0:00

I'm David Grosso, and you're listening to

0:02

Follow the Profit. Thanks

0:09

to apps like robin Hood, Acorns and we Bowl,

0:11

investing is more popular than ever among young

0:13

people. What are they treating this wealth building

0:16

strategy like a game or get rich

0:18

quick scheme? When games stopped blew up,

0:20

there was a lot of conversation about the fact

0:22

that retail investors were inflating the

0:24

company's price for no reason and establishment

0:27

investors were losing money. Of course, platforms

0:29

like robin Hood took drastic measures that

0:31

we had Follow the Profit probably aren't

0:33

cool with, like stopping people from trading.

0:36

But now young people are buying into new crypto

0:38

scams every day, and it seems like gen z needs

0:41

a lesson on investing better.

0:43

Our guest today is just the guy to teach

0:45

that lesson. He's the CEO and co founder

0:48

of Dan Drew Partners and the author of the

0:50

new book Legacy Investing,

0:52

How the point zero zero

0:54

one Percent invest His name is sal

0:58

what's up? How are you, David?

1:00

It's over the top. Thank you, finally

1:03

we get to talk. It's been a while. How are

1:05

you doing. I'm fantastic,

1:07

you know, I'm it's it's this world

1:09

that we live in. That like, it seems

1:11

like everyone's investing, but no one knows

1:14

what they're doing. So no, it's it's

1:16

pretty timely everything

1:18

everybody is speculating today. That's really what it is.

1:20

I mean, that's really what I think. The pandemic

1:23

is really wired into

1:25

our d n A. I think that we're all

1:28

somehow gamblers to some

1:30

degree or not. And whether it's a sports gambler

1:33

or you're now gambling on stocks or

1:35

crypto, that seems to be the mainstream

1:37

wave of creating a living

1:39

today for many people is to day trade

1:41

and speculate. So how

1:44

do we know how to invest or how can we learn

1:46

that? You know? It's interesting

1:48

I think people today, especially if you were to look

1:51

at what I wrote about in my book, how the

1:54

one thousandth of the top one percent

1:56

invest. They look at things over a

1:59

period of lungevit. They want to know. They

2:01

usually have impact plans, and you and I have friends

2:03

in common, but they have impact plans that require

2:05

them looking out twenty forty years into

2:07

the future. So they're not going to invest in anything

2:10

short term at all. And a lot of the flashy

2:12

shiny objects that are coming out are

2:14

mostly based for retail people to speculate

2:17

on, because we're speculative consumer

2:19

based society today.

2:21

Yeah, and it's really interesting because we have this

2:24

new class of people, right that just

2:26

want to get rich quick schemes, right,

2:28

and we have our whole society, uh,

2:30

you know, built around this idea that

2:33

let's not do anything of value. Let's just

2:36

pump and dump, get out as fast as possible,

2:38

and then do nothing, which is a fundamental

2:40

philosophical problem in America

2:42

today. Yeah. Well, it's also

2:44

gives them, you know, I think it causes

2:47

some sort of a moral hazard internally because

2:49

everybody has been taught, especially people older

2:51

than us who have depression ary

2:53

parents or grandparents, who are taught to follow the ways

2:55

of Warren Buffett. Right. And Warren Buffett, of course

2:57

such special advantages and he does not

3:00

invests like everyday middle class American,

3:02

I can tell you that right now. And he had advantages

3:05

working to his favor over the past

3:07

fifty years. However, when you look at things today,

3:10

it seems though the society is just a couple

3:12

for many sort of like long term strength,

3:15

waiting it out, getting things accomplished,

3:17

and when you look at the top

3:20

one thousand of the one percent. They're

3:22

looking more for impact and longevity.

3:24

They're looking to cure diseases. They're looking

3:26

to really established themselves, and their

3:28

brand is being something much more

3:31

permanent, whereas if you look at the middle class

3:33

today, they're all g r q s, get rich

3:35

quick. It's people who I know who have no

3:37

financial background. They'll call me and the last

3:39

few what do you think of game stop? I said, I don't know anything

3:41

about liquid, you know products, I don't do anything

3:43

about that. And it's it's it's

3:45

scary too, especially it's how things are trading

3:47

today, how many people are just fully

3:49

invested into this. And my

3:52

worry is is just like two thousand and eight, nobody ever

3:54

really tells you how much they have into it until

3:56

you know you witnessed later on how much they have. And

3:58

I saw this with the media or to grow of bitcoin

4:00

in two thousand and thirteen. There are a lot of chiropractors

4:03

who are telling me about it like it was the most

4:05

evangelical moment of their life, and then

4:07

they all end it with but I just have a little

4:09

bit of money into it, and then you never

4:11

hear from them ever again. It's like, well, that turned out

4:13

to be a little bit more, and you know sort of

4:15

that that money vaporized because it's

4:17

just in our DNA today, right, We're in a very

4:19

consumer based society.

4:22

Yeah, it's funny though a lot of times

4:24

there's a lot more profit making opportunity

4:26

in the long term and nobody realizes

4:28

that. And even these days, even corporate America

4:31

acts that way. We worship at the altar

4:33

of the quarterly report and we're not really focused

4:35

on how we're going to make money or build sustainable

4:37

revenue models over ten of the twenty years

4:40

now, and that's a fault in society. I think.

4:42

I think there's a lot more money betting on how

4:44

far a stock will go than actually how profitable

4:46

the company will be, and that to me sort

4:48

of the couples where the value is in

4:51

the liquid treated products such as a stock today,

4:53

if you're putting that much money into it and your long

4:55

term savings and it's safe and secured and everything

4:58

in your four oh one k what have into,

5:00

the house burns down and I think a lot of people are going to

5:02

find out the hard way, especially going into

5:04

an administration that doesn't seem to be every

5:06

proof business they're intimating

5:09

that they might increase rates. And if they do increase

5:11

rates and look out below, Yeah,

5:13

increase capital gains taxes specifically,

5:15

that's what you're referring. Oh that too. I mean that's a tax

5:18

as well. Right, but I'm talking about short

5:20

term interest rates. Well, they're gonna

5:22

have to raise interest rates now, I mean they're at

5:24

zero. There's nowhere to go here about.

5:27

But do they But do they,

5:29

David? They haven't for the past

5:31

twenty years, right, No, they have

5:33

not. That's correct. In the car places in the

5:35

world that have negative interest rates, so they could go

5:37

down. I guess that is incorrect. Yes, So

5:41

yeah, just because the c f AS textbook

5:43

says one thing doesn't necessarily mean that it's going to

5:45

happen in real life, as we've seen today, and

5:47

the pandemic has been a perfect example of

5:49

that. So you talked

5:51

about burning the house down. Let's talk about

5:53

how a lot of families, you know, store

5:55

their value and that's real estate. What do you think

5:58

of real estate as an investment and

6:00

specifically how the top one thousands

6:02

of one percent invests. I

6:05

think that's that's a very good question. I think the same

6:07

thing that we've seen with stocks today, we've seen housing

6:09

be the same speculative instrument because you have these

6:12

cable shows, cable channels dedicated

6:14

to fix her uppers. And so that's great

6:16

because the average American can actually create

6:18

wealth using single failing homes

6:20

to speculate on. It's not really something that you want

6:22

to have long term rentals. I can tell you from

6:25

having a portfolio of over a thousand single family

6:27

homes and a distress credit fund. I had

6:29

at one point that those tenants

6:31

you do not want to have. Um they're very difficult

6:34

to manage. So what a lot of wealthy people do is

6:36

that they geared towards what we call statement assets.

6:38

And this could be office towers in New York

6:40

or l A or Orange County what we were talking about

6:42

before, Or it could be industrial

6:44

centers like Amazon fulfillment centers or things like

6:47

that. Where should the pandemic

6:49

happen or occur, you know that you're gonna go to bed at

6:51

night knowing that your tenants are richer than you are, so

6:55

you don't think this is gonna play out well. I I've

6:57

grew up in a family where we had a lot of tenants,

6:59

and I can tell you it's I'm massive hassle for

7:01

a lot of people who are buying real estate. Now. I don't

7:03

think they know that yet. No, they

7:05

don't, But they also don't know. They don't

7:08

they they you know, in the problem, And you're

7:10

right because a lot of people who are systems

7:12

oriented come into real estate thinking

7:14

that, oh, it's it's a bunch of homes in a

7:16

box. You have an eighty unit residential

7:18

building. What could go wrong? Well, a lot

7:20

can go wrong, and you know when you have different tenants and different

7:22

tenant laws. We're starting to see right now that things are

7:24

not ending well, and in New York there's a tremendous

7:27

amount of pressure there too. So

7:30

so do you suggest

7:32

that people hold just real estate that

7:34

they live in and more long term,

7:37

you know, stable real estate like you were talking

7:39

about. I think the best way for people to

7:41

participate today, and I really do mean this

7:43

is to partner in in private partnerships

7:45

with people who are more experienced

7:47

than you are. And I think when you start writing

7:50

checks as an equity investor, rather

7:52

than trying to do it yourself, which is what a

7:54

lot of people tried to do in two thousand five

7:56

six seven, got wiped out in two thousand and eight,

7:58

and it's happening all over in it's

8:00

better to look over the shoulder of people who are

8:02

a little more older and wiser than you are

8:05

so that you don't make the same mistakes that they

8:07

do, because it's never just about the money

8:09

for a lot of these families about it's about their reputation

8:12

in their brand, and sometimes they don't want to be implicitly

8:14

involved in the opportunities that they don't really know enough

8:16

about. And if they follow the leadership

8:18

is smarter people who are more established and more

8:20

experienced, then that's usually

8:23

seems to be the way how these newer emerging

8:25

families seem to insulate themselves

8:27

from a lot of risk. So sal one

8:29

of the things I tend to look for is even the mention

8:31

of one word or a one term,

8:34

which is real estate crash. And none of

8:36

the media is reporting that that's even a possibility.

8:38

Do you think that's incorrect? Let

8:40

me tell you a story. In two thousand seven eight,

8:42

I was walking up and down Park Avenue with

8:45

a lot of institutions and hedge funds with a tin

8:47

cup out looking to raise money because I

8:50

thought that there was going to be a housing crash.

8:52

People didn't really believe the thesis. It

8:55

wasn't until there was one cowboy firm an institution

8:57

who said, you know what, we get it, we like it. They're

8:59

kind of trarian and the rest of his history.

9:01

I think you're gonna see if

9:03

it happens, it's going to be a controlled implosion.

9:07

And the only way that that could happen right now

9:09

is that if there's any sort of contagion where

9:11

interest rates go up, and if interest rates go

9:14

up even twenty basis

9:16

points for example, that's going to have a

9:18

real material effect on the stock

9:20

market. And I don't think people really understand

9:23

that, is that rates don't have to go up.

9:25

They've been conveniently low for a very

9:27

long period of time. People have gotten accustomed

9:30

to it. A whole generation has gotten accustomed to

9:32

it. But when things turn around,

9:34

history has a way of repeating itself, and is the

9:36

equity investors who are the most speculative

9:38

at this point and probably the most at risk and the most

9:41

levered, are the ones who are going to feel the pain.

9:43

And you're gonna see it in real estate too. But that's where opportunity

9:46

is to be able to buy assets that you might not have

9:48

been able to get into ever before,

9:50

maybe Class A whatever, because of

9:53

the opportunity that the time is correct. So I think buying

9:55

right in real estate and being with smart people

9:57

with smart shoes is the best way to go, especially

10:00

for emerging families who are looking to protect their reputation.

10:03

So how do you even find something

10:05

to invest in right now? So far you've talked about

10:07

equities or stocks that you know, they're they're

10:09

kind of property. Real estate is expensive

10:12

and risks, repeating the same pattern that we

10:14

saw in two thousand eight. So what is their

10:16

south? What is it accessible for a regular

10:18

guy like me, you know, for

10:20

a regular guy like you. As far as the income is

10:22

something interesting that came out and there's this convention

10:25

called peer to peer lending, and

10:27

people today who really want to understand and

10:29

put some savings away and get some income off of

10:31

it. And I use it myself, and people

10:33

in my firm have used it when we've given bonuses

10:35

out they use it as well. But it's actually

10:37

lending peer to peer, and you can actually get a

10:40

very good interest rate and some good monthly income

10:42

coming off of that. Now, the issue with that

10:44

is that it's unsecured, so it's basically

10:47

you're giving you know, unsecured money

10:49

like a credit card to someone else. However, it's

10:51

all pooled together and you can

10:53

put in investments for as little as twenty

10:55

five dollars. But if you know what you're doing and

10:58

you're lending to the right people, it could good.

11:00

It could be a good income producing

11:02

wealth creation mechanism for people who have anywhere

11:05

between a thousand dollars to maybe fifty

11:07

dollars. Okay, so we have to touch

11:10

on the big thing that everyone talks about, crypto.

11:12

You know, we have all these diverging opinions, and

11:14

in fact, I've made a name for myself by

11:17

being a crypto commentator because I'm pro crypto,

11:19

but I owned none of it, which is, you

11:21

know, I guess I'm the only one you

11:23

know, what is your idea? Because you know, we hear

11:25

some people saying, oh, it's a complete scam, and we

11:27

see other people saying like, oh, it's

11:29

gonna be the only money in the future. And I'm

11:32

gonna guess that you're going to say the truth is somewhere in the

11:34

middle. Cell I think it is right

11:36

now. But remember, so U just the retail that pays the

11:38

research and development for the institutions to

11:40

understand how this new product works

11:42

into the market before it's widely accepted. And

11:44

that's what you're starting to see right now. And media has

11:47

just allowed these corporations too.

11:49

And I'm using this word gas light America by

11:51

saying, hey, Tesla, is

11:54

you know buying all this bitcoin? Oh, Walmart is going

11:56

to be taking bitcoin soon. Well they're not. They're all

11:58

these false flags. And then you have China too,

12:00

which says that they're going to ban crypto because I think

12:02

that they want to make sure they have a very stable digital

12:04

wand coming out. My thought is

12:07

is that it is not I think

12:09

a store of wealth at this point. It's

12:11

it's a great speculative tool

12:13

for people who want to speculate on it

12:16

um, but it's also an identity investment.

12:18

Right, So the people who invest in crypto

12:20

usually have a different personality than the guys who

12:23

invest that we know, invest in venture or

12:25

invest in real estate. Right. The

12:27

crypto guys they were on their sleeve. It's

12:29

a religion to them. They you know, they drive

12:31

a Tesla. They're evangelical about

12:33

it. So today, no, it's

12:35

true it's a it's a you know, and there's conferences

12:38

that you and I, you know, know of

12:40

where you get trapped in cars and a tesla

12:42

and you're just you know, you just hear this guy talk

12:45

about and he's imparting his entire digital

12:47

personality onto you, quoting

12:49

things and new coins and coins that he's into and everything.

12:52

I like it. I think it's great. Some of the companies that

12:54

we have give us coins as a as a result

12:56

of inequity investment that we have into it, and that's

12:58

the only exposure we have, except that I

13:01

had to make a make

13:03

good on a bet for a hundred dollars and I had to get a coin

13:05

based account because the guy would insist

13:07

only taking crypto because he wanted me to

13:10

get indoctrinated into the whole

13:12

crypto thing and start trading it like he does. And

13:14

I just, you know, I haven't gotten involved in it.

13:16

But I think it's going to evolve into its own

13:19

But there's a lot of competing powers and a

13:21

lot of old competing powers that don't

13:23

want to give up full reserve currency

13:25

status yet. And I think people really need to understand

13:27

that things are evolving, things are happening much

13:29

faster, especially from a socio economic and

13:32

geopolitical standpoint, So anything can

13:34

happen right now. But if you look at El Savador

13:36

as a proxy for launching this, it's

13:38

been kind of rough, to say the least. And I think there's

13:41

gonna be a lot of opportunity during this frontier

13:43

stage for a lot of Malfeesians

13:46

and maybe, you know, bad things to happen while

13:48

before this gets sputton down. I've

14:00

always been shocked by people just assume

14:02

that the government and the powers that we are

14:04

going to be like, oh, yeah, this is a thing, no problem,

14:06

keep on going. And I think that's very

14:09

naive of a lot of investors, meaning

14:12

what do you mean this is going to keep on meaning crypto itself?

14:14

Yeah, that's all. This is now a thing

14:17

Like the government's gonna be fine with it there He's

14:19

going to be like yeah, sure or whatever. And it

14:21

seems like the government's

14:23

going to clamp down on all these cryptocurrencies

14:26

sooner rather than later. I think

14:28

so too, because there's been so much money that's been

14:30

made, right think about it, There's so much in taxes

14:32

that have been made that are probably not reported. And again

14:34

I don't know. You know, I don't actively

14:36

trade any crypto products whatsoever. I

14:39

don't even own any. But at some point the government's

14:41

gonna want their take as well, and they have

14:43

to eye it because if you think about it, what were

14:45

people doing the during the entire pandemic.

14:47

They were day trading. You created a whole

14:50

geopolitical, interconnected economy

14:52

of people day trading during the pandemic,

14:54

and that sort of changed everybody's hardwiring.

14:56

So of course the government's gonna want to take advantage of

14:58

that, I think. So, speaking of everyone

15:01

being a day trader suddenly during the pandemic,

15:03

what do you think about apps like robin Hood, which

15:05

it's almost like playing a game, right, It's like,

15:08

oh, I'm gonna buy stocks passively

15:10

on my phone and hope for the best. I

15:15

mean, it's a Junk George approach, right, I mean, it's like I'm

15:17

going to drink a diet coke with my big macmeal

15:19

and hope for the best too. And then we found

15:21

out that all those dirty water hot dogs

15:23

that I love in New York City of Sara Kraut take

15:26

what twenty three days off your life that I think I heard,

15:28

So, you know, we all have some sort

15:30

of terminal point I think in our lives.

15:33

I just think that, you know, getting getting

15:35

back to that is it's

15:40

I don't know. I mean, there's many ways to look

15:42

at it. What what

15:44

what? What do you figure it's going to be? What

15:49

the apps and whatnot? I mean, I think it's

15:51

I mean, I think so here's what I'll say.

15:53

I think if you look at and I just I

15:56

think that there is going to be increasingly

15:58

more attention

16:00

paid to how much dopamine these companies can

16:03

get from you in order to get them addicted to their

16:05

apps, just like nicotine or anything

16:07

else that we've had and robin Hood and these

16:09

apps make it very easy for people to

16:11

become investors because under

16:14

the banner of investing and learning

16:16

how to invest, it's really becoming a dopamine

16:18

addictive society for gambling. So that's

16:21

my take on it. Of course, at some point I'll

16:23

be on it, you know, when I have the time to do

16:25

it, and you know, if I if I want to. But it

16:27

is something where if you start it, you don't stop.

16:30

And I think that these apps are designed to do that.

16:32

And if you combine it with the fractionalization

16:34

or the you know, the financialization

16:37

of everything. You can buy a slither of a share of

16:39

Google for one tenth of its price, So

16:43

these apps make a lot of money off of those fees because

16:45

it's those fragmented, smaller fringe

16:47

investors that pay the most fees to be able to buy

16:50

the lowest common denominator of the stock. So

16:53

that might not be the most popular opinion, but I

16:55

just put it out there, David. It

16:57

sounds pretty accurate to me. I'm not even gonna push

16:59

back on you, and that's why I hesitated at

17:01

first. I was like, I didn't know they're gonna go with this,

17:03

but I'm like, all right, well,

17:06

you know, anything goes. I followed the profit.

17:08

You know, I've made a name for myself sal asking

17:10

questions and make good wash. So well,

17:13

no, I'm just giving you the hard answer,

17:15

and I'm not I know, you didn't invite me to be on here because

17:17

I was namby Pamby, So I just want to make sure I'm

17:21

also not offending anyone either. I

17:24

think if anyone's offended, they need to, you know, recalibrate

17:28

their whole you know, the way they observe

17:30

the world. So what do we do that. What

17:32

do the rich do in an environment like this? Right?

17:35

They stare at things like real estate

17:37

it's expensive. They look at stocks.

17:40

Oh, everyone's buying them right now. It doesn't

17:42

really make a lot of sense, right, And

17:44

you know, inflation is higher than normal

17:46

as well, so holding on the cash doesn't seem very

17:49

prudence either. So where do they stash

17:51

all those bajillions of dollars that they have?

17:55

You know, there's two there's two things that you're seeing

17:57

right now. A lot of it is going into private companies

17:59

because a lot of the wealthy have figured out that they have more

18:01

control. Newer wealthy people,

18:04

emerging families have figured out that they

18:06

have more control investing in the private stage companies

18:08

that have the possibility to go public.

18:11

So they have control because they can control the

18:13

basis for the price that they invest into, but also

18:15

the terms. Right they did they like the CEO?

18:18

Do? They don't? Whatever. Meanwhile, if Martha

18:20

Stewart were to do something stupid again, her stock

18:22

price would drop, right, So you know, you

18:25

got to look at it from the standpoint is the

18:27

middle classes absolutely brainwashed

18:29

and convinced and convinced that they need liquidity

18:32

like oxygen. But when the wealthy have manufacturing

18:34

companies, they are throwing off millions of dollars

18:37

a month and they're looking to put it somewhere. They have the same

18:39

concern as you, but they also have

18:42

a little more sophistication and dexterity because

18:44

they're getting into what I call private company

18:46

arbitrage. These companies before they go public,

18:49

they're investing into and they're all

18:51

put together, run and operated, managed

18:53

by world class families or operators

18:55

who have done this before many times.

18:58

So for them, the wealthy invest in people,

19:00

they're not really looking to invest in the assets because

19:02

those are the people who are going to add another

19:05

layer to their legacy on the next big

19:07

life sciences or whatever industry

19:10

you have. You know, I p O. That's

19:13

really what it comes down to. And there are real estate

19:15

opportunities out there too, but they're

19:17

mostly clubby types of deals. They're not widely

19:19

out there known to the public because they're

19:21

usually smaller, they're not usually that big,

19:24

and um, you know what, the families

19:26

are just saying to say, mice go where elephants

19:28

can't, and that's really paid off well as far as

19:30

investment returns by not going

19:32

where the big guys are going but mostly following

19:35

where the smaller, more nimble, more sophisticated

19:37

families are going. Is that a bright spot in

19:39

the economy right now because we do live in the golden

19:41

age of startups and there are a lot of exciting

19:44

companies that are coming onto the scene. And while

19:46

the statistics point to you

19:48

know, low startup rates, it seems like the startups

19:50

that are going big are more exciting

19:53

than ever they are.

19:55

But remember, it's cost a fraction to start

19:57

a company today than it did even twenty years

19:59

ago when I got started. Today it's almost

20:01

and I hate to say this, it's almost like there's no excuse for

20:03

you not to start a side gig, right. I mean, how

20:06

many people do you know who have friends who

20:08

are always belly aching that they don't make enough money or

20:10

whatever. And the people who control media,

20:12

like you are the ones who are really doing

20:14

very well because of the fact that you're you know. And

20:16

I think that's where it goes. And I talked about this in my

20:18

book Investing legacy is at the

20:21

level for middle class to

20:23

achieve well today as media and you can

20:25

you know, use any example you want from someone who's

20:28

giving stock advice who had left a Wall Street

20:30

investment bank, to even someone on TikTok,

20:32

to even only fans, this is where we're going

20:34

today, and when you follow the trends

20:37

of you know where that's going. That

20:39

could be a good wealth creation mechanism

20:41

for a lot of the middle class. But as it relates

20:44

to the um wealthy, who have

20:46

a lot of money and they're looking to put it away and they're

20:48

looking to stockpile that into other things,

20:50

they have impact statements that last

20:52

a much longer period of time,

20:55

so they're more interested into you know

20:57

what we call getting into the private company private

20:59

company arbitrre. Maybe it's a life scienist

21:01

company. Maybe it's a company that will

21:03

be acquired by another larger company in a larger

21:06

industry, by a multinational. These

21:08

are the companies and assets that they're paying

21:10

attention to because it gives them the opportunity

21:12

to deploy money. But it also gives them the opportunity

21:14

to really flex in front of their friends, sort

21:17

of to speak that they're a little more sophisticated than their

21:19

others and yeah, you know,

21:21

we have similar friends in common. So they like that

21:23

and they like to be known as being proceved

21:25

more sophisticated smart because it's just

21:28

you know, just like anyone else, they're addicted to it opening

21:30

too, but they have different ways of expressing them.

21:33

So we're about to see one of the largest wealth

21:35

transports spurs in history, specifically from

21:37

baby boomers to people like us. What do

21:39

you think the lessons learned by the very top

21:41

that are applicable to you know, every family

21:44

who has some form of assets, smaller, big,

21:46

even if it's just their primary residence.

21:49

How can the next generation keep you

21:51

know, the dream alive. You

21:54

know, I mentioned this in the book, and it's something that we've been

21:56

working on for the past year and you're starting to see.

22:00

You know, during the nine nineties, you saw a lot

22:02

of investment banks go public and you saw a

22:04

lot of things become spread out then and

22:07

with that you saw a lot

22:09

of bure accuracies where there are a lot of conflicting

22:13

maybe ideas politics running

22:15

in institutions, none of which has really helped any

22:17

of the wealthy families today because

22:19

their money is going to use, but they don't

22:22

really know if it's being used for anything that

22:24

benefits them or benefits their

22:26

wealth manager and their agenda that they have.

22:28

So there's a lot of conflicting agendas

22:31

in these wealth management firms that

22:33

we've been seeing and hearing over the past few

22:35

years. So these families want to take more

22:37

control, but what they want is more

22:39

experienced and so what you're starting to see,

22:42

and it's it. You know, there's been clubs around

22:44

that have been like this forever, Like Harvard Club has

22:46

an investment club. You're starting to see more society

22:48

based investing where people who have shared

22:51

common values, whether it's political,

22:53

religious, whatever, what have you, are

22:55

coming together and they're investing um

22:57

the cabals of wealth reforming and investing

23:00

into these private companies and those are really good,

23:02

I think going to be much more influential.

23:04

You're starting to see these pools form today.

23:06

You heard about it with the Art Goes with the family

23:08

offices that were involved in that. But you're starting

23:11

to see more of uh solidarity

23:13

among some of the families that relates to the

23:16

societies and the relationships that they have.

23:18

They only want to be with people who are like them, and I

23:20

think that's where it's going today, is that a lot of people

23:22

are looking towards leadership in the

23:24

form of mentorship and experience based

23:28

investing, if you will, so that they understand what they're

23:30

doing. Maybe their parents didn't, but at least

23:32

you know they have a shot. And if you look around

23:34

in Asia and other investment banks such

23:37

as I can't remember who it was, but some of them have

23:39

actually started like small little day

23:41

camps for people our age of wealthy

23:44

people to come and spend a week in Singapore

23:46

to learn go to the formula one but

23:48

learn you know, wealth and everything, and really it's

23:50

like a primer for private equity and a venture

23:53

and real estate, which is great. So the investment

23:55

banks are doing it, they're already on top of it.

23:57

But I think you're going to see that perculated, especially the

23:59

ways it's at he's running today, You're going

24:01

to start to see people just start formed cabals

24:04

of wealth and influence, so investings

24:07

of us to solve problems right. And a

24:09

lot of these big families, especially in the age

24:11

of inequality, have so much money

24:14

that they of course they want to you know, retain

24:16

their wealth, but they also want to do good. So are

24:18

you seeing a movement towards the uber wealthy,

24:21

towards carrying about the future

24:23

and maybe environmental issues,

24:25

social issues, etcetera. Yeah,

24:28

you know they the wealthy coined term and this

24:30

is a term that's become like for

24:33

the point zero zero one percent, is called impact

24:35

investing. An impact investing

24:37

is something that's personal to you. And in my book

24:39

Investing Legacy, I say impact investing

24:41

to me means different things. I had.

24:44

You know, my parents died, I'd

24:46

like to set up a cause for them for educational purposes.

24:48

My brother, um, I would like to set up

24:50

something for more like social liberal causes

24:53

for him. When what you're where things

24:55

are going today is that

24:57

with these families is that they're looking to brand

24:59

themselves. I was saying, hey, I made an impact

25:01

when I left this world. Now, it doesn't necessarily

25:04

mean a billion trees and a continent you don't

25:06

live on. But if you were to look at the stream

25:08

examples of Elon Musk, he's

25:10

made an impact and he is doing something for

25:12

the greater of humanity that he feels

25:14

as though he's doing. But for today, what

25:16

a lot of these families are doing is that

25:18

they do impact investing because they want to have

25:20

some sort of a metric to understand what

25:23

happens. What happens if I invest

25:25

in this company. Well, in life sciences is the

25:27

ultimate impact, right, It's you get

25:29

bragging rights for life because you have cured

25:32

or if helps someone maybe in an

25:34

oncological you know, in a cancer situation

25:36

that your family is going to be able to say

25:38

for the rest of their lives that grandma and grandpa

25:41

did something different and great and that's where

25:43

they are today. And that's where you're starting

25:45

to see where a lot of the investors go is what

25:47

is the measurable impact to humanity.

25:50

Another example of this would be Dolly Parton.

25:52

Dolly Parton is a superhero

25:54

today because she made an investment

25:57

in during a time

25:59

when the world came to a stop, and

26:02

she that goes to her superhero legacy.

26:04

Besides being a fantastic performer,

26:07

she helped cure and save the world from

26:09

a disease. Yeah, well you're

26:11

talking about when she donated

26:13

money to the Majornal vaccine research.

26:15

Is that correct? Correct? Yes, correct,

26:17

yes, yes exactly. Whereas

26:19

if you look at the middle class, you know they'll

26:22

run like a Susan Cohman thing, but they don't

26:24

really know where that money is going. They don't really care because

26:26

it's more emotional to them. It's just, oh, you

26:28

know, whatever it is, it's it's

26:30

it's not something, it's consequential, Whereas

26:32

with these families, it's their raison,

26:35

you know, it is there. The reason for getting up in

26:37

the morning and moving is what kind of an impact

26:39

am I going to make with

26:42

the investments, with the capital and reputation

26:44

that I have. So

26:54

I want to talk about young people here for a second, because

26:57

we're in a weird situation, right, those under

26:59

forty, specifically what I'm referring to young

27:01

people, young people young ish.

27:03

I guess I still like to think I'm young, right,

27:06

Um, we're worth ten times

27:08

less than the average baby, right, And

27:10

that's called into question the whole idea

27:13

whether market capitalism

27:15

works for young people. So,

27:17

you know, that's why you see all the movements

27:19

and you know a lot of

27:22

alternatives to our current

27:24

system, or at least reforms to it. I

27:26

think everyone can agree that our system

27:29

could be a lot better. Is there any

27:31

way that you know, big money people

27:33

can help, you know, initiate

27:36

some sort of change, And I don't

27:38

know, do something about the situation, because I feel

27:40

like the way we're going it endangers

27:42

the longevity of market capitalism.

27:45

Yeah, I do too. But the corollary and anity

27:48

that David is that this is the time in the

27:50

history of the world where there's been more individual

27:52

brands made and millionaires

27:55

made than it every time before in history. And

27:57

all you need, literally is an iPhone.

27:59

Sure, So it doesn't make sense to me for

28:01

someone to do that when people

28:04

are doing I mean, that's really I think what the

28:07

democrat democrat you know, democratization,

28:10

the democratization of capitalism

28:13

is today is through technology, is the ability

28:15

to sell things on eBay, start

28:17

a business, do things like that. So I

28:19

don't really understand the mindset around that because

28:21

I've seen people and people

28:24

I can tell you stories of people who I know who

28:26

make millions of dollars a month online

28:28

and they do it and they're no smarter than you and

28:30

I. They just happen to have a different drive

28:33

and a different value system

28:35

that gets them to where they are. But they're using

28:37

all the tools they can media technology

28:41

in order to build their own brand and create

28:43

companies for themselves that are meaningful, lasting,

28:45

sustainable that they can pass down to their

28:47

kids. So it's something that I think. It's

28:50

it's it's it's a movement. I don't understand

28:52

because it's never been easier for anyone

28:55

to become an entrepreneur today. I

28:58

guess it's uh, what you're saying

29:00

is true. I guess what simultaneously is true is

29:02

that housing, education, healthcare,

29:05

food, stuff like that is more expensive. Well,

29:07

that's that's a different market force, and that's

29:09

totally that's contingent upon other things.

29:11

When you look at housing, that's largely contingent

29:14

upon interest rates. People don't like to talk about it,

29:16

what it is, right, and when you make mortgages

29:18

mortgages available to people, there's more money in the

29:20

market, you have more bidders, and then you have people bidding

29:22

up. And now we're starting to see some of these

29:24

people, especially the younger

29:27

ones, the youth, you call them under forty, have

29:29

buyers or be more s buying homes right now because

29:31

they thought it was something that you know, was going

29:33

to be a battion of American wealth. But that

29:36

hasn't been the case over the past decade. If

29:38

you think about it, it has been if you're if

29:40

you're you know, houses have gone up in value if

29:42

you sold them and you were able to liquidate that. But

29:44

the problem is is that where do you move to next

29:46

after you sell or move out, or you're gonna rent and

29:49

rent her up to as well. So there is

29:51

a housing crisis in this country. I think it's

29:53

coming to a it's going to come to a precepice

29:55

at some point. But it's it's something

29:57

that is it's it's a global phenomenon

29:59

to it's happening all around the world. And

30:02

America has always been a safe place to invest.

30:04

And before it used to be um

30:07

money, which just come over here just because it should be

30:09

here, because it's easier to park and stash money. And

30:11

if you know anything about Miami real estate, there was a

30:13

lot of cash deals that were going on, so it became unaffordable

30:16

in those areas, and then you had a lot of people who

30:18

are just buying real estate from overseas for a period

30:20

of time. And in New York City you saw that in condos

30:22

in the time Water Building where nobody really lived there,

30:24

they all had lights on. So today you're

30:26

starting to see something a little different that's running you

30:28

know, to the point is can Americans afford

30:30

to live in a house anymore? And that's really what the question

30:33

is. So this wanders

30:35

into politics, so we have to talk about politics.

30:38

So it sure of like, you know, if

30:40

you were the czar of America, what

30:43

would you do to incentivize, you

30:45

know, or solve these problems. Let's

30:47

talk specifically about the housing crisis, you

30:49

know, because this is something that eats away at all of us,

30:51

right, this is something we can't run away from,

30:54

right, We all need to live somewhere. It's

30:56

not but I also think that you have to There's

30:59

a lot of issues that play here. You have to remember, we have a lot

31:01

of inflation. Inflation is man made

31:03

um and you also have very low interest rates. And I

31:06

think if you were to if you were to move

31:08

interest rates just a little bit, I think you'd start

31:10

to see a normalization here. Not everybody

31:12

would lose their homes. I don't think anybody would

31:14

have to lose their homes because they've had so much inflation.

31:17

But I think you need to have somewhere where

31:19

the middle class can benefit from

31:22

fiscal policies that benefit them,

31:25

not just the top one thousandth

31:27

of the one percent. And of course everybody's

31:29

seen it across the board because when you lower

31:32

interest rates, you see that in the stock market. So

31:34

although the housing might have gone up. I think

31:36

the household wealth has gone up as a result

31:39

too, as a corollary, not just in

31:41

household equity, but also in stocks and bonds

31:43

that a lot of people own. Right now. There are people I know who

31:45

I never thought would have as much money as they do, showing

31:47

me a dinner a million dollar trading

31:49

account on each trade, Like, I never thought that these

31:52

guys would ever be able

31:54

to do that, and sure enough they are,

31:56

so there is a lot of money there. But I think for the lower

31:58

middle class of people who are not what I consider

32:00

to be the entrepreneur class in society

32:03

today, and those are the youth right there are the people

32:05

who are either entrepreneur and they have their own

32:07

businesses or they're going off into institutional America

32:09

doing something else. I think for the people

32:11

who are the non you know, the non

32:14

entrepreneurial class, they're gonna have difficult

32:16

times because at some point,

32:18

wages are just not going to be

32:21

able to keep up with things the way they

32:23

are right now. And that's where there's going to be a lot of problems.

32:25

How you rein that in could be any number

32:27

of ways. Healthcare that's

32:29

always been the third rail. But I think when

32:31

you start looking at housing, that's going to be much

32:33

more of an interesting play. I hate

32:35

to see the day where American

32:37

retirees can't afford to retire an American

32:40

and have to retire to like somewhere

32:42

else, you know, in South America. Any

32:44

of the commercials we see on TV to buy a second

32:46

house, and that could happen because the price

32:48

of living in New York, I'm sorry, in America could

32:51

hit levels where it's almost

32:53

unaffordable to keep property, and it's become

32:55

prohibitive in certain points. I think

32:57

for people even to catch up with it, and until

33:00

things change a little bit, it's better for people

33:02

to just wait and not get psychologically

33:04

involved in it because it's always dark.

33:06

As before, Dawn, I don't know

33:08

what's going to happen right now, and if you look at the

33:10

three trillion dollars that the government

33:12

is looking to push through and all sorts of other

33:15

I call an incendiary events fiscally,

33:18

you don't know where it's going to be. And maybe being

33:20

a renter is probably the best bet for most Americans

33:23

today because it gives them the mobility

33:25

to not be locked into a mortgage and

33:27

if they lose a job or should want to take a different

33:29

career path in life, would be much easier for them

33:31

to do that. Yeah, I was faced with that

33:33

because I just moved to a new market.

33:36

I moved to Los Angeles from Florida, and I sold

33:38

my house and I was looking

33:40

at just, you know, what I would have to borrow and

33:42

what I would have to buy, and basically there's no reason

33:45

for me to buy. And that's antithetical

33:47

to everything we push in our society, because we

33:49

think about permanence, we think about settling

33:52

down, and it's almost seemed silly as someone

33:54

who's from an immigrant family. I grew up in Miami.

33:56

We're Cuban, you know, we're all

33:58

into this notion of prompt But basically

34:01

what I'm looking at is throwing six

34:03

figures down the drain and then paying

34:05

more than I would have with rent, which

34:07

signals to me that maybe the market is

34:10

a bit too high. Right now, You're right, Yeah, I think

34:12

you just sit back and rent. I just think

34:14

you just sit back and rent because everything cyclical

34:16

some point. So

34:19

reason interest rates is touchy, though, right, because

34:22

I mean we have gotten so used

34:24

to, as you've mentioned in this interview

34:26

several times, low interest rates. The government's

34:28

addicted to debt, our corporate

34:30

sector is addicted to cheap money. And

34:33

really, if we were to raise interest rates, as

34:35

you say, inflation woul temper and things would normalize.

34:38

But there'll be a lot of pain from

34:40

doing that. Yeah,

34:42

it would. It's not going to be it's not going to be

34:44

easy. But what are the other

34:47

what are the other choices that we have right

34:49

now? I guess you can say go to war. That's

34:51

one way. I mean we've done that before, right, I mean, there's

34:54

other way. It's not a popular opinion

34:56

right now, but the that

34:59

is what's needed I think at this point to put the world

35:01

off of the debt bench. I'm not saying

35:03

it's going to happen. I'm not saying practical,

35:05

practicality or pragmatically it's going to

35:07

happen. Technically, if

35:09

it does happen, it's going to cause problems.

35:14

Leverage right now, everything is so leverage.

35:16

And you even said just twenty five basis

35:18

points, that's nothing. We used to do that

35:21

regularly, just to you know, I

35:23

mean that was the Greenspan days. Yeah,

35:26

in a pre financial crisis world,

35:28

things moving basis points was not even

35:30

big news. Yeah,

35:33

but then again, you have homes today that have increased

35:35

in value by fifties sometimes,

35:40

so we're back to where we were before, pre two thou

35:42

eight levels with the big mansions and the prices

35:44

and things being over bought and people

35:47

over paying for things, and you

35:49

know, sellers could you know, no concessions from

35:51

sellers and buyers writing love letters to the

35:53

sellers to buy homes. I mean, this is the buyer's market

35:55

we're in, I'm sorry, a seller's market that we're in right now,

35:58

and that's going to be very difficult to change age unless

36:01

people get buyers fatigued because they just are

36:03

tapped out there two over leveraged. Six months

36:05

after buying a house, they figured out, you know what, we

36:07

can't really afford to have the Christmas presents that we

36:09

want. Maybe this wasn't such a good idea

36:12

after all. Maybe it should be something where

36:14

we should rent this out, or maybe we should do something

36:16

different. And I think you'll see that happen because

36:18

I think a lot of people got into these homes

36:21

thinking that it was going to be a lifetime

36:24

um investment. But you have to think about it. Our

36:26

parents didn't refinance their homes as many

36:28

times as our generation did, right, especially

36:31

your parents that they were Cuban, they probably had no debt

36:33

and I'm just assuming that, um, most

36:35

of the girls don't have any debt. Okay, so most

36:38

immigrants don't have any debt, So you know, with

36:40

them, to them, that was a real stable of wealth because

36:42

for them that was wealth. But for the Americans,

36:44

the homes, do they really own it or they

36:46

really renting it? Think about it, if you're

36:48

buying it and you're using a you know, VH

36:50

a loan LTV

36:53

and you're coming in with fifty dollars on a

36:55

million dollar home, do you really

36:57

own it or do you really lease it? And really what's

36:59

the who's really winning that equation right

37:01

there? And I think to your point, I'd rather be

37:04

a renter in this market than being a buyer. So

37:06

are we ever going to raise interest rates? Or are

37:09

we stuck in a trap here during the Biden administration

37:11

where they're going to struggle to raise it? Well,

37:15

I mean, are we in a free market

37:17

right now? Are we not in a free market? Uh?

37:21

It seems like a free market to me, But you

37:23

know, okay, so I

37:25

mean it feels like but it

37:27

feels like at any given point, maybe

37:30

the current administration could raise rates just because they

37:32

feel like it, correct like they've done anything else, like

37:34

they've done because they feel like it. Yeah

37:37

they could. Yeah, I mean, the

37:39

FAT is supposedly an independent

37:41

institution, not that it seems to act that way

37:44

anymore. But no, it's not. I don't it's

37:46

not. I mean, but you and I both know it's not, because

37:48

that's what presidential candidates talk about for the

37:50

past two election cycles, is the FAT and interest

37:52

rates. And even Trump was a king of debt to self

37:55

proclaimed king of debt, and he added

37:57

four trillion or two hundred years worth of

37:59

debt to this country in eighteen months. So

38:02

anything, I don't think, Okay,

38:05

So I don't see And I used to say this

38:08

that I didn't see any and I'm forty six

38:10

years old, and I said this when I

38:12

was like thirty nine, you know, shooting

38:15

my mouth off, raising capital, you know, trying to

38:17

make a name for myself. And

38:19

I said that there was no catalyst for race to increase in

38:21

my lifetime. And people looked at me like,

38:23

like, I said, did he say, jelly? You know what? You

38:26

know, Like, what did he say?

38:28

And it was very awkward, but now people who

38:30

are starting to see it. But I think that the caveat

38:33

to that now is that this current administration,

38:35

you don't know what could happen. It's it doesn't seem to

38:37

be as stable as prior administrations,

38:40

which means that anything can

38:42

happen at any time, right, And

38:45

you know, we really don't know what's going to happen with the

38:47

Federal Reserve. We don't know what kind of pressures there are

38:49

with that. We don't know what's going to

38:51

happen with a three trillion dollar you know,

38:53

five trillion, whatever the number is today.

38:56

These are numbers I never even thought that we would

38:58

be thinking about even twenty years ago,

39:00

and now we're way over the brink of that. And

39:03

that's going to have consequences. So yeah,

39:05

there there, there is going to have There are going to be consequences.

39:08

I just don't know when the levy breaks, but it's

39:10

getting to the point now where it

39:13

has to rate to me, have to go up

39:15

in order to keep credibility for people to keep

39:17

buying bonds. And if that means taking

39:20

air out of the stock market and killing some

39:23

Middle American investors in their four own

39:25

case, they're gonna think so

39:27

be it right, because that's really what they

39:29

need to do. They need to keep the economy

39:31

going. America has always been a safe place.

39:33

Where else is all that money

39:36

going to go? We don't know yet. It's certainly

39:38

not all going to crypto yet. So

39:42

leaving you here, So the top

39:45

zero zero point one percent, are

39:48

they expecting interest rates to go up? Do

39:50

they see that? Is you still we started this with

39:52

the point zero zero one percent have a long

39:54

term view on being Yeah. They I think

39:56

at this they see it as being

39:59

you know, prepare for the worst, but hope for the best.

40:02

Hope for the best meaning interest rates do increase,

40:05

but prepare for the worst, meaning that they're not going to increase.

40:08

And so what they're doing is they're getting in the more like inflation

40:10

type things like fine art, you

40:12

know, like things like that. Sports teams

40:14

are trading because that's a huge store. If well, think about

40:16

at the end, the the NFL is a

40:19

I mean, think about the brand protection, the fierce

40:21

brand protection they have being an

40:23

owner of that as a statement assets,

40:25

so those have increased too, is

40:27

a beneficiary of interest rates. I was talking

40:29

to someone in my book who their steak

40:32

went from two fifty million, two fifty

40:34

million dollars too, I think over

40:37

a billion dollars in the last five years,

40:40

um because of the fact, maybe because of

40:42

interest rate sports, maybe sports betting.

40:44

But those are what the point zero zero

40:46

one percent are investing in, those types of assets

40:49

that are not traditional to you and me,

40:51

but to them are assets that

40:54

really not only define who they are, but

40:56

they also are tremendous um

40:58

you know, holders of value. So

41:02

well, that was a fascinating conversation. I

41:04

think I'd learned a thing or two from you. Sal thank

41:06

you more about you. So your book

41:08

is called Legacy Investing. How the

41:11

point zero zero one percent invest

41:14

Hopefully I don't mess up the zeros

41:16

that's you probably had to etch that into your

41:18

brain. So that's

41:21

the only math in the book, though I promised that's the only

41:24

bath that's in the book. Awesome, Well,

41:26

thank you so much for making the time for me. I look forward to

41:28

seeing you soon. Thank you, David, I appreciate

41:30

it. Thank you, Take care. This

41:36

was a really important conversation

41:39

if you want to understand where the world is going

41:41

and how you can really profit off of

41:43

what's coming next, which, of course

41:46

no one knows what comes next, but having the information

41:48

to read the tea leaves always helps.

41:51

If you're interested in our guests more.

41:53

He has a website, it's investing Legacy

41:55

dot com. Again. His name was Salvator

41:58

Salvatore Boushem meaning lish uh

42:01

you know, sell someone I know,

42:03

and he always gives me the inside scoop about

42:05

everything that's going on in the world. I'd

42:07

like to thank my team of producers, Rob

42:10

Scott Cheyenne and our executive producers

42:12

New Gingrich and Debbie Myers. I am, of

42:14

course your host, David Grosso. If you're

42:16

enjoying the show, please give us five stars and

42:18

leave us a review so that others can learn

42:20

what the show is all about. Follow The profit

42:23

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42:25

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