DAY 2 Liveblog: The Future of Money & Wealth Conference

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Adam Taggart
Status: Peak Prosperity Co-founder (Online)
Joined: May 26 2009
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DAY 2 Liveblog: The Future of Money & Wealth Conference

The event features speakers like Simon Black, Peter Schiff, Robert Kiyosaki and others -- with a strong bent on real estate, as most in the audience are real estate investors.

I'll be live-blogging my notes here as I'm able during the day.

To read my notes from yesterday, click here.

Robert Kiyosaki (author of Rich Dad, Poor Dad)

  • Education system is a criminal operation these days. Drives students deeper and deeper into debt, without teaching them much of value.
  • The money system is run by the Fed, the Treasury and the banks -- run for their benefit, not yours
  • RK is a big proponent of using debt wisely to buy cash-flowing assets. Sees this as an achievable path to financial independence.
  • The discussion was more philosophical than financial. Basically, he encouraged the audience to educate themselves, think critically, and question what we're told.

Tom Wheelwright (Rich Dad Tax Advisor, Author of 'Tax Free Wealth')

  • We're going to spend the next 40 mins on reducing your taxes, legally, by 10-40%
  • While this will be US-centric, tax law is surprisingly similar from country to country
  • As you move from employee towards being a business owner and investor, tax rates go down (look at Kiyosaki's cash flow quadrant: E, S, B, I)
  • The tax law is fundamentally a series of incentives that largely reward business investors
  • If you want to change your tax, change your facts (meaning: can you move into a different category: from employee to business owner, etc)
  • If we do what the government want/incentivizes us to do, we will pay less tax. The government is your partner -- you get to choose how much it receives (by deciding how you earn your money)
  • 3 primary financial statements
    • Balance Sheet
    • Income Statement
    • Cash Flow Statement
  • Employees and Small-business owners are afraid of audits. Big businesses aren't, because they get audited professionally (by their outside accountants) every year.
  • Investors have teams that do all the work for them. They seek the highest quality team members.
  • Only 5 ways the goverment provide incentives:
  • Deductions
    • the new tax changes removed a lot of deductions for Employees (but did not for Investors)
    • Trump made sure real estate investors won big with the new tax laws. They now get the following deductions:
      • bonus depreciation now applies to buildings -- you can deduct a lot more. When you buy a property, contents/land improvement can be fully deducted in Year 1
      • bonus depreciation also applies to vehicles. Commute times are not deductible, so start your day at your home office -- your commute is now 30 seconds. The rest of your car's use that day is business mileage. Trucks/full-size SUVs for business use can be 100% deducted in the first year you buy it, even if you borrow to purchase the vehicle.
      • Pass-through business deduction of 20%
      • Employ your kids or elderly parents, put the income in a UGTMA account -- free from SS and income tax

Doug Duncan (Chief Economist of Fannie Mae)

Title of talk:  Fiscal policy and the Fed: Stimulus/Response

  • Puts the chance of a recession in the second half of 2019
  • “We’re in a significant paradigm shift.”
  • “We’ve entered a cold war with China…less military, more technology and trade.”  China would love to supplant the dollar as a reserve currency with the Yuan.  It’s a powerful tool to be a reserve currency.
  • Therefore, we’ve seen the peak of globalization
  • “In Japan, most days now there are no trades in the JGB bond market.”
  • Current trends may see the nearly complete loss of manufacturing jobs.  So we may someday have the “non-farm non-manufacturing employment report”
  • The current economic expansion is aging and relatively (very) weak.
  • Even though unemployment is low, we’re not seeing a rise in wages.  (See also:  robots, and Chinese labor)
  • Newly employed workers are increasingly coming from people who were “not in the labor force” – up to nearly 70% of the total.  This is higher than the ratio that were prior peaks before the onset of recessions.
  • Social pressures being fed by the loss of middle class jobs can explain both the opioid crisis and Brexit. “Trump had his thumb on something everyone else in politics seemed to miss.”
  • Expectations for 2019 are for slowing GDP growth (from 2.8% to 2.5%) and for unemployment to decline from 3.9% to 3.7%.  CPI and ten-year bond yields basically flat.
  • For the first time in many years, more people now report feeling that the economy is on the right track vs. the wrong track.
  • Alternatively, a majority of people think this is a good time to sell real estate vs. buying.
  • Existing homes for sale are at 30 year lows (due to boomers choosing to stay pat, and age in place).  Exacerbating this is many in construction left the business, and those that remained are not interested in expanding, so fewer homes being built to increase supply.   This means that rental market a good place to be for some time yet.
  • 10 year bonds locked in a range and likely to stay that way.
  • “I’ve met with Powell several times, and I don’t believe he will step in to cushion stock market volatility via “the Greenspan put.”    Volatility would have to be significantly higher before he might be swayed to act.
  • This Fed will be far less interventionist than prior ones, and would be far more tolerant of rising rates and stock market volatility
  • Tip:  Read Jerome Powell’s first speech and compare that to Janet Yellen’s last.  You’ll see a person who is using plain language and not economic jargon.  He’s just not as likely to step in at every little market wiggle.
  • Summary:  Doug seemed a bit more upbeat than last year, and said that their data is showing a relatively calm if not strong economy that should just chug along.

For those interested, a 12-hour video compilation of all the live presentations from this conference can be ordered here from The Real Estate Guys

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