Are You In The Top 1%? Banking, Bitcoin, & Gold, Ep. #219

Welcome to another insightful episode of the Capitalist Investor, where your favorite financial trio, Derek, Tony, and Luke, break down today's hottest economic trends and investment insights. In this episode, we navigate the world of digital assets and touch upon key issues from NFT frenzy to the contentious gold versus Bitcoin debate. Our hosts don't shy away from tackling the big subjects – from global economic currents to the ever-evolving tech landscape. Tune in for a reality check on today's value system and explore the critical strategies for prudent financial planning!

The Boom of Non-Fungible Tokens (NFTs) and NBA TopShot (01:30)
NFTs are taking the digital asset world by storm, as highlighted by the popularity of NBA TopShot, a platform for buying and selling limited edition digital highlights from basketball games. Our hosts delved into the world of NFTs, analyzing their value proposition and discussing notable purchases like Donald Trump-related digital items and rare sneakers. However, they remind listeners of the importance of conducting due diligence before diving into such purchases, given their volatile and speculative nature.

Bitcoin's Role in Investors' Portfolios (08:30)
Bitcoin’s surge and its positioning as a hedge against traditional financial systems was a focal point of the episode. The hosts explored Bitcoin's recent performance, the surge in its price, and the launch of Bitcoin ETFs, which make the cryptocurrency more accessible to investors. However, they cautioned about Bitcoin's volatility, underscoring the importance of understanding your risk tolerance and the operational aspects of owning and storing digital currencies.

Implications of Tax and Regulations on Investments (12:15)
The taxation of gains from Bitcoin and the shift to investment in physical assets like gold were also discussed, painting a picture of the broader implications of government regulation on investment strategies. The hosts opined that assets like gold could be seen as a hedge against inflation and financial calamity, with potential shifts in investor sentiment towards more tangible commodities like diamonds.

Changing Attitudes Towards Money and Wealth Disparity (29:50)
A societal shift in attitudes towards money was keenly observed, with discussions on how people today value material possessions over long-term financial security. They pointed out that while some are accumulating considerable wealth, others are challenged by the cycle of increased income leading to higher spending, rather than saving. The episode also shed light on the dramatic rise in the net worth required to be seen as part of the elite 1%, laying bare the stark wealth disparity growing in America.

Technological Advancements and their Impact on Major Companies (43:45)
Apple’s recent performance dip in China led to a broader conversation about innovation cycles, the challenges large tech companies may face, and the eventual plateauing of technology's exponential growth, as suggested by Moore's law. The hosts surmised that even giants like Amazon are not immune to being replaced, and this cycle presents both opportunities and risks for investors.

Remember, this podcast is for informational purposes only and should not be considered as financial advice. Consult a professional for your specific needs. Subscribe, share, and hit that notification bell for more episodes. Let's dive into the discussion!

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Transcript

0:01

Hello and welcome to this week's episode of the Capitalist Investor. As always, you got me, Diamond Hands D. We got the whole crew together again. Tony the tiger, cool hand Luke. What's going on, guys? What up? What's going on, man? Let's do this. We got a lot going on. We're going to get right to it. So obviously lots going on this week. We'll talk about Biden's new rule on the credit card industry, and that should be an interesting one. We'll talk about how inflation impacting the rich and what you need to do to be in the top 1%. We'll talk a little bitcoin, obviously, because we got to, we got to. It's popping right now. It's mooning. It is definitely mooning. We'll talk a little iPhone and we'll talk a little iPhone and credit cards. And we're going to talk gold. Gold bitcoin. Yeah, we're hitting it. We're hitting all the bases, but we're doing it all in five minutes per se. Let's get this moving. Let's do it. So the banking industry not too happy with the Biden administration basically putting in a new rule that late fees can't be any more than $8. I think I read that correctly. Yeah, it's $32 now. It's kind of the maximum, obviously, then interest and stuff on top of that. But just the fee for being late can't be more than $8. So we talk about the government supposedly being just the referee when they're getting in there and they're changing the game. It's not the best thing. It's not even their game. It's not their game. They're going and telling other companies what they need to be doing. Right. So this is what I found fascinating. So I remember back in the day when I first got my first credit card and I got my introductory rate at what, 8%. And I missed a payment because I was like 18, 1920 years old, just dumb and missed a payment. And then what happens next is my 8% goes to like 30%. So here's what I found actually pretty fascinating, is that they say by doing this, it's going to save the average person $220 per year for 45 million people who are late on paying their credit cards. So you're incentivizing people to be late. There are only 200 million working class people. You're telling me that roughly 20% to 25% can't make their credit card payments? That's what's mind boggling to me, that's how tight it is. I don't think boomers realize Gen x. I don't think Gen X realize the lifestyles millennials are living. And I don't think millennials realize the lifestyles gen Z is living for. Sure. The multiple generations down definitely don't understand. So, listen, my peers, when it comes to credit cards, student loans, car loans, everything, their whole paycheck already is maximized every single month without or every single paycheck. Two every two weeks without being. Having any room for any kind of discretionary income. I mean, that's how most people between probably 21, 22 to probably 35 are living right now. But I'm, I don't know, 15 years older than you. Maybe I lived that life, too, when I was out of college. Yeah, I mean, I had some discretionary income, but I had my car, I had my apartment, and I had all my bills, and I get to go out a little bit. Maybe that was a luxury. Maybe like you're saying, like, hey, these people are eating ramen and hitting up the value meal. I don't know. These people aren't. That's the difference. You guys were willing to eat ramen. My generation is not willing to eat ramen. I thought they want to eat ramen. No, they are not willing. So therefore, they will go into debt to go out to Wendy's every night or whatever it be. Okay, here's the other crazy thing. So the only way on the capitalism side of this is credit card companies will fight back. And the way they're going to fight back is they're going to jack up interest rates or deny credit for people that need it. Those are the two things that I see. They're going to get their money back, and it's going to be going from 25% interest to 32% interest. So credit card companies want you to borrow money and not be able to essentially pay off the principal. But there's a balance between what that amount is compared to when the credit card company gets scared that they will never get the money back. Right. So I think we're approaching that time frame when credit card companies are starting to realize, maybe actually, I will never get this money back because of lifestyles people are living. So what I think you're actually going to see is credit limit decreases. Really? Yeah, for new account openings for younger people. I think the systematic. You know how we talk about unemployment? Systematic unemployment is rising because if jobs just aren't being created, it's the same thing with credit card companies. If you just systematically don't up your credit card limit, or if you don't keep the credit card limit where it's at, you can systematically decrease it for everybody, which decreases. That would be new because they've never done that. That would be fascinating. If credit card interest went down, that would blow my mind. No limits. Limits. Oh, the limits. Credit limits come down. So, like, if you have a $20,000 credit limit on your discover card, MX card, and you've now taken out$10,000, and now they're getting kind of concerned that maybe your income, what you're spending, maybe they even can see the transactions in your account. They lower that from 20,000 down to 15 because they're concerned that you are getting over. And I've seen that when I was again, younger, 10, 15, 20 years ago, whatever, I paid off my credit card, and they chopped my credit limit in half. Back in the day, they've done that. Okay, I thought you meant interest rates. I'm sorry. All right, next one. All right, so how much do you need to make to join the world's richest 1%? So, basically, that number is now 5.8 million in net worth, but more notably, that is up 12% from the prior year. Yeah. So inflation is hitting the rich, and that's 12%. Right. That means everything around them went up 12%, not this 3% Bs they're feeding us. Right. But think about this. So, in 2022, to be in the top 1%, you needed 4.4 million. Last year, 5.1 million, and now it's 5.8 million. That's a heck of an incline. Yes. The wealth disparity is getting bigger. That's just what it comes down to, is the wealth divide in America is getting bigger. I would say top 10% are getting way richer than the bottom 90%. Right. Bottom 90% are still spending credit cards like we were just talking about. Top 10% are making more money, have more asset values, because their home has appreciated. Their stock accounts have gone up. Maybe on paper, maybe they actually aren't worth this much more, but they actually, on paper, are right. That's the difference. My father made it. We were having cigars real quick. My father and I were having cigars, like this past weekend when he was up here. And one of the things he said to me is like, I just don't understand how so many people have so much money. My dad's one of those guys that saved money his entire life. We were very middle class growing up. Southeast, small town Ohio. He did a really good job saving money. And I would say he's probably our average client. What? Our average client is here, right? And he just said to me, I could go buy a house when I retire in Florida, but I would be stretched. And I just don't understand how people just continue just to buy, buy these retirement homes, second houses. And it really, I think, really gets. When you think about it, how do so many people have so much money compared to the average person? Yeah, it's wild because even I'm only. Well, I shouldn't say only, but I'm 43 years old, so I grew up in late 80s, early ninety s. And it seemed like a lot of people I grew up with were in kind of the same financial situation towards the end. In high school days, middle class had a little bit of disposable income, but everyone seemed to be very equal and everyone seemed to value money similarly. And now it seems to be just like, what can I buy? Bigger, better, more expensive? Same thing, man. I grew up in middle class, very lower middle class, if that. My mom worked for a bank. The houses and the costs. I mean, I know there's inflation and everything, but I don't remember people buying new houses every three years. No. And house appreciation back in the early 90s, it was not like this. I think everyone's doom spending. Every generation is doom spending. Here's a hypothesis, a vision, or just a stupid comment. I don't know what's coming. Do you think that the generation before the boomers were such good spenders that some of the boomers and even Gen X, look at the balance sheet when they inherit and they're banking on that money to go and do what they want to do now and say, hey, that money will be coming in this direction in the next three to 15 years or something? I don't know what. I'm just asking. What I think is lack of foundational values that America has in today's world. The spirituality of younger generations is not there. Whether you believe in Christian Buddhism, like Hindu, it doesn't matter. The religious aspect of that plays a factor into what you do on a daily basis. And when you don't have any kind of foundation to live by, you live in excess. And a lot of excess, I think that is truly contributing to not enjoying the moment. No one's having kids, no one's getting married. So they are just living this selfish lifestyle of spending, spending, spending on themselves to think that they think will make them happy. But in the end, that doesn't truly make them happy. Right? That's what I think. But another comment, with the rich getting richer, like$150,000, like making 100 grand when I graduated college was like, you were making it, and I got to work to get there. Now it's like everyone. I'm not going to say everyone makes 100 grand, but you make 100 grand and it's not enough. And then they were saying 150 grand. In some cities, I will just say the higher cost of living cities, I'll just say California. Cities like that. Oregon, 150 grand, I can only imagine. I mean, if somebody's paying two grand, $2,500 for a rent, that's a mortgage payment. That's an expensive mortgage payment. In Cleveland, we see with what we. Do here from a financial planning perspective, the more money you make, the more you end up spending anyway. So you just upgrade your lifestyle. Bigger house, bigger, better car. So you end up actually becoming somewhat financially free if you reach those income levels. But you just upgrade your life and you actually. That's what you do. You spend what you make. Yeah, that's why it's hard for anyone to save, because they're like, oh, I'm making more money. I'm going to go get that car. I've been wanting, which is fine and dandy when the economy's rolling, but when something breaks, then it all costs falling down, and that's what I've always been concerned about. All right, so moving on to Apple. Apple's getting its clock cleaned in China because they're losing ground in selling iPhones. Is that more in China and not really the US, or are they losing ground in the US, too? I think it's losing ground, like market share in the US or anything like that. They're just. Profits are getting squeezed a little bit because of inflationary wholesale prices and geopolitical tensions. Right. The concern is, I mean, China. Let's go broader here. China's like, debt's GDP is like 250% or something like that. I think Japan's like, is 290%. So basically, these economies over in Asia, even some in Europe, got built up through debt, right? So they basically pulled forward more than we did. All this growth, which has stimulated the economy, created all these companies to compete with the United States. Now it's like, are these companies technology actually going to be able to compete with the US to continue to take market share? Because if not, China is in really bad situation. Maybe China is winning because maybe it's a form of people spending less money. Hey, my iPhone versus cell phone X, there's no difference. They do the same thing, but it's $300 less, and the service is $20 less a month. I don't know. It could be just a combination of that. But at the end of the day, Apple is not innovating. I've said this before. They're not really doing. I mean, Gray, we got some goggles now that I haven't seen or know anyone that has bought them. They're four grand. Right. But they have not done anything. When they get AI onto the phone, which they're working on, which could take a few years to do so it doesn't burn through the battery because it's so energy intensive for AI. Right. Until they innovate something like, yeah, I'm surprised they haven't lost a lot of ground thus far because I see the commercials for, like, Google phone and stuff and looks like they can do some cool stuff on it. I don't know. I think that's exactly what's happening. I think the competition is finally catching up to Apple, and I think the advantages to having the iPhone over a different brand and the price you have to pay to get there, that is shrinking by every new iPhone release. Right. I'm a perfect example. I used to get every single iPhone every single year. I think I stopped that around the ten. So what? We're on 15. So I'm using it now until the battery stops working. I still have a ten. These things are relic. There's a theory, or there's a certain limit to where technology can get to with how small it can get with the chips they have and the processing power with the current materials that we have, like silicon. Right. I think we're kind of close to approaching that kind of limit. Right. Which is why technology is getting so fast and efficient that you don't need to upgrade, like you said. So if these companies can't, that's another concern with technology is, like, what else can we do without really discovering the wheel? Again, from technological side of things, the. Only thing I would say Apple's advantages is that they're tied into everything. If you've had an Apple phone, man, it's a little difficult to unwind it from everything else you have because it's probably an Apple product, too. And, you know, your droids and stuff like that will not mesh well. It's called Moore's law. That's the term I was referring to. Moore's law says that the number of transmitters in an integrated circuit doubles about every two years. But eventually, that's going to be tapering off. Yes. And you see that they talked about that with computers. Right. Ten years ago, you had to upgrade your computer because you needed the extra power to handle whatever applications you were trying to run. That's no longer the case. If it physically lasts, you could still use a ten year old computer right now. Right? So, yeah, definitely an issue for hardware. That's why Apple's been doing so well, because they've been able to get past that with their subscriptions and their ecosystem that locks people in. I like that word, ecosystem. Yeah. But, yeah, that's going. The life cycles of companies, eventually you get replaced, no matter how big and bad you are. I'm sure Amazon will be there eventually, one day, probably not anytime soon, but it'll happen and someone will innovate and know I won't be ordering everything that I purchase basically through Amazon anymore. All right, be a sad day. Yeah, that's right. All right. Bitcoin. Yeah, it's mooning. It's going up. It's going up pretty nice, right? What is it up 50% year to date? If maybe more. Maybe. I think a little bit more than that. So it touched 69,000 a coin and now it's around 65, 66, something like that. The ETF came out more available to be invested in it. So that's got to be helping. Every institution is going to buy like a 1% sliver. Yeah. The April having, the having of bitcoin, the mining will become more difficult, therefore the scarcity will be even higher. And that's coming up in April. But the one thing that I read, this one analyst, and he goes, he's actually worried about the retail investor investing in bitcoin because more is better. So they'll go and buy a levered three X or two X bitcoin ETF. So when the ETF goes up 5% in a day, that thing's up ten. But when it's down seven and you're down 14, the swings are immense. And they're worried about the profit, taking the scared money. Like, oh, my God, I lost four, I got a bail, right, and pull the rip cord. So I don't know, I think there's a lot of Momentum behind it right now. I have a couple of thoughts just because I know what I'm doing. My family, my father bought it at 18,500. That's what the limit price we put on to buy it back when it dropped. So we timed close to the low. Now we're up almost four X money on that. And when that happens, now it's a larger portion of his portfolio. So I have a price target in mind. About$80,000 is where I think it's going to go. Maybe start to really stagnate a little bit after this, Momentum fades a little bit. So we're looking to trim a little bit at $80,000. But I think everyone still, I think the philosophy should be everyone should own 1% for the long term, because it's either going, in my opinion, a million or zero. It's one or the other. In the end, it's going to 1 million or zero. So you want to always have a small sliver. But as it goes up and as it's becoming more of a higher allocation in your portfolio, you're going to want to start to trim a little bit, especially when it four x's from a price point, maybe. Do you think it's better to actually own a bitcoin so you can go on Coinbase and put five grand, buy some bitcoin, you own 0.2% of a coin or something like that? Is that what you do? Thoughts on that? Or would you? My absolutely direct thoughts on that. My dad and my father, who has the majority of our bitcoin, he's holding it on a flash drive, and he transferred from Coinbase to the flash drive. And I told him, until we're going to go ahead and sell that, don't put it on the exchange, because if you remember, Coinbase went under a couple weeks ago. There were theories about hacking, things like that. It's not your money when it's on the exchange, it's not your bitcoin. So if anything ever happened to where there ever becomes a crack in the financial system, and whatever they do, you still can own the bitcoin on your flash drive. So until the day comes that we're selling it that day, we're not transferring it back to the exchange. Yeah, I actually had that conversation with one of my clients. I think he said he had three or four coins. And I'm like, all right, well, not prying, but where is it? It's on the exchange. I'm like, you need to go buy a ledger. Right? The flash drive you're talking about, you go get a ledger, what's called, and you buy it, and then you put it in a fireproof safe in your house. And I would even put it in a fireproof envelope inside the fireproof safe. Right? Because I have a ledger for some of my minimal coins, higher price jPEG, but also some of my small amount of bitcoin. I just threw it on there why not? But that is the safest thing you can do and smartest thing. But you can't invest in the ETF. And then put the ETF on a ledger. It's got to be through the exchange, like Coinbase. Are there fees still high, like on Coinbase and still. They're extremely high. What is it, like 3%? No, it's like 1%. Okay. I want to get too far deep into it. There's one called a maker fee and taker fee. If you basically buy it market, it's a taker fee. Those are higher. If you have limit sells or buys, those are maker fees. Okay, so essentially it's 1%, the first $1,000, then it's like 0.6%, the next 10,000, then 0.3%, next 50,000. So just quick tip out there. If you have a lot in bitcoin, you want to sell it, like on exchange like that. You want to sell like $1,000 and then wait an hour. Sell another $10,000, wait an hour, because then your fees will go down systematically from that. That's what we're going to do when we're. But they also put Ethereum up next to bitcoin when they show it on the ticker, on TV and stuff. And they typically move in lockstep. But I'm actually noticing, I feel like Ethereum is going up more than bitcoin. I don't know exactly why. I mean, I have my theories. I think it's just an alternative bitcoin, and it needs to catch up. That would be my only immediate guess. Just smaller market cap. Yeah. I mean, all the small coins are going. All the small coins are going up, too. People are buying NFTs again. I saw someone pay like $16 million for one. I don't even know, for one of the rocks. Picture of a rock. Yeah. All right. It's like the real one of the first NFts out there. The famous ones are really plain looking. Yeah, I know you're talking. I forget. Yeah, but they were like the big money before. But yeah, someone just bought that. I see the NBA topshot transactions come through my Twitter all the time now. Someone just spent like $23,000 on LeBron. Are you guys going to buy your Donald Trump NFPs? Because they're there. What about the shoes? Donald Trump shoes? They did have those. Was it only one pair of shoes? I think it was 300 or something. 300 pairs. Okay. All right, go ahead. The one pair in question, he signed those one. Okay. Because I saw that for the 15 grand for him or something. I think it was like nine. Yeah. All right, one last topic. Gold goes hand in hand with bitcoin, does it? I think so. Why? So I'll give you my quick take. I think bitcoin, everyone says it's rising because the stock market's rising, it's more speculative, and it's going up like that. It's part of the reason, I truly think that all the things we talked about earlier about credit card debt, things like that, systematically problems, government debt, we talk about all the time. I think bitcoin is mainly rising because people are concerned that the system is kind of. The bitcoin isn't exactly what it was supposed to do as a hedge against the system. It was created after 2009 when a financial easing happened. Rates were became 0%. The Fed's balance sheet was a trillion dollars. Now we're like eight and a half trillion dollar fed balance sheet. Right. So it was created basically as a hedge against a failing monetary system. And I'm not saying we're there where it's failed yet, but I think it's actually going up because of that. Gold. Historic gold does the same thing. Yeah, I mean, I know you said bitcoin and it's just so new. And again, let's just say the power goes off, power grids are crushed. You can't use your bitcoin, but I can have a gold bar in my basement and go get a knife and shave off some things and trade it for some pigs. Is that how it works? You get a knife? Yeah, I don't. Yeah. Yes, it does, Luke. I'm going to go get a knife and I'm going to shave off a shilling. But I am dead serious, though, like something tangible where it's just hard to trade. I. If I wanted to buy a car in bitcoin, I mean, I know I could, but, man, I don't know what to say. It's just like a hard transaction. Right. Well, actually, just my family situation. The bitcoin, we're thinking about selling at eight round 80 is what we're kind of looking at. We're thinking about buying physical gold with it. So kind of like, that's where my take is. It goes kind of hand in hand. Here's just a way off and left field, because I'm thinking about that. Think about the four X gain that your parents had. How does the IRS know about that? How does that come into play? Because Coinbase reports IRS above a certain amount. Do they? Yeah, they're legally obligated. That's stupid. Because I had a seven x or on bitcoin. Yeah. That's what ended up how I was able to buy my house and do the down payment, things like that. I sold mine at 40. I kind of regret it now since it's back up to whatever it be. But yeah, Coinbase sent me like a form and that was four years ago. But gold, what do you guys think about gold going up to all time highs? So it's up like 16% in the last twelve months. But if you look back when gold hit its record at that time in 1980, it was worth $850 an ounce, which would equate to $3,200 in today's dollars. So it's an all time high, but on an inflation basis it's not. Yeah, that's always the thing. Everyone always says that gold is an inflation hedge. But if you look at it over a longer period of time, like you did, it is not right. It's ultimately calamity hedge. It's a commodity. Can it be and should it be part of your portfolio? I think of a well balanced portfolio. It can if you're trying to hit home runs every day, like, you ain't touching gold because it's too boring. Yeah. What's interesting is diamonds are trying to do the same thing with diamonds right now. It's like commoditize diamonds, diamond standards, the name of the company that they have like coins where you have like ten diamonds within the coin and they all like, I know diamonds are weird because you have clarity. You have all these different metrics and stuff. But apparently every coin is supposed to be worth the same. So the next commodity that's coming up is diamonds. Apparently they're trying to commoditize, create ETFs for and things like that. That's going to be interesting to see. But diamonds I don't think are the same as gold historically. Thought of the same at least. No, but again, it could be and should be part of the portfolio because I call calamity hedge. Whether that's geopolitical issues, monetary issues, wars, stuff like that, it usually goes up. So it makes no sense. Right. So market is at all time highs and so is gold. Yeah, who's right? Yeah, exactly. Houses are at all time highs. Bonds have rallied since the beginning of this year. I mean, the end of last year, every asset class is essentially up and it's like, who's right, who's wrong? What's really going on? Yeah, and the end of the, it's every country practically is in a recession except the United States. Why? Because we printed $6 trillion to support what we're doing right now. That's the scary part. I think China was trying to print, they were trying to print, like 500 billion. And I'm like, that's it, man. We spend that in three days here in the United States. 50 days. Yeah. Trillion every 100 days. I think I just saw that. Yeah. Exciting times, guys. Yeah. All right. Take us home. Take us home. D all right. Well, thanks, everyone, for listening this week. If you got any questions, comments, ideas for the show, hit us up at info@swpconnect.com and we will talk to you next week. You the opinions expressed in the podcast are for general informational purposes only and are not intended to provide specific advice or recommendations for any investment, legal, financial, or tax strategy. It is only intended to provide education about the financial industry. Please consult a qualified professional about your individual needs.