Tuesday Macro Q and A: Why do you hate stocks?

What’s going on, guys? Brandon here, Legacy Group Real Estate Team. We have your Macro Q and A. This week we have “Why do I hate stocks?”

Why do you hate stocks? That’s the question I get all the time and we’re going to answer it here, now. The truth is I hate stocks because – I actually don’t hate stocks. They’re just not the asset I would be in right now and I’m not in right now.

There are a million different indicators as to why. If you have watched our Insider’s Reports, we’ve gone over them. We’re going to go over the next five months of our Insider’s Report from this month, from last week, the next five months. We’re literally going to go over Cryptocurrency, Precious metals, that Everything bubble, which is everything from bonds, the stocks, the Warren Buffett Indicator, Mike Maloney’s Stock Fragility Index. Everything is flashing red, yellow, red, whatever you want to call it, massive warning signs, caution tape. It’s gonna be an interesting time ahead. Let’s just say that.

So I don’t hate socks. I don’t discriminate what asset class there is. The biggest misconception – the thing we’re told all of our lives – is that we have to diversify and make sure that we’re in different places. That way if something happens that we have a different allocation of our money and we’re not all in one spot, but that is really the antithesis of what you want to do. You want to be in the asset classes that are undervalued.

I was just having this conversation this past weekend with one of my loved ones and it was interesting because they come from a financial background and they tended to not agree with me, that’s totally fair. Everyone has to do their own homework. So I say all this, and I want everyone to go do their homework because that’s exactly what needs to be done.

Every person’s different and every person has a different risk aversion. I’m not the smartest person in the world, don’t claim to be, never will be, never have been. So I want to make sure I’m dummy-proofing what I’m doing. By cycles investing, which is actually what we’ll, right here first, by cycles investing. Again, I’m not smart enough to know if this is some type of stock thing. I don’t know, don’t care, don’t think about it in terms of stocks. We have to start thinking outside of the box of stocks and paper. Paper is a stocks bonds, mutual funds, and that’s why I’m gonna put her here.

The 4-Asset Classes

Does anyone know the four asset classes? We have paper, we have businesses, we have real estate, and we have commodities. So these are the four asset classes and this is what needs to be your diversification, in these different asset classes because when these things go up, generally, say paper and real estate go up, commodities are down. Business might be down. Buying businesses, having a car wash or whatever, what have you. Kind of a free-floating, you know, free ranging. It does his own thing a lot of times. But usually, these things are closely linked. Usually, paper and real estate are closely linked commodities, so it might be gold, silver, oil, grain, wheat, corn, those commodities there. Those are usually inverse of what’s going on with paper. Real estate right now, and I’ve got some I’m going to read here from, it’s literally from Realtor Magazine, so the national publication for realtors. Again, I feel it’s my duty not only as a business owner but also as a real estate agent and as a business owner and having multiple businesses. It’s my job to inform our clients, inform the public, the people around me and my loved ones, whoever it may be, whoever will listen to me rant and rave. Whoever will hear the sound of my voice and hopefully spark some interest, some intrigued and that way someone else would want to go do homework and start looking at some of the things that I’m talking about because this is what’s plaguing us. We have things like this article, which I’ll read here in one second, it’s from Lawrence Dionne, who I’m sure is an incredibly smart man. The Chief of the  National Association of Realtors, now our chief economist, he’s been doing this for a long time. I’m sure he’s an incredibly smart man. Like I said, he says some things in here which are, some of them are true, but some of them I just quite frankly I have to laugh at.

When you have these different classes, again, you have to see what’s up and what is down. We have gone through these and many different things. We have the ratios that we use and that’s just one of the easiest ways. The ratio is to see what’s undervalued or overvalued. The whole point of this is you want to find assets, asset classes, and now you take the ratios, you’re finding what’s overvalued or undervalued. You’re taking the DOW, say in paper, stocks, bonds, mutual funds, IRA’s, 401K’s. You’re taking the DOW and you’re dividing it by a medium priced home, by dividing it by an ounce of silver, an ounce of gold. You’re seeing these ratios and can start to plot them. When we plot down, that’s when we find out over the course of time what’s undervalued, overvalued.

Analyzing the Ratios

I could give you the ratios not just because I know them, but the whole point is I want you to go do your homework and I want you to find out what they are coz me just telling you isn’t going to do anything. For really quick for instance, right now, the most undervalued asset class is commodities, and the most undervalued asset in there really, because gold and silver are just true money, and silver is so undervalued compared to gold. So you have, not only is commodities are undervalued. Generally, you have silver within that class that is even more undervalued. It’s 1/80 of gold. So it takes one ounce of gold to buy 80 pieces of silver or 1/80 ounces of silver. Usually, that natural ratio is about 1:12, 1:15, 1:20. In just a few years ago it was down to 1:30, 1:40 event. It’s a really good time to buy gold, but we’re at one to 80. That’s incredible! I mean, silver is so undervalued and eventually when these things crash, they, which is natural, we’re going seven to nine-year cycles, right? We’re in year nine. Well, when it goes up, gold and silver go up, always, always have, always will. This is what’s gonna happen. Again, you can add in crypto because that really is in essence, kind of a new asset class that’s really been created. But there are still interesting days we’re gonna get into later this year about that and do some really in-depth. I already have about three pages of notes that I’ve made. It’s going to be probably one of our most in-depth Insider’s Reports in a while. It’s about three months from now. I’ve already been planning that already doing that, but right now this is for thousands and thousands of years for, since the beginning of time.

That’s what people have been trading with and using and it’s still around and always will be. It’s the safe haven asset. But I don’t care, you know, if the market is exactly the opposite and these were very high and these were fire sales. I would be talking about paper and real estate. That’s the difference. That’s the thing that when I get into debates with people, I think they, sometimes I try to get them to realize “I don’t care.” I might be talking about gold, silver right now or I might be talking about one of these classes. I don’t care what asset class it is. If these are down, I want these things, so those are down, this is most likely up. Well, then I want these things. I want paper and I want real estate. I want to be buying cash flowing real estate, rental real estate. When the market has crashed, commodities are way up. I want to sell off the gold and silver, at least a good portion of it. I’d transfer that money over into that currency I should say. I’d transferred over into real estate and cash flowing real estate or maybe some incredible fire sales in the stock market with say Apple or Walmart or whatever it may be. That is the whole point of that. That’s the four asset classes and that’s why this is so important. That’s what cycles investing is. It’s finding the undervalued asset class, not just one asset class. Because again, everyone, what are we all told: “diversify for the long-term in stocks, bonds, mutual funds, IRA’s and 401K’s. That’s all in the same asset class. Well, when the market goes down, all of those things go down.

We saw that in ’08, we saw that in 2000 and the.com crash in ’01. We saw that in ’08-09′ we saw in the Black Friday or Black Monday campaign. I’m getting all my days mixed up now. At 87, this cycle repeats and we had one in the 90’s. Well, it just repeats over and over and over and over again. In order to get out of that valuation channel, we need to start investing in the undervalued asset class instead of continually just stockpiling here. Making money and then decreasing by 50%. Then making that game back up, regaining that and then losing it again 50%. Then gaining it again the next eight years, and then losing it in a year and then gain. That pattern is a valuation channel that most people are stuck in it. It’s really as Robert Kiyosaki says that, “the rat race.”

Unemployment rate

So I don’t hate stocks, it’s that I’m a valued investor, I’m a cycles investor. That’s what it is. That’s what I hope some of you can be in. Some of you are. I know some of you already. I just want to read this really quick, kind of finishing up here for today’s quick Q and A. He talks about $5 million. The unemployment rate is an absolute joke. It has been really for years, probably since Reagan. They started getting shifted around, you know, the first Bush and then Clinton, and then, George W started messing up a bit and Obama really messed with it and skewed it to make it look good for them. Each president kind of did his own thing and now you can’t even trust it. I mean there’s the different rates you can actually go in and you look in the government website, you can actually see the different kinds of unemployment rate they calculate. You have to do your homework. It’s really up in the teen somewhere. It’s right here,  $5 million net new jobs in the past two years, pushing the unemployment rate down to 3.8%, the lowest rate in 50 years. That’s incredible. I mean, I don’t see everyone with the job. I mean there are people everywhere without jobs, fault employment.

“Morgan News, despite recent volatility, the stock market has been close to all-time high helping pushed the combined wealth in the US across 100 trillion marks for the first time.” What does that mean? Is anyone truly wealthy? Newsflash, all the currency being printed in the last 10 years, which you’ve been printing massive amounts that’s why the stock market is so high and breaking all-time highs. We’re at 14,000 when the market crashed in ’08, we crashed down to about six and change, we’ll say 6.5. We’re now back up to $25,000. What has been truly accomplished in that time? You know, if anyone can tell me what’s truly been accomplished that we, all of a sudden we’re breaking records here and now have just launched. We are almost double the stock market before we crashed in a way. So if someone has an amazing answer, please let us know. I don’t know of anything. And again, pushing the combined wealth of US across a hundred trillion mark, it doesn’t mean anything. Unless people took the money out of the market and made money from that or took money out, that’s the only thing that means. It doesn’t mean anything, it’s all paper. People have or net worth from paper millionaires  It’s because on paper they might be a millionaire, they might look like they’re a millionaire, but they don’t truly have that cash. They don’t truly have that money.

This next step, the median price home has risen 40% over the last five years. It continues to climb. Again, what does that do for you? You know, in order to take that money, you either have to have HELOC or sell it. So if you’re selling your home, you have to go buy something else. You gotta go find something else in an overvalued market or you have HELOC, which again, maybe you have a decent rate on it, but then you’re still using that. Really the only thing you can do, the one good thing out of that is that you could use that HELOC to go buy cash-flowing real estate to leverage yourself, to buy assets. But a lot of people chooseth to buy liabilities. They use that money, that HELOC, to go buy a new boat or a second home or a new car. Then it’s another liability that they’re having to pay off themselves instead of cash flow in real estate where they have renters who are paying off their loan for them. So that’s the difference. Again, this is the stuff we talked about all the whole time in our Insider’s Reports. We get into real detail with this. We’re printing astronomical amounts of money and we have then Quay I, Quay II, Quay III. I think we were in Cuba before. I don’t even remember now to be honest. You have Quay Infinity and this is why the cash is sitting on the banks’ balance sheets.

All the biggest banks in the world, all the biggest bankers, they run the world. You know, not heads of state are the bankers. The bankers around the world, ever since 1913, the Federal’s created, you can thank Woodrow Wilson for that. The income tax, the Federal Reserve, and we lost 95% of the purchasing power of the dollar. Since then, in the last hundred years, 95% of our purchasing power. We all joke, “Oh, Grandpa’s house used to cost $5,000.” Well, that’s just inflation and that’s just because our money is eroded. It doesn’t mean that those things got more expensive. Actually. it means our dollar is worth less. So that’s why when you measure against gold or silver, things of value, then you start to see where a true value lies. So again, do your homework is the most important thing. I tried to throw up as many assets as I can on here and put links to these things as well, guys.

Buy in, Sell out

I’ve got a couple more things really quick. Home sales are down 1% of course, because buyers, the homes are too expensive because there’s no one building because costs are too much to get contractors to build. There’s no one wants to do skilled labor, unfortunately, so it costs way too much, homes are being built. There’s an inventory shortage and we got hedge funds. People buying up homes and sitting on them. So we have a huge inventory shortage across the country and that means that prices go up. First-time buyers can’t buy. People can’t sell their home. Take that 40% of the median house price for raising 40%. They can’t take that equity out and go buy something else because they’re jumping into this insane inventory shortage market. The number, it’s incredible. Consumers strongly expressing it’s a good time to buy fell 7% over the last year. Of course, because they’re seeing people get destroyed, they’re seeing buyers have a heck of a time making multiple offers. Homes are going  10, 20, 50, a hundred in some markets. Some markets are going hundreds of thousand dollars over asking price. That is when you start to get worried. Warren Buffet always says, “when people are getting greedy, that’s when you get scared. When other people are scared, that’s when you get greedy.” and that goes back to cycles investing. So if people are getting greedy, “stocks or they’re never going to go down. What do you mean? You always got to be in the market?” Well, that’s when you get scared and you start thinking about other asset classes because that’s when generally things start to happen. And when people are scared, these things crash and people aren’t scared. That’s usually when it’s a good time to come in. We’ve all heard of buy low, sell high, yet very few people do it.

So that is our quick “Why do you hate stocks?” I just want it to bring you guys that today because it’s a question I’m often asked. I just had the conversation again this weekend, a fairly heated discussion about it this weekend and it’s something I’m very passionate about. I guess I feel like it’s my job to present this to you, present a different way of thinking and right, wrong or indifferent. It’s something that I do my homework on constantly. I want you to go do your homework because it’s the only way that any of us can really go forward and have some control, some semblance of controlling our life.

Jim Rohn always, always says, I mean one of my favorite quotes of all time. Jim Rohn is one of my favorites, a personally developed people of all time and he always said: “If you leave your government to manage your wealth by the end of your life, you can divide your life earnings by five. But if you take control of your wealth by the end of your life, you can multiply your earnings by five.”

So it’s always something that’s stuck in my head and I just take it very seriously. The downtime that I do have I’m trying to study and trying to get better so I can bring more information to you, so I can make more sound decisions. Like I said, part of it I feel as a true duty or responsibility to be in business still and be in business in a year from now and five years from now and 50 years from now. That way I can continue serving because it does no good if all of a sudden I’m giving you advice and then I’m out of business in the year or I’m out of business in five years. I think that’s something that, I don’t know if it’s a skill. I don’t even know if it’s a skill. It’s just the way I think. I think very long-term, 33 years down the road. That’s how I’m thinking. I’m not thinking you know, what’s good tomorrow and I really think it’s my duty because it doesn’t look good one, but it also doesn’t do you or it doesn’t do anyone any good. If we’re in business, we’re helping a bunch of clients and all of a sudden we’re on a business in a month out of business in a year. Well, now I’m leaving people high and dry. So I really feel it’s my duty to inform my employees, the people around me, that way they can provide for our clients and that way I can provide for them and then we can take that message out to everyone around us. So I thank you for listening and you’re a time, attention, energy because we talked about assets all the time, but time truly is our, our most important and valuable asset. So I thank you for spending it here and I’m humbled and honored to have it. So thank you guys and we look forward to seeing you soon.