CW 323: Deceptive Advertising Schemes & Scams with Investment Counselor Doug

Welcome to Creating wealth with Jason Hartman. During this program, Jason is going to tell you some really exciting things that you probably haven't thought of before. And a new slant on investing fresh, new approaches to America's best investment that will enable you to create more wealth and happiness than you ever thought possible. Jason is a genuine, self made multimillionaire who not only talks the talk, but walks the walk. He's been a successful investor for 20 years and currently owns properties in 11 states and South 17 cities. This program will help you follow in Jason's footsteps on the road to financial freedom. You really can do it. And now here's your host, Jason Hartman with the complete solution for real estate investors.

Welcome to the Creating wealth show. This is your host, Jason Hartman and we are at episode number 323 today. Thanks so much for joining us. And we have got Doug joining us today where we're going to talk about some, some of those too good to be true ads that you see and these marketing gimmicks and so forth. And we're going to touch on that. But what I talk about with Doug today is hardly an exhaustive list of this because in our culture today, we are bamboozled and fooled by so many gimmicks and so many marketing schemes and so many things are just sounding too good to be true. And most of them really are too good to be true. They're not true. But we'll kind of dive into that. And you know, a lot of that goes with managing expectations and it goes with managing our own expectations as consumers. But it also goes with kind of this, this copywriting culture that you see out there where this stuff can be so compelling and you, you just think as you read it, well, how could this not be true? I know I've fallen for that so many times in my life and it's been very costly to me. And don't let it happen to you. Learn from experience rather than the most expensive experience, which, or lear, what I want to say is learn from someone else's experience rather than your own. It's much less expensive that way. So anyway, I've got Sarah here to join me during the intro portion of the show. And then we'll talk to Doug about some of these schemes and gimmicks and some of this crockery out there in the world of marketing. And Sarah, how are you doing today? Good.

Thanks for having me back.

Good. Before we dive into some topical issues today, I first want to tell you that you are in big trouble.

Because of what you just told me. Do you know what I'm talking about here?

You mean the great investment I just made?

Oh, this is not a great investment at all. In fact, the only investment, I guess. Well, it's probably on par with the quote investment unquote that you just made. But we can tell you're getting successful here. And I mean, you've been successful for a few years, but you're starting to, like, throw a little money around. And this one bothers me because, you know, I'm talking about learning from someone else's experience. Well, I already had this experience that you're, you're just getting into here.

Well, you never talked about it on the podcast, so. I didn't know that.

I bet I did. You've not listened to every one of 322 prior episodes. I think I've talked about this. Okay.

So what'd you just do?

Well, I just bought a boat. It's summertime, kids just got out of school. I've been bugging my husband to get another investment property. And you know, we've been wanting a boat for years and he talked me into it.

Well, congratulations. You now have a hole in the water that you can throw money into.

Because that's what a boat is. They say the two happiest days of a boat owner's life. The day they buy it and the day they sell it. Oh, gee, so now you've had one of your two happiest days.

Oh, boy. Okay, well, I'll let you know. I'll let you know how the summer goes.

Well, at least your boat isn't a big yacht like I had, which is just more and more expensive. But I tell, I guess, please don't come on the show in the near future here and tell me you bought a timeshare because then I'm really gonna. I'm really gonna yell at you. Okay.

Oh, boy. Well, you know what? I don't know. I mean, that's an edit.

Well, look it, you're not out too much because this is just a small boat. And the funny thing is when I asked you, well, how big is it? You said you didn't know.

You know what? I'm my own worst investor. And I do the same thing when I look at income properties. It's funny because I have some of the most amazing detail oriented clients that do a lot of really good research. But when it comes to my own deals, and this boat included, I just kind of. I think you described it as a ready fire aim one time.

Well, oddly though, and this won't come across as a logical statement, but from experience. Again, I have seen many times, many, many times, in fact, the vast majority of the time in life that people that dive in and just do things even when they're not. They don't analyze and agonize over them to death, but just the wisdom of action itself carries with it its own rewards. And that whole ready fire aim concept is really legit. I listen to a lot of audiobooks. I just love audiobooks because they're portable and I can listen while walking the dog in the car when I can't be reading. But one of them I heard explained pretty well just last week, I believe it was, where the author was talking about the ready fire aim concept. And I don't even remember which book this was because I've gotten through about four of them in the past week. But when you. If you look at it actually like the. The metaphor of a gun, if you are holding a gun and say you're at the shooting range and you're aiming, aiming, aiming, and you don't actually fire the gun, but you spend a lot of time aiming, you don't get any good feedback because as soon as you fire the first time, you can see where the bullet goes and you instantly get feedback of where it hit on the target, on the bullseye. But if you don't fire and you spend your time aiming and aiming and aiming, you really, you have no feedback. And that's why there is literally wisdom in action. When you try things in life, even when they don't always work out perfectly well. And God knows, a lot of things in my life haven't worked out that well, real estate not being one of them. Real estate's been pretty, pretty darn good to me. But, you know, other things that I've tried, but you get feedback and you learn stuff. And the idea is, learn inexpensively. Don't learn in an expensive fashion because then you can recover more easily from them. But, yeah, so you bought your boat, you don't know how big it is. I bet your husband knows how big it is. Guys are usually up on the numbers.

You know, I hope he knows how to start the thing. That's what I'm praying for.

But, hey, you do a good job with your investment properties. I mean, I don't know why you would say that about yourself.

You know, I've picked some pretty good ones. I'm just merely saying I kind of. Just when I see a good deal and I'm ready, I just go for it. And We've been wanting, on this boat topic, we've been wanting a boat for years and we never really have looked for a boat. And this opportunity just came up and I said, well, let's just do it. I have to write a check to the government for my quarterly taxes and you know, I want to enjoy some of it. So that's what we did.

Your boat isn't large enough, but on some boats you can actually take a second home, write off if it has a kitchen and a head, meaning a bathroom and a kitchen in landlubber terms. But then it'll just cost you more anyway. So who wants a tax write off that costs you money? Mine was a huge expense and I'm glad it's gone.

But anyway, well, congratulations on your new divestment. I wouldn't call it an investment. It's divesting. You'll be divesting. It'll be helping you divest some of your money.

Well, I'll let you know when the second happiest day of my boat experience occurs.

There you go. There you go. Well, hey, before we get to our guest today, I just want to talk about a few things here because we're going to talk about ad schemes and we're going to talk about big promises and things that under deliver and all that kind of stuff. But I've been thinking about managing expectations lately. And one thing, I made a much smaller purchase today. I just got it today and that is I got a new Kindle. Now this is my, I think this is my first fourth Kindle that I purchased Amazon.com Kindle the ebook reader and the reason I dove in and got another one because I usually just use and read Kindle books on my iPad and I love the iPad mini, the smaller of the two, that's just a great little device and or you even read them on the iPhone. But the reason I got the Kindle, because the new Kindle Fire HD for 199 bucks it actually has a thing where it will sync professionally narrated audiobook with the text. So and this is huge for me because I love audiobooks. So I can be listening to the audiobook and then I can pause it and I can pick up the reader and sit down and read and then stop reading and it syncs to the audio. I mean technology is so amazing nowadays and, and get this now here's another feature it has and maybe my listeners don't know this, but when I was a little kid in elementary school I was knows if it was an accurate diagnosis by today's standard. But I was diagnosed with dyslexia, and I think it was really kind of cured by this eye doctor I went to. My mom, bless her heart, really paid attention to my reading difficulty when I was very young. And now I read all the time, and I love to read. But when I was younger, you know, I remember she spent a bunch of money and we didn't have much money, putting me in a special school and helping me get ahead or keep pace with the other kids and really learn how to read well. And then she took me to this special doctor that kind of cured the dyslexia. I think if it can technically be cured. And what happened is when these E readers came out and these Kindle devices and so forth came out, I thought, wouldn't this be the most awesome tool for speed reading? And I remember when I was in college, I took a speed reading class because I thought if I could speed read with. With my love of learning and love of knowledge, it would just be awesome if I could just read really quickly. Like I remember I got the Evelyn Wood speed reading home study course years ago, and I just never figured out the speed reading thing. But a lot of it is about moving your finger to make your. To train your eyes to move faster across the page. Well, guess what other feature the new Kindle has. Okay, now, keep in mind, I don't own stock in Amazon.com and they're not an advertiser on the show. But I just want to tell you this thing I'm really excited about. It's called full immersion reading, where you can actually hold the device and read it while the audio plays. And I'm thinking that might help people, including myself, of course, become faster readers. I'm not sure yet because I'm not sure if I read faster than a person talks. I'm going to know soon, but I'm hoping that you can actually adjust the speed of the audio playback so it will make you read faster. And I think that's a big, big element of speed reading is making your eyes move faster across the page. So we'll see. I'm really kind of excited about this. I think this could be a great tool to just become a faster reader, and that means you're a faster learner. So I'll let you know on the next show. Okay. But, hey, we talk about personal finance and real estate investing here, right? Right. Yeah. Okay. So we better get on with that topic. Real estate.

What's that?

Oh, yeah. There we go. Okay. Okay. Well, we got your boat I got my little Kindle, you know, whatever. So you know, manag expectations. So Amazon.com right? I mean, what a great company they are. When I checked the delivery date, I was supposed to get the Kindle tomorrow. Of course it came today. And when you look at companies like Amazon, Apple, I've always noticed that those shipping dates, your product always comes a couple of days before they say it'll be there. And when you go to some of the most successful restaurants like the Houston's chain and Houston's owns Bandera, Gulfstream, R and D, these restaurants are all over the country and you know, or Cheesecake Factory or P F Chang's or you know, some of these big chain type restaurants, you know the ones I'm talking about, I call them hers. It's my own acronym, High Efficiency Restaurants. Because they're some of the few restaurants that actually work really well and have really refined business models and make a lot of money. And they always tell you that the weight is longer than it really is. Have you ever noticed that where you'll go in and. And they'll tell you the wait will be. Which is absurd and ridiculous, 45 minutes. But some of these, depending on location, they're very popular on a major evening where people go out to eat dinner and you always get seated faster than they say. So I think this kind of the way this ties into real estate investing is the ready, fire, AIM concept is one part of it, but the other part of it is as investors, we all have to remember that we've got to focus on, as Stephen Covey says, keeping the main thing the main thing. And in so doing, that means we've got to manage our own expectations and not become distracted with the little things that are just unimportant. You experience this in your own life, Sarah, and with your clients, right?

Well, yeah. And that's true. And for the most part, in working with Platinum properties and our investment counselors, myself included, we do our best to not to over promise and under deliver. We're pretty good with our Performa projections, we're pretty conservative. But every once in a while we don't get it exactly right. And what I mean is, you've been hearing a little bit on past podcasts about rehab delays and construction delays. We do. We try and give you a realistic time horizon from when the completion is going to be on these properties. But every once in a while it rains in Indianapolis or St. Louis or wherever we're working, there are delays. That's one thing that we're really experiencing is trying to readjust and really set the expectations with the clients. So they know, look, this is. Ideally, the property is going to be done in 60 to 90 days, but just know that there's no guarantee. And if it takes longer, there are many benefits to a property taking longer, especially in a market like this.

Yeah, in a market that's appreciating, when you have delays and you've only put down a small earnest money deposit, I mean, you've basically, you're benefiting from that. It's better that it's delayed. Now, granted, you don't get the return on your investment from the property being rented. The return that might be projected at just as an example, 25% annually, depending on the property and, you know, what tax benefits you qualify and so forth and how you financed it. But the return, although I haven't calculated it, I would guess if you put down maybe a $5,000 deposit on the property rather than the full $40,000, that with the down payment and closing cost, that you've probably benefited in a huge way by the delay. The delay has actually helped you because if the property is going up in value, as we're seeing in so many markets now, I mean, why would you be upset about a delay? I remember when I did some speculative deals in the Socialist Republic of California back in the day, and I've done that through a couple of cycles in California, having been doing this quite a long time now. First of all, I never have experienced a new home construction being on time. That's the exception, not the norm. If you think about all of the moving parts, all of the different trades, all of the different contractors, all of the different suppliers, all of the different inspectors, I mean, that is just an incredibly complex thing. All of those things that have to come together just right for a house to be constructed on the date expected, it just almost never happens.

Let's not forget that many of these builders went through their own hardship years ago, like a lot of us did. Some of them went out of business or their business slowed down.

Their own financing is not as loose as it was years ago. Another delay, and it's kind of a hidden delay that most people don't think of is they're kind of doing their own Rob Peter to pay Paul. They're waiting for some of their first deals to close to fund their next subdivision.

That's right.

When one client doesn't get their financing documents in and they don't close on time for one reason or another, and they have their own delays, they could Be setting back another 10 investors.

That's absolutely true. A lot of that plays in with the lender and the way the lenders do construction releases. When a builder finances a tractor of homes, for example, they'll have certain milestones that they have to meet. So if the tract has 50 homes in it and they release them in phases of say 10 at a time, and they have five phases. Now this is obviously a fairly small builder I'm talking about could be a large institutional builder. They're subject to the exact same thing. Just change the numbers a little bit. And when they do that, before they can open phase two, they've got to have 60% of phase one closed, for example, before they can get the construction financing for phase two. Or maybe it's really phase three, I don't know. You know, I'm just giving you an example of how that works. And the bank will not release more money until they have those underlying transactions closed. So that's just like you say, it's a thing that goes on behind the scenes in the builder's business process that people are unaware of and they shouldn't have to be aware of it. I mean, the buyer, the investor listening to this doesn't need to be aware of that. They just need to be aware conceptually that that does happen and that there are delays in construction. It's the, what, whatever dates you're given, just add 20% to it. I mean, if they, if they tell you it'll take 100 days, assume it's going to be 120 days, it's going to be four months. In that case, if they told you a little over 90 days. So just, just understand that. I mean, as investors, do you really want to waste your time stressing about this three week delay and making a bunch of phone calls, sending a bunch of emails, I mean, that's just, that's like majoring in minors. There's no, there's nothing to do there. I mean, you know, you're talking about an investment that depending on how things go, you might hold until the depreciation schedule is run out for 27 and a half years. I mean, this is just not a big deal. It just doesn't even matter in the scheme of things.

You're right. Here are some other thoughts on that. Look, if you've been waiting for a few months and there's not an end in sight, or you're getting frustrated and another deal comes up that's better than this one and it's ready to close now, which sometimes those Come up a good deal, it's already been rehabbed, ready to go buy it, move on to that other deal. And chances are, if you're looking to buy multiple properties, by the time you close escrow on something that's ready, you could still be caught up in that other delay and maybe close on both. And if not, it's very rare that clients lose a deposit or anything like that. And if the builder is late, you're usually out of contract anyways. Or they're out of contract.

Yeah. So sometimes. But I don't want to make that sound too easy, sometimes you can get out of the deal, it depends. But if it's the builder's fault, you may be able to back out of the deal and get your deposit back. There are just all kinds of factors here to consider. Just that basic idea is, look, keep the main thing. The main thing, focus on what matters. And what matters is getting good quality properties and making them work over time. That's what really matters in this game.

Yeah, I couldn't agree more. Couldn't agree more.

So anyway, the bottom line is, everybody, the important thing we've got to do is we've got to manage our own minds to keep the main thing. The main thing. That's what's really, really important. And not be sidetracked with little diversions that are just a little pebble in the shoe type thing. But the next thing I want to talk about is some upcoming shows. We've got some phenomenal guests coming up and one of them we just booked today, I'll be interviewing later this week and then publishing shortly after that. And that is a name you may or may not have heard of. But let me tell you something. The name I'm about to mention, this guy was like a God 10 to 15 years ago in the investment world. And that name. Is anybody thinking of who it might be? It is George Gilder. George Gilder is a. I mean, he. He really. I met him. I remember I met him on a Forbes cruise with. And Steve Forbes was there and his daughters were there. And I got to know them real well and hang out with a couple of them. And that was in Scandinavia, in Russia. And this was about maybe 10 years ago or so. And George Gilder was one of the speakers on the cruise and he made a bunch of very accurate predictions. And he made some terribly wrong predictions too. As most of these guys. It's a mixed bag when you make predictions. It's gonna go both ways for you. But anyway, I just can't wait to interview him and hear what he has to say because I mean he really, really is a kind of a futurist in a way in the world of technology and what he calls the telecosm. I think he may have coined the term. I know I'm pretty sure he coined the term the telecosm, but I think he also coined the term the blogosphere. And he's had zillions of subscribers to his newsletters that are very expensive, or at least they were at the time and just really has some interesting insights. So he's coming up. Can't wait to interview him. And we've just got a whole bunch of other great guests coming up. Al Goldstein, who I interviewed last week, told a great rags to riches story of how he moved from little crummy single family flats and condos up into big apartment buildings. And now his company has about 8,000 apartment units. So some really good guests coming up and some great stuff. Les Leopold is coming up. He's going to talk about hedge funds. Katherine McBean on the millionaire Corner has some interesting stuff to say and some interesting advice for investors and just a bunch of great shows coming up. So more to come on that. But Sarah, before we go to talk about ad schemes and scams, let's talk about a couple properties real quickly. This first one in Texas I really like.

Yeah, it's a newer construction. Well, it's not new, but newer. 2004 is the year built. It's about just under 2,300 square feet. Purchase price is $139,500. This is a bank owned property that you do have to submit an offer on. So it's not turnkey in the sense that you raise your hand, you buy it and it's yours. You do have to submit an offer on this one and get it accepted.

Do you think you'll have to pay above full price and if so, how much?

That's an interesting question because we've actually had some clients offer a little bit less and have success getting those offers accepted. Especially because these are contingent on inspection. You still have the right to inspect the property before you close. If something comes up that didn't initially meet the eye, you have a little wiggle room there with the bank and negotiating room. So we have seen some pay under asking price. But the way this market is really turning, I don't give it long until you're going to see these properties bid up. So I think we're in a good little window of opportunity here with these properties. These will Need a little bit of work after you close. We have a contractor in place, you've heard him before in Austin. And we also have property management in place. It's still turnkey. It's just a little bit of a different process. Just give us a call. We'd be glad to kind of walk you through the expectations there. But back to the numbers. You know, estimated rent is $1,400 a month. You can finance these. The only part you can't finance is the repairs you do have to pay out of pocket. And we're talking about very minimal repairs here. It's estimated at $6,000.

Yeah. No, actually this one's 6,500, the one I'm looking at. Yeah. So here, basically what you've got here is you've got a down payment subject to qualifying of 27,900. You've got some closing costs, and then you've got $6,500 in fix up and repair costs that are not included and can't be financed, as Sarah mentioned. So a total of about $40,000 to buy this property. But look at what happens here after you own it. The pro forma here says $215 a month, positive cash flow. That's almost $2,600 a year. And your debt coverage ratio, 1.39%. So again, debt coverage ratio, if you're really, really conservative investor, is the number you look at to say, look, how likely is it that something could go wrong here? Could this go poorly for me? Could I end up losing this property and giving it back to the bank? Highly unlikely. With that kind of debt coverage ratio. Because your rent to value ratio is ever so slightly above 1% here. And this is in the, in the Austin metro area. Now, Austin, we haven't been able to make this market work very well for a few years now. I own in this market. I love the city. I mean, Austin is just, it's a great city, no question about it. But again, it's a more expensive city than some of the others that we talk about. You know, it's a lot more expensive than Birmingham or Memphis or Indianapolis or anything like that. But the return on investments here overall, when you look at all these projections, is projected at 33% annually. So again, the famous question from me is, what if it only goes half as well? So you'll make 16.5% annually. That ain't bad.

Yep.

Anything else on that one or the area in general, Sarah?

No, I mean, just that, you know, in expectations with working with the local provider he works very efficiently, he's very responsive. Clients have enjoyed working with him. He bringing on getting us new inventory on a regular basis. But, you know, the price points I'm seeing in Austin right Now is about 115 on the low end to, you know, 165ish. So a good, good range of properties too, to fit different price points that investors are looking to stay at.

Yeah, definitely. One quote came to mind and I remember this quote from when I was about 18 years old. I remember this quote that I always try to remember because a lot of times as we were talking about the expectation issue at the beginning of this episode, and this is a quote, I believe it was Jack Parr who said it. And he said, my life seems like one giant obstacle course with me as the chief obstacle.

So again, folks, that message that we were talking about, I didn't want to forget to tell you, this is about getting out of our own way. Let's not become our own worst enemy. The market has turned. It is largely a seller's market. I don't want any of our, I hope none of our providers are listening to this right now, but I know a few of them are probably ultimately going to be hearing this. Some, somewhere, somehow, maybe some of our clients who are listening will go and tattle on me for saying this. But you know, in some ways, these sellers and these people, they're kind of doing us a favor. I mean, it's just, this is not a buyer's market anymore. It has turned. The seller has the power now, and that has dramatically turned from the way it was two years ago. So we all got to adjust our expectations there. But the funny thing is, even though that may be the attitude to some extent, and I hate that that's the attitude, and I hate to even say that and have to bring that up because think about it. You're buying something that's a high ticket item. It's 100, $130,000 maybe. But the deals are still fantastic. So we got to keep this in perspective. I mean, you're still getting deals that are. I mean, they're not quite as good as they used to be, but they're still pretty darn good. I mean, look at this next one. This is a Memphis property built in 1980 and only $55 per square foot, well below the cost of construction. Land is free. And Sarah talked to us a little bit about this one.

Yeah, this is a hard one to come by. It's kind of in that sweet spot that investors are looking for in Terms of price point, it's $79,900. It's about 1,450 square feet. And yep. Cost per square foot, $55, which is great. Estimated rent, $895 a month.

So a little more than 1% RV ratio.

Yep. An estimated cash flow is, and this is with 20% down, is just under $200 a month. And you know, 1980s, it's not new, but it's, We've certainly sold older homes, but this one comes rent ready. So, you know, it's already been renovated. You know, it's a nice looking little property. Great curb appeal. And you know, your, your point of entry is under $20,000 if you can qualify for the 20% down financing.

Yeah, that's, that's fantastic. I mean, and look at this. The debt coverage ratio here is 1.59%. And the cash on cash return projection is 12% annually. So if it depreciates in value to half, which the market's going the exact opposite direction of that right now. But say that you're a total pessimist and you think we're going to have massive deflation as long as the deflation doesn't happen in the rent and the expenses stay the same. Remember, expenses would deflate too, in a deflationary environment, which I think is like so unbelievably unlikely. But for the three people out there in the world who still think deflation is coming, that one's for you. Okay. For the other 300 million people who don't think that in the US.

Your cash on cash return, 12% annually. Overall return on investment projected at 43% annually. And on these properties, you know, this one's back to 1980, we adjust and increase the maintenance percentage to 5%, assuming you're going to have more maintenance expense on an older property like this. So, so fantastic. Yeah. Good.

Well, one other thing too, I just noticed on this property, and again, this is hard to come by, but this one has a solid tenant in place that's been there, looks like for seven years.

Oh, yeah, yeah. It's interesting. Yeah. And you know, my mom was on the show and I talked to her the other day about this. I said, hey, is that tenant from 1989 still in that one house you own? And she says, yep, still there.

Never painted it, never changed the carpet. I can't imagine what that place looks like.

So your mom's tenant probably has a bunch of rental properties all across the country that she doesn't know about.

Yeah, that might be True. That might be true. Yeah. Very interesting. Well, Sarah, any other insights you'd like to share about the marketplace or investments or anything like that?

You know, really, I just want to say be patient but don't wait too long to act. You know, we're hearing rumors that the interest rates are creeping back up. We don't know how quickly that's going to happen, but they're still good today. There's still a lot of great deals. Yeah, the properties are selling quickly, but just contact your investment counselor. We'll be glad to help you narrow it down and pick out a good property.

Fantastic. Well, good stuff. Well, hey folks, happy investing. Let's go to our guest and let's talk about advertising schemes. And by no means is this an exhaustive list and I apologize in advance if the audio quality is not up to par on this. I'm not sure how it will sound. I feel think it's okay. But just so you know, I had to record this one mobile, which means I was at a Starbucks actually as I was doing it and that's pretty rare. In fact, I don't think I've ever done that. But no, I did it one time with one of our local market specialists. We were sitting at a Starbucks. So I apologize for sound quality if it's not totally up to par, but once in a while you just have to do it. I feel like the topic's important and the guest was available and I just jumped in and went ahead and did it. So anyway, we will be back with our guest here in just a moment and thank, thanks so much for joining us today. We'll be right back.

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Next segment here is really corresponds with the old saying if it's too good to be true, it probably is. I'm sure you've all heard that well worn cliche. And for that we are going to talk about some advertising schemes. I don't necessarily want to call them scams because they are apparently legal, but in my opinion they're pretty misleading. And so we'll kind of dive into that. And we've got Doug here to talk about that. How you doing, Doug? Doing pretty good.

Jason, how are you doing today?

Good, thanks. And just want to tell the listeners I apologize for the sound quality Because I am in a public location here in Newport beach today. But I wanted to get this show done because we've been trying to do it for weeks or get this segment done, I should say. And we're finally, let's just do it. Forget about sound quality. We'll do the best we can and muddle through it. But you wanted to focus on three advertising claims that seemed pretty ridiculous, right?

Yeah, yeah, there was three that I've seen that just set my teeth on edge. So one was a claim that came a pretty popular newsletter provider saying that you can force banks to trade to give you real silver for your paper dollars. And of course this appeals to inner conspiracy theory and all of us to say, yeah, I want to stick it to the man and force those darn banks to give me real silver.

Yeah, all the gold bugs will like that one.

Oh, yeah, yeah, the gold ones will all go. The gold bugs will all go nuts over that. The second one was to buy real silver. I'm in quotes. As they say, hold in your hand silver for $3. And then the third one is just one of those ones. It's the old penny stock newsletter scam, right? You see, someone comes out and says, hey, if you followed my advice to invest in this one stock, it would have gone up over 100%. See how stupid you are for not subscribing to my newsletter and following my advice.

Now, let me address the silver one for just a moment. Basically, that silver one, I think the assumpt everybody's mind when they say, when they hear that $3 silver is that it's an ounce of silver. But silver is about 32 bucks an ounce at this time of this recording, I think. And so if that's a tenth of an ounce, then it should be 320, right? So is $3 really a good deal?

Why, how astute of you, Jason. In fact, the. I'm going to let the cat out of the bag and he's out of order a little bit. But what that is talking about is buying what they call junk silver. So as many people are well aware, in years long gone by just regular coinage, regular, regular had a certain percentage of silver in them. And what you can do is you can buy a bag full of old coins that contain a certain percentage of basically the bullion value of the silver or what they call the melt value. And I think a bag of 10,000, you can get a bag of 10,000 of those junk silver dimes for roughly $3 per dime. So what this advertisement is exhorting you to do is to go out and pay market price for a bunch of silver. Well, that is literally no different than me going down to the local coin huckster and paying 33 bucks for a silver eagle. No different. There's no difference. The only difference is I bought a whole bunch of little silver eagles instead of one big one.

Yeah, but, but the thing is to wade through that. I mean, look at the cost. In time you're going to have the. Have to probably watch a very well done marketing video, read through a huge letter, a direct response letter written by a brilliant copywriter.

Allow me to clarify. You will have to wait through a long, a long video that you can't click out of. And so because, you know, the reason why I know is because I signed up for a couple of these things under the, under the free look period. You know, basically, you know, I signed up for like couple weeks just to see what all this stuff is and then I just cancel it out so that I get my money back. Yeah, you have to, you have to wait through this about 15 minute video that you can't click out of. Then you have to go through this long list of copy and then as soon as you sign up, your email box will just be flooded with marketing copy over and over and over again. And then of course the thing that I keep wondering is, well, if this advice is so great, why is it that I have about a 50 to 1 ratio of marketing copy to actual advice and content?

Right. It's over complicated.

It's almost like.

I'm going to give away my bias here. It's almost like these companies aren't really in the business of providing advice. They're, they're in the business of marketing copy and sell their advice. Therein lies the secret of all these kind of, you know, of all these too good to be true email things.

All of these things. It makes you wonder because these kinds of this marketing copy, this is all regarding very scalable investments that could easily be duplicated quickly. So if you can buy silver for 110 of its value, which is what it's misleading people into thinking, then that makes you wonder why the heck are they even bothering to be in the newsletter business? I mean, that's a scalable business. Now people could ask me that about real estate. Well, why don't you just invest all day? Well, I have a good answer to that. Investing is a more involved thing when it comes to real estate because you've got to find the deals to acquire. You've got to negotiate the Deals. But buying silver is a click of a mouse basically. These are very scalable things, stocks, same thing. You're going to talk about some of the stock scams or schemes, I should say, or great marketing copy. And all of those things are very scalable. As soon as you make $1 and double it, you can take that $2 and reinvest it a second later and you could scale that up in a matter of a month and be retired on owning your own island.

Yeah, exactly. That's the thing that's so appealing to say, ooh, gold for three, silver for $3. All those suckers that, all those suckers working at the office and I'm going to show them, I'm going to repeat this so many times, I'm going to be retired by next month. And of course naturally end up finding out that, oh, all that he did was show me how to pay market price for silver. Thanks for that. Can you maybe show me how to pay 20% over spot for gold?

It's ridiculous. Okay, go on to the next one.

Sure. So the next one is deal is the, and this is staying on the silver, on the silver trend for a minute is the force banks to give you real silver for your paper dollars. And this attracts gold bugs like a moth to the flame, right? Everybody who is paranoid about the government, who these days, that many people who aren't maybe a little, at least a little paranoid about the government, they're thinking, oh, all right, yeah, let's get some real silver. I don't want these worthless paper dollars anymore. Well, what they're talking about with this is again like we were talking about before is how in years gone by there were certain, a certain percentage of or there were certain coins that had a certain silver content in them. And one of those coins were the 50 cent pieces or the half dollars. And the thesis of this whole strategy and ask the trade money for half dollars with the idea being that you're going to look through all the half dollars to see how many.

Were minted in, I think like the mid, at or before the mid-60s that had some actual silver content. There's two fallacy to this strategy. One, I actually tried this and when I went to the bank they go, we don't carry 50 cent pieces anymore. As soon as we get people get them in, they go right back out the door. So one is that you're going to have to go all over the place in order to find places that even have any 50 cent pieces. And then two, let's say that you do find a bank that has some 50 cent pie. Say you do sift through all this stuff. I think the melt value of a 40% 50 cent piece is around 10 bucks. What is your time worth? And if it takes you. It takes you an hour to get one $10 silver piece traded out, then that's what, $10 an hour? That's not a very good use of your time. Let's say you happen to have some education, right? But let's say your time's worth 30 bucks an hour. Well, you'd need to be able to churn one of these things out, like, what, every 20 minutes in order to make it worthwhile. So that's you. Not only are they trying to get you to. Are they getting you all excited about doing something that for the most part can't be replicated. They're trying to get you excited about doing something which is a patently unproductive use of your time. Most people, you know, with even a ability could go out and just. And could go out and get a job, just get a regular job or get a second job and work and then buy silver at spot at a faster rate than it would take you to use this loophole in order to build silver bullion reserves.

Yeah, assuming the loophole even works in the first place. In real life.

In the first place. Yeah, exactly. Exactly. Yeah. It gets people all frothy at the mouth over the idea of trying to stick it to the man when. But when you really do the math on it, you find out that it's you. The only thing you're doing is sticking it to yourself.

Yeah, right. Right. And, you know, one of the things I think people have to realize is. Is the whole sticking it to the man idea. The man knows how people try to stick it to him and has already put up roadblocks to make that difficult. All right, what's the next incredible scheme that's too good to be true?

So another one that I got was something saying, oh, if you followed my recommendation from last month and invested in this one stock that it's doubled past then. And if you'd done that, you would have doubled your money. And with the implied thesis being such a cheap skin flint, you won't Even subscribe to my 99$, in your newsletter. And if you had, I would have told you how you could double your money. You're such a moron for not following my advice. That's the implied thesis on all this. And it's the same as all the penny stock things. Right. You see the thing in the mail, oh, this penny stock is going to go up in values in the next week. They say, oh, see how stupid you were? You didn't put your money in. Right after I recommended it, it went up by 40%. And you get, oh, see, it's just gone up another 30%. See, even if you bought at the second letter, then it would have kept going up. But there's a couple layers to the fallacy in this whole, in the whole pump and dump. I call it the pump and dump stock fallacy. In almost every situation, the way these types of things work is you'll have some group, they'll make a whole bunch of recommendations and they'll cherry pick the ones that work out well or the ones that shoot up like a Roman candle, and that's what they'll send the email out on. So the very same group that sending out this marketing copy did their own report card, and it turns out that the average of all their recommendations didn't even beat the s and P500. So, yeah, it turns out it's really easy to cherry pick something that just went up like a Roman candle, but it's really hard to cherry pick stuff that's going to go up like a Roman candle every time. When you're picking stuff in real time and you're trying to do this in real life, it turns out it's really hard to figure out what's going to go up and when.

You know, the problem with the whole stock game, Doug, is that the SEC and the industry in general gives the public the impression that is, is so highly regulated that they can't get, get hurt. And what really happened, it's like, it's amazing to me that there's not a law against that or that there's not a law that, that says, that identifies the exact way these investment advisors have to calculate their returns. I mean, it's a joke. Like, even, even investment advisors that'll be on the radio that I've heard them talk about how, how they're audited, how they're, you know, they have auditing firms that, that audit their results and so forth. I mean, even that isn't what it sounds like. They've just figured out a way to say it so well that it, it, it sounds great, but in real life, you really don't know what you're getting. I mean, it's amazing. And I'm talking about the, the advisors that are, that have model portfolios that might have three model portfolios that they use. And it's it's just ridiculous. Ridiculous. It's totally ridiculous.

Another thing too, same with newsletters. And I was going to say, if we can go down a little bit of a tangent, and this is one of the things that I've actually been thinking about a lot lately is when you, when you talk to most of these people, they refer to themselves as wealth managers. Well, in Wall street vernacular, wealth manager is effectively a financial babysitter. A wealth manager doesn't do anything to actually manage your money. The only thing that they do is, is they suck for people to give them their money so they can allocate it to money managers. Money managers are the people who actually make money decisions, but they hate dealing with clients. Money managers don't ever deal with clients. And so anytime you talk about one of these people who's an advisor or a wealth manager, their sole purpose in life is to generate sales copies so that you give them their money so they can take a percentage, so they can put you, so they can shove it in the portfolio of money manager who also takes a percentage and then actually manage your money. So the thing is, it's like the. What you really have to think about with.

The proverbial Wall street investments is how many layers of middlemen are you going through? I mean, there is real money to be made on equity investments, but if you do, you can afford to pay a bunch of middlemen. You have to actually learn how this stuff works and probably need to start becoming your own advisor, which is a lot of work. All the people that make money in Wall street put in a lot of work. And I guarantee the money managers don't make their decisions based on some newsletter that they get once a month in their email inbox.

Yep, that's for sure. If it were all that easy, everybody would be doing it. Right? Because see, the difference is, and I just want to stress this, it alludes to what I said before. The difference is with income property investing, that does take some effort. If you can read a newsletter and go online to a brokerage account and trade some stocks and make a fortune, I mean, that's easy. Everybody would do that. That's a scalable, easily easy business. You could deploy $10, you could deploy $10 million all with the same amount of effort. With income property, it's different. You got to go find deals, negotiate them, make it all happen. It actually takes some time to do.

Takes some time and some effort. And then I kind of close the loop with. Because I was talking about the penny stock pump and dump scheme. So the way, and I'm not necessarily saying that the newsletter I got was a pump and dump scam, but the way the pump and dump scams typically work is that you'll have a person who publishes a newsletter and it's in a penny stock or some kind of very low liquidity stock. And what a low liquidity stock means, it's a stock that has limited volume and limited number of share, limited flow, that are kind of available.

And so what will happen is you'll have some group that will go out and sell, hey, there's mining stock or there's stock, you know, and they'll write pages and pages and pages of marketing copy and say, hey, I'm going to give you the inside tip. This stock is about ready to just go up like crazy. Well, so then what will happen is. So then people say, okay, I'll read this. Okay, I'll go buy a few shares. Well, if this letter goes out to 500,000 people and 10% of them go buy a few shares, the float is so small that those 10,000 that those people going out and buying the shares will push up the price. Well, I can guarantee you that the person who sent out the letter bought their shares and picked up part of the float before any people that they sent that letter out bought. Because then what happens is when those people buy, it pushes up the price. Now, what they can do is get a send letter saying, oh, see, everybody who's reading this, actually, if you. If you followed my advice, you'd be up 30% by now. Then they get the second case. And at that second kick that's on the people who originally bought in, that's when they sell out, because now they have liquidity so they can get rid of their position at a higher price. Well, if all these people that are looking at how much money they made on this thing, if they actually try to sell out, there's nobody left. There's nobody left to buy. Because what they've done is they bubbled up the price. So now if they want to sell, they have to push the price back down. It's the penny stock. It's actually. It's what. Gordon Gekko did that in Wall Street. Blue Horseshoe loves Anacott Steel. You know, what is it that he's doing with that? The whole idea of that is you take something with a limited float and you jack up the price.

If someone buys to acquire it, it increases the price on them or you jack up the price. So the people that you just told to buy the stock look like they're.

Liquidating your position at an escalated price that whole time. And then all those people that you just told to buy in, if they try to liquidate, the float vanishes and then the price has fallen back. There should have been the whole line. That's how the volatility cycle goes. And if you don't know about that in advance, it's really easy to get sucked in by the marketing copy and say, oh look, look at how much money this guy's making. The stock's going up to the moon. But the thing is, right, just because there's a certain price on a stock doesn't necessarily mean, let's say you own a stock and the price is really high, and this current market price is really high. It doesn't necessarily mean that you're going to be able to sell your shares at that price. It just means the last transaction was at that price. Well, when you go to list your shares, it may be that there's nobody left who's willing to pay that price. The only people may be willing to pay 10% less than that or 20% less than that, or 30% less than that. Whenever people talk about the current price of a stock, the current price is the last transaction price. And for high volume stocks, it tends to be pretty stable just because there tends to be enough volume, enough of a float to where the prices tend not to jump so much. When you're talking about low volume, low float stocks, the prices jump all over the place. They can go way up or way down just based on the availability and liquidity.

Because a small amount of trading will make a big difference.

Yeah, exactly.

It's because if you come in with any kind of volume and you want to buy shares, you could have to bid the price up. And then if you have a can of bond that you're trying to unload, then you may end up having to push the price down.

Well, what would you like to just wrap up with on this subject? I mean, obviously don't believe everything you read. Don't believe everything you hear. I mean, folks, think about it. If it sounds too good to be true, it probably is the well worn cliche.

I think the main thing that I would say is that number one, just learn, write down and always repeat to yourself that there are no shortcuts. These shortcuts do not exist. The only quick way to wealth is to sell subscriptions to idiots who think there's a quick way to wealth. There is no shortcut. It does not exist. Unless you're dishonest and so you are. And then, and I think that from there it's really, it's not so much about this is the best way. There are lots of different ways. Income property happens to be one of the very good avenues because it's.

The.

Primary thing that you need to be successful in income property is patience. You need to be patient because the real property comes from a long term investment. And so, so if you have or can develop patience, you can be successful in income property. If you're talking about like trading equities, you need to be very, very, very, very disciplined for a very long time because a lot of the profits from trading come from grinding small profits over and over and over again. And you'll have profitable trades, you'll have to take losses and you have to grind it out over a long time. Well, that is a very hard cadence to keep up. And not everybody has that kind of temperament and beneath. So I think the most important thing when you're doing your investments is knowing yourself, know what your demeanor is the most supportive of. And I think the reason why income property is good for a lot of people is because.

Patience is something you can develop. Getting beat up by the market every day and not getting depressed, that's kind of something that you have or you don't just because. Right. It's very easy to get depressed when things move against you. And being able to withstand that and stay disciplined in a trading strategy is really hard. That's why more people don't do it. And so I think the main thing for income properties is just that the key component to success is that most people can develop. So it is an avenue.

That most people have access to and can execute successfully. I think that's where its value really comes from.

Sure, yeah, good point. Well, hey Doug, thank you for sharing this with us. And I think your insights are great. And folks, if it sounds good to be true, it probably is. Don't get scammed out there. Be smart, be prudent, be conservative and be realistic. Doug, again, thank you so much. Appreciate it.

Not a problem. Jason.

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