WHAT WAS COVERED
0:12 – Episode starts. Financial principles and industry change.
3:42 – Rapid industry change and market forces.
7:49 – Investing in a rapidly changing market.
12:02 – Financial scams and how to avoid them.
15:16 – Investment fraud and scams.
21:50 – Episode ends.
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——————————————————————————————————————————- 0:11 0:36 0:43 0:58 1:16 3:42 4:45 5:51 6:10 7:06 7:08 7:50 8:31 8:35 8:38 11:44 12:25 12:54 12:56 13:51 13:58 16:23 16:29 17:01 17:07 17:33 17:41 19:32 20:16 20:55 21:15 21:49 This Material is Intended for General Public Use. By providing this material, we are not undertaking to provide investment advice for any specific individual or situation, or to otherwise act in a fiduciary capacity. Please contact one of our financial professionals for guidance and information specific to your individual situation. Sound Financial Inc. dba Sound Financial Group is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. Insurance products and services are offered and sold through Sound Financial Inc. dba Sound Financial Group and individually licensed and appointed agents in all appropriate jurisdictions. This podcast is meant for general informational purposes and is not to be construed as tax, legal, or investment advice. You should consult a financial professional regarding your individual situation. Guest speakers are not affiliated with Sound Financial Inc. dba Sound Financial Group unless otherwise stated, and their opinions are their own. Opinions, estimates, forecasts, and statements of financial market trends are based on current market conditions and are subject to change without notice. Past performance is not a guarantee of future results. Each week, the Your Business Your Wealth podcast helps you Design and Build a Good Life™. No one has a Good Life by default, only by design. Visit us here for more details: yourbusinessyourwealth.com © 2020 Sound Financial Inc. yourbusinessyourwealth.com ———————————————————————————————————————————
Full Episode Transcription
Hello World. My name is Paul Adams. I am the co host of the sound financial group podcast and Cory is where he’s back. That’s where he is. He is in studio today and get a chance to anytime. He has not seen all the terrible things I’ve said about Dave Ramsey. So his formal, former formal, formal, formal, I think I’m getting the words right his formal
technology, you tell me what else you’re gonna say. And then I’ll tell you if it’s formal or former, former apology,
I will tell you for sure. Cory may have to apologize as the second Dave Ramsey one releases and like my partner, he doesn’t know he’s got anger issues. I don’t know what you’re gonna say about it. But I know Cory can smooth about anything over so
well, for now. I kind of feel like Michael Scott after he wasn’t manager and becomes manager again and gets moved back into his office and just plays the bossa nova on the keyboard. Granted, if we can get that little Casio keyboard bossa nova in the background.
Yeah, feels like we’re just bringing it together for us. So it’s going to be next week, guys, we’re gonna get into the different types of life insurance since we figured out in the last two weeks that Dave Ramsey doesn’t know enough about life insurance to certainly be as confident as he is to talk about it. So since we’ve been heavy in some factual stuff, last couple episodes, I thought we would take some fun videos and articles to just kind of talk about financial principles, and how it impacts us. Now this next video clip we’re going to watch together. And then Cory and I are going to talk about it. It might make sense. Cory, we didn’t talk about this ahead of time. But we’ll watch it again, after we talk about it, so people have the different context. So here we go up, which by the way, as we jump into this, we should mention this is Jimmy, what’s his name? Isn’t it Jimmy Sutton, the British comedian, he sounds real proper. It’s pretty foul mouthed in a lot of his stuff. So the video we’re gonna watch is of this gentleman stand up comedian, hilarious guy, and a bit intellectual, we find out from this clip, when he was appearing on the Joe Rogan show. Now if you guys get a chance to check him out, he is not an offensive guy. But I must say if you get a chance to watch his stand up as a result of seeing him here, I would just say he will say the most foul things in the most appropriate way. He’s just so proper with his English accent and all that. He doesn’t do any of that here. But he’s going to talk a little bit about how industries certain industries have changed overnight. And I think we’re moving into a place of accelerated change. That makes a couple of these simple truths way more valuable for us as investors. All right. So this is Jimmy Carr, highly offensive comedian, but he does it in great British accent. Now in this clip, he’s not being offensive. But for those of you that appreciate offensive comedy, he does do it in the most refined British way you could imagine. And this is a clip of when he was on Joe Rogan, that I think really speaks to the amount of change that’s coming at all of us as investors, and we’re going to talk about how this kind of rapid change can be managed inside of an investment portfolio. Here we go.
You know, the biggest industry in the world was in 1903. Beavers very close whaling was the biggest industry in the world in 1903. And whaling disappeared overnight, like in a year and a half it was gone. Those towns were just empty because the whale oil wasn’t required anymore. Because suddenly we discovered electricity, Edison all of that stuff for Tesla. It was really interesting how that that industry just fell away. It’s like the story of you know, the why the brownstones have got stepped up to the front door. Why? horseshit rarely there was bullshit everywhere they’ve always got those metal scrapers by the site the smell was horrific if a horse died in the street you had to wait for it to act provide to cut it up and take it away horses everywhere so they made a law just say right forces we’re gonna put tax on some judgment made another law the next year we’re doubling the tax we’re gonna say if you have a horse then you have to do this. You have to do that whatever it was. It kept on kept on kept on and what stopped it Henry Ford cars came along or golf or there’s five of them left in Central Park, right? All gone in no time. So
he’s talking about the fact that we had entire industries like we sometimes look at today in the investing world etc right Korea and it’s like, oh, it’s so different now. But but the rapid change or maybe somebody could unseat Google or whatever. And literally, it wasn’t even any one person trying to put the whaling business out of business. It was this confluence of free markets finding a more efficient solution. It didn’t require the fuel for the whaling ships that didn’t require the harvesting of whales, it didn’t require hunting their populations to the brink of extinction. It meant that we could have lights in our homes instead of whale oil lamps. Right, were able to create kerosene, which put the whale oil business out of business overnight, because it was it was not explosive. It would burn dependably clean, you could burn, I remember having a kerosene heater as a kid that could just run inside the house because it didn’t throw off the kind of fumes that other heaters would Yeah.
And well, and if you were watching for the way, like, if you were trying to understand the whale, the whaling business and watch out for threats to the whaling was like this, at first wasn’t going to show up as anything even to do with whaling
is drill on the land, on land bridge, really. And there’s somebody in the whaling business going on another boat out, we get five whales, so much blubber and like, easy money, and then the whole world changed. Now, you couldn’t do it by watching whaling stocks, if we put it in today’s vernacular, to your point, you couldn’t be like, Well, I think next year, the migration patterns going to change and therefore, or whaling is going to reach its end, because we’re over hunting. So I’m shorting all the whaling stocks. See, these are all the market timing, and speculation, things that we naturally think about in an attempt to get ahead and build financial security. And yet the entire industry was gone. Same thing with the horses. And I love that thing about the brownstones, I didn’t realize they
didn’t realize that either.
But you look at those pictures of the street, horse poop. And yet that problem was wiped away with the advent of the car. And this is something we talk to our investors about all the time. And as you’re listening at home, you’ll notice that we talk about all these entrepreneurs that were invested in. And we’re not investing in every entrepreneur, we’re investing in the ones that were good enough at what they did to create a publicly traded company, and they’re out there solving problems every day. Now, the petro clinic chemical industry solved an enormous set of problems. Yeah. Mm hmm. And created whole new ones. Great.
Now, what I love is like, you could have been someone saying, oh, whaling is on its way, I am gonna buy stock and these two or three whaling companies, because I just see more demand for candles and whale lamps going up. But if you bought a, as close to what we would call an academically allocated, globally diversified portfolio, like you bought a wide range of companies, then your wailing stock would have gone down. But the stock of this company that eventually it was going to be called GE would start going up like crazy. Shell. Yeah.
What who’s the one that had the dinosaur? Sinclair?
So yeah, sorry, totally.
They were selling dinosaur juice. That’s the I think that is the most brilliant part about their logo. It’s not really dinosaur juice. I know that. But I do love calling Philo’s to know I love it. Yeah. But, but to Korea’s point, you would have automatically adjusted your portfolio. Because if you have a portfolio that owns basically the entire market, then you would own the up and coming petrochemical companies, or the up and coming auto manufacturer, because just gonna be worked into the portfolio, you won’t have to be able to predict it. And you couldn’t have like, there’s nobody out there maybe maybe the first guy who decided to make his logo, a dinosaur. Like maybe that guy, he was like, we’re gonna take over the oil, the whale oil industry. You know, but odds are he just found oil and they burned it really inefficiently. And somebody’s like, well, we can do this and we can make kerosene out of it and gasoline and diesel, and then it all just evolved. So we can’t predict what’s coming in the future. What we can do is hold a portfolio that also doesn’t predict but takes advantage of the growth of the entire market. Because the flip side is these individuals that created this year Your mount of innovation also created a lot of problems. We’re seeing it today. Tesla has changed the electric car market. It went from you were somebody driving a Prius, this ridiculous looking car. I remember talking about it back in like 2008 and then Fisker came out and Fisker had this hot little car that was so cool and super fast and they went bankrupt, I think more than once now. And then out of all the people trying to make electric cars Tesla went well above and beyond. And now we’ve got a huge problem in South Africa and these cobalt mines just just an absolute face of human tragedy. And some other entrepreneur is going to solve that one. And we being free market investors get a chance to participate in that solution in our portfolio. So are you ready for our next one, Cory? I think we already got that one. Pretty good. Now this one is just fun, kind of plays on one of our prior podcasts about all the scams that people get into and how it happens. This is a really funny video, and then we’re going to talk about the posts next to it. Oh, me? Oh, yeah. Well, I only got 10 So here’s 10 I owe you 10. Hey, MO. You owe me 20? Well, here’s 10 No, no, you’re 10 you’re me. 20. Here’s 10. I owe you 10. Here’s the 10 I owe you. Here’s the 10 I owe you. Here’s a 10 I owe you good, man, we’re all even. How about the 20 bucks you owe me? I do love that banking system explained, all they did was pass around 10 bucks and pay it all off. I didn’t put this in an Excel spreadsheet, it might work. But what could also have worked is we all owe each other $20 How about we just all drop our debts and they didn’t have to pass around money to pull that off
that gene that time this genius of the three stages. That’s That’s amazing, but it is what it sounds feels like sometimes in the American banking system. So I we were going to try to get rid of the comments on the on the side until I noticed the very last line. Yeah, the last paragraph, you know, DM us to talk about how you can improve your wealth. Again, not saying they’re a scam I have actually have no idea what this company is or does or who’s behind that handle. But if the first step of solving your financial issues is a DM on social media that might not be
to an unknown company. Yeah. Encryption airy, Krypton, airy, Krypton, airy? Yeah, I yeah, I would, I would say that I’ve I’ve heard some, you know, young, sharp looking financial advisors. And if I see them at the bar, and they’re talking about a bunch of people in their DMS, they’re usually talking about investors. So keep that in mind.
That we, like
it’s okay. Like, if what you were going to do is inquire about a new holster that you saw on Instagram, or maybe one of those houses that comes in a kit and you’re gonna build it in your backyard or a 3d printer. That if it’s like, Hey, if you have questions about the product, DM us, right, but what you shouldn’t do is like, Hey, if you’re having a problem, medically, DMS No. Problem financially, DMS know if you have a serious legal challenge, DMS maybe if it’s a specialty law firm you’ve been following for a while, but all the same DMing is not a good solution. Because what is DMing lead to a DM leads to a whatsapp leads to a telegram leads to you sending somebody cryptocurrency promising a 9% monthly rate of return. And then and then they
send you 9% back the first month, so that you put even more in and then it all spirals out of control. And
my favorite part of those scams is that then they have you record a video saying how great it’s been investing. They post it to the private group you’re a part of and as soon as it posts, they kick you out, they tell everybody else that they paid you out, because that’s what they told you to say in your video and then they kick you out and you can’t counter what they said. So definitely watch out for scams and there’s another one this one is maybe one of my favorites number one because it starts with Florida man. And if you guys don’t know about that, man, man, every crazy thing that happens in the new like Florida man beats alligator with a frying pan Florida man, you know, drunk drives tractor down to City Hall dumping accidentally a manure spreaders load of hooey on the front steps it always starts with Florida man. So Florida man whose family business once owned playgirl magazine pleads guilty to $250 million fraud at lending company tell me if you saw that headline, that’s not an article you’re gonna read. Once again, what this was was somebody offering an investment that was going to perform in some way better than what you could get if you were just academically allocated globally diversified. And it is tempting, it is the siren song of every investor, the potential that I could be doing better somehow than what I’m doing. And so the way this worked is they told people, that this one global investors, that what they were investing in was the factoring of invoices for small companies. So if you guys aren’t familiar with what factoring is, that is when, say, I am a company that sells auto auto parts, yeah. And, and but my bills are 60 days, they’ve got 60 days to pay them. And let’s say it’s the industry standard, I go to a factoring company. And by taking a slice off the top, maybe a five or 10% discount, they will send me the money now and they will go collect the invoice.
So it’s a way to Ashville problem problems for a small to medium sized business.
And that’s called factoring. I mean, a very legit thing. It can cost you a lot more than what you’re prepared for. But sometimes it’s super important to a struggling business. Well, he told people, that’s what he was doing with their money, but that was not what they were doing with their money. They were Oh, right here, money on credit card payments, vacation travels, drivers, nannies, housekeepers, tuition, mortgage payments, luxury car payments, and insurance payments for his art collection and jewelry.
Suggest spending it, he was just spending it was his own private checking account. Yep.
And I don’t know how much of all the investor money he spent. But one of them has to pay like 57 million in restitution. So they probably found that they spent a lot of it but here’s the crazy thing. Look at the age of the people starting this thing if they give them life in prison, there’s they’re going to be in for six months. Andrew Dale lead better. Just a great last name.
Let me let me try let me see life in prison or a two year sentence? Well, let’s do a two year sentence because that’s longer. Yeah, yeah.
Just leave me in the cell till two years is up. So 2021 conspiracy to commit fraud and securities fraud. Five years in prison for an 81 year old. What if it was a prison gang due to a guy like? Do you think they make him like smuggle in Viagra? Or what else would be like any inflammatory medicine for arthritis like he’s just piping today and getting it in the system? So then Steven Alan Schwartz 78 of Delray Beach also in this was a director 36 million wrestlers and the other guys 148 million in restitution. Like I get it now. How’s he Corey? Seriously, the judge is a fool. How in the heck is he going to make enough money to pay that back while he’s in prison? I think that’s unfair to the investor. And then, Jen Douglas Alice, who is a Florida lawyer, she was the first one to plead out on this thing. She was in 2019 was sentenced to eight months in prison in order to pay more than a $29 million restitution here’s the thing. If you are a person who is considering an investment that’s supposed to outpace the market, make sure that their lifespan is going to be longer than the five year prison sentence if it doesn’t work. Because there is a less of an incentive if somebody is super super old pulling this off but the main point although there’s some hilarious stuff in here is that this person clearly looked like they came from money like if you met them somewhere into this fraud these people looked really well heeled, I’m sure. Nannies
name which a lot of people you know, I saw how this played out every single time. Someone probably a guy you know in his 50s or 60s, goes to invest and pretends not to know that it’s the play girl family fortune because like why would they not right? They’re like, Oh, you’re involved with what? Oh, I didn’t even I didn’t know that is. I didn’t read that name on the back of a magazine every day. I for the last 20 years, whenever So, but there’s no point where someone is enough of a celebrity or rich enough that you can stop doing your due diligence to see if it’s a scam or not. Because right now there’s no
understand what’s causing the returns. Right? You’re looking for, hey, what kind of rigor do we have? Is there auditing? Is there? Are there other investors who have gotten their money out? Can I see the last balance sheet, how much you guys taking compensation, like if you were somebody that wanted to invest in something like this, and maybe they were offering 30% returns? If they’re offering anything better than 8% return, and you’re not having to do anything, you should look really close guys. Because if you’re not doing anything, they can’t support that they may be just speculating with your money. And they’re hoping they produce that kind of return. And
you’re thing we’re generating a huge amount of rate of return. And they’re paying you that much. They don’t have to because they’re already that much above the market. So they’re not understanding supply and demand. They might be missing something else somewhere else that that’s going to ruin the deal. That’s right, even if they weren’t good at one thing that they said they could they do. They just don’t understand the economics
really well said. So today’s episode, we have traveled from Jimmy Carr to the Three Stooges to play girl magazine. And we hope that this has been a contribution to you being able to design a good life, design and build a good life. But I forgot to tell you guys something really important for you on the episode. You need to like this episode, mainly because Cory is back. I don’t know why you wouldn’t like an episode of course, you need to subscribe to the channel. Let’s get this one is the highest like episode we ever have just so I can feel a little
Yeah, 1000 views on the video that talks about the founder of Playgirl magazine horseshit at the three stages and whale oil and when we slip some whale oil in the side door. Anyway, everyone, we hope you enjoyed this episode. We really look forward to seeing you next week and we really do hope that this helps you design and build a good life.
This Material is Intended for General Public Use. By providing this material, we are not undertaking to provide investment advice for any specific individual or situation, or to otherwise act in a fiduciary capacity. Please contact one of our financial professionals for guidance and information specific to your individual situation.
Sound Financial Inc. dba Sound Financial Group is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. Insurance products and services are offered and sold through Sound Financial Inc. dba Sound Financial Group and individually licensed and appointed agents in all appropriate jurisdictions.
This podcast is meant for general informational purposes and is not to be construed as tax, legal, or investment advice. You should consult a financial professional regarding your individual situation. Guest speakers are not affiliated with Sound Financial Inc. dba Sound Financial Group unless otherwise stated, and their opinions are their own. Opinions, estimates, forecasts, and statements of financial market trends are based on current market conditions and are subject to change without notice. Past performance is not a guarantee of future results.
Each week, the Your Business Your Wealth podcast helps you Design and Build a Good Life™. No one has a Good Life by default, only by design. Visit us here for more details:
© 2020 Sound Financial Inc. yourbusinessyourwealth.com
Podcast production and show notes by Greater North Productions LLC