“The time of maximum pessimism is the best time to buy and the time of maximum optimism is the best time to sell.” — John Templeton
Today I wanna tell you about my secret financial weapon.
It’s a strategy that has you jump from one asset to another.
There is so much more you can do beyond one asset class.
This strategy can become a weapon in your arsenal that you can use to grow your wealth exponentially.
Let’s jump into it!
1. The Framework
The framework for this strategy comes from a guy named Mike Maloney.
He has a YouTube series called The Hidden Secrets of Money.
Let’s introduce this framework by going through an example of price vs. value.
This example will show that you can (and maybe should!) go from one asset to another.
You can buy an asset when it makes sense and then sell when it makes sense.
We’re going to use the example of houses and gold over time.
Source – Hidden Secrets of Money – Youtube
If you bought a house in 1920, it was worth around $3,000.
That’s about 150 ounces of gold.
(This assumes that gold was $20 an ounce.)
You can hold that amount in gold or cash or the house.
Those are all equal trades.
In this instance, gold may have been the best investment to hold.
When you get to the 1930s, the house is worth around $2,000.
The Great Depression happened around this time, so the value went down.
Now, instead of taking 150 ounces of gold to buy one house, it only costs 60 ounces.
You could have taken those 60 ounces and bought 2.5 houses.
Let’s say you do that and hold the 2.5 houses.
Fast forward to the 1970s when a house is worth about $30,000.
We’ve gone from a house costing $2,000 to $30,000.
Each house would now be worth around 850 ounces of gold.
With your 2.5 houses, you could sell your houses and get 2,125 ounces of gold.
Our 150 ounces of gold is now over 2,000 ounces!
Let’s say you sell and take that gold.
As you go forward to the 1980s, you’re able to take your gold and buy houses worth $60,000.
If you do the math, you could buy 30 houses for 2,125 ounces.
In 1980, it only costs 70 ounces of gold to buy a house.
By now you might be wondering: What exactly is happening?
How can we make sense of these prices and values?
In short, the value of gold went up and the value of housing didn’t rise that much.
Assets fluctuate in relationship to each other.
In the example, you have 30 houses in 1980.
We do multifamily, so this would be great for us!
I wouldn’t necessarily recommend the average investor have 30 houses.
But for this example, it shows how powerful this framework can be.
If you go all the way up to the year 2000 with those 30 houses, each of them is now worth $200,000.
That’s 800 ounces of gold per house.
If you sell those houses, you could walk away with 24,000 ounces of gold.
We’ve gone from 150 ounces to almost 200x that number!
If you convert to gold and hold until 2011 after housing prices go down, it only costs 150 ounces to buy a house.
You could buy 160 houses! This would give you a net worth of $48M. Not bad!
I’m aware that this is a pretty extreme 90-year example.
But it showcases how jumping from one asset class to another can be incredibly valuable.
It’s like a lightsaber you can use to defend yourself when certain values are uncertain.
There are times where one asset class makes sense and another time where it doesn’t.
So, the question then becomes: How do you value an asset class?
2. How to Value an Asset Class
It’s easy to look back and regret past investing decisions.
Sometimes the best investments are not apparent – unless you understand how to value them.
When you’re looking at valuations, it’s good to look at historical valuations specifically.
One way to do this is to look at a PE for the stock market.
As seen in this chart, PE fluctuates up and down.
When the stock market valuations are high, that’s the point of highest risk.
And yet, that’s when people are most excited about the asset class.
This requires you to be a contrarian investor, which means you’re looking for value.
You’re thinking independently.
You’re looking beyond what everyone else is doing.
If everybody’s in real estate, it might be time to start selling your properties.
If gold is a terror, maybe start selling your gold and buy another asset.
It is important to note that if you move between assets, you will have other considerations such as tax.
When these considerations come up, I think of something my friend Jason Hartman once said:
Something may be a great deal, but compared to what?
What can you do with that cash?
What can you do with that gold?
How does that compare to what you would get if you bought the asset?
The ability to move from one asset class to another is a great way to tackle this.
At Bronson Equity, we are involved in multiple asset classes.
Along with our investors, we have $200 million in multifamily real estate.
We also invest in car washes, ATMs – even oil and gas deals!
We’re always looking to find the best opportunity.
3. Learn About Other Asset Classes
If you also want to find the best opportunities, the easiest way is learning about other asset classes.
Learn about things that are not in your wheelhouse.
Talk to other investors.
Listen to webinar presentations for different types of deals.
Go to events.
Try to find out about unique opportunities.
I was at an event recently and found a guy doing timber over in Texas.
I thought that sounded awesome!
We got to talking about doing a webinar or a podcast together at some point because I wanted to learn more.
The more you can learn about different assets, the more tools you’ll have.
Do the work.
Read!
Talk to other investors.
Sell things when they make sense.
Everything should be for sale in your portfolio at the right price.
Crazy things will happen.
Sometimes the stock market is booming.
Companies that usually aren’t for sale go on the market.
That happens because somebody pays an incredible amount for it.
Mark Cuban sold broadcast.com for billions of dollars to AOL when buying prices were super high.
That’s how he became a billionaire!
He took advantage of those swings.
In conclusion: Learn from other people.
Find assets that make sense for you.
Never stop learning and growing.
Now I want to hear from you!
Do you have any must-have money making methods you want to share?
Let us know in the comments.
Before you leave, make sure to check out our special report about inflation investing. It shares the best choices to invest during an inflationary environment.
If you are interested in investing with us, we are happy to answer any questions that you may have. Join our investment club today and we will be in touch.
Disclaimer: I am not your investment advisor. This is for educational purposes only. I am not giving specific advice on what you can do. I am simply giving my opinions.
