Walk 2 Wealth Ep 73 - 2:25:23, 11.47 PM

[00:00:00] This is Walk to Wealth, episode 73. Welcome to Walk to Wealth. Why enlighten and empower young adults to build wealthy, abundant lives? I'm your host, John Mendez, and I'm currently walking to Wealth as we speak. And if you know the traditional route of finishing college, working in nine to five interior sixties, and hopefully having enough safer retirement isn't a path you wanna take, then join me as we walk to wealth together.

[00:00:31] Before we start today's episode, you know I gotta give my shout out for the week. Shout out to Gianna. She said insightful questions. I often talked about starting our children young when it comes to financial education. I was so impressed with John Mendez for both what he already knows at such a young age and the way he is spreading this knowledge.

[00:00:48] No matter the age of your kids or whether you are. , you yourself are still young or young at heart. I highly encourage you. Listen to this his, he asks such insightful questions that are sure to be burning in [00:01:00] his audience's mind and does them a great service. So thank you for the five star review. Really means the world to me.

[00:01:06] And if anyone, if you guys find this valuable, leave your boy a five star reviewer. It really means a lot. How many of you guys get a phone call and you look down to see who's calling and it's scam like? How many you guys pick up the phone when someone calls and people are trying to tell you that they have loan forgiveness or they're gonna forgive your car loans, or they're going to have you invest in some type of whatever.

[00:01:30] I feel like everyone gets scam calls like every day. It's to the point where, Scam likely is probably my best friend. That's how much they call me. And in today's episode, I had brought an amazing guest. His name is Robert Perky, and he literally specializes in helping you stay safe from scams and from frauds, from Ponzi schemes, a whole nine yards.

[00:01:50] This is what he does. People like to talk about how accounting is a boring industry, but after this conversation you realize that accounting can be pretty interesting when there's a lot of money involved and people [00:02:00] are doing a lot of. Stuff. In today's episode, we're gonna be helping you make sure that you keep your money in your pocket where it belongs, and helping you stay safe from a lot of the predatory scams and frauds that people are out here doing.

[00:02:13] Robert is a C F P. He's a c p a, and he's been helping people do this stuff for over 10 years, but it wasn't always this way. Back when I was in college, my very first accounting class, I, I went to school for. Very first accounting class. I had a teacher who was great and he asked me, what do you want to know?

[00:02:31] And at that time, Enron was dominating the news. Huge. Good question. Quick question for anyone that may not know what Enron is. what? What's Enron? Oh yeah, . So Enron is one of the biggest financial scams ever. It was a huge company. They were an energy company primary. And they made our plants. And just one day, this huge energy company that everybody thought was a rising star, was gonna take over the market.[00:03:00]

[00:03:00] The stock price went from $90 to $40 because the c e O sent out an email that said, we don't have any money. We're completely outta money. Few days later, people got to the bottom of it went from $40 to zero, $0 because. They were lying. They lied about the income coming in. They lied about the money that they were making.

[00:03:26] They lied about everything, and it was a huge shock to everybody. How could this happen? How can this giant company that we've invested in that's had these predictable stock returns, how could it disappear? What happened? And if you wanna learn. The smartest guys in the room. It's a great book. There's also a movie about it, but people talk to me all the time about accounting is boring, and that always puzzles me because they look at Enron.

[00:03:59] You have [00:04:00] these people on the own calling cussing out investment analysts. You have executives going out to strip clubs, buying cocaine with the company, money, going to all these huge crazy parties, doing all these crazy huge over the top things, and you're telling me that that's boring to you. I don't understand it.

[00:04:22] Why is that boring? What is your life that is so much more exciting than. I'm not getting here. Crazy, crazy stuff. Crazy stuff going on. But I wanted to know what happened. How, how does a huge company, one of the biggest energy companies in the world, how does it disappear? Where did it go? What happened? Why was it there?

[00:04:46] And I really gravitated towards fraud and I really gravitated towards how, how does this happen? How, how? A Ponzi scheme work. How do people lose their money? [00:05:00] Why is some things illegal and some things aren't? Why is, you know, um, Elizabeth Holmes with Theranos in prison, but the people who made these really ambitious claims and goals about like electric car companies, why aren't they they in jail?

[00:05:17] What's the difference? And those are the types of questions that I always wanted to. And I got my first job, I was working for the courts, for the economic crimes division, and it was my job to go find the money. So these people stole from whoever, from the state, from their loved ones, from investors, and my job was to go in and find out where did that money go.

[00:05:40] Loved the job, loved everything about it, but the pay was terrible. , they paid almost nothing. So while there are some very dedicated civil servants, I decided, hmm, I, I am not that dedicated. When did a lot of auditing, did a lot of different types of auditing, did a lot of analysis, [00:06:00] and now I just want to use those skills, help people out, help people avoid those scams in the first.

[00:06:09] Yeah. So if you don't mind me asking, let me ask you a couple questions about the idea of money, right? What was that like kind of growing up in your household? Because as you said, you kind of knew you were dedicated but not dedicated to be a a, a silver servant's faith, but you always had a, i, I feel it sounds like you always had an idea that you should be paid what you're worth, right?

[00:06:26] In terms of like the value that you bring. And clearly you provided more value than that civil service. Could pay you. So you went out to seek other opportunities. Right. But tell us what was kind of like money growing up and you said you had an interest for accounting. How did that evolve? How did you cultivate that?

[00:06:40] Did you always knew you wanted to get into that field? What was it like before college? Yeah. Well, I, I grew up, my mom had me when she was 18 years old, single mother. We did not have a lot of money, but I had a really big family and I had, I was like the only kid in the family, so I was kind of spoiled and I had a lot of [00:07:00] opportunities to spend.

[00:07:01] even though there wasn't money in my household, and my mom did a really good job from a young age telling me what money was worth and making me understand what kind of things were expensive at any time, I liked an expensive thing. She wouldn't just cut it outta my life entirely. She'd say, you have expensive tastes.

[00:07:21] You better make this work. And going, going way back, I, I sang when I was a. and I was pretty good at it. I was, I was in a couple of operas. I was in a couple of theater performances and in high school I said, I want to be an actor when I grow up. I want, I want to be a performer when I grow up. And my mom gave me one of the best money lessons that I ever had.

[00:07:45] And she said, great, let's see what the job is. And she took me out to open casting calls. She took me out to doing that. and doing what actors do and doing what musicians do, trying [00:08:00] out auditioning, trying to get things. And I learned very quickly, one, most of the jobs out there pay like nothing, very, very little.

[00:08:09] And two, it's a lot of really hard work that isn't necessarily the fun work that I imagined. So that was my best money lesson as a kid of things Cost. and you have to earn that money some, somewhere. You gotta do something for it. And so it was very important to her being young, being a single mom, to strike that balance of giving me opportunities when she could, and then being realistic, getting your feet on the ground and knowing what the world is.

[00:08:47] Yeah. And then, so in terms of like the accounting, when did you think that came into play? Cuz you, you wanted to go to st the singing route, the, you know, musician, actor to kind of route and accounting at least that face value. I didn't know about the, the, the cocaine [00:09:00] lines and the massive parties and celebrities and everything, but from accounting and singing slash acting, it kind of seems like two completely different industries.

[00:09:09] What made you make that switch? When, how did that switch? Well, it's back to what my mom always taught me, and I knew it as a senior in high school and I looked and I said, I want to make money, right? I want a job that pays a lot of money. So I went and I looked at the different jobs out there, and the first two jobs were engineering jobs.

[00:09:33] And the college I got into didn't have an engineering program, so I said, I'm not gonna do. And number three on the lists was accounting. Number four on the list was financed. Now that's probably changed. This is a long time ago. But I said, well, if you can make a lot of money doing accounting, then I'm gonna try to do accounting.

[00:09:50] That's that. I mean, that's what, that's what got me there. That's what got me in the door. And then fraud is what got me to fall in love with it. Amazing. And so let's get right into the [00:10:00] fraud. What is essentially fraud? What is a Ponzi scheme? What are some like typical frauds that people, you know, get are the victims of in this day and age that you're seeing on your end?

[00:10:08] Yeah, so I think a hard concept for a lot of people, and I alluded to it earlier, what's the difference between fraud and an investment? Like what makes us say that this is a scam? Because investing in Ponzi scheme, Sound pretty similar. I'm gonna give you some of my money and then you give me back more than I put in, right?

[00:10:32] It, it sounds kind of irrational if you haven't operated in that world. If you haven't lived in that world. And first off, I'm just gonna briefly touch on finance theory. Why do people need to finance things? And I like to think about it in terms of a delivery company, right? Very simple example. You're big, you're at capacity.

[00:10:54] You have so many customers that you can't service them all. So what you need to do is expand. [00:11:00] How are you gonna expand? You're gonna need more trucks, you're gonna need more people. You need to get out there and actually do things. Hiring people, buying trucks, buying stuff to make your business bigger. All costs money.

[00:11:13] And so we have to get it from somewhere We borrow. The reason banks are willing to let us borrow money, the reason that investors are willing to let us borrow money is because we are taking some money now to give back more money later. At the heart of finance is money today is more valuable than money in the future.

[00:11:32] Money cash in my hand is better than a promise of cash. It's better than a promise of more cash. Cash is king. It is the center of finance. Now, some people figured. This is a Ponzi scheme. Now I don't have to actually improve my business. What if I just continuously got a new stream of investors and I just took their money, spent it on cocaine and strippers, and [00:12:00] then when it was time to pay them back, I just got a new investor and I paid them back with their money.

[00:12:05] Right? So the difference is, A legitimate investment is paying for things with their expanded business. It's paying for things with their new profits, their new revenues, the work, the thing that they're providing. A Ponzi scheme is paying people with new investors and new investment funds coming in. Now, the thing to think about a business that grows bigger can pay people back with those future profit.

[00:12:35] A business who relies on new investors, always has to get new investors, and they always have to get more investors. They constantly have to get more to pay back the old investors, and it gets bigger and bigger and bigger until it's unsustainable and collapses. So zen when you're being offered the opportunity, invest in somebody things.

[00:12:56] Sometimes it, it's a little difficult, difficult to, you know, decipher, you [00:13:00] know what's going on. And pretty much. Who's what and what's what. Especially if it's like a startup company or a company that has some promise or a company that says they're doing X, Y, Z and here their returns, and that's some KPIs.

[00:13:13] Some, you know, Aren't weighed the same. So it's like, yeah, I'm making a ton of revenue, but my profits are negative. Right? So like there's things like that. So it's all, it's kind of hard for someone who doesn't really know much about investing to kind of differentiate between the two. What are some things you kind of look out that anyone should look out for when presenting an opportunity to get into an investment?

[00:13:33] Number one question, and you just gotta think about this from outside of. Anytime someone's giving you an investment opportunity, you always ask what is in it for them? What are they getting out of the deal? And that'll help you think through, right? In our legitimate example of a delivery company, what are they getting out of the deal?

[00:13:56] Well, they're getting new employees and they're getting new trucks. [00:14:00] That is their end of the bargain. That's what's good for them. What am I gonna get outta the deal? How are they gonna pay me? How is this gonna work? Well, the new trucks, the new employees are gonna allow them to make more profit. That's how they're gonna pay me back.

[00:14:15] Right. This can kind of be a mix in the middle too. So like, let's say that there's a broker in the in the deal and they get a huge commission, right? They're trying to sell me stock, or they're trying to sell me an investment in this delivery company. What's in it for them? Well, the huge commission is what's in it for them.

[00:14:33] They're getting paid to bring in that. So they're getting some of my money upfront just for convincing me, just for making me make this decision. Now that, does that mean what's in it for me? Nothing. No, it doesn't. It means they're taking a little piece of that. You still have something that you can get back just every time.

[00:14:53] Think about what's in it for me, what's in it for them, because there is nobody, nobody in this industry, not a single [00:15:00] person that is doing it purely out of the kindness of their. And there are no little kids who dream about being accountants. They dream about making money and accountant and accounting, finance.

[00:15:11] Those are the ways to get there. And so really look skeptically and say, why are they doing this? Why are they at my door? Why are they willing to promise me so much back in the future? And how are they gonna pay it? How are they gonna pay it? And it's really, like I said, thinking outside yourself, putting yourself in their shoes.

[00:15:31] What what's going. What's good, you know what's going through their mind. So now, now tell us a little bit about, so we kind of asked the question. Let's say we present an opportunity and now we're, we ask them, what's in it for us? What's in it for them? What are some answers that you should look out for?

[00:15:45] Because that's when it comes to, you know, sales. We, a lot of trained professionals, if you're not practicing, they understand psychology. They have a way with words. They're like that smooth talker at the bar that can go and talk to any girls and pick them up. Doesn't matter how good they. , you know, um, they, they [00:16:00] just know how to use their words and know how to evoke emotion to get people to buy, to get people to sell.

[00:16:04] They, these are trained professionals. Right. So what are some things you kinda look out for when you're hearing these answers? Because a bad answer kicked down very, very nice in the hands with the right soccer. Right? If someone knows how to, how to way with words. So what are some things you just kind of look out for, aside from like key metrics within the actual business in terms of like business models?

[00:16:22] So my favorite, and this comes down from being an auditor and this is how auditors dissect situ. Ask why at least five times. Keep asking questions. Don't take that first question. And there's a really good story that I love about this, and it's related to Enron. There was an analyst who on the earnings call, figured out the scheme pretty much before everybody else, and he said, I don't understand how you guys make money now.

[00:16:50] This the, uh, CFO f of the company thought he was muted on the phone and said, this guy is an. and asking [00:17:00] questions is what got him labeled as an asshole and, and Enron's whole marketing up until that point was ask why a lot of people put it out there. Kind of an original meme back, it wasn't back in the nineties.

[00:17:13] Ask why asshole when it's a house of cards. When you don't have that, it's really hard to come up with those answers. What scammers and bad salespeople try to. Is make it sound like it's so confusing that nobody could possibly understand that. That's why Enron, they label them the smartest guys in the room.

[00:17:33] They don't have to explain anything to anybody else because they're so smart. They know everything. And you know nothing. That's a terrible assumption to make. That's a terrible assumption. And if you don't understand something, they don't deserve your money. It's their job to explain it to. It is their job to make you understand it.

[00:17:53] And if they can't do that, they're either ripping you off or bad at their job. And either way, they don't deserve your money. [00:18:00] So ask those questions and when you get that follow up answer, it's gonna be smooth. Just like you're saying. It's smooth, it's polished. They worked on this a million times. They have trained to get you to say.

[00:18:14] what they have not trained for is for you to say, how does this work? Or what about this? And if their response is, don't worry about it. You don't need to understand that. Or I know better, or, this is really complicated and I, I, I can't, I can't walk you through it right now. Again, they're either terrible at their job or ripping you off one of.

[00:18:38] Yeah. So then let me ask you, cuz you said if you don't understand what you're investing, you shouldn't invest in it, which I a hundred percent agree. It's one of the, the principles I got from Richest Man and Babylon that I still follow to this day. But, um, in terms of understanding, what level of understanding should you achieve before you say it's okay, let me put my money in.

[00:18:57] Because at the end of the day, some of us may not wanna be [00:19:00] traders, so it's like, why go? Spend one to two years trading, right? To become a trader before I start investing. Or for example, real estate. Why should I have to go buy a hundred houses to invest in one property? Right? So it's like mm-hmm. , what level understand should you reach before you could say, yeah, you're understand enough to invest in it without having to spend years reading and looking up and, but cause that takes time and a lot of the times, if we're gonna spend all that time and effort, we might as.

[00:19:27] Get into that, as in a professional ourselves. But let's say we have another job and this is our career. How do we invest in an asset class? What level of understanding should we, should we seek at a bare minimum? At a very bare minimum, you should be able to ask, how are they gonna pay me back? How am I gonna get my money back?

[00:19:45] And if you want to take it a step further, really dissect. Assumptions are they making? What do they think is going to be true? Especially with speculative stocks, [00:20:00] we, we have to answer those questions. So I'll bring up an example of Tesla. I am not saying that Tesla is good or bad. I'm not saying it's a ripoff, this is an investment advice, but let's look at some of the assumptions about Tesla, right?

[00:20:16] We can look at how much they charge per. We can look at how much they earn back per car, and then we have to start asking questions of, do we think one third of all the cars in the future are going to be Teslas, right? That's what the market seems to think. That's what those valuations seem to push out there.

[00:20:38] So for every Chevy, every three Chevys that you sell, you're gonna be selling at least one Tesla. For everyone. For everyone out there. Is that a reasonable assumption? Do we think that's going to be true? If you think it's going to be true, well maybe it's a good deal. If you think now there's no [00:21:00] way, well then you have to say, well, how else are they gonna make their money?

[00:21:03] How else are they gonna pay me back? How else is that gonna get aid at some point? To know what those assumptions are, to know what everything else is. I like to trust experts and so I always go and start with a trusted news source. One of my favorites is Morningstar. So Morningstar will tell you exactly what the assumptions are, exactly what, so they'll, they'll have bears say, and bowls say, so the bears or the people who think now they can't justify this valuation, and they'll talk about some of those assumptions that they think are false.

[00:21:37] They have what the bears. Why they think those assumptions are true, why they think those guesses are true. And you can read that, think about it, and then make a decision based on that. And now that's for an individual stock. There's also analysis for things like a mutual fund. And the more layers that get between you and a stock, [00:22:00] the higher your fees are going to be.

[00:22:01] So you can, you could find a investment analyst that you trust, invest with. , they'll invest their that money for you. Here's the thing, one, you gotta make sure you trust them first and foremost, but they're gonna be charging you something. They're not doing it for free. You might have a mutual fund in between.

[00:22:20] They're charging you something, they're not doing it for free. And you have things that eat away at your fees that you just have to be aware of. I, I like to give the analogy of like landscaping. Can I mow my lawn? Am I capable of mok? Yeah. I. Would I rather pay someone to do it also? Yes. I, I don't, I just don't want to spend the time and energy to do it.

[00:22:44] So even though there's a fee involved, even though I'm paying somebody to do it for me, for me, that's still a good deal. Yeah, and so then let me ask you, because there's, I know there's, especially with Fidelity, they have some that I'm invested in, they, but they have some index funds that are zero fees.

[00:22:59] When you hear [00:23:00] zero fee at face value, it's like, at least from this advice, it seems like, oh, is it a scam? What's the, what's the difference there? Have you been seeing like scams with index funds as well? It's really hard to pull off a big widespread scam with an index fund with that type of thing because it's very regulated.

[00:23:17] That's the right thinking, right? If they're saying so, like Fidelity has zero cost direct indexing, that's a, they offer that. We gotta ask what's in it for them, right? For Fidelity models specifically, you can break it down and it's coming from the clearing houses. You wanna buy stocks, there's somebody else who wants to sell stocks.

[00:23:39] And the clearing house's job is to match those people up. So if Fidelity is providing people who want to buy stocks for a fee, you can look at other places like Schwab. On the other hand, they make money off of vital cash, right? So they have a lot of low fee options. They will charge your account, they'll [00:24:00] earn interest off of your money, but they won't give it to you.

[00:24:01] They'll keep it in their pocket. . So we gotta ask, is that a scam I'm okay with? Or is that a scam? Is that a ripoff? How are they getting paid? Why are they doing this? I think the biggest one that a lot of people have been looking really closely at, including the S E C Robinhood Zero Pings. Why are you guys charging zero fees?

[00:24:21] You don't have the cash products like Schwab, you don't have the market share like Fidelity. Well, in some cases it turned out well, it's because they were executing the trades. Not in the best interest of their customers, right? They, they were over, the customers were overpaying for stocks. Now, is that a fee?

[00:24:40] I, I don't think we could call it a fee. You overpaid for something and that went in Robin Hood's pocket again. Am I okay with it? Everyone's gonna get paid. I personally like to go with transparency of saying, Hey, I'm gonna pay you this much to do this work, and I can see everything here. We can drill, we can [00:25:00] drill.

[00:25:01] We can, especially with the brokers going on right now, there's, they're really fighting for business. And so they'll subsidize things for now, who knows if they're still gonna be free 10 years from now? And then you have to make that decision. Do I switch? What, what do I do? What, what's gonna happen? So let me follow up on that because we have Robin Hood, we have WebU, we have M one Finance, we have God knows how many more there are.

[00:25:26] But with all these no fee trading platforms out there, Is there such a thing as like a, a good scam, I guess you could say? How, how can we protect ourself there? Because it seems like everyone at this point in time is just offering no, no fee training platforms. Well, and scam, or a fee or a charge. I, I used to say for my business that I avoid how people avoid fraud.

[00:25:48] That didn't work out very well because most of the things that I saw, well, it didn't meet the textbook definition of fraud. They were rip-offs. They were bad deals, but that doesn't mean they're. And you go back to like the car, [00:26:00] you're gonna buy a car from a dealership. At some point, you know they're getting paid.

[00:26:03] Oh, they're marking it up. What's your alternative? What are you gonna do? Are you gonna walk into the New York Stock Exchange and with a trade ticket? Like, I wanna buy this. Like, nobody's gonna do that. So our job as a consumer is understand how are they making money? What's going on? and there's some platforms where you can see the differences.

[00:26:25] There's some research that people have done where people on, the one that I've saw specifically was people on Schwab were comparing their quoted price to people on Robinhood and people on Schwab were getting a better price. That pushed the government to take actions that pushed the government to file a suit on the consumer's behalf against Ram.

[00:26:46] Ram Hood had to pay out a settlement because they were. Doing the right thing. So really understanding how is the real trick, understanding why are they doing this? What's in [00:27:00] it for them? And sometimes you just have to accept it of, yeah, every every car dealer is going to be charging me a markup and I don't have an alternative.

[00:27:09] I'm not gonna go. Down to gm, knock on the door, like, give me a Chevy. That's, nobody's gonna do that. That's not ever gonna happen. And it's the same with the brokerages, but you gotta kind of weigh it out. Hey, is this trading fee that I'm paying through? Just throwing out an example here, not a recommendation at all.

[00:27:29] This trading fee I'm paying through interactive brokers, is that worth what I'm getting from? and are they giving me the best deal possible? That's gonna be different for each person, but really understanding what are they getting out of the deal? Mm-hmm. . And so then I wanted to ask you another question because another commodity that everyone is, they're talking about now, especially my age generation, is like NFTs, Crip, that whole space in there, there's constantly things going on there.

[00:27:59] [00:28:00] Literally, I was playing basketball last summer and one of the guys I was hoping with, I went to high school. He was like, yeah, John, I was in, he was trading, uh, cryptocurrencies and he was doing pretty well at it. Actually. He lost some money, but he was doing pretty well just from trading. And then he was like, yeah, so we put a lot of money into this one crypto startup, and then they ended up pring the accounting.

[00:28:18] Then no one got their money back. And then long story short, he lost, I forget how much, I think like a thousand bucks or something like that. He, he lost a good chunk of change. So what are some frauds there that you're probably seeing and that you could help our listeners look out for and, uh, because it's a new hot topic and everyone got their eyes on cryptocurrency?

[00:28:35] Well, the one that you're talking about, first of all, when we look at him, I won't say it for fear of getting sued. I think we all fuck what it is. It's surprising It actually wasn't though. Oh, it wasn't. It wasn't. And it was something else entirely. Yeah, it was, and I'm assuming you're starting talking about the one that starts with a letter D, right, that Elon loves.

[00:28:55] But no, it was actually something else that he got scammed on and lost his money. But that, that's a whole nother one as [00:29:00] well. So we gotta ask, we gotta ask ourselves, who, where am I getting my money from? Where am I getting paid? So let's talk about our pal Elon. A lot of people accuse me of being an Elon hater.

[00:29:15] I don't know. The guy is clearly much smarter than I am right off the bat. I'm humble enough to realize he is much smarter than I am. Do I think he has my best interest at heart? Hell no. He is not looking out for me. So that one I will talk about cause I got hard facts about that one. Right? So I think what we're all talking about on, on that case was Doge.

[00:29:38] Dogecoin is a joke. It's literally a joke. And if it's literally a joke, they copied and pasted old code from the Bitcoin blockchain and said, Hey, this is a joke. Here you go. And it got big because Elon said, we're gonna start accepting payments in Dogecoin. [00:30:00] And then everybody bought in. When people bought in, that made the price of it go.

[00:30:04] And then for some reason it went down and people who know finance know what that reason is. You can look at Tesla's financial statements. We know that both el, we know for a fact that Tesla bought in. They have to include that in their financial statements. We don't know what Elon did. That's a mystery.

[00:30:22] Some people have speculated. Some people have guessed, but he doesn't have to tell us because they're not regulated securities. We know that Tesla. Made at least a hundred million dollars off of this deal by buying Dogecoin very low, riding it up and selling it at the top, and then it went back down over a joke over, over snl, right?

[00:30:48] How Elon made his money, how Tesla made his money. Very, very clear. Buy low, build up excitement. Get people excited about this in. Their [00:31:00] excitement, their money that they are paying from their pocket drove the price of this up and then sell high once the price has gone up. Now, once they started selling, the price starts going down.

[00:31:14] It, it, it doesn't have that hype and momentum. They are taking money. So when you're buying your $400 Dogecoin, you are buying it from the richest man in the world. He is selling it to you at that. And now you have to decide who's gonna pay me more, who's going to, who is going to buy into this at a higher valuation than what I have bought into this app?

[00:31:41] And for something like Dogecoin, especially this, so the, the one that I'm thinking of that I won't name is a lot of these crypto lending platforms where you deposit your crypto. And they're gonna pay you an outrageously high interest rate. They were promising a 17% interest [00:32:00] rate. Now most finance experts immediately have red flags going off because that is too good to be true.

[00:32:06] How are you going to pay it back? How are you going to pay back a 17% interest rate? What, where does that come from? And the answer was, it comes from future investors. Now we know that's a Ponzi scheme from. If I get my money back from future investors, I'm, that's a Ponzi scheme. And once the investors dry up, the investment collapses.

[00:32:29] It's not an investment, it's a scam. We gotta ask ourselves these same questions, and I think the thinking that goes into crypto so often is this is going to replace money, this is going to replace currency and. Just like a fiat currency. The only thing that gives it value is the fact that everyone believes it gives, it has value.

[00:32:56] Now, I'm willing to work for US dollars because the [00:33:00] stuff that I buy, I'll tell you the expensive stuff I like. I like all the newest Apple products. That's my thing. That's where my money goes. I know that I will be able to trade my dollars for Apple products at a reasonable rate, and I'll be able to go in and say, okay, what's a new MacBook cost me?

[00:33:15] Okay, I need to work for this many hours. , that's gonna be worth one MacBook to me, if I got paid in Bitcoin, I don't know, five hours, one hour, 30 hours, it changes from week to week, right? So think about this. If you're in charge, put yourself in the shoes of, of, imagine you're Walmart, right? And you're a believer in crypto, and you say, you know what?

[00:33:41] Bitcoin is gonna replace US dollars. What kind of stuff do you need to do? What steps as the C e O of Walmart do you need to take to make that a reality? Right. Well, first you need to go and upgrade all of your systems. Instead of that credit card machine, [00:34:00] it's now going to be a Bitcoin machine. Well, can it mine it fast?

[00:34:04] Can, can we process the transactions fast enough? Well, no, because it's not as efficient as traditional transaction processing takes 20 minutes for a transaction to go through. Well, we need to now build a bunch of infrastructure for that to happen. Okay. I get my stuff from different countries, different vendors.

[00:34:22] I now need to convince them that I'm gonna pay them in Bitcoin. I need, I need to convince them of that. I need to answer these questions of my employees. Are they going to start accepting Bitcoin instead of money? All those questions need to be answered. We can't flip a switch and get rid of the US dollar, even if everybody thinks it's a great idea.

[00:34:41] It takes work and. And before buying into a currency that you think is going to be the next US dollar, say, what has to happen? What, how am I going to get paid back? And why would the c e O of Walmart do that? Why would they put in all this work to make me [00:35:00] rich unless they had something on the line?

[00:35:02] Everybody is, everybody is in it for the money. Everybody is looking out for that. . And so a lot of these, a lot of these things off of that I've heard it referred to as the Greater Fool theory relies on somebody else paying more than you paid for it. Now, here's where it gets a little tricky because there are some things that are legitimate out there.

[00:35:26] So like staking your Ethereum is one example. There's economic value that you are providing. You are creating a new thing. Smart contracts have economic. What the finance industry's having a really hard time with right now is how much economic value, how much are we gonna be able to get out of it, and can we justify 20, 30, 50 billion on certain blockchains to get that money back?

[00:35:55] Are there gonna be 50 billion of smart contracts in the [00:36:00] next 10? I don't know. Maybe if you think the answer is yes, that one might be good. Now, if you think, is somebody gonna be a bigger sucker than me and pay more for this for no reason, then it's probably a scam. You have somebody else trying to get it back from you.

[00:36:17] Yeah. So then, and here's another question I wanted to ask you on the, on the topic of like staking and also on the topic of, you know, the hype, right? So how can you kind of differentiate the. and things like that from an actual stock going up. In, you know, in its evaluation because a lot of the times, as you mentioned earlier, you can't not go downtown and go on to, to Chevy and ask, Hey, can I get a car?

[00:36:43] You also can't go down to Chevy and say, Hey, let me see your financial reports. Right? You have it. It is not like you can just call up the c e o and you're like, Hey, how's the company doing? It's like, where could you find this information so that you can kind of figure out how is this company actually doing so that I can make an informed decision?

[00:36:59] Depends [00:37:00] on how deep you want to go and how much time and effort that you wanna. So there are people out there that have gotten really, really creative and the job is a financial analyst, and what they're doing is they're making guesses and projections about the future of a company based on the information that they had.

[00:37:17] Now, one part that's slightly untrue, any publicly, any publicly traded company, Has to release at least quarterly financial statements. So at least once every three months they have to tell you, this is where our money came from. This is what we're doing. And those statements have to be audited. So you have to have an auditor go in, check 'em out, say it looks good.

[00:37:40] Our auditor's always right. Not a hundred percent of the time, but we try our best. And they go in, say it looks good. And so you get that. The next step up is earnings calls. So accompanying those quarterly statements, the usually the CEO is gonna be on the phone saying, Hey, here's what happened. Here's what we think is [00:38:00] going to happen next quarter.

[00:38:02] Here's what's going on. Financial analysts can ask them questions directly. They can say, have you thought about this? What about these pricing pieces? And those are, they're, they're officially available to join for any shareholder, but there's a lot of sites where you can just find them, track 'em down, track down those earnings calls, and anybody can listen to 'em again, that is, that is you in the weeds doing the work.

[00:38:28] If you want to take it a step back, you can look at those financial analysts again, one of my favorites. Seeing the different points of views. morningstar.com they don't, they don't pay me for anything, but they listen, they do the polls, they talk to the financial analysts, and from there you can go back and go to the financial analysts and say, you think the share price is gonna go to here?

[00:38:51] The earnings is gonna go to here. Why do you think that? What's going on now? Do they kind of have their own vested interest? Yeah. Yeah. They, they bought into [00:39:00] the stock right. . They might hype something up if they have it, but very, very regulated. If they're hyping it up with lies, they will go to jail. They can kind of paint a picture, but it's, it's, we gotta go in with that same skepticism.

[00:39:17] We gotta go into the same skepticism as anything else. It's just more information and it's telling you, where do I look next to learn about this company? Where do I, where do I look next to understand what is happening here? Those are the actuals, the fundamentals. That's what's driving in theory share price, driving dividends.

[00:39:39] There's out outside factors too, and that's where it gets a little bit trickier of if people do get excited about a stock, if everybody's buying into a stock. That's gonna make the share price go up and we can ask ourselves, is that because there's something new about the company? So like the pandemic happened, everyone is buying into Zoom and [00:40:00] Peloton.

[00:40:01] Well, yeah, that something happened. We think they're gonna have a lot more business now that people are home more often. Something changed. Something happened and we need to respond to it. You as an investor have to think, well, is that good, bad? Is that the right reaction? What's going? And as we're getting started looking to those analysts and thinking about, okay, are they lying to me or are they telling the truth here?

[00:40:27] What can I verify? What can I look into myself? Becomes a good step. A really funny one that I like an analyst figured out, they could get satellite pictures of this oil company who stored oil and barrels. So the barrels would go up and they were floating in water, and the barrels would go up and down in the water based on how full they.

[00:40:48] So this analyst figured out how much oil is in, in how, like, how, how much volume did they actually do? They know what the price of oil is, so they accurately projected [00:41:00] what their income was gonna be before the quarterly statements came out. And now you gotta ask yourself, well, are they lying? Is that legit?

[00:41:08] Can I look at it? Can they show me the evidence? Can they answer it? Can they show, show me, tell me what happened, and prove it. answer those questions. And on that case, I, I, I think, yeah, yeah. You can go verify it, you can see what happened. It's just using that brain and thinking mm-hmm. thinking things through, getting the information, thinking things through, and really asking how am I getting paid back?

[00:41:35] Yeah. So then let me ask you, we kind of talked about his Ponzi schemes. You talked about a couple investments in the stock market, mutual funds. You touched on crypto a little bit. What are some other common, I guess, scams that are frauds that you're seeing that you, of your clients are dealing with and you, you're protecting your clients with?

[00:41:50] With? Yeah, so the, probably the one that I see the most often, I wouldn't call it fraud because it's technically legal. It's a rip off, [00:42:00] but it's not. It's not fraud. A lot of it comes down to hidden fees and fees that are excessively high. So let me tell you about one, I'm not gonna name the company for fear of getting sued, but it's a real estate company and the way it works is you give them your house, they manage it for you.

[00:42:19] They will pay you the fees back and they'll put it in a pool with other houses, right? There's some bigger companies that do this. This was a very. They'll put it in a, in a pool with other houses and give you back some of those fees or, or some of the, the rents that you're charging. So give 'em the house, you get the rents.

[00:42:36] I let, I looked through the contract for my client and it went page by page finding all of the fees that they paid. This company charged 12% per year in fees. Now, quick. That means over eight years, the value of your house is now zero because you've paid so much of it in fees. The other [00:43:00] thing that happened, a lot of these fees, not all of them, came out of the principle, came out of the value of the house, not about, not out of the rent proceeds.

[00:43:07] So what'll likely happen to a lot of their customers, they'll get those, that revenue stream, they'll get the rents coming in, and then when they go to sell the house because they need the money or because they passed away and their kids want the cash. , the company's gonna say, well, sorry you owe, it's these fees that you owe us.

[00:43:28] You have to pay those back to us. You're only gonna get 10% of the value of the house. You're only gonna get a a small portion of the value of the house. The rest goes to pay us. Now, when I called up that company with my client on the phone, I said, Hey, you guys are paying 12% in fees. This is outrageous.

[00:43:48] He says, No, no, no. That's not true. That's not true at all. No, no. We would ne that's really high mountain fees. He says, well, let's look on the contract. And I [00:44:00] went down the contract looking at all the different pages where all the different fees were list. I say, well, how, how do you say that? That's not 12%?

[00:44:07] And he says, oh, well those aren't fees. Those are expenses. Those are expenses that you're listing. And I said, well, does the client have to pay them? And he says, well, yeah, the client has to. Okay, well anytime Money's pointing outta my client's pocket, let's just call that under the umbrella of fees. Let's just call that there.

[00:44:26] So a lack of transparency and people getting into investments without understanding the fees or what you're getting into. And that was a very extreme example, but I see a lot, a lot of folks getting sold on life insurance. I got no business being in a whole life policy. Can that work? Can it make sense?

[00:44:46] are the fees astronomically high also? Yes. So you have to decide, are those high fees worth what I'm getting? What is happening in exchange for it? And [00:45:00] again, every single time, how are you getting paid? Ask the salesperson. How do you get paid for something like life insurance? I would ask straight up, how much are you gonna make off of this?

[00:45:13] If I sign this contract, how much are you gonna make? And I guarantee you, for life insurance, if they answer the question, if that's a big, if, if they answer the question, it's gonna make you think twice about it. So then kind, let me ask you, what are some common things that you see that you notice that are common no matter what the industry is, but like in scams or frauds in.

[00:45:38] What is like a common thing across all of them that you could just tell no matter what you're trying to invest in, no matter where you're trying to put your money in, you could kind of easily just say like, this is a fraud. I'm out the easiest. See, a lot of this comes from experience. A lot of it comes from knowing the next question to ask.

[00:45:57] And one thing that I've done for my [00:46:00] clients is I give 'em a script and I say, if you answer this, they're gonna respond with this and then ask this, and they're gonna respond with. and knowing what they're not saying, you gotta know what they're not saying is, is the key. And usually that is they're either understating the risk, so the investment is riskier than they're leading you to believe they're understating the fees or they just do not have a plan to pay you usually.

[00:46:32] Those are the things. So you have to listen for not what they're saying, but listen for what they're not saying and own in on that. Ask questions about that because that is what they're good at. They're good at dancing around those issues. And so in particular, those three things, what are my risks? What are the risks to me?

[00:46:53] What could happen to me? What could happen? I'm not asking you what's probably gonna happen. I'm asking you what could. [00:47:00] and if they go back to, well, probably, or under our projections or most of our client go in and say, what's my worst case scenario here? What's the worst case scenario that answers the risk?

[00:47:12] Expenses? How do you get paid? How are all the ways that you get compensated? Any regulated financial investment has to tell you. Now, most of these scams are not regulated because they don't want to tell you they're operating under the radar. Another red flag. Not all unregistered investments are scams, but it's just one of many red flags.

[00:47:34] But if you can't get a clear statement of what your fees and expenses are and where they come from and how you pay 'em, at a minimum it's a ripoff. And then number three, how are, how are you gonna pay me back? Where does the money come from? And if they say, well, that's just how investing works, or You don't understand, or, oh, come on.

[00:47:52] That's how the stock you, you mean to say you understand how the stock market. It's a lie. It it, it's a misdirection. How [00:48:00] are you gonna pay me back? Where's the money coming from? And those, those three pieces are what you have to listen for them not saying amazing. So, We kind of touched upon what's upon this scheme, and we looked into inve, frauds and mutual funds, stocks, cryptos, just general scripts that you should use to protect yourself and look out for, remember, where could my listeners get in touch with you?

[00:48:25] Where can we find out more about this? So that we're protected in the industry where everything's online, and it's almost in getting harder and harder nowadays to kind of distinguish what's real, what's not, what's a good investment, what's not, how he, how could we get in touch you? How could we find you so we can stay up to date and make.

[00:48:42] We're not getting screwed over. Best way, my website, dify.com. D E L A G I F y. There you can find more resources. You can check me out. You can go and look at my investor, uh, profile, my s e c reg, or my, excuse me, my state registration as an [00:49:00] investment advisor. I'm not s e c registered. I'm state registered, my state registration as an investment advisor.

[00:49:05] You can go to find those extra pieces of information about me, but find the resource. On how to protect yourself. And what's there again? dify.com. D E L A G I fy.com. Amazing. And now it's time for my favorite segment of the podcast. Final four questions, how we end every episode. Question number one. What is the most impactful lesson you learned in life?

[00:49:29] The most impactful lesson that I've learned was don't be afraid to ask. Why? Don't be afraid of what people think about. and if you are embarrassed to ask a question or if you think that it's a dumb question, don't worry about it. Just do it, because that is the biggest barrier to knowledge, and it's the biggest barrier to really uncovering the truth.

[00:49:53] Don't be afraid to look stupid or look like a jerk because you're asking the right questions. What is the [00:50:00] most admirable trait a person can have? It's integrity and it's doing the right. Even though you're not gonna get caught. And I, I think that's so true of if there's no consequence to doing the wrong thing, do you do the right thing anyway?

[00:50:18] You should always do the right thing. That's a very philosophical question. Okay. If you had to change someone's life for one book, which book would you recommend? Uh, that. The Illustrated guide to, or excuse me, the Illustrated Book of Bad Arguments. It talks about how we can be tricked by deceptive language, how we can fall for things that sound right, but in reality aren't.

[00:50:42] And what is the legacy that you're trying to leave behind? I just want somebody to have a terrible day because they tried to rip off the wrong person. I want to ruin a fraudster's. I want them to see my [00:51:00] picture and cower in fear knowing that they're about to be exposed. That's what I want. That's amazing legacy to leave behind, and there's definitely a ton of people that you're gonna help in the process of achieving it.

[00:51:13] So Robert, I had an honor and I had a prevalent, you know, I'm losing my words here. I had an amazing time trying to listen to your story and figure out what could I look out for now in my life, because they're getting more and more prevalent. Like I, you get random text messages from this guy or that guy, or random dms everywhere here, left and right, people asking for money.

[00:51:31] This episode is definitely needed, especially as social media becomes more and more popular than it already is, right? And so, uh, thanks again for hopping on and just sharing your story, sharing your wisdom, sharing your experiences. Just helping us, you know, equip ourselves with some tools to make sure that you were able to go on throughout the day and not get screwed over.

[00:51:53] At least have a better chance of not getting screwed over. That is all for today's episode. Thank you guys so much for [00:52:00] tuning in and showing love. You guys have been showing crazy amounts of love so far, this 2023, and because I love you guys, if you found this episode to be valuable, I'm gifting you guys a complimentary.

[00:52:11] Master training the four businesses you need to start before starting your dream business. If you wanna get into entrepreneurship, this is the perfect one hour training to get your feet wet, make sure to go click the link in the bio or you can go to bit dot lee slash walk. Number two, wealth gift, and you can get the training.

[00:52:31] Get access now. Again, I love you guys. I'm your host, John Mendez, and I will see you guys in the next interview.