Summary: Want to know what we learned during our week in Sun Valley at Tony Robbins’ Platinum Finance event in early February 2020? This is your chance to get a sneak peek into what speakers like Ray Dalio, Paul Tudor Jones, Bill Gross, Harry Dent, and Peter Diamandis shared with us about the future and opportunities in global markets and new technology. If you’re ready to reconsider your current investments and perhaps even expand into new investment areas, jump in and get ready to take notes!
With the stock market in a nosedive, I realize I should have written this post the day Tony Robbins’ Platinum Finance ended, Feb 13th, a little over two weeks ago.
And, in full disclosure, I should have put into place the plan we put together a little faster too. It would have saved me a ton of money. Actually, it could have also made me some serious money!
But hindsight is 20/20. And there’s still a chance for me to put into place some of the important concepts that I learned from the trip.
So, with that, I want to summarize the main learning points I took away from the Platinum Finance week so that you and I both can start to make some moves within our financial portfolios with the clarity gained from the teachings of today’s greatest financial minds.
What is Platinum Finance?
For those of you who haven’t heard me talk about Platinum Finance before, here’s a quick explanation.
Tony Robbins has something called the Platinum Partnership, which Kenji and I both joined in 2019. In addition to gaining access to all of Tony’s public events, we also have three private events we can attend each year.
One was Relationship, where we spent a week in October in Maui learning about how to make our intimate relationship better. As I wrote in my two-part series on Relationship week, this one was truly life-changing and worth the whole price of the Platinum Partnership.
Another one of the exclusive trips is Platinum Adventure, which is being held in May in Mauritius this year and is based on learning survival skills. To say I’m excited about that one is a bit of an understatement!
The third one is Financial Week, where Tony gets the top financial experts to come speak with his Platinum Partners about what is happening in the financial world right now and what they believe will happen in the next year. Past speakers have included many prominent speakers including: Alan Greenspan, Bill Clinton, Ben Bernanke, Tony Blair, T. Boone Pickens, George W. Bush and Warren Buffet.
The speakers at this year’s Platinum Finance included:
- Niall Ferguson (author of The Ascent of Money)
- Erik Price (billionaire and founder of Blackwater)
- Bill Gross (founder of seven different one billion-dollar companies)
- Ray Dalio (extremely successful investor, billionaire and author of Principles)
- Jawad Mian (founder of Stray Reflections, an independent global macro research firm)
- Harry Dent (a stock market forecaster, investor, author of multiple bestselling books)
- Peter Diamandis (physician and founder of Singularity University, leader in futurist technologies)
- Paul Tudor Jones (hedge fund manager, billionaire and philanthropist)
- Greg Wyler (tech entrepreneur and inventor)
- Mark Allen (physician, currently focused on human longevity)
- Ajay Gupta (fiduciary at Creative Planning who manages Tony Robbins’ investments)
- Michael Smorch (of Blue Ocean Corporation)
- And more!
Each of the speakers shared their vision of where the economy is at this time and where they believe it is going over the next year. Not surprisingly, there were considerable differences in opinion. However, there were a few common underlying themes among speakers as well.
No one truly knows when the market crash is coming and how big it’s going to be
A theme that was repeated throughout the week was acknowledgement that a crash is coming, however, few were willing to put a date on when it would occur.
Harry Dent was the only person who really put a line in the sand. He suggested that the crash would likely begin this spring to fall, specifically mentioning May. He also hypothesized that the crash would last approximately two years. Finally he suggested placing a put option on stock market performance in the next several months. Right about now, I’m wishing I had done that…
Now, we don’t know if the current tailspin is the beginning of the downturn or just a blip like the Oct-December 2019 fall in the market or if this is finally the crash that will lead to a bear market. As of this writing, we haven’t yet hit a 20% decline, so we’re still not technically there.
One nugget that I picked up during Platinum Financial, though, was that often after the initial drop there’s a moderate short-term bump up in the market before the free-fall. So, this would suggest that if we are entering a crash, the current dip will be followed by an increase in stock prices before things go down again, in a very big way. You can bet I’ll be watching what happens over the next several weeks to see if we do have a bump up and then transition my retirement accounts at that point over an equivalent of Ray Dalio’s All Weather Fund as I had been planning to next week (about a week too late!).
China is a major player and world power
There was broad agreement across most speakers that China is now one of the two most powerful players in the global market. Niall Ferguson even went so far as to combine the two international powers calling it “Chimerica.”
Because of the role that the Chinese economy now plays in the global market, there was a lot of discussion of how the Wuhan Coronavirus outbreak would affect the world’s finances. Since the virus was relatively new, there was a lot of uncertainty.
One speaker, however, felt confident enough to draw a clear picture of the effects of the virus. Erik Prince forecasted that the Coronavirus would have a downdraft effect on the Chinese economy for the next 1-2 years and that issues with production, such as with medical masks, for example, would occur since so much of the world’s products are now largely produced in China (China currently produces 60% of the global mask supply.) He also advised that there would be a magnified “butterfly effect” on the global economy.
Similar to Erik, Niall Fergurson noted that the last crash of the global economy in 2008 occurred because the US economy stalled.
What would happen this time if China stalls?
Niall also noted that major financial problems have been building up since 2009. He thus advised shorting China.
Other pearls from Erik Price regarding China included investing in the ingredients of lithium batteries (since most Chinese cars are now becoming electric) and there is a relative lack of natural resources in China. He suggested rare earth metals like aluminum, copper, graphite, nickel, cobalt, lithium and manganese were good investments. He suggested “selling China what it needs from a third country.”
Erik also noted that the Chinese are buying gold in massive quantities instead of buying US Bonds, which he believes is from China setting up a gold-backed digital blockchain currency that will compete with (and maybe overtake) the US dollar as the world’s reserve currency in the near future. This could certainly affect the value of the dollar in the near future and is something to keep your eye on.
Finally, he suggested investing in Hong Kong as the Chinese stocks crash (since it has effective governance). But in comparison, Jawad Mian suggested buying Chinese bonds, since in his opinion, everyone is underweighting China!
This just goes to show you how much the experts would sometimes give conflicting advice. As Tony reminded us multiple times in the week: the goal of the week wasn’t to tell us what was going to happen in the world. It was to give us the best advice from the premier experts and let us think for ourselves and come to our own conclusions.
The experts invest in offerings with asymmetric risk-reward
In addition to China, a theme that was repeated throughout the week was investing in asymmetric risk-reward opportunities.
The idea behind asymmetric-risk reward is that you invest in a way that if you win, you have a massive upside, knowing that you’re going to have a lot of failures, but that you’ll end up on top in the end. It’s about making multiple risky bets, knowing that if only a few make it, you’ll still end up on top.
As an example, Paul Tudor Jones uses a 5:1 rule to guide his investment decisions. He says if he has a hit rate of greater than 20%, he makes money. “I can be wrong 80% of the time, and I’m still not going to lose.”
A couple of examples of investments that we discussed with asymmetric risk reward potential included cryptocurrencies, emerging technologies such as 5G and AI and advances in the health longevity realm.
One of the most compelling speakers of the event was Bill Gross, the creator of one of the first incubators called Idealab, who is building companies focused on creating renewable sources of energy and storing energy. He believes renewable energy is the trillion-dollar investment opportunity of our time. During his presentation, Bill shared his purpose in life, which is to solve our climate crisis. He aims to do this by making renewable energy cheaper than fossil fuels. By making it cheaper, economics will dictate people’s behavior instead of having to force people to use renewable energy technologies. As part of his mission, he has started three companies: Energy Vault (backed by Softbank and many others), Heliogen (backed by Bill Gates) and Carbon Capture. Kenji and I have been fortunate to have the opportunity to invest in these companies. It’s gratifying to know that we’re investing in the future and the health of the environment by investing with someone who is so passionate about tackling climate change and at the same time, have the opportunity for a possible asymmetric reward in the future.
Another amazing speaker was Peter Diamandis, who showed us why he believes 2010-2020 is the decade of abundance. During his speech, he covered advances in health and biotech, 3D printing (he showed how philanthropists like Tony are funding building houses using 3D printers for people in the developing world!), robotics and transport, AI and global communications. One of the most exciting to Kenji was an X-prize for growing proteins at scale in order to “establish a more food secure and environmentally sustainable world by 2050.” There are so many new advances that we don’t necessarily hear about frequently; it feels like the world is on the verge of another major technology revolution.
There are all kinds of non-correlated investments out there
Before Platinum Financial, I didn’t realize how many investment options there are available to the average investor. My financial world has largely consisted of real estate and stocks, especially index funds with an occasional high-risk fund or business investment like Idealab thrown in. At this point I have a total of four uncorrelated investments.
But there are a number of other uncorrelated investments (meaning that they aren’t tied to each other, so when one goes down, the other isn’t affected) available in the market. In fact, Ray Dalio suggests building your portfolio on 15 uncorrelated investments, so you can reduce your overall risk by about 80% and 5x your performance.
As I mentioned, we heard from a lot of speakers on different technologies that can be uncorrelated investments such as 5G technology, satellites and longevity therapeutics. We also had lectures on life insurance, multi-family real estate and discussions about cryptocurrency, investing in up and coming markets (such as Iran, Ukraine, South Korea and Saudi Arabia) and diamond and gold trading.
One rather unique investment we heard about is buying life settlement policies. Large companies will actually go out and purchase people’s insurance policies, like whole life insurance policies, and then collect on them when they die. Their returns were quoted to be fairly good (in the 10-16% range) with “bond-like” risk (i.e., low risk). I had no idea this even existed – but after learning about it, I’m definitely interested in putting a portion of our portfolio into these types of funds.
Diversify across currencies, asset classes and countries
One of the shared themes this year was to diversify your holdings across currencies, asset classes and countries. It’s a global world. And, as one speaker says, outer space is eventually going to be part of that too. Therefore, investing in only the US is not enough portfolio diversity. As I mentioned, speakers had a range of suggestions for where to invest.
- Erik Price suggested Hong Kong, Iran, Ukraine (real estate!), South Korea and Venezuela (more oil than Saudi Arabia, more gold than most countries), though he put a special focus on ensuring adequate governance where you invest. He also discussed Socotra, a little island off the coast of Yemen that could become a major shipping hub.
- Ray Dalio suggested investing in higher dividend asset classes including utilities. He also suggested India and China may be good investments.
- Jawad Mian discussed shale, software technology, investing in Chinese bonds, the Middle East (including Saudi equities), financial and health biotec. He reinforced that most of us are over-exposed in USD and need to be buying other assets.
- Harry Dent suggested India and SE Asia will become more powerful players in the next 10-20 years.
I could keep going, but for the sake of brevity, the point is, diversify outside of the US and within your portfolio asset classes in the future.
Multifamily real estate is likely to weather the storm well; homeownership is risky
You knew we had to have a section on real estate, right? Several speakers discussed real estate during the conference, and, for those of us investing in multi-family, most of the opinions were positive. I couldn’t say that about single-family homes (SFH) and homeownership, though, since multiple speakers had strong opinions about the short and long term future of SFH.
As many of us know, millennials tend to rent and not buy. Harry Dent also pointed out that the older generation is becoming a generation of renters since they didn’t save well for their futures, so they can’t afford to keep their homes in retirement.
Because of this and because the baby boomers are the largest part of the population, he forecasts that a huge number of single-family homes are going to be flushed onto the market. One of the things he drew attention to is that there are 8 million empty homes in Japan due to people dying or just giving away their homes as they age.
He hypothesized that things are going to be similar here in the future. Real estate, he said, will never be the same. And then he suggested US prices for primary homes may drop 50%… Winter, he said, favors apartments, cash, and bonds. He advised selling all non-strategic real estate ASAP and talking your kids out of buying their first home.
Similarly, Niall Ferguson pointed out that US policies that encourage people to purchase homes has led to a “property-owning democracy [that] skews our financial strategy into a one-way unhedged bet on an illiquid asset.” And a single asset class at that. This, he advised, was risky.
Finally, the one thing that I heard that I do think was concerning in relation to investing in large multi-family real estate was about inflation. Ray Dalio noted that there has been an inflation in assets across the board as more money has shifted into the wealthy’s hands.
I can definitely see how Trump’s policy of bonus depreciation and the involvement of hedge-funds in buying up large amounts of real estate has led to an inflation of prices over the last 5 years. So I can see how there may be a correction in the near future.
That being said, investing in cashflowing real estate allows you to weather the storm because you can afford to have the properties continue to cashflow while you wait for sales prices to recover. If you’re investing in appreciation plays, though, I’d be wary.
I can tell you, I was never so happy to not own a primary residence as I was after listening to some of the speakers.
So what will we be doing differently?
There are several changes we plan to make in our portfolio as a result of Platinum Financial. I include these here so you can see what we’ll be doing. It’s of course, not financial advice, and in no way am I suggesting that what we’re doing is right for you. But for those of you who are interested, here it goes.
1. We plan to be more diligent about putting more of our money aside for investments
In the past, we’ve just re-invested any money we made in real estate back into real estate. Also, many of us who own businesses are guilty of putting the profits from our business back into the business instead of pulling a significant portion out for investing. From now on, we’re going to make sure we take 25% out of our blog business and our real estate business and put it into investments, including less risky investments (into our security bucket).
2. Buy some gold
We also plan to get some of our money into in gold (which was suggested by multiple speakers). We plan to do this by switching my retirement account (that I can’t liquidate because I’m still working at Swedish) to something that resembles the All Weather Fund. This is Ray Dalio’s suggested diversified portfolio which is made up of 40% long-term bonds, 30% stocks, 15% intermediate-term bonds, 7.5% gold and 7.5% commodities (I’ve read both Charles Schwab and Vanguard have created funds with this mix). Ideally, I’m going to find a fund with a significant amount of international bonds and stocks too to lower our exposure to the US dollar.
3. Hire Creative Planning
We’re also planning on hiring Creative Planning as our financial advisors to ensure we maximize tax-loss harvesting and get access to life insurance settlement options. We’ll also have them help us make sure we’re putting more into our “security bucket” by “automating savings” and investing it in lower-risk assets that have less volatility.
4. Continue to invest in multi-family properties
On the real estate front, we are going to continue to invest in multi-family because the tax benefits just cannot be beat. We will continue to be diligent and only buy properties that cashflow and meet our criteria. In the short term, we are going to focus on stockpiling cash in preparation for the downturn, when properties will be on sale. And we’re definitely not going to be buying single-family homes or a primary residence or a vacation home or anything like that until the market drops significantly.
5. Invest in a cryptocurrency fund
We’ll invest in a cryptocurrency fund. I understand that this is a super asymmetrical risk-reward, so we clearly won’t be putting a lot of money into this, but you can imagine if there is 1000x return, what even a $25,000 investment could do. Michael Smorch of Blue Ocean Corp pointed out that a survey of millennials asked where they’d invest $1,000, 44% of them chose crypto. So that would argue there’s a future in cryptocurrency (and maybe even a Chinese gold-backed cryptocurrency!).
6. Continue to make small bets in asymmetric reward opportunities
We’re also going to continue to place small bets in various asymmetric reward opportunities in the form of venture capital funds and companies that we have access to as part of our network of Platinum Partners. In fact, Kenji and a couple other partners are starting a company to 1) give people access to funds that they would not normally have access to and 2) allow for smaller investments into funds that have high minimum investment requirements, e.g., $500,000 or $1 million.
7. Tony’s Four Rules
Finally, we’ll focus on following Tony’s four rules of investing: don’t lose money, look for asymmetric risk reward, take advantage of tax efficiencies and diversify.
So where is the economy going?
Paul Tudor Jones described today’s economy as “it’s like going to a party at 11pm and having a great time all night, knowing you’ll be hungover the next day.”
Whether the current drop is a marker of midnight, we’ll all know soon enough.
