Kevin meets Kevin O'Leary | Inflation, Housing, & Market Crashes.

hey everyone welcome back to the meet kevin show today meet kevin meets kevin o'leary investor entrepreneur of course mr wonderful i am super excited to ask a ton of questions about what the heck is going on in this crazy market and world please welcome kevin o'leary hey kevin how's it going great to be here kevin i love this kevin squared thing it's great i love that absolutely so kevin i want to get right into it we had cpi data this morning it wasn't as bad as expected what's your take on inflation is the fed going to lose control are they going to maintain control what's your take i think the fed's been pretty clear they are focused pedal to the metal and keeping rates at basically zero until they can get these last nine million people replaced in the economy redeployed and and i think everybody's beginning to realize it's happening very quickly that the economy that we're trying to stimulate back doesn't resemble 2019 or 2020 anymore there's been this incredible digitization that's occurred during the pandemic where now the entire economy and and purchase preferences as well with the individuals has changed it's very much direct to consumer all kinds of new business models have emerged retailers taking a back seat in terms of how products are sold to people now all kinds of fundamental changes going on in business travel what's happening in terms of expenditures in the s p 500 companies right down to small you know montpar businesses and we and we don't yet know what it looks like until we get out of this pandemic so as far as the fed's concerned they're focusing on all the people that lost their jobs for example in business travel and airlines that's 10 of the employed people somehow involved in that chain in america all the people that lost their jobs in movie theaters that were cineplexes nobody wants to go back to anymore all the people that lost their jobs in restaurants and food services businesses have to be redeployed by the new digital economy whatever that looks like and that's why you're going to have a current focus on that for at least the rest of the year and that's extremely constructive for stocks i mean we've never seen anything like this i have never ever seen data like what i'm seeing now in q4 of this year we may achieve past the nine percent gdp growth you haven't seen that since the 1950s kali yeah it's absolutely incredible just the growth of projections i believe they're they're thinking if we add together 2021 and 2022 we could be growing like we were growing in o5 which a lot of folks don't want to hear o5 because what came after that which begs the question is it possible that if the fed keeps uh keeps the fed funds rate so low for so long that we end up letting the inflation genie out of the bottle i mean i've heard you yourself say hey we we shouldn't be spending all this money yeah i think a lot of the expenditures wasted that's because it's such a blunt instrument the 1.9 trillion dollar package that already has been legislated i would say 50 of that will be wasted the infrastructure package is more interested interesting but we don't yet know what that's going to look like and it may have the detrimental impact of raising corporate taxes again which makes the u.s uncompetitive the idea that yellen can run around the world asking for a standard minimum corporate tax is a joke that's never going to happen the asian markets which are very very tax efficient in terms of low taxes are killing us in growth they're just really getting competitive and they have no interest in raising corporate taxes you know to kill that golden goose so we will again if this tax proposal is put through be the highest corporate tax jurisdiction in the world in terms of the g7 and you'll start to see all the inversions starting again companies making moves to get out of the u.s so i'm not sure they're going to be able to do that easily so that's a big question mark regarding inflation you have a bellwether every day you simply watch the 10-year the 10-year bond will not be competition for equities until it has a three handle in front of it which is a long time from now or what about 1.6 so you're going to stay the course on stocks because that stocks actually do well in inflationary times they tend to actually have pricing power and corporations do very very well when inflation comes into the economy it's runaway inflation you don't want you don't want to turn america into venezuela or cuba or something like that but i think we're a long way from that right now long way from runaway inflation that's and that's a fear that a lot of folks have is that we might see that kind of hyperinflation that we're going to that that essentially the country is debasing the dollar and and that we can't trust the dollar anymore and that's maybe why you see a run into cryptocurrencies is that not something that you believe that the dollar could could lose its value or potentially even collapse or lose its status as uh the world's uh you know reserve currency well there's some speculation you saw a lot of pundits talking about this this week that china was really trying to promote cryptocurrencies as a way to getting out of under the mat of the dollar because the truth is the chinese economy is based on the us dollar in the sense that everything outside of their economy settles in usd nobody wants to take the chinese one and hold that long term they have no idea what the policy makers are going to do with it so if you want to do business out of hong kong or out of china you ask to settle in u.s dollars and that's really what the chinese are frustrated about what they prefer to see is a cryptocurrency perhaps one they bring on them on themselves uh which i would never take into custody because the chinese could simply turn it off if they weren't happy with you or something you said about them or bitcoin and that's why bitcoin is at a new high today no government controls it but it does have its own issues emerging now so we've got a very interesting time going on here we're basically and i think the best way to put it in an economic war with china china doesn't play by the rules doesn't give us access to their courts does not give us access to the middle class they use american courts to litigate their own ip domestically and sell tons of products into the largest economy on the earth currently which is the us economy and until that playing field is leveled we're going to have tremendous tension with that regime this morning came out and said that they want to play nice with biden in so many words it sounds like you don't believe them no i don't i just look at the last ten administrations and how crafty they are in making nice sounding nice and then keeping everything the same as before the only thing that chinese understand and respect is the stick that's what they understand and so you can look and back for the last five administrations and realize until the last one where they really put the pressure on them nothing was changing the idea that you can form a cohort of american and european economies to work together to bring the chinese a bit to bay is not going to happen because in europe basically 25 of most of those economies is tied to china so while they'll give lip service they don't want in any way taint their relationship with a quarter of their gdp that's why it never worked the only time now is to go hard core against china and say look we understand we're in a competition we understand the left the loving you know the the playing field is not level so let's let's level it and the way to level it is to say let's let's make it level right now what would that mean delist all the chinese stocks do not give them access to our courts we don't get access to their courts make it the same for both then build it back up when the chinese feel the pressure of that stick they'll understand they have to somehow raise the bar now that sounds torturous and difficult but it has to be done it has to be done it makes no sense to me that an american manufacturer has to give up their ip basically have it stolen that hasn't changed you've heard a lot about it from the last administration but it's the same the chinese people are not at fault it's the policy of the chinese government that is causing these tensions and it's really time to address it now now's the time because if they become bigger which they will in the next 20 years you won't have that leverage anymore remember the stick is what they appreciate the stick is what they want the stick is what will work the stick is what they want i mean the stick is generally associated with sanctions i i don't believe that china wants sanctions but it sounds like that's what you're advocating no i'm beyond sanctions i want to take them right out of the financial system in north america they don't get access to it it's that so alibaba neo xbank d-list sure you know the economy the economy is so large and there's so many other places to deploy capital in those markets it'll find a way or if you insist you can simply go buy those shares on the hong kong exchange or whatever exchange it is but it'll make it much harder for compliant institutions in the us to do business with them and also you know frankly that stick will really put some pressure on them to solve the problem my assumption is you have a few rough quarters when you do this you implement it but then we get to what we want a really collateral discussion with them about leveling the playing field america can compete china can compete just level the playing field and let the competition begin but don't keep it in this unbalanced football field where it's so unfair for other economies that don't get access to the chinese economy if they want to play with the big boys they've got to play with a level playing field and if it takes a little pressure to get them there that's okay the stick works now what do you think about uh tesla tesla's one of the first manufacturers in in china u.s manufacturers in china many ownership uh in in their company uh to china do you think that this maybe sets a precedent for maybe there is a nice way to play with china maybe we just got to do the elon musk way yeah absolutely i mean that is the right direction to go into partnership to actually have access to their middle class and sell cars to them why not elon musk is a maverick in terms of what he does he doesn't play by the rules obviously but he's actually a good way a good designer of how this relationship should work if american companies if boeing wanted to go to china and build planes there they shouldn't have to give up control of their ip to do that and that would help the that would help the chinese economy if you know think about all the technology they can actually provide for that growing economy and in partnership way i don't know why they're not discussing that but that's the kind of potential that we could have across all kinds of different technologies and also when it comes to pandemics you really have to ask yourself why do so many of these originate in china i'm not pointing fingers i'm just saying if we're more cooperative on biotechnology we could stop them in their tracks and save billions of dollars millions of lives and be cooperative that basis again the stick is the way to go do you believe that the biden administration will change anything over the next four to eight years i think the bite administration is uh focusing on what they said in terms of their mandate to get every american vaccinated that wants the vaccine and we're in the throes of that we're probably in the sixth inning they've done very well in their in the execution of a bit of a setback today on the j j vaccine but that doesn't mean we can't keep going we've still got two other alternatives american ingenuity and technology brought these new medicines out of moderna and pfizer and that's tremendous but at the end of the day that's the focus of the administration when that's over with then the infrastructure package comes and somewhere along the line he's going to have to address china now i'm glad to see he did not take off the tariffs that were put on and hard won from the last administration like them or not like them the policy was very very good for the american economy to start pushing back on china but i think he can use that and continue to lever it but you know at the end of the day the chinese are very very good at playing wantedness in this administration off against the other because their leadership is for life that's not how the american economy works you get these four to eight year cycles and they've learned how to play that ball they'll immediately say let's have a meeting let's get together let's talk about our future together as friends and nothing will happen you gotta go to that meeting with a stick wow wow uh so i want to go back to something you mentioned earlier was a this digitization of our economy there are a lot of folks very excited about investing in recovery stocks which obviously have done phenomenally since the election uh the recovery of even the macy's the nordstroms uh and uh the airlines what's your take i mean is this a sector that you stay away from is it a value trap like kathy woods says what's your take no these are not uh stay-at-home stocks anymore these are work from anywhere stocks and so what you're starting to see happen up and down the s p 500 is that companies are realizing people that work in accounting compliance or logistics who used to work in cubicles at hq do not want to return to those cubicles anymore and that represents about 15 of the workforce they're asking for more flexibility in lifestyle maybe they're raising elderly parents maybe they're raising children they don't want to do the commute but whatever reason it is we now have proven technology that allows them to work efficiently and productively from their homes and so you're going to start to see these stocks become the bellwethers of the new generation of digitization they're the ones that have allowed a global you know move to e-commerce and it's not just domestically zoom for example crowdstrike docusign adobe microsoft licenses shopify these are all the tools that are used to digitize america whether you're nike or whether you're a small business around the corner and companies like facebook allow for geo-locked advertising there's so much of this technology that was put to work over the last year that's proven to be very very productive and in a way will change the cost structure of the american economy to deposit i'll give you an example you don't have to fly to bentonville anymore and spend two days to meet the buyer at walmart the world's largest retailer you can do it on a zoom call get 18 minutes and the buyer themselves are 20 or 30 more productive and you save thousands of dollars in business travel now it's not good news for the airlines because even though they're coming back it's all basically vacation tickets so 248 dollars was the average ticket last week including the return travel that means everybody's going to disneyland in a big tube that's a very crappy business they won't make any money and as a result of that those airlines over the next two years probably a couple of them have to go bankrupt and consolidate capacity because business travel is permanently impaired by maybe 15-20 percent but there's nothing wrong with airlines going bankrupt they're very good at it they do it every 10 years and they reduce capacity and that's what the fed is worried about all the people are displaced they're highly trained employees we've got to find a way to redeploy them maybe it's going to be cloud kitchens maybe it's going to be pick and pack storage maybe it's going to be all kinds of new digital reasons to exist in the new digitized america 2.0 but we've got to find them jobs wow wow so uh of of airlines that could go bankrupt any particular ones you look at or you're looking at the most highly leveraged ones or do you think a company like spirit could be the one that wins because they don't cater so much to business and they cater more towards the disneyland traveler well all the balance sheets are upside down and the combination of loans from the government and debt they went and raised on their own in the open markets the fed kept the debt markets liquid so the deterioration of even one of the strongest companies in the airline industry boeing that balance sheet has been decimated there's billions and billions and billions of dollars of debt on it now i'm not saying boeing will suffer the slings and hours of the operators because they're one of the companies in the world that makes airlines and we do need them but the airline industry itself is gone through a massive change really it's just a bus now a bus to move people around to their vacation destinations the business travel component while everybody's so up you know optimistic about it i don't see it coming back a lot of it will but not a hundred percent and that fifteen twenty percent was where all the profit was when you paid you know five thousand dollars for a trip to europe on a business class or first-class seat nobody needs to do that anymore so you go there for a vacation and you do it for 999 dollars the airline makes virtually no money doing that they're just filling up tubes it's a miserable business but that's okay you know you've got 11 sectors on the economy you don't have to focus on the losers you can focus on the winners and the winners sound like you had mentioned sound like the adobes the facebooks the microsoft's huh yeah i think technology is a good bet and will be it's got volatility but people say to me oh it's over for the you know the zoom stocks and the shopifys no it isn't it's in they're in their second inning it's hilarious if you look at the volatility of uh of amazon over the last 20 years you would have never owned it it's so volatile some years it goes down 38 but in the long run it's created a trillion dollars worth of value for shareholders same thing is going to happen to these these economies and these stocks that are going to provide digitization another sector which i really believe in now is healthcare i think we're going to domesticate all of drug manufacturing hazmat materials medical devices to puerto rico to canada to mexico to north america so that we're not be held into the chinese when it comes to a pandemic because we don't know what covet 20 21 and 22 are or when they're going to come but they will come there's no question about it we need to be ready for that and obviously use our technology to protect us in a way we hadn't thought of before so that's another one and the consumer whenever you tr you sprinkle 1.9 trillion free dollars out of a helicopter just throw it down at people for free the consumer spends it so i think they're going to be very very strong in the next year year and a half so i like those sectors over let's say energy or airlines or anything else frankly got it now biden you know of localizing production that's a big priority of biden for example even with auto manufacturing wants to use american unions to to build vehicles in america what's the possibility though that using american labor just ends up shooting prices sky-high and then people have to default to chinese or japanese-made vehicles yeah that is a big problem biden is in a bit of a pressure squeeze on that one you know it's great um the only way to make the american economy uh self-reliance self-reliant sustainable long-term is to make the economy competitive globally so that all people that want to invest in corporations from all countries and all jurisdictions come to america like they do to vietnam like they did to china like they do to asia and singapore because those economies are very productive very low taxes extremely high growth and have very good domestic markets as well so the problem he's got is you know the rhetoric from the left side of his party to tax the rich and take all the money away from people and d you know disincentivize entrepreneurship in america is not a good model because that's not going to get people saying gee i can't wait to invest in america the highest corporate tax rate in the world that's just not going to happen and so i think that debate even within his own party is going to be very tough now what happens because i'm a bit of a policy wonk midterm elections are a bit of a problem for biden because every incumbent every incumbent regardless of party loses seats in in the midterm it just happens that way so he's on this really delicate razor wire balance given that he's sort of got you know the ability to do this if every one of his party members agrees and that means he has to get it jammed through in less than 24 months i don't think it's gonna be that easy i think it's going to be hard fought i think he's going to lose seats he probably knows it so it's better to come in with a more moderate middle of the road strategy and leave the massive tax hikes um for afterwards you know at some point after the economy is running at full throttle back to unemployment under four percent like it was part of the pandemic and i think that's a ways off so i think you've got a really interesting political scenario coming but if all of a sudden he jams up corporate tax rate to global highs the economy just sputters out that's what will happen wow tell me about this so you actually think despite us stimulating as much as we are just that corporate tax increase could be enough to to sputter out the economy could you define that a little bit what are you saying sure it's a very simple equation you're pouring free money out of the sky from a helicopter into into anywhere you can stuff it okay but then you're raising taxes so you're taking it back right away before it doesn't have a chance to have any effect whatsoever you're asking people to pay more tax and corporations to pay more tax what was the point of the free money then i mean that made no sense you're basically letting it fall out of the helicopter and immediately the tax man grabs it it's before it does anything so that that really makes you can't suck and blow at the same time it doesn't make any sense and that's really the bottom line that's the problem he's got because corporations uh don't have feelings they don't have emotions they can move overnight people tend not to want to leave their families so maybe the u.s has to start considering what the europeans did a value-added tax that taxes usage but doesn't tax necessarily corporations frankly in some ways the nordic model works better in the swiss model where there's basically no corporate tax they just tax people and so much competition for capital goes into those countries to set up businesses to service you know europe and asia from countries with no corp or low corporate taxes and the people pay the vit tax i think there'll be a lot of dialogue about this but just raising corporate taxes is going to be very detrimental yeah it does sound like in order for biden to even get his 50 votes it does sound like he'll probably have to compromise down to like a 24 or 25 percent if if he ends up going for that corporate tax bush do you think if he goes for it there'll be some kind of compromise or where's your take on that i think he's a good president for the times in the sense that he seems to want to be more of the i mean america could use a boring president for a while it was it was just too exciting with the last administration but i'm not i'm not but i'm not being critical their policies were right on and so you know i think biden now is trying to be the oldest the old style um leader where he where he believes in compromise on both sides now i don't think the country is in that mood anymore you've got some very very divisive policies on either side of the aisle it may be very hard to get that love and feeling back um and i'm not sure it'll happen you'll get some indication of it in the midterms which aren't that far away but there's a lot of seats up for grab there's a lot of um aggressive tone in both parties and you know in biden's case he's got to try and stay a moderate even though he's got some very very aggressive almost socialist uh pressures coming at him and um the same for the republicans who have some extreme right-wing views that they've got to somehow consolidate so i think politics is getting really interesting i want to go back to something you mentioned about airlines and hiring people and getting back to this max employment i got to thinking what happens when you get even the tech firms who have laid off tens of thousands of individuals during the pandemic what happens when they go to rehire but let's say they've laid off 20 000 they go back and just rehire the best 5 000 right and now like you mentioned they don't have to travel anymore so we need less people traveling we need less sales people because one person can do the work on zoom that five people did before in sales what happens to all of those other people and is that is that just really good for the tech companies for the bottom line and what happens to all those people where do they go it's a great question but it goes back to the old analogy that's used so often everybody thought television would destroy radio and radio is bigger than it's ever been and so what happens is the economy evolves and creates new jobs and i'll give you an example well i do a lot of guest lecturing to graduating cohorts of engineers because generally a third of those classes i don't care whether you're mechanical robotic chemical whatever are going to start companies and i like to be there for them as an investor and what i find that's so intriguing is i used to say look if you're going to get yourself 180 000 in debt in college for a graduate and postgraduate degree pick a discipline that's going to let you pay it back and the top three are engineering engineering and engineering and if you have you have any time at night take some engineering classes that's what i used to say i don't see that anymore because in my own portfolio of over 35 companies i look at my number one growth expense in the last 18 months has been hiring artists writers wow videographers animators all of the people that have digitized the websites of all of these different companies and they're they used to be dirt cheap there are no starving artists anymore they're not starving they're getting salaries of over a quarter million dollars a year if they're any good because they can tell the story and digitize the service or product online and entice customer acquisition and so there's a whole new dynamic to the economy that we never could foresee so i'm not worried about good good employees will get hired in a growing economy you just don't want to kill the golden goose and the way you kill it is you over tax it wow so so what do you say to people who maybe have lost their jobs uh is is it a matter of retooling and re-skilling is it a matter of of uh waiting for that unemployment to run out what do you say to folks it really makes a lot of sense to go back to what you were good at when you were younger let's say you're in your 40s you've lost your job if you actually were a good writer a photographer a videographer editor those are skills that are highly valued by this digital economy and so it's a retraining exercise there's lots of online courses that show you actually how to use fake facebook instagram um you know linkedin so you can become an added value to a company that's trying to use those platforms and so i always say to people look if you if you don't know how to use social media train it train on it so that you can show others how to do it people will pay you to help them build up traffic on their website this sounds like such a basic thesis but it's so true today yeah yeah what's your take on universal basic income is that's going to be something that we need as sort of this wealth gap continues to widen i don't think it works i think we have a form of it right now with stimulus checks flying in from the sky even to people that are employed that really never made any sense to me it would have been better to give those dollars to people that were actually unemployed for longer while they found new work but you know that's a very blunt instrument that's just another form of taxation i don't think it works i think a social net can be there's different models you can see what uh the nordics do the swiss um they they do provide a social net uh for people that are you know poor people in the lower class so they don't suffer that's very important but the idea that uh you have it's almost worth reading ann rand you know atlas shrugged where you get this idea of can you get half the economy would pay for the other half in perpetuity probably not um and that's you know there's a lot i haven't found a country where that's been successful long term you know the soviet union collapsed cuba i wouldn't want to live there venezuela no thanks and they attempt that kind of thing it just doesn't work wow wow gotcha yeah so in on the note of the wealth gap there's a big uh crisis essentially happening in real estate where real estate is becoming increasingly unaffordable and it seems to be the competition of the haves versus the haves and hots uh i know you have some uh you know pretty pretty uh strong arguments about commercial real estate and transformations there i want to start though with residential what do people do do people buy a house today do they or do they just invest in stocks and forget about real estate well real estate falls into two large asset classes and i've been participating in both for a long time commercial real estate is nowhere near as safe and buoyant as residential obviously if you've got companies saying that 15 of their staff are going to work from home that favors residential real estate way over commercial because if you had a office tower in boston and all of a sudden i'm seeing this happen every day my lawyers are are going to be cutting out 33 of their floor space and you know out of their out of their corporate headquarters because a lot of their staff don't want to return to the office anymore and so that puts pressure on the value of aaa office so let's say it was trading at a 4.2 cap which is basically 4.2 percent yield um i think uh by the time this is all over it'll be trading at a six percent cap a six percent yield because there's going to be it'll be harder to find tenants that want to take long-term leases sure and that's a lot of loss of value so i've reduced my exposure to commercial real estate from 31 percent of my portfolio down to eight and i've increased my holdings in residential because i see for the next two years a continued buoyancy in in housing pricing the ability to buy homes and rent them most people in america want to live and work at home if they could and you know it's not 24 7 there but they'd like the ability to stay home a few days a week and work you know and maybe go into the office once a week or once a month or once a quarter whatever it is that flexibility is what's pushing the value of residential real estate up i do not see that trend ending it also gives new geographies you know if you don't want to live in san francisco and you want to live in seattle but your main job is in san francisco you can do that now there's ways to do that and you know maybe you travel quarterly just to hq or you know basically that kind of flexibility and even my own organization um my holding company most of my staff have indicated they have no interest in going back nine to five to the office anymore we've proven over the last year we can work independently and very successfully and we're making that change now you went from 31 commercial to 8 because you and you see cap rates going up so the risk premiums going up why not go to zero well unfortunately real estate has one attribute that has never changed it's relatively illiquid people it's not like a stock you can buy and sell during the day real estate has very large transaction costs associated with it sometimes the building may be in construction and has not been stabilized for example that's one reason you wouldn't sell it because it's a diminished value there's all kinds of reasons it's hard to get to zero because there just isn't enough liquidity and also different asset classes have to be treated differently i mean a hotel in boston may be more valuable than an office space because there's not a lot of hotel square footage right now there so i look at it that way i've got a great team that manages my real estate portfolio we've determined that you know we're at a point now where there's no there's no reason to sell the last eight percent we're going to wait 36 months and see what happens uh but that's a significant reduction in exposure and now i have a very very large cash position to redeploy um we try on on average six percent from our operating company a year so that i'm really challenged i can't use fixed income to get six percent without taking an inordinate risk so it really favors the work i'm doing in equities and finding companies private companies where i can take significant positions in um and that are cash flow positive and that's you know why i do what i do making six percent you're in you're out may sound easy but it's not right right absolutely now what do you believe that uh there's gonna be an opportunity to rotate back into commercial do you want to be a part of that i've heard you talk about maybe a transition of shopping malls into uh i think you mentioned this rumor that shopping malls might turn into offices because people don't want to go into elevators anymore it's not a rumor that's starting to happen they have ample parking um you are on a single floor and you can set up offices in 1200 square foot shops that you know used to be retail i'll give you an example of my thinking on it let's think about one of my big customers for my for my consumer goods companies bed bath and beyond they closed 200 stores last year 200 and they were so the anchor tenants of many many b grade malls across america they have no interest in using those again because their online direct consumer sales are up 76 yeah so their business remains intact they curate consumer goods oils scents candles sheets towels you name it it's a very successful model and brand in that respect but they don't need those stores and so what's going to happen to those stores the most likely outcome would be let's say they traded at a five cap before when they were fully utilized fully stabilized and the tenant was bed bath and beyond now they're empty maybe somebody comes along and says for two million dollars a building i can turn it into a cloud kitchen for all of the local food delivery services or i can turn it into a climate controlled pick and pack facility for an online retailer or i can turn it into residential condos but it's going to require capital and so the cap rate probably goes up to seven seven and a half percent while plans to to redeploy capital to switch it out to something profitable again that's a time when i probably get involved so i might go to the debt side provide construction financing or modification financing i think i could probably get nine ten percent for that maybe maybe it's less we'll have to see how much demand there is or i may um you know uh decide to take an equity position in a company that does that kind of conversion who knows but those are the kind of things my team is looking at now makes sense it also sounds like you probably wouldn't want to be uh spearheading any of those kind of renovations dealing with the cities huh no no i think what's going to occur is because a climate controlled pick and pack facility or storage facility uh employs very few people and it's highly profitable but it doesn't employ anybody you can run a giant facility of climate control storage with 12 people instead of 1200 and so i think the politicians there will not favor that kind of conversion and not allow building permits so i think it's a very long drawn out arduous difficult conversion cycle and frankly i find many other opportunities more interesting right now than going through all that because i've been involved in that business for decades and so you know construction financing permits local politicians yadda yadda at some point you tire from that and you want something that's a little more productive yeah no kidding uh gamestop this is uh something very similar what are your what are your thoughts on gamestop is is it going to a thousand or is it going to zero well you know gamestop went through as everybody knows a really interesting um iteration it its brand as a result of what occurred over the last five months is worldwide the ip of gamestop the actual brand itself has way more value today than it had five months ago before it became in every you know became part of every headline around the world day after day as you know the vigilantes or the reddit crowd or the robin hood crowd whatever you want to call it the democratization of stock trading um so you recently saw they're going out to raise capital the analogy is um netflix i guess saw the writing on the wall when they were mailing cds to everybody and said we're going to digitize this and they had a brand maybe gamestop can do the same thing maybe they can provide added services they've got all these retail locations maybe they can have you know classes in a setting where people want to spend time with each other in those stores 1200 square feet 1700 of them i don't know what the outcome will be but if i was short that stock right now i'd be worried and i'm not sure okay all right i think it's going to get a second uh kick at life i think there's some very smart people probably see what i see in the ip being worth something and this whole social you know constituency supporting it the pricing of the stock is kind of irrelevant at this point but if you're short if you're short you're really hurting yeah yeah no kidding no kidding yeah just because the long run hasn't really been priced in yet because we don't really know uh and the upside is uh is is limitless so um i want to go back for a moment to somebody just starting out uh let's say they've got 20 30 000 do they try to buy a one-bedroom house or condo or do they go all in on index funds or ishares or uh you know do they just yolo it all into tesla what's what's your take there well i have a rule that my mother taught me decades ago that served me well in all the volatility i experienced as an investor from my early 20s on a simple rule let's talk about the market first never let one stock become more than five percent of your portfolio and never let a sector of which there are 11 sectors in the american economy like you know real estate's now a sector technology uh healthcare they're all sectors never let the sector become more than 20 of the portfolio and that gives you diversification which is very important to to be able to uh survive volatility in a market when you make a big bet and you let tesla become 80 percent of your net worth and should show it correct um a lot of people learned that the hard way in the dot com era you know they had stocks like pets.com that went to zero that kind of thing but if you have diversification um you don't have that problem because the likelihood that everything goes to zero is lower much lower regarding um housing you have to understand something about housing you really can't buy a house for twenty five thousand dollars so what it means is that you're going to take on debt and so mortgages are most people's largest um obligation in their lives and their largest asset is their home there are periods in time when prices of housing correct and you're under water in other words you don't have any equity anymore because you owe more than the house is worth and so sometimes the best thing to do is to say i'm going to be a renter until i can actually afford a mortgage even if the market corrects and that may be a better discipline because the truth about retirement if you have the average salary in america 56 000 it might be better to simply put aside a hundred dollars a week put it into an etf and index etf the market has given over a long over 100 period 100 year period somewhere between six and a half and nine percent return on average long term some years are down some years are up there is volatility but the point is at the end of the day that has ended up being the way you retire with over a million and a half dollars but you have to have the discipline of putting aside a hundred dollars a week and there's so many different apps you can use to do this now it's not like it's hard to do what's hard to do is change your behavior because most people spend everything they make and more and then they end up in debt but it would really be you got to remember something when you put 100 into an index fund that's in your name that money's for you it's not for anybody else you're building your own future which i think is a good way to look at it yeah well a big thing that we hear a lot about right now is this having an emergency fund having that six month emergency fund something that i found is a lot of people they'll save up that cash they'll build up that six-month emergency fund but before you know it vacation time comes up and oh we'll just borrow from the emergency fund and we'll just repay it because i mean whatever like why not you know and then what happens is nobody ends up ever investing uh what's i mean is a hundred bucks a week gonna do it it's the minimum if you can put 400 bucks aside which is actually doable with your average salary of 56 000 it's the minimum obviously you should do more a simple way to look at it is take 10 of your paycheck and put that away and never hit it do not touch it obviously i understand medical emergencies and everything else but the truth is when you take money and burn it on a vacation or buy some useless piece of crap you're never going to use which many people are guilty of including me you've actually you've killed off your future that money's not working for you anymore so do you really need another pair of jeans another pair of shoes just look at your closet of all the crap you don't wear that's all money you wasted the truth is most people wear you know maybe a dozen different things they have even though they have 30 of something that's what my mother taught me she said buy few things but buy really good things when you buy them that last and i that's the philosophy i have in everything from watches to clothing wow wow now i want to ask you a specific question on real estate there uh one of the ways i started well the way i started was uh i bought a house putting three uh three and a half percent down as a fixer-upper uh my girlfriend at the time she put uh half of the down payment in uh and i put down half so each put down about uh six seven thousand dollars plus some closing costs and that uh and one of the things that we found that was so beautiful about that was we were now able to buy a 300 000 asset that needed some repairs so i could put my own sweat equity into it we were able to control a three hundred thousand dollar asset having a net worth of nine thousand dollars each uh and and so we were able to do that with a monthly payment of about two thousand bucks a month and the beauty about that was worst case scenario if we needed to we could move and rent it out for that you know even putting money aside for repairs and that uh yeah or worst case scenario we thought hey if we can't afford the payment we'll rent out rooms isn't that potentially a way that people can start house hacking or renting out rooms or buy a duplex would rent out another room just to be able to leverage up their wealth maybe quicker than they could otherwise yes it is and i did the same thing with the exception that i don't think it's a good idea with a random girlfriend you should enter into a financial relationship called marriage if you're going to do that because that asset you become very very valuable becomes part of the couple's financial stability every time i've heard of people that have and i've got plenty of examples of this you fall in love it's euphoric you buy a house together you're not married then poopoo happens 50 of unions fall apart for a lot of different reasons but then you've got this horrific litigation trying to solve for liquid you know liquefying the house or one side buys the other half from the other it's a mess and so i always say to people look i did it on my own um i borrowed ten thousand dollars and i was able to buy a house and i rented every room out i lived in the basement um but i over time built a lot of equity up in that just as you said but i didn't do it with my girlfriend at the time because i don't even know where she is anymore i did it myself so unless you're getting married i wouldn't do it that way okay well well fair correction there i will say uh knock on wood but lord and i uh we we are happily married now and have two kids maybe we we were the other fifty percent but i no that's that's a great it's a great story but i mean if others listening i i really you know i wrote a book called men women and money exactly about this and i'm very proud it became a bestseller almost overnight but it deals with topics like this and it and it really talks about the reality of you know where money fits in love and it you know there's a reason that after seven years fifty percent of unions uh fall apart it has nothing to do with infidelity most marriages can survive that but it has a lot to do with financial pressure and that's why when i did a lot of research with divorce lawyers and they said it's always the money it's always the money one couple outspends the other and drags everybody into debt and finally that just takes over the only reason they're together is fighting about debt terrible yeah that is terrible that's unfortunate uh okay interesting so so a potential way to start yeah and what we are seeing though uh with with home prices going up i have this this thesis i want to run by you i believe that potentially as home prices continue this sort of course that we're on lack of supply lack of new construction coastal cities going uh incredibly high especially in the suburbs if this continues at some point investing real estate for a normal person becomes unaffordable uh is it possible that america turns into a a renter nation where maybe the top 10 percent own houses and 90 percent don't and they just rent yes but this this thesis has been tested multiple times in the real estate market over the last 100 years prices get excessively high in certain regions people can't afford them they move to other jurisdictions it has a natural tendency to resolve itself or the economy has explosive growth and salaries go up to match the cost of rent or purchase or ownership it tends to balance itself we're in an extreme period right now we've never provided 1.9 trillion dollars of free money to the economy ever before and we're about to maybe put another trillion in infrastructure spending which is going to support all kinds of different jurisdictions this could be the new golden age of america and always you know when you think about the gold roaring 20s or the early 50s a real estate was part of what was coveted and still is today by every american family you want to own that home with the change now that some people particularly as we have an older population are preferring different kinds of housing condominiums in where i am here in miami have become very very popular because of ease of use and yet their pricing per square foot is much more than a home which makes no sense at all because you don't own any real estate you just own a box of cement and yet yet that you know the pricing here is four thousand five thousand dollars a square foot for some very premium condos and i tracked the condo index in pretty well every geographic region of the us as a way for me to keep an eye on inflation and housing prices and right now we're really stretching the limits yeah does that mean you believe there's a potential correction in store for real estate no it doesn't happen that way and again using miami or boston as a market or austin texas is another good market to index yeah um you know there's so much activity of moving out of high tax jurisdictions into low tax so that's why texas and florida have this renaissance occurring but generally what happens first and you're starting to see it now is um the bid asks condos is the best way to do it because you can always index each unit so let's say there's one i'm looking at here i was just examining the date on it last week the last time it's an it's a three bedroom uh 2800 square foot condo there's probably 30 of them in the building that are identical and the only difference is what floor they're on because if you clear obstructions you generally get a 25 premium and so on the twilight floors where you're half instructed it's a perfect market in that sense last time one of these condos traded it traded for 3 million 150 000 the owner of one of them now with an obstructive view is trying to get 4.6 million now that's not going to trade that's not going to trade and it hasn't traded and so what happens is it sits there and i'm just now speaking about the whole index these condos sit on the market for generally up to 18 months people that put stuff on the market are willing to wait a year and a half to see if they can if somebody hits the bid and if it doesn't happen the prices start to fall so where we're at now is we're three months into the wait and see because the volume of trading is slowing at that high end which always tells me potential 20 correction coming but you just don't know when or what the black swan event is going to be that triggers it because if you look at the history of boston miami austin you get tremendous volatility particularly miami there's no market more volatile than miami and so you know if you're if you're an indexer like i am in in you know buying multiple units potentially you you really want to catch it when it starts going down and we haven't seen that yet so i got to wait 12 18 months would you be buying individual condos as investments and then renting them out or wouldn't yeah absolutely absolutely for sure but you wouldn't do it now because the economics don't work that's another trigger um you if you if you buy a condo for uh 4.6 million then put 400 000 into it so now it's 5 million being prepared for rental and all you can get is 18 000 a month which is pretty well the limit right now um uh that's a really bad investment yeah and so that that tells you that the the unit price is overvalued has to come down about 30 percent when that happens nobody knows right right uh now uh what about uh residential multi-family buildings would you just go buy a large building or why don't you just go to austin and buy a 100 unit building because the cap rates are below four percent and so um having been in real estate my whole life i don't buy when cap rates are sub four percent um when i first got involved in climate controlled storage it was 11 cap rate now it's trading at under five so you know and and i sold at a seven cap which meant i left 20 on the table you can't ever catch the top or bottom but going into real estate at sub four percent cap rates when ranking rates potentially could rise is a very bad outcome and and a real money loser so that's why i'm just sitting on my hands i have capital to deploy in real estate but i haven't seen anything that attracts me yet you know people show me uh 3.2 cap multifamily no thanks got it yeah i've got this rule uh rule of thumb that if interest rates go up one percent prices come down 10 almost this this one to 10 ratio and hey if we get a two percent bump in rates uh there's your 20 percent pretty quickly but then the afford but then it becomes unaffordable again because the rates are higher so so how do you balance that well then the rental market kicks in i mean the great thing about real estate it does have all kinds of pressure valve releases uh rental becomes more attractive remember you're what i tell people there used to be this philosophy back in the 50s and 60s and my parents used to tell me when when they bought a house it was for life that's not how people think today when they buy a house today is for 36 months maybe five years maximum you know whatever they're going to move they're going to raise a family whatever it is don't fall in love with real estate the only argument you could make for long term is is waterfront property in various regions of the world where it's extremely hard to replace it and so i i tend you know when i when i purchase uh waterfront property i value it based on how many linear feet it has on that and more you know obviously people really covet privacy but you look in lake tahoe or regions of maine or cape cod or you know nantucket those prices have very very little volatility because they're based on access to waterfront wow and uh are you worried at all about rising sea levels in in florida i think what you're miami beach yeah definitely i mean you if you if you bought right now on the sunset isles of venetian causeway another index i track um what used to cost uh four million just five years ago is trading for 22 million and so so when when you try and buy um hurricane insurance you can't get it you have to self-insure yeah so you know if you if you really thought uh the ocean was going to rise 18 inches well you'd be writing off 22 million dollars but most people feel during their lifetime they won't happen but that doesn't mean it won't i mean it's sort of a really interesting dynamic when it rains hard in miami here in miami beach on collins avenue it floods by two feet sure and so and then you've got to wait you know sometimes 18 hours to get rid of all the water it's a really interesting dynamic you're bringing up there but again right now the markets are so buoyant so so stretched that people are not considering that but when you do go talk to the insurer look i'm gonna i'm gonna um buy a 22 million dollar house they say good luck we're not going to insure it sure sure it just seems like fortunately though the hurricanes in florida it's been gosh it's gotta it's gotta have been at least 30 years since we've had a cat five in florida though huh it's been a while no it has and that's exactly the kind of thing you should say when the cat eight comes you know that's what do you believe well i do not take anything for granted on climate change right now i just you know i'm a very very big uh i have a very big business in the wine industry um you should be aware this morning uh it is snowing in bordeaux and the drc region and burgundy the loss of this crop is going to be catastrophic that you and we're getting hail in geneva we're getting freezing rain uh in the jura in switzerland where the white wine is made and these are this is where i source my my juice and um we're going to get wiped out this year that's climate change i mean i'm talking about snow in you know late april in bordeaux like you don't see that too often do you have crop insurance there no you can't do that i mean it it doesn't matter because what the challenge they're going to save probably 18 to 20 of the crop last night we were using water to spray on to the berries there's all kinds of strategies you're talking about um you know you take take montrachet in in burgundy people think it's a giant region it's the size of a parking lot it's worth a billion dollars a row almost it's insane and so it trades at crazy prices lvmh is a corporation buying one row of grapes at a time so when you have that kind of an investment you can afford you'd think to be able to intervene but the rules of the drc that the multi-hundred year rules do not allow you to do that you you you lose your passion if you're caught putting fertilizer up your pant leg and walking the vines or or using some kind of a device to put water on it from your pant leg those are those are tricks that have been tried by farmers for hundreds of years it's forbidden and so this is the kind of thing you deal with in the wine industry that tradition is why a bottle of montresia is worth a thousand dollars yeah when it's a good year and it won't be a good year in 2021. oh yeah yeah well i'm sorry to hear that golly yeah so climate change i mean what do you think though but like the federal reserve starting to talk about climate change uh kathy wood kind of suggested that the fed seems like maybe they're getting a little distracted and they should be focused on the economy is is the fed right to be concerned about climate change to the extent there's an economic cost i mean i think you know if you believe that burning uh huge amounts of coal is detrimental and i do i mean i just can't think that's a good thing um you should stop buying bitcoin from the chinese for example because that's what they do they have 64 of all the coin mined uh i have made a choice not to buy their coin and frankly because institutions uh have the sustainability committees to answer to now and ethics committees and uh they won't buy china coin so my thesis is to start to invest in companies that make sustainable coin green coin yeah and i i i ran uh this is interesting because you're indicating it's institutions so i asked on twitter which is mostly going to be retail uh 6486 votes here 76 percent of people who replied to my poll uh when i asked whether or not they care where their bitcoin or crypto is mine 76.5 said they don't care uh and only 10 said yes they care and they'd even pay more is this going to be something that starts from institutions and then people start caring is is that why you're focused on that my experience was rather interesting i i first bought ethereum and bitcoin in 2017 but because i work in a highly regulated environment i have many investments and has some chairman roles in certain financial services companies uh i have to be compliant to institutional standards and so uh when i announced that i had uh you know finally so you know regulators uh all around the world were very negative in 2017 on any cryptocurrencies i don't care what country you're in and then all of a sudden in switzerland in germany france england australia new zealand and canada uh the regulator opened up in fact uh there's now etfs in the canadian market where you can buy an exchange-traded fund that only owns a bitcoin and so i decided to increase my weighting and went public saying that i've reduced my portfolio allocation for 2021 is 70 equities um 22 a fixed income which is a massive reduction from a year previous it was usually 50 50. a five percent gold of which half is stored and the other half i'm balancing with gld and then finally uh three percent in bitcoin now i didn't expect to get any kind of feedback from that it's just a reallocation i did it in the last weeks of january you got a lot of feedback oh my goodness i was inundated with institutions calling me from all around the world and sovereign funds saying wait a second where are you getting this coin you're compliant aren't you i said what do you mean just like 70 of those polled in your poll really why would i care and they said are you aware that 64 of this coin is coming from a country that burns coal to make it and has alleged human uh rights violations and is under sanction from the united states that's china and i and i realized that i had the reason these institutions are not participating in allocating bitcoin has nothing to do with just the regulator although they do consider it but regulators are opening up what they're concerned about is their ethics committees and their their sustainability committees that sit above the investment committee on a large institutional mandate so before they can allocate any asset class any asset class point of origin of of the asset where jurisdiction is how it was created these are all questions that have to get approved by their committees and so what i found occurred was i immediately um said okay i'm not going to buy blood coin from china what i'll do is i will go to the mining community the pools in europe and the pools in the u.s and i will basically fund their expansion i can like you know if they're looking for 20 million dollars to expand facilities and become more productive i can help them finance that and in exchange i want a royalty paid in virgin coin where i know the providence and i found a tremendous amount of institutional interest in that uh to join me you know beside me doing it it solves their problem too because they can go to their committee say this coin i own in a wallet that has never traded it's it's our coin it's property it's virgin it's compliant it's sustainable there are no ethics issues with it and i believe over time as the institutions start to really get involved in crypto that you will see a premium you'll have the discounted blood coin from china and you'll have the premium virgin coin with provenance no different than blood diamonds same thing sure sure now is this something uh that look as an example delta airlines they have a partnership i believe it's delta with gevo to supply a certain amount of their fuel uh with biofuels uh i think it's enough for like a hundred flights a year it's a drop in the bucket right but i feel like they do it so they can market and and give the little green batch hey sometimes we use biofuels right is that gonna be the same thing i mean is it just something where you put a little bit in your portfolio that's clean and the rest is whatever because whatever then you can put the little green check mark on yeah i know what you're saying i mean for years companies would do that sort of um to get the the aura of sustainability and that they cared and they were green it was a marketing stunt yeah but that is not what's occurring uh today in terms of the consumer they smell a mile away because they have the power of social media to vet out anything and they do that and so what i'm finding now in my own investment philosophy let me give you an example um here's a company that i'm in a joint venture with comcast in um this is called blue land uh their mission very simple mission statement is to eliminate 50 million plastic bottles out of the environment a year globally very simple i haven't found anybody that doesn't think that's a good idea and so when i was pitched they said we have found a way to crystallize cleaning fluids a patented way this is a this is a full bottle of surface cleaner toilet cleaner they give you a sustainable bottle they ship it to you direct you drop this into the bottle with water and now you've got a full month's supply of surface cleaner and no plastic bottle throw out now i would have thought that company would have a hard time uh growing it is one of my most successful companies why because the constituency the buying constituency doesn't want marketing they want a real solution and this company has a mission a real solution and it works and so that's become part of the metric of what those consumers are buying is it sustainable that's part of my mandate that's what i want i'll support this company i'll go out of my way to support the company i'll buy direct from them and uh it's it's it's you know the growth rates on this thing are going through the roof it'll it'll it'll hit a hundred million dollars in sales very soon and so uh it could be spack but frankly i'm not a big fan of spax i i feel i feel it'll be bought by a strategic that's what will happen when you get to 100 million you you get the big guys knocking on your door yeah and that makes a lot of sense uh you get like a clorox or something to come buy that product from you and uh patent it or well i'm sure it's already patented by your ip why um why no not a fan of specs is it just because of loose sec regulation and those uh those ridiculous investor presentations that are mythical projections that they give well no actually i do have about 20 specs in my portfolio right now but only from from operators that i know you know spac is no different than private equity and so i need to know the team that's actually backing the spec has actually done deals before and knows how to buy at the right multiple and knows how to operate and so if you know you're talking about the gorez brothers or you're talking about bill ackman or you're talking about teams like that i buy their specs and i own them right up to when they despect then i then i look at what they bought and say i look at it as a public company in fact my wine business is in the middle of a spa conversion right now and so you know obviously i i'm very excited about it now we're going to go public that way through us back so i'm not against facts i'm against celebrities facts the id the idea that some celebrity knows what they're doing in private equity i think it's a joke i mean you have to spend your career learning how to do that stuff so you know sticking some celebrity on his back and saying you know give me 250 million dollars another 500 million dollar pipe i avoid those like the plague i think those are going to go to zero wow wow go to zero oh my goodness uh you mentioned the gorez brothers are you in matterport now what gore brothers i got to know uh way back you know 20 years ago i have a tremendous amount of respect for their philosophy and how they operate um and some of the people that used to work for me did go and work for gore's and said nothing but good things about them i i like alec i really do you know why because he's a cash flow guy i'm a cash flow guy he respects cash flow that's what he understands he understands cash flow he doesn't understand future cash flow he understands cash flow now and then he tries to grow it he doesn't price businesses off maybe they'll be profitable maybe they'll have cash flow he looks at existing cash flow on the stability of that cash flow and he makes economic and leveraged decisions based on what he knows is factual and his historic data from that's the kind of operator i like to invest in or beside and you know it's just a philosophy but you know his track record is impeccable that's great well i mean that's great to hear yeah a lot of us uh watching right now we uh we're in uh one of the gore spacks uh and it's the matterport 3d scanning business for real estate yeah 3d scans but so uh you mentioned that uh you're you're heavier on cash now than than you've been how heavy is is heavy well it's primarily because of the reduction from 31 to 8 percent on commercial real estate and you know that that started last a year ago january and then we did do some selling during the pandemic period march april may at more depressed prices um well right now the cash is about uh 38 we just looked at it this morning which is extremely high it's extremely high and so we we are deploying uh we have uh done some deals uh they're mostly private um you know i have and i and i also stepped up and when i did the reallocation down from 50 down to 22 in fixed income we did deploy into large cap equities but you know that's a big dislocation when you take an asset class from 31 down to eight i mean it's going to take me a year or two to get put that money back to work and and um you know yeah that's why they call it work i mean you know we look at it and say we're getting zero for it when i say cash i mean cash i don't put it in mutual funds you know or short term bond funds i mean cash cash is cash so if there's some kind of correction or or illiquidity event where these mutual funds break a buck i won't be part of that so i have my cash makes nothing there there is some interesting work i'm doing with my team in crypto where we're garnering for yield using various leverages uh usd versus ethereum versus um bitcoin but this requires a tremendous amount of technical skill and uh it's more of a corporate uh strategy and it's not something i would recommend to people at home but you know i have a full-time team doing this and you can kind of glean depending on the volatility of bitcoin which has been less volatile lately somewhere between five and seven percent returns but you are taking risk it's not free and so i've struggled with this so i've i i did a video maybe about three weeks ago and i've talked to a few crypto ceos block five voyager and so on uh about the crypto lending space and specifically the lending of stable coins like the gemini coin or the usdc my concern is it and i love your comment on this obviously my concern is you've got thousands of retail crypto investors out there who look and go yay i've got this stable coin and they see that as a savings account they see that as as their cash but they don't realize they've turned on lending so now they're getting paid six to eight percent on this stable coin and so when push comes to shove and something breaks in the crypto space one day people go back to okay well who uh gets that original dollar that's sitting in the bank vault somewhere well you're 13 per people down the road because this same dollar has been rehypothecated 13 times isn't that a massive risk that there could be a a lending disaster that comes out of that yes um it would be a liquid illiquidity event if you're going to do this um and i do some i have employed a material amount of money into this strategy uh just to you know use cash but i understand the risks i i understand the allocation i'm taking it is no better than a single c credit you would never get a triple b credit on this strategy and yet there's room in a portfolio like mine to have a single c exposure for yields of five to seven percent but what i would recommend is and i don't have an equity interest in them but there's a company called circle out there that has some of the and i've i talked to all of them um i've got a whole team talking to everybody that participates in this on a corporate level so if i have a an operating company uh which i do with a lot of cash on this balance sheet i can go to a circle and say look i want to open a corporate account and decide that maybe i'll put a five percent allocation into that lending strategy uh with full transparency full tax reporting full compliance and have my cfo work with them and that's what we've done and so it's sort of it because all of these wallets and all of these retail uh you know apps and all that stuff they're just laden with ridiculous fees and so when you're you know you pay us a really stupid price to have a well i'm not going to mention names but anything you download on your phone you're in the crypto space you're going to get whacked with a ton of fees you don't see sometimes or at least you're not aware of and so my attitude is if we're going to do corporate lending uh let's set up corporate lending let's go find providers let's find you know check out their compliance committees let's talk to their management um you know i'm very fortunate it's it's really great to be mr wonderful everybody returns my calls and i'm very appreciative of that but you know at the same time i'm doing a lot of work for other lps that that that may want to pursue this and if i go set it up and it works and i've you know i've got some very smart guys working for me on this i'm willing to deploy some capital some capital uh because i believe the regulator will continue to examine the potential of cryptocurrencies for for an efficient a way to run an economy and if we don't do it the chinese will and i'd be very very careful you know that that we stay as i like to say oh could ant with what the chinese are doing on cryptocurrencies they would love nothing more than to create a coin controlled by their own blockchain that they could basically provide a stable coin to the world to trade off like the american dollar is and then turn it off if something you say something bad about china they could do that and i don't want to see them do that so we're in as i said earlier an economic war with them if any and if anybody's going to get you know create a stabilized coin for global commerce i want it to be the united states and have the same rule of law associated with it and the same court system associated with it and then because for me who does business in switzerland in europe in in england in australia with all these different currencies i get killed when i'm transferring into euro or or swiss francs or british pounds what a total pain in the butt why can't i just use a standardized currency and trade in all those countries right right that completely makes sense now you mentioned that this is single c i mean isn't that like you're talking junk level but these are stable coins it's not rated and so it's not even fair to call it single c it is what it is it's exactly as you described there are inherent risks that most people do not understand and so when you get into um you know it's it's it's like that song superstition you know when you trade in things you don't understand that's what happens bad things happen sometimes uh so so uh okay now i i want to go back for a moment to uh what uh your mother told you about diversification some folks uh you know we've got warren buffett's view on diversification we've got other folks views on diversification that maybe when somebody starts out they shouldn't diversify much so they can build wealth and then protect their wealth later how do you respond to that you know diversifying less when you're starting out no i understand diversity is important but so is liquidity i mean you gotta you have to balance both of those when you buy an asset that's illiquid like real estate sometimes that is it's diverse in the sense it's a different asset class but it does not provide for liquidity in times of stress and so you know one of the tests i asked everybody to do when they look at their their their net worth is how much of this is liquid how much of it is catastrophic outcome occurred to my family a car accident catastrophic illness whatever where's the liquidity for me to survive with if everything i own is uh in a liquid asset that's not diversification and so you need to have some liquidity in your model you need to understand where there's risk you can't value every asset the same way and liquidity is very very important and not given enough respect because in times of financial stress it's the liquidity that provides you the opportunity to redeploy capital so when i say cash cash that's pure liquidity when something corrects and i want to buy it i'll have the the you know the the fire power to do it i'll have that dry powder waiting to redeploy and i'm waiting now so far there's been no correction but i've lived i've lived through lots of volatility and i know just when it seems to be safe poopoo happens that's a good point yeah so a i mean a lot of people are going to hear that and they're going to think okay so what you're saying is all in on stocks because i could just swipe up and they're liquid can you speak to that well not every stock i mean obviously large cap i only own 100 of the s p 500 because i care about the quality of the balance sheet above all the ability for the business model to be sustained i want to participate in the cash flow profits in the form of distributions you know you can find companies paying 1.5 to 2 percent of their profits in the form of dividends and have potential growth of their of their value um and so i do that but they're generally very liquid but when you get into the micro stocks or you take very speculative positions on in things like junior pharma you have to understand that there's volatility there and you need to mitigate that risk and so this comes from experience i've always said i'm a big fan of robin hood because even though it's got a lot of criticism it helps 22 million people learn about stocks you can't even shorter stock on ramen room people don't know that so i think vlad the ceo there i had a chance to meet recently expressed to me his heart felt concerned that people didn't blow themselves up on this platform and they've done a lot of work to try and help people uh protect themselves from themselves and so i i'm a big believer in um in in learning the ways of the stock market in that way even if it's only 200 you're playing with you can buy fractional shares and start to understand portfolio management yeah i mean to one positive note there on robin hood you had talked about any any of these apps you can download probably paying big fees for crypto and i noticed that in the crypto space huge spreads uh large fees you know the spot price is way off from what you're able to buy or sell it for robinhood has been one of those that even though you can't transfer your coin i don't even i don't even think you're actually getting a coin you're getting like a you know an index uh it is the one that seems to be the cheapest out of all of them it just consistently has the cheapest price every time i run experiments are you bullish on the robinhood ipo um i am i think it's going to do very well i think um you know coinbase is going to do very well there's a lot of interest in crypto a lot of interest in trading platforms um you know it's it again financial services in the end is valued by um ebitda or cash flow multiples and right and right now because the growth of those platforms looks so fantastic but when you go and look at banks and book values and uh in the end you can really hype it up but in the but unfortunately over time if you don't if you don't grow into those expectations of free cash flow uh the market re-value revalues you financial services are generally uh commodities banks are commodities um they don't have anything proprietary from one to another other than brand and so it does level the playing field eventually how would you value a coin base i mean obviously their their numbers here in q1 have been insane i mean phenomenal growth and insane cash flow i mean you're talking about cash flow they got cash flow does this mean you're plowing into coinbase um i i think as a trade it'll be interesting but you know uh when you start to value cash flow past 17 times well past the market value you really got to believe the growth and so the assumption about coinbase is what else can they sell these people right it's sort of like the sofi model what else can they sell can they sell insurance can they sell mortgages can they sell credit rating services can they sell whatever and so you once you have once you've captured the customer how far can you go is the whole idea and um that's why it's interesting to investors it's very hard to amass a base of that many wallets really really hard and so you know getting just past the first ten thousand is almost impossible but then past that you can grow into the millions of them because you found a way to acquire customers on an economic basis which they have so there is value there no question so it sounds like you're probably not all in on tesla the way to play tesla um is is to use the thesis of diversification keeping it at a five percent waiting i bought tesla at 238 dollars pre-split uh when my son became an intern there he now works there as an electrical engineer and he made me he made me look at the company a different way he said it's nothing it's not a car company it's it's a it's a data company it gathers data it has tremendous value long term and if you view it that way you should own some so it convinced me to buy some one day when it was downgraded that stock obviously became one of my best performing positions but every time it would go blow past five percent i sold it down to five percent so now my cost base in tesla's zero um and so and that's how i that's the discipline i have i don't let stocks uh be more than five percent for very long and i continue to sell sell into the strength but i keep my position and so you you lose out on all the upside but the diversification metric you get is is very very good in volatile times you don't participate in the full drawdown because you profited from your winners it's just a philosophy that you learn to appreciate every time a big position takes a big nosedive and you let it grow more than five percent yeah now i i don't i don't recommend what i'm about to say and it'll be a little embarrassing saying it to you but i'll say it and i don't recommend this i want to be very clear about this uh uh of so about half of my net worth is in real estate about half is in stocks uh so uh the portfolio because there's there's debt obviously against the real estate and a little bit against stocks as well which i know you're not a big fan of uh but uh of my of the half that's in stocks about uh 48 is tesla is that really bad yeah yeah is that's really bad so i get roasted by kevin o'leary i had to do it that is that is a very bad idea um because you saw a drawdown of 25 or 23 and it's come back a bit you know your cost base is probably very low on tesla um you know so i would never ever let that happen in my portfolio ever so if anything happen if anything happens to tesla you're going to really be crying the blues but you know but you thank goodness we met you can fix this kevin that's true yeah exactly that's a good point so okay well so what would let me ask you what would you do with the portfolio we'll lay it out there so uh well you didn't tell me your sectoral ratings i mean you know i could go to town on your portfolio and tell you where you're under invested where you're over invested at the stock and sectoral level i mean you know i would i would prefer in a portfolio and have exposure to at least five sectors you know and right and at least 20 stocks i mean to me that's i own way more than that but you know i've i've got the only sectors i don't have exposure to right now are duration risks like reits uh energy stocks i don't have any exposure to right now i do have exposure to banks but you know just jp morgan i have some exposure to financial services i'm looking for companies that are really in the sweet spot for america 2.0 the consumer stocks the technology stocks the healthcare stocks and so my weighting is a little bit you know full weightings into those three sectors um and so then 40 of the sectoral weighting to others but i also have geographic exposure i'm up to 20 in europe now um which is a first for me because the values are so interesting there it's a it's a zip code that people have hated for a long time but i think this is low growth right sorry low growth is oftentimes what people think when they think of europe right yeah but all that's going to happen there is there's going to be tremendous stimulus poured in by their government too and frankly there's 50 stocks in europe like like roche and nestle that are really if you think about them domestic stocks just happen to be headquartered in another place i mean those so much american tobacco sold in the us so i try and find those companies that are representative of sectors i already own here and i'm just getting getting them at a pe discount in europe and i don't mind having some currency i buy them in the native currency so i've got some exposure to swiss franc to euro to british pound um there's nothing wrong with that if you're going to take exposure to bitcoin you might as well own some other currencies too so we'll just see how all that plays out but you know i think it's early um i think this is going to be a very good year for equities and i'm very optimistic so why no reits you had mentioned reits were a no-no for you well uh reits tend to have a duration risk so um i wouldn't want to own a reit that just has a bunch of malls in it right now because they have to go through conversion there's a lot of optimism that they'll you know there's some not the name names but i i owned all those rates i've sold all of them and i'm glad i did when i sold them because they're down significantly from where i sold them um and and i don't see any reason to get back into them right now we've got to go through this transitional period over the next 24 months so i can see where in commercial real estate i should redeploy and i will i just don't see anything attractive you know you've got an empty building uh with no tenant being you know people trying to sell it for a four cap i don't think so i'm not gonna do that that's not a good idea there's a reason it's empty you know it's and so uh we've got to wait this out a little bit and and that's one of the reasons you're being patient i mean oftentimes people's cash burns a hole in their wallet uh oftentimes for the negative they spend it on things they don't need like you mentioned i have this problem where when i get cash i spend it right away to invest in uh so i don't i don't have that problem i've learned that this one a long time ago cash is just another asset on the balance sheet it's where it's overweighted right now we we are overweight and that's a problem it's it's pushing down returns pushing down irr sure but i've learned uh through conditioning in markets like this to keep some powder dry there'll be great opportunities coming i don't know where they're going to be i'm looking at deals every day every day you know i spend about i don't know 90 minutes a day going through the new which is our deal flow's insane right now we just have a huge amount of but you know i try and work with others and say let's categorize these into buckets something we'd look at something won't touch you know we look at a lot of different things and we have certain core strengths we're very good at we have a tremendous due diligence team um we are a sustainable investor not because it's a marketing scam because the the people that we invest beside have those mandates and consumers on the consumer goods and services company we've already learned through the blue lands um you know prime six i'm an investor in uh this is i'll give you a good example i'll just hold it up this is uh the first charcoal company in america that is sustainable it takes uh the waste of hard grain mill or hardwood mills the sawdust compresses them into these incredible uh incredibly efficient logs that don't have any waste material consistently burn at the same temperature every time they sell when they plant a tree that used to be a corny marketing scam now it's the number one in demand charcoal in america every grocer has customers coming in saying where's my prime six i want to buy prime six i don't i don't want to buy this stuff that pollutes i want prime six so that happens right and we're a big investor in that that's incredible what do you think about i know you mentioned energy like utilities you weren't enthused about what do you think about like um like an end phase the solar revolution and and even to some respects uh tesla in the energy business well tesla's different i mean it's a it's a data company and a battery company and a technology company um and has also captured the imagination of investors worldwide so it's getting an index weighting as an ev company as well but a lot of the solar companies have yet to proven uh profitability without government subsidy but i think that's coming the wind is even worse in some in some cases there's municipal restrictions and all kinds of issues but yet those are sustainability mandates and they will get better and better as time passes in terms of technology the sector that does look like it's really going to get killed is hydrocarbons because you've got ge declaring they're going to phase out the combustion engine the gm i should say and um and you've got you know this mandate from every uh federal government level and uh state that they want to get out of uh hydrocarbons so i would say that the companies will be more efficient at spending less in cap x but the pes of all of these once great energy stocks schlumberger you know chevron exxon i used to own those i don't own them anymore because i think their p's they'll just keep getting compressed and frankly uh when i have you know uh institutional clients say did i see schlumberger on your balance sheet uh now i don't have to be embarrassed about it wow see one of the things i didn't like about the s p 500 like straight up s p 500 index fund which is probably where you stand as well is you get more money allocated to tobacco companies than you get like starbucks or target is is that kind of like that same feeling you had when folks were saying why are you investing in these oil companies yeah but i i believe in the sustainability model is now perpetual and remains saw as larry thinks letter said a few months ago you know he's really pushing on on corporate mandates to fund sustainability and climate change issues and you can debate that till the cows come home but the point is that the reality of what is going on and so i don't want to have to answer to a institutional client anymore uh that yes we have schlumberger on our index we don't and there's a reason they don't want to see it there and they won't do business with us this is right down to retail investors they don't want to see it they don't want to own it so i am not telling them what to own i index for them and so that that's sort of uh the way i look at it yeah uh tesla you mentioned almost has an index weighting as you mentioned you just mentioned you quickly mentioned four or five different sectors it's in does that mean i could put five percent into each of those and justify my 48 percent well it's a five percent into a stock i mean your tesla starts you know your stock should be five percent of your waiting maybe six at best and then you you would take the the money you made there that you diversified and you invested in other sectors that appeal to you for me right now that's consumer health care and technology but doesn't mean it stays that way forever it's just that the allocation i probably own in aggregate close to 900 stocks around the world and and probably the largest position i might have is five percent in one of them and so it's um it's really uh a diverse index uh of of ownership across multiple sectors multiple geographies and that's my equities and then i do all these very highly risky investments in these small private companies but i've had some great outcomes there okay i think i add a lot of value as an investor in terms of of helping them grow and acquire customers and i know i'm worth that and i you know when people approach me i always have a good time when someone calls me up and says you know we're just closing around um uh we have sales of two million dollars or closing around at a 25 million dollar pre-evaluation we'd love to be an investor and i say look that's wonderful i'm very appreciative you made this offer to me i understand it's a private syndicate you're forming i'll make you an offer based on my value to you and you can accept it or um you don't have to but i couldn't care less what your valuation is i don't care if you want me to be an investor it's a very simple rule i want 12 and a half percent of the company before the employee option pool which will drop me down to 9.8 percent if your pool's 21 22 which it often is uh i will in some cases you will give me that stock and put a long hold period on or in other cases i will buy it or a combination of both but if i don't have 9.8 i'm not really interested and uh and then and their answer is that's outrageous what do we tell our investors and i say i don't care but if you want if you want me if you want me and all the power i have to get your story out there and all the customers i can acquire this is what it takes to engage me and fifty percent of the time they tell me to go you know what and the other half and then they're halfway end up doing deals and i'm and i i know my value i'm extremely good at helping companies grow i have a fantastic team that does the same but this is the power of social media i have 5 million followers which i think the majority of them are investors or want to be investors and follow you know my muses about where i go and that doesn't mean they have to invest the way i do but they're interested and i bring these issues to the fore and in doing so we create a community of people that want to become investors in various companies and i think that's a great job for me to have it's a useful productive use of my social media but i don't do i don't do it for a two percent holding i don't care about that it doesn't even get me out of bed in the morning i couldn't care less i wouldn't even wouldn't matter i need skin in the game yeah so for those of you that are sending me all these prospectuses that are not willing to give up 9.8 don't bother great messaging so it sounds to me because when you mentioned you're in 900 different stocks that sounds extremely diversified i mean i think studies show that if you have 30 to 50 stocks you almost have you almost mirror like 95 percent of the diversity of an index fund yeah 900 that's incredibly diversified are you being so conservative if i can say that on stocks because you're taking larger risks in private equity it's an interesting point but no the reason i own so many stocks that it can vary from a few hundred to you know multiple hundred is i study the draw down in other words i look at the history of a stock in a correction and so if there's if there is a massive correction 30 40 correction i want that stock to only participate in maybe two-thirds of that correction and i define my ownership base not on upside but on downside protection i don't need more money i need to keep what i've got and i want it to be productive and i want to be able to distribute six percent so yeah my attitude is saying i would i covet much more protection to the downside than i do out performance so i'm the reason i'm so diversified is is those holdings those individual stocks have tended to have a history of very good performance in drawdowns that's much different than an investor says all i care about is beating the indexes i don't care about beating the indexes at all is that uh unique to you though that uh you've already established wealth like what i mean for the the 20 25 30 year old watching right now and they're like look i got i'm they're looking at their portfolio going dang i'm 25 in on tesla and and every time it dips i'm buying more of it you know the buy the dip culture like isn't that potentially a great way to build wealth it is um it's more rock and roll but what invariably happens to that kind of investment style is you go through a massive correction and you get you learn a very important lesson the generation that is trading right now has never gone through a sustained correction it hasn't and and that's okay because it's coming i don't know when i don't know what'll trigger it but they will learn their lesson and it generally happens in your 30s uh if you have a lot of leverage on it's a hell of a lesson because you end up in a negative net worth position but you do learn it and i learned that lesson in my early days i shorted yahoo uh when it was 35 and watched it go to 280 and never cut and never covered the short i had to wait four years for it to get back down to 12 that was a very stupid investment but it taught me a very important lesson about the power and the risk of shorting stocks and i'm very very very concerned about that now when i do hedge trading and so i'm very you know you learn that lesson it gets ingrained in your dna um and and i don't make those mistakes anymore and and what i concern myself now with and it happens to anybody once you turn 40. preservation of wealth becomes part of your investment metric and the various things you do like diversification and sectoral diversification we talked about are part of that so i don't need to beat the market i did that already i need to keep i need to keep what i've got that's awesome what do you think about uh folks who were very enthusiastic about options these days robin hood is right there very much makes options trading extremely easy and these derivatives used to be pages that people would never go to in the td ameritrade or scott trade days yeah the thing about options is particularly writing calls for example i mean most people use options do not understand how they work and how they should be used i don't want to sound you know negative on the use of options but let me tell you you know in a bull market when you're writing calls you get called away long before the potential of your stock is realized and so you're just you're timing you're trying to time the market when you use options very hard to do i'm not against it okay but i don't use them anymore i don't use leverage and i don't use options it doesn't mean you shouldn't it's just that i've learned over a long period of time that there's an additional risk in using options particularly if you're using leverage on options because you're goosing the the the mechanics of it dramatically and that's where people blow themselves up so if you're going to use options it's really worth in the jarion brothers are very good at teaching you how to use options i would recommend them to anybody they're really strong at that um but i don't need to use options anymore i don't have to and so if i'm going to go long a stock i'm going to go along a stock until it's a six percent waiting i'm going to trim it down i don't need an option to do that i like to i have an expression about investing i teach everybody that i i guest lecture with now keep it simple stupid because i mean when you get into these complex straddles and callers and all of this stuff with leverage sometimes you wake up with a hangover after going out to a party and you forget the position you have on and at 9 45 you just blew yourself up yeah it's that's actually what happens sure you've got to be careful oh yeah yeah that's interesting you know another thing that kind of goes along with this portfolio building that i want to touch on or ask you about at least is uh i have this theory that you go through a phase of life uh you go through your growth phase and then you go through like the cash flow phase uh and uh sure you can have both but people regularly ask me oh should i pay down my mortgage and a belief i have is that in your growth phase you don't it's inexpensive money 30-year fixed rate debt you don't go for that 15-year loan when you're in that payoff phase that retirement phase where or you're getting close to that retirement phase where you want dividends and cash flow and your income's going to go down because you're going to work less hours then you go for that 15-year mortgage can you speak to that idea i would agree with you as long as it's a fixed mortgage it's not a variable rate mortgage yes where that where that blows up is when rates make a big move and all of a sudden you're readjusted up on your monthly payment by 20 30 percent that can't happen hasn't happened recently but you know if you're not going to be paying down your mortgage which is often your best investment because it's a certainty when you pay it off versus the volatility and risk of the overall markets it should be fixed rates so you know you're not and if you're doing that then i would agree that you start putting some aside into the indexes where you have volatility but when you pass 45 you really should try and have your mortgage paid off because you have to be in the gathering mode and the the debt on your house remains uh you know a liability and it will forever until you pay it off so i my models are generally you know i got out of debt um like when i was crossed into my 40s and i never looked back and i pay off my credit card amount there's no scenario where people offer me debt where it makes sense if i if i have cash to deploy why would i take on leverage sure makes no sense so i i i just don't and i i go to sleep at night i have risky positions on but that you know i don't put it all into one basket that's the whole point are you not leveraging your real estate at all then um i much prefer i i met a really interesting um a really interesting guy years ago you're making me think back when i started buying my first homes renaulting and then renting them out he used to buy homes the same way i was doing it and he he took me outside and showed me the house i owned and the one beside it and he said your home is a pasta home this home beside you is a steak home and i said what the hell does that mean he said your home has a mortgage on it this home that i own because he was he owned as a landlord that was renting houses beside me is a steakhouse it has no debt every dollar that comes out of it i can go buy a steak with i can cook it on the barbecue but i can't eat steak when i have a mortgage because i don't know what's going to happen until i pay it off so you're a pasta guy you can't eat protein yet and i it was a brilliant analogy because he basically said use the steakhouse to pay off the pasta house sure get rid of the debt move down the street which is what he was you know he's an older guy he owned the whole street i was just a new kid on the block who just bought one i overpaid he was trying to buy the house i overpaid for it but it ended up being a great investment but the point was he was right so when i when i stabilized a storage facility let's say as i did years ago i use that cash flow to pay down the debt of course and that and then when you get the big correction where there's totally illiquidity and all of a sudden guys that are over 11 are blowing up and having to sell their places at discount prices there you are waiting to pick up the pieces it's pasta versus steak now you get it yeah i mean honestly it's it's a great argument i think of uh i never did refinances on the original properties that i bought and they're all in southern california which you're probably not happy about that but uh in when the pandemic happened and the federal reserve on a sunday reduced rates to zero i immediately called my lender and said refinance everything so i figured i'd need cash for for what was to come and it ended up probably i think it it could very well and it sounds weird to say but it could end up having been one of the best decisions i've ever made or ever will make because i had all of this cash that came to me at the end of march beginning of april which is the bottom of the market and i put it all in but you live through a period of a unique time when for 30 years rates did nothing except go down that's probably not going to happen for the next 30. so you were an opportunist you did the right thing but the reduction of leverage is always a long-term strategy that works and so you use these opportunities as you did to reduce leverage or at least pay a lower rate on the leverage you had but at this point in in my investment philosophy i don't use it i don't need to use it i don't want to use it and i don't want the covenants associated with it they reduce they reduce liquidity and diversification i look at all these these you know i do i don't even sign ndas anymore i i don't sign really no people are always saying you have to sign this nda before i show you my deal i said i'm not signing anything if you want to show me your deal that's great if you don't want to show because andy like ndas have all kinds of covenants that restrict your flexibility in other unknown situations you're signing an agreement that stops you from doing certain things and you don't know you're going to do them yet so my attitude is if the deal is so hot and so important it's yours keep it i don't need to know the stuff you want to keep a secret because by the way you see this pile over here these other 40 deals i haven't had a chance to read these yet but i'm going to look through these next so you know it's it's just the diversity of in the end what i've learned is and you know i'm i guess unabashedly when i say this it's really good being mr wonderful i love it uh i want to ask you about nfts are you going to get into these or or is this uh is this a big bubble waiting to burst no it's a derivative of the digital economy um you think about what it promises for uh the arts i'm very interested in music and uh i collect art as well modern art um i think there's merit that the because it's a new asset class it's going to be immensely volatile some of these have 90 volatility but i think the idea that you have something that's copyrighted in perpetuity that can't be forged is really interesting and a good idea and so i i think at the end of the day they will find their place i'm dabbling um i'm in a negotiation now on a particular piece i don't know if i'll close it or not it's just it's like my watch collection my wife said to me why do you keep buying those watches you if you wore three watches a day you couldn't get through your collection anymore and i say well as an asset class is performed she said that's ridiculous what do you need another watch for and it's they have performed they're up over 100 in the last two years i i enjoy the art of watchmaking i want to support the people that give up their lives in the age of 14 to become a master watchmaker in italy or switzerland or germany or even england now and and so those people mean a lot to me and i want to support them and i buy their watches i mean i have a watch i'm wearing right now in fp jorn you probably have seen this on putin's wrist this company only makes 900 watches a year maybe 17 of these it's appreciated over 100 since i bought it 18 months ago maybe putin did that to it i don't know but it doesn't matter it's it's a piece of art and what about the uh the art on my apple watch like the pictures of my children on it well i've often said about apple watches that's great uh you'll probably have to burn in hell because you wear that you're not supporting real watchmaking that thing is a you know kev that tells you right now you're 20 off retail if you walk around with an apple watch on like that thing is not that that is a piece of consumer electronic junk and i and i own apple stock that i would never be seen dead with an apple watch on not a chance in hell so you're probably not happy that not today but usually i wear two of them one for my texts and one for my twitter notifications yeah that's that's just that's garbage that's what that is that's awesome okay uh wow so uh very interesting insights uh okay so i think the we've hit a lot of different things here i think the the last question then then i have for you has to do with uh florida california this exodus and then and then maybe one more on port one last one to wrap up on portfolio you live in florida did you go to florida because of the zero percent state income tax uh for my operating business yes but i also moved here for lifestyle florida and texas are the two big options uh california new york massachusetts those states have priced themselves out of growing businesses anymore they're going to have to somehow figure it out but i'm not waiting around for them to do that i would never start a business in any of those states and in fact when i buy businesses i move them out of those states i recently moved one out of california northern california to jacksonville florida coders are much cheaper here taxes are much better you're talking about a 17 difference i really like the competition between states because you've got you know pretty soon california will be a vacation a location but you wouldn't want to start a business there i would never invest in that state and i won't invest in new york or massachusetts either until they get their poop together meanwhile down here in florida we're just rocking we've got the cultural vibe it's fantastic spectacular art scene fantastic investment environment great mayor for the city i mean everything's working here it's an example of what america can be and an example in texas the same way of what we every state should be if you want to be globally competitive but you know all that rhetoric coming out of new york imagine pushing away amazon with thousands and thousands of jobs and they simply said okay if you don't want us we'll just move to carolina and we'll employ 25 000 people down here i mean not to name names but some politicians just don't get it they just are so far from reality that they drive their states right into a ditch so i'm not going to fight with them i'm going to visit i'm going to visit but i'm not going to live there i think that's the whole point the 17 competitiveness for your business are you talking about your employees being able to take home more money and therefore they're better in every way florida is better than a high-tax jurisdiction in every way access internet employment colleges research lifestyle weather who the hell wants to be near the northeast in february i mean i i wouldn't like there's a reason birds fly south where do they go to florida they like the taxes and the weather that's the whole point well well what do you say about uh the socal weather i mean you've got mediterranean climate over there you got that i love socal love soquel love uh to go work out there we make shark tank on the sony lot love it uh would never uh take a residence there or invest the business those guys are clueless well i i could i could rent something but i'd rather just stay in a hotel because i'm there for you know a few weeks i got to make sure i'm not there too long the neck if you stay there too long you get taxed at a ridiculous tax rate that's even in my views on american that's the way i look and lots of other people are figuring that out saying why what do they have that i need so much that i can't get in texas or florida we're at that stage now particularly when they're contemplating raising corporate taxes why would you ever start a business there ever what you want to do is sell your product and service there but don't have the nexus of your corporation there it's not good for business so how do i convince my wife lauren to finally leave california she doesn't want to leave california for you mentioned it earlier family and weather well simply look at your tax bill each year i think yours is going to care well i get it um i would rather have that money to start businesses with create jobs in america and then give it to the federal government you know you should really uh you should send her to my official boot camp for um re-education okay how do i do that it's expensive i get a huge royalty it's fantastic oh my gosh okay okay so um wow uh incredible i've gotta get going i've gotta be in the studio in 11 minutes i gotta yeah yeah true okay uh last question then uh so if you had uh real estate here so i've got uh like i said fifty percent of my portfolios in california real estate southern california real estate uh would you just 1031 exchange this stuff to avoid taxation or or uh would you put it all into a big multi-family building in austin or what would you do i diversify i'd get some other geographies i'd sell a couple of properties and then redeploy it somewhere else just to get diversification 1031 and then what do you uh for for tesla stock you pay some big taxes if you got that low basis especially in california i'm paying like 56 out here something insane it's another reason to leave another reason to leave california but i i never let taxes make investment decisions for me i i i keep on the diversification tax is something you pay you're gonna have to pay it whenever you sell it so you might as well stay diversified anyways i've really had a good time today kev this is enjoyable kevin shout out your channel how do people follow you kevin o'leary tv on every platform instagram twitter facebook linkedin please join me love to see you on instagram where i have a lot of fun it was a pleasure kevin thank you so much for being here everybody for watching thank you so much consider sharing the video and uh folks we'll see in the next one thanks

Channel: Meet Kevin

Views: 600,215

Rating: 4.9089866 out of 5

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Id: FBuXIBeepC0

Length: 108min 0sec (6480 seconds)

Published: Tue Apr 13 2021