Welcome back to another episode of the Meet Kevin show. It's been a while since we've done one of these, but today we have none other than the famous uh Ross Gerber from Gerber Kawasaki and ticker symbol GK And boy do we have a lot to talk about from markets. Crazy capitulation happening today. Huge down day Tesla hit 10 11 down for example NASDAQ down nearly four percent scary day, a lot of fear and it's all just three days away from Christmas Ho ho ho and welcome Ross Gerber yeah can you believe Jerome Powell killing another Christmas He did this to us in 2018.

this guy is like he makes the Grinch look like like a great guy. You know it's like his job to force the US economy into recession and Destroy people's Christmases and it's two. Two of the last five years we've had bear markets and this one's severe because of Jerome Powell and it's almost like it's like the point of America is not to make money. Now you know it's like we don't want people to make money.

They did too. Well, you know, we gotta. We gotta bring everybody down 25 and that's basically what's happened. You know we, we've got.

You know, four to five percent interest rates and and everybody's lost 25 of their value. And you know a lot of stress and tension about it, which is certainly reasonable. but you know there's a reality that we just all have to face with four and five percent interest rates that the value of our assets are less and it sucks. Yeah, I mean it seems like Jerome Powell really is is focused on this rear view mirror mentality too.

I mean why is everybody talking about Q3 GDP Who cares, right? Even stronger, all the companies in their earnings calls were complaining saying that things were changing in October not Q3 nobody cares about Q3 we care about Q4 and what's gonna happen next quarter but it seems like drone Powell is sort of legislating if you will off of the pass. what's your take on that? Well, totally I mean they're a completely reactive fed. They were slow to react when inflation had risen in last. November They should have started raising rates you know, good three or four months before they did.

and because of that, they jammed rates down our throat and had to talk rates up. You know, and now they're looking at data that's so old now I'm not I Don't think that the FED doesn't see what we see I mean they have to read The Wall Street Journal and see the layoffs and see you know, especially like housing for example, which I'm sure we'll talk about today. Oh yeah, you know I just I I have client I have a lot of clients in real estate, you know and I'm on the board of another real estate company that's in commercial and residential and it's just like debt. like it's just like everything's stopped now.

A lot of people think like once the New Year comes, people will kind of come to terms that rates aren't going down and if you want to buy anything, you're going to have to do something. But but prices are going to have to come down to offset these rates. And and people who live in, you know most of the United States are going to lose 25 of the value of their home. Um, thanks to Jerome Powell and and I say thanks to Joe and Powell because I think rates are unnecessarily High to achieve the same goals he could achieve with lower rates? Yeah, yeah, no kidding.

It does seem like uh, it's gone a little overboard I Was looking at inflation break evens and we're kind of sitting at where we were in 2018. But then I compared to 2018 and you know the FED funds rate then was two and a half percent. Now we're at what four and a quarter and they're trying to hike us up to five and a quarter. all while the indicators are pointing down not up right.

It just seems overdone. like this fed forced recession is is, uh, honestly gonna make them turn the money printers on again. What's your take on that? Is that possible? Could that happen? Well, and that's that's the whole point. The whole point is like, why do we have to have an economy that's fundamentally based around the FED stimulating it versus just letting some inflation run Like for example, who said two percent inflation should be the goal? Because ever since I started the industry, we were running inflation numbers at three percent.

Or actually, when I started, we were running inflation numbers at five percent. And then we lowered inflation Like you know what, Like when you retire in 20 or 30 years, what's the cost of living going to be And so when you start thinking like okay, I'm 40 years old I want to retire at 70. So 30 years of inflation? Well, the difference between two percent inflation and three percent inflation is a lot okay. But the difference between two percent growth and three percent growth is a lot too.

And if you're trying to build wealth, you want more growth, but you want to keep inflation within a range. But the fact that the FED is so focused on a inflation rate that's so low that it implies that there's almost no growth in the economy. That's what's most troubling. Because it does.

It essentially says that the only economy they see is one that they have to stimulate because they make it so slow. Yeah, I Mean it almost seems like uh, we're in a place where we're always going to be in a world where the FED is either over stimulating or over tightening. Can we just live in a world that actually operates like normal? It seems like they're actually making booms and busts worse. when the purpose is to make them less bad, they seem to be making them worse.

Well, if you look at the long-term trend of like the way the FED has acted since inflation was crazy in the 70s, you see this just still this gradual as they would raise. It was never as high as they would lower or get worse. And then when the financial crisis happened, that was the moral hazard of when the FED really said now I'm going to start controlling the economy, we'll raise rates a lower rates to zero, We'll print money, we'll buy bonds and it was the same thing they did during the pandemic, which they support asset values, which certainly helped during the pandemic, But they got to a point where it's like the only economy that people seem to think exists is one that's stimulated through fed action, which has also led to the extremely negative sentiment that if the FED doesn't do this, then we'll never have a good economy without it, which is also incorrect. So the the real question is the Fed or me Or you have no idea where rates should really be right, Like should it be? Is the Fed right? Should they go to five? or should they have stopped at three and a half? Nobody really knows, because we're not going to know for another six months.

Okay, what the real rate should have been, but if you look at the actual two-year note, it's still sitting around four, two four, And so that's what the two-year said. The tenure is telling you, three six, you know. So in my mind, the Fed's gone far enough. that's what the Market's saying.

So any further increases and that's really what's hurting the market is any further increases from the Fedges further exacerbate the recession we're going to have next year now. Something that I think is interesting is, uh, it was running through the scenario in my mind and I wanted your take on this and we'll see what ends up happening. But when stocks do end up recovering, it does seem like people would be more inclined again to maybe move from cash over to stocks. And if people sell bonds to move into stocks, then we would see the value of those bonds come down.

And even as the stock market Rises is it possible that we could actually see bond yields rise? And the reason the whole reason for mentioning that is is it then possible that as the stock market Rises mortgage rates actually either stabilize high or potentially rise a little bit and continue to hurt real estate while the stock market actually starts recovering? I Don't see that as much. You know what? I see is that like a 10-year rate which really functions around mortgages, you know it's really thinking like what's inflation over the next 10 years and I got to be a little bit above it. So that's so the Bond saying right now inflation is going to be Let's say 3.3 3.4 over the next decade and I'm a little bit above it. So if I buy a tenure, I'm going to come out ahead Okay So that's a pretty elevated level of inflation still by my mind and it's certainly the fetus made it clear they don't think that's acceptable.

Okay, so if that's the case, then mortgage rates will probably be lower based off the fact that when the economy really slows, people will be buying bonds. Okay, so what will happen is the Fed will be done at some point in Q1, probably when they see all the data, finally that they've killed the economy And then it's like they're going to keep rates higher and so that like means the long Bond will actually probably still be inverted until the FED actually starts lowering. Okay, so this set of scenarios is what the market really doesn't like. You know, it really doesn't like the idea of the FED having to hold rates at let's say, five percent.

Well, the bonds are saying we don't need this and it's essentially you're just driving down the economy and so investors will continue to buy longer term bonds. The longer they hold the short rate high, because it's more likely we're going to have a slower economy and lower inflation. You know, right? So it would be the opposite. So let's say the FED said I went too far and I'm lowering it 50 basis points next meeting.

Okay, we'd all cheer. The markets would cheer. but then you'd have the bond sell-off because that we'd have growth. then you would maybe are, oh you know, and then it's like oh, so you know that scenario is zero percent.

So right now, so what you're saying is, uh, the market might be more interested in focusing on are we recession bond yields up? Are we growth? bond yields down? right? In that case, Nissan yields down means we'll grow and bond yields up mean bad. So another thing, speaking of growth, uh, you know I was comparing I looked at Nike's earnings and I saw that you know in the prior two quarters they had negative year-over-year earnings. In this last quarter, everybody got so excited because they're year-over-year earnings. Ross This is a big number.

Okay, deluded year over year earnings grew by two percent, right? Okay, and that's Nike And uh, they're selling for somewhere around 28 29 times their earnings. you know, 18 months out and Tesla right now is selling for less than that. somewhere around 24 25 times earnings, 18 months out, 12 months out. And yet Tesla's growing earnings that 35 to 50 percent.

What's going on with Tesla You know it's funny because the people in my office are like, ah, all you do is talk about tests like oh, that's what everybody wants to talk about. Yeah, you want to talk about MGM I'm super bullish on MGM it's my number two position nobody wants to talk about Vegas nobody wants to talk about Formula One I'm sorry I'm sorry I'm not talking about Tesla today and then everybody throws rocks on me. No, um, look, you guys have seen what's going on. you can't be everything to all people and Elon's stretched himself far enough here.

And it's the stock. Sales have been super dilutive like any way you look at it. he's sold 40 billion dollars worth of stock in the last year. and if you like, think about individuals coming up with 40 billion to buy this stock from Elon so he could buy Twitter That's a heck of a lot of cash.

So if you're wondering why Tesla stock is down, it's because you have a major seller and that same person isn't convinced anybody to be a buyer. In fact, what he's done is he's convinced many people not to be buyers. And what a lot of people perceive now is he may be convinced a lot of people not to be buyers of the car which I don't not necessarily believe but but I think how would I say this I think sometimes we try to do things and it doesn't work quite how we want them to be. and Elon I think is starting to take the right steps to find a CEO for Twitter and get back to Tesla as soon as possible so that the focus can be back on what's important which is launching the Cyber truck this year, scaling production at their factories and if we say earnings estimates are between six and seven dollars a share, they have to achieve that.

You see what I'm saying. and so if they achieve that and Elon's focused, we're looking at a 300 stock. Okay, it's a incredible Buy if they make their numbers this year right? Okay, but to do that I think 100 Elon needs to be focused on Tesla that's just what I think that's my opinion. he Elon might not agree with my opinion either, but that's my opinion just the same.

I think Twitter needs a media CEO and and it's not really the best thing for him. and and so I've worked really hard over the last week to try to convince him and and and you know people that you know he can do a good job at Twitter and just not be CEO you know and I think you tweeted my favorite tweet of the day yesterday which was you know I'm I'm not CEO anymore I'm head of software and services which is basically CEO which is true, but it's all about Optics You see what I'm saying? it's all about Optics And so I think there'll be a big General sigh of relief when Elon moves back to Austin again. Yeah, no kidding. I Think it's really what you said about the order book about Elon having gone through 40 billion dollars of selling which is uh you know, not volume right we and I think people confuse that and I'd love for you to comment on that for a moment people usually hear oh he sold 40 Bill oh the volume will absorb that in a couple days.

Yeah, that's not true because really This is 40 billion of held shares not traded shares that now have to be offset by another 40 billion of Hell chairs. And the reality is in the last. Uh I think last week Van attracted a report that retail only bought 650 million of Tesla in a five-day period. So that takes you 61 five-day periods just to offset his selling.

Yeah yeah and and that was sort of like when we were having he's like oh Securities analysis 101 and I was like I got to the page on dilution and I I was like here we go you know so tell us about that he he yelled at you he kind of he he he saw back at you and said I said I was gonna work you know I took I took a Kevin pathraf Playbook and I said I was going to run for governor which is Tesla board of directors and and of course you know when I first said it I don't think he really perceived that that was a potential but then when I tweeted again you know basically like this sucks. You know, like just totally absent. You know, like board doesn't even say anything like they don't do anything you know like the Tesla board they could be nobody and nobody would even know the difference, right? Um, and and then so Elon didn't like that I said it was time for a shake-up and he was like well, what do you recommend Ross so I I put up my three-point plan which is you know essentially we need to know what's going on with you and and what. You know what the next move is and and we need to know.

You know we need you to say that you're going to stop selling stock I mean what institution is going to buy a billion dollars of Tesla stock right now knowing that Elon could just dump it on right? And so you know we need to stand still agreement and and we need a secession plan? You know, one of my favorite investors died today. this guy Scott Minard Scott Minard runs the Google fund that we have a lot of money in the Guggenheim bond fund. uh Gibbix is the symbol g-i-b-i-x uh he I've met him many times in Guggenheim's down the street from here and and he was a pure Bond guy and I'm a Pure Stock guy. so I used to love you know his take because it was always negative to the stock market so it was like I always like those views that are most negative because I want to especially from really smart guys because I I wanted like debunk it or understand it or whatever you want to say.

So um Scott was a bodybuilder and he was massive and he used steroids which unfortunately led to his demise. It seems he died of a heart attack working out and he's Young relatively 60 something? Yeah, 62 maybe? Yeah, we say that's young. Yeah yeah. but this is why you have secession plans because the first thing is I got I don't know I got to see how much money I got it at Guggenheim but it's it's money.

But they have a team that runs this money. but Scott's the brains behind this whole thing. Yeah, Guggenheim's super good. but now I gotta look into like what's next with this fun.

Are we going to liquidate our positions in this fund? Like what's the secession plan? So asking for a secession plan it's a normal part of business. Um, asking for, um, some sort of detailed plan of what Elon's roles will be over the next six months is not an outrageous ask. And asking for a commitment for transparency about stock sales is also not an outrageous ask. And if I can't get any information from these people, I'm going to continue to press to run for the board because communication is the key for successful companies and when companies aren't communicating well with shareholders and and and customers.

Um, you get a lot of dissonance and that's where Tesla is right now. Yeah, yeah, no kidding. It seems like that transparency is really important, but then again, you know I suppose if you have this really Long View Maybe it just creates this nasty void where you know anybody who's on margin or or loses Faith because of this political drama leaves and it creates a nice buying opportunity. If you have cash left, you know, uh, interestingly, I Think there's a chance that in this fed induced recession you could see companies like GM and Ford cut back a lot on on EV production because those are money losing vehicles for them, right? Ford loses money on their Machi So in a recession, you're trying to preserve cash so you want to produce less money losers? Well, I I've seen them actually idle the The Ice plants is what they've done well.

So I'm wondering though in a recession, could it potentially be that they hit the gas a little less on EV And we'll see what you think because we know that's what Toyota is doing right? Toyota And the the head over there. Toyota Hybrids, right? But what's your take on Tesla Maybe Taking more market share during a recession? I Think any company that pulls back from their EV business like Ford it would be a huge disaster because people love the Ford EVS Okay, so my basic premise is still I don't think Tesla's having any problems selling EVS Personally, they're discounting EVS because all this nonsense from the government. So the government. you know the Biden Administration is really not serve people well from a lot of things they've promised and one of them is this: EV tax credit.

So starting January 1st there's supposed to be an EV tax credit for Tesla for 7 500. This is what's causing all of this. So if I'm about to buy a Tesla why would I buy a Tesla today when I could wait two weeks and get 7 500. So the government was supposed to release last week and this week like what are the rules who qualifies so that consumers would know and they punted it for another three months.

So now they're saying we're going to give a broad idea of who would qualify but we're not going to say till March Now this screws. Tesla Okay because it's just like people put off. at 7 500 bucks, it's a legitimate amount of money. So Tesla then discounts to say well app.

you know it's a tax credit for 7500 but I'll give you four grand off now to buy the car because essentially you're you would otherwise save more but you'd have to wait. You know what I mean. And so this discounting is smart because Tesla's cost of production has gone down. So we've seen Commodities spiking in the castle that raised prices last year several times and now commodities prices have dropped and so Tesla has bigger margins and now they're able to just throw these discounts out left and right to try to Goose sales.

Now that it's like super confusing for consumers of what to do around the end of the year, so it's a little bit frustrating that the government can't seem to be honest and clear with who qualifies for what incentives it affects. Tesla that's odd I'm just looking at that now I'd say here's Reuters Uh, just on the 19th here. revamped 7 500 EV tax credit taking effect Jan 1 Treasury Department said it will delay until March its release of the proposed guidance on the required sourcing of EV batteries. The announcement means some EVS that will not meet the new requirements may have a brief window of eligibility in 23 before battery rules take effect.

So I'm not exactly clear. Does that mean nobody knows? Nobody knows. This is the point. This is the point.

So it was like, well, you're supposed to according to the law, you get the 7 500 on January 1st if the car, right? But they're supposed to have released who qualified Now by my math Tesla qualifies. But it's like this totally arbitrary set of like numbers like 40 of the batteries from here. The assembly is from here, blah blah blah, you know. So the government made it super complicated and nobody likes it other than Tesla Really? because they're the only ones who really do everything.

Most things here in the United States That said, it confuses consumers because you know the 7 500 is real and when I bought my first Tesla I got that 7 500 off and that's real, you know. So I paid 60 000 for my Tesla Model three I think it was and I got 7 500 back and the state of California back then was giving 2500 as well which I didn't get qualify for. so you were getting 10 000 back in California buying a Tesla and and so you know that puts some pressure on the stock short term, but it's such a short-term issue that ultimately ends up with Tesla winning anyways. I Just think, right now, for investors, if you have the ability you know you're not leveraged and you have Capital This is a very unique opportunity because I don't necessarily think the recession is going to be that bad and I don't necessarily think earnings aren't even going to be hit that hard because nobody's factoring in the fact that we're going to get margin expansion across multiple Industries because of the lower cost of input.

You know, like China is a best today, but once they get out of this coveted mess in three months, they're going to be like America last year when everybody's going shopping crazy and they're all going to go to Macau and hopefully they're all going to gamble in McAllen Bring back you know that business because they were investing in MGM and they're going to go to Shanghai Disneyland and I Think there will be an economic Boost from China next year that a lot of people aren't factoring in. Um, because they finally got rid of zero code. So I have three points to my bull market plan. The first point is the Fed has to stop raising rates.

the second point is China had to get rid of zero covet and the third point is some sort of ending of the war. And so we've got one of those points down now. So now I only have two points and the fed's got to end soon and they just have to. I Mean even if they go to five percent, they still ended in q1, you know? And then the war in Ukraine can't go on forever.

So Putin's kind of bluffing saying he wants to go for the long War But if you remember how the Cold War ended, well, you were kind of young. Well, the Cold War ended because Russia and the United States were in this spending race for nuclear weapons and eventually Russia ran out of money before we did. and that's what's happening right now. so Russia can continue to spend tons of money on their military, but they're going to run out of money and they're going to run out of people and that's what's happening now.

So So I Think for investors, it certainly sucks that the FED has gone out of their way to ruin another Christmas But if you can, sort of keep focused and buy these stocks here in small amounts as I've been recommending for the whole year and staying conservative still as we get through Q1 I think this opportunity passes and and the markets have got a bottom in here somewhere and rates have got to top somewhere here. And then we've got to find this sort of base. and then we have this opportunity for markets to start to move again into a new bull phase. But boy, you know they've made it super tough on on investors.

Yeah, no kidding. Oh, that's that's really interesting. Yeah, I mean yesterday, Ukraine just got funded with another 45 plus 2.2 billion dollars. It doesn't I mean that's certainly going to keep Ukraine going for a while.

and I think they realize this is probably it because next year. Honestly, for the next two years we're going to have a lame duck Congress or or maybe not a lane duck, but uh, but a stalemated Congress that probably won't be too enthused to provide a lot more funding to Ukraine So they've got to stretch this. I Imagine Ukraine is well aware of that. Uh, but is it possible that Ukraine runs out of money? if that? U.S Money stops and then Russia Does you know Prevail Well, we're not going to stop.

We're not going to stop. And you know Ukraine has become the what the 50 the second state of the United States. In a way, um, look at it this way: if you want to destroy your adversary Putin it's a lot better for America that this is happening in Ukraine versus U.S soldiers being involved in U.S You know kids dying in this war? so you know the Ukrainians have suffered greatly fighting this war. So the fact that we can only just give money and arms is a huge plus.

Because they're destroying our adversary, they're destroying Putin's Army And what they've done is they've done a wonderful advertisement for the U.S military Industrial complex because our weapons are clearly the best we have like such a superiority in Military and defense. It's unbelievable and and we've added to that in our Fund in GK So Northrop and and we've recently added Raytheon. But the military Defense sector is going to have a Renaissance over the next five years between all the spending I mean Japan Just said they're going to spend 50 billion dollars a year. So the budget for Ukraine's military defense that we've given them is about half the size of the entire Russian military budget for the entire country of Russia.

So we've essentially given Ukraine and the Europeans almost an equivalent spending on military equipment and personnel as Russia has completely so so. This is real bad for Russia and it's real good for America. So this war is real good for America and Russia clearly is the probably the worst Putin. It's just the worst government in the world and the people are hostages to this and so destroying Putin and their current government is a wonderful U.S goal and and if we succeed, the world will be in a fantastic Place Moving forward You you see Uh, Russia or in other words, this war with Russia Because obviously in the short term, it's created a substantial amount of suffering here because of high oil prices, gas prices.

European Potential nonsense in the snow with your kids murdered fighting for your life. Okay, we have not suffered at all. We've had higher prices and we have a strategic petroleum reserve. Gas prices are back to normal.

Look Americans are have to understand sacrifice and the sacrifice that Ukrainians are making today is immense and we have nothing to complain about, just that we had a little bit of inflation or whatever that's gone, but people are arguing today. long term. this is actually better for everyone that Russia gets weakened is what you're saying. and that's not just weekend, but Ukraine stays free And the West The idea of democracy.

you know. Remember a few years ago it was looking dark. We had dictators in America and Russia and China and in Brazil and ah, dictator Trump Dictator that was in we don't want that, We want democracy. Okay and I'm not saying this from a partisan perspective.

we want a democracy If Republicans win Fine, but we wanted democracy. you know. and and so having democratic governments like in Ukraine creating a system where Ukraine becomes more part of Europe the West is a huge power move like for the West you know. And so the rebuilding of Ukraine will be an enormous economic boom.

remember: China Remember Japan and Germany were destroyed post-world War II and became some of the strongest economies in the world thanks to I Think it was the Bretton Woods agreement when the United, States and Europe helped rebuild Germany and Japan and built them into economic powerhouses. Ukraine could become an economic Powerhouse In the global economy, they have wonderful resources and and can totally supplant Russia's place in the world. But eliminating a massive nuclear threat that's a constant destabilization from Western, Democracy is a massive victory for America massively so. we haven't done that yet.

but but so that's why. Don't worry like the funding's not going away for Ukraine like even Republicans, Even a divided Congress will provide something to make sure. Remember who the Republicans like to support defense companies? So the budget was raised for defense well above what Biden wanted actually because of the Republicans the Republicans added to defense. So the Republicans don't you know they might say this or say that that's based off their constituency.

They just want more money spent on defense and they've won. And they'll use Ukraine as a reason to spend more money on defense whether they care about Ukraine or not. Wow, and that's why you got to invest into fast contractors right now. because we're in a cycle now where it's clear to me that a ton of money in Europe Japan in the United States needs needs to be spent on defense, not just for the future, but to replenish what we've used.

Hmm, that's it. Yeah, that's really incredible because that it it. You're really saying we could now have a a Powerhouse of an ally in Ukraine And now all of a sudden we're actually really boxing in Russia and China right? And yeah. interesting.

And what does she do? What does she do? He goes to Europe He has a little talk with some people, gets rid of Zero Kovid, his economy's bankrupt because of these policies, so Right needs to get the economy of China going. He's in no position to attack Taiwan. You know it's like the the most important thing she does is get his economy going before his entire system falls apart. So no kidding.

So we've got our enemies at Bay right now. and if it weren't for the FED putting us at risk of a severe recession, America could be in such a driver's seat over the next five ten years. In the global economy and the global power structure, it's like wow, That makes me wildly bullish. Yeah, once we can get through these two other issues, which is the Fed in Ukraine you know, so I don't know how long that's going to be and you know I'm buying bonds until it's over.

Yeah, well, speaking of buying, by the way, I know House Hack is the best performing investment I have for the last 60 days. So tell tell us a little bit about Househack. Uh, you're on the board of House Hack. There's a website people can go to to read the solicitationhouseack.com It's my real estate startup, which you're a board member of.

Tell me about this, right? So let's start with the disclaimer: this is for accredited investors, right? And so House Hack is a real estate investment that, uh, Kevin has started that I've decided to be a part of. Um, because I think it's a very, very good time for investors to start looking at renting residential real estate or owning rental residential real estate. And because I don't expect, you know, a massive decline in real estate prices. but I expect a pretty decent decline in real estate.

Um that there's this opportunity out there. and so Kevin has raised money to do this. I've invested in House Hack as well I'm I I offered to be a board member for several reasons. One, um, Kevin's younger and very ambitious.

so I figured working together would blend both of our skill sets in a very complimentary every way. So we have different experiences and background I know very little actually about real estate, but I know a lot about finance and so it was really a great opportunity for me a to learn from Kevin and also Kevin to learn for me. So that was why I wanted to be involved. Also, the issue of credibility.

you know Kevin's a YouTuber and he's building a huge future for himself and Company and I I'm very much a supporter and and believer in that. and and and I think as he's moved from just being sort of a YouTuber into a real Financial business. um, he wants to learn and Associate himself and do things the right way. and it's hard if you've never been in this industry to know like how do I handle all these different things and if you just pay Consultants it's it's not helpful so by working together it really gives us.

he gets this like tons of experience that I've had and help him build his financial businesses and do it in a way that creates transparency and Trust so that investors don't have to go through what they've been going through in the crypto industry. that is super important to Kevin and that's something I wanted to. Really: Express To people that you really do care about transparency and trust and that's why I was willing. You know there's a risk me doing these things with you and I was like you know this guy really wants to do things the right way and you started by making the right decision of moving House Hats hacks assets from the bank into an account that's managed by me at Gerber Kawasaki And by doing that, there's a third party and our assets are held at LPL Financial so that there's third parties holding your assets if you're an investor in House Hack until these assets are deployed and after our strategic discussion, we decided that the best thing we could do for House Hack shareholders is to buy short-term treasury bonds because we felt Not only was it actually a really prudent thing to do with the money because we could earn over four percent, but actually opportunistically because we both felt interest rates were high that we could actually even possibly make some capital gains.

And I'm I'm actually proud to say that the House Hack has a capital gain now in our bond portfolio of about thirty thousand dollars because of the timing of the purchases. And so actually the rates have gone down a little bit since we bought and so the bond yields have gone up. so we've picked up about a one percent. No, it's a small percent sure of game, but it's a game monthly.

I Think we're looking at a gross yield of something. what like 70, 80k or something like that a month? Crazy. We're doing nothing right now, just right by real estate, right? No. We got Jerome paying our bills.

It's it's thank you U.S Taxpayers for giving us such a high rate of interest that we don't have to do anything and still make money right. And that's kind of. The whole point is it's like you know money sits on the sidelines until rates go back down and then we buy real estate. You know? Yeah, so so House Hack is I Think for investors who want diversification and want to create ideal and income flow and some capital gains, a House Hack is going to be an opportunity for people to take advantage of what we are looking to buy, which is mostly single-family residences that you call them What? What do you call these things? wedge deals? Maybe you can explain a little bit like what is a wedge deal exactly? Yeah, great.

So I the reason I call the deals that I like looking for wedge deals is because I'm looking for something that I could buy in a 500 000 neighborhood that I could pick up from a seller who has to sell because they got racked, a tenant, got evicted, or they lost money and their mortgage expired and they can't afford the new mortgage exactly. You know they just got to get out. They need the money for some reason and they have a fixer-upper and you walk into this thing and it smells like you know, nasty. It's Ally it's got problems, defects, whatever right? And so my goal is to try to go into a 500 000 neighborhood and buy homes for 375 350.

knowing that I only need to put 25 or 50 000 into them to make them safe and Quality Rentals I don't like low Quality Rentals I Renovate every single rental I touch. So they're my standard and their quality because that's how you attract good tenants. But now what you've done is you've actually bought place for 375, say plus 50, you're into a deal for 425 which is below the median home price in America In a neighborhood that's a great neighborhood with great resale comps all around the you know values of let's say Five. Now you've created a 75 to maybe 100 000 wedge depending on how much you've spent and what kind of deal you got.

and that wedge is really just extra Equity So we took basically four hundred thousand dollars of capital 425 000 of capital in an example and turn it into five with no Market movements at all now so that I have an insulated blanket if it goes up, the blanket gets bigger. So so the really you're taking two elements. part of it is the opportunistic element of it, and then part of it is the the time and the fixer-up effort to add value in the purchase so that then you ain't you gain value on the real estate, but also a higher rent that you would associate with that better property. Yeah, and I'm trying to get somewhere between three to four bucks per dollar that I spend in renovation as the the wedge right? So this is where you get the homeowner that walks into like and this this exact thing happened to me in 2018.

I Walk into a property with these clients. these home buyers. It's a 650 000 property and I'm like this place is worth 800 Grand all day long. So you go in and it's just.

you know. some of the blinds are broken, the carpet's sturdy, the kitchen has an old, uh, an old color of wood. but it's a 2003 built home or whatever it was so it was only a 15 year Euro ishold home and I walk in with the home buyers and they look and go. Oh my gosh, this entire place needs to be gutted.

We need to spend 150 000 on it. That's what home buyers think. Remember: a single family you're competing with home buyers they don't know anything about Market values they don't understand investing so they told me we don't want to buy the home I said okay, no problem I ended up buying the home I spent 20 grand fixing it up, got it appraised for 150 Grand more. Totally like 20 turned into 150.

Yeah no, it's totally like my house that I just bought. You know it's the same thing. it's like it's a fixer-upper I've lived here for years and my landlord finally panicked and sold it to me. but like if I put any I'm about to put some money into it.

but I'll make three times what I invest because the guy never put a dollar into this place. Yep and it's just like a win. and I'm like dude like I'm gonna make good money investing in my own home and and that's I think what you're trying to do on a smaller scale because obviously Palisades is a little bit pricey to do wedge deals. sure.

But and the Market's pretty tough here. Actually, it has not gone down here that's for sure. Um, there's no Supply but I think when you look at markets like What markets do you like the most? Yeah, uh, let's let's hit that. Let me also just quickly say there's a because like Austin's coming down quick and I like Texas a lot Yeah a quick answer here for Hector Hector's asking um when can non-accredited investors invest So we just completed just an update for everybody we just and also for you Ross we just finished Bob just finished with the auditing firm our SEC audit.

so our audit is 100 done uh and now it gets signed off over the next few days and goes to our uh reggae attorney. She then puts everything into a package, submits it to the SEC say first week of January the SEC has it. We'll hear back from the Sac by my birthday around the end of January. We'll probably go back and forth for a month or two and we think by March you will no longer have to be an accredited investor and you could potentially invest in House Hack.

But but not just yet. So Ross to answer your question about locations, you know what's what's interesting is, uh, you? You do have some really neat opportunities already. when you look at home price declines. you can look in in a Texas for example and you could see in some areas like Austin prices have already come down as much as 18 from their Peak because when we were there in Idaho right? that's so expensive.

Yeah, it's all really come down. So the the problem is, we, we don't know how long the pain is going to go. We just know that the pain is still happening, right? So smart. I Mean this will happen.

It just started so there's there's no rush to declare. Okay, for sure we're going to invest in this area because we want to declare where we want to invest. We're ideally roughly when the Bottom's hitting for that real estate market. How do you know? Well, usually you tell when you get closer to a bottom when you see a really sudden and substantial absorption of inventory below Trend and at the same time rates are level or falling right.

And then when you pick up the phone, this is the most important thing. People are so afraid of meeting people in person and this is what I'm going to be doing I'm going to be traveling all of 2023 meeting real estate agents around the country in person to find these areas. But people are afraid of this. But this is how you know the bottom is.

You get on the phone and right now you call an agent in Austin hey, how many offers you get? Dude, man. I haven't I haven't even had a showing in three weeks, right? You know, closer to the bottom, what does it look like? Hey, you know I saw you had a place that went up for sale. It's been on the market for three days just wondering. You know, do you have any offers I Can't believe it.

All of a sudden out of nowhere we got 13 offers. we're going X thousand over list. You know that's when you know, uh oh okay, that at the same time is inventories turning in an area that was the opposite. When you get that change that's right on the stock market, right? Like volume, you get a bottoming price.

You get an increase in volume. You get raised. You might know that better than me. It's the same idea.

It's the same idea. but I Had a great meeting yesterday with a real estate client of mine who's been doing it for probably 50 60 years. You know he's an old guy and we were talking about the market. He's a builder so he knows lots and lots of people and and we were talking about the market and you know he's like I've been doing this 60 years and we're just beginning the decline because it's a such a slow process and because there's been so few transactions.

Yeah, you don't even see the decline in pricing at all yet because the sales have just dropped and dropped and dropped. So they're saying it's like basically like the Pandemic right now that like there's so few sales and so you don't actually see the comps. this is like the fed, you know? Oh well. Inflation hasn't gone down because I haven't seen the lagging indicator yet.

You know what I mean, right? But we know it's down. but it's down. So like so like if you look at and every Market is different so you have to put that out there. But if you look at what's going to happen with real estate, especially if the FED keeps rates higher for longer, as these mortgages mature, and as people need to move, or as people lose their jobs and can't afford their homes anymore, they're going to have to sell.

and they're going to have to sell into a tough Market which brings down prices. you know, lower lower. So one might say it might be a year till we really see a good opportunity in real estate eventually. Yeah yeah.

And the best part is in the meantime, we make good money because the FED has raised rates too far. You know it's it's such a it's a crazy thing. You know, like like the FED is paying us to wait for them to knock down real estate enough for us to then buy. and then people are pissed about wealth inequality rightfully rightfully.

Yeah, because of the policies that the Democrats and the FED have put into place like what do you want people to do Not take advantage of the fact that the FED is sinking the housing market well? I'm sorry, What do you want me to do? I've been trying to stop this for a long time, but I'm certainly not going to buy houses cheap if they're cheap. Yeah, yeah, uh, you know it's it's sad because the last people to benefit in an economic Bull Run are poor people. They're the last ones to win. The first ones to start winning are people with assets, real estate uh, stocks to be the primary two, obviously followed by bonds, right? And and see, this is what exacerbates wealth inequality is the Fed.

It's the Fed and it's crazy. And it's crazy. So it's like they make houses unaffordable to people you know, so that like people can't afford houses, then they create layoffs. that like they're saying it, they don't want wage growth.

Okay, like the markets are getting hammered today. Why? Why? Because the economy hasn't died Q3 GDP Yeah, the economy hasn't died. I'm losing my ass because the economy hasn't died. Uh, people that have finally made some more money who finally seeing Rising wages that we're gonna stop this right now.

We will Not let you not be poor. That's what they're saying. But when I when the financial crisis happened, there was this thing called Occupy Wall Street and they had the pictures of Bernanke and all these people up with like x's over it and whatever because everybody knows why there's so much wealth inequality. it's called.

Look at Donald Trump's tax returns. Yeah okay now I pay way more taxes than Donald Trump and you do too I I paid more than him in in his disorders the last four or five years. I paid more than that last year. That's right, that's right, and I'm close and I'm like and I'm like dude, our system is so rigged against the average American and the Democrats take over I'm a Dem I vote for all the Dems you think this is going to stop no they make it worse, they make it worse.

crazy and and so I'm super frustrated right now and people are like oh, you're mad because your stock portfolio is down there I'm like no, I'm gonna buy all my stocks next quarter and I'm gonna make a ton of money on the next cycle I have liquidity I'm not leveraged. Okay, but what makes me sad is all the people we work with who are trying to build wealth and get jobs and buy houses. And and get ahead. Americans Want to get ahead and the FEDS is constantly knocking you down and and the old politicians that control our society only benefit the old.

Just like this new retirement plan thing where they give tons of benefit to me because I'm over 50 and they gave no benefits to you at all. Okay and so it's like looks like we've created a system that's like so rigged for the old wealthy people who actually see running our country. You know it's just totally rigged to those people and everybody else are just held down by the fed by taxation policies by BS real estate laws whatever you want to say. and it's super frustrating to see this whole cycle happen again, Right as the economy is finally growing and people are finally getting wage growth.

Yup, nailed it. Yeah, it's it's crazy. So um, what's um, you know for 2023, are you gonna come travel with me? Are we going to go visit people in person? Would that be cool? Well, you know they're nothing I like more than to travel around talking to real estate agents and stuff. but that's not quite my job.

but I will certainly visit. Um, yeah, you know, My my goal with uh House Hacked and my other real estate Ventures is is actually to learn because I'm a stock guy and I've been a stock guy my whole life and I've worked with real estate people my whole career because they wanted to diversify and I've spent some time learning. but I Hate. You know how I started our relationship was that I hate real estate? Yeah, I still and I still hate it.

It's still just as horrible. Um, but but I've realized a lot over the years that you know I kind of started in. you know, the first real estate boom you know, before the financial crisis, like learning how to lose money in real estate and then I've made good money in REITs over the years, you know, in the stock market. But what I realized is that the fundamental basis for wealth a lot of it does revolve around real estate and it's a great thing to understand.

So that's really my goal is to learn from you and my in my other real estate, you know, uh, company. I'm involved with a lot more because I want to be able to provide my clients a broader uh series of advices and areas that I I'm not an expert in that I'm I'm learning on. So it it's also the fun of my job like you know, like I like learning and and there's so much to commercial real estate for example that I just know. Yeah, so I'm excited for that.

But my main goal actually for 23 for me is my company's growing very rapidly. You Know, despite Market declines, um, the demand for financial planning and services is enormous and and we have you know, 27 advisors. our accounting business has grown to five accountants now as well, our accounting business is booming. So let me know at Gerber Kawasaki you have financial Advisors Accountants.

You have an ETF that that you actively manage with your firm, your licensed financial advisor. It's like this is a lot of stuff. How do you deal with an insurance company too? And true, how do you do you do all this and I mean it sounds great for people? Sort of. Yeah, we do a lot of things.

not everything, but like, remember, it's all around a client relationship. That's where it starts, you know. So our goal is to get families and individuals put them in a you know, improve their financial situation and that and that's really crucial in times like this. what we call asset allocation.

You know, making sure you're not taking too much risk. So you know we've lost a bunch of money this year. But because the general focus of our firm is conservative, you know nobody's losing all their money and all that kind of stuff. You know it's just like we have to bounce back next year, you know? Um, so building a financial plan is one of the key things we do.

and then we provide those services. So we've always managed our portfolios by hand so the ETF was just an extension. It was a way for us to scale our business because the investment management for now we have 11 000 plus clients is super hard and so by having an investment product it allowed us to give our clients GK stock picks but in a much simpler manner than trying to manually buy and sell stocks for now 19 000 accounts which is just not possible right? So we so that was actually meant for an efficiency and and that has worked. Um, Insurance and Accounting is are different divisions run by different people at my company and so when you come in as a client You're simply we work as a team so you're simply referred to those experts within our company so that you can get the services that you need.

The reason we provide those Services is especially like accounting is We found that Most accountants were extremely difficult to deal with and ended up causing us a lot of wasted time so we were wasting more time dealing with other people's bad accountants So we were like maybe we should just do this ourselves and at first it was not easy. Our first year was quite painful, but then we found the right team and it's just taken off since then and what we found was there's just tremendous demand from people for a good accountant that's reasonably priced and so there is. You know, because we already do your financial services, We were able to price our accounting services at a very competitive rate and we already have everything for you so it's super convenient. We know your whole financial situation and we added all this technology that a lot of accounting firms don't use because we started from scratch.

So once we have your information in our system now this year for example, we're going to be able to, you know, provide people their taxes for them in advance and be like what's different you know, send us your W-2s and what's different. So we're trying to make accounting like in taxes the easiest possible for clients so so really for us it actually improves efficiency providing these Services versus using outside people from our clients which ended up wasting a lot of our advisors time with bad tax returns and back and forth and wrong information. It says bringing in-house increased efficiency and increased results for our clients. So um, also taking advantage of all the tax advantages you know? Can you explain that? I Don't think people fully understand the idea of like the tax advantages of an ETF like the rebalancing benefits that you get and it it it is.

Nobody teaches that right? I mean tell me from your people. I mean this is part of the reason you started Pp2 right? It's like it's a tax shelter that most people don't realize. So I've been putting all my money into my ETF and you know I Can't believe it's like 15 bucks. This morning I was like I You know this is incredible because the entire way up on the next cycle I won't produce a capital gain.

There you go And and this is the amazing thing. Yeah, ETFs have this real estate tax advantage that only exists in ETFs and it's very similar to a 1031 exchange and a 1031 exchange allows you to move your basis or your investment from an appreciated asset to a new asset without having to pay taxes. And you can do that in an ETF. So let's say we buy tons of Tesla and it goes up.

It's a dream and it goes up and we double our money and we want to take profits well. instead of selling and paying a capital gain, you can do what's called a custom basket and basically you just move your Tesla stock for a basket of other stocks and there's no tax consequence really? Vanguard Got this law pass for rebalancing the S P and stuff because they didn't want to have tax consequences on all their rebalancing, but it when active ETFs were created. They didn't realize that Traders like me could take advantage of this tax advantage and that's why I started the ETF. It certainly wasn't timing that certainly wasn't good.

Um, but the tax advantages of them now multiplied because we started at the top of the market. Now we have embedded ten dollars of basically free capital gains before I even have to even worry about any capital gains like it's crazy. So yeah yeah, like you can only put x amount in your IRA in your 401k. but you could put a million dollars in either of our our funds right now and not have a capital gain spit out on the entire next Market cycle.

That's actually really interesting because what you're saying is Vanguard helped either Lobby or whatever to to get this change. But that's because they're worried. maybe that oh well. the allocation to Apple is 1.61 It needs to be 1.6 So they sell that little you know one basis point or whatever.

that in theory would pass on a capital gain. So they created this loophole to solve that so that it's just an exchange there. There is no capital gain now because active management is popular. Somebody could go from, you know, 20 Tesla it rallies to 40.

Okay, you drop it to 10 basket change. No capital gains is what you're saying. Yeah, yeah, yeah. great and so like.

So that's what I've been doing with my own money is I've just been like buying my ETF every week, shifting assets into it. especially now that it's cheap because it's essentially like an IRA in a lot of ways. not every way. but in certain ways.

And on the last cycle last year, I paid so much in capital gains taxes, it was insane. Yeah, and so if you look at your portfolio in a typical year, you would have maybe three to five percent of your return eliminated from taxes. You know, Now in years like this where you lose money and now you can Harvest taxes tax loss Harvest you get a double Advantage because then you can embed these losses that you harvest, then put your money in an ETF that doesn't even produce capital gains. Oh my.

God What a great opportunity. And that's why I say it's time to meet with a financial advisor. That's what we do at Gerber Kawasaki If you're a house hack investor or or you want to invest, we got to get a PP on LPL somehow. Um, but if you want you know, ideally, um, if you want to invest and really get a good financial plan, build that's kind of The Secret of what we do.

Okay, there's Investment Management which is like I want to build a stock portfolio or I can just buy the S p and then there's Financial Planning And that's tax advantages and using the plans. for example, your 401k plan for example, the Roth IRA I. He was talking to a young person online yesterday about the Roth IRA and they were like oh, this and that I Go! The Roth IRA has been around since 1998. Okay, and if you started I remember and it was like two thousand dollars you could do in a Roth and we were throwing parties when this thing was invented and boy, you've been able to build an enormous amount of tax-free wealth.

Do you realize that the Roth IRA you don't qualify for it if you make a lot of income. But if you, if you don't make a lot of income and you qualify for run now, you also qualify for a Roth 401k. No matter what your income level is, and figuring out how much money to put in these retirement plans is one of the keys to your future because they've changed the law. Now to be up to 75 before you have to take money out of your IRA right? So it's all tax deferred.

So if you build your financial plan right, you're avoiding paying taxes on your gains by investing in real estate Ira accounts ETFs outside your IRA For example, Roth IRA You know, municipal bonds tax-free and that's what you guys help do is that's what we do is we help you build this portfolio, but by doing it in a tax efficient way, we increase your returns by a substantial amount over time just by being tax efficient. And that's one of the reasons we added accounting to our firm. and that's one of the reasons you should be working with us because we can look at all the stocks we want and or we can buy the S P or we can buy our ETFs That's not really the game. the game is building a financial plan that's going to work when the market goes down.

You know we have a lot of stress clients and the clients that are frustrated to lose value including myself. but we built Financial plans for people you know so that they're going to get through this and we just have to constantly remind our clients to think ahead. six months to a year we're going to make back our money. things will get better.

This is a really bad year, but you have a financial plan that you're not losing your house, you're not losing your retirement you know. And in fact, if you're saving for goals and you're 30 years old, this is exactly what you want to be honest. Yeah, yeah. okay.

last question I have for you Ross uh and then then we gotta run. So some folks uh are under this impression uh and and I want your confirmation that uh I took all our house hack money and bought a Jet did I take money from from your fund I told you not to buy a jet. This is your own fault. It's your own fault.

You know you rent Jets Okay when you buy a jet so you didn't call your financial advice. see this is what Kevin does when he doesn't want to hear no, Okay, this is what he did. He doesn't call us no, listen. I've had clients buy Jets and they eventually sell Jets because they're very expensive to maintain and you can rent them.

Okay, um, and it's the same tax deduction. you know, whatever. But the problem when you buy a jet is the Optics. You know this is what I've been trying to teach.

Uh, Elon You know it's like it's not really what you do, it's how it's perceived. You know? and yeah, and and so you can say I'm buying a Jet to fly around and do business. Which is true. Okay, because the truth is.

Commercial Air flight is the most inefficient way to do anything. So it's real hard to run a business. If you've got to jump from City to city and you've got to fly commercial, you know, good luck with that. They cancel half the flights, right? So you know.

But one of the reasons that you moved the house hack money to be managed by me was so that there wouldn't be this bull crap. Yep, Okay, so I can safely say I Looked at the account this morning I'm happy to Post Its values or if you wanted me to and it's held by LPL Financials our custodian. It's a third party custodian. It's 21 million, 500 000 I Think that we have in there and hopefully the new capital that we raise will continue to flow in so that investors know that Kevin who makes a lot of money personally bought his own chat.

Okay, um and and that's when you see what the FTX fraud and I certainly get people's reticence. And I unfortunately was growing my career in a period of time with the Madoff fraud and it sucked. It sucked because there's this distrust that people, it's exacerbated and people should have this distrust anyways to make sure they're doing the right thing. But I think when you're once again you're young and you're on YouTube and you're trying to build an investment business.

you have these certain challenges and and that's one of the reasons I think working together has a value for both of us. Um, because I think one of the reasons GK uses a third party custodian as well is to build confidence with our clients. LPL is one of the top Holdings actually in my fund as well because it's such a well-run business. You know the people who run LPL are are great, You know? Yeah, and and we've worked with them now for over a decade and and they run us all a business and that's where your assets are So you know I Think it would be fair to say you know we? For me, there's no reason why House Act isn't 100 transparent with its assets and it's held by Third parties and this is what FTX couldn't do.

They would say oh, we hold our assets, then we transfer them to Alameda and then we trade your assets. like for example, we could have taken your money and traded stocks with this. but we're not going to do that right? Okay, we're not doing that at all. The Mandate was we can only buy treasury bonds.

That's all we wanted to and now it's the best performing live account I've got because in the last 60 days, right? Yeah, yeah, we're up. We're up in this market. You know? Well, you know for what it's worth, Uh, just I'll keep it mostly on the note of househack. What I think is really interesting about it is, um, you know I'm uh I signed for this plane myself.

it's my liability. It's personal liability, but it's uh, it's b