Wealth Formula by Buck Joffrey

Latest Episodes:

411: Heads I Win Tales You Lose: The U.S. Banking System Jan 28, 2024

Show notes

The challenge with investing is that you can do everything right and still lose. Unfortunately its supposed to be that way otherwise everyone would take the biggest bets possible all the time and always win. That’s just not reality.

In good times, it is very hard to anticipate what could happen if the unexpected occurs. Over the last 24 months, we saw interest rates rise at a slope never before seen in the US economy. This was just a few months after the Federal Reserve called inflation “transient” signaling that it would not raise rates.

In hindsight, the subsequent rise in interest rates to curb inflation is all clear now but I don’t remember hearing anyone talking about the scenario before it happened.

As a result, many including me lost money and continue to hold our breath as rates start to level out. As much as we hate it, this is the way the system is supposed to work.

The thing is, all of what we are experiencing is going to happen again in one shape or another. Over the next few years, those with ice in their veins will buy when everyone else is scared. And hopefully, they will remember what this feeling we all feel now feels like and sell when things feel too good to be true.

As Sir John Templeton put it, the most dangerous words for an investor are “this time, it’s different”.

It would be easier to accept this fact of investor life if it applied to the big boys as well. But it doesn’t. 2008 was the extreme example. The big banks lost big bets. Had those bets come to fruition, they would have made lots of money. But they didn’t win those bets. And the taxpayer paid for their losses and all of the lawmakers said it would never happen again.

But it did. In 2023, the taxpayer stepped in to bail out multiple regional banks. This time, those banks weren’t even being irresponsible. They were investing in a way that would be deemed conservative. Yet, they too were the victim of unparalleled rate hikes by the Fed.

Lucky for them, they were banks and not individuals like us. What happened with those regional banks and is it likely to happen again? My guest on Wealth Formula Podcast this week is a brilliant Professor at Stanford who was brought in to investigate the regional bank failures in Silicon Valley.

When she talks, the government and people like Jamie Dimon listen. See what she has to say about the current state of the banking system and how it affects you.

Show Notes:

08:29 What is wrong with the banking system?

11:34 What went wrong in Silicon Valley?

13:58 How do FDIC rules work?

24:20 What should have been done in 2008 to prevent this from happening again?

28:28 Will what is happening to Silicon Valley happen to the rest of the country?

31:44 Is it still risky out there?

410: Is Ray Dalio Really Who He Says He Is? Jan 21, 2024

Show notes

My social life sucks. I moved to Montecito in 2017 from Chicago a married man with 3 children. When we got here, I didn’t know anyone.

Luckily, I had my family and was plenty entertained by my three little girls. My now ex-wife also served as social coordinator to make sure we had things to do.

Then with beginning of Covid, my marriage came to an end. Since moving to Montecito, I had been working from home on businesses that had become very successful but I hadn’t worked on my social life at all because that had been outsourced.

So I entered Covid isolation with almost no community or life outside of business. Needless to say, it was lonely. The only good thing that came of it was a lot of success in those businesses that occupied my time.

I used Covid as an excuse while it lasted but the truth is that my social life still sucks. I have not been successful in that aspect of my life. So, I’m not a good person to tell you how to create a successful social life and will not be writing a book about it anytime soon.

So why am I telling you this? Is this some kind of suicide letter? No. I’m too busy with my longevity podcast for that. What I’m trying to do is to simply illustrate that you can be wildly successful in one aspect of your life and an abject failure in other parts.

The funny thing is that for anyone successful, it is very difficult to truly assess what they are good at and what they are not from the outside.

Take a look at Tony Robbins. Is he a success? He’s a great communicator. He’s helped a lot of people and made a lot of money. But he’s been married multiple times and who knows how his relationships are with his children.

But if Tony Robbins wrote a book on marital a bliss, it would be a New York Times bestseller. Why? Because he’s Tony Robbins and he is a successful guy that people want to listen to. But, like the rest of us, he’s far more successful in certain parts of his life than others.

Similarly, hedge legendary hedge fund manager Ray Dalio has written multiple books on “principles” for investing and for life. Dalio is certainly as qualified as anyone else to talk about money.

But why would we assume that his success translates over to anything else? In fact, there are plenty of people who have worked with and for him who consider his principals outside of investing to be a failure at best and downright fraudulent at worst.

So why would people buy books by Ray Dalio that don’t involve money? Because, again, he’s a hugely successful person and people want to learn how to be successful.

The challenge for everyone is to look at any of these god-like figures and to understand that they are human with all sorts of flaws. And while we may be able to learn some things from them in which they excel, we shouldn’t translate success in certain parts of their lives to suggest that they’ve got it all figured out.

My guest on Wealth Formula Podcast today wrote a book on Ray Dalio that tells the story of a man who may be quite different that the image he has created for himself. It certainly has pushed a button for Ray Dalio as he has threatened to sue the author and has thrown back fiery accusations about him.

It’s a fascinating story that you are not going to want to miss. Tune in to this week’s Wealth Formula Podcast as I interview Rob Copeland, the author who has thoroughly pissed off Ray Dalio!

Show Notes:

00:08:29:06 Who is Ray Dalio really?

00:13:15:03 What made Ray Dalio a successful hedge fund manager?

00:14:53:09 Alpha vs Beta returns

00:18:05:22 The Dark side of Ray Dalio

00:22:42:19 Can Ray Dalio really predict the zombie apocalypse?

00:27:12:16 Getting sued by Ray Dalio

409: You Will Own Nothing and You Will Like It: Carol Roth Jan 14, 2024

Show notes

As you may know, I have three daughters aged 14,11 and 8. The oldest, Camilla, is now in high school.

For those of you who have been listening for me for a while, yes, that was the little girl who did an introduction for episode 100. We are all getting older by the minute.

Anyway, recalling that it was at around her age that I began to think about the world in a greater context than simply ice hockey and food, I have begun trying to have more meaningful conversations with her.

Recently, I decided to talk about the political science definitions of conservative and liberal to help her start understanding the basics of political theory.

I told her that conservative ideology values the individual and advocates for small government. I quoted Ronald Reagan who once said, “The nine most dangerous words in the English language are ‘I’m from the government and I’m here to help’.”

Liberal ideology, on the other hand, puts greater value on the collective whole of a people over the individual. In such a belief system, the emphasis on equality trumps individual achievement and focuses on the redistribution of wealth via government services to serve everyone.

While you know that I have a bent toward conservative ideology, I did not try to persuade her one way or another. I was just trying to teach her the difference.

My goal for her was to simply think about her own opinions and share them with me. But she wouldn’t. She got very uncomfortable. And, when I pushed her on why, she admitted that it had to do with the fact that her mother and I don’t agree on some of this stuff.

The funny thing is that while her mother and I certainly do disagree on some political issues, we never fought about it and it was never an emotional issue. But these days, it seems that political disagreement means that you can’t be friends or family anymore. Disagreement has been replaced by disagreeable.

That’s a shame because these discussions are incredibly valuable for people to discover their own true values rather than to simply cling to tribal political party instincts. Sure I’m a conservative, but I have plenty of disagreements with the current “conservative” Republican Party. For example, the party has shifted away from fiscal responsibility, free trade, and civil liberties—all of which are tenets of true conservative ideology.

Having more open discussions about politics without emotion would be good for everyone. It would also help people to understand what is happening on the global stage.

While America has been the Mecca for the individual since its inception, it is starting to move in the direction of a more liberal global arena that values personal achievement and success less than the whole. The growing popularity of political figures such as Bernie Sanders in the last election cycle supports that.

My guest on the Wealth Formula Podcast is a best-selling author who has been sounding the alarm on the coming of this new world order where you will have everything you need but nothing will be yours.

Is she being an alarmist or is this a real concern? Decide for yourself on this week’s episode of Wealth Formula Podcast.

Show Notes:

00:08:52:20 Movements that are trying to stop personal wealth creation

00:12:18:02 Players in the financial world war

00:14:56:08 Private ownership = wealth creation

00:17:16:01 How is Wall Street working against us?

00:24:13:18 Thoughts on the wealth tax

408: Boring is Good: The Case for Self Storage Jan 08, 2024

Show notes

For those of you who have participated in our self-storage offerings in the past with Reliant Real Estate, you know that you can make a lot of money in this space. One of our deals, while not planned this way, nearly doubled investor equity in less than a year.

Those kinds of returns are sexy but self storage itself is NOT sexy at all. It’s just where people keep there stuff when there’s no room for it in the house. But in times like these, boring is good. In fact, when it comes to business, boring is a very good quality in all seasons of the business cycle.

Self-storage facilities have historically shown resilience during economic downturns. Unlike other real estate investments, they often experience steady demand even in challenging economic conditions, as people downsize, relocate, or seek temporary storage solutions.

Everyone needs storage space whether in urban areas where living spaces are smaller, or in suburban and rural areas for personal or business use.

And from the standpoint of the owner of these facilities, it takes advantage of one of the major characteristics of mankind—inertia.

Do you have stuff in storage? I do. How badly do I want to move that stuff to another storage facility in order to save $10 per month? Not nearly enough.

That’s why those rents creep up over time without losing much in the way of occupancy. It’s a great business model if executed well.

Reliant Real Estate has done it well for several years and, although I am not partnering with them on their current fund, I am investing in it and promoting it for them as I think it represents a really good opportunity with minimal risk.

This week on Wealth Formula Podcast I wanted to make sure I got Kris Benson, Reliant’s Chief Investment officer on the show because there are just a few weeks left before the fund closes and I wanted to remind you of that while reviewing some of the key elements of this unique real estate asset class.

Show Notes:

00:04:04:09 The story of self-storage

00:06:56:17 The inertia behind the self-storage business

00:13:51:17 How has the run-up of rates and inflation affected self-storage?

00:16:55:15 How does debt work in self-storage

00:19:51:02 Institutional vs. mom-and-pop

00:23:12:10 The current reliant fund opening: https://reliantfund4.com/

407: New Year, New Business? Dec 31, 2023

Show notes

Wealth Formula Nation,

Happy New Year! I have a feeling that 2024 is going to be a good year for us.

I think we are going to pick up quality assets at a discount like it’s 2012 and liquidity will come back to the real estate markets.

I’m also eager to develop our own investor platform into a more diverse investment source. Real estate will always be our bread and butter but there will also be other opportunities in which to invest that will be vetted by our world-class due diligence team.

You’re going to new opportunities in sectors like commercial aviation and even business mergers and acquisitions led by Zulfe Ali who used to do that for a sovereign wealth fund.

With the New Year, you might also consider whether you might want to start a business of your own. As you know, I am a strong advocate for business ownership.

And while doing a creative start-up is not everyone’s cup of tea, there are an increasing number of ways to get involved with business utilizing the skills you do have.

One of those options is franchising. We’ve talked about franchising on this show before but I recently met a guy who wrote the most popular book on franchising ever published.

He didn’t try to sell me on franchising at all. Frankly, I left the conversation thinking he probably talked me out of it. But that’s also why the coaching clients he does have seem to do as well as they do.

Is franchising right for you? I think this episode of the Wealth Formula Podcast will really help you figure it out using some very good self-assessment questions. If it is, this could be one of the most exciting years of your life as you embark on a new business venture.

Show Notes:

00:05:50:22 What exactly is franchising?

00:10:36:15 Stats on franchising

00:14:48:02 The personality type that fits franchising

00:21:16:21 Does franchising have to be a full-time job?

00:26:47:09 The scalability of franchising

00:33:14:19 What are people franchising these days?

00:34:34:15 Green flags and red flags

406: Wealth Without Wall Street Dec 24, 2023

Show notes

When I first started podcasting a decade ago, I was very anti-Wall Street. But what does that even mean? I guess I hadn’t really contemplated that.

My show started not long after the financial meltdown of 2008-2009. For many of us, the greed that was unveiled during that period was eye-opening as we saw major institutions fold losing ordinary people their life savings yet the architects of the disaster floated out of harm’s way with golden parachutes worth 100s of millions of dollars.

That, to me, was Wall Street and I wanted nothing to do with it. Actually, to be honest, I didn’t have anything to do with it anyway. I had just finished surgical training and didn’t have any money to lose.

But…It did emphasize a concept to me that I grew up with anyway. As the son of a scrappy immigrant slumlord, I knew that there was a different way of creating financial success than simply handing it over to wealth managers that were part of the traditional financial “Wall Street” paradigm.

These days I think I’m a lot more level-headed in my views. I don’t see traditional public equity markets as empirically evil. I am also acutely aware that investing outside of Wall Street has its pitfalls too. You can and will lose money investing outside of Wall Street as well. And while you may avoid the greedy CEOs responsible for the mortgage meltdown in 2008, you also have to avoid the charlatans that inhabit the wild west that is private investing.

What do I mean by that? Well, the economy did a number on a lot of us and we lost money fair and square so to speak. That’s going to happen. But there were also multiple Ponzi schemes and downright terrible business models that were poorly vetted by unsophisticated capital aggregators as well.

The point is that there are landmines everywhere. Pick your poison. The good news is that you just need to win most of the of time. That’s what I have been able to do over the past decade and as a result, by most measures, have become a financially wealthy individual.

That said, I’m always striving to become better as an investor and a lot of that revolves around understanding my own strengths and weaknesses and trying to especially compensate for weaknesses.

For example, I know that I want to diversify my holdings outside of real estate a bit more. I am about 80 percent real estate now. So I’ve gotten Zulfe Ali involved with our platform who is world-class at evaluating businesses as the former chief investment officer for a sovereign wealth fund. This will be good for me and it will be good for Investor Club in the coming years.

I also am thinking about potentially starting other businesses—possibly a franchise or some other low-time commitment endeavor. Why? Well, it’s fun for me and I know that I have a track record of success in business. And, again, I could use the diversity.

Remember, personal finance is personal. There’s not a single recipe for success. The principles of wealth building are pretty constant but the ways people generate the cash to build that wealth is limitless and I encourage you to consider taking a deep dive for yourself on this topic.

You may find that remaining purely passive as an investor is what suits you best and that simply diversifying your assets is all you need. On the other hand, you might discover an inner entrepreneur who wants to come out and shake things up a bit.

My guests on Wealth Formula Podcast today emphasize the differences between investor types which I think might be useful as a topic on which to drill down a bit. They call their show Wealth Without Wall Street and we discuss this and many other interesting concepts on this week’s episode of Wealth Formula Podcast.

Show Notes:

00:10:53:05 When did Wealth Without Wall Street begin?

00:12:21:13 What is the business behind the podcast?

00:14:18:12 Who is their avatar?

00:17:28:10 Owning a job is harder than working one

00:19:00:14 What is their primary content?

00:21:03:20 What have they learned along the way?

00:25:09:23 The analysis tool they use

00:34:25:05 Advice for people who don’t have money to invest

00:38:36:04 Frameworks for investing

405: Another Perspective with the Cash Flow Ninja Dec 18, 2023

Show notes

During college, I spent a summer working in a laboratory at the University of Chicago where my biochemistry mentor did his PhD. The lab studied prostate cancer and was the legacy of Charlie Huggins, a surgeon who won the Nobel prize for discovering the testosterone dependence of most prostate cancers.

The guy who took over that lab was his protege Shutsung Liao who did some trailblazing work of his own. He was brilliant and for a young biochemistry geek like me was fascinating to be around. He thought differently than most. His thoughts were original.

And that’s what he demanded of people in his lab. In fact, one of the particularly unusual philosophies he had for his postdocs was “do not read too much”.

He felt that reading others work had a role in learning what was known but also could be detrimental in that it could unduly influence the direction of one’s own thoughts. In other words, he didn’t want his postdocs to simply follow and expand on the ideas that others were proposing. He wanted them to have their own ideas.

That idea has always stuck with me and I was reminded of it the other day when a fellow podcaster asked me which podcasts I listen to. He, of course, assumed that I listened to a bunch of other personal finance shows.

I listed my top shows for him which included Purple Daily (Minnesota Vikings Football) and The Drive with Peter Attia which is about health and longevity.

The truth is, I don’t listen to any other investing shows. I used to, but I realized it was a little bit of an echo chamber in the alternative investing podcast ecosystem. And just like Dr. Liao warned about in that cancer lab, I started just saying and believing what other podcasters were saying.

I’m fortunate enough to be interviewing economists and other smart people every week so I’d rather formulate my own ideas based on what I learn from them. One thing is clear, they don’t agree with each other!

For those of you who listen to me, I highly encourage you to listen to others—especially those who do not agree with me. It’s important to hear the ideas of multiple sources when it comes to something that you want to know about.

Economics is not a hard science. It is a social science based on theory. Similarly, personal finance is…personal. So it’s best to learn many different perspectives and philosophies out there and see what resonates with you.

And sometimes, it’s good to get together with others and compare notes. And that is exactly what I’m going to do on this week’s episode of Wealth Formula Podcast. I am going to sit down with another well-known financial podcaster and see what he’s been hearing on his end.

Exposure to different thoughts is critically important when you make important decisions in your life, like what to do with your money. So make sure to listen in to this week’s interview with MC Laubscher aka The Cashflow Ninja and see what he has to say.

Show Notes:

00:09:34:09 Where are we in the economy?

00:19:56:18 What to look for as indicators of how the economy is doing?

00:24:51:06 Permanent life insurance in volatile times

00:32:16:16 Don’t let losing make you too scared to invest

00:37:05:09 Changes in tax code

00:47:02:06 Diligence in the cashflow world

404: An Update From AHP Servicing With Jorge Newberry Dec 14, 2023

Show notes

In this bonus episode of Wealth Formula Podcast, Jorge Newberry shares with us some background on what’s been happening with AHP as well as his perspective on real estate and the debt market.

403: The Tax Case in the Supreme Court That You Must Know About Dec 10, 2023

Show notes

You know what drives me crazy? Politicians talking about how rich Americans need to start paying their “fair share”.

First of all, they aren’t really taking about the rich. They are talking about you—the high paid professional.

To be clear, if you are making $400K-$800K per year as a W2 wager earner, you’re doing well for sure. But you aren’t rich. Yet, you are the one that gets vilified and gets destroyed by the tax code the most.

And let me ask you a question. Do you think you are paying your fair share of taxes? In California, you’d be paying a tax rate of over 50 percent. I bet you don’t think that’s fair either. At least you can agree with those politicians on something!

Then there is the estate tax. For those of us who have done well in our lives and paid taxes along the way, there is an extra kick on our way out. Its punitive—again taxing over 50 percent on money that has already been taxed.

Do you think the government deserves that money or your family? I think I know the answer. And if you think that you aren’t rich enough for the estate tax think again. Those numbers are coming down next year and there are many who would like to see it start as low as $1 million estates. This will affect you if you don’t plan for it.

Luckily there are groups like the National Taxpayers Union (NTU) Foundation out there that are looking out for us.

In fact, there is a case about to go in front of the supreme court shortly that could have profound affects on your investments. The case is called Moore v U.S. and it is something you should absolutely know about.

To help you understand what the stakes are, I invited NTU member Joe Bishop-Henchman to explain it to us on this week’s episode of Wealth Formula Podcast.

Show Notes:

00:07:47:12 Moore VS U.S.

00:10:21:01 The main arguement

00:15:17:18 What happens when either side wins?

00:20:10:24 What is defined as realised gain?

00:24:37:07 Implications of the ninth circuit court case

00:29:48:10 When can we expect a decision?

402: Investing with Benefits: Real Stories from Wealth Formula Nation Dec 03, 2023

Show notes

As the end of the year approaches, many of us are thinking about ways to mitigate our tax liability for 2023. Unfortunately, this year there is not a whole lot in terms of options.

The IRS has clamped down on syndicated conservation easements and anything resembling it. If you are being talked into something like that, I would suggest you be very careful. Anyone selling them at this point is not looking out for your welfare.

Similarly, although captive insurance is a legal right of every American, the IRS has made it its mission to audit them. It’s almost as if the IRS has become a branch of government that ignores the legislative process completely.

So what can we rely on? Oil and gas? No thank you. I’ve never made money in oil and gas and would have been better off just giving my money to charity. The space is also ripe for charlatans.

At this point, you are pretty much left with investments that will give you some depreciation and that only helps you if you have passive income to offset.

Real Estate opportunities have been far and few between. We have had one in 18 months and that is currently on waitlist. If you are an accredited investor feel free to check out that webinar at JoffreyCapital.com. You might get lucky and get in.

So, what’s left? Well, prepaying things for next year is not a bad idea. I used to prepay advertising for my now defunct cosmetic surgery office. If you are into deferred accounts that will give you some relief as well.

There is one more option and that is simply to invest your money without significant tax benefits. Sometimes, as much as it pains me to say this, paying the tax is the right thing to do.

After all, you can safely invest in a fair amount of stuff right now that is yielding pretty well. It’s just not tax efficient. For example, you can put your money in CD’s and get over 5 percent.

Or, like me, you focus on life insurance products like Wealth Formula Banking or the Wealth Accelerator (hyperlinks to WFB site).

There are many advantages to these kinds of policies that have been characterized as “investing with benefits”. The benefits are often significant and under-appreciated as I have tried to point out on numerous occasions.

But don’t take it from me, take it from others who are doing the same thing and see if there is a line of reasoning resonates with you.

These types of policies should probably be apart of every portfolio in my opinion. And in this week’s Wealth Formula Podcast you’ll hear why—not only from me but from other Wealth Formula community members.

Show Notes:

00:07:06:15 What is Wealth Formula Banking?

00:13:19:07 What are the reasons why investors have chosen Wealth Formula Banking?

00:21:57:20 How have investors been using Wealth Formula Banking?

00:30:30:19 Amplifying your retirement strategy

00:47:57:06 The Wealth Accelerator

00:57:10:22 Advices from fellow investors