To start this Flashback Friday episode, Jason Hartman shares two articles, first is Wall Street’s perception of Business Insider, and the second is an article from Newser about CEO wages. Afterward, he interviews Douglas Goldstein, author of Rich as a King. They talk about using the concept of chess to become a more strategic investor and zero-coupon bonds.
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If you’re that kind of person and you’ve got the capital and you’re a great negotiator, you’ve got great people skills. You You could probably be a successful flipper, but it’s like a job. Right? If you’re not flipping, you’re not making money and that’s why I prefer income property because you just make money every month.
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Welcome to this week’s edition of flashback Friday, your opportunity to get some good review by listening to episodes from the past that Jason has hand picked to help you today in the present and propel you into the future. Enjoy. This show is produced by the Hartman media company. For more information and links to all our great podcasts, visit Hartman media.com.
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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 multi millionaire 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 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.
Jason Hartman 1:24
Welcome to the creating wealth show. This is your host, Jason Hartman. And this is episode number 518 518. Thank you so much for joining me today. We have as our guest debate, Douglas Goldstein, CFP, and he will be talking about chess and investing. And you know, chess is such an interesting game of strategy, right? It’s interesting how Watson the IBM computer can now beat a human quite handily. And then the best chess players in the world. But you know, the game of life is kind of like the game of chess and in many respects, right. So that’ll be our guest today. But before we get to him, I want to share with you really since he’s, you know, got a wall street background, of course, a couple of interesting articles as I sit here on the balcony of the Radisson Blu that’s blcu Radisson Blu in Dubrovnik, Croatia. And I am looking at a view from this balcony that is so beautiful, it is almost impossible to describe. It’s really are just an incredibly, incredibly gorgeous view. I wish you were all here with me. So we can talk in person. You know, maybe I’ll get this view picture up on the Jason hartman.com Facebook page. How’s that sound? Yeah, I will put these pictures up there. And I put a picture, I put pictures of a lot of my travels up on the jetsetter Facebook page as well. So if when you hear me talking about all these places that I’m broadcasting from, or narrow casting, I guess is a more proper word, not podcasting, narrow casting, because you are a specialized, targeted audience. So it’s a narrow, but very capable and very, very interested and engaged group of people. So I always appreciate that very much. But anyway, this Business Insider article is quite interesting. It says a fresh reminder of the average person’s perception of Wall Street. And I’m just gonna read here some things here that are, you know, we’ve talked about these so many times over the years on the show, but they’re really interesting. The article is by Julia LaRoche. And it says I got a fresh reminder of the average person’s perception of Wall Street on Monday morning, while I was sitting on a bench having coffee in Manhattan’s Lower East Side, the owner of one of the neighborhoods, most successful bars or restaurants sat next to me. He asked me what I did for a living, I replied, I’m a reporter for Business Insider. When he asked me what I wrote about, I said, Wall Street. Oh, insider trading, he responded, explaining that he had watched an episode of CNBC American greed, which by the way, listeners, watch that show. I’m going to just take a pause on the article here because that show, you know, there’s one thing there’s one overriding theme in all of those American greed scams that they talk about on CNBC is American greed show, which has an excellent show, by the way, you know what the overriding theme is? Can you guess? I bet a lot of you regular listeners know already, don’t you? Well, that overriding theme is not following. commandment number three, thou shalt maintain control. Almost every one of those scams I’m going to go out and say, you know, 98% of those scams is related to relinquishing control of the investors money to somebody else. Not maintaining control, not being a direct investor. So it’s like you could sum up almost every episode they’ve done in that one. way. Anyway, the article goes on to say, a primetime series that explains crimes in the finance world. He mentioned a scam overseas that a friend had been duped by a friend of his had been duped by the borrower went on to explain that he perceived Wall Street as quote, smoke and mirrors, unquote, how many times if I said that right, the smoke and mirrors economy versus the real economy. He said his broker invited him into the office and showed him Bloomberg terminal screens of the market going up, he added that his broker suggested he buy shares in one of the bank’s stocks, because it was, quote, a great deal on quote, and quote on the up, unquote, the stock, he said, ended up going down day after day. In the end, he felt as if they were just there to take fees from him. He added that he could simply use technology like ETrade, or Scottrade and open his own trading account and pick stocks just as well. Or even better. He’s probably not the only one that feels that way. The article says, Now, a couple comments on that one, artificial intelligence, we talk a lot about the future on the show, we talk a lot about how it’s an amazing time to be alive. Well, one of the big areas that AI or artificial intelligence is going to come into play in a major, major way, is replacing Investment Advisors. So when you look at these Wall Street type products, who do you think can pick? Pick a winning investment better? I mean, you know, first of all, I’d say stay out of Wall Street run for the hills, Wall Street is the What do I say? The modern version of organized crime? Right? But do you really need a human investment advisor? Hey, I don’t know, do you really need a human Real Estate Investment Advisor either, maybe I’ll be replaced, too. I kind of think it won’t be the same in my industry, because it’s so much more fragmented. You know, certainly artificial intelligence and algorithms can read charts, interpret charts, interpret history, and do a much better job of that than a human being could ever do. Same with medicine. Same with the self driving car, same with so many other things, as we have talked about on so many prior episodes. And the other comment I want to make on this is that Harry dent, who has been on the show many times is out with a new prediction. And he predicted some stuff like this. I don’t remember the numbers on prior episodes. But he is now predicting the Dow dropping to 6000. Yes, dow 6000. What do you think of that? Are you ready for that one? Remember, he also predicted gold at dropping to 750 and then dropping even further to $250. just totally mind blowing to just think about the massive impact that would have on the financial markets. We’ll see. I don’t know if you’ll be right. He’s been right. He’s been wrong many times. So we shall see. We shall see. Okay. But it’s interesting to just kind of contemplate those ideas. And you know, it’s probably about time to have Harry back on the show. We haven’t had him on for a while. Or the president of his company either. Rodney, who is really great, too. So we’ll get one of them on the show. Here coming up soon again, to hear more about what they think. Next thing. Oh, I don’t want to forget to mention this to you. flashback Friday. A lot of you like those flashback Friday episodes, this upcoming episode. The next one, it’ll be Episode 519. On flashback Friday is going to be one you really don’t want to miss. And one of the reasons I don’t want you to miss it, is because during the intro portion of our next episode 519, which will be a flashback Friday episode, you’re going to hear something very, very important that you know you heard it a couple of years ago when the episode originally aired, but you’re going to hear something important again, there. Okay, so make sure you tune into that one. And check it out. And by the way, one of you listeners asked if we could put the dates on the flashback Friday episodes. And the transcriptionist and podcast producers that we’re using have agreed to take care of this by putting the original episode number in date in the show notes that you can find at Jason hartman.com. And if by chance they don’t get the date in there, they will have the episode number, the original episode number that it aired. I think I’m always saying that actually also in audio format, and you can just look on whatever podcast platform you’re using to listen to our show. And you can see the original data was published as well. So I just wanted to give you two ways to to see that in case they don’t have it right in the transcript but they did say they would have it in the show notes. Okay. So make sure you listen to flashback Friday episode. Okay. Talking about wall street here again, right? This is a news article. This one is amazing CEO pay hits a wild new milestone. And you know, I would love some opinions from you listeners on what could be done about this. Because the typical leftist argument, the liberals would say, well, we need to pass a law. But I don’t think a law will do whatever work for this type of thing. I don’t think you can legislate this problem away. But I wonder if there is another solution. So you know, don’t just use the voicemail system for questions. You have all the we love your questions, going to Jason hartman.com. Click on that little link on the right hand side that says send voicemail. And don’t just use it for that. Let’s hear your ideas. I’d love to hear your ideas on any of the stuff we talked about on the show, but especially this one, how would we solve this problem? I don’t think it can be solved by legislation. I don’t know how it can be solved. But here’s the problem. And you know, Lou Dobbs talked about this in his book war on the middle class many years ago. I’ve quoted that many times. But here’s what the news article says. It says CEO pay hits wild milestone. So what was the average CEO paycheck last year? Oh, just 373 times higher than the average workers. Now, keep in mind, that’s the this is my comment. That’s the average workers, not the lowest paid worker in the company, not the minimum wage worker. That’s the average worker. Okay, that’s up from 331 times higher the year before, according to a new report by the labor organization, AFL CIO, which by the way, I am not a supporter of the AFL CIO by any means, but it’s still interesting to note the stats that they’ve compiled here. That means the average s&p 500 company chief made $13.5 million in PE last year compared to $36,000 for the typical technical and non supervisory worker reports Mashable. By the way, Mashable is a great website. Really like some of their content. Walmart was singled out for CEO Doug McMillan’s 19. Boy, that’s a funny name, huh? millions. It’s not exactly spelled the same way, but almost $19.4 million, which is a stunning 810 times higher than the average Walmart employee salary CNBC notes, quote, America faces an income inequality crisis, because corporate CEOs have taken the rising wages agenda and applied it only to themselves. Unquote, says AFL CIO President Richard Trumka his solution, let shareholders decide what CEOs should make. He tells CNBC. Well, I agree with that, of course, the shareholders should get a say in that. But do they know? Not? Not at all? It’s, it’s just not right. And so what you have when you’re not a direct investor, is you have this total conflict of interest, this disparity between the goals of the investor, the customer of the company, and the employee of the company, right? These are the three major stakeholders in any corporation, the shareholder, the employees, and the customers. And you have this special class this coin, you shouldn’t day, this elite class carved out of the employee class of the C level executives and the boards of directors who give themselves big, fat paychecks. They just take advantage of the entire system. It’s a really, really sad scenario. You know, at lunch today, at my conference here, I was talking with a gentleman who had a company that basically created an and programmed software for investment bankers. And so you know, he lives in London, of course, a huge financial center, just like Wall Street, sold this company and talked about the incredibly complex kind of software and the 10 to $20 million installations of this software that he would sell to these companies while he sold that company. And I said, Well, what are you doing? And he said, Hey, you know, he’s, he’s kind of looking for his next thing. And taking a little time off in between gigs. He said, he’s been investing in real estate and buying properties in London. And I put my theory to the test again, that no matter where you are in the world, no matter what currency in which you are dealing, the RV ratio formula that I talked about, holds up worldwide, in every currency in every language in every market. And without knowing anything. I said, Let me guess what your tip Deal looks like it’s a $1 million or 1 million pound property that rents for 3500 pounds or 30 $500 per month. And he said it was actually a little bit worse than that. And then I told him, I said, you know, here’s where we like to invest in all these different states around the United States. And we like to get 1%. If we’re going to put a million pounds, or million dollars into anything, we want to get $10,000 per month, or 10,000 pounds per month. So the RV ratio once again, holds up worldwide, it is a global phenomenon. And it is just such an easy and excellent rule of thumb that you can use to avoid making big mistakes when you invest. Of course, there’s a lot more to it. But that’s a great first cut. And it’s really, really easy to use and understand. So that’s it for now, go check out some of the great properties at Jason hartman.com and the property section where you can earn RV or rent to value ratios in the 1% range, and not make the mistakes of an investor investing in a market like London or any other expensive market around the world. We’d love to have your comments on our voicemail system. So go leave them at Jason hartman.com. Click on the Send voicemail button and we’d love to hear from you with comments and questions. Let’s get to our guest. It’s my pleasure to welcome Douglas Goldstein to the show. He is the author of rich as a king, how the wisdom of chess can make you a grandmaster of investing. And he’s coming to us today from a place I visited about oh, maybe 15 years ago or something like that. And that is Jerusalem. Doug, welcome. How are you?
Douglas Goldstein 16:55
Hey, Jason, great to be here. Doing great. Good
Jason Hartman 16:56
to have you here on we’re at a Sunday afternoon here. And it’s like in the evening there. Right. So
Douglas Goldstein 17:03
that’s right. Well, we’re used to working around the clock. Yeah,
Jason Hartman 17:06
absolutely. Well, you know, I find this to be a fascinating concept that you’re you and your co author Susan Polgar are applying the game of chess to investing and, and really wanting to impart a more strategic overview of this investing game. And people really aren’t that strategic sometimes. Are they they click I don’t like to think they are, I think but in reality, it’s not I’m guessing
Douglas Goldstein 17:30
are your thoughts? I am sorry to say. But I do think that’s very true. You know, one of the topics that people it’s actually become more of a hot topic these days is called behavioral finance. In fact, one of the Nobel Prize winners, Daniel Kahneman wrote a best selling book about it, Thinking Fast and Slow. And people began to realize that the way that investors handle money has very little to do with logic and common sense, but has so much more to do with the emotions that guide them, and sometimes guide them down the wrong path.
Jason Hartman 18:00
Well, as I like to say, we all like to think of ourselves as logical beings. But we ultimately make decisions emotionally and then rationalize them with logic. Would you say that’s true?
Douglas Goldstein 18:11
That’s exactly what happens.
Jason Hartman 18:12
Okay, so the game of chess and investing, give us the broad view here.
Douglas Goldstein 18:16
One of the things that I discovered and you know, maybe I’ll step back, I’ll give you a little background for how we got here was that sitting with with one of my kids, two of my kids, actually our chess champions here, and so they have coaches, and I was sitting with one of them with her coach, my daughter was a top player. And we were examining a game, we were doing a post mortem of a game that I actually played with my daughter. And the coach said to me, he said, Doug, why did why didn’t you move your Bishop away from this square? And I had some excuse, like, I don’t know, I was busy focusing on something else. And then the next move we analyzed, he said, Doug, your Bishop was badly placed, why didn’t you move it away from this square? And again, I had some other reason I wanted to cast solar, I was developing another piece and this conversation went back and forth for a while until finally it struck me that I sounded exactly like my financial planning clients sound. When I asked them, Mr. Smith, you’ve got a pretty poorly performing investment that’s not going anywhere wanting to move it. And he always says some excuse. And that’s kind of when the, the, the light bulb lit up and I realized this one piece of advice, then I began listening more carefully to what Boris was saying, as far as chess goes, all of the pieces of advice he gave seemed to apply directly to what we what I discovered I was discussing with clients.
Jason Hartman 19:36
Okay, good. So I used to be fascinated by the game of chess when I was a kid, I would play chess for hours and hours on end. I never got good at it. But I but I was certainly fascinated by it. And it seems to me the whole key to chess, please correct me because I may be totally wrong is just being able to think several moves ahead. How one thing impacts another and another And another, you know, is that what you’re trying to apply to investing?
Douglas Goldstein 20:04
So I’m glad you asked that question because frankly, that’s what most people say. And they’ll say, hey, Doug, or they’ll speak to my co author Susan Susan Polgar, they’ll say, What a great idea. chess players are thinking so many moves ahead. And like you’re saying investors have to do that as well. And, frankly, I like to tell them that if that was all there was to this book, we could have saved ourselves years and years of research and writing hundreds and hundreds of pages, and just printed up a bumper sticker that said, plan ahead. It wasn’t raining when Noah built the ark. Okay, good point. So I like to think there’s more to it than that. And and I really think that, and by the way, that’s the question you’re raising. I once asked Susan. In fact, it turns out when I asked her when we first met each other many years ago, I asked her how many moves ahead, do you think? And she laughed? And she said, this is the most common question that we ever get get. And she’s quite frankly, you know, not so many, maybe one or two. And it was fascinating to me. And then I began studying that most of the World Chess grandmasters and World Champions, they’re not planning ahead 30 or 40 moves, like we might expect. And in fact, if you do the math, it’s simply impossible for the human mind to do the trillions of calculations that a decision tree would grow into after just a few moves. It’s just not possible.
Jason Hartman 21:22
That’s why computers are so good at this kind of thing. Because, you know, the human, the human mind, and I’ve been studying AI quite a bit lately. And yeah, you know, I’m very much a futurist and love studying all of the stuff I do. I mean, we truly live in an amazing time, Doug, I’m sure you’ll agree. But you know, that’s why computers, can’t they, they are very good at that type of thing. Of You know, all these if then scenarios, but, but our minds aren’t good like that. We’re good at other stuff. But that’s not that’s not one of our things, is it, but one
Douglas Goldstein 21:51
of the things we are good at, I think is reevaluating on a constant basis, which is something you have to do certainly in your business, Jason, you must see that, that it’s not just that you go into an investment, and you never think about it again, or you say Listen, I’m gonna put all my money here, and I’m done for the next 20 years, you’ve got to keep an eye on what’s going on. And you’ve got to look for opportunities, and you have to know how to deal with them. But real life comes up, right real life happens. And a good chess player or a, someone who’s going to own a rental property, or someone who’s going to set up a stock portfolio has to be able to adjust for what’s going on in the market. I’m not saying you have to be a trader, because quite frankly, I am not a big fan of buying and selling all the time. But that doesn’t mean you can close your eyes to what’s going on.
Jason Hartman 22:34
So what do we do? I mean, you know, give us some, like I met, we’re dying for some strategy here, like how do we apply this to our investments. So, you know, we’ve we’ve got, you know, 1000s of clients, they’re out there, they’re buying income properties, it does become a little bit addictive, as long as you don’t have a bad experience, which certainly happens once in a while. But even then, it still becomes a little addictive. And that’s great. You know, and they’re, they’re sort of playing this game of Monopoly, if you will, in accumulating all of these income properties. I mean, how do we apply strategy to this? How do we apply strategy to any investment? You know, I know you deal a lot with stocks and bonds, and, you know, the Wall Street type traded stuff, either one, I mean, just, you know, any, any examples or stories? I know, you have a lot of stories here.
Douglas Goldstein 23:20
Yeah, I like the term you’re using, which is accumulating, because one of the problems that that certainly, I find all the time when I’m thinking about money, and I bet this happens to you is sometimes you feel what to do, when there’s nothing to do, maybe there’s not a deal that’s in front of you, or maybe you just can’t figure out how to improve your situation. And in discussing that with Susan, one of the things that she said, which is really important is if you don’t have a good idea, as much as possible, do nothing. So on the chess in the chess game, it’s impossible because every move every time, it’s your turn, you have to make a move. But if you if you don’t have something to do, don’t just start moving your pieces around. She said, that’s the easiest thing, that that’s what makes it easiest for her to to be an amateur player. Because all she has to do is just stick to her plan. And after a few moves, the amateur doesn’t really know what to do, but he’s forced to move. And that’s what ends up making, you know, he makes a mistake. But luckily, as investors, frankly, it’s little bit easier for us. Because if you have cash sitting on the side, and you don’t have a good move to make, don’t make a move. Just sit tight.
Jason Hartman 24:26
Yeah. I mean, I say that my clients all the time. Sometimes the best deals are the ones you don’t do.
Douglas Goldstein 24:32
That’s Warren Buffett has a great quote about this. I forget the exact wording but he said that the difference between baseball and the stock market is that in the stock market, there’s no such thing as a called strike. So if you missed a great stock came by and you didn’t buy it, don’t worry, wait till tomorrow you’ll find something else. And I think that’s that’s very, very true. In the world of investing,
Jason Hartman 24:55
you know, you’ve got a lot of chapters and sub chapter titles here in the book. How to avoid mistakes when you’re halfway there, how to achieve financial goals, you know, the plan to get rich, and there’s just so many sub heads of all of these things, and then you get into the tactical side. So you start with strategy, that’s the higher level, and then specific tactics, you know, do you want to maybe talk any more about strategy and then get into some specific tactics we can use,
Douglas Goldstein 25:23
I want to take you back to something, Jason that I said earlier about behavioral finance, because I really think that’s where a lot of this strategy gets messed up, we, we don’t have to go into a whole long discussion about the importance of planning ahead, because I really want to dive into why people aren’t able to do that. And what really happens is that people will tend to get overconfident, for example, in their ability to make a decision, and they’ll get so overconfident. And by the way, men are much worse than this than women, that they’ll start making deal after deal or trade after trade that ultimately leads them to dramatically underperform much of the markets. And, you know, let alone being able to stay ahead of inflation, which is impossible, of course, when you’re losing money. So I think the strategy that people have to start with is to is to look at the big picture and allow themselves to develop an overall plan so that the emotions don’t come in and ruin every good decision that they’re going to make.
Jason Hartman 26:19
Okay, good. So tell us how we can do that. I mean, yeah, I would agree with you, you know, men are usually more willing to be risk tolerant, and so forth. And, and by the way, you know, just a side note on that, that’s one of the reasons there is this wage gap, that people are, you know, especially on the left are always complaining about, it’s because metal, usually, not always, of course, they’ll take the more risky jobs, you know, the, the outside sales job, for example. And that pays better than the admin job where you got to study salary. And having employed hundreds of people over the years myself. I mean, many hundreds, you know, I’ve just seen that pattern repeat over and over again. So, you know, risk reward ratio, right. I mean, you know, if it’s a
Douglas Goldstein 27:06
calculated risk, have you found that when dealing a difference between men and women as far as the real estate investing also? Yeah, absolutely. I,
Jason Hartman 27:13
I think that, you know, men are more willing to be speculative, they’re more willing to be gambler ish, with their investments. Now, certainly, women will, will gamble for entertainment. You know, and unfortunately, many people of both genders gamble as an addiction. And that’s terrible. You know, but but in the markets, people gamble, too. I mean, you know, Wall Street has been called a giant casino by many, many people, you know. So, I would say that the non gambling side of investing is the side that produces income. If you if you invest in dividend paying stocks, you are an investor. And I’m not even going to call it investing. If you buy non dividend paying stocks, you are a gambler, you are a speculator because you’re betting solely on a story. If you’re a real estate investor, and you buy cash flow properties, that’s investing, if you buy properties that you simply expect appreciation to occur, that’s speculating or gambling, right, I
Douglas Goldstein 28:13
think that’s actually a very good point. And a lot of people get confused, because they, they, they get sold a, you know, a basket of goods by someone who says, buy this property in some terrible area, and it’s going to, you know, it can’t get any lower, because, you know, you have to just, you’re required to actually tear down the property when you buy it. And so people go, Wow, it’s so cheap, I can make, you know, 100 times my money. And it’s exactly what you’re saying, they’re not realizing that, that may not be a good investment, they’re not identifying a property or a stock or a fund that’s going to create an income stream for them. And really, what I think most people are looking for, at least in my experience of investing, is they’re not trying to become millionaires, they’re trying to achieve certain goals, that not the least of which is being able to pay the bills every month, securely for the rest of their life. And that’s where I think, you know, income in in one form or another is so critical
Jason Hartman 29:04
income is pretty, you know, at least when it comes to real estate, investing income is pretty reliable. I mean, you know, it’s nothing is perfect, but it’s a lot more reliable than trying to predict depreciation. Okay. I’ll tell you that much. And, and so my rule is just anything. I mean, this is the rule. Anything without an income is not an investment, it’s a speculation. Anything without income is not an investment. It’s a speculation. So these people that consider themselves investors, and they buy gold and silver. I mean, that’s just a speculative gamble, you know, Bitcoin speculative gamble, you know, talk about the ultimate fiat money. It’s a cryptocurrency. I mean, I mean, that is that is the definition of fiat money. You know, they they say that the dollar isn’t backed by anything. Well, I would disagree. It’s backed by aircraft carriers. full faith and credit is no no friggin but full faith and credit. How about the military. It’s backed by aircraft carrier. Yours, intercontinental ballistic ballistic missiles, ground troops, helicopters, that’s what’s backing the dollar. Okay? It’s just that you hear these arguments from these gold bugs. I mean, they’re just, it’s just crazy. It doesn’t make any sense. It really doesn’t, you know, if it doesn’t produce income, it’s, it’s it’s a gamble, you know, and then sometimes gamblers when Listen, I do some speculative stuff myself, but you know, income is the reliable thing. So, would you consider that? How would that play into the chess metaphor that we’re talking about?
Douglas Goldstein 30:31
Yeah, let me give you a good example, as you’re saying, and I’m beginning to think of something that that Susan once told me, you know, when you play with someone who is so much better than you, and Susan, I played a number of games together. And needless to say, very, very rapidly, she crushed me. But I, after the games, I would always say, Well, what could I have done better. And she said, You know, when you feel like, there’s nothing to do, meaning you can’t develop some great strategy, and there’s no such fantastic tactic that’s gonna let me capture her queen. She said, just look for one piece, you can move that will give you a small advantage, try to take one if you’ve got a whole arsenal, right, you’ve got a bunch of pawns and a few other big pieces, which one is not performing? And how can you switch that into something that’s performing even a little better? And so I think that applies very much to the world of investing, whether it’s saying, you know, I’m sitting on $100,000 in money market earning 0%, can’t I even put that into a CD? is one step up? Or is there a property that’s available? Or is there some sort of portfolio change I could make just to improve it a little bit. And I’m not saying you necessarily have to do some radical, radical switch. But if you are a long term investor, finding the parts of your portfolio that aren’t performing, and just making them improve a little bit, just the compound interest is going to make a huge difference. Yeah,
Jason Hartman 31:54
you know, that’s really an interesting statement, Doug, because Einstein called compound interest, one of the great wonders of the world or something like that, you know, he has, he has a quote, like that, I can’t remember exactly how he said it, but, but it’s true, you know, in maybe that old story of the, you know, that the two people hiking in the woods, and they see a bear coming in their direction, and, and one stops to tighten his shoelaces. And, and, and, and the other one’s running and says, Come on, man, you can’t outrun a bear. And he says, I don’t have that run the bear just have that run you. You know. And that’s really the point. Because economics, financial success, wealth creation, it’s a relative game. Okay? The whole economy is based on the theory of relativity. So say, for example, tomorrow, there’s another huge financial crisis. And let’s say it’s, it’s worse than the the great recession we just had. And some would argue we’re actually still in even though it doesn’t look like it. That’s maybe another discussion. But I urge entertain that argument, I’m willing to entertain myself. But you know, and say it’s worse than the Great Depression was, you know, seven plus decades ago. And tomorrow, every millionaire is only worth 100 bucks. Okay, and we’re just talking to us here. Now, we got a global audience, but we’ll just make $1 to make it easy. So you know, everyone’s worth 100 bucks, every millionaire, right. But if all the millionaires are only worth 100 bucks tomorrow, and everybody else is only worth 10 bucks, well, they’re still rich, I mean, because all the prices in the marketplace, they may not adjust immediately. And that’s what kills investors, by the way is the lag time between cycles. That’s what kills people. But you know, the prices ultimately in every marketplace will have to adjust, or sellers won’t be able to sell anything. So a brand new $100,000 car will then become relative to everybody having a net worth of $10 or $100. Right, the car will have to get cheaper, or nobody will be able to buy it. And so it’s a relative game. And with that, with that incremental move that you just mentioned, if you can just give yourself a slight advantage. And think about this, when you look at Bank rates today, there are meaningless I mean, you know, you’re in half a percent in the bank, right? If you’re lucky, right? Yeah, if you’re lucky, good point. If you can make 1% you’ve not increased, you know, don’t think of it as a half a percent increase. Think of it as a 100% increase relative to what you were making, you’ve doubled your return. And if everybody else is only making half a percent, I mean, wow. You know, you you play that out over the course of 10 years. And that little tiny thing is a big difference. So, you know, I say if you’re not going to buy a property, if you can invest in private lending, or hard money lending where you’ve got good security, you know, ideally you’re even doing short term loans. You can make 10% on your money, pretty conservatively. Really? Gosh, you know, you’ve basically taken the bank returned and multiplied it by 20. That’s what a 2,000% increase, the numbers become staggering, I
Douglas Goldstein 35:15
think when people begin to find new ways of really improving what’s going on, and what they’ve got going, Yeah,
Jason Hartman 35:23
yeah, keeping your money in play over time, exploiting Einstein’s compound interest, quote, is an amazing thing. You just, you just
Douglas Goldstein 35:32
gotta be patient, right? Absolutely. And that’s probably that goes back to the behavioral finance thing, which is simply that people aren’t patient. And they, you know, when they read a story, or they hear about someone who made money, they never bother to see how long it took them to make that money.
Jason Hartman 35:46
Yeah, yeah, yeah, no question. You know, you’ve got a subhead in your book about zero coupon bonds. And I’m just kind of interested in that, because I’ve heard a lot about them. Are they even around? I mean, do we even have zero coupon bonds anymore? And can you explain what that is, to the listeners?
Douglas Goldstein 36:01
Sure, zero coupon bonds? Well, let’s go back to what a plain vanilla bond is. A bond is simply a loan that you make to a company or to a government, and it has a certain period. So let’s say it’s a five year bond, and maybe it’s a 4% bond, so they pay you every year 4%. And then at the end of the period, they’ll pay you back the face value of the bond. So most bonds are issued at $1,000 apiece, which basically means you’re lending money, five years later, they’ll pay you back the $1,000. And every year, you’re getting a 40%, a $40 coupon or a $40 payment from the issuer of the bond 4%. In the case, you mentioned Yeah, 4%, which is, which is $40 a year on $1,000 bond. So the the value of the bond might go up and down during the life of the bond. But assuming the issuer doesn’t default, then you know, you’re going to get your $1,000 back at the end. So zero coupon bonds are kind of a derivative of these bonds for people who don’t need the $40 every year. And what happens is that the the bond is basically stripped of that coupon. Imagine, literally, it was a piece of paper that had little $40 tags associated coupons. And if you just tore those off, and put them to the side, that $1,000 bond would no longer really be worth $1,000, because you took off the $40 interest payments every year. That’s called a zero coupon bond because it now has zero coupons on it. And those are sold at a discount. A lot of times people would buy those, because they could buy them at a discount to the $1,000 final value. And they might pay let’s say $800 today, and they know sometime in the future, they’ll get back $1,000. And because they don’t need the income currently, all of that interest is growing on a compounded basis as well. So that’s what a zero coupon bond is. I don’t necessarily think they’re as popular today as they’d been in the past when interest rates were higher.
Jason Hartman 37:57
Right, right. Right. What about, you know, a lot of the sort of asset protection, people talk about bearer bonds, and I’ve interviewed several of them on the show are those around
Douglas Goldstein 38:05
anymore are those even legal to have bearer bonds, I have not seen one in at least 10 or 15 years, and I’ve been in the business a long time I usually these days when especially people who are global, I strongly advise them not to walk around with stock certificates or anything, where they where it’s physical, because because of the the difficulties and trying to actually trade such as security, if it’s held by a brokerage firm, you know, that they’re the ones validating the security. But if someone walked into my office and said, Hey, Doug, I have a certificate for 100 shares of XYZ stock, I wouldn’t just sell it for him on the spot, we have to go through a whole procedure to make sure that it’s it’s a good certificate. And it could take you literally weeks, if not months to be able to sell that. So you lose all of the benefits that the liquidity of having stocks or bonds normally have when you have them inside a brokerage account.
Jason Hartman 39:00
Yeah, very interesting. I just kind of wanted to ask you, as an aside about that. Part D of your book, you know, talks about 64 strategies to make you as rich as a king. And you like in those all two chess moves. And is we’re kind of wrapping up here. You did talk about, you know, the, the the small moves and so forth. And I think you alluded to that every every piece has a purpose and so forth. But you know, are there any one more of those you want to pick out just before we wrap up?
Douglas Goldstein 39:27
Yeah, I’ll tell you, Jason. There’s what I wanted. I’d like to touch on and sort of come. It comes from when I was getting ready for this interview, and I was looking at your website, and I noticed that one of the things that you have on your website is a huge amount of information that’s free that people can learn from and I remember when I was talking to Susan, and once again, it goes back to a game that we played, and I lost a piece to her. And she said Doug, you just gave me a free piece. And she said that’s a good lesson in chess and and investing whenever something is free. Really free, meaning it’s of value. And it’s not that it’s a hidden thing where you’re going to someone gives you a free offer, but really, you’re gonna end up spending a lot of money. Nothing wrong with taking advantage of it. And it certainly when you go to websites like yours, or like the rich as a king website, we have tons of information, whether it’s blog posts, or, or podcasts or articles or calculators. I think that people who are really interested in improving their investment game like they would their chess game, take advantage of all this stuff, because there’s so much you can do, you know, just to just to learn to trade the stock market, you can play free fantasy stock games, you can find financial calculators all over the web that can help you to determine what sort of trading or what sort of investing or loans that you can afford. And I don’t understand really why people aren’t taking the time to find these these these great tools like you have on your site. And we have on our site.
Jason Hartman 40:54
Yeah, well, some do. And some don’t. You know, I think I think one of the challenges nowadays is the world is just so awash in information, it’s really hard to find the good stuff, there’s just a lot of stuff out there. And and now the job, you know, used to be in the old days, the job was, you know, can you find the information, and it was really hard to get the information. Now the problem is sorting through all the information that’s out there. You know, that’s a that’s a huge job in and of itself. But hey, I appreciate you sharing this with us today. And the website is riches a king.com. Is that correct?
Douglas Goldstein 41:29
That’s right, just like the name of the book. And the Twitter handle is the same as well, rich as a king calm.
Jason Hartman 41:31
And the book, of course, is on Amazon with 32 reviews and five stars. So congratulations on that. And, Doug, thank you so much for joining us today. Keep up the good work,
Douglas Goldstein 41:42
Jason, I really appreciate it looking forward to speaking to you soon.
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Jason Hartman 42:25
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