you do. The power of that kind of tribe is priceless. Most of you are on an island. You are successful and live amongst other successful professionals. However, you do not buy into the conventional wisdom of personal finance that your colleagues believe in so you listen to shows like mine for alternative thinking. That’s a great place to start but there is no replacement to get out there and actually meet other people of like mind. The power of tribal investing is perhaps no more evident than in the area of angel investing. Angel investing has created enormous wealth in this country. However, if you don’t know what you’re doing, you will get raked over the coals. The good news is that tribal investing is alive and well in the area of angel investing and, even if you have no experience at all, might be something in which you too can participate and profit from while having a lot of fun in the process. Make sure to listen to this week’s Wealth Formula Podcast as I interview super angel investor David S. Rose (http://angelinvesting.com/) to learn how, you too can be an angel investor! Buck

As many you know, I will be leaving Chicago in August to move to Santa Barbara, CA. For the last 5 years, my family and I have gone to the same beach house every August. It always ends up being the best couple of weeks of the year. So last year in August, I did a podcast from that beach called, “What is your dream and WHY aren’t you living it???” It was episode 14. I was in an aspirational mood. We were having a great time again. My little girls were playing on the beach and we were eating great Mexican food every night and falling asleep to the sound of the Pacific Ocean. At one point on that trip, I told my wife it was time–time to stop making this a vacation that we looked forward to every year and to make it our life. She asked me, “Can we really do that?” and I said, “Of course we can. We can do anything we want to do.” Of course, what she meant was–could we do it financially? After all, all of my businesses were in Chicago for the most part and I still went into the office at least 2-3 times per week. It was a very logical question. But–in typical Buck form, I just made the decision and decided to worry about the details later. Now, that may sound a little crazy to many of you–maybe even down-right irresponsible right? How can you just make a decision to move before having a clear plan on how to get there? Well, I would actually argue that the way I went about things was the right way to do it. If you decide to go somewhere on vacation, what do you do first? Do you first figure out where you want to end up or do you start the process by looking for airline tickets? Obviously you’ve got to know where you want to go before you figure out how you are going to get there. Similarly, I just decided that we were going to move and I had a year to figure out how to make it happen. The podcast I did was mid-August last year and we will be moving almost exactly one year to the date. You see, most of the limitations we see in our lives aren’t real. We make them up for ourselves and then we believe them. It’s a terrible problem that most people have to some degree. The problem is that, if not recognized, these artificial limitations can keep us from meeting our potential or simply being happy. There is no one who knows this better than, this week’s guest on Wealth Formula Podcast, Dean Graziosi. He is truly a rags to riches story and he is one of the most inspiring people I have ever met. DO NOT miss this episode! Buck  

I have a lot of people in Investor Club who lend to flippers. These notes pay pretty well–I hear over 12-15 percent on a regular basis. These investors ask why they would ever invest in anything with less return. It’s a fair question but there is a very good answer. When you lend to people who flip homes, you are investing in a business NOT in an asset. Investing in businesses is inherently riskier than investing in an asset such as real estate. As a guy who starts businesses, I know that instinctively. I have had businesses that threw off 7 figures of profits one year then were in the red the following year. The multiple variables involved with businesses such as markets, competition, and management make it a much more volatile endeavor than investing in an apartment building where people have to live–hopefully you can see the difference. It is also from my experience as a guy who starts businesses that I have noted that there is often hidden variables within a business that dictate their success that people from the outside cannot necessarily identify. With some of my businesses, this relates to my own instincts as a marketer and directing our marketing initiatives. If I sell a business that relies heavily on my special skill set, the person buying it has to be able to make up for that special skill set or they may not see the same results. Suffice it to say that that knowledge has kept me from purchasing businesses as investments. My conclusion is that I am better off starting businesses from scratch. The exception to this thought process is buying a larger business. For example, a business with a $50 million revenue with management in place sold by a passive owner might be appealing. The problem is that a business like this might have a yearly profit of $10 million and therefore might cost me $50 million to purchase. I don’t have that kind of money–yet. It might be something we do as a syndication in investor club at some point however. If you’re a savvy investor, you probably noticed that I used a multiple of 5X times profits to determine the cost of this theoretical business. For businesses, that would not be out of the ordinary. Is that high or low compared to real estate? Well, D class apartment buildings (no money no credit crowd) might be trading at around 10X profits AKA a cap rate of 10–so that building with a net operating income of $10 million might be worth $100 million or more compared to the $50 million you paid for a solid business. In other words, if you know what you are doing, buying businesses can potentially be very profitable. It is something that I have not done but almost certainly will do in the future. My guest on Wealth Formula Podcast this week, Victor Menasce, has a lot of experience in this area. I invited him on the show to tell us a little bit more about buying businesses. Make sure to tune in–you never know when you might learn about your true calling as an investor!

In 1789 Benjamin Franklin wrote, “Our new constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.” Well, if you have paid attention to any of my emails and posts in the last couple weeks urging you to download a report and watch a webinar from my friend, Tom Wheelwright, then you know that statement from Ben Franklin may only be partially true. Tom Wheelwright, who also happens to be Robert Kiyosaki’s CPA has shown how it is quite possible to legally NOT pay taxes. If you did not take advantage of this information, then that’s your loss. But I can tell you from personal experience that what Tom Wheelwright is TRUE! On the other hand, as of 2017, DEATH IS STILL GUARANTEED. I can tell you this with some confidence, because I am a physician 🙂 And if you think that life expectancy always increases, you are wrong. For the first time since the 1990s, Americans are dying at a faster rate, and they are dying younger. Americans are also sicker compared to people in other “rich” countries and in some states, progress on chronic diseases like diabetes has actually reversed. I have my theories on why this is happening but suffice it to say that it is. Now, when we think about investing, we often like to know what the “guarantee” is. What is the investment secured by? We don’t want our investments to be unsecured. That’s why it’s nice to invest in something that is correlated with something real, like real estate, on which we can hang our hats. Now, what if you could invest in something that was backed by something guaranteed more so than any real estate or other tangible asset–something that was guaranteed in all economies, good and bad and regardless of the equity or real estate markets? Well, it is possible to do that. You just have to invest in something that is guaranteed by death. That may sound morbid to some of you, but the richest people in the world have been using a technique for decades unknown to the rest of the 99.99 percent of us that might be the ultimate investment hedge–it’s an asset class called life settlements. Sound interesting? Then, listen to this week’s Wealth Formula Podcast, and become one of the very few people on the planet to know about this unique asset class! Buck

The other day, I was speaking with a member of investor club and he said that it was very hard for him to look around and see funds (like AHP) that were offering double digit returns and take them seriously. He was comparing them to the low single digits of dividends in the equity markets. If double digits were available to people outside of the markets, why in the world would people buy bonds, he wondered. I actually hear this more often then you might think. Why? Because we have been brainwashed by Wall Street! They want you to think that getting returns higher than 4-5 percent is associated with only HIGH RISK INVESTMENTS. I know fund managers that could and would pay out double digits to their investors but don’t because they do not want their funds to be perceived as “too risky”! Folks–you are getting ripped off and you need to wake up. How do I know that you can make high returns with low risk? I OWN ZERO STOCKS, BONDS, AND MUTUAL FUNDS and I’m doing pretty well! But don’t listen to me. Listen to Richard Wilson on this week’s Wealth Formula Podcast. Richard is the founder of Family Office Club and works with $100 million plus net worth families. When you listen to what he has to say, compare it to my message and come to your own conclusion.

Last week, my wife and I took our daughters to a town fair. We stayed until the end and as we were walking out were offered free cases of blueberry yogurt drinks and bottled ice coffees–whatever was left over from what they couldn’t sell at the fair. At my urging, my eight year old daughter Camilla accepted all the free inventory and decided to put up a stand outside the house selling the stuff–instead of a lemonade stand she was going to sell kafir and bottled coffee. Next, she needed staff so she hired her little sisters (4 and 2) and mom as contractors for $1 a piece (I negotiated the contracts for her). At this point, she knew that she would need to sell at least $3 worth of drinks to break even. While it seemed daunting at first, she began to see the potential upside and got very excited. She almost gave up after the first hour with no customers but I had to remind her that she would still be on the hook to pay her employees. Pretty soon, her luck started to change and by the next hour she had broken even. Then there was another grueling 30 minutes of waiting and she started to get a little nervous. Maybe it was all a big big waste. Maybe she should have taken that dollar as an employee since it was “guaranteed” and let her 4 year old sister be the entrepreneur. But as I often say, the key to business is sticking around long enough until the next time you get lucky. My daughter saw that for herself when 4 of the neighbor kids came out of no where and raided her inventory. Before she knew it, she had now collected $20 in total and she was super excited. In fact, we decided to call it a day and quit while we were ahead. However, before that, she had to pay her sisters and her mom so she was down to $17. Then I told her she had to pay me half of that in taxes. That’s a very quick way to teach a child about taxes! Anyway, she actually did learn a lot from this exercise and I am now thinking about a future in which rather then giving her an allowance, I buy her inventory and make her sell it. What do you think of that? Inventory could mean anything obviously–I would let her figure out what she could sell and buy that for her. After all, that’s real life. If you want to be successful in business, you have to figure out what people want or what they need. A successful business comes down to either providing something that solves a problem or pain OR entertainment. We usually don’t talk much about entertainment as an asset, but it is indeed a very powerful and potentially lucrative asset class to consider. My guest on Wealth Formula Podcast this week has a very elegant business that focuses on this. Make sure to tune in this week to find out how you can collect royalties by owning songs.

I keep reading about how the equity markets are bracing because of all of the things going on in the news–senate hearings on Trump and Russia, the referendum in the UK, and the fed about to raise rates again. People are worried about how these national and global events will affect their retirement money. Never mind the fundamentals and that price to earning ratios are at record highs for no apparent reason. Instead, the markets are bracing for commentary on events that have nothing to do with your stocks in apple and GE. By definition, that is irrational. The equity markets, my friends, are irrational. By the way, my apartment buildings don’t seem to care about any of this. I guess they lack feeling. In the meantime I recently saw an article from a “thought leader” on physician finance who I have interviewed on this show write about how you need to keep dumping money in the markets because you are going to get a 7 percent yield with the goal of retiring with 1/4 of your current income–he called that “financial freedom”. His philosophy is typical of conventional wealth management–just do it! Invest and it will grow. That is not how you get wealthy folks. That’s a great strategy for nike, but not a wealth strategy you should rely on. That is how you will end up dying broke. For all of you doctors dentists and other healthcare professionals out there, I need your help spreading our message. Send my book to your friends and coworkers. Invite me to talk to your colleagues. I’ll come. This is my mission ladies and gentlemen. Listen, I’m not a permabear. I don’t think the sky is falling all the time. In fact, there is always something to invest in any economic cycle. Just don’t be a lemming! Educate yourself and use reason. Now, my guest on Wealth Formula Podcast this week has built significant wealth on betting against the economy. He is a former economic policy advisor to Ron Paul and is probably best known for his prediction of the housing meltdown in 2008. Make sure to listen to my interview with Peter Schiff. Buck