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Mindset & Money | Avoid The Middle of The Pack

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Hosted by
Mike Ayala

On this episode of the Investing For Freedom podcast, Mike talks about not getting caught in the middle of the pack when it comes to investing. Mike explains where the smart money goes and why investing tycoon Warren Buffet is getting out of the stock market right now.

“A lot of people are scared to pull their money out, but I’d be scared to leave it.”

HIGHLIGHTS:

0:00 – Intro
0:34 – While watching a nature documentary Mike noticed that only the ones in the front of the pack knew where they were going, the ones in the middle are the most vulnerable
1:41 – Mike relates a herd of animals to people on Wall Street
3:30 – Warren Buffet, one of the greatest investors ever, says don’t buy stock right now
4:26 – Buffet thinks the stock market is way over-valued
5:58 – Mike explains that we must “follow the smart gazelle’s who know where the prime feeding grounds and watering holes are”
6:28 – Take your money off the table and reallocate assets
7:18 – You could invest alongside people who already know what they’re doing, if you’re an accredited investor contact Mike at team@investingforfreedom.co
7:50 – Mike is launching a fund for buying HVAC service businesses, which you can also get involved in by emailing Mike
8:27 – Smart money always follows alternative assets
8:54 – The demand for affordable housing is as strong as it’s ever been, and Mike thinks it’s only going to get stronger

FULL TRANSCRIPTION:

Thank you for joining me on the investing for freedom podcast. Today, I’m going to talk to you about not getting caught in the middle of the pack.  I love watching shows about nature and you see these large herds of gazelles, in the African savanna and it’s majestic to watch. And they move in unison like a well-choreographed ballet. Really like watching these big herds of animals move around, it’s pretty impressive. I happened to be watching one of these shows this past weekend and I noticed something for the first time while I was watching. I noticed that only those out in the front knew where they were going, the others and especially the animals in the middle of the pack, they just kind of move along with it. And people, you’ve heard the saying that, there’s safety in numbers and that’s part of why they do that, I understand that. But those in the middle, they just kind of go along with wherever, they’re just kind of moving along blindly. And it also got me thinking the ones in the middle they’re the most vulnerable, because the ones out in the front, the sides, in the back, they’re in the best position to sense danger and adjust for things, predators, outside predators. They’ve had a head start on the ones in the middle when they’re making a run for it. The ones in the middle, were at a disadvantage from a visibility aspect. They just can’t see what’s going on, and so they just move wherever everybody else is moving. And after watching these packs of gazelles for a while, I realized that what I was seeing was no different than what’s happening on Wall Street. At the front of the pack you’ve got professional financial advisors, the brokers, the money managers leading the pack. They’re out in front, they see what’s happening and they can see the danger sooner than the individual investor. And they’re usually the first to save their own skins.

The ones at the end of the pack on Wall Street are the casual investors, the novices and newbies. And you see all this money that’s flowed into Robin Hood and all these other areas where people are just getting in at an all-time high. As the professionals in the front, they’re more sensitive to danger and they kind of bail at the first sign of danger. And it’s interesting, just invest in the stock market, keep your money there, invest for the long haul. I’d be interested to talk to a lot of money managers and see what they’re actually doing and whether they’re doing exactly what they’re advising their clients to do. And I’m not saying all of them, but generally speaking. These professionals, they don’t have other professionals guiding them blindly. They’ve got their ears to the ground, they know what’s going on.

The retail investor, us, the individuals, we’re caught in the middle of the pack, we’re relying on the professionals and we’re the last ones to sense danger. And we’re the ones who bear the brunt of the market disasters. What I’m here to say today is, don’t get caught in the middle of the pack. And if you’ve listened to me for any amount of time, you know that I’m not really heavily invested in the stock market anyway. There are ebbs and flows and there are certain times when I get in and get out of a certain type of asset, which I won’t go into right now, but I’m here to tell you, don’t get caught in the middle of the pack. So those with the thousand foot view are currently sounding the alarm on Wall Street, and they’re saying, run while you can. There’s been a lot of talk about this lately, but Warren buffet is probably one of the greatest investors ever, and he’s definitely got a pulse on Wall Street and he’s screaming right now – “don’t buy this stock market”. Warren Buffett’s also showing with his actions that now’s a bad time to invest in stocks. He’s cashing out a billions of Berkshire Hathaway’s own stock and holdings, and they’re buying back Berkshire stock. In other words, he’s sidelining his cash, he’s getting ready.

So what about those in the middle of the pack? So far, the retail investors are either not seeing the warning signs or they’re ignoring them. So why is Warren Buffet getting nervous? Obviously he thinks stocks are way overpriced. After falling more than 30% in March at the beginning of the Covid pandemic, the Dow has since recovered, and it’s recently topped at its previous high in February of this year, before the crisis hit. So why doesn’t Warren Buffet like this latest rally? I think he thinks that the stock market is way over valued. And it’s interesting, again you’ve been hearing a lot about this lately, but just him cashing out of some of the big banks and buying Barrett gold. That’s a big indicator of where he thinks that the economy is going.

He relies on one particular indicator to gauge market value and he calls it the best single measure of where evaluation stand at any given moment. The gauge takes the combined market capitalization of publicly traded stocks worldwide and divides it by global gross domestic product. I am quoting this out of a market insider, a reading of more than a hundred percent suggests that the global stock market is overvalued relative to the world economy. This indicator has recently soared towards an all-time high for both the US and the world. Buffet’s indicator isn’t the only gauge telling us that the stock market is on a sugar high, and sure to come crashing down. The Dow’s price to earnings PE ratio is also sounding the alarms. The PE ratio measures the average of the Dow company stock prices compared to their earnings. A high ratio indicates stock prices out of touch with underlying economic fundamentals. So with the Dow currently trading at a PE ratio of around 28, nearly double the historic average of 15 stocks are clearly overvalued and bound to come crashing back down to earth.

So Warren buffet is clearly reallocating away from the stock market.

What I’m saying is don’t get caught in the middle of the pack and wait until it’s too late to get out of the way of danger. Warren Buffett’s already moving out a lot of this stuff. So you might be asking, where do I go once I get out of the Wall Street danger? Follow the smart Gazelles who know where the prime feeding grounds are and the watering holes are. Follow the smart money, the smart money, what are they doing right now? Well, they’ve broken away from the pack a long time ago, and I’ve been talking about some of this for six months or more. They were obviously prepared for a current economic turmoil because they’ve started pulling out of the stock market a long time ago. A lot of investors would say, well, you know, what do I do? Or we’re scared. And maybe, you’ve already experienced some losses in certain areas or whatever. Take that money off the table and reallocate assets. And this is what they do. They’ve reallocated the assets they pulled from the stock market to assets that had long favored assets like, things that don’t cause you to rely on your job for income. So, what could that be? That could be real estate. I’ve been talking about investing in businesses. It’s a great time to buy businesses. And a lot of investors are scared to get outside of the stock market because they don’t know. You might be saying, well, Mike, I don’t want to own my own business. Mike, I don’t to go out and buy a mobile home parks. Mike, I don’t think it’s a great time to buy rental property. Cause I’m not really skilled in that area. Okay. I understand that. If you’re not wanting to do that, as I’ve said all along, I mean, you could hire a coach, you could go through a coaching program, whatever, or invest alongside of people that already know what they’re doing. And Four Peaks Capital Partners, we obviously have some opportunities for accredited investors. But there are people and companies out there where you don’t have to be accredited. So I guess the thing that I would throw out to you, if you’re an accredited investor and you’re interested in investing in real estate and not doing it on your own, just shoot me an email at team@investingforfreedom.co and just in the subject line, put Four Peaks investment opportunities. And I’ll get back to you with investment opportunities that we have.

We’re also launching a fund around buying HVAC service businesses. We’ve been working on this for a few years. We’ve launched a company called Velocity Venture Partners, and we’ve got a fund that we’ll be launching in the next few weeks. And so if you’re interested in investing in that same thing, just shoot me an email at team@investingforfreedom.co and in the subject line, put service company. And I’ll get you some information on that if you’re an accredited investor, you’ve got to be accredited in order to get into one of our funds. But again, if you search around out there, there are some funds out there that you don’t require you to be an accredited investor. If you don’t know what that means, again just reach out to me, shoot me an email. But here’s the thing, that’s why the smart money always follows alternative assets, especially the ones that produce consistent cash flow and they’re backed by tangible assets. And usually this also provides significant tax savings. That’s why the smart money is drawn to commercial real estate. Manufactured housing like we’re in.  It’s fairing very well through Covid-19, affordable housing is probably going to do even better after this than it was before. Because the demand for affordable housing is as strong as it’s ever been. And I think it’s just going to get higher as we start seeing the mortgage foreclosures, etc. kind of waved through the economy. So that’s where the smart money goes, it goes into assets like multifamily, affordable housing. And so I’m just here to say, get out from the middle of the pack. We need to avoid the Wall Street danger now and look to alternative assets that could provide safe, steady stream of cash flow and reliable appreciation all backed by hard asset. And again with significant tax benefits. So, I know it’s scary, I know the stock market is at an all-time high. Mike, why would I get out right now? Just be careful what bobbleheads you’re listening to. The smart money is definitely not doubling down on the stock market right now. It’s going into assets that are going to provide cash flow and have a safe, steady stream of income like I said. So again, any questions around any of this, I’m not a stock market guru obviously, but if you want to talk about investing in hard assets, real estate want any more information on any of our funds, just reach out to me team@investingforfreedom.co, just shoot me an email. We can talk about whatever you want to. So I hope this helps, I know it’s scary. I know it’s scary time to pull the money out of the stock market, but there’s so many things you could do with it, and you’ve  got to get educated or you’ve got to invest with somebody that knows what they’re doing. So that’s really the bottom line. A lot of people are scared to pull their money out, but I’d be scared to leave it. So you should really think about getting out from the middle of the pack, have a great week.

 

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