The Investment Panel: How To Reduce Taxes, Use Puerto Rico Entities & Invest in Cryptocurrencies (The Capitalism Conference)

I say the best thing you can do is take care of your bases so you don't ever have to react. And you can make decisions on playing over here on something that's exploding and diversifying your portfolio. However you would enjoy investing rather than being dependent on it.

You're listening to Freedom fastlane presented by.

Capitalism.Com this is the show about building businesses and investing the profits so that you can live life on your terms. And now, your host, the future owner of the Cleveland Indians, Ryan Daniel Moran.

Hey, fastlaners, Ryan here. And one of the best parts of the Capitalism conference last December. My favorite part of every year is a panel that we put together that we just call the investor panel. And, and the investor panel is exactly what it sounds like. It's where we talk about investing for wealth, investing for cash flow, and protecting your money from the evil hands of politicians. So we brought up this rockstar lineup of people who were for crypto, against crypto, reducing taxes, investing for wealth, investing for cash flow. And we have them talk about what's going to happen in the economy. We have them talk about what's going to happen throughout the next year. And it's always interesting to go back and see who is right, who is wrong, and what are you going to do differently this year than last year. For example, we talked a lot with Tom Wheelwright about some things that you can do to protect against taxes, excess taxation, but some of them were late in the game because we recorded this in December. So you can use some of these tricks and tactics in 2018 to protect your money from the evil hands of politicians this year. So we talk about cash flow, we talk about where to put your money this year. We have some interesting predictions about cryptocurrency and we can see who's right and who is wrong over the last few months. So you're really going to enjoy this. And by the way, if this is a passion of yours because you have made a decent amount of money in business and you're now looking to park your cash somewhere, get more cash flow, get more upside. I believe that you make your money in business, but you create your wealth in what you invest in. It's why investing is a heavy emphasis of our backroom mastermind. And I am considering putting together some trainings and some workshops specifically about where to put your capital in order to have the most long term growth. In fact, we're working on a capitalism fund which you might hear me talk about coming down the road. So for now, enjoy this broadcast of the investor panel from the Capitalism Conference. And make sure that you're subscribed to the podcast because we've done some individual podcasts with some of these experts in past episodes. So enjoy this from the Capitalism Conference.

All right, let's start with Tom. Can we go down and do 30 to 60 seconds on your background and what your specialty is?

Sure.

So, Tom Wheelwright, background. I spent several years with Ernst and young, including three in their national tax office, 14 years as an adjunct professor at Arizona State University Masters of tax program, and four years as in house tax advisor for a Fortune 500 company. So my specialty would be tax. The last 25 years, I have international CPA firm based out of Phoenix, Arizona that goes by the name of Provision.

And in 30 seconds or less, what is the number one way to pay less taxes?

Get a better tax advisor.

All right, ten words or less.

Kent Clover, My specialty, let's start there is real estate investing, specifically single family homes. My company goes up and buys single family homes in Dallas, Houston, Little Rock, Oklahoma City, and Memphis, Tennessee. We buy these homes, turn around and rehab these homes and put tenants in these homes and sell them as performing assets to investors all over the country. We do this to the tune of roughly seven to 900 properties a year. We currently manage about 5,000 of these properties for passive investors from all over the world. That's what we do.

So people come to you when they want to invest in real estate, but they don't want to do all the headaches.

People come to me when they want the baby, but they don't want the labor.

You got it?

Got it.

There you go.

Mauricio.

Yes, sir.

30 seconds.

My name is Mauricio Rould. I'm one of the managing partners at Four Peaks Capital Partners and we help investors diversify their portfolios with high yielding investments that are tied to real assets. Right now, oddly enough, we are in the mobile home park space because that's where we find the most opportunity is right now.

And you say that you are, is it asset class agnostic?

Correct.

You're after yield rather than asset class. Correct.

Right now it's mobile home parks. Tomorrow, who knows?

Sam Prentice, give us 30 seconds on your background.

I'm Sam Prentice. I'm one of the co founders of wealthpoint. What we do is we help investors set up a way to take the liquid dollars they want to store for future investments and earn better than 0%. So most people store liquidity and earn 0% in a bank account. We have a way to store 0% and earn 5, 6 7% long term averages with very limited downside risk.

Very cool. And I'm particularly interested in your model right now because we'll talk about the market and where it is.

Absolutely.

And asset prices being where they are. And that's why I'm compelled by what you represent. Dinesh, 30 seconds on your background, please.

I'm Dinesh Kauba. My background is in technology in Silicon Valley. I call myself an entrepreneur and a cash flow junkie. I like to find cash flowing investments. I've played around in a lot of different types of asset classes. I have a passion for keeping the money I earned. So tax reduction is a big area of interest for me.

When I had my exit earlier this year, I had a lot of people come to me and say, so do you have a tax guy that you go to? I'm like, I text Dinesh.

And say, what do I do? So Dinesh, he is 100% exactly like me, just in a different body.

And.

A few years ahead. So I go to him and we geek out over different things that we're researching. Ryan Hauser, would you give 30 seconds on your background, please?

All right, Ryan Hauser, I've been in business for 27 years in various industries such as sign companies, investing in real estate, then of course, online marketing. But now I literally live and breathe cryptocurrency. So it's kind of where I'm at now.

Tell me about that living and breathing cryptocurrency.

I mean, honestly, 90% of my portfolio is in cryptocurrency, and that's how all in I am. The only reason I'm not 100% in is because you got to leave a little bit out there. People just think you're nuts.

So let's start there.

Looks like we can relax for a little bit.

I have an opinion on what Ryan thinks of crypto, and I'm not going to ask what you think of crypto. I'm going to ask for your predictions on crypto over the next 12 months. I'm going to start with Dinesh. What are your predictions on crypto in the next 12 months or so?

A lot of stuff's going to get filtered out. I mean, I think the fundamental technology is very compelling, the blockchain. But there's a lot of garbage out there. So filtering through that is what's going to continue to happen. I mean, if there's a crypto with real value beneath it as far as solving a real problem, then I think it's going to hold its value and grow as Far as using it as a currency, I still can't see that happening anytime soon.

Does it matter?

As far as to trade it and invest in it, apparently not. So.

Every time I think bitcoin is as high as it could be, I see it even further. So, yeah, it can't make any sense.

Out of that part.

I want to jump over to Kent. Real estate is your expertise. Real estate is kind of the gold standard in terms of wealth generation and cash flow. It's where most people default to. It's the steady asset class that people invest in. So since you've been in this game for a while and you live and breathe real estate, are you tempted to look at something that is exploding and what do you think is going to happen in crypto over the next 12 months?

Am I tempted? It's very intriguing, for sure. I don't own any crypto the way I look at it. As long as the fundamentals of my portfolio and our investors portfolios, in other words, their foundation is in place and their investments are locked in, their future secured. If you want to go and gamble and just go like you would go to Vegas or whatever the case may be, that's pretty much the way I view it, is that there's a lot of emotion, there's a lot of excitement surrounded around it, but it's completely unregulated at this point. So it's easy to be manipulated at this point, which I think a lot of the experts agree. Which, again, if you're part of that wave and it's going up and you're able to take advantage of it, yeah, it's very intriguing. It's very. Again, exactly like going to Vegas. I like to go to Vegas. I like to go gamble. I like to put a little bit of money down. I like to walk out with more money than I came in with. But I also know my foundation is taken care of, so I'm not betting my future on it when I walk into Vegas. And so with those types of things, I have no idea where it's going. I really don't. And I would hate to speculate because about the time when I was sitting with somebody a month ago and telling them that 5,000 is about as high.

As it would go.

Here we are a few weeks later, and I look like a moron. So, you know, who knows? I really, I mean, it's so speculative at this point that I don't think anybody really knows. Quite frankly.

Tom, you work with some of the wealthiest people in the world. You have seen booms, and busts and ins and outs. What's your perspective on crypto and where is it going in the next 12 months?

You know, I'm fascinated like Ganesh about blockchain technology because, you know, the reason that we function as a capitalist society around the world is because of something as simple as double entry accounting. Debits are on the left, credits on the right. Without that, we could not function as a capitalist society. Blockchain technology is actually the next evolution of double entry accounting. So it's such a powerful technology, it will absolutely change the world. The technology will. And banks are looking at it, the Fed's looking at it. What of course I'm looking at is what's the IRS going to do with it? What's Congress going to do with it? Because right now, in effect, it's just like trading in any other currency. So it's basically a currency trade and they've not stepped in. Just like you said, there's no regulation on it. I think the first regulation you're going to see actually is going to be tax regulation. That's typically the first regulation you see of any kind in any area is tax regulation. So if you kind of want to see where the governments are thinking about it, then you kind of have to look at the tax and will they treat it like gold, for example, which has its own tax rate which is higher than normal capital gains rates. And you can't spend it like money, okay? It's treated as an asset, not treated as money. And so it's going to be very interesting from that standpoint. You know, what Sam and I were talking about yesterday on cryptocurrency is where's the weak link? And that's what I look at is where's the weak link? We saw miners the other day that had, you know, people getting the miners. Now, can you get into Bitcoin itself? It's blockchain. It's pretty safe. But can you get to the people that are in there? What's the weak link? Actually, when I'm analyzing investment, what I'm looking for is, what's the weak link? And it may be at the miners, something like that. And then the other question is, will there be others? So, you know, in the early days, you know, when real estate was new, you know, the first apartment building, everybody will like that apartment building. Pretty soon, everybody's building apartment buildings. So will we see the same thing in cryptocurrency and blockchain technology where you're going to see a lot of new cryptocurrencies a lot of blockchain technology. And then what happens when the central banks adopt cryptocurrency? And we'll see.

Is there a way to minimize taxes from the gains that were earned in cryptocurrency? How are they being taxed right now?

Absolutely. Do it in a Roth ira. I'm serious. That's absolutely. When you talk about any kind of paper trading, I'm not a fan, as Sam knows, of using IRA money for real estate inside the ira. I think it's a mistake because of the tax benefits of real estate. But doing trading of either currency trading, stock trading, option trading, anything like that is really easy to do in a Roth ira. And, you know, if you got a business, you know that a Roth 401K, even a solo Roth 401K can put up $53,000 a year. So if I were trading, I would be doing a Roth ira. And then you're never taxed on it. You don't even have to worry about it.

That's beautiful, Ryan.

Just to get onto the tax right now. Right now, the government sees cryptocurrency as property. So just like in real estate, it's property and you have your capital gains. But in Congress right now, the bill's in there to change it to the same as US currency. And so when it gets passed in 2018, be another nice little jump you guys want to get involved in.

That's fantastic. That would mean what?

Basically, a lot of people are always scared. I mean, who is in real estate here, really looking?

Yeah.

So how many people do you have come to you and not do deals because they're worried about paying capital gains? They don't want to take that $65,000 profit on that $100,000 increase because they want to pay 35 grand to the bank? It's crazy, right? Well, you have the same. Those same individuals don't get into cryptocurrency because of capital gains. It's like, I don't want to make 100 grand if I give 35 away. So that's going to basically eliminate that and get a lot more people into it. Not only that, it's telling the other people that, hey, the government knows there's not a damn thing they can do about cryptocurrency and blockchain. It's not if you're going to get into cryptocurrency, it's when and how late do you want to get into something saying it's too late to get into cryptocurrency is like saying it's too late to get on the Internet. Saying cryptocurrency is going to go away. Saying the Internet's going to go away.

By the way, taxes. That's why I didn't buy Bitcoin. Just think of all the taxes I would have had.

That's what I'm saying.

Yeah, worst reason ever not to invest.

Why would you want to make money?

Exactly.

Ryan, where do you think things are going in the next 12 months?

So all my predictions have always been wrong, to be honest with you. They've always been low. I expected bitcoin to get to 13 grand by February. As you can see, we went over that. I used to say 40,000 next year. I now say $100,000 next year. That's bitcoin alone. Cryptocurrency is there. It's there to stay there.

Based on what value?

Okay, so three weeks ago the market cap was 80 billion. Right? Now yesterday it was 460 billion. It'll probably hit a trillion, possibly by this year.

Again, but based on what value?

It's more or less the technology than it is the value. So it's kind of hard to explain. I mean, will it get mainstream as far as the currency and to spend? Yes, it will. But will it be bitcoin? No, it'll be ones that are on the Ethereum network and system because stuff is just so much more secure. There's no fraud. You can't go in and print bills and stuff. You can't go in and create. And then of course, there's the lack of supply. For instance, only 21 million Bitcoin.

I have 21 million used tissues. That doesn't make them valuable.

It does when you're able to do so for me to send you a million dollars, I literally could do it right here on my phone to your phone. And you will get it before we get off this stage. Go back before cryptocurrency, but now we're.

Talking about the technology. So this is my issue, is that we flip hats when talking about crypto and blockchain. And they're different animals in my opinion. So to say, yes, this is great technology. And then we talk about bitcoin. There's only 21 million of them available, or it would just start a new currency.

Right.

So there is no scarcity, there is no limit. So I think that's a flawed argument. But what the technology is obviously compelling. But what I'm hearing you say is that the value is just in the adoption, which has some value But I think that that will change very quickly. Other things get adopted.

It's in the technology as well. I mean, there's not going to be a major department store, anything out there that's not going to be on the blockchain. For instance, Walmart will eventually have their own, their own system set up blockchain. When Amazon announces that they finally accept bitcoin or a certain cryptocurrency, I mean, that's where it's going to go. John McAfee says his prediction was $500,000 the next three years. And a lot of people don't.

John McAfee has also said some weird.

Shit, okay, but he's also pretty damn smart. But here's what people don't understand when he says that it doesn't mean that bitcoin is just going to jump to 500,000. It basically means in three years time, because of the disruption on the financial industry, that cryptocurrency is going to have. Our US dollar in three years may be worth, say, 30 to 40% of what it is today. So in all reality, bitcoin's only got to get to 150 grand to be worth US$500,000 in three years.

So do you think that'll have a really quick year? It'll have a corresponding effect on gold as well?

No. I mean, bitcoin's not only surpassed gold, but will always remain to be in gold. I mean, gold's gold. You're always going to have your old school that are never going to adapt this new stuff, you know what I'm saying, to where gold's at. Like, I mean, if you look into here, I mean, if we were to ask everybody who owns some gold in here, I bet we don't have 3% of this, you know what I mean? And one other thing I want to say is cryptocurrency.

Yeah.

I mean, up here, of course, but with cryptocurrency, the thing I just always tell people to do when they're asking about it is don't take advice from somebody that's not doing it. Because I, to this day, I'm over 54,000 people in my membership. And to this day, I don't have one person that's got into cryptocurrency that is not loving it.

Well, obviously.

Yeah, but that's what I'm saying.

Those are the same people got in the stock market 10 years ago. They're loving it too. But that doesn't mean the stock market.

They love to keep 2006 and 2007 too.

Right.

Everyone's a genius in a bull market.

That's right.

We all agree that the technology will fundamentally change. Absolutely. Absolutely. I've heard people say that it is more disruptive than the Internet. I don't agree, but I think the technology is absolutely fascinating. Where we disagree is on the value of the coins themselves. I'm of the opinion that the only thing driving Bitcoin is pure speculation. It is pure frenzy. And we could make the argument that there's an adoption curve that is the reason why it is going up, which I think will only spill over into whatever the currency that is most commonly held will be. So in your view, what are some of the coins or currencies that people should be paying attention to?

Okay, really good question actually, because you're right with Bitcoin. Okay, but just because we know that speculation is what drives that price, that doesn't mean that price is not going to the moon eventually because of that.

We could say that about anything.

Well, okay, but we do have certain coins that are backed by. You want me to drop a coin?

Yes.

Okay. Orme is from Ormeus and you guys got my word for it. It's trading at about maybe three bucks right now. Now this coin, this whole company is genius, what it's done. So John Barksdale is probably one of the top three traders in the world and they own IM Marketing, which is a company that helps network marketing companies market. And they've, they've done a total of 8.5 billion in three years, the companies that they've helped market. And anyways, so they have a bot that's been trading on the fiat side for a while now. It's already done over half a billion dollars in profit. They spent a million dollars and they revised that software to do cryptocurrency. It's almost like artificial intelligence, even though I don't like to say that. But it literally scans the world for all social signals and it trades on that. So we put in $3,000 in March of this year and it's down right now to 12 million. But a month ago it was at 15 million from $3,000 on the software. So now they've started a company called Ormeus and this coin is backed by Bitcoin and Ethereum and they mine right now and they're doing a few million dollars a month. They've just signed a 250 million dollar mining contract for mining. And all of their mining money goes into the vault. And 40% of what they make goes Back into the mining. And you cannot touch any of that money without purchasing it with Orme, which is the coin. So my prediction is that coin will see $100 in 2018, currently at three bucks.

What, what other coins are you following?

Well, obviously, you know Bitcoin, I got about 50 into Bitcoin, the other 50 into everything else. Ethereum. Ethereum will do at least a thousand bucks. Bitcoin, cash, you go to 3000. This is all within six month prediction. And so that's like, that's doubling your money in those two right there. Because Ethereum just went up, I think to 500 this morning from 400 and something yesterday. So, you know, guys, if you're really just wanting to kind of get in and kind of dabble, just stick with the top 10. Go to coinmarketcap.com and stick to the top 10 and you can't lose. There's only one in the top 20 that I wouldn't advise people to get into because of. It was built on a whole marketing background, not really sustainable stuff. And I don't really want to say the name of it, really.

That so shocks me that a cryptocurrency is all pump and dump marketing. Yeah, that I am absolutely shocked by this.

So Ethereum, Bitcoin, Basically the top 10 are the ones that you're talking about.

Yeah, basically top 10. What I would also do, guys, is take 10% of whatever you're gonna put into crypto. Well, maybe 5%, 5 to 10%, depending how you are, and literally go out and buy 10 or 15 ICOs that you hear good report from. You literally need one ICO to completely change my portfolio.

By the way, full disclosure, this is not investment advice.

Yes, yes, Right. Actually. Right.

You should not listen to anyone here on the panel, including me. None of us have any idea what we're doing. This is for entertainment purposes only. Asterix. All financial decisions are at your own risk.

I actually meant to say that Please.

Consult your investment professional before making any investment decisions.

There we go.

Continue, Ryan.

Thank you.

Continue.

No, thank you. I actually meant to say that before I even started talking. That's like a big deal. But for instance, you could take a coin like bitconnect that you could have got last year for 16 cents. Wild card. All right, well, it also went to 400 bucks. So you could have taken 10,000 and made 25 million in a year. Now, guys, that stuff is all. It doesn't happen. Well, it does happen, actually, quite regular. But my point is you don't really know which one's going to take. So just go throw 5, 10% in a few ICOs and just.

Yeah. Which one is guaranteed to quadruple?

I know, I know, I know, I know. Why don't we just start at the Capcom?

Yes, right.

We just create the Capcom coin. It'll go through the moon.

Well, unfortunately for me, I have ethics, morals, and it really hurts my cash flow sometimes. This is an interesting question that has come in. What do you think are some of the social and business implications that are going to come from blockchain technology?

And how can entrepreneurs take advantage of the coming changes? Who would like that one.

In real estate?

Certainly within my lifetime, using blockchain, you will be able to buy and sell a property in real time.

Right.

That is a very long process. Right now it's a lot of paperwork trying to get all the municipalities and all everything in alignment. Recording title, recording deed. At the moment that those governments or that government in general is using blockchain technology. And title can be transferred instantaneously. That's a really exciting place that I know in real estate, that I know is on a lot of people's radar.

I think what you're going to see is instantaneous payments for things like imagine the day when you take an order on Amazon and the money is in your account within seconds. Instead of waiting two weeks to do that. That is going to completely change funding your business. Because now there is immediate cash flow rather than having to fund the whole thing. Imagine when that's true on Kickstarter. When on Kickstarter you can raise dollars and they're in your account. Rather than having to go through a long process. Imagine what that is going to do for affiliate marketing when you are doing a launch and instead of having an affiliate manager or controller write checks, your affiliates get paid instantaneously. What is that going to change in terms of promotions? I think that's going to what's going to affect deploying capital. Right.

Think about companies that have to finance that cash flow. Their businesses change overnight. They become extinct immediately. When that happens.

Correct.

And no returns unless you authorize them. There's no somebody coming in there buying your membership for $3,000, coming in, downloading all your videos and then going to get a refund. And whether you don't authorize it, they go to their credit card company and they get it back anyways. That doesn't happen here. They don't get a refund unless you authorize it. So a lot of fraud gets taken out of the situation.

I'm hopeful that it goes to identity theft. For example, if the IRS were to use and a lot of identity theft arises because of our Social Security number, which is really an IRS driven number, and blockchain technology is really that check and balance. I mean, that's the way I look at it. It's a check and balance. And if you've got that ultimate check and balance in a closed loop system, then what you have potential for is really making it very, very difficult for identity theft, which I think is a major, major issue right now, as we see with banks, we see with Equifax, we see with everybody. If you have that closed loop and I think you got some protections there and I'm hopeful that there's some impact there.

There's a great question that was just submitted. Can we move on from crypto?

Yeah, I mean, there are homes that still have telephones in them.

I think, Ryan, going back to your question though, I think fundamentally for society, I think blockchain enables a huge amount of efficiency.

Agreed.

It's going to make every industry more efficient.

Agreed.

It takes out a lot of the unnecessary stuff that happens now to verify things. I mean, even there's like some very interesting applications that I've seen. Like for example, the shared economy, like being able to use your computer at home and rent out the time that it's not being used in exchange for crypto. So it's generating its own little economy. And the reason that these cryptos are increasing in value is because they're being produced as a result of doing some kind of work, some kind of economic output.

I think the biggest key is what the crypto is doing. What the blockchain technology is doing is it's giving you a better way to utilize. It's a true free market currency, which is key. I think that's really key to open that up and have that closed loop that it has. I think that's very key. What you talk about, of separating out the technology from the crypto itself. There's a lot of risk associated with the crypto right now that we need to be aware of. And so taking that and separating those out like you've done is, I think, very key.

All right, I want to ask this word for word for each of the panelists. If you had a client, had a million dollars in cash and wanted to create a well balanced portfolio, how would you counsel them to invest? We're looking at a 45 year old. Entrepreneurs take home a six figure salary, they're investing the rest in their business. They have a Million dollars in liquid cash. How would you advise them to invest? Mauricio, I'm going to start with you.

I mean, I would almost question why you want it too balanced, but I would stay. I'm in real estate. I think real estate is the number one vehicle to grow your wealth. And so within the sphere of real estate, you can look for some balance. But I mean real estate, there's so many amazing reasons why you want to be in real estate, which include the leverage that you can get, all the tax benefits, all the hedge against inflation, the number one vehicle that made more millionaires around. So if I had a client with a million dollars or if I had the million dollars myself, liquid, it's all going into real estate. We're obviously partial to mobile home, so.

A big part of that would be.

In the mobile home park space. But real estate in general is just a great asset class.

Kent, what about you?

I would echo that and I would just go one step further. We really try to focus a lot of it on cash flow, real estate specifically.

Right.

And income producing real estate. That again, we would use that money and help them to leverage, get cash flow properties that are turnaround in a passive environment that they can sit there and count on that growing their wealth anywhere from 10 to 12% a year without having to actually think about it. I think that's a really all the benefits that you just listed. Mauricio. That's a really safe, practical way to invest the money and continue to use it as an annuity and look up in a few years and have turn a million dollars into several million dollars.

Sam, what about you?

So first off, you take a million dollars, you put a million dollars into the high cash value life insurance strategy that you've used and we've talked about. You take $1 million, put it in there, then you leverage out 900,000 and go buy cash flow. Because my whole asset allocation model of what I think makes sense is I believe in speculation. I'm all over speculation, which is where I feel like bitcoin, for example, falls into. I'm not going to go back to it, I promise. But that's the top of the pyramid. You start off with a base asset. What life insurance does is it provides you that base. We can put a million dollars in and pull out 900,000 right away. That's really key. You take 900,000, you then go up to your mid range. I was talking to Kent about this before. It's kind of back to the casino example we'll get to in Speculation. But you take your base there, you then go up and you buy cash flow and assets, businesses, real estate, those sort of things. That's going to provide you with one, a base asset that if everything goes to heck in a hand basket, you can fall back on. You've got another cash flow level above that that provides you with the cash flow to operate your balance sheet, where it basically gives you that base where if everything goes wrong, you can say I'm not required to do anything because I have a cash flow and base and assets that are hedged against inflation and assets that grow, assets that have limitation on downside risk that are not speculation. They're long term proven strategies that are going to win many more times than they lose. Now then once you have that base built, you have your cash flow on top of that. Take the cash flow, you've got your lifestyle met by cash flow alone from passive investments. That's when you know you've hit it. That's when you know you can relax.

Amen.

And you're good to go. You've built that base. The other cash flow is gonna fund your other speculation. Think of this. I put it in the book at our table back there and I talked about this beforehand. Think of it like roulette. And I do apparently not know how roulette works. Kent was explaining it to me.

But basically the idea is if you think of if you spin a wheel and it's got 50 numbers on it and you spin that wheel and if you hit it, you get $51, you pay a dollar per spin and you get $51. If you win, you, you're going to win one out of 50 times. So that game is going to win more times than it loses eventually. The problem where people get in trouble is they start at speculation without the financial or mental fortitude to take that time and continue investing down the road. So that's my key, that's my model is take your million dollars, build your base, build your cash flow, diversify your cash flow and from there you can speculate. And while that may not be the sexiest, while it may not be the most exciting, that's a game that I'm going to win a lot more times than I lose. And that's what investing is all about. It's putting dollars at work and winning.

More times than I lose.

Hey guys, this is Ryan.

We're going to quick break and we'll.

Return to the show in a second.

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We are fundamentally biological creatures, which means that our brains pay attention to things that move and things that scare us. So we tend to be reactive to those two things. So our natural reactions say, this thing's exploding, let's put our attention here. Or this thing scares me, this thing is crashing, let's put some attention here. And I say the best thing you can do is take care of your bases so you don't ever have to react and you can make decisions on playing over here on something that's exploding and diversifying your portfolio. However, you would enjoy investing rather than being dependent on it.

Sam, I want to add a 10 second follow up to that. Just psychologically, as a business owner, what does it do for you when you know that your financial stability is not tied to just one particular concentration? How key is that to just mentally? When you know, I've got a base and an asset class is diversified across multiple multiple doors, I've got cash flow that comes in, how much more intelligently aggressive can you be with your dollars? If you banked everything on crypto and you see it start taking a downturn, what do you do? Like you said, emotions behind it, having that base is what allows you to be an intelligent investor. This is not my idea. Warren Buffett talks about it. There's Benjamin Graham writes a book about the intelligent investor. While those things have changed, the types of investments that are out there with new Technology, the Internet, the strategies behind buying where there's value, paying taxes, as Tom would do, where there's value, all those things, looking for value is still 100% the way to make money and grow long term wealth that is stable and that psychologically works for you as an investor.

Tom, what about you? If you have a client who has a million dollars in liquid cash, where would you point them?

I have a very different philosophy. First thing I'm going to ask them is, do you want to grow or do you want to maintain stability? Okay, if you want to maintain stability, you want to diversify, if you want to grow. Nobody ever made a lot of money diversifying. The point of diversification is to not lose money. Okay? So most of our clients, they want to grow, okay? They're in the growth phase of their business. They haven't reached the pinnacle, they're not ready to settle down, start a family of diversified portfolio. So what we do is apparently Mauricio is not as agnostic in asset classes as he said he was because he loves real estate. We are completely agnostic because we're not financial advisors. We don't have an asset. What we do is we help people decide what asset class they should be investing in. If you look at the difference between a professional investor and amateur investor, a professional investor is very focused. Professional investor. Professional investor. Professional investor. Okay, so we have a professional investor here. His asset class is real estate, specifically single family homes. This is what's right for him. We have a professional investor down here, which is cryptocurrency. What's right for him is cryptocurrency. He knows cryptocurrency. I know nothing about cryptocurrency. I'd be an idiot to invest in cryptocurrency. I'd literally be an idiot investing in cryptocurrency. Real estate can be the same thing. How many idiots are in this room, including myself, that thought we knew what we were doing in 2005, 2006, right. In 2007, we found out we were not so smart. So finding what you love to do, developing a strategy or plan of action for that one type of asset that you are going to love, doing cryptocurrency, whatever it is, and then creating that investment decision, okay, if you look at Warren Buffett, if you look at Bill Gates, you look at Donald Trump, you look at all these professional investors, they do one thing, they don't do a whole lot of things, they do one thing, they do it really, really well, and that's all they do. And that's why they don't lose, that's why they're successful. If you're a successful business owner, it's because you do one thing, you do it really, really well. So develop that those criteria for investing and make one decision and apply that decision over and over again. It does not matter the asset class. What matters is the investor.

And for me, that asset class is businesses.

Clap that up.

Thank you, Chris.

So for me that's businesses. Because I know that I can get involved in a business and double it quickly and take it to sale and get a huge exit and we all party and then we get to play with the profits. Because that's my sweet sauce, that's my skill set and everything else I have to be comfortable losing because I know I'm not going to lose in business when I know that it's within my wheelhouse. And it's going to be hard for you to lose in real estate, you to lose in mobile home parks because you have some sort of competitive advantage in that space because you know more than most people in that space. So I 100% agree. The question that I find this very interesting, Tony Robbins argues that most people should just park their money in low fee indexes and walk away. If it were that simple, you probably wouldn't be up here giving advice. So why is he wrong?

That was pre cryptocurrency.

Actress saint.

Would anyone like to go against Tony Robbins?

I actually think he's right. And the reason is that most people won't spend the time to understand investing. This is not most people. Okay, so people who want to spend the time and the energy understanding investing will never be well off parking their money in a mutual fund or something like that. But most people, we run across most people, you know, most people, they are better off in their 401k and their well diversified portfolio mutual funds because they are not interested in taking charge of their life. They're not interested in taking the time to be educated on it. They're not interested. They're not here at Capcon. Okay, which says a lot. There's 650 people here. This is a little teeny tiny fraction of the population this place. There should be 20,000 people here.

Amen.

Right?

So I actually think Tony's right that most people should because that's where most people's heads now is it the best thing to do? I mean there's no question nobody's smarter about your money, nobody cares more about your money than you do. So why would you turn it over to somebody else.

I think Warren Buffett even said that diversification is a protection against ignorance. It makes very little sense for somebody that knows what they're doing. And so it's my echo.

We've talked a good amount this weekend about tax efficiency, reducing taxes. Dinesh, you're the only person that has looked at things that I've talked to about things offshore. I'd like for you to comment on your involvement there and how do you feel about that? And then I'm going to have Tom see if he agrees or disagrees.

Okay. Well, I mean, I don't really look at offshore. I'm a big fan of Puerto Rico as a tax incentivized U.S. territory. There's a lot of specific tax incentives in Puerto Rico that can be very beneficial to business owners. And so that's my area of interest. And I like to say there's a lot of misinformation out there or people not really understanding all the tax laws and the incentives that are there and how to use them.

And how do you use them specifically in Puerto Rico?

Well, I mean, there's different laws. It depends on what you're doing. So there's Law 20, there's Law 22, there's Law 7, which is to do with historic buildings and investing in historic property over there to generate tax free rent. I have stuff set up there as separate entities. I don't bring the money back here. I'm just letting it compound over there.

So you have business entities in Puerto Rico that are there to invest in Puerto Rico and you're leaving the money in Puerto Rico and compounding and you'll address that money later by bringing it over when you want to bring it over.

And there's ways to bring it over completely tax free.

And I believe that's you live there for six months and then you walk across the border and say, no, there's not a lot of money in my pockets.

183 days on average for three years. That's the rule. There's some gray area there, but as far as I understand, that's the rule. And who knows, with the tax law changes, there could be a tax holiday and could bring it back next year.

Got it. So you have the entities in Puerto Rico and you're not touching them and you are letting them compound. And you will address it when it makes the most sense to address it, either personally or because of some change in the tax law, Correct?

Right.

Tom, is he doing it right?

Well, I don't know if he's doing it Right. I'm not into his personal situation. I mean, Puerto Rico has some amazing tax benefits. No question. Okay. You have to live in Puerto Rico at least for that 183 days to get those tax benefits. And without power and Internet, et cetera. If you want to do that. That's the first question. You know, we like to say, if you want to change your tax, change your facts. Okay? So the fact that Dinesh has changed is being a resident of Puerto Rico.

No, I don't have.

Or having business in Puerto Rico. That's a fact. You're changing. So, you know, there's thousands and thousands of opportunities. I mean, offshore. Absolutely. Just remember that with the new tax bill, the US Is about to become a tax haven. We're going to be a tax haven. Okay. At 20% tax rate, we qualify as a tax haven. So then the question is, what are your. Don't forget all the costs. Okay. When you're doing this. And I'm completely agnostic on this. You know, I have clients that absolutely. Overseas, Puerto Rico, other places. I have other clients that they want their money where they can see it, they want to be here. You know, they get nervous about that. So it doesn't matter. There's always a tax strategy. Remember that if we're at a 20% tax rate, if you have transaction costs, and that's really important to consider that there are always transaction costs, whether it's, you know, how do you do business in Puerto Rico? And I'm not slamming Puerto Rico. I think Puerto Rico has. I mean, seriously, talk about tax havens. It's US Territory, and it's a tax haven. I mean, that's like. There's a lot of positives there. Downside, being hurricanes and all that kind of stuff.

Stuff.

But there's a lot of positives to it. There are, you know, much more negatives to other Caribbean islands because we have, you know, they're considered to be. The IRS doesn't like them. Iris is agnostic about Puerto Rico. Okay. It is a US Territory, so they follow US Law except for their special rules. So there's tons. Just remember that, you know, when you're doing tax planning, consider transaction costs. Make sure you dot your I's and cross your T's and. And make sure that it's right for your situation, because everybody's going to be different.

Good question. I happen to own a condo in Puerto Rico. Does that open any doors for me in terms of tax breaks? As an online E commerce business owner.

I would ask Dinesh. He's Done more research than I have in this.

That's a longer conversation. I need to understand a little more about the specific situation. But, yeah, there is a way to set up your business in Puerto Rico and not have to be there to get some of the tax benefits.

But, Marisa, this is the lawyer in me coming out. I'm an attorney, used to do entity formation. So for you guys getting a little bit of excited about maybe setting up a company in Puerto Rico, I mean, you have to have a real business in Puerto Rico. You have to hire Puerto Rican employees. I think it's five that you have to have. So the income that's being generated from that business has to be happening in Puerto Rico. You can't just set up an entity in Puerto Rico and run it from Austin, Texas, and get any of the tax benefits. You've got to have a real business over there.

I'll defer on that one.

You're deferring to Mauricio on that one. Okay, got it. All right. I want to ask. The market is at all time highs. We've been in an economic boom for nine or 10 years. Cycles tend to be seven years long. So historically, we're a few years overdue. And yet we continue to boom. New sectors are growing, cash is abundant. Things look pretty good. America is great again.

All kinds of things are booming. New tax laws mean that we might be keeping more money in our pocket as business owners. Sometimes it feels too great again to be true. So do you have any predictions on what will be happening over the next 24 to 36 months in the economy and how does that impact your investment strategy? Ryan Hauser?

I think it's after the 36 months where the big shift is going to be happening.

After 36 months, yes.

So like, you know, 2000, what would it be? 21, 22. So right now, I mean, obviously we're going to be. We have a big disruption coming in with cryptocurrency and the blockchain. Just all of that stuff that's hitting. With that coming to the market, you got the devaluation of our dollar, got the other countries that are basically trying to bankrupt the United States. We got a lot of stuff happening. But 2021, 2022 is where I think we're going to have a huge financial disruption in.

And is that because of the global shift that will be happening because of blockchain technology or something else that you think?

Not just blockchain technology, but just everything? I mean, almost every industry, if you go back far enough, you're able to somewhat predict what's going to be happening. I mean, for instance, when 2008 happened, I mean, I was big into real estate, doing investment seminars and stuff like that. And I was literally up here kind of like, I'm trying to preach cryptocurrency. I was preaching get out of the stock market, get out of your real estate, at least pull out your equity. If I'm wrong, what's the worst case? You just go, put it back in. But if I'm right, and then, you know, less than 5%, I bet, of my audiences listened and they all wish they had because the other 95% lost their homes and investment properties. And, you know, because what were they called, option ARM loans at the time and stuff like that. We, we just, when stuff gets so volatile, we get so aggressive with bitcoin going the way it is. I mean, we got guys that people get in on the rise. They get in on the greed and the rise and stuff. They don't understand the situation. And then, of course, when we do our little retracement, that's when they sell because they panic, and that's when you want to buy. You know what I mean? And so we just do everything backwards because there's so much called stupid money that rushes into the opportunities, and so the intelligence isn't there, and that's what disrupts our economy.

So you think there's going to continue to be stupid money for the next 36 months, and that's when we might be in for some different times?

Yes, definitely. Yeah.

Okay.

Who else would like to take this one?

Think of how the cyclical economy works and how as a business owner, your balance sheet kind of follows that. So the reason there's a lot of stupid money right now, Ryan, is because there's a lot of people who are making very, very good money because we're in this bull market economy. So right now you've got a lot more money to play with. So you go put it in cyclical things that are at their peak. Now, when that bull market changes and the economy's not doing as well, does your business do as well? Likely not. Now you start going to liquidate assets. So if you don't get outside of the cycle with your assets, you're exposing yourself to a lot of risk. It's just no way around it. And so my theory is that knowing where we're at in the economy right now, it's a coin flip. So whether it happens in 2022, and obviously there's a lot of Reasons to suggest it could happen sooner or happen later. When we're in a coin flip environment, you are completely remiss if you only prepare for one side of the coin. And so being prepared for both sides of the coin, having some countercyclical assets, what he said is brilliant. You have real estate, why tie up the equity inside of it? Hold that equity outside in something countercyclical that's not in the same cycle. You're liquid. If we have the downturn, you're going to go buy your neighbor's properties at pennies on the dollar. You're going to make a lot of money because you're buying at a value. If we don't have a downturn, just put the money back and you save your debt cost. But going through in today's environment, my biggest counsel I can give to investors and this is from working with high, high net worth clients, what we see happening on a routine basis as we are pulling dollars out, holding them in countercyclical assets and staying liquid in today's environment to some degree, because I think that that's going to present a lot of opportunities when you do go through the crash.

Real estate guys, we're at all time highs, how much time.

Asset prices are.

At, cap rates are all time lows.

The valuations are crazy. What do you think is coming and how does that affect your strategy?

So first of all, I would, I would disagree a little bit that everything's great. You've got to remember, those of you that were in my Talk yesterday, that 50% percent of Americans live on $600 a week or less. Okay, so 50% of Americans live on $600 a WEEK or less. So for some folks, it's not going great and it's not going to get any better. As we've talked before, it's the recession. It's not a question of if it's coming, it's a question of when and how severe. And so I absolutely think there's a recession coming. And that's one of the reasons we're in the mobile home park space, because it tends to be a recession resistant asset class. Because unfortunately the residences that are in these homes, below where they are, they're living out of their cars and below that they're homeless.

Right.

And so what happens in a recession is you get the compression down from all the asset classes in real estate. All the A players get pushed down to B, B to C, C to D. But when you get down to the mobile home communities, they don't have anywhere to go. And so in a recession, you actually unfortunately get sort of an increase in demand for mobile homes because everybody gets pushed back and the people who are already there can't fall any further. So that's the main reason we're in this particular asset class today. So today, Tom, I'm not agnostic, but, you know, but tomorrow, you know, maybe tomorrow we're in the stock market because it's at, you know, 3,000.

Absolutely, yeah. One thing that I have noticed is when certain sectors or certain assets are moving, other ones get neglected. So they tend to be almost beaten up as a result of the money moving into other places. Even in the crypto world. I was having a conversation backstage yesterday about how a lot of cryptocurrencies had gone down while bitcoin has been booming because all the money is being pulled out of one and going into the one that's moving, which is driving some of the exuberance. And you might have a currency that is superior in technology being neglected just because the money is flowing to where the money is flowing. And in the same way, you would have certain sectors of real estate booming and something like mobile home parks all of a sudden be attractive because the cap rates are healthy, because other people are not seeing the asset price move, so the money is going somewhere else.

I mean, Tom's absolutely right. Then in most real estate markets, cap rates are super depressed. But in the mobile home space, I mean, our Last park was 12 and a half cap, which you just don't see in other asset classes.

So, yeah, consider that in Austin, the cap rate, which is basically your return on investment if you paid cash for it. That's what cap rate means. Okay, Consider in Austin, a class B apartment building. Right now, cap rate's right around 3%. That's a class B. That's not a class A.

Okay.

Class A's are downward of 2%. What happens is every time your cap rate doubles, your value drops by half. So just consider that math.

Anyone else want to take this one? We're at all time highs. How does that impact your investment strategy?

I would just echo that. We saw the compression in the last recession as well. Our business model, we kind of focus on that. Bread and butter, all American, $125,150,000 home. That's what we're looking for, and that's what we really focus on. And we saw our businesses actually in the last recession grew pretty dramatically for the same reasons that you're talking about. All that capital kind of found its way down into It. So from our standpoint, it's not a matter of if it's coming, it's just a matter of when it's coming. And keeping as much cash on the sideline and just staying in that lane is really, really critical, not getting distracted by all the other opportunities that certainly exist. But just stay right where we are for the time being, for sure.

This is an interesting question, and there's a few questions about debt, about how to best use it, and specifically using it within one's own business. So I'm curious, we talked about this a little bit in the private equity Q and A yesterday, but what's your relationship with debt? How do you feel about it, good thing, bad thing? And how do you deploy it in terms of your investment strategy? Do you use debt? Do you prefer to just look at cash? What are your favorite forms of debt, if at all, Dinesh?

I think debt is great. If it's used responsibly. It allows you to create a lot of leverage, but you have to use it the right way. I think the problem with debt is there's a lot of misunderstanding about how it's actually used. You think of debt, you think of credit card debt. That's not really the best kind of debt, but there is some very good debt, which allows you to get a huge multiple of leverage on being able to grow your wealth. It's tax efficient. You get to write off your interest. I never, almost never, invest anything in full cash. I borrow the most I can. My credit score is 849. So you got an improvement then.

That's a good score.

So I want to echo what you're saying there, Dinesh, because the purpose of debt is to buy an asset. The purpose of an asset is to create cash flow. Okay? So if you have debt that's not creating assets, you need to get rid of that debt. That's bad debt. If you had debt that's creating assets, that's good debt. If you have an asset that's creating cash flow, I mean, traditionally thought of as asset, bank, asset, if it creates cash flow, that's a true asset. If it's not creating cash flow or not creating enough cash flow, time to rethink. Should I get rid of that asset? So it's the number. It's really simple formula. Debt creates assets, assets create cash, and you follow that formula, you're always going to be okay.

So that brings up an interesting question of, in terms of evaluating investments and if something is performing, I have historically always valued things on cash flow because I Want something to pay me dollars over time, in the future, forever and ever. And yet then there are things like cryptocurrency, which you only make your money when you sell. But it's going up so much that it's tempting to give up that strategy in order to pursue a new opportunity. What's the gold standard for you to evaluate an investment? Is it in cash flow? Is it an upside? Is it in something else?

It depends on what you're looking for that asset to do for you. Like, you know, the gold standard for assets is that each one is individual on an asset. You look at the elements of an asset. I think I had this in my talk the other day, where you can divide assets up into different elements. You can look at return, how accessible the asset is, how tax efficient is, how expensive it is, how safe it is. So depending on how your balance sheet is allocated, you're going to pick assets that have more of the elements you need and less the elements you don't need. So if you're looking for an asset to just have to grow your wealth long term, you don't need the cash flow right now. That's okay to have speculation. It's kind of like angel investing. Again, back to the model of building your base, going from there and working up.

Yeah. And let's also clarify, having your money in the bank is an investment. Everything is an investment.

Yes.

Having it under the mattress. My business partner, Clement Wong will say all money has a return and all money has a cost. And so we are constantly weighing positives and negatives. So one, keeping it in cash just requires no mental bandwidth. But we are still having trade offs of upside security in the same way that all other investment vehicles have all.

Assets, their value stems from cash flow. All assets, their value stems from cash.

Flow, cash flow or potential return.

It's either current cash flow or future cash flow. Okay? So if you look at cryptocurrency, you're looking at future cash flow. Okay. If you look at mobile home parks, you're looking at current cash flow. Okay? So to me the question is not, is it cash flow, capital gains? Because me, capital gains, if it's just capital gains, I call that like you do, I call that gambling, I call that speculation. Okay, if that's all it is, because it's like 1999 now, I know a lot of you guys are kind of young for 1999, but that was like yesterday for me. So in 1999, I mean, we had Yahoo, we had all these companies that were through the roof On a speculation of future cash flow. No current cash flow. Speculation of future cash flow. And we all know what happened 1999, 2000, when that just came coming down, People start realizing, oh, the stupid money. Then all of a sudden, the smart money goes, I want real cash flow. So it's really a matter of where's your heart? You know, I mean, we're a bunch of risk takers here as entrepreneurs, so a lot of you, your heart's going to be in that speculation, that's fine. But if you want, if you want to actually know how accountants, banks, people who do numbers, we value all assets based on cash flow.

And also take that. How do you evaluate the investment opportunities that you're looking at? Dinesh, I want to put you on the spot for this.

I think I evaluate it a lot based on the people involved. I mean, there's fundamentally the vehicle itself, but essentially you're investing in the people. So I. That's been my experience. The more I've done stuff, I learned that it's more important to partner or invest in the right people, whether it's a startup company, whether it's any kind of asset class. You're investing in real estate because, like, a lot of people here have their own businesses. You don't have time to go study that industry and become an expert at it yourself. So the only real way to create cash flow or passive income is to partner with people that are. That's their livelihood, and that's what they're doing for a business.

I like the quote. Behind every investment is some sort of business. Behind every business is a person. So ultimately, we are betting on people.

And I look at the business model as well. If I can't understand the business model, then I try to stay away from it.

Ryan, what about you? Because you move from a lot of investment classes into one, and it's one that doesn't necessarily evaluate based on people. So how do you evaluate the assets that you buy?

I mean, it's really different for everybody and everybody's situation. But, I mean, you look at 85% of people that purchase homes, it is the biggest financial decision they'll ever going to make. And they're completely clueless about what the hell they're doing.

Right.

I mean, and they realize, and sorry, if anybody's real estate agents, I'm not talking about you, that are in this group, but real estate agents.

They'Re only somebody that has passed a test. They don't even have to have ever required a real estate transaction. And people look at Them as they are the ones to advise them. And so there's just so much poor advice being put around. And it depends where the situation is, what percent you gain. Like, for instance, where your financial situation is, what percentages of gain that you chase. You know what I mean? If you're younger, you should be hitting, you know, 20% and higher. But when you're starting to get 50, 60, maybe 70 years old and stuff like that, obviously you're 4 and 5 and 10%, that are a lot more secure are the better financial advice and way to go.

Where are you looking to get 20% returns? Didn't you just say if you're, if you're young, you should be getting 20% or more?

Well, let's just say CC is just two words that start with a C and a C. And I mean credit cards. I don't.

I don't want to belittle the risk capital. I don't want to belittle the volatility of cryptocurrency. Okay, but for instance, the cryptocurrency to our normal fiat currency is like Napster was to the music industry. The music industry didn't die, but it definitely got devalued. The singers are not making a fraction of what they used to make. The US Dollar will end up not being worth a fraction of what it is today. So I'm not saying go throw your whole portfolio and be like me and go crazy, but, like, get involved that something that you see in front of you is changing your life. We have very successful people up in here in real estate and everything. Everything will be able to be acquired up here through cryptocurrency. I'm just saying get knowledged about something that is literally going to change your life whether you're in it or not.

Amen.

Absolutely.

Hey, guys, this is Ryan.

We're going to take a quick break.

And we'll return to the show in a second.

Hey, guys.

You know that my financial strategy is to build businesses and to invest the profits.

And when it comes to investing the.

Profits, I look for cash flow. I look for it to be backed by something real. And I look for tax efficiency. It's why when I recently sold a business, I called the good folks over at Four Peaks Capital Partners.

And today's episode is brought to you by them.

You've heard them on the podcast before when I interviewed Mauricio Rauld on the topic of mailbox money and why investment funds could be a source of passive cash flow for some entrepreneurs. I use investment funds like Four Peaks as part of my long term strategy. And I'd encourage you to go listen to the episode called How Rich People Generate Mailbox Money and you might want to check them out if you're looking for opportunities. Right now with asset prices as high as they are. I am mostly looking at cash flow opportunities, which is why I had them on the podcast. So make sure you check out that episode on Mailbox Money with Mauricio Rabould.

This question makes me smile.

Help.

I will owe $500,000 this year in taxes. How can I offset this on December 9th at the end of the year? How can I offset this and re inject it into my business without tying it up in real estate or other things? Also, I would like a pony, Infinite Upside and a steak, please.

Tom, actually, believe it or not, there are answers to that question and you're going to like them. Okay. I would tell you there are two things you ought to be considering. One is something we call captive insurance. Captive insurance is as a business owner, you have a lot of risks that you are self insuring currently. You have market risks, you have currency risks. You might have political risks. There are all sorts of risks that you are currently self insuring. There is a mechanism called a captive insurance company which is sanctioned by the Internal Revenue Code that allows you to set up your own insurance company and you can pay premiums to that insurance company. That insurance company does not pay income tax on those premiums and your business gets a deduction for them. It is real. Okay, we've looked at this many times. So you're going, it's like taking money from my left pocket, putting my right pocket and getting a deduction for it. That's real. Basically what it's like now, there's restrictions. I mean, you got to follow the rules. You got to be really, you got the right people. And you are, by the way, December 9th, you're like @ the very last minute because it takes a couple of weeks to set up an insurance company. You can imagine you've got to go through all of the process. So if you're going to do that, I would say you'd better call our office on Monday. Okay, if that's what you're going to do. The other one that is like too good to be true is the actually only legitimate tax shelter in the US right now is called the conservation easement. And conservation easement works like this. Let's say that you're a farmer and you own several thousand acres and you're about 20 miles from development now, over here, we got real estate people who are salivating 20 miles from development. I want that property because I could put in a master plan community and maybe five years down the road, but it takes that long anyway to get going on that. So what you do is you go, okay, well, let's go ahead and do all the planning process that we would do for a master planned community on this property. Only the farmer never wants to leave. He'd like to own this in his family for generations. And guess what? The conservation people of the US Would like to maintain those farmlands and wetlands and all of those, that natural beauty that we have. And they don't want it developed either. So they were able to several years ago to get into the tax law. A deduction, It's a contribution, charitable deduction for the difference between that value as if it were developed and the value if it can never be developed. That's called a conservation easement. Now, typically that in a conservative conservation easement, and by the way, you don't have to have the land. You can invest with the farmer. Okay? So there are companies that do this for a.

Living.

And. And you can take $100,000 today and invest it in a conservation easement on Monday or Tuesday, and you will likely get a $400,000 deduction on your tax return. So if you got a $500,000 tax bill, that means that you've got well over $1 million of income. You can offset 50% up to 50% of that with the charitable contribution conservation easement. Now, if you're in a 40% tax bracket. Let's run the numbers real quick here. 40%. Okay. If you get, okay, a $400,000 deduction, four times four, last I checked, was 16. That means that that is a 60% return on your investment right now, and you're reducing your taxes. You're not in real estate. You're never going to get that farm, by the way, that farmer's going to farm that forever. So it's just an immediate tax. It's actually a legitimate tax shelter. It's called a tax shelter. You're going to disclose it on your tax return as a tax shelter. The IRS is going to absolutely know you did it. Okay? And it is absolutely.

Legal. Can I add one thing to.

That? Yes.

Please. Dinesh, I know you love.

These. If you call your CPA and tell them about this, 9 out of 10 CPAs will tell you not to do it, or they will discourage you because it's considered a listed transaction, which.

Is called by the way the non technical term for a listed transaction is a tech.

Shelter. Right. So it does require you to do it the right way. I think the problem with it is that there's a lot of companies that have abused this piece in the tax code. And instead of giving a reasonable fair valuation that could be justified, which I think Tom was dead on, as far as that range of the deduction you can get with 4 to 1, there's people out there doing projects that are 8 to 1, 10 to 1, don't get greedy. They're just abusing the valuation method because there's different methods on different projects. So I think it's really important to get into the right project because these are pretty involved setups to get the qualification of a conservation easement. There's not a lot of people that I've seen doing it right. So you have to get the right projects that have all the correct documentation. So when you do submit it. The other thing that's interesting about that I heard from CPAs when you tell them about this is, oh, you're going to increase your audit risk. Well, actually you're not increasing your audit risk because you get a K1 from the partnership. You're investing in a partnership that puts the money in the conservation easement. So it's the partnership that would.

Get audited on top of that, let me add, is that the good partnerships, the people who know what they're doing. Okay, part of what your investment goes to is an audit.

Fund.

Right. And it's not a defense fund. And you plan on them being audited. We've seen them being audited. You want to be with, of course, a company that is more successful than not on audits. You want to be with conservative, like Nunish said, and you want to make sure their documentation is complete and that your accountant knows how to properly report that documentation. And by the way, you'd really like it if the conservation easement company that you're investing with does the documentation, all the documentation, including the tax return documentation for you, because it is extensive. To give you an example, we had one that didn't and we had to do it. Now, this was actually captive insurance, had to file the same form. It's not a listed transaction, but last year they required to file the same form. We had one client that their captive insurance company did not do it for them. It cost them $15,000 in professional fees to just do those forms. Okay. And I mean, can you imagine doing that on three or four conservation easements? That would be significant dollars so you want to make sure. I mean, it's like you say, Dinesh, it is about the people you're with. And if your accountant doesn't understand this, are you highlighting to the IRS that you've got this? Let me tell you, if you have a $500,000 charitable contribution in your tax return, I don't care if you've got that disclosure or not. You are highlighting. You're saying, look, I've got a $500,000 deduction, so you want to disclose everything. And if you disclose everything, what's the purpose of an IRS audit? To find out what you haven't disclosed. That's the purpose of an IRS audit. And if you're disclosing everything, then why would they audit.

You? So to add to what Tom said, it's very important to find a company that has sufficient reserves to cover an audit. And I've actually even found projects where they are able to get insurance to protect your actual investment. So if you do end up getting audited and the valuation gets questioned and all of that, and you end up not getting the full tax benefit and you actually end up negative, they will cover you back to make you.

Whole. So just to be clear on the structure of this, essentially land that will not be developed, that will be protected forever, you can essentially fund that, and that's incentivized on an 4 to 1 to 6 to 1.

Basis. I stay on the 4 to.

1. So we'll say 4 to 1. What that means is that $100,000 contribution means that it's a $400,000 deduction, which, if you're taxed at 40% ends.

Up being $160,000 in your pocket, plus state tax, maybe. I mean, yeah, so every state's different. So some states only allow it if the conservation easement was done in their state. Other states have different valuation rules. So states, this is actually what I taught at Arizona State University was state tax. Your state. Everybody state's different. That's actually why we specialize in multi state, because it's something you've got to look at very.

Carefully. Could this be one of the ways that Mexico pays for Trump's wall?

No speculation.

There. Okay.

None. What do you think is going to happen to interest rates over the next 12 to 24 months? And how does that impact your investment strategy? Sam.

Prentice. So if you think about what interest rates, how they're controlled, that's the lever that the government has to control the economy. So when, if you think about it, your income, for most people who Sell things. Your income is based on someone else's spending. So someone else's ability to spend money with you is what drives your income. So you think about how cyclical economy works. There's a great video I'm going to recommend here. I don't normally recommend other people's work. This is one that's very worth watching. It's economic principles.org put up by Ray Dalio and it's been endorsed by Bill Gates, Warren Buffet, quite a few people. Excellent 30 minute video about macroeconomics. That will be very helpful to you to watch. But if you think about a cyclical economy, the question there is, is how does the government influence spending? And that's with the debt lever. So right now the debt lever is pretty low. It can go a little bit lower. We've been raising that debt lever up a little bit. The goal the government has is to try to raise that debt lever without sending us into a recession. Because if they raise the debt lever too high, where it now becomes uneconomically beneficial for you to borrow, then you're going to quit borrowing, you're going to quit spending, which means you're going to quit making income or someone's going to quit making income. As that cycle happens, lower spending, lower income, we go down into a downward recessionary type cycle. That's natural, that's to some degree healthy. The issue we have is when they lower that debt down to try to spin the cycle back up, they lower it down to zero. Well now if that doesn't fix the problem, then we go into the Great Depression. So that's the issue you have when you're trying to deleverage, which is the state we're in right now in the economic cycle, is that deleveraging state. So I do believe that interest rates need to rise. The question is, is the economy actually strong enough to support that or are we surviving on hope? I think there's a lot of data to prove that says that if we continue to raise interest rates, that may send us back into a downward cycle which would spur kind of the next pullback in the economy. So my answer, I believe interest rates will be rising slowly, but that that's going to be one of the primary drivers of some of the risk that's going to be coming down the pike as.

Well. Does that change your investment.

Strategy? Absolutely. And the reason it changes the investment strategy is we have to play both sides of the coin. We have to be aware that if we're in the cycle we're in right now with that, you know, we're in this upswing, we have to be prepared for a downswing eventually. And so as interest rates rise, then that risk can only increases, in my opinion. And so being prepared for that downswing is paramount of importance. And so I prepare my balance sheet with extra liquidity. And honestly, one of the things I was going to mention, this. This whole panel thing that's been set up here is so, so strong. Dinesh mentioned the people. When I think of investing in cryptocurrency, I had no clue on. What I do, literally, is if I can start sneak and catch him beforehand. I'm going to be visiting over here with him to see. Because you've got so much talent of how to manage assets. But how it affects my strategy is I'm pushing a little bit more liquidity because I feel like liquidity is going to be very, very valuable as we go through the next swing in the economic cycle, which will be driven.

By interest rates, meaning you're keeping cash on the sidelines, because you're waiting for.

That cash on the sidelines. That doesn't equal zero percent, but.

That'S right, of course, you're freeing up resources so that you can buy.

Assets. Pulling chips off the table, trying to do as well as I can with those chips off the table, but not tie them up. So that that time when there's more value in the economy, I'm able. Because how difficult was it to make money in.

2009? Not.

Hard. Granted, a lot of us were not making a ton of money in 2009, but in 2009, was it difficult to invest, to make money? Real estate guys up here have been doing this for a long time. You can be kind of a moron and do very, very well in real estate, which is not the only time I can make money, but it's certainly a great time to invest in. So being prepared for that, to take advantage, not letting the downturn control you, letting the downturn be your time of opportunity is really kind of the message that I.

Preach. Marisa, you might be the loudest voice that says, we're due. It's time. So what do you see happening with interest rates and is that.

Impacting? Well, my biggest. This is a good segue. I mean, my biggest thing with the interest rate is you've got to remember the US has just over $20 trillion in debt right now. And our interest that we're paying out on debt is really historically minuscule. I think it's around 2.5%. But if interest rates were to sort of quote, unquote, normalize, you're looking at close to about 5%. That's a trillion dollars in debt payments that you've got to make. What's the size of our budget now? Three and a half, four million.

Bucks.

Right. The last one, a third of that's going to have to go just to pay the debt, the interest on the debt. So that's, from a macro standpoint, that makes me.

Nervous. It's just this whole thing that.

We'Ve just been doing it reverse for so long. We've been borrowing and spending, which is not the way you create wealth, as we all know. And as we continue to borrow as interest rates go up, that's just going to hurt the economy further, which is going to create this next recession. And that's why I like to be in an asset class that's doing well now, and it's going to do just as well, if not better, when that.

Happens. Kent, you've seen up cycles, down cycles in real estate. What do you see coming, and how is that impacting your.

Strategy? I actually don't think I can say it any better than these guys. There's no doubt that it's due and it's definitely coming. I definitely think that as interest rates start to climb, which I think they naturally have to do in the near future, continue to bump up, the economy, in my opinion, is still kind of fragile and easily could do send us back into a recession quicker than we then anticipated. And because of that, yeah, we're sitting on a lot of liquidity. We learned some hard lessons in the last recession and very grateful that we were. We survived it, but there were a lot of people that didn't, especially in real estate. They got beat up by speculating and buying on appreciation and just not making fundamentally good investing decisions. We changed our whole model. We changed exactly the way we approach everything we do from an investing standpoint. And now, more than ever, we are sitting on more cash, more capital that we can deploy quickly to take advantage of when it happens than we ever have, just because we anticipate that it's going to.

Happen. Dinesh, I think there's one huge wild card here, which is why no one can predict when this might happen, is that the technology, it's revolutionizing things. I mean, the reason I think our cycle is this long this time, is a combination of things with the low interest rates. But the technology itself, the Internet, has revolutionized so many industries. It's made things more efficient. There's new ways of creating money there's new ways of making money. I mean, this whole room's full of people making money that probably couldn't have done it 10 years ago. So I think the next wave of technology that's coming is probably even more exponential than the Internet. And it's going to create opportunities for the US to grow in ways that people can't see right now. It's well beyond what you can see. So I think it's a real wild card as to if that huge recession happens, it might be in certain industries, and then there'll be certain industries just exploding in the next five, ten.

Years. Ryan, you've made quite a bit in cryptocurrency. You placed your bets, you did well. Do you plan on pulling any chips off the table and putting it into other places, or are you doubling down on what you're.

Doing? Yeah, definitely. But we're still in such the newborn stage of cryptocurrency. And the one downfall of cryptocurrency, which I'll say, which is like me swearing up here, I really don't like to say downfalls, but money magnifies your problems. And right now it's never been easier from like a closet guy living in a basement playing gaming to become a millionaire. And if you know that you're one of those ones that may suffer from the problems of getting rich too fast, look at your credit card statements. How many liabilities and stuff. What do you purchase on your credit card? Are they income producing or are they like going up to the Club and you're $20,000 in debt from buying, you know what I mean, drinks and stuff like that? Those are the type of people that if they're living on 60 grand a year now, and now they're able to go make half a million dollars when the economy even takes a little bit of a shift. They're ones that all they do is they raise all of their expenses now to live on that half a million dollars, and then when they make that turn, it's a bigger crash. And then of course, the ones that are educated, like how you were saying, people learned a lot from the last recession. Yes, certain people live, but a majority of the population still never learned. They suffered, they lost their homes, they're still back into racking up credit cards, still living paycheck to paycheck. But now we're going to take what happened there and we're going to multiply it to where now you have people that shouldn't have $20,000 now having 100 grand or access to It. And there's not only going to be a big turn, there's going to be a lot more. I mean, I really hate to say it, but, like, bloodshed and this stuff, this terrorism kind of stuff, these, you know, the shooting in Vegas and stuff like that. Because you've got people that go and become rich all of a sudden, whether it be cryptocurrency or something else. And then they do a stupid move, maybe, and go all in on. On margin on Bitcoin and lose it all. And then they think they're going to be like some army hero, you.

Know, that's why we don't call it Freedom Fast Lane anymore. We found out people were making money way too fast and everybody was grabbing a douchebag, so we had to.

Change the name of it. Yeah, I talk up here like I'm all pumped and excited about it, but I'm actually kind of scared for the.

Future.

Interesting. Because of the growth and stuff.

Yeah. Real quick, let's start at the end here. Come here. How do people follow you or people get involved in what you're up to?

Ryan? Well, for me, I'm actually doing a whole transformation, getting away from the whole free stuff that I'm doing. So just hit me up@, like, ryanhauser.com or ask me for my business card, and I'll get you that way because literally everything's being changed within the next week.

So.

Cool. Or find me on Facebook with that same.

Email.

Dinesh. Yeah, just connect with me on Facebook or LinkedIn. It's probably the best.

Way. Sam, We've got a booth out back. If you stop by our wealthpoint booth, go by. We've got some books, a few materials that we wrote for the conference. And then in about a couple weeks, we're actually doing a webinar. So if you sign up there, we'll be doing a webinar that will blast out to you specifically about when is it right to implement some of these strategies? Because a lot of business owners have the questions of when do we take advantage? Like, you know, you're sitting there, what cash flow should I put where? So we're gonna do a strategy session with, you know, whoever wants to join onto it, doing a webinar about where. When do you implement some of these strategies? So if you go by the booth, meet one of my staff or find me anywhere. Enjoy visiting with any entrepreneur that's out.

Here.

Mauricio. Probably our website, fourpeakscapitalpartners.com or if you guys have got a due diligence checklist@privateinvestingguide.com it's privateinvestingguide.com has a due diligence checklist that we put together. Kind of things you want to look at, including the team which is probably number one on there. Dinesh, what to look for before making an.

Investment. Kent, I think you have a breakout today, correct?

Yep. Easiest place to find me is going to be at the breakout or on.

Facebook. Kent Clothier Will you spell your last name just for C L O.

T H I E R Kent Clothier.

And Tom, the person more popular than.

Me on stage or people following tax free wealth advisor.com if you want to, you know, learn more, get education, et cetera. The book's Tax Free.

Wealth. Do you guys get a couple nuggets out of this? You enjoy this. Give it up for everybody on.

Here. Good job.

Guys. We're.

Good.

Hey gang, Hope you enjoyed that segment from the Capitalism Conference. Just so you're aware, you can go to TheCapitalismConference.com and get on the notification list for the next time we have one of these investor panels and we have the next Capitalism Conference. We're going to have announcements coming out about that throughout the year. So make sure you're on the waiting list to be first in line to get your spot at the Capitalism Conference. Also, if you enjoyed this episode, we have past episodes with Ken Courtright, with Mauricio Rauld, with yours truly talking about wealth and upside and cash flow and tax avoidance here on the podcast. So make sure you go back into the archives and look at some of the content we've done specifically on what to do with your capital once you have made it. Of course, I believe that if you don't have a business that needs to be your number one investment, double down on business, make your money there and you make your wealth in what you invest in. Also, if you enjoyed this and you're saying, all right, look, I'm doing pretty well in physical products brand, what do I do next? We focus on that inside of the backroom mastermind. You can find out details there@freedomfastlane.com backroom where we work on growing your business towards eight figures, selling for a nice seven or eight figure payday and.

Then investing so that you never have.

To worry about working again. That is the goal and the focus of the Backroom. Sometimes we call it the backroom because we partner people together, we open up exclusive opportunities that don't exist to the general public and we create kind of insider access to both, deal flow, investor opportunities, and the ability to sell your business for more money than without it. So go over to freedomfastline.com click on backroom to look at an application. Hope you enjoyed today's episode. Share it with an entrepreneur who is making money and not keeping it, because this will help them do that. It always helps us when you subscribe to the show and share this with people that you know would find value in it. Thanks for listening and we'll see you on the next episode.