Lessons And Secrets Around Wealth That Only The Wealthy Knows With Chris Naugle

Nothing beats experience as the greatest teacher. Before becoming America’s #1 Money Mentor, Chris Naugle went from having money, losing it, and figuring out what he was doing wrong. In this episode, he joins Dr. Diane Hamilton to share his roller coaster of a journey while imparting great lessons around wealth. Chris is a highly sought-after speaker, author, the CEO and founder of The Money School™, and Money Mentor for The Money Multiplier. Here, he lets us in on his book, Mapping Out the Millionaire Mystery, to reveal the secrets of the wealthy—many of which are complete opposites of what we have been taught. Chris also takes us into the world of real estate, exploring deeper the ‘buy low, sell high, and don’t lose money’ philosophy. What is more, he dives into the current market situation, learning to become your own bank, finding where to invest in, and other wealth-building strategies that could come in handy in these fast-changing times.

TTL 836 | Wealth Secrets

 

I’m glad you joined us because we have Chris Naugle here. He’s America’s number one money mentor. You’ve probably seen him everywhere and we’re going to talk about money.

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Lessons And Secrets Around Wealth That Only The Wealthy Knows With Chris Naugle

I am here with Chris Naugle, who is a highly sought-after speaker, author, and America’s number one Money Mentor. He has done a lot of things in the real estate industry. He’s the Cofounder and CEO of FlipOut Academy, Founder of The Money School and the Money Mentor for The Money Multiplier. He is the author of a Mapping Out the Millionaire Mystery: Step into the Secret of the Wealthy and he has podcasts. He’s got so much going on. I’m excited to have him here.

Welcome, Chris.

Thanks for having me on. I’m excited to be here.

I was interested in this because I don’t get a lot of real estate experts on the show or in wealth building. I’m having a real estate license and being a loan officer. This all is right up my alley of things that I love to talk about. This is an interesting time. Just watching the market, supply and demand have changed dramatically. We have a little supply and a lot of demand, especially here in Arizona in the real estate market. I want to get into when is the good time to buy and all that. I also want to get a background on you because I know you’ve got a pilot show on HGTV and you’ve got so much going on. Can you give me a little backstory on you?

I grew up in a lower-middle-class family. My mom raised me and dad wasn’t part of the picture that much. What mom did is always instilled in me to dream and I was an artistic kid. Everything I did was visual. I drew a lot and everything I drew, I’d focus on and intently that eventually, those things happen now. Obviously, as a kid, I didn’t know the universal law. If you dream it, you believe it, and you can achieve it. That happened, but early on, one of the big dreams I had, when I was a kid, was to be a pro snowboarder and that was everything. I thought about everything I did.

I went out there and I did what everybody else was unwilling to do because I live in Buffalo, New York. If you haven’t been here or anyone reading hasn’t been here, it’s probably not a bad thing. It’s not exactly the icon for where people want to live but it is beautiful. In the winter, we get a lot of snow, but we only have Hills. Becoming a pro snowboarder coming out of Buffalo, I had two choices. Move to the mountains or travel to the mountains on a weekly basis. That’s what I did because I had to stay home and be here for mom but that ended up manifesting and becoming a reality.

I became a pro snowboarder and founded my first company in my mom’s basement called Phat Clothing Company, a t-shirt line that I started when I was sixteen and that turned into a skateboard snowboard shop called Phatman Boardshop. I ran those shops for many years and I was living the dream, but then life sometimes gets in the way. The first recession that I faced was in early 2000. The dot-com crash and my business took a 30% hit. I’m like, “What do I do?” I went back and started applying for places. Of all places like a punk snowboard kid, I landed in Wall Street.

In times like today, people are wrapped up in the euphoria of what we call FOMO, Fear Of Missing Out. Click To Tweet

I became a financial advisor which was supposed to be a temporary thing back then. I was like, “I’ll do this until I can jump back in.” I love the movie Wall Street with Michael Douglas and I was like, “I want that.” What happened was not part of my plan and I loved it. I loved helping people and working in the financial world. I excelled and became a top financial advisor all the way up to 2008. I was crushing it and had flipped a couple of houses. In 2006, I did my first flip. In 2007, I did another. In 2008, I dove in big and I had my retail shops.

My one lease came due. Two buildings down were this dilapidated paint store. I had this dream of converting it into a three-unit strip mall and I dabbled in real estate. I’m like, “I can do this.” I took the plunge borrowed money from a guy I shouldn’t have, I call him Knuckles, but he was the only one silly enough to give me $340,000 or $370,000. I started this process and it all seemed like it was going good, and then the great recession hit. It brought me to my knees in a way that I’d never been taken down. It happens so rapidly and I remember I had depleted all my assets.

I was doing well as an advisor and I had nothing. I was literally making these monthly payments to this hard money lender by completely stripping everything out of my stores for the business it was doing and everything I made in my financial advisory job. I got down to one payment. I have enough money for one more payment. This is that point when you’re at a low point and you have to make hard decisions. My girlfriend had moved into my house, I remember the night I came home and I said, “Lorissa, I need your help paying the mortgage and utilities, and by the way, my friend Pete is moving into that bedroom down the hall. My friend Jessica is going to move into the bedroom upstairs. What do you say?”

I had a 50/50 shot, but I think she liked me because she did stick around and she helped me. By the skin of my teeth, I made it through that period of time and that got me to 2009. I was beaten up but the store was moved. I had my strip mall and I ended up refinancing out of that hard money lender. Now, what I had comes through a hard time and I’m like, “This real estate thing is pretty big.” The other thing that I always knew is I’ve been in the financial world for long enough to realize that my wealthiest clients were in real estate. If they’re all in real estate and they don’t want to put their money in stocks, I should probably get into real estate.

Warren Buffet says it best, “Buy low, sell high, and don’t lose money.” Remember that because we’re going to talk about that a little bit for methodology and what we’re doing. To wrap up the rest of the story, from 2009 to 2014, I bought real estate. Pennies on the dollar and I did well. I got up to 36 units. In 2014, my 37th deal, I brought it to the bank with who I had a relationship with and they said no. He said, “Mr. Naugle, you don’t fit in the little square box called debt to income, and because of that, our bank has to freeze your lines of credit.” What happened is, it spiraled very quickly and I ended up having to sell all 36 units and the dream house that I and Lorissa had bought.

What I’m trying to get at is my life has been this giant rollercoaster ride all the way up to this point and this one hit me the hardest because I had money and lost it. I had money and assets again and I was losing it. This time, I wasn’t just losing assets and things. Lorissa, who had been with me for this whole thing, we were having difficulty because it’s hard when you get in these dark places to be positive and we split. I remember at that point, I was literally at the very bottom. Everything is somebody else’s fault and you play the blame game. I remember getting a postcard in the mail and it came at the right time. It was a three-day seminar to learn how to flip houses.

Why would I go to the seminar to learn how to flip houses when I’d already been doing this? I’ll tell you the answer is, I was so down in the dumps and I had nothing to lose but by going to this. They gave away a free iPod shuffle and that was enough to get me there. True story. That’s the only reason I made it to that event and then at that event, I didn’t want to be there. They’re talking and I’m like, “This is a sales pitch,” but then two guys get up in front, Greg and Mike. I’ll never forget them. Greg is now my business partner. They start talking about money and my ears perked up. I’m like, “I’m in the financial world. What are they talking about?” As I listened to them, they’re talking about money in a completely different context than I ever heard it.

TTL 836 | Wealth Secrets
Mapping Out the Millionaire Mystery: Step Into the Secrets of the Wealthy

They’re using money and doing things with money that I only heard the wealthy do and I didn’t even think was possible. I’m thinking to myself this whole time, I’m like, “These guys are doing the exact opposite of every single thing I’ve been taught to do as a financial advisor. I’m missing something.” I dove in. That was in 2014. What happened is I built relationships with these two multi-millionaires and I learned some secrets of the wealthy from Mike and Greg.

That secret that I learned was involving changing one thing in my life. It’s what’s catapulted me in that seven-year timeframe from then until now. I’ve done 268 flips, I’ve owned large portfolios of rental, and managed tens of millions of dollars, and here I am now. As you’ve mentioned, I’m known as America’s number one Money Mentor. I teach the truth about money and how money and what the wealthy do, but all that came from a journey of technically having it, losing it, and figuring out what I was doing wrong. It’s an important rollercoaster.

It’s important to get that backstory. I was selling subprime loans right before the crash and it seemed like nothing could fail. Everybody was doing stated loans. They could buy million-dollar houses and be a hostess, and it was like crazy. I didn’t work for a company that did crazy loans but at that time, it didn’t make sense to me that you can get all this. A lot of us should have seen a lot more things coming, but right now, it has that feel. It seems like the market is so big. Everybody is buying and everybody is moving.

Here at Arizona, a lot of people from California and we’re seeing a big boom here. It’s hard to know how much will stay. Some places are more stable than others. They continue to go up more than other places but if you’re going to buy low and sell high, it doesn’t seem like a good time to buy because everything seems so high. Everybody has that sense like the stock market. What if I said that about Apple in the day? It seemed high and who knows where the ceiling is. What do you tell people who were thinking about buying real estate?

This is such a great topic and a timely one. I skimmed through the last several years and one of the things I do is surround myself around multimillionaires and billionaires that are in this space, and I study it like a nerd. I studied market patterns, economics, and different economic theories. Here’s what all my research has done. I’ll save your entire audience a lot of work. We are literally at the very top and you talked about 2008. What was going on. A lot of people are like, “That can’t ever happen again,” it’s happening right now, identical. Maybe it’s not GMOs, it is CMOs. It’s different names but they’re doing the same things. There’s so much money in the system because the government keeps printing it.

The banks have to move that money. They do start doing things and taking a lot more risk in doing it because they technically have to move money, and that’s their job. What is happening is this whole COVID-19 thing. These massive amounts of money printing and stimulus that’s happening have created these massive bubbles. A lot of people say, “It’s different this time.” No, it’s not. It is the same as it was back in 1929. It is exactly the same now as it is in 2006 or 2007. Get in your car and drive around. Drive through some of these new developments. How many houses can they actually build? I live in Buffalo and this is not a desirable place like Arizona, Utah, Texas, or Florida.

There are so many developers building massive developments and you got to ask yourself, “How are people able to buy these houses for $600,000, $1 million, or $1.5 million. Is there that many good jobs?” When you watch the news and you look around, it doesn’t seem like there are that many good jobs. The exact same bubbles are happening that always happen right before a giant crash. Except this one is a prolonged bull market. We have been in a bull market since 2009. Since COVID-19, around March or April of 2020, the market has literally gone straight up. Look at the charts. I study this stuff. If you follow The Economist, I am not going to get into any names, but there’s a whole bunch of them. Each one has its own little things. You got to put them in a blender and blend it up and see what you get.

Sometimes, you have to do the opposite of everything you've been told to do because that's what the wealthy and the big money do. Click To Tweet

Here’s what’s coming in the next couple of years. The whole thing is going to collapse. There’s no other way for it to go any other way but I can’t tell you when. Nobody can. You cannot time the market. Here’s what I’m doing. I had a large rental portfolio and I have done exactly what I had been taught to do. That is buy low, sell high, and don’t lose money. I’m selling everything and I am massively very aggressively trying to sell off my rental portfolios, which is tough because of the moratoriums. The renters don’t want to show units but I am doing it.

I’m getting top dollar for these properties and that’s what we’re supposed to do. I’m not saying this is the right philosophy for everybody but for me, if I sell it all and get incredibly liquid, sit back, wait, park my money in privatized banking plans so that they’re guaranteed to earn the interest rate, and provide liquidity and control. When the market drops, I strike again as I did in ‘09, but without making the mistakes I did. If you want to become wealthy, a multimillionaire or a billionaire, this is what they do. They wait. The problem is, nowadays, people are wrapped up in the euphoria of what we call FOMO, fear of missing out. You mentioned Apple and you look at the stocks, “It keeps going higher.” You look at Crypto, “It keeps going higher.” “I can’t miss out. My neighbor is in it.” “This person is doing it and I don’t want to miss all this.”

It is the biggest and oldest trap in the financial world. This is what they want you to do and they want you to buy into this whole euphoria because the guys at the top are watching and eventually like dominoes. If you’ve ever seen dominoes, it takes a long time to set the dominoes up in your pattern, but the second one goes down. It’s all done. That’s exactly what happens when the stock market goes down. You saw it in March 2020 and you’re going to see it again in the future. The question is, are you ready for what’s coming? Are you literally going to capture the opportunities that come out of this or are you going to ride the rollercoaster down like I’ve done too many times in my life?

I had a house that I bought for my kids when they were in college and I probably bought it when it was towards a higher end of the market. It crashed but I still needed the house and all that but I ended up selling it later. If I had held onto it, I would have made big money. Is it the long-term thing? Sometimes, if you hold onto it long enough, it’ll eventually come back. You’ll get the high again. It depends on how much tolerance you have for sitting through the waves.

Precisely. Here’s the thing. You heard me say it and I might’ve scared you a little, and you’re thinking, “Sell and sell.” If you can hold through this anytime you invest for the long-term, your chances of making money are there. The problem is, let’s pick on the stock market or real estate when everything deflates and it will when it deflates. What’s going to happen? The same thing happens in every other recessionary or depressionary period. People lose jobs and money gets tight. Things have to go in order to provide basic necessities of life, housing, clothing, and food. If you’re in the stock market or 401(k), and all of a sudden, the market crashes. You lost 30%, 40%, 50%, you lose your job because of this downfall, and you need money. What are you going to do?

Are you going to think about, “I can’t sell these stocks because I got to wait the long haul, so I don’t lose money?” No, you’re absolutely going to act on fear and desperation, and you’re going to sell those stocks. Look at 2009 and 2010, how many people liquidated when the market fell apart because of fear. They bought back in and they’d made their money back, but people don’t realize that if you lose 30% and then you jump back in. It’s going to take you 43% to make back the 30% that you lost. It’s called the draw-down effect. In real estate, the same thing. If you own a rental, you bought a property and for a very good purpose. You sold it, but if you held that, you would’ve been just fine.

Real estate is probably the greatest investment on earth because, in the downward cycle, one thing you know is that you can use the rents and rents don’t go away in the downward cycle. You can use the rents to stabilize and hold through those periods but the problem is, if you’re too highly leveraged in your rentals or your real estate portfolio, it’s very hard to hang on. You got to make sure that you’re not leveraged, that you’re not in a dangerous situation. If the market does fall and your property loses, let’s hypothetically plan for the worst, 30% of its value. Are you okay surviving with your current rent rolls? If you are, awesome.

TTL 836 | Wealth Secrets
Wealth Secrets: Sometimes if you just hold onto it long enough, it’ll eventually come back and get high again. It just depends on how much tolerance you have for sitting through the waves.

 

I have a question for you because I have a lot of people who are Boomers reading this, they are over 62, and could get a reverse mortgage. Would it make sense to take out that money, put it into buying something else, and investing somewhere else? You’ve got all this money in your house. You can get a higher amount out on a reverse mortgage than you ever could.

Let me put it in context. First off, I’m not a fan of reverse mortgages. There’s a place for them but they’re widely put out there as being the silver bullet. They’re not. They’re bad for most families, especially when it comes to legacy planning. There is an alternative and there are private equity groups. QuantmRE is one that I love. It’s big pension plans and big money put their money together. What they will do is almost the same thing as a reverse mortgage but they won’t take the house. They’ll give you the equity in your house without any monthly payment, without any debt, and what they’re going to do is share in the upside potential of the appreciation. Imagine if you’ve got all this equity in your house and you’re like, “I want to get this equity out so I can use it.”

I’ll tell you why that’s important but you don’t want the monthly payment. You can’t qualify for the home equity line and you’re scared to death of a reverse mortgage because your family will get nothing at the end. This is the alternative because they’re going to give you the equity. You’re not going to have any debt and not going to have any monthly payments. You don’t have somebody breathing down your neck and you know about what to do and what you can but all they’re going to do is they’re literally going to share on the up or downside in the future of the appreciation in your house. It gives you the ability to stay in your house for 30 years if you want.

When you sell your house, which most people will eventually sell their house, they’re going to share in that upside potential. If your house appreciates in 30 years, 20%, they might split that 20%. 60% to you 40% to them. It’s an awesome alternative. Let me go one layer deeper on that. Equity in people’s houses. This drives me nuts. We’ve seen one of the biggest increases in property values that we’ve probably almost ever seen. I could be off on that one a bit but it’s crazy. People’s houses have appreciated 30%. You could have bought a house for $150,000 and It’s now worth $300,000 or more in Arizona and some hotspots.

All that equity is in your house and doing nothing to change your life. You can brag about it and be like, “My house is worth this and I’ve got $150,000 in equity.” Boil that down, get off your high horse and think about it. What is that equity doing to change your life? Are you taking more vacations? Did you take the grandchildren or the children on a vacation to Disneyland with the money that you have in your house? No, it’s literally sitting in your house, lazy doing nothing. It’s the laziest money on earth. I always described it as imagine you had a hard day at work, you’ve worked a double shift and you come home, you’re exhausted. It’s dark out and you open your front door. You look into your living room and right there on your couch is your money eating potato chips, drinking your soda, and watching your TV. Your money looks back at you and you’re exhausted. It says, “What? Did you have a hard day?”

That’s your equity in your house until you take that equity in and actually send it to work, which your money wants to work for you, but you’ve never been taught how to make your money work for you because most of us have only been taught how to work for money. What you need to do is extract that equity and you can do that through a home equity line of credit. You can do it through the private equity group. Quantm or even a reverse mortgage. You’ve got that money in your hand. The question is, what do you do with them? You can’t take it and put it in a bank account. You defeated the purpose and that’s what people do.

One problem Americans have and probably worldwide is debt. Bad debt and credit card debt. There are tons of people with credit card debt. If you had equity in your house, you took that equity out, and let’s say it with a home equity line that costs you 5% interest. You own Visa, Amex, and Amazon credit cards. That’s $30,000 and they’re charging you an average of 15%. If you’ve got money at 5% and you’re paying 15%, you want to make a quick 10% without any risk without working any harder. Take the equity in your house. Pay off the credit cards, take the exact amount you were paying to the credit cards, and pay it back to your home equity line of credit. A lot of people don’t even think about that.

Banks are risky drivers. Click To Tweet

I’m surprised many people don’t think to do that too and it’s amazing.

It’s brilliant because that is the entire formation and foundation of the infinite banking concept. It’s simply moving money. You literally, in doing that, are becoming the bank and treating your money the same as a bank treats your money every day. Why not make the interest?

Back to your statement about taking your money, do the Quantm thing or a reverse mortgage thing and you’ve got all this money. If you rather than take it, locked or some other kind of thing where you’re going to have to pay it back, you’ve got all this equity and you think, “What do I do with it now?” That’s where a lot of people who I talk to like that sense of safety knowing it’s in their house and they’re not going to lose it. They don’t want to have to be paying in their retirement the home loans and things like that. That’s understandable. We’ve given them a couple of options with the Quantum and reverse mortgage where you’re not paying. If you’re saying real estate at the top that may not be the place to invest, where would you tell them to invest?

That’s the billion-dollar question because that is the trickiest thing. We know that if we invest now, we’re doing the opposite of what the Warren Buffetts and the Wall Street guys say, which is, “Buy low, sell high, and don’t lose money.” If we buy now, we’re buying high. Chances are we will sell low and we will lose money. Where do you take this money and put it? If you don’t have any credit cards because that would be obviously the first place, take back the money that you’re giving away to everybody else in debts. I tell people, “If you take a home equity line of credit, it doesn’t mean you need to tap into it.”

It doesn’t mean that you need to go and extract that money but having the home equity line of credit gives you access to the capital. When the market does drop, you then can deploy that capital into deflating asset prices. I don’t care if it’s buying stocks $0.30 on the dollar, buying real estate when it deflates at $0.20 on the dollar. Whatever it is, you have the ability. The problem people made in 2009 and the problem people made even in the past years is they had these home equity lines of credit but they didn’t take the money out. All of a sudden, the bank gets a hold of it and says, “Everything is falling apart. We’re going to freeze everybody’s line of credit.” All of a sudden, the equity you thought you had access to, you have nothing. You got to play the old cup game where you put the ball in the cup and guess where it is.

You got to take the money out. March 2020, I extracted all the money from my lines of credit. People thought it was crazy because they’re like, “Why would you pay interest on that when you have nowhere for it to go?” I said, “It’s all about you being in control of money.” I took all this money from these lines and I put it in a variation of about six different banks. Some of those banks are private banks. Private banks are not banks. They’re insurance companies. I put as much of that money into giant neutrally owned insurance companies so that it was out of the bank where I had the home equity line because the bank that I have a home equity line decides to freeze it. They can freeze it and I have no access.

If I take the money out of the home equity line, I put it in my bank account at the same bank. You didn’t do anything. You’re in the same boat. They’ll freeze it. They’ll take the money out of your account and pay that line back. You’ve got to get it out of that bank and into some other banks. I basically moved money from credit unions to community banks but the majority of my money and wealth sits in private banks. Mutually owned insurance companies. Why? Because they don’t operate like a bank. Banks are risky drivers and banks don’t put their money where they tell you to put your money. Banks will tell you, “Put your money in mutual funds, ETF, and put your money in CDs.” They don’t put their money there and look it up. It’s called BOLI.

TTL 836 | Wealth Secrets
Wealth Secrets: If we invest today, we’re doing the opposite of what Warren Buffett and the Wall Street guys say: to buy low, sell high, and don’t lose money.

 

They put their money in giant mutually owned insurance companies through a vehicle called BOLI, Bank Owned Life Insurance. As soon as I say that life insurance, everybody is like, “Here we go.” Exactly what I said when I first heard about it, but you got to do the research. If the wealthy, the banks, credit unions, and giant corporations are storing their capital in mutually owned insurance companies, why are you not? You’ve always been told that’s the wrong thing to do but that’s what I was telling you. Sometimes you have to do the opposite of everything you’ve been told to do because that’s what the wealthy and big money do.

Banks were also investing in these mortgage loans that were repackaged. I remember talking to Ken Fisher who was on the show and a friend of mine about this. How do you know where to invest? He’s big at saying, “Once it’s in the newspapers. it’s too late. It’s already played out in the market.” I’m curious. You’re not mentioning the stock market so much as a place to invest. Do you ever invest in stocks and get into the market or are you mostly stick to real estate and this bully type of thing? Where else would you invest?

I absolutely invest in the stock market. As a matter of fact, I have a full-time trader that works for me trading our accounts but we don’t trade the way that normal people do. We don’t buy things and hang on to them. We trade, sometimes, a frequency of one day. We’ll buy something in the morning and be out in the afternoon or buy it in the afternoon and be out in the morning. It’s a complicated process that can be simplified but most people won’t learn it. That’s how I trade the market but right now, I am definitely very much moving out of the markets. Here’s an easy one. Let’s look at where else were the banks and giant insurance companies park their money? US Treasuries.

Ken Fisher talks about this too. If you understand how US Treasury bonds work, you would understand why insurance companies in the wealthy moved their money into them in times like this, when the markets are high because there’s nowhere to put your money. You don’t want to put it in the stock market like Crypto, maybe. Everybody is talking about it but I would say like what Ken does, “It’s too late.” You’re at the top and it’s already pulled back a lot. It’s going to pull back a lot more and then I’ll buy it but not now. US Treasuries are guaranteed. Their bonds are issued by the US government. You might be like, “US government is in debt.” Yes, but they’re still your best bet.

US Treasuries are guaranteed but here’s why you would put your money into US Treasuries. Number one, they’re guaranteed and number two, they’re incredibly liquid. There is always somebody willing to buy your US Treasury, even China will buy it from you. Don’t get excited about the yield. The yield on the bond right now might be 2%. You’re like, “That’s terrible and I don’t want to make 2%. I can put it in Apple and make 20%.” Two percent is what you make but here’s the thing. Since COVID-19 started, this is easy to understand, the Fed pulled interest rates to almost zero. Fed rates are close to 2% on the treasury. We’ve had a 2% increase in about a year’s time when the whole market does fall apart. If we bought US treasuries right now, they are at a very low purchase price because bonds trade inversely to the market into interest rates.

If interest rates go up, bond prices come down. You can buy these bonds cheap but when the market collapses again, I keep repeating this and, it will. Stop thinking that’s not going to happen because it will. When it does the first lever that the Fed pulls is what? The interest rate lever. They’re like, “Let’s bring the interest rates back to zero. That’ll stimulate people to spend money and get things moving again.” They’ll pull that lever. Interest rates will go from 2% down to 0%. If you did the math on a third-year US Treasury, if you bought it now and you waited with it, you wouldn’t be happy because you’d be like, “I need 2%.” When the Fed dropped rates from 2% to almost 0%, do you realize your bond would appreciate in value between 30% and 40%?

That’s a 30% to 40% growth because it’s inverse. You could google inverse relationship of bonds and it’ll show how it works. If interest rates go down, if you drew two arrows right across, one had drawn arrow down, that would be interest rates. If interest rates go down the other arrow draw, it’s going up. That’s your cross and that is the price of the bond. If interest rates go down, the price of the bond goes up. It’s very easy to understand. Draw a line right through the middle of that cross and that’s your coupon. That’s your interest rate. Call it 2%. You’re always making 2% on your money, which is not barely pacing inflation but it’s still better than what the bank pays you. If the interest rates get pulled from 2% where they’re at zero, the price of that bond, that arrow that goes up, it goes up roughly 30% to 40%.

No more than 5% should go into any one position. If you do, you're exceeding the amount you should. Click To Tweet

From 2%, let’s say instead of dropping it, I know it has to drop. If they didn’t and it goes up, then what happens?

The price of the bond goes down then you should buy more of them.

It’s almost like dollar-cost averaging.

It’s exactly what it is. I’m telling you it might happen in the next couple of years where rates tick up a little bit, but you’re never going to be able to get the top and you’ll never get the bottom. I know that Ken talks about this, too. Ray Dalio, he was the CEO of the largest hedge fund in the world manages China’s money. He talks about this all the time. You can never time the market. People tell me all the time, “I’m going to wait it out and when the market gets to the top, I’m going to sell then.” I’d look at them, I laugh, and I say, “Good luck.” The best in the world can’t do that.

What’s interesting to me is not only that but this influencer marketing. The GameStop and the things that have changed. I don’t even grasp how that happens. Nothing really changes at one person or a group or different could have such an influence on something that nothing happened. How has that not manipulation or illegal in some ways? Can you give us a little background on that?

I watched that and I was like a fan right in the crowd that we were trading that too but I was shorting it just like the hedge funds because I always side with the big money. What happened there was something I never thought possible. Social media came together. A bunch of small traders, the Robinhood traders. You’re talking about millions of small investors and they focused all their energy on one thing, GameStop. They took a company which is a company I would never ever invest in. The best day in the world is a $20 stock and that’s me literally being gracious.

They ran this stock up to over $500, which is unbelievable and what happens is, because I was on the short side, when you short a stock, you’re hoping that it goes down. If you’re shorting a stock, what’s happening is when that price goes up, there’s a thing called margin that you have to cover. That’s the brokerage. They lend money to you, that margin as you start going up in price when you wanted it to go down. That spread gets bigger and you got to cover that margin. You heard them talking about this, “You got to cover it.” These big hedge funds had to keep dumping money into their brokerage to cover this margin. I remember when this thing was going down. I’m like, “How can it go higher than $200?” My trader and I were like, “I don’t know but we can’t sell it now.”

TTL 836 | Wealth Secrets
Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant

I’m like, “I’ll put another $20,000 in to cover,” and then two days later, “it’s up to $400. We got to cover.” I dump another $25,000 in. That’s hard. Think about that. The hedge fund does have a limit and they got to that margin call. It was hundreds of millions of dollars and it was like, “We got to get out.” They cut their losses and they took millions of dollars in losses. I commend all those small investors because they made great money. If they got in and they got out around $200 to $500, they made silly money.

They could have paid off their house in some cases but the problem is the mother who has that 529 Account or that college account. She’s like, “This will pay for my kid’s school.” She bought in at $300 and it rose to $500. She didn’t know to sell. She thought it was going to keep going because it’s FOMO and greed. All of a sudden, it drops and all her dreams of paying for that college are gone, and it will never come back. That stock will never ever be what people wanted it to be. It was interesting to see how that happened. It’s still at $156. For anybody that’s investing in Dogecoin, do you realize that started as a joke and now it is more valued than Ford Motor Company? If you’re buying into that, you need to look in the mirror and ask yourself a serious question of reality, “Does this make logical sense? Does GameStop at $156 make logical sense?”

Does it matter if it makes logical sense? If at the time you can get in and get out and people are looking for those, is that going to be the next day trading thing? Those people can sniff out the ones that are going to be influencer-driven.

Correct and it’s a great play. We play it all the time. I’m always looking for those opportunities to figure out. We used to watch the hedge funds, “What are they buying?” Now, what we’re doing is we’re watching, “What are the Reddit investors looking at and driving up?” We can get in and get it but does the average person know enough to do that consistently and persistently. We’re professional traders. I’ve been doing this for years and I know exactly what to look for. The average person doesn’t. They got money in their 401(k) and they dump it into a GameStop. They’re thinking long-term because that’s what they’ve been taught. They don’t know to buy it and sell it.

Here’s the best advice anyone can do. If you’re going to trade the markets that way, you need to have a set of rules, and those rules include, “If I buy it at $10, what are we going to exit at?” Let’s say $20 and you’ve set the rules. You write it on paper. “If I buy something at $10 and it goes to $20, I’m out,” but then when it hits $20, don’t get greedy. Don’t let the euphoria of, “It’s going to go higher. I’m not going to sell it.” You will lose every single time. You’ve got to follow the rules and also position size. I teach all this, but the position size is when you put money into one position. Here’s the rule, 5%. Don’t put more than 5% unless it’s cash, US Treasuries, or privatized banking.

No more than 5% should go into any one position. If you do, you’re exceeding the amount you should and people push that limit all the time. I would say you can push it on gold. You could have 10% in gold. You can have as much as you want in cash. Privatized banking is guaranteed and so is US Treasury. Sky is the limit there but again, people don’t trade with rules. Professional traders do and hedge funds do. The average person trades on emotion and rides the rollercoaster. Unfortunately, when this whole thing flips and goes the other way, there’s going to be a lot of people left holding the bag and they’re going to arrive at things straight down. That’s how people lose money. It’s an old game.

It’s Interesting to look at some of the ones that I wouldn’t have thought would do so well. Domino’s, for example, tied into the technology of how people were able to buy their pizza. You wouldn’t think that a pizza company would do everybody else in so many ways. Is that something that would surprise you or what do you think of Domino’s success?

When you're at the top, you can plan that exit down the mountain any way you want. Click To Tweet

Domino’s success is the same takeaway as a book called Blue Ocean Strategy. They found a need within an old industry, the pizza industry, that nobody else was going after. They literally created a blue ocean for them. They’re a phenomenally run company and they sell pizzas. You pack your car up, they bring your pizza, slide it in your trunk, you close the door, and you’re gone like no big deal. They figured out a piece that was missing and many other companies have done that. Like Uber, they disrupted the taxicab industry. We can go all day long talking about companies that have created blue oceans. Apple did it. There was that time when we used to buy CDs or even cassettes at my age. Eventually, it got to the point when Napster started the free music you could download but Apple came out with iPod, whatever it was.

That’s crazy. It was only a couple of years ago but they took an inefficiency in the market. They saw something and they created it. That’s what Domino’s did and there are companies doing that every day but people are like, “Tesla will never go down if the market goes down.” Wrong. “Apple will never go down. They have too much money.” Wrong. You don’t understand market sentiment. When the market goes down, everything goes down with it. If you told people back in Enron’s time, it was going to be bankrupt. They would have been like, “You’re crazy.”

That’s when I teach a lot of courses. Still, we talk about Enron a lot. One thing that was a good lesson with that one is if you are going to invest in your company stock for your retirement account. That’s not always a good idea because the company turns into Enron. Not only do you lose your job, but you lose your retirement if that’s your main focus and a lot of people do that. I would imagine a lot of people who work for Apple probably think, “I’m putting everything in Apple because look how great we’re doing.”

It’s like Lowe’s or Home Depot. I talk to people all the time and I’m like, “Let’s look at your holdings.” I look at it and I’m like, “Why do you have 60% in Home Depot?” They’re like, “It’s a great company and I work there.” I’m like, “It might be a great company now. In five years, it might not be. That is foolish. You are a risky driver. I’m not getting in your passenger seat because you can’t do that. That is not trading with rules.” It’s such a difficult thing to wrap your head around all the things to do. What I always tell people is to start with the basics. All this stuff is probably making your head spin with us talking about Domino’s and markets going up and down and the big crash that’s coming.

Here’s the simplest thing. Look at your needs and goals in the future. What do you need? Are you retiring in five years? If you are, you should not be in the market no more than 10%. Fair warning to you. If you’re retiring anytime in the next ten years, you should not. I would take that money and I would put that money in US Treasuries. I would find safe places to park that. I know that you’re not going to be happy with the return but I’ve never met a person that wasn’t happy making 2% when everybody else lost 30%. They’re the biggest cheerleaders like, “I made 2%.” If you’re not excited about 2% because everybody is making 10%, 15%, or 20%, but when everybody loses 30% and you made 2%, you’re at the top of the world.

Here’s the way I look at the analogy, a climber. When a climber gets to the top of Mount Everest, he is at the top of the mountain where he looks out, and he can see every single thing. The stock market is at the top of Mount Everest. It could go a little higher, but what are you going to miss out on 10%? You’re at the top and it’s a beautiful view. You’re above the clouds, you can see everything. When you’re there, if you pulled the plug and you just got out, you literally locked in unbelievable gains that most people would froth at the mouth about because it’s so good, and then you sit there at the top. It’s a beautiful view. Spend some time up there and wait. When everything starts falling apart and you start watching the news, it’s like, now it’s down $102, but let’s say it was down $1,000 and everybody is screaming, “I’m losing everything.”

You’re still at the top of the mountain looking at the view and you’re like, “Everybody is losing? Maybe I should try to plan my exit down this mountain.” When you’re at the top, you can plan that exit down the mountain any way you want. You can take the easiest path or the hard path. You can go anywhere you want when you’re at the top. When you’re at the bottom and you want to get to the top, if you lose 30%, do you want to get back up? Climbing Mount Everest, from what I hear, is pretty tough and people die doing it. I’d much rather be at the top than at the bottom of Mount Everest. The market is at the top and real estate is massively in a bubble in some parts of the country.

TTL 836 | Wealth Secrets
Wealth Secrets: You don’t so much need an advisor. What you need is to teach yourself and learn how to be in control of your money.

 

Can it go higher? Yes. Can you still invest in real estate and make money even though it’s at the top? Yes, but you should know the strategies. If you don’t, sometimes, it’s best to sit at the top of the mountains and wait. It’s not hard to know when because people are always like, “I don’t know when to buy back in.” Open up CNBC, your fidelity account, or Vanguard account. When everything is red, everybody is screaming that they’re losing their jobs, jobless claims are rising again, and everything else, that’s a good sign that now is the time to start buying back in. While Warren Buffett is alive, when that man starts buying, that’s a good sign that you should start buying too, but right now, is Warren Buffett buying anything? Most people probably don’t even think he’s alive anymore because he hasn’t been in the news much.

He’s around and sitting at the top of the mountain, enjoying the view, waiting for the party to begin, and then he’ll start putting money in those. I don’t understand why people can’t see that big money is not doing the same thing that the average person is being told to do. Ken Fisher talks about this. They all do. The big guy is at the top that nobody is listening because of FOMO, their fear of missing out, on something. It’s the inherent gambler in us. We all are wanting to gamble and take that little extra gain, and that extra gain could cost you your entire financial future.

It’s frustrating for a lot of people because they want to hire a financial advisor. As you said, you did that and do that. You do these different aspects of it. I’ve talked to so many different ones and they all have such unique perspectives. It gets very confusing. Everybody I meet who seemed to have made the most money did it through commercial real estate. You think, “Maybe I need to look at that,” You look at right now, nobody is able to work in these buildings and it’s so confusing. How do people know who to trust?

I was a financial advisor at a very high level for many years until I retired when me and my wife got our show on HGTV, but I teach people the exact opposite. I teach them that they don’t so much need an advisor. What they need is to teach themselves and learn how to be in control of their money, and then simple philosophies, simple strategies, and what to do based on their needs and goals. It’s all needs and goals. What are you trying to do? What are you trying to get? Let’s figure out how do we get there. You mentioned commercial real estate. That would be a good thing to look at but it’s a bit early because you’ve got all these moratoriums. Commercial real estate is going to get crushed massively. Mark my word on it.

These big landowners can’t get rent. They can’t collect rent. The government says, “You can’t evict your tenants.” I know I’m a landowner but when this all happens, depending on how long these moratoriums get, these buildings will drop in value because of simple supply and demand, and it’s going to happen across all asset classes. Even single-family homes might only drop 5% or 10%, but that would still be a good buying opportunity. Everybody has to understand that there are ebbs and flows in the market. When I say the market, I don’t just mean the stock market. I mean the real estate market, any market. They work in incredibly predictable patterns. The average person isn’t taught this because there’s no money in it. The average person is not taught how to put money into these privatized banks. Do you know why? There’s no money in it.

Everybody is taught to do things with their money. Ken talks about annuities. He hates them because they’re super expensive and advisors push people’s money into annuities. Why? Big old fat commissions. Whether it’s me, America’s number one Money Mentor, or Ken. We’re telling you to do the opposite of what the mass is telling you to do because you have to do what’s best for you. I’ve never met anyone that hired an advisor and the advisor cared more about their money than they do. For everybody reading this, you will care more about your money than anyone else. Wouldn’t it make sense to be a good steward of your money? Learn a few things, take control of your money, and then move your money the way the banks do.

That sounds complicated but I can teach you how to do it in 90 minutes. Ken Fisher could teach you how to do it in 90 minutes. This is not hard. You’ve just been trained your whole life to think that it’s above your education level. It’s not. You’ve been taught that because somebody else had to make money on you giving them control of your money. Think about that will change your entire dynamic of how you invest in the future. I love Ken Fisher’s model. He beats up on the big guys, downplaying or bringing out the truth of annuities, and he’s got a great strategy for managed assets. Is that right for everybody? No, but for his group, he became a billionaire by doing the right thing for clients. I do the same thing but I’m not taking possession, controlling, or managing your money. I’m teaching you how to take control.

You have this book, as I mentioned, Mapping Out the Millionaire Mystery: Step into the Secrets of the Wealthy. How else would you teach them? Is it through your book, through your podcasts, how are you helping them?

Not everybody likes to read books, so I got the podcast. We do weekly webinars called The Wealth Webinar series. We do free events all the time. I’ve been taught by my mentors to give my best stuff away for free, and we do that. We have a three-day event that costs $297 and we teach you for three days all about this. That’s how I teach people. A lot of my education is completely free. I am so empowered. I’ve been fortunate to make up a large amount of money with the different things that I’ve done, whether it’s real estate, private funds, or privatized banking. I now can go out and teach people things that will help them get control of their money.

It doesn’t make me a penny but I make money three layers deep. Some people want to make all their money upfront. When I was an advisor, I had to sell and go out. Make the sale. Otherwise, I don’t eat at night. That’s the mentality. When you start talking to the wealthy, they get advice from advisors or advisory groups that don’t make money by selling something. They make money by creating a return and putting that person in a positive wealth situation.

The big money is not doing the same thing that the average person is being told to do. Click To Tweet

It’s a different dynamic, but the average person doesn’t think they have access to that and they’re like, “I’ll give up control because that person’s smarter than I am with my money.” All of a sudden, when they lose 30%, they regret making that decision. They should have spent 1 day, 2 days, or 90 minutes watching a video to learn what to do with their money from the baseline and foundation level and then build upon that whatever they liked to do. Investing is not complicated. We’ve been taught that it is.

It’s a little complicated but I think you’ve made it a lot easier. Let’s put it that way because it can be overwhelming for so many people and you offer so much great advice for people who can use this. If they’re looking to find you, they want to get into your webinars, follow you on social media, or your website, how can people find you?

It’s very easy, go to www.ChrisNaugle.com. Everything on my website is free and you can get my books for free. All the training are under Free Resources. The number one thing I would tell people to do is when you go to the website, you want the number one thing that will change your life by changing one thing, watch the 90-minute training on there. That 90-minute training back when I was in that hard place in 2014 is what changed my entire financial destiny and it will do the same for yours. Start there and then YouTube, I put all my best stuff on YouTube, and it’s kind of funny. All this stuff is free. Watch it and apply it in your life. Don’t watch things and not apply them. Knowledge without application is useless. You have to learn, take 1 or 2 things out of each, and apply them immediately.

This has been great, Chris. This is so helpful to so many people. Thank you so much for being on the show.

It was my honor and privilege. This was a lot of fun.

I’d like to thank Chris for being my guest. We get so many great guests on this show. If you’ve missed any past episodes, you can go to DrDianeHamilton.com. At the top, there’s a lot of dropdown menus but there’s also a bunch at the bottom as well. If you want to read the blog, you can go to the Blog or you can go right down to the bottom and check out some of the other links that we have to take some of the assessments that we offer. To look at some of the testimonials, to find out more about consulting and speaking. There’s so much content on my website. I want to make sure you guys check it all out. I hope you enjoyed this episode and I hope you join us for the next episode of Take The Lead Radio.

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About Chris Naugle

TTL 836 | Wealth SecretsChris Naugle is a highly sought-after speaker, author, and America’s #1 Money Mentor. His success includes managing over 30 million dollars in assets in the financial services and advisory industry and tens of millions in real estate business, with over 200 transactions and an HGTV pilot show since 2014. In 20 years, Chris has built and owned 16 companies, with his businesses being featured in Forbes, ABC and House Hunters. He is currently the CEO and founder of The Money School™, and Money Mentor for The Money Multiplier. As an innovator and visionary in wealth-building and real estate, he empowers entrepreneurs, business owners, and real estate investors with the knowledge of how money works. Innovating what it takes to break the chains of financial slavery, Chris is driven to deliver the financial knowledge that fuels lasting freedom. To date, he has spoken to and taught over ten thousand Americans.

 

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