Inflation Spike & Rate Hikes?: What’s Next for Your Money | Weekly Market Recap

Andrew Brill 0:00
Hello, and welcome to Wealthion. I’m your host, Andrew Brill, we’ve got some exciting news for you coming up. So sit back, relax and enjoy the weekly market recap. weekly market recap is looked back at some of the best moments our guests have shared with us this week. And the exciting news is that we have a conference coming up June 1, more details to come. But we’ll be joining forces with SALT to bring you ways for you to invest wisely, and keep and grow your wealth. Now, let’s get to the recap.

This week on SpeakUp, James Lavish spoke about the current state of the economy and how confusing the indicators are and the battle the Fed is facing. He also touched on the state of Bitcoin and the price of gold.

Anthony Scaramucci 0:52
What’s relevant right now you’re looking at the economy today. You’re saying okay, this is a trade I would put on right now. This is something I’d be doing with my personal money right now, today, and then based on why give us your perspective on the economy, and then something actionable that we could do this week?

James Lavish 1:12
Yeah. So I think the most important thing to that, that people are confused about the economy right now. Right? So you’re seeing all kinds of conflicting numbers come in from the CPI to unemployment numbers, and you hear the Fed talking, they’re talking about a pivot, you’re hearing the Treasury, you’re talking. The most important thing is to understand that we are in a battle right now. We’re witnessing a battle between the Treasury and really it’s the US government’s Congress, and the Fed. Right. So we had inflate, we had inflation was created by the expansion of money supply. And you know, and there was, as as you know, that there were supply chain issues during the 2020 year and Pandemic lock downs. But that inflation was sought to be battled by the Fed, the Fed has two mandates, they have the mandate of of stable prices, which is really just that 2% inflation, we can come back to that. And then they have the mandate of full employment, but they raised rates exponentially in terms of against zero interest rate policy, when we were at zero interest rates, they raise them up to over 5%, five and a half percent at the top end. So that’s supposed to have contracting kind of influence on the economy. It’s supposed to, it’s supposed to make the economy contract. It disincentivize late loans and for borrowing and, and that’s the natural state. Meanwhile, up in Congress, we’re like you said, we’re we’re spending like drunken sailors, it is just out of control how much we’re spending to give people an idea, we have a 2 trillion plus deficit run rate right now this year. And we are not in a recession. This is unheard of we are literally spending like we there’s no tomorrow is just is pouring liquidity into the markets. Part of that liquidity is coming in, in the form of all the interest on our debt. We’ve got 34 and a half $34.6 trillion of debt that we have now on the books, and we’re paying over one, it’s like $1.1 trillion a year on interest just on that. So that goes into the economy, then you’ve got things like the, you know, the the inflation Reduction Act, which is it spends money on infrastructure, and green energy and green projects, and that pours money into the economy. And so you’re seeing in the economy, you kind of two economies in America, right? So you, we witness some recessions and some contraction, so you’re seeing layoffs, 200,000 plus jobs in the last this year alone. And then on the flip side, you’re seeing some expansion, and you’re seeing the interest of the of the inflation rate just kind of stuck at 3%. Why is it stuck there? Well, you’ve got some expansion areas, because of the all the spending and the additional liquidity coming into the market versus the contraction of like, commercial real estate, for instance, office real estate, we’re seeing a major problem there. Well, it’s very sensitive to higher rates. So that makes sense. So you’ve got these two things at play. And so what I’m watching really carefully is the bond market and for clues in the bond market, what’s going on, because people understand inherently, even if you’re not thinking about it, you just understand that if we’re running these deficits, if we have this much interest on our on our debt, and we’re expanding on our debt The only way to manage that is with more inflation. So you’re looking for things that will do well with inflation. And if you should have been owning gold through this period, and that is one of the things I own, and you should be owning Bitcoin, we can talk about more about Bitcoin as an investment in a second. But what I wouldn’t be doing is I wouldn’t be owning long bonds, not unless it’s for a very short trade, what I would be doing is moving my debt exposure all the way up to the near end to two years and, and shorter, because the only way around this is for higher inflation, which means ultimately higher rates and the longer and more debt that’s going to be issued, and you’re going to have bond investors demanding rate premiums at the longer end in order to to be compensated for that. And that’s just reality. Yeah, well, you have to take a leap of faith when you’re in a developed Western country that in specially in the United States, we have the benefit of being the global reserve asset and the global reserve currency in US dollars and treasuries. So we, we look at Bitcoin, typically, people in the United States come to Bitcoin as an investment, as a way to make a bunch of money, as you know, it’s an alternative way to make money. It’s, it’s just something interesting and out there on the risk curve, right. But if you go to those countries, you’re talking about Venezuela, Argentina, Lebanon, Egypt, these people need a place to store their hard earned money. So you go out to work, you work for this, you get compensated. And if you don’t want to spend all that immediately, and you want to save that, where do you save it? You can’t access US Dollars typically out they’re difficult to get they’re super expensive. So what do you do? Do you just keep it in your currency? Do you keep it in the Bulevar? Do you keep it in the peso? No, you want to do something else with it? And so even the IMF put out a report that admitted that Bitcoin is important tool, a store of value for people in those countries, why they don’t care about the volatility, because they know it’s volatility, an asset that’s increasing in adoption, which means it’s increasing in worth, as opposed to if they put their money in the peso. They know that it’s volatile, but it’s decreasing down to zero, and it will be revalued time and time again. So this is a really important, you know, form of currency and foreign money for them to store their value in. And then secondly, if they want to flee someplace that is oppressive, you know, this, you’ve done a lot of work on this, Anthony that if you want to leave someplace, that’s oppressive. How do you do that with cash? How do you do that with gold, you can walk across the border, and I know somebody who has done this with his whole family from Venezuela, he talks about it, how he was able to sell all of their assets, put it into Bitcoin, walk across the border to America have those you know those 12 words in his head, and they took their entire net worth with them, it would not have been possible without Bitcoin. So it’s a different mindset. And it’s going to grow kind of from from the ground up, in my opinion, it’s organic, and it’s going to grow in these countries that need it so badly. At the same time that now in the United States, we have the ETFs, which has allowed the institutional adoption of Bitcoin, and for them to understand it’s a first kind of step for for investors, institutional investors, we’ve been doing this for a long time. I’ve been in the game for 30 years. And so I’ve seen how difficult it is for people to get their head around fiat currency, the money is broken. And this is something necessary. So this, this is the next step. And it’s kind of it’s an evolutionary process. So it’s actually pretty normal, in my opinion.

Anthony Scaramucci 9:06
It’s, it’s about as beautifully articulated as anybody I’ve heard, so I’m gonna if you don’t mind, I’m going to be stealing and plagiarizing from you. lavish in the months ahead, okay. It’s very well put.

Andrew Brill 9:19
And despite the most recent news on inflation, not heading where the Fed would like it, Adam Johnson joined me to talk about how bullish he is still on the economy. And the market. He believes the market jet still has plenty of fuel left to climb higher. I read the newsletter, I see your notes, and it seems like things are actually looking up. So that’s a really good thing for the market. What’s your take on the economy right now?

Adam Johnson 9:45
Well, I think it’s a lot stronger than people get a credit for. You know, if you remember, Andrew, you know, it was only a few months ago that everyone was so certain that recession was just inevitable. And I kept saying no, it’s not inevitable. In fact, I don’t think it’s going to happen and I’ll tell Oui, three, I call it the three E’s, earnings employment and the economy. The economy is growing somewhere between two and 4% GDP growth, that’s pretty strong. And meanwhile, we’ve got just about everyone employed who can work, right. I mean, I remember when I was an economics major down on Princeton, my professor would say, well, full employment is somewhere between five and 6%. And now we have learned that full employment is probably somewhere down around three to 3.2%. We’re around 3738. So a lot of people are working. And when you have people working, they are making money. And when they’re making money, they are spending money, which is why you have economic growth. And of course, that translates into earnings growth. So we are now in the middle of the first quarter reporting season. And I think we’re going to by the time, it’s all said and done, we’re only about a fifth of the way through it. By the time it’s all said and done, Andrew, I think we’re gonna find out that growth in the first quarter was 10%. earnings growth was 10%, which is an acceleration from the fourth quarter of last year that was at about 7%. And then the third quarter of last year was down around four, so four, seven to eight. And now 10. That’s a trend that that gets me excited. I’m fully invested. I know, I’m the optimist. In the room. I always, almost always am. But there’s a lot more to like than not to like Andrew,

Andrew Brill 11:25
I know it’s a subject that drives you crazy, because everybody talks about it. And I know that you would wish it would go away the interest rate question. And now we’re done. I seen your notes. Now you’re calling from maybe only one decrease this year, as opposed to maybe they’d sneak in a second. But it could be smaller than we expect. Yeah,

Adam Johnson 11:45
Yeah, what a change. So, four or five months ago, the Fed Funds Futures market, believe it or not, there’s actually a market for what you think the Fed is going to do. In the same way, there’s a corn futures market and oil futures market, etc. And that, by the way, is not just for gamblers. It’s for hedging. You know, if you have interest rate exposure, you can offset some of that by hedging in the Fed Funds Futures Market fine. Several months ago, the fed fund futures market was predicting three rate cuts by June. Here we are, you know, almost, almost to June. And rate cuts are nowhere in sight. And it was forecasting another, the market was forecasting another three rate cuts by December. So total of 625 basis point rate cuts are a total of one and a half percentage points over the course of year. And now, the fed fund futures market says we’ll get one in December and maybe maybe we’ll get another one in January. So big change. The reason is because inflation kind of started to creep up again. But just as the pendulum always swings too far in one direction, and everybody thought that recession was inevitable, and I mean, inevitable, and it didn’t happen. Right now everyone is saying, Oh, well, we’re only going to get one rate cut. Hang on, it’s still only springtime. We’re not even at the half halfway point for this year. So I suspect, given that we’ve had three months in a row of slightly rising inflation, that that will start to roll back over again on the optimist. But there are enough indicators that suggest to me that that is likely going to happen in the next couple of months, which means by the time we actually get to October, November, December, chances are the fed fund futures market will have shifted again. And I think actually it’ll shift in consumers favor where we have more than just one rate cut, you know, two, maybe three.

Andrew Brill 13:51
So what what, what themes? I mean, let’s switch gears and talk about investing with theme. I know you talk a lot a lot about your mentor saying you know, pick a theme and go with it. What themes are you looking at, in now and into the future?

Adam Johnson 14:06
Well, the obvious one everyone’s talking about is artificial intelligence. And you say how do you get there? Well, fine. You can buy all these big companies like Microsoft, Intel, Google Facebook, they’re obvious because they all have internal AI efforts. But you know, the building block of AI what makes it all possible semiconductors, so yes, in video I flagged in video for my Bullseye subscribers back at 175 two years ago. My first target was 475. We sold a little next target was 675. We sold a little next one was 900. So little my target at this point is 1200. The reason I sell on the way up is there goes my phone dropping off my desk vibrating because people are calling and you know, you have to sell names as they go up. otherwise they get too big. And so that’s why I’ve been selling Nvidia even though it’s a winner. And then you say, Okay, fine. What else besides in video oh, all kinds of companies are part of that computing, power theme, Marvell technologies mrvl and other wonderful AI play that focuses on the databases behind artificial intelligence, you know, think about all the criss crossing of data that has to happen in order for a computer to to generate new intelligence, right, that’s generative AI, you’re generating new knowledge. That doesn’t come. It doesn’t come easy. It comes from crunching a tremendous amount of data, you need databases, that’s Marvell. They’re just so many different aspects to computing by Excellus ACLs. This company makes machines that embed silicon wafers with ions, well, again, that’s the raw material for creating a semiconductor. So you don’t, if you want to play AI, you don’t want to just own the big obvious ones like Microsoft and Google, you want to own the raw materials, the picks and shovels, the chips, and and the other companies that are responsible for making the components of the chips, and then wiring all this together. The data centers, you know, Prologis, right. I mean, there’s so many different aspects to computing power and artificial intelligence, you know, you could have an entire portfolio, you know, 30 names just on that one theme. What about all the derivative users of artificial intelligence, which is ultimately you know, the story, I’ll give you an example symbiotic, s YM is that ticker, this is a company that is converting all of Walmart’s distribution facilities into AI power distribution facilities. So it’s robotics and it’s aI really cool stuff. Andrew, the truck pulls up. An automated forklift goes in and loads it, D palletize. It meaning takes the pallets apart with all the stuff, then little robots store all the stuff on shelves record where it is. And then when the individual stores need more products. A program is just sent back to that distribution facility in their 47 distribution facilities around the country that Walmart operates. Then the robots go retrieve all the stuff, build a pallet so that it’s weighted correctly. Again, this is all artificial intelligence enabled that enables that. And then it’s loaded onto the truck. And the pallets are positioned in a way to optimize weight and stability, again, made possible by artificial intelligence, and then the truck is on its way. So artificial intelligence is something that happens in so many different ways. It’s not just a chip. It’s not just something happening inside a computer. It’s actually happening all around us. And I think every company is going to have to be an AI company.

Andrew Brill 18:12
Many of you been asking about the current state of the automobile market. So James Connor went out and spoke to YouTube’s expert on automobiles, Ray Shefska from CarEdge.

James Connor 18:25
So Ray, let’s get into it. I have a real love hate relationship with dealerships. I love going into the dealership and checking out the new cars. But I hate the whole negotiating process. Because every time I buy a new car, I feel like I’m getting screwed over. And there’s always like 10 or 20 additional charges that I can never make sense of on the invoice. And then they’re always pitching you on new services like tire insurance. Why don’t you just take us through this whole process? And how can I better prepare myself so I’m not getting screwed over.

Ray Shefska 18:57
Just so you know, I have that same love hate relationship with it. The way it’s designed is customers are kind of kept in the dark as to everything that’s involved in the sale. And as I like to say, car dealership personnel are some of the most creative people on the planet. And what I mean by that is they can create these visions of you being able to come in and buy something at a particular price until you actually get there and then that’s not really the price. And that’s normally where the friction begins. That’s typically where the customer goes. Damn. I hate dealing with these people. These these are not like nice human beings and and it’s only because of the car business has has made it this way. dealership personnel are trained to turn every body into what’s known as a payment buyer. And no, they don’t want you to know what you’re actually paying for the car, they want you to know and concentrate on what your monthly payment is. And the reason for that is if all you’re concentrating on is the monthly payment, then they can manipulate the price, they can manipulate the amount of time that you’re paying back that loan. So they can make more money when you’re just looking at your monthly payment, and not what we like to say, the out the door price of the vehicle, what’s the selling price of the vehicle, including all fees? And that’s the part as a customer, you really want to concentrate on? Not the payment.

James Connor 20:46
And how can I better prepare myself though, when I go into a dealership? How can I know what the real prices are? Maybe how much the margins is, how much room do I have to negotiate?

Ray Shefska 20:58
You have to figure on most vehicles, there’s somewhere between five and 10% of margin built into the selling price. Plus, there’s some what’s known in the industry is under the line money. And what I mean by that is, you know, there’s an invoice price that the dealer pays. And then there’s money that they get from that invoice price. For instance, there’s something called hold back and hold back is usually one and a half to 2% of the base MSRP that the dealer collects after they’ve sold the vehicle. And then there’s advertising assistance that the manufacturer pays the dealer, and that can run 567 $100 A car. And dealers don’t pay cash for their vehicles, they finance them just like customers do. And that’s called floor planning your inventory? Well, the manufacturers give dealers floor plan assistance, that’s more money that’s under the line. And floor plan assistance can be another 567 800 hours. So there could be $2,000 of money that dealerships are getting that that are below the the invoice amount that they actually paid. So what you just always want to concentrate on is the selling price. And if you know there’s usually five to 10%, if the vehicle has an MSRP MSRP of $50,000. Well, there’s probably close to $5,000 worth of margin. So work when negotiating that $5,000 down to something that’s more amenable to both parties.

James Connor 22:46
And Ray, one of the things I’m always debating is whether or not I should buy a car or lease a car. How do I determine what’s better for me?

Ray Shefska 22:55
Well, somebody once said, loose who was much smarter than me a guy by the name a Getty had an oil company, small oil company of some kind, he said, You, you buy things that appreciate and value and you lease things that depreciate value, I can assure you that 99.9% Of all the cars out there depreciate in value. So I don’t know what the point of trying to own a depreciating asset is. But if you ask me, I leased my cars. I don’t buy them, because I look at them as a depreciating asset. But it depends on on the person and how long you’re anticipating keeping the car how many miles you’re planning on driving the car. Leasing doesn’t necessarily make sense for all people. My wife, God bless her when she was alive. She hated the fact that I leased cars, she would look at me she could. But at the end of three years, we We own nothing. Yeah, but we we’ve used this car for three years. And now we’re going to use another brand new car for the next three years. But we we don’t have anything to show for it other than the use of the vehicle. So it depends what your comfort level would be with leasing something as opposed to owning it. Now. Realizing that leasing it, typically you can lease a more expensive car for a lower payment than you can financing that car. It just depends on your comfort level with a lease.

James Connor 24:37
Why don’t we tie this all into the economy? And maybe you can just provide us with an overview of what’s happening in the auto industry in 2024. And just as a reminder, the US economy is growing very strong three to 4% annualized. The jobless rate is very low. It’s been below 4% Now for 25 consecutive quarters so we got a very strong economy. Enemy? What’s happening within the auto industry? Are we seeing strong sales?

Ray Shefska 25:06
Well, yes and no, the sales numbers that get reported seem to seem to indicate growth. But when you dig a little deeper into the numbers, you notice that the sales that have really increased is the percentage of sales that are fleet sales, to rental car companies, to governmental fleets, to large fleet buyers, retail side of things has has slowed or even stagnated to a certain degree. And there’s two things in my opinion that that contribute to that. Affordability. If you were to if you were to poll most Americans, and they have 83%, said they didn’t feel as if they can afford to buy a new car 83%. Okay, that’s a huge number who says I can’t afford to, I can’t afford to play in the sandbox anymore. And that’s because manufacturers during COVID, with Chip shortages, and everything else, only wanted to produce high profit margin vehicles, high priced vehicles. And when interest rates were next to nothing, it made it easier for people to be able to buy those. Now with inflation and interest rates as high as they are trying to keep a an affordable monthly payment has become harder and harder for most people. So even though sales are up, there’s fewer people that are actually in the market who feel as if they can afford to be in the market. Here’s an interesting stat, at least in my mind. 17.3% of all people in the United States who financed a car last quarter had a payment of $1,000 or more a monthly payment of $1,000 or more. I make a pretty decent living. I don’t have a lot of expense. But I sure as hell couldn’t afford $1,000 a month for a car payment.

James Connor 27:16
And then when you throw on fuel, maintenance, insurance,

Ray Shefska 27:20
Exactly.

Andrew Brill 27:21
When it comes to personal finances, many of us are embarrassed or simply won’t talk about the debt we find ourselves in. I spoke with Psy from FirePsy Chat about his journey out from under $110,000 with a debt to financial independence. And now his desire to help others do the same.

So $110,000 in debt, that had to be a pretty big burden that you carried around with you, I would assume?

Johann “Psy” Ko 27:49
Absolutely. Yeah. I I couldn’t sleep for days. And I remember just staying up at night trying to figure out the numbers. I went to the internet to try to find some resources on how to pay down debt. There was some debt forgiveness. And I didn’t tell my family, I didn’t tell my co workers didn’t tell mine, my boss or anybody because I was really embarrassed by it. So what I realized was that the car loans, those two cars that I didn’t need had to go first, right? So I got rid of them. And that took a lot off my plate because I got rid of them. I went to the dealership and I said, Well, you guys just buy these back. And I’ll take out a difference of the loan. And I did that. And then the next thing I did was really just kind of start budgeting and know what I could do to pay down my credit cards as soon as I could. That was my first thing. The first thing that I had to do to pay down my debt.

Andrew Brill 28:49
Now you counseled people now that’s, that’s what you do is in your website, FirePsyChat. That P-S-Y. And that’s, you know, people come to you for help. Now. What do you tell the people that come to you? There? I’m sure there’s there’s people, they come to you obviously for debt help financial dependents, and we’ll get into fire in a few minutes. But what do you tell them when they’re they’re so down and they think you know what, I have to change my life completely. Some of them I would assume don’t have to change their life 180 They’re just they need to get out from under for a little while. And then they can have that freedom that you have.

Johann “Psy” Ko 29:32
Now, every person’s financial situation is different, right? So that’s why we call it personal finance, because it’s very personal for each. Each one of us, each one of you. I’m sure your personal financial situation is different from mine. Now, when people come to me and say, Hey, I need a direction, and that’s what they really need is a direction right? So I have all these debts or I have let’s say I have $20,000 that came in it, and it’s just sitting in my bank right now, what should I do with that, then I tell, you know, I give him the direction and say, here’s some options that you can go through it. Here’s option A, there’s the Roth IRA, and there is you can invest, increase your retirement contributions, or you can move that money out of the traditional bank and put it in a high yield savings account. You know, that was one of the things that I didn’t realize that 82% of Americans don’t even know what a high yield savings account was. And they’re just putting in a traditional bank that accrues point zero 1% in interest. So that’s, you know, it’s just people in debt or people that have money, they just need a direction, right. And one of my favorite moments is that I have high school seniors come to me and submit their information on my website. And they said, Can you just walk me through what a Roth IRA IRA is, you don’t need to tell me what to invest. You just tell me how this works. And I said, No problem, I’m not even going to charge you 30 minutes to an hour, let’s go through this. And 18, seven or 18 year olds, they leave the meeting, and knowing that they’re going to become multimillionaires in the future. So I’m very hopeful for some of the younger generation, despite what you read on the news about Gen Z, doing this Gen Z doing that. There are some really incredible and smart Gen Z, saving and investing a lot of money and people who are in debt. Like I said, it’s just a, it’s a direction, given the tools. I do 20% of the work, they do 80% of everything else.

Andrew Brill 31:40
Let’s talk about the fire movement a little bit. And that’s something that you’ve gotten into although fire standing for financial independence, retire early, you’re more into the financial independence part. But the retire early part is something that you know, you if people want to do, they can certainly do it. Let’s talk about that a little bit and explain to me how you’ve gotten into that. Obviously, you have a 401k now, and a Roth IRA. And that’s a vehicle to which people can use to retire.

Johann “Psy” Ko 32:11
Yeah, yeah. So I discovered the fire of movement during all the readings I was doing when I was paying off my debt. And I found this website, I can’t remember the name of it now. But they just call it the fire movement. I’m like, What is this about? Right? So even on their website, they focus more on the fi than read. So there’s the financial independence and retire early. I know there are some YouTube channels, and there are couples who retire early in their 40s and just living abroad. Some people say I just want to achieve financial independence, so that I have the possibility to retire early. That’s where I am, I, I still have, I feel like I have a purpose here what I’m doing. So I don’t want to retire now or in my 40s. I thought about retiring at 45. But now it’s more like no, I want to I just want to be financially independent. So I can continue to do what I love to do what I’m passionate for. And this, that’s really the idea of the fire of movement so that you’re not stuck at the 95 workplace, doing the job that you don’t even like, and you’re just going to work every day until you’re 6067. Right. And then you collect your Social Security pension and you’re done. Fire movement is above that. So we don’t even consider social security pension, right? That is a nice to have, because we are going above and beyond with investing. So when I said that I was really disciplined, and I gave up a lot of things. During my Debt Free Journey, I still give up a few things so that I could continue to pursue my fire of move my fire journey. So when I started investing, saving money, I was putting away 2530 45% of my income towards saving. I did that in my first year. And I said that was good, but I didn’t have any fun. So I stopped doing that. That was in 2018. I said, You know what, I need to set some cash aside to have fun, because I need to have that balance between life and saving money with the fire. So the whole idea was to continue a gret aggressively investing but at the same time, have a little life for yourself, you’re no longer in debt, so that you have the possibility to retire earlier if you want to. Because most people I can feel it, you know, going into my 40s I’m gonna be I’m not going to be as active as I was in my 20s or 30s. And I want to have the possibility of maybe just call it quits or take a break from my work and just travel the world. That’s really the biggest idea.

Andrew Brill 34:44
Without getting personal. Where do you suggest people put money away to get the maximum return so it can grow exponentially? So by the time look if you know if like you’re in your 40s I’m actually in my 50s so you know if I want to retire Aaron 1015 years by the age of 70, you know what, I have a company I have 1020 years left, I want to travel the world, I want to see things that I’ve never seen before. I have a bucket list just like everybody else. I want to enjoy those things. Where are you telling people to put their money?

Johann “Psy” Ko 35:16
So I have like a checklist, right? So coming from the military background, we all use checklists. And it’s easier for us to understand that follow. What we always prioritize is the getting that 401 K match and then do the Roth IRA, and then do everything else. always prioritize your long term investments first. Because if you fail fire, let’s say you can’t retire early, you didn’t get to invest as much to retire early, you still have your 401 K and Roth IRA, by the time you’re 55, you can start collecting your 401k. And then by the time you’re 59 and a half, you can still have that money in the Roth IRA. So what I always suggest, and there’s a checklist on my website, is that step one, figure out what your annual expenses are right now. And then you can multiply that by with inflation, and there’s a calculator on my website for that too. And then the next step is to get that 401k, but only up to the employer match, that’s free money that you’re going to get. So you should never leave that out. If your employer gives you a 4% contribution. If you contribute a percent, then that 8% should be the minimum that you do, then the next step is to have that cash cushion, right. So I teach that and say, you don’t want to invest everything you have, you don’t want to own everything in cash either, right, you want to have a balanced your net worth. So calculate your net worth and find out where you are, and then build that cushion between you to cash in into investments. So it kind of like you don’t want to lay on the floor. Without a mattress, you get a mattress that matches your cash. So you have that cushion between the floor and where you are with investing, then the next step will be to max out your, your Roth IRA, your health savings account. That’s another great tool too, for the early retirement strategy is that people are thinking, Oh, health savings account. That’s just for health, right? No, it’s not, you know, you can actually take money out of Health Savings Account early. So if I spent 200 bucks this year on copay, I can reimburse myself 20 years from now, and the 200 bucks that I spent in 2024. There is no expiration on it, because there’s a loophole in the HSA that you can reimburse yourself in the future, and then go after you’re done with the 401 K Roth IRA HSA, that is your long term retirement plan, then you move on to start planning for the intermediate or short term retirement plan. So if you’re like 10 years from I want to retire by age 50, and I’m 40 right now, then you start investing in that 10 year time horizon. If you’re within 15 years, then you start investing in that 15 year time horizon. How do people do it? I mean, just opening up a taxable brokerage account, right? So you can go to any brokers that has a taxable brokerage account, and I don’t do anything fancy index funds ETFs. I don’t do fancy individual stocks. I do a few here and there, but it’s not why I’m growing my investments. That’s not how my investments are growing. It’s mostly from index funds, just really, really boring investments. Once you figure that figure that out the time horizon, and how much money you need to invest every single month to get to that fire number is what we call it fire number right? The rule of 25 and you have your annual expenses multiplied by 25. That’s how much money you need invested to achieve financial independence.

Andrew Brill 38:39
When it comes to cryptocurrency. Some of you have reached out and asked how to go about investing in it. We reached out to our RIA Winrock and Brett rent Meester explained to us how to get into cryptocurrencies. Understanding that you can actually buy things with crypto these days, there are actually some athletes getting paid in crypto, but this is more of an equity at this point. It’s not something that I’ve heard a lot of people say, look, you’re not gonna go out and buy things with this right now. ventually it could come to that but it do you guys look at this more of an equity at this point to grow wealth.

Brett Rentmeester 39:17
Well, we kind of see it as dual purpose to the point I made earlier on on hand. At some point, this could be a hedge against a system of fiat currencies running into trouble, whether the dollar, the euro, the yen, etc. So so it does have that characteristic. We might not be there yet. Currently, there’s still a lot of speculation it’s still correlates with equity markets and risk. So the second component of the investment is you’re invested in a disruptive technology with a huge network effect that’s growing, but it kind of goes through its natural booms and busts.

Andrew Brill 39:50
I have Bitcoin and Solana theory and I have those all on my iPhone. On my stock charts. I follow them daily to see what what they’re doing, what do people have to know before they invest at you know, right now Bitcoin, like I said around 62,000 ether, which is on the Ethereum blockchain in the 3000, range Solana around 131 40. So that’s a big range when it comes to those three. I know, there’s a bunch of different cryptocurrencies out there other than those three, what does someone need to know before they go and invest? Say, Okay, you know, I’m going to put a chunk of money down on this particular cryptocurrency?

Brett Rentmeester 40:30
Yeah, well, let me just give one quick disclaimer, as we jump into some of these names that, you know, this is not to should not be construed as investment advice, and everybody ought to talk to their advisor, or if they’re looking for like minded advisor, and they like this message, you know, reach out to windrock be using some of these coins as examples, not recommendations. So let me start with Bitcoin, just out of the gate in the lead to the others. I mean, I think the first thing for people to understand is, Bitcoin blockchain is a revolutionary technology. It’s not a fad. It’s real. Just take Bitcoin, for example. The estimates are hard to get but but if I told you, there was something that was able to do over 700 million transactions globally over the last 15 years, and I had no CEO, no employees, no Corporation had never been hacked. Now individuals have been hacked wallets and exchanges, but the Bitcoin code has never been hacked, that would seem pretty remarkable, like an ecosystem that’s just flourishing on its own. And yet, you know, that’s what Bitcoin has done. So that that’s point number one of what people should know, this is this is real, it’s here to stay to, like other technologies going through an adoption curve. So you can go through the, you know, your your innovators, to your early movers to the early majority, and we’re probably somewhere approaching the early majority, which you could say is where the internet was in the late 90s. But this technology is moving quicker. And third, if you look at the market capitalization or size of the market, you know, at about 2.3 trillion by some estimates, you know, the whole category would be a top five enterprise and the s&p 500. So the space is getting rather large. And then if you go beyond that, Andrew, before we get into specifics on coin, you’ve got some countries starting to adopt it, the basket case countries, the ones that have really suffered under hyperinflation and depreciating currencies, El Salvador being maybe the best example. But there’s a lot of minefields. I mean, this is still new technology. So it’s uncertain, there are a tremendous amount of fraud there, simply because people aren’t knowledgeable and they’re trying to reach out to others to help them navigate in the land, they just say that people should understand is, there’s all sorts of terminology that’s complicated. It can range from NF T’s to RW A’s real world assets to defy to a term called Hottel H O DL, which hold on for dear life. The reason that’s become a thing in crypto, is because there’s extreme volatility that the average investor who hasn’t been in the space just isn’t used to. And so when things are going great, there’s this FOMO or fear of missing out, bitcoins going to be a million dollars. And when things go down, there’s this panic selling. So you wrap all this together. It’s real technology, it’s here to stay. But it’s a complicated, fastly evolving space with a lot of danger that people just have to go in eyes wide open on.

Andrew Brill 43:27
What are the complexities that investing in the choices in investing in crypto?

Brett Rentmeester 43:34
Yeah, well, there’s a couple there’s the vehicles, and then there’s the coins themselves. So it’s, if we could maybe just start with the vehicles. I’d say, with the advent of the Bitcoin ETF, and the SEC basically approving it, it’s made it a lot easier for the average investor to go on a Schwab account and buy it. Okay. So that is one way to do it. It’s the most simplistic but it kind of is Bitcoin centric, I’d say. The other way that a couple other ways, there still are some vehicles that we refer to as closed end funds things that own cryptocurrency, but issued a fixed number of shares, such that there are times where the price of what they own varies from the price that what you can buy it in. So a good example is greyscale had some funds and Bitcoin a theory and some of these things were out of favor and you could buy their fund and at one point Buy Bitcoin at a 50% discount to what the fund owned. So there are still some opportunities like that today. The third would be we have an ability to go buy direct cryptocurrencies, in the name of a client, you know, specific purchases of the kinds of names you mentioned. And the fourth if people are looking for exotic more complex things like I want early stage coins that are launched or NF T’s and those kinds of things. There are some private funds that are out there.

Andrew Brill 44:57
You talked about coins and In cryptocurrency, what are the different coins? And what is a coin?

Brett Rentmeester 45:05
Yeah, well, I’d say, you know, when the space began, it was bitcoins and Bitcoin is kind of a monetary experiment. And then the second major coin was Aetherium, that you mentioned. And that was kind of the first look at, hey, how do we take blockchain and make it applicable to businesses and be able to do business type things, so called smart contracts between people and things that will self execute of certain conditions. And that opened up a whole new realm of how much you generate. And from there, we’ve gone down, you know, many verticals, that that would be beyond the scope of today, but things ranging from real life, or real world asset kind of applications to decentralized finance, things that used to be done in the banks, that can now be done lending, borrowing options that can be done in these decentralized exchanges. So I mean, it’s a pretty wide range of applications at this point. And that’s part of the issue. There are at least 10s of 1000s of cryptocurrencies at this point, maybe more. So it’s changing, it’s evolving. It’s such a dynamic ecosystem. So it requires staying on top of it. And it’s hard for a lot of people to do that. And I think the risk is people kind of chase the hot thing, and don’t step back and have the right framework and how to approach you know, the space.

Andrew Brill 46:26
Which with each different coin using its own blockchain, is there a way for these blockchains to talk to each other? Let’s say, I invested in Aetherium, and someone else has invested in Bitcoin, and I want to peer to peer purchase something from them. Can these blockchains talk to each other or do business with that person?

Brett Rentmeester 46:50
That’s right. Well, yeah, it’s a great question. It’s this is very analogous to a lot of technology role rollouts. Historically, think of cell phones, there was a time where all these little cell phone networks all over, you know, you were traveling, and he had to roam because you had ATT or Verizon, but they didn’t talk to the little network in Michigan, where you were driving through. So over the years, cell phones, cell phone networks did exactly what you said they found a way to connect and be interoperable. That is under way, currency, so not perfectly. But there are technologies, there are platforms that are solving that issue. And there are ways to so called move from one Chain Bridge from one chain to another. It’s not quite as seamless as it will be in the future. But I think that’s the vision for the space.

Andrew Brill 47:35
All right, so let’s get back to when rock and I come to Brett and I say I want to buy some bitcoin. How are you helping me through or I want to buy some cryptocurrency? How are you helping me through this?

Brett Rentmeester 47:48
Yeah. Well, listen, I think I think most people come to us looking for an overall strategy in cryptocurrencies fits, you know, piece of that strategy. So you start with the big picture and kind of get down based on risk tolerance and a variety of other things to do cryptocurrencies have a fit, and if so, how much and then, you know, it is about the individual, the simple solution is shirt go by the Bitcoin ATM at Fidelity or Schwab. That’s an easy solution, but not always the best. I mean, there are ways to own it directly, which, again, I gave you the example of the hardcore crypto, people want to own it directly in their own private wallet or custody, nobody else. People can still do that. But you’ve got to be tech savvy, and make sure you don’t make a mistake or lose your password or your keys, so called keys, but you’re in trouble. So a lot of people don’t feel like they’re at that level, they want to be in the system, but they probably want to do something a little more than just owning the Bitcoin ETF. So that’s where a typical client might own some of these funds that are trading at a discount. And if they have enough money that they want to put in the space, we might open an account where we’re buying individual cryptocurrencies in their name through a third party custodian, but held in private wallets for security for that client. So it could be you know, that whole range of options.

Andrew Brill 49:03
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