Episode 112 of Plan For Life Now is definitely for you!
Steve:
Welcome to Plan for Life. Now, episode number one 12. Dave, we’ve taken a little bit too long to do another one of these podcasts. The fans out there. There were grumbling.
Dave:
There was some grumbling.
Steve:
Yeah, and I can’t blame ’em. I mean, it’s been about six weeks since we’ve done a podcast and don’t really have any good excuse for it. We’ve been busy.
Dave:
We’ve been busy, but that’s the nature of, I mean, it’s not, this is something we do for fun and information mainly for our clients. And of course the vast listening audience, which I believe regularly hits triple digits.
Steve:
Do you want me to check that while we’re talking here? I can check it for you.
Dave:
One of the ways to get your listenership down is to not do one for six weeks.
Steve:
No, you’re creating scarcity and I don’t know if it works like that. All right. So yeah, we probably have been busy. Well, that was me. I don’t know. Could you hear that?
Dave:
I heard a little scuffling.
Steve:
I was trying to click on our last podcast to see how many listeners we had and started to play. So yeah, no excuse. I mean, I guess we’ve been busy always. People always ask me, what are your busy times of year? Busy times a year tend to be in the fall. Right after the summer ends. People say, oh my gosh, I haven’t done anything. I should really do something right after the new year. So once again, I’ve been busy with Thanksgiving, Christmas, Hanukkah, I should do something. And then around tax time tends to be busy just because people are thinking about their money and their investments. So yeah, we’ll blame that, but it was definitely tax time. That was the reason. And it
Dave:
Is our busy, I mean, it is true though. It’s spring and fall seem to be busier.
Steve:
Alright, so before we dive into your article that you brought up, that I think is really good, I did want to loop back something we talked about in the last podcast was a book review that I did before I had read the book, which is always a little bit dicey reviewing a book before you’ve read it. But I was basically going off of other reviews that I had read, and this was the Tony Robbins rate. I’ve already forgotten the name of it. What was it called? Master Your Wealth.
Dave:
You’re asking me, come on,
Steve:
I I’ll find it as I’m talking here. Something like that. Master your Wealth. And it was interesting because Tony Robbins, as most people know, personal, what would you call motivational speaker, personal guru guy. And he’s uber, uber successful doing all of that stuff. But he has ventured into personal finance and I think this was his third personal finance book. So I guess he just didn’t get it out of the way. Whatever he had to say in the first two books, wasn’t enough needed to come back for a third. And as I mentioned before, I had actually read the book, it was co-written by a financial guy, and it sort of seemed like it was all one big sales pitch for this.
So another confession here, I couldn’t make it through the whole book. I couldn’t finish it. Right. I got through, they have it broken down into segments and I got through the bulk of the recommendations and the rest were kind of quotes and anecdotes and things like that. And it was like once you’d heard a couple chapters of it, a lot of it was the same. But here are the big takeaways, the things that stuck with me that I thought were strange, I guess I’m not going to say they’re wrong or they don’t exist or anything like that. They struck me as odd. One of Tony’s recommendations or investors out there, right? This is mass affluent people. We’re not talking, this is not geared towards other, I don’t know. Do you think he’s a billionaire?
Dave:
Maybe Tony Robbins? Yeah. Based on his financial advice and the way he thinks, I would say he’s at least a half billionaire, at least a 500 million net worth guy.
Steve:
Yeah. Frankly, I think hundreds of millions once you get to a billion, just, I don’t know. It sounds better to me. Hundreds of millions.
Dave:
You know what Bill Gates said? I’m not going to interrupt you. Bill Gates said, and again, this doesn’t really play with the masses, but he basically said once my net worth was $10 million, it didn’t matter anymore.
Steve:
Oh yeah.
Dave:
It just didn’t matter. I really haven’t thought much about it since 10 million, which is like, okay, now all I got to do is get to 10 million.
Steve:
Yeah. Wow. That is, I think we all know plenty of people who are worth $10 million. They’re not flying on private jets anytime they feel like it.
Dave:
I think that’s a disturbing comment for the 4 million net worth people that’s like, oh, I thought I was happy. Now. Okay,
Steve:
So here were, this is not in any way supposed to be an all inclusive synopsis or summary of Tony Robbins book, but these were the two things that really struck me as interesting. He goes through this very long detailed explanation of why private equity is the place to be. And if you don’t know what private equity is, here’s the real quick synopsis. We all know publicly traded companies, we can list off dozens, hundreds, thousands of ’em, apple, Google, Walmart, those companies are publicly traded. They have stock that trades every single day on the stock exchange. And you can look up every second what the price of that is. Private equity are companies that are not publicly traded and they don’t have stock out there. They don’t have to publish their earnings reports, all of that kind of stuff. And there has been a definite uptick in the number of private companies versus public companies over the last 20 some odd years and a variety of reasons.
People talk about tighter accounting requirements and all that. But his argument was you should buy stakes that are called general partner stakes in these private equity firms that are investing in these private companies. And that sounds great. I mean, I like that idea. You give all these arguments, but when I start to look into it and dig into it in practice, this is not an idea that’s just only Tony Robbins knows this and he’s only sharing it with a couple of friends. Everybody knows that these are good investments. Why would they be just selling them to mom and pop investors Main Street? It’s just, once again, it comes down to, well, his co-author is packaging these and selling these. I don’t know the details, so I can’t comment on that, but it just strikes me as if it feels too good to be true, it probably is. You’re not getting something for nothing there. So that was my first head scratcher. I’m not so sure about this moment. The other one was almost more of a laugh out loud head scratcher, and I texted you about this immediately when I read this. One of his big investment ideas is to buy minority stakes in sports teams. So Dave, were you in the bidding when the commanders were up for sale? I can’t remember. Were you part of that group?
Dave:
I was actually thinking of it, but then I decided, you know what? It would mess with my rooting for, I was going to do it. But then I realized, you know what, this might tarnish just the way I root for the team, so I’m going to bow out.
Steve:
So what did the commanders sell for? Like 6.2 billion,
Dave:
6 billion? No, not even 6 billion even. But the bottom line is to be an investor for the commanders, you had to put up at least a hundred million dollars if you’re one of the 17 minority investors, I think the low price was a hundred million. And even the other investors looked at you kind of, okay,
Steve:
We’re going to deal with all this paperwork for a mere hundred million.
Dave:
Okay, riffraff guy.
Steve:
Yeah, so that one I was just like, are you kidding me? And I mean, once again, he’s talking about packaging it through one of these investment partnership deals, blah, blah, blah, that you can get in. But I always sit there and say, okay, there is so much money sloshing around out there and really rich people who have a hundred million dollars and can barely scrape into it are getting into it. Do you think you’re getting the same deal if you’re putting in $50,000 and packaging it with whatever, a thousand, a hundred thousand different investors? I don’t know.
Dave:
It’s out of touch. And what’s disturbing about it is Tony Robbins I think probably had best interest is somewhere in his brain at heart maybe. But the reality is this is out of touch. It’s one thing to be out of touch and it’s another thing to be in the stratosphere. You’re on Pluto of out of touch because your net worth is whatever, a half billion dollars. And it’s so weird because the things I look at more are things on the opposite side of this crazy world, and that would be the median net worth of a 65 ready to retire. The median net worth in this country is of a 65-year-old is $350,000. And if you don’t know, net worth is not just your money on hand. That includes the equity in your real estate in your home. So put that in perspective of what people are dealing with. Tony Robbins is talking to the masses. The masses are dealing with a real problem, and Tony Robbins is offering a crazy non solution. But something to think about if you’re one of the investors in the Commanders
Steve:
Commanders. Right. All right. So enough about Tony Robbins and his financial advice there. Dave. Let’s get into this Scott Galloway article that you sent me, and I actually subscribed to his newsletter as well. So I actually had glanced at it, but after you sent it, I looked in more detail. Why don’t you set this up for our listeners?
Dave:
Yeah. Well, Scott Galloway and I actually like listening. This guy, he’s a pretty famous, I guess I’ll call him business. He’s a professor at NYU in the, I don’t know which school, I guess it’s the graduate school Stern School, but he’s also really more known as podcaster. He is one of the most popular podcasts in America called Pivot, which sort of deals with business and deals with tech business. And he has his own podcast that starts to really deal a little more nerdy in business. And I would definitely call him sometimes politically incorrect. And definitely he’s going to be someone, if you listen to him, you’re not going to agree with everything he says. Yeah, but he’s very astute person, knows his, oh, he’s
Steve:
A really smart
Dave:
Guy.
Steve:
He know this stuff and mean just to set it up. I mean, he was a guy. I love hearing, I’ve heard his story a couple times, him tell it on different podcasts where he made a fortune in the.com era and lost it all. And then he made a fortune again, I think before, I guess it was the financial crisis, and lost it all again. He’s a guy who, he was on Wall Street or Silicon Valley, wherever he was. Made a lot of money, lost a lot of money a couple of times.
Dave:
Yeah, I’ve been following him since Covid started and started to get into that. But this is the first time I’ve even brought him up on our podcast because he wrote on his newsletter and he is been talking about this some on the podcast he does too, about what he thinks is going to be the next big bubble. This is not someone who’s talked about a bubble. He’ll talk about individual companies and stuff. He’s never talked about general bubble or made that type of predictions. But I think what someone makes of his stature makes, who doesn’t do this a lot is not a doom say or makes a prediction. It’s worth listening to. And then in this newsletter, which I think is just AI bubble or something, he lays out the case that the AI thing is going to be a bubble. It’s going to be. And what he talks about is he talks about Nvidia, which A is doing obviously. He says the difference in this company in one year of where it is to where it was to where it is now is unbelievable. But he does also say, look, let’s look at Nvidia basically expected its value stock wise right now is $3 trillion or something like that. It’s expected revenue for 2024 is 20 billion. And while 20 billion is great, you have to remember that a trillion is a thousand billion.
So that’s 3000 billion is the market value and the expected revenue is a fraction of that 20 billion. And number one of the AI companies, you know what I mean, like the grand, that’s not saying. And as he points out, that’s not necessarily saying that he thinks that Nvidia is going to crash, but it is basically saying when you look at all the, remember everything then is spawning out of ai. AI is why the big seven are also doing, most of them are doing well, not all of them aren’t related to it, but most of them are doing well. And you have that. So you have maybe an overvaluation right now, a frothing of the ai, but it’s mixed with something that I think is the more important mix and it’s more of a historical thing. And that’s like starting with the tech bubble was the tech thing, correct?
Oh yeah. It was just correct. But early in 1999 and 2000, yeah, you’re totally on track. As a matter of fact, last time I checked, which was this morning, I had to wait. And granted, I’m now at my beach place, so it’s not the same as being at home. But the bottom line is to do a couple of Amazon returns. I had to wait 20 minutes in line at the UPS place that we have here in Oceanview, Delaware to basically with everybody else doing their, so yes, you were right in 2000 about everything being.com, but at the time, that turned out to be an overvaluation and that led to the tech bubble.
Steve:
Right. So I mean, just to state it another way, I mean, will AI changed the world and be absolutely revolutionary? Is that possible And the fact that we’re in a bubble possible? Yeah. I mean, that’s what we saw play out in the late nineties with the internet, was the internet absolutely transformational once in a millennium technology that changes our lives. But it also was a big gigantic bubble with pets.com and garbage like that.
Dave:
And then he goes on to say, I’m sure this is going to happen. This is going to happen. He said, doesn’t say, I’m sure this is going to happen, but to say when it’s going to happen, that’s a different story. He said, if you can predict when this is going to happen, if I could predict when this happen, I wouldn’t be writing this newsletter or doing a podcast. I’d basically be putting all my efforts and all my money into shorting the market or whatever and make all my money on that. He said, you cannot predict when this is going to happen. Don’t ever try is his message. And then there’s other message, which again, now we’re getting closer to what we deal with is to always, this is again the opposite of Tony Robbins. This is great advice for regular human beings, diversify whatever the heck you’re doing.
Diversification in your portfolio is obviously way more important for people who are listening to this podcast. Most of you retired or near retirement, is to really take information from someone who’s really smart and is not out to scare you or anything. And is information is, I know this is going to happen and don’t act on the information, but as a matter of fact, diversify, don’t get out of all your stuff, but diversify. And it reminds me, and this led me to my next thought, which is in the world of diversification, there’s even in, I would say that the last year, let’s go year to date, just for fun. The last year to date, or year and a half has been really good for investments. It’s been really good for your equities, it’s been really good for your fixed income stuff. It’s been really good. But there’s always some losers.
And there’s, in on the real estate side, we have portfolios that are diversified and we have some real estate stuff that is basically invested in what we think makes a lot of sense, which would be apartment building, not the office buildings and stuff like that, but apartment buildings and warehouses. What’s going to, where’s all the stuff going that you get because you buy stuff online? How’s that going to work? How’s it continue to work? But even that right now is deflated. I mean, but what’s going to happen in the future with those types of investments? There’s always going to be something that looks crappy in your portfolio that’s ultimately going to look good in the future. And quite frankly, it’s going to help make those returns in the future better for you. That’s diversification. That’s the smart people push. I just appreciate finally reading an article that is about something bad or bubbly or bearish, but then having the solution to this to act accordingly, which is why I like Scott Galloway. He is a very, in my opinion, a very smart guy.
Steve:
Really smart guy. And I mean, I was jotting down a few things here as you were talking. So the first one, when he talks about you don’t know when it’s going to pop, I always look back at the late nineties, the tech bubble, and you had people in 1997 who were pounding the table screaming about how this was a bubble. This was overvalued. Were they right? Absolutely. They were right. But what did they have to put up with? They had to put up with 19 97, 19 98, 19 99, where the stock market was up. I don’t have it in front of me, but I think it was about 30% per year each year. So that’s what he means when he says, Hey, it’s going to pop. But I wouldn’t be sitting here writing this if I knew when, because it could go on for several years, several more years there.
Dave:
Were you in the meeting when, in our old firm, and we used to have a lot of meetings, which I always found to be over meeting to me is very, so many
Steve:
Meetings,
Dave:
A lot of meetings in that firm. But anyway, one of these meetings, the meeting was near over, whatever, I don’t remember if you were in this one or not, but we were all sitting around talking about, this was before 2008, maybe it was like 2006 or something like that. We were all talking about what’s going on with this stuff. It’s like, can everybody afford a million dollar house? What the heck is all this about? And we’re like, I dunno, this seems a little crazy. Nobody was saying, I’m going to short the housing market, because we didn’t know.
Steve:
I don’t know if it was the same meeting or not, but I remember being in one of those meetings and somebody was sitting there talking about how they knew somebody who worked at McDonald’s, worked at McDonald’s and was able to buy a house that was like $850,000. And at the time, my wife and I were trying to buy a house, and we were looking, oh, should we buy 300,000, 400,000? Oh, we’ll stretch a little bit. And then I’m hearing this story. This person’s buying for 850,000. I mean, it makes you question, and you’re going, well, gosh, am I doing something wrong? Should I be stretching like them? It’ll always just keep going up. And of course, we all know how that story ended, right?
Dave:
Oh, that guy who worked at McDonald’s who bought, is going to lead to the second greatest financial crisis in American history. Okay.
Steve:
Yeah. The next thing I jotted down as you were talking there was just that whole diversification idea. I mean, it’s such a boring concept. I don’t know. Boring concept, but I mean it, there’s no sizzle, there’s no sex appeal. I mean, it’s fun to talk about Nvidia, by the way, Dave, I was pulling up Nvidia stock performance. That’s just crazy. But diversification’s not exciting or sexy or cool. Diversification though is about not losing your shirt. And that’s one of the things, the lessons, when I’ve listened to Scott Galloway talk about his history and his lessons, he says, I wish I had somebody in my ear in the late nineties when he started whatever company telling him, diversify, diversify. Because he just had all of his money loaded up in whatever company and it got wiped out. And he of course, smart guy able to start over.
Most of us don’t want to have to do that. And I was struck by this. I met with a client for the first time yesterday, Dave, a woman and single woman, she’s probably got about three, three and a half million dollars 60 years old, doesn’t plan on retiring anytime soon, but she has 100% of her money in stocks, 100% nothing sitting on the sidelines, anything like that. She doesn’t plan on retiring. But we started to have this discussion works in corporate America. What if you were to get laid off? What if your health means you can’t work anymore? And that happens to coincide with the stock market downturn. You’re basically there. You’ve achieved the goals you need to achieve. It doesn’t mean you take everything and bury it under the mattress or whatever, but just to diversify a little bit, I think makes a lot of sense there. And you protect yourself in a big way versus just go, go, go. And I think there’s big parallels to if you own big positions in one stock like Nvidia.
Dave:
Yeah. And diversify can go the opposite way. If somebody’s all in cash, they’re not.
Steve:
That’s a good point.
Dave:
And they’re playing a living in retirement for 30 years, then they have to be swayed to diversify in the opposite, in a maybe more aggressive direction if their situation dictates it for whatever reason. So it works both ways.
Steve:
That’s a really good point because I feel like a lot of people right now are happy and complacent with the 5% plus yields that they can get on their cash, whether that’s in T-bills or money market accounts or CDs, whatever. And they’re looking at that and they’re going, eh, why should I bother with bonds or anything else longer term, getting 5% of my cash? Here’s what can happen very quickly. Federal Reserve decides to cut interest rates one time, two times, three times, four times. All of a sudden that 5% is down below 4%, and you’ve sort of missed the boat on locking in some of those higher rates. So not that you ever want to lock up everything, but we’ve been making the argument, Hey, it makes sense to lock in some of these rates, not for all your money, but for some of your money, so that you can have those rates guaranteed for 3, 5, 7 years, something a little bit longer term. Alright, let’s cut it off right now and let’s make a promise to all the listeners to check in before another six weeks.
Dave:
I was going to say see in September, but that would’ve been a joke.
Steve:
Oh my gosh. No, we’re not doing that. No,
Dave:
No, no. Let’s get back to our normal schedule.
Steve:
Get back to our normal schedule. Maybe we will shoot to try to do around the middle of June there. So we’ll get back on that schedule. Thank you all for listening. Hope everybody had a good memorial day. Good start to the summer and hope everybody has a good summer.