Hello everybody, it's Sam from financial samurai and in this episode I want to talk about the importance of protecting your wealth. That's not funny money Funny money to me is any type of wealth that you just look on the computer screen and you can't touch and there's no utility So in other words funny money can include stock market wealth Cryptocurrency wealth and other type of wealth that really has no utility And the reason why I want to talk about this again is because something amazing happened the world's second biggest crypto exchange FTX Just got bought out today.

Well, it's in due diligence talks to get bought out by the number one cryptocurrency exchange finance because FTX was perhaps secretly insolvent or Lending out customer deposits or investing customer deposits when it shouldn't have nobody knows for sure but the bottom line is that the value of FTX which was once worth maybe Twelve thirteen billion dollars is now worth only a dollar because customers have withdrawn their capital So things aren't working anymore but the interesting thing is Supposedly about seven plus billion dollars of Bankman Freed's net worth was in his crypto trading house Alameda research Which also has plummeted to a value of maybe a dollar because what it held has also sunk tremendously in value It's very complicated.

But the bottom line is Sam Bankman Freed's net worth Plummeted from around fifteen point six billion to only quote only one billion dollars in a 24-hour time span So funny money is real folks You know all the value that we assign to our net worth to our investments that provide no real utility Is very subjective it can be anything the market wants one day and totally different the next day You know you see even with stocks right earnings misses of let's say five percent five percent Miss on the top line or three percent miss on the bottom line and these growth stocks Get crushed they get crushed by ten twenty plus percent in just one day Because future estimates have to be ratcheted down and so when we invest in funny money if we invest in things That are subjective in value then we must be prepared for that volatility But more importantly if you want to protect your wealth preserve your capital, especially after you've made a lot You probably want to consistently convert some of that funny money into real assets So the number one real asset most super wealthy people convert their funny money into is in real estate Because real estate is tangible it provides utility.

It's less volatile and It generally generates income higher income higher Yields than other assets normally, of course real estate can also go down in value Especially if the market is highly over levered we saw that in 2008 in 2009 But for the most part real estate is more stable and it'll probably last long after you're gone You know how sometimes you see in the news like some billionaire buys a hundred million dollar property or 50 million here or 200 million And you think yourself who the hell needs like 20,000 square foot mega mansion, right with 20 bathrooms And 18 bedrooms is just kind of nuts But the thing we must remember besides looking at these people and saying wow, you're nuts.

You're greedy You could save the world with all your money Is that they want to try to preserve their capital because deep down they know a lot of this massive wealth that they've generated Is a lot of due to luck and a lot of it is funny money and very subjective in value So they can sell some of these assets convert it to their mega mansion Then at least they know that if all goes to hell right if their FTX exchange goes to zero They'll still have their hard assets to live off of now The problem is carrying costs are gonna be very expensive but these very wealthy folks have figured out a way to diversify their net worth and Earn income in other ways to preserve their lifestyles this strategy of converting funny money into real assets is very common for Foreign government officials now you would think if you're a foreign government official Let's say in China or I don't know a communist country or somewhere you wouldn't be making a lot of money, but uh, a lot of these folks make a ton of money and I won't get into the details on how they make a ton of money on a government salary But they do and what I've seen here in San Francisco is a lot of that foreign money Comes and buys up San Francisco real estate prime properties around the city and then they just leave them empty They leave them empty for years Yeah, they pay the property taxes and all that but what they've done is they've converted their funny money way of making money Into hard assets in a sovereign country like the United States where the currency is more stable The government is more stable.

The assets are more stable and they're not going to be confiscated away by the government and I'm particularly wary of this happening because one I live in San Francisco and before this I lived in New York City and Two it's because I lived overseas in Developing countries for 13 years and I worked in international equities for 13 years where I would travel back and forth to places like China India Hong Kong Taiwan Indonesia Malaysia and so forth from a foreigner's perspective US assets are very valuable and from an American's perspective who has never Traveled outside the country.

I'm not sure how good we know we have it We take our freedom our stability our government for granted because this is all we know So everyone I encourage you to review your net worth asset allocation Look at what percentage of net worth is in funny money assets stuff that provides no utility or tangible value Maybe consider shifting some of that into hard assets and it doesn't have to be real estate.

It can be fine art. It can be Expensive wine something that you can actually enjoy because if you accumulate all this money and you don't enjoy it You don't spend it. You know, what is the point? What is the point of everything? Well, I'll tell you the point the point is to use your money to live a better life and have more freedom to do what?

You want now what's gonna happen to FTX the crypto exchange? Well, probably finance will not buy it instead finance will probably let it die because FTX was finances largest competitor So if you let your competitor die after you look at the books, you know You not only can you get inside information on what's going on with that exchange and its financials But you dominate more market share once your competitor dies.

So this is a story Everybody should be following because it talks about treachery it talks about Competitive business dynamics it talks about huge amounts of wealth evaporating overnight I mean these are the reasons why maybe a lot of folks don't want to be entrepreneurs because it is a Cutthroat business folks and the bigger the stakes man the bigger the risks and the bigger the rewards and downfalls One final takeaway is that if you happen to be running a business You need to pay attention to your debt levels You can't have too much debt.

Otherwise, you could be taken to the cleaners once revenue plummets Another thing is you might be tempted to do something funny with the cash on your company's balance sheet And the reason why it's considered funny is because whatever you plan to do with that cash might not be consistent With your business model, right if you run a business raising chickens, but you use your cash flow to invest in Cryptocurrency, it's not synergistic and you could get in trouble.

For example Financial samurai has some cash on the balance sheet if I use the money to invest in real estate Not very synergistic It probably wouldn't sink the company because financial samurai is cash flow positive and there's no debt but you got to be careful because once you have that cash funny things start to happen in your mind and Sometimes in CEOs minds they might want to use it to pay for their fancy Mansion off the books or something They might want to use it to invest in other things to try to make more money and make their company more valuable So, let's see how this all plays out but for cryptocurrency investors This is a blow to confidence and trust and as investors overall, you know trust is paramount You've got to trust the institution to be a caretaker of your money to do the right thing Otherwise, you're just gonna pull your money, which is what everybody did with FTX.

Alright folks I hope you enjoyed this episode. And if you did, please leave a positive review. It is unfortunately Mass layoff season you're seeing all over the news about Elon Musk laying off about 3,700 employees at Twitter or over 50% of its workforce Facebook announced it will be laying off 13% of its workforce or about 11,000 employees these companies are laying employees off because of poor share price performance Obviously a poor economic outlook and also the desire to save just on costs and not pay out RSUs bonuses so holiday times can be good or they can be bad and I encourage any Employee who is worried about their future at the firm or who wants to find some new opportunity and leave To plan out a severance negotiation.

I wrote a book in 2012 that has helped Literally thousands of people negotiate tens of millions dollars in severance to leave a job They dislike to do something else or to retire early and the book is now in its fifth edition For 2022. So if you want to save $10 on the book use the code save 10 as a V E T E N on Checkout and you'll save $10 and I'll put it in the show notes.

Take care everyone. Be well