Episode 35 – Climbing the Wall Street Wall

This is a snow-bike. It’s a dirt bike converted to ride in the snow.










Scene 1: In this scene you see people climbing the Wall Street Wall, making their way towards wealth. Most do it without the safety of a rope.

Scene 2: When the markets crash, those without a rope will tumble to their financial demise.
Moral of the story – “Sometimes you want to climb with a rope.” There are ways to participate with market gains, but not lose when the market crashes.

Hi everyone, welcome to the wealthy and wise Wednesday for our podcast and video this week, hope you are doing great? Yesterday I believe, yeah yesterday was I am doing this on Tuesday to get ready for Wednesday. Sorry trying to get everything in my mind but on Monday I spent a day up at the mountain riding snow bikes. I don’t know if you are seeing this, I will put a picture up just so you can see it if you are watching the video. By the way, I am going to show a few pictures on this as well. So if you are on the podcast make sure you go and take a look at this. You can just go to wisemoneytools.com/35, that will take you right to this podcast episode and if you scroll down, you will be able to see a few pictures.

Anyway, the first picture I am going to show you is from the snow biking yesterday, we ride this thing called a Timbersled, and if you have never seen one, what you do is take a dirt bike, so I happen to take a Yamaha 450fx and you take the wheels off and you put a track on the back and the ski on the front and the kit is called a Timbersled and you just can ride in and out of a tree and up and down the mountains and yesterday the snow was, we had about foot and half of fresh powder on top of some packed snow from previous weeks and man you can just fly through there and it was almost like powder sugar, it was so light and flying all around, it was just a great day. So hope you have some fun over the past weekend and enjoy some of your outdoors, wherever you may be. That might be skiing or snowboarding or if you are in the warmer climates. Maybe when swimming to the ocean.

Anyway, hope you had a good weekend? I am going to talk to you about you know this market crash has been on everybody’s mind and it really wasn’t much of a crash, ended up dropping about 9 or 10%, I believe and then it recovered fairly quickly and stand a little bit again but it’s got everybody just a little bit worried, a little bit nervous and I thought that I would show this couple scene if you will, this cartoons scenes, I love to have this drawn up because I think they do a really good job of explaining. It is kind of some philosophy or some strategies that you can use. So this first one is kind of scene one of scene two and couple of things that you notice, one is we have got ourselves mountain to climb and this mountain is kind of in shape of the wall street or the New York stock exchange, so it is got to, it is a mountain but it is shaped like the New York stock exchange depicting that everybody is trying to climb to the top of this mountain.

What is at the top of the mountain? Well it is wealth, so this is how people feel like they have to attain wealth is investing in the stock market and taking risk and you will notice we got a few climbers, we have got a few climbers, we have got some guys on their way to wealth and some are climbing up the columns in front of New York stock exchange, some are coming up on the backside, some are coming up on the left and the right and just about everywhere. But you notice one thing about them is that they are scaling this wall really without any protection, without any safety, and in this case without a rope. You will notice one guy in the middle, he is scaling the same mountain but he’s got a rope and that rope kind of depicts a way to get to wealth without taking all the risk. When you are scaling the wall street machine so to speak and you are doing it without any assistance, without any safety net, then you are basically taking all the risk on yourself and now switch to scene 2.

Scene two has a little market crash, a little earthquake if you will, you will notice that the earth has opened up, the rocks are cracked but because of that earthquake or that shakeup in the market price, we have got those that were scaling the wall street wall without any kind of safety net are now tumbling and falling off the mountainside and they have got nothing to cling on to but the guy with the rope, he is still just doing okay. He has made his way to wealth and he has got the rope. So the whole purpose of the story and maybe the caption that should be there is, you can make your way to wealth even with a rope. And it is really true, there are many safe ways toward wealth. It doesn’t mean that you are not going to take some risk here and there and take advantage of some opportunities that might come along. But there does come a time, this might be in your 50s, in your 60s, in your 70s but whatever that might be but there does come a time when you want a rope, when you don’t necessarily want to give up on making money and growing your wealth but you want a safety net, you want to make sure that if the market does crash, you have got a rope to be hanging on to and you are not going to be wiped out and tumble to your financial demise.

There are ways to do that, you know there is a lot of talk out there and literally tens of billions of dollars going into what they call in desk annuity and the reason is because index annuity give you the opportunity to still participate when the market goes up and everything is doing well but he has a rope in the sense that when the market does take its correction or has a crash, you can’t go backwards, you can’t lose, the worst that can happen is the flat or zero year. I am not going to go into all the new ones and how they work in this podcast and video but I just want you to know that there are ways that you can have a rope. Now, does every financial adviser use them? no. Does every financial adviser like them, love them or advocate for them? No. and for the most part what I have seen out there is those that don’t use them or like them are typically your fee-based adviser because you can’t charge a fee for people who own an index annuity, so it takes money out of the fee part and as a result, they do not like it.

There are three types of annuity, there are a fixed annuity, a variable annuity and an index annuity that I was talking about and you want to know the differences between the three. I am not a big fan of the variable annuity because that doesn’t put a rope around you. There is kind of a string and there is some protection but not necessarily a rope and the index annuity certainly have the rope and you can still scale the wall street’s wall and still build your wealth as that market grows if it does continue to grow but then have the safety of that rope. A fixed annuity is just essentially that, it is basically kind of like a glorified CD, it gives you a set rate of return and an interest rate. The problem with those right now, you can imagine with where interest rates are and our current economic cycle. It is really hard to kind of get the head in those because the interest rate or the crediting rate are so low. So again, I didn’t want to make this so product specific and talk about you know whether or not you should or shouldn’t have an index annuity, I just want to kind of to pick that there is a way to still participate in the markets and have the safety net of a rope. [00:09:22] for everyone, of course not, every product has its pros and cons and the reality is there is really no such thing as the perfect product or a perfect investment. There is always going to be give and take here and there but what I would probably encourage you to do is if you are in your five, maybe ten years away from retirement, you have got some money that you just want to make sure it is going to be there, you want to put a rope around it just in case there is a market crash. It is something certainly to consider.

The other side of an annuity is that they are originally designed to be an income stream that you can never outlive. They are essentially like a source of security or pension, once you lock in the income, you can never outlive it no matter how long you live assuming you take the live option and you can also have joint live options with you and your spouse so that your income can last through both of your lifetimes. Lot of different ways to go there but again the idea here is just to show that there is a way to protect a lot of your assets if you want to and put a rope around them so to speak in case of a market crash and with all the jitters that are going on now, I mean how many people thought oh, this is another 2000 or another 2008 when we saw the market give back 10% just in a couple of days. You also can see how fast that can change, I mean this literally change overnight and we dropped a 1000 points from 500 points, I mean it is just so quick. In fact, we have the largest single-day point lost, wasn’t the greatest percentage loss but it was the greatest point loss in a single day in history. So it can turn fast, so I guess the moral of the story and the moral of this depictions of the cartoon that we got here is that if you are ready to put a rope around you, take advantage of what is going on and take a real hard look at where your assets are and how much you can potentially lose and more importantly is are you scaling the wall street’s wall without any safety or protection and could fall to financial peril.

You know Warren Buffet and many other analysts will tell you, we typically go in ten years cycle that within that 10years period of time, we have both good and bad years and we have gone Oh wow, almost 9 years without really having a bad year. So we are in our 10th year of really not having an economic turndown and guys like Warren Buffet are sitting on the sidelines with plenty of ropes, they have 105/110 billion dollars in cash. It is not even on the market waiting for some sort of opportunity to buy in when the market does make a correction. So they are definitely harnessed in and protecting their capital and since they are and I say they; Warren Buffet, Charlie Munger and many others like them who use that style of investing. They are again harnessing, [00:13:06] down and not getting too involved in this market because it just didn’t have much value there. So it is good, it is good opportunity, maybe a little wake up call, maybe give us the time to look at our portfolio and re-evaluate that we want to put our rope on some of our money and make sure that if the market does take it crash, we are not going to be falling off the wall street wall.

So I hope that was interesting and a food for thought, again to see this depiction, if you are listening to the podcast, go to wisemoneytools.com/35 and you will be able to see this depiction and scene and of course, if you are watching on the video you will be able to see them. Well as always any question and specifically about how to put a rope around you, please reach out. I will always reach out to questions@wisemoneytools.com and we will do our best to answer your questions just as quick as we can and in the meantime you have a great week, enjoy whatever weather that you have as we move into springtime. All that is going to change in the few months, so take advantage of your winter if you have one. Meanwhile, I am going to ride hopefully again this weekend and enjoy another day up in the snow. So that is it for this podcast and video, have a great week and I will talk to you later, take care.

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