Money Habits To Prepare Against Inflation, Market Crashes & A Recession EP 1283

The majority of people are very scared of slowdowns in the economy, slowdowns in the markets. However, for the minority of people, recessions, crashes are opportunity to build.

Welcome to the School of Greatness. My name is Lewis Howes, former pro athlete turned lifestyle entrepreneur. And each week we bring you an inspiring person or message to help you discover how to unlock your inner greatness. Thanks for spending some time with me today. Now let the class begin. How can people overcome the fear and anxiety of everything crashing right now and start to set themselves up for peace and protection moving forward?

So there's the R word, recession, which when people hear that, It gives them anxiety, fear, panic, makes people scared because they think of layoffs, companies going down. A couple of things that I want to mention regarding that is, you know, the majority of people are very scared of slowdowns in the economy, slowdowns in the markets. However, for the minority of people, recessions, crashes are opportunity to build wealth. You can think of almost like Black Friday for investors. So, the first point that I want to make regarding that is some people will use slowdowns as an opportunity to build immense amounts of wealth. More millionaires are made during recessions than any other time.

How do they do it?

So, that's the thing. You want to find the opportunity. And the way that you find the opportunity is first to understand how you get there because history doesn't repeat itself. but it does rhyme. And so what happens is people say, oh, this happened in 2020, so it must happen again. Or this happened in 2008, so this is probably going to happen, or this happened in 2001. That's not how it works. You have to understand what happened, how you're getting to where you are right now, that way you can look for the new opportunity because the opportunity is going to be similar but different. And you want to be ready when times are okay and good and prepared, that way when things go bad, you can come in and pounce on the opportunity and take advantage of it.

So you've got the stock market, which is, you know, have it looks like record lows. It seems like every week it just keeps going down. You've got the crypto market, which is in the NFT space, which it seems like it's going down and down deeper into a hole. You've got the housing market, which seems like it's starting to take a turn and might pop in this bubble. What, where is the biggest opportunity right now?

So let's talk about how we got here so you can see where the opportunity will be. So, in the past, for the last number of decades, anytime you saw an economic slowdown, the response was to create inflation. The response was to stimulate. So, go back to 2001, when the dot-com bubble burst, we saw interest rates get cut, there was stimulus by the Federal Reserve Bank. So, anytime you inject more money into the economy, it creates inflation. Same thing happened in 2008. The 2008 bubble, real estate bubble burst. And then we saw a new quantitative easing. We saw cutting of interest rates, more money was injected into the economy. Same thing in 2020 on a extremely bigger, much bigger level. 2008 was the largest quantitative easing in the history of time and 2020 blew past that.

It was like 5, 10 times more, right?

Yeah, significantly more. And so what happens is when you create more money, It reduces the value of your dollars. This is what inflation is. Inflation comes from the word inflate.

So when you print a lot of money to put it into the economy, right? New money, which creates inflation, correct?

Right. And the value of a dollar goes down causing the price of things to go up. So when 2020 happened, we started printing more money and injecting this into the stock market, into corporations, and into people in the form of stimulus checks and unemployment. So what did that do? Well, in 2020, we saw the fastest and most severe stock market crash in history. It exceeded the rate of the Great Depression. Wow. And then what happened? The Fed opened up the money printer and boom, shot right back up. It was the fastest stock market growth in the history of time, which if you think about that, we had the fastest stock market crash in the history of time. And then we had the fastest stock market recovery in the history of time. How is that possible? Well, we printed and insane amount of new money. And when that happened, we created something called unlimited quantitative easing, where they essentially just said that they would print and do whatever it takes to help recover markets. Well, when you start printing all of this money without producing more products, because now, you might have the world is shut down, what happens? We have people who have money and nothing is being produced. So now if you have money and you can buy stuff, but nothing is being produced, what's going to happen? You start shopping. and things get bought and all of a sudden companies can't keep producing the products that they had before. Now you start to create supply chain issues. So now this started creating supply chain issues and then this caused the price of things to go up even more because now companies say, well, I don't have more mugs to sell you, I only have a few, so I'm gonna have to raise the price of these mugs. And now you start to go down this inflationary spiral because now that people need more money to buy things, they go to their boss and they say, Hey, look, I need more money. It's more expensive to survive. then your boss pays you more money, hopefully. And then your company says, our costs have just gone up. People need more money. So what do we need to do? We need to charge more for our products. Now you charge more for your products, people need more money, it starts to create this spiral. So that was the issue that kind of led us to where we are now. And up until just a few months ago, inflation was supposedly transitory. It was supposedly this temporary thing that would just magically go away. But the interesting thing though, if we go into a little bit of data, I don't wanna get too confusing, but the interesting thing though is there's really no clear answer as to how much money was created. We have ideas, but if you look at this thing called M1, which is the amount of money out there, you can go to Google search, Fed M1, they have a chart of it. And what you'll see is that in the beginning part of 2020, There was just under $4 trillion of money out there, M1. And then now today, there's over $20 trillion out there in M1.

Of money, actual dollars.

Now let me say, the reason why I'm saying it this way is because when the pandemic hit, the Fed started creating more money, but they also changed the definition of money. M1, which is the definition of money out there, as soon as it started opening up quantitative easing, they changed the definition of it. Why? Now, there's no real answer for this, but my guess would be that if people knew exactly how much money was printed by the Fed, then people would be more of an uproar of what's going on, because then they would see, holy cow, you're printing all this money, making businesses rich, making investors rich, making Regular people poorer because inflation disproportionately hurts the financially uneducated and the financially poor because guess what? Now your gas is more expensive, your groceries are more expensive, your rent is more expensive, but your wages aren't keeping up with it unless you had a 20% wage increase. Your cost of living is probably outperforming your wages. So that's what's happening in terms of money. We had an insane amount of money printing being done. And in addition to that, we also saw interest rates get cut. What are interest rates and how does that have anything to do with inflation? Well, the Federal Reserve Bank is the Federal Reserve Bank. However, they're not federal. It says so on their website. They're not a reserve because they don't keep any cash reserves. They're not a bank. You and I can't go there to deposit money or do any banking. So the Federal Reserve Bank, while it's not federal or reserve or a bank, they control our monetary supply. They control our money. There's two ways that they can do that. One is through interest rates and the other is through printing money. So through interest rates, they have the ability to raise and cut interest rates. When we are in a slowing economy, a recession, they cut interest rates to stimulate spending because our economy runs on spending. If I have $1,000 in my pocket and I go to Amazon and I spend this $1,000, well, Amazon has more money to hire more employees, invest in more infrastructure, do more things in the business. But if I keep that money in my pocket, they're not making as much money and they can't keep growing. So our economy runs on spending. And when you cut interest rates, spending goes up. When mortgage rates drop to 2.5%, people wanna go and buy a home. People wanna go out and buy more cars. People wanna go out and spend money because it's not as expensive. And businesses do the same thing. Institutions are gonna go out and borrow an insane amount of money because it's cheap. If I can borrow money $100 million at 3% a year and I can grow my company at 5% a year, I'm gonna do that all day long, right? And that's what institutions did. So more money gets injected into the economy when interest rates are down. So that's what happens typically when you're in a recession. It creates more inflation, right? Because you're adding more money to the economy. However, it helps to stimulate the economy. Now, when you're in a growing economy and you wanna cool down the economy, wanna cool down inflation, you do the opposite. You start raising interest rates, making it more expensive to buy a home, making it more expensive to live. And then you also can, in this case, remove cash out of the economy. This is what the Fed is trying to do now.

How do you remove it out of the economy?

So the Fed is, well, interest rates and then their balance sheet. And I'll talk about interest rates first and then go into the balance sheet. So the Fed right now is raising interest rates because they want to slow down inflation. So when you raise interest rates, what happens? It's more expensive to buy a home now.

So less people buy.

Less people buy. Less cash enters our economy. Less institutions borrow money. Less corporations borrow money. So borrowing goes down, less dollars enter our economy. The second side is the balance sheet. So this one's kind of interesting because you have to understand a little bit of how money works on the government side without going into politics. So the government is not a for-profit entity. They don't sell products for money. Right, what they do is they get their money from tax dollars. People like you and me, right? We pay taxes and then the government spends money. So when the government spends less than what they bring in, no problem. Their tax dollars cover it and then they have a surplus in case one year they overspend. But that's not what happens here. We spend more money than what we bring in. So that's why we have this national debt of $30 trillion, the national deficit. and so how do you cover that? Well, if you spend more money than what you bring in, you can do a few things. You can raise taxes, which is gonna make people angry if your taxes go up. And so you can't always do that. Second is you can go out and you can borrow money. You can go and raise debt. So that's what the government does. They go borrow money from countries like China and Japan, but there's gonna be a limit to how much money you can borrow. So if you can't borrow enough money from different countries and what's left. Well, then you can issue something called a treasury bond, which is where not anybody, people like you and me, anybody listening to this can go and lend money to the United States government. But if the government is running a big deficit, meaning let's just say they need to raise $4 trillion, where are they going to get this money? Well, if they can't get that money from regular people, then they're going to call up the Fed and they're going to say, hey, Fed, we want to issue $3 trillion of treasury bonds, no one's going to buy it. Can you help us out? Now remember the Fed doesn't have cash piles sitting there so what did they do? They print $3 trillion, give it to the government, this money is created out of thin air. Now the government has this $3 trillion, inflation just happened and then the government is able to now spend this money without any sort of taxation. However, you still pay the price. The most expensive kind of money that there is is free money because now when the government gets this money for free out of thin air, Everybody pays the price and the person who pays the price disproportionately are the poor and the financially uneducated because now you have to pay for inflation. Your wages don't stretch as far. Your savings don't go as far and now your cost of living is significantly higher. So you're becoming poorer each and every day. Inflation hurts the poor and the reason I'm not even talking about the middle class is because inflation is the reason why the middle class is getting wiped out.

It's turning into more poor.

It's turning more into either poor or the wealthy, because if you understand what's going on here, you're gonna change the way that you use your money and it creates this divide. So more and more inflation creates a bigger wealth gap. And that's what we're seeing happen now. Some people during the pandemic became insanely wealthy. Yes. You know, they talk about how the richest Americans had gained billions and billions of dollars worth of wealth. Well, the poorest Americans saw no change. And so when the cost of living is going up so significantly and you don't understand this, you're being screwed over by this system and you don't even see it happening. happen. So that's the issue with inflation. And if it becomes a real big problem, well then you can run into some sort of currency crisis or you can run into an issue where the government can default on their debt. And this is an issue that's actually happening right now, not in the United States, but Sri Lanka. They just defaulted on their debt, the country.

Really? What does that mean?

We have so much debt, we have spent so much money, we have no way to make the payments. We're going to default and now the currency goes into collapse. Inflation goes through the roof. the economy goes to down.

Wow.

It's a big problem and it creates a lot of civil unrest. So that is the worst case scenario because now it's you're worried not only about the economy, but you're worried about the currency and you're worried about being able to find food. You're being able to like food becomes a scarcity. And right now, because of the inflation issue, not just in the United States, but around the world, the World Bank said that about a dozen countries are on the verge of a potential debt default. Wow. Because of all of the inflation that's going on. So it's a real issue and most of us have no idea it's happening. That's why it's known as the hidden tax, the silent tax. Everybody pays the price and if you don't know you're paying the price, you're the one that's probably paying the biggest price. Right. So this is where it's so important to get educated on that.

So what would be the thing if there was the biggest opportunity to create wealth right now.

Yeah.

What industry or sector would that be? Is that in this, you know, stocks? I feel like, I feel like nothing is stable. Like if you're gonna put money in something, you could make a lot or you can lose it all within a month. Is it the stocks? Is it the crypto NFT space? Is it the housing? Is it, you know, investing in yourself in another way? What would you say we should be investing in?

Absolutely. So the first, so the answer is gonna be looking for where the opportunity happens. Okay. So 2008 was real estate. That was the biggest real estate opportunity in our lifetimes. In 2020, it was stocks and crypto. In 2020, the stock market, from its bottom to the end of 2020, grew by 60%. The crypto market grew by almost 600%. And so it's like, if you didn't.

Get out, you probably would have gone back to- if you didn't go back.

To- Of course, but this is where, you know, again, the psychology of your investing is so important. But the thing that you want to pay attention to now is you want to see where things are going. That way you can make the right moves. Remember, history doesn't repeat itself, but it rhymes. So you want to look at the same data points and the same factors and see what's happening.

If you could make a prediction of what do you think is going to happen over the next few years based on history. So let me know what's rhyming right now. What's rhyming for you?

So it's going to depend on one thing. It's going to depend on what the Fed does next. Because right now, and I'll explain and I'll give you a defined answer in just a minute, but I like to give you my reasoning first.

Yeah, give me the context.

So right now the Fed is working to fight inflation. But how it's like 8-9% interest rates. Yeah, they're raising interest rates and they're going to start selling off their balance sheet. So the Fed balance sheet is around $9 trillion. And so starting in June, they're going to start selling off these assets. while raising interest rates. And the Fed says that they're willing to fight inflation because, because the economy is so strong and robust and because the economy is so strong and it can withstand any sort of interest rate hikes. So what is the Fed doing? In essence, they're pulling money out of the economy and now they're hoping that the economy will continue to stay strong. So by raising interest rates, what's happening? Housing is becoming significantly more expensive.

Housing or rent? Like buying a home or renting?

Both of them. Rent costs have gone up by 20%. Buying a home has gone up by even more. And I'll tell you why. Because when people talk about home prices, what do they talk about? They say, oh, well home prices are up 20% from a year ago. But your housing cost is significantly more than 20% because if one year ago you wanted to buy a home for half a million dollars, you could get a mortgage for two and a half percent, 30 year fixed.

Now-- 2.5% mortgage?

Oh wow.

Yeah, interest rate.

Interest rate, yeah. 30 year.

Put 20% down.

So $100,000 down. Yeah. You could borrow 2.5%. $400,000 at 2.5%. It would cost you something between $1,600 and $1,700 a month.

It's not bad.

Today, that home is not $500,000, it's $600,000. 20% more. And your mortgage rate is not 2.5%, maybe 5.5%. So what does that mean? If you put 20% down, you're not putting down 100 grand, you're putting down 120 grand. And you're not financing 400,000, you're financing $480,000. So you have to borrow more dollars and then you're borrowing the dollars at a higher interest rate. So you're not borrowing a 2.5%, you're borrowing at 5.5%. So now your mortgage on that same house, the exact same house, assuming no upgrades, has gone from $16,700 a month to 24, 25, $2,600 a month. So your housing cost is significantly higher. So now with interest rates going up, what's happening? People are saying, oh my God, homes are significantly more expensive, mortgage applications are starting to go down. In the stock market, what's happening? Well, businesses are having higher costs to operate because now if you were one of the companies that were relying on debt and your stock price in order to operate, because when you're in a low interest rate environment, you don't really need to make money because investors will keep throwing money at you because they can just keep borrowing money super cheap. Right. And so if you were one of those companies that were not profitable, you might have just said, well, I'm worth $40 billion. I don't need to make a profit because I could just borrow money. I can just get an investor to invest money into me. But now people are looking at you and saying, I can't borrow that same money at the same rates as I could before, so I need a better return and you're not making a profit. So I'd rather invest my money somewhere safer. so a lot of companies are seeing their valuations drop, meaning stock prices are dropping as interest rates go up. Same in the cryptocurrency market. There's a saying that when the tide goes out, you see a swimming naked. What happens? Well, there's a lot of free money out there. There was. And so people could just keep swimming in the free money, throw it into anything, and just hope that they'll make money on it because there's a lot of dumb money out there. Yeah. But when that money starts to go away, that's when you see who was swimming naked. That's when you see the scams, you start to see the bad investments, and you start to get exposed because now people want to put their money somewhere safe, and some are smarter. So people are leaving the risky investments and moving to the smarter places. So now back to your question, where do you go? Where do you put your money? And the reason why it depends on the Fed is because it depends on what the Fed does next. If they continue fighting inflation and they say, we're gonna do whatever it takes to bring inflation down. That means we're gonna pull money out of the economy. We're gonna jack up interest rates. Even if that means that we're gonna go into a recession. Even if that means we cause a housing market crash. Even if that means we cause a stock market crash. We're going to keep doing it. If they do that, well, then you're going to have a big buying opportunity in pretty much any asset class, assuming you find a good investment there, a strong fundamental investment. But there's also the chance that the Fed doesn't do that. There's a chance that the Fed says we're starting to raise interest rates now and this is what they're doing right now. And then six months go by and they say these higher interest rates are really hurting the economy now. The economy isn't as strong as we thought. and then they start cutting interest rates. Now what are you doing? You're in a high inflationary environment. Oh man. And now you're creating more inflation in order to fight the economy. 'Cause the Fed can either fight inflation or they can fight the economy. They can only do one or the other. And in all the previous crashes that I talked about, we were never worried about inflation. We were worried about an economic slowdown. In 2008, we were worried about an economic slowdown. 2001, economic slowdown. Even in 2020, the worry was not inflation, the worry was deflation. Right. The Fed says we can't have deflation. We don't want people to have their savings worth more, we need to create more inflation. And now it's we have an inflation problem. And so if the economy goes down, what do you do? You create more inflation to save the economy. However, that creates more inflation. Our economic slowdown today is being caused by inflation. You cannot fix an inflationary recession through more inflation. What's that going to do? It's going to make the inflation problem worse. Yeah, it'll probably boost the economy in the short term, but it will crash the stock market and the real estate market. Not downwards, but upwards.

Interesting.

And that's a very interesting concept to think about because when you think about a market crash, what are you thinking? Stock prices go down, real estate prices go down. But if you're worried about high inflation and then you start creating more inflation, what's going to happen? People are going to take the dollars and they're going to want to get out of cash because they're going to say, if our inflation rate goes even higher, our cash is going to lose value even quicker. We want to own any asset stocks, want to own real estate, maybe cryptocurrency, some smart ones. You're going to see more cryptocurrencies potentially go under. We've already seen some go under. So you're going to want to make fundamental investments, but you could see just a lot of money flow into these assets. Kind of like what we saw happen in 2020. The, we were in a recession, but the stock market was going upwards. Why? The money printer let it all end.

So that's where you want to pay attention to what's happening there. How high do you think the interest rates could get to? What's the potential range you think?

So let's talk about history. In 1970, it was the last time we saw inflation this high, or in the late 1970s, closer to 1980. And in that time, we were facing double-digit inflation. And in order to fight that inflation, the Federal Reserve then said, either we can fight the slowing economy or we can fight the inflation. Similar issue. It was called stagflation. stagflation is a very weird economic concept where you have a slowing economy and you also have rising costs. So it's like the worst case scenario. And so during that time they said, okay, we have a slowing economy and we have high inflation. We're gonna say, ignore the economy. We're gonna bring down inflation because that will save our dollar, it'll save the currency. And so what did they do? They jacked up interest rates and mortgage rates. were almost 20%. What?

When was the last time it was over 10? Remember?

In the 90s to early 2000s, around that time. Really? 90s probably. Yeah. It was the last time it was over 10.

So if it went over 10 now, what do you think would happen?

If the Fed continues to jack up interest rates to bring it over 10%, home prices will have to go down. I mean, because people won't be buying. You can't afford the home at the same interest rate today. And that would also significantly hurt businesses because the businesses that are relying on debt, they're gonna see a big pain, a big crunch. And so that's where the Fed is facing a big dilemma. They're hoping that inflation will go down, but the question is how? They're hoping that it's still just supply chain. They're hoping that it's still just Russia. They're hoping that it's still just other issues. But the one issue they never talk about is the money printing and the stimulus. And that's the concern. If we really want to get serious about fighting inflation, we might have to get more aggressive. And if we get more aggressive on inflation, it's going to hurt the economy. Even a previous Federal Reserve chairman said that we need to crash the markets because we need to get serious on inflation. Because we don't want to deal with a currency crisis would be even worse than just dealing with a recession. And so that's where it's, what is gonna happen? And are we really that bad? And the last thing I wanna mention on that is the money printing that we saw happen in 2020, it has just come out that it also led to the biggest financial fraud of America ever.

Really? Why?

Because people abused the system.

Oh yeah, they lied about things, they got free money they shouldn't have gotten.

It was the biggest financial fraud in our history. And the reason why, from all angles. But if you look at the PPP, which was the loan to businesses, that if you have employees, you have rent, if you have business costs and you're shut down, you can get essentially a free loan from the government and you don't even got to worry about paying it back. It's crazy, right? And if you are taking out, I think it was less than $2 million, you don't even have to explain what you use the money for. You have no justification. You can just borrow the money. So what happened? Well, some businesses use that money for good and some people said, well, I don't have a business, but I wonder if I could look up a registry of businesses and say, oh, these are some businesses and just start applying under these business names and say that I need the money. Wow. Billions and billions and billions of dollars were stolen. Where did the money go? Lambos. They went into nice cars. They went into nice homes. And it's just coming out now. And so we saw tens of billions of dollars go to just complete waste. Even in the unemployment program, now they're starting to realize that some people who were getting unemployment, didn't justifiably get the money or shouldn't have gotten the money. And so they were sitting at home playing video games when they should have been working or could have been working and maybe they were doing something that they shouldn't have.

There was no incentive for them to work because they were making just as much or almost or more.

Or even they were working and still getting the unemployment because they were doing something illegal. And so it created all this fraud. And so it's like, We had all the stimulus without really any regulation. Regulation, without looking into what we're doing with it and it created the biggest financial fraud and now who's paying the price? The average person, regular people are paying the price to inflation and if you're just now relenting to what inflation is, you're really probably getting pinched by it and it sucks because we're never taught about this. When are we ever taught about inflation? When are we taught how to fight inflation? It's so unfortunate.

Unless you're in like an economics class in college or something maybe.

Well look, I tried to get into business school when I was in college. I needed to take Econ 1 and Econ 2. I almost failed Econ 1, so I couldn't get into business school. So I don't even know if the economics classes teach this. I know.

So I'm curious, okay, let's say it goes above 10% interest rates at some point this year. What would be your next three moves? Like if you see it creeping closer there, what would you be investing in or taking your money out of or what would be your next three moves?

Sure, so I think the more liquid and more active investments would be your liquid investments, things like stocks, things like cryptocurrency. So again, if you look at 2008, when the stock market crashed, started going down, it bottomed out in 2009 and then it started going up. So the 2008 crash happened, started in 2007 and then bottomed in 2009 and then it goes up and by 2012, the stock market had fully recovered. But in 2012, that was when the housing market bottomed. So the housing market bottomed three years after the stock market crashed. Wow.

And why?

Well, the stock market has a lot of panic, it has a lot of emotions, and you can oversell very quickly because it's all emotions, right? When you see the headlines on the news talking about what's happening in the markets, people get scared and they sell today, right now. And then you see assets go down, and you go, oh my God, my assets down 30%, I wanna sell my stocks. It keeps going down and so it's a very emotional driven and it can happen essentially in the blink of an eye because you can buy and sell stocks in a second. The housing market doesn't work like that. The housing market has a much longer lag time because it can take easily 30 to 90 days to buy and sell a home. And so you just understand that the housing market moves significantly slower. And so if interest rates say went up to 10%, I have a strong hunch that the stock market would get hurt bad. And I think there would be a lot of opportunity there. In the stock market. In the stock market.

To invest then in the stock market.

Yeah. And that's if you believe in the American economy. I do. If you think the American economy is going to be strong in 10 years, 20 years, then there's opportunity there for you. And so what that would mean for me is looking for strong companies that are not going into bankruptcy that I can find opportunity to purchase. And if you're not interested in investing in individual companies, if you're not willing to spend the time doing that, because I think the majority of people should not be investing individual companies because they're not willing to put in the time, effort, research and have the psychology to do that. Then you can just look into an ETF that gives the exposure to the general stock market, the S&P 500, which is the biggest 500 companies on the stock market. And now you're just investing in a piece of America and you're able to buy at a discounted price. So that's what I would say there. And then if you're talking about cryptocurrency, you have to first I'm not here to tell you believe in crypto or don't believe in crypto. That's not what I'm here to do. If you believe in crypto, I do, I invest in crypto. If you believe in the technology, you have to be willing to weather the storm and you have to be willing to understand that, you know, price makes a big, changes the sentiment of crypto. Because when prices of crypto go down, people think crypto is fake. It doesn't matter. When prices of crypto go up, people think, oh, it's the future. And so if you really want to be an investor, you have to be able to cut through that emotion and cut through the noise and understand Okay, I like the blockchain, I like the technology. I'm not investing in the meme stuff. I'm investing in something that has actual value that can actually create change and then that can be an investment for you. But now, in terms of timing, I want to make sure I mention this because a big mistake that happens, and this happened in big part in 2020, is you can't time the market. Nobody knows when the bottom is and it doesn't make sense trying to time the bottom. When the 2020 crash happened, I was making videos on YouTube. And one of the things that I was saying when the market was just collapsing, I said, Look, here's what I'm doing. I'm buying on the way down. I buy in phases. I don't know when the bottom is, so I'm just gonna keep buying. When I do my research now to find the good companies and the investments that I want to own. So I'd spend my time when times are good to find the good investments. I already know what I want. Now, all I'm looking for is a good price. I'm looking for a good entry point. When the price goes down, hey, it's on sale, I'm gonna buy. If it goes down further, I'm gonna buy even more. So every time it goes down 10 to 15%, I buy and I buy more aggressively as it goes lower. And when I was making those videos, I got a lot, I got flooded with comments of people saying, why would you buy now? The market is collapsing, it's gonna go way further, wait for it to drop. And I kept saying, look, I can't predict the future. I don't know when the bottom is, I'm not trying to time the bottom, I don't know how long we're gonna be at the bottom. what happened? The fed opened up the money printer, the x factor, I like to call it, and it shot back up. So if you were trying to time the bottom, what happened? You missed the opportunity to buy because then it starts going up and you say, no, it's too high. I don't want to buy. And then it keeps going higher and higher and higher, and you just missed it. Yeah. So instead of trying to perfectly time the market, either do a dollar cost average system where every week you just buy a little bit of your investments that you like, whether the market's up or down, doesn't matter. Passive consistent, automatic, you let it do its thing. Or if you want to be more active and you want to look and research the companies and the investments that you want, make your list and just look for a good buying opportunity and buy on the way down.

Is it, in your opinion, would you buy a home when interest rates is over, or I mean, yeah, when interest rates is over 10% or you feel like even though you're getting in a massive discount, you're paying more every month, Would you consider that or you just wait until interest rates go down?

So I look at home buying very differently than the majority of people. I look at buying a home the way I buy a shirt. For me, a home is not an asset, it's a liability. So what does that mean? I want to buy a home because I want to create memories. I want to buy an investment property or an investment because I want to make money. So if you're buying a home because you think, oh, I want to get rich because of my home, I think you're looking at it the wrong way. Because you should be looking at your home as I want to make memories here. I want to live here and I want to grow my family here and I want to spend time here. If that's the reason why you want to buy a home, what you should be paying attention to is not what's going on in the markets, not what's going on with interest rates, but instead what you should do is say, can I afford it? Right. And what does that mean? Can I afford the down payment? Can I afford the monthly payment? Property taxes. Can I afford the property taxes?

The fix ups.

The move in costs. And then, you know, you move in like, I mean, the furniture, the upgrades, all that. So if you can afford it, then you buy. If you can't afford it, if you're stretching yourself too thin, you don't buy. Because what happens to so many people is you get sucked into trying to time the market. But again, if interest rates drop and you own a home, you can refinance. Right. And so, remember.

It'S almost good to buy it when interest rates are high if you can get the house on discount. And then if in a year or two the interest rates drop in half, you can refinance.

Just make sure you can afford it. That's the biggest thing. You have to be able to afford it because if you are stretching yourself too thin, going paycheck to paycheck to live in a home, you're hurting yourself because now what you're doing, you don't.

Have the ability to invest in other places. You cannot invest your money. Do you think people will be able.

To actually buy a home in five to seven years? It depends on what the Fed does. If the Fed cuts interest rates and we go into a recession, so our economy slows down, the Fed starts cutting interest rates, mortgage rates go back down, you're gonna see a bigger flood of cash into the housing market and that will create a bigger wealth gap and it will make it significantly more difficult for the regular person to buy a home. Home ownership will become a real American nightmare because it will be so difficult for the regular person. We will turn into essentially a renter nation. Wow. Where homes are owned not even by regular investors. Corporations. Corporations. They've been buying up... I was reading about... Blackstone's been buying up a ton of homes. Yeah, BlackRock's buying like... BlackRock and Blackstone. Yeah, they're buying one out of every.

Four homes in certain neighborhoods. That's crazy.

Yeah. And, and so they, which means they.

Believe people aren't gonna be able to afford them and they're gonna have to rent from them.

Yes. And so it's, it's a, it's a crazy time to understand that, which is why, again, I look at the home like a liability. Can you afford it? Yes. Then buy. If not, then don't stretch yourself too thin. I used to be a real estate salesperson. And the reason why this is so important is because when I was a salesperson, you know, what they say is, you know, you want to tell people this is their, biggest investment of their life. So buy a home that you love. Now, again, real estate agents are not bad people. Banks are not, bankers are not necessarily bad people. However, you have to understand the messaging. If I tell you this is the biggest investment of your life, what are you going to say? I want something bigger. I'm willing to stretch a little bit thinner. I'm willing to go a little bit further because I want that home. And so what does that do? Well, it makes the banker richer. It makes the real estate agent a bigger commission check and they walk away and now you have to deal with it. If you can afford it, great. But if you start to struggle with it, you're the one that has to deal with the problem by yourself. And so what happens for so many people is your home is a money pit until you sell it. And then you have to hope that you sell it for a profit because there's no guarantee, right? We don't know where home prices are going to be in five years or 10 years. I can't predict that. I don't know what the Fed is going to do. And so the main thing that you have to understand if you're thinking about buying a home is ignore the markets, ignore what's going on in the world. Can you afford it today? And please do me a favor. Okay. I very rarely try to tell people what to do because I feel like, you know, I try to, I want you to be educated so you can make smart decisions for yourself. But the one time that I really tried to give people, like I say, don't do this, is when it comes to adjustable rate mortgages because they've been making a huge comeback now because now the interest rates are five and a half percent. People say, I missed out on the opportunity to get a low mortgage. And now I have been seeing a huge growth of adjustable rate mortgages because now banks will say, Don't pay 5.5% on a home, pay 3.7% today and it's a 5/1 arm. Meaning after five years it's going to readjust and then your mortgage payments will readjust and if it goes higher, don't worry, you can just refinance out. And it is so risky because we don't know where interest rates are going to be. If they go up and they go up significantly, and now you're like, oh my God, let's just say mortgage rates are 10%. I don't want to pay three times more for my mortgage from $800 a month to $2,400 a month. I can't afford that. So let me refinance. Well, if you do that and home prices have dropped and you can't refinance because the bank says, well, you don't have enough equity in the home. I'm not going to refinance you. And then you can't sell because you're underwater. Well, now you're in a tough situation. So Pay a little bit more, get that fixed rate mortgage because if mortgage rates do drop, refinance and lock it in because other countries in the world don't always even have the option to do a 30 year fixed. We do, but an ARM, an adjustable rate mortgage is significantly more risky. The only time that I would say an ARM is okay is if you are 100% confident that you're gonna be able to pay off the home during that initial teaser rate. Because if you cannot, then you are taking on a huge gamble with the home that you live in, with your family's livelihood. You know, it's one thing if you do it with an investment, but with the home that you live in, avoid that extra risk and just lock in the rate, please. Right.

I'm curious, here's a question we got from people on YouTube. If someone has between a thousand and $10,000 today, to invest. They can spend on whatever they want. And they had to turn it into $100,000 within three years.

Oh, okay.

What steps should they take? And obviously this is not a guarantee, but if you're like you have to turn this $1,000 into $100,000 or $10,000 to $100,000, what would you invest in right now and how would you manage it over the next couple of years?

So I'm going to give you kind of a longer answer than maybe you were hoping for on this one.

Give it to me.

I'm going to start by telling you what you should not do. to. Okay. Because the first time I remember, I had a thousand dollars extra on my bank account. I was in high school. And what I did with that is I took the thousand dollars and I went out and I bought a watch.

No, don't do that.

Yeah. And this watch was very studded up. It was all crystals. And I was like, oh, it's a nice watch. Clean. So what happened with. Yeah. What happened with that watch? Well, I made that watch company richer. I made the jewelry store owner richer. And now the thousand dollar watch today is made worth maybe 50 bucks. It was just a show. So my value of my investment dropped like a rock, but now these companies made money, which now they could take that and invest in more products, more inventory, more marketing, more whatever. So the first thing is you got to understand that you want to put it in something that's going to help make you more money. So I'll give you my personal experience because I saw the biggest returns by investing in me, but that will be more of an active investment, and then you have the opportunity for a passive investment, which is why It's a longer answer than what you were probably hoping for, but I'll try to get to all the answers there. So I feel like everybody who, especially if you have the entrepreneurial mindset, you go through these phases where you first go through this like, I'm a hustler, side hustler phase, and then maybe you become like a solopreneur, and then you become an entrepreneur, and then you become a small business owner, and then you kind of go to that business owner route. So you kind of go through these phases because Initially, when I first started as a side hustler, I didn't know what entrepreneurship was. I was just trying to make some- Trying to make some cash on the side. Exactly, you're just starting off. For me, I started off in the event planning space. So I was in college, I started hosting teen parties for other kids in college. And I didn't really have any money to spend. I was 17 years old when I started. So I was like making very not attractive deals to me, but it was only where I could get started. Because what I did was I would go to venues, to host a party and I wanted a venue that wouldn't charge me any money upfront and in exchange they would say just give us 50% of every dollar that you earn. So if I made $1,000 in revenue from COVID charge, right, $10 to come in, I give the venue, the club, whatever, $500 and then I didn't have money for a DJ. So I said, look DJ, I need someone to play music, let's work out a deal. They took 50% of what I was left with.

Oh man.

So I would give them, you know, left with $500, they would take $250. Now luckily the business was able to grow where, you know, we were making on the low end a couple grand a night. And then what was I able to, I was able to negotiate better deals. And then I was able to start investing my money into marketing. So I started taking some money. And I remember the first thing that we did was I started investing money into flyers. It was $100 at the time to print 5,000 small flyers. And so I got creative and I was like, look, before the event, we need to distribute all 5,000 flyers. We cannot have them in our possession anymore. And I can't do this myself, so I need salespeople, essentially.

But I don't want to pay for salespeople.

Street team interns, college students. Yeah. So what do you do? I'll give you VIP entry into the party, which doesn't cost me a penny. Yeah. And I will give you a shout out at the party. Doesn't cost me anything. Makes you feel cool, makes you feel exclusive. You get to walk past the line. You have this lanyard that says you're this, you know, VIP, whatever. And so now I have people at some of the biggest colleges in my area passing out flyers, trying to get everybody to come, because now you want to be one of those people. So, you know, I got these free. salespeople that are trying to promote it. Smart. You have to be creative. And that now starts to multiply the money. And that's when I realized that I'm just a side hustler. I will never be able to build a business on this. I don't want to build a business like this because it was a very dirty industry, which is why I got out of it. I did not like the scene. So I left that and started kind of going down more the entrepreneurship route, not going more into Innovation. So I started a sock company. So now I'm starting to invest money, my own dollars, into the sock company. That way, now I can build a product, build inventory, build build a website, build advertising, build marketing, and now I'm able to grow this much faster because now I have some skills that I learned from my mistakes because I screwed up a lot. My first event was a complete flop. I had some very bad failures. I had lost money on some occasions. It was, you know, when you deal with club owners, you're dealing with very interesting people and you learn very quickly, right? I'm a 17 year old going up to some of these club owners trying to figure out The game and they're.

Taking advantage of you.

They're taking advantage of you. And it's also dangerous. I remember one time I went to a club to talk to the manager because we had a party the next week and I said, Where's the manager? He said, oh, we got stabbed last night. Oh, man. And so, you know, you learn very quickly to protect yourself, to protect your own interests. I mean, it's, you're literally, I mean, there was a lot of physical stuff that happened. I mean, I got, I was the bouncer a lot of it. So, I, you know, you learn to protect yourself physically, learn to protect yourself mentally, learn to protect yourself financially. So, I had to learn very quickly. and so now I take things I learn, I'm in a much safer, much smoother, much cleaner industry, the sock industry, but I start to learn and I start to apply some of the same marketing. How can I be creative in the marketing? How can I get people to learn? And you know, you can't learn this in a textbook, you just have to try, be willing to fail. And so same thing there. Now I kind of go into the entrepreneurship route and now I'm starting to learn and I start to sell and then I realize my passion isn't in socks. I like the stocks, I like the business idea, but my passion isn't there. My passion is more on the financial side. So now I was also doing minority mindset as a hobby. Minority mindset starts to grow and then I start to build things like market briefs, which is our financial newsletter. So now I'm building market briefs and now I'm turning more into like from the entrepreneur to the small business side because in market briefs, I am not the only worker, right? On the minority mindset channel, it's my face, it's me talking. and it's, you know, we have video editors and all that, but it's mainly me. If I'm not working in minority mindset, we're not making any more content and it's not growing, which is okay, right? It's not for me like as my business, for me it's my way of helping to pursue my passion and my mission to help spread this sort of financial education, the things that I was never taught. But my business now, market briefs, we have a whole team, right? We have people that read the, that lead the creative side that write the news that every day we have the business development team, we have the operations people, So, we have a full team that are doing it and if I were to not go into work tomorrow or if something were to happen to me, the business will continue without me. And so, it's a matter of flipping that money into the next thing to the next and being willing to invest the time, the education. So for me, it took me a solid decade. So I don't have a better-- Three years, I couldn't figure out how to do it. It took me a long time to figure it out.

Maybe you could do it now.

Now is the time.

Turn a thousand into a hundred.

I could do it significantly faster than a year.

That I'm hearing you say is, you know, invest that thousand into a skill. Invest it into a skill.

You will get the best return.

And put it into, you know, that could be, okay, I'm gonna buy a camera and for the next two years master becoming great at using the camera, whether it be video or photography, and then start working with clients and making some side income and using that money to reinvest in more equipment.

Exactly.

Using that money to maybe have someone else help me. to scale my side business and then have that cash to invest in other things as well. And then develop new skills, new skill and new skill.

And it takes that mindset though and the willingness to take risk because, you know, I would also caution that because you have to be willing to just try. When I started a minority mindset, I didn't have a camera. I didn't have any fancy equipment. I started recording videos off my phone. And I was like, you know, I'm not going to invest so much money into this when I'm trying to, you know, it's a hobby for me.

See where it goes.

See where it goes. But I did take an acting class. I was in law school. So I was in law school part-time. I was working on my business full-time. And then I took an acting class in the evenings, night school, because I was like, I've never talked in front of a camera before. I'm not even a good public speaker. I don't know how to present myself. I don't even know how to hit the on button on a camera. How am I supposed to do this? So I took an acting class because I was like, well, I'm willing to learn. I'm willing to try. So you have to be willing to get uncomfortable and you have to be willing to take that risk. and this is gonna, I don't know if this is gonna offend people or I'm gonna say a bad word, but the reason why I think I've been able to become successful is because I'm stupid. My whole life, I've been told, Me and you both, man. I've been told, Just Pretend They're Stupid. Just Pretend They're Stupid. Why would you wanna do that? And you know what? That's the reason why I am where I am today is because I'm stupid. Because I'm willing to, I never looked at the risk and it called it stupidity, but for me, I just saw the opportunity as I know I want to achieve something bigger because I saw how hard my parents had it. I saw how hard my grandparents had. My grandparents were refugees. They lost their homes. They lost everything. They had to fight for their lives. And so I saw the things that my family had to go through. My grandparents raised me. They lived with me. So I lived with my grandparents. I'm a parent. So I heard their stories, talked about the struggles. And that was where I started to get my basis of financial education because my grandfather would tell me, and he actually repeated this to me a couple weeks ago when I was on the phone with him and he was like, you know, the biggest and worst disease is poorness because he said, I grew up and I saw extreme poverty. So my family is from a state in India called Punjab. And in 1947, our home, the state of Punjab was severed by the government. And if you were a Sikh, a member of the religion that I am, and you're on the west side of Punjab, you had to migrate east, otherwise you were going to be killed. so my grandparents were on the west side and you literally had to like run. Like my grandfather, all he had was a clothes on his back and a sword in his hand. And as they were coming across, they got attacked by a mob and he saw his uncle get his head chopped open right in front of him.

No way.

They had a fight and so he put his uncle on a horse and that was the end. Holy cow. He got to the new side of India now and he's there he lost his shoes on the way. He has no home, no money, no anything. And so he says, I saw extreme poorness. And when you're in that level of poorness, forget helping other people. You can't even feed yourself. How can you feed your family? If you can't feed your family, you can't feed another hungry person. And so that's what he talks about. And that's my initial, the importance of, because again, they didn't know investing. They didn't know financial education. What he knew was- Survival. Survival. And what he would tell me is work hard. follow the system and become successful. And that's why I wanted to become successful, because I saw that. Now, I didn't know the right way to do it at the time, but that's what we're all taught, right? We're all taught, go to school, get good grades, get a good job. But there's so much more to it that we're never taught. But that's where my initial, like, I need to become successful, I need to work hard, was from that learning that.

Basic kind of need. I'm curious, this is something I don't think many people talk about, or I don't hear people talk about, the emotional side around money. and the fear and emotions that are tied to money when you say, okay, here's a couple thousand dollars that I have in my bank account. I'm going to invest some of this. And then you see it in the stock market crash or go down or you lose half of it in a week. How does someone manage the emotions in the visceral response to when their money goes up and also goes down in an investment?

So you have know your strategy and you have to be willing to stick to the strategy and trust your strategy. So that means when times are good, you need to spend your time being learning, get educated and believe your strategy because if you just start switching your strategy in the middle of times, you are going to be the one paying the price. The stock market is a place that transfers money from the patient to the impatient. And so if you are impatient because you're like, oh, things are going wrong temporarily, and you sell, what happens? Someone else can pick up your investment at a discounted price. So that's the first thing that you have to understand. You have to understand the strategy and be willing to stick with it and make sure that it's been time tested. And again, history doesn't repeat itself, but it rhymes. And you can see the success of certain strategies through previous downward cycles. Downward cycles happen. It's a fact. I mean, every 8 to 12 years, we see some sort of economic slowdown. We see some sort of market crash. This is nothing new. this is why for successful investors, they love recessions. They love market crashes because it gives them an opportunity to come and buy. It's like Black Friday, right? For investors. So the first thing you have to understand is that, and then that will help you kind of just close your eyes. Remember, these are just day-to-day swings. You only lose money if you sell or if your investment goes bankrupt. So you want to make sure it's not going bankrupt and then understand that. But then on the flip side, you know, you talk about the actual emotions, I'll tell you. It was difficult, you know, because I had very high expectations on me to go out and become a professional. I became an attorney because essentially the conversation was, if you do not become a doctor, then you're going to lose all pride in the family. So at least become an attorney. That's how it was. It was difficult.

Second best.

Yeah, exactly.

And if you're not that, you're a failure.

Yeah, exactly. So, you know, it was tough. And, you know, for me, I was like, okay, well, I can go to law school part-time, which means I can work on my business full-time. However, I wasn't the best student in law school. And the reason was because I was devoting a lot of my time and energy into the business. Now I did good in law school. I'm not good, like I actually did really well in the bar exam. I enjoyed learning. I love learning. But I knew that in the back of my mind, oh my God, if I graduate law school and things don't work, I don't know how I'm gonna work as an attorney. Like I'm gonna be like the bottom of the barrel. Like I don't know what I'm gonna do. 'Cause I don't like know the traditional how to work as an attorney. I'm sure I could figure it out. I don't know what I would do. And so I remember I was sitting there and I was like, oh my God, like when I'm done with law school, like it's over. Like I was already making decent money, so I was fortunate there, but I was like, what if this is just like just temporary? What if things go down and I don't have any like security and that's it. And I would have so much anxiety. I couldn't sleep at night. I would wake up in the middle of the night multiple times and I would be shaking and I was like, what if not only am I gonna like financially not be able to take care of myself, how am I gonna take care of my parents? How am I gonna what am I going to tell people? What am I going to do? And just the amount of questions is it is hard. And that's, you know, the faith in you be willing to take that risk tolerance is hard. And I was fortunate that I have tough skin. And I think the reason why is because, you know, my whole life I was bullied. I look different. I wear turban. I have a beard when I was in elementary school. I was picked on because of it. Then we went through 9/11 when I was, you know, young. Oh, man.

Just a bunch of-- how old are you at 9/11?

I was maybe 10 years old. So right around 10.

And is the tradition, you know, is did the youth dress in this way as well? Or was it more once you're of a certain age?

So I wore a smaller turban.

Okay.

And, you know, it's still very identifiable.

Right.

I was picked on before that.

How old were you then? 911?

Around 10.

So what was that like for you?

So I went to a school with all white people. so people just, they were not accustomed to other religions and cultures, races and everything. Yeah. And so when 9 11 happened, everything just went. I mean, it was really bad where I was, like, picked on, bullied, I was punched. I was, had my stuff thrown around. I was spit on. Wow. There was times I had my turban ripped off. I mean, it was, it was pretty bad. Really? Yeah. I mean, it was pretty, at 10. At 10. I mean, it was, it was 10 11 12.

It went on for years. I mean, for years because 9 11 was 5-10 years of yeah, it was.

A lot this energy. Yeah. And, you know, it was just one of those things where I would come home and again, it was my grandparents. My grandfather, he was a very tough person, right? He went through a lot and he ended up joining the army. He was a very like, he was like, you gotta stand up for yourself. Yeah. Yeah. And I was like, oh, I was a really timid young kid. I was like, I don't know. And then my grandma was this loving person who said, no, it's okay. Give me a kiss and hug. Say, no, you never want to fight. just, you know, just teach them about them. So I had like these two kind of polar opposites and I think that was great because that helped me see both sides and become more of like understanding different opinions. But, you know, when you go through that and you realize that, you know, I'm not accepted or you feel that way, when you want to become an entrepreneur, you don't get accepted. And it translates differently where now it's like, oh, I don't like your business idea. You're dumb for doing that. You must be stupid for doing that. Who's gonna start a sock business? You were supposed to become a doctor. That saying that I heard so many times. Oh, you know, people will call my parents and say, oh, so your son is supposed to be a doctor now. He's selling socks. And it was like, you gotta have some tough skin, man, to be able to hear that and keep going. And so I was fortunate to be able to go through that and let that make me stronger. But now it's like, it is what it is. You know, I'm gonna keep doing me, and it's like, you know, goes back to the Hey, I'm stupid. And this is what I'm going to keep doing because I believe in it.

People don't see what I see, but.

I'm going to go for it. My man, thank you so much for being here.

I appreciate it. Thank you for having me. It was a great time as always. Thank you so much for listening. I hope you enjoyed today's episode and inspired you on your journey towards greatness. Make sure to check out the show notes in the description for a full rundown of today's show with all the important links. And also make sure to share this with a friend and subscribe over on Apple Podcasts. as well. I really love hearing feedback from you guys, so share a review over on Apple and let me know what part of this episode resonated with you the most. And if no one's told you lately, I want to remind you that you are loved, you are worthy, and you matter. And now it's time to go out there and do something great.