by | 19, May 2022

Book Deep-Dive: Principals

How far back do you need to look to see history repeat itself? Often, you don’t have to look far. But what if you looked back 500 years, could you find a pattern that might predict tomorrow?

Ray Dalio’s, Principals For Dealing With The Changing World Order, focuses on patterns, of both economic and political occurrences. Ray takes a look through history’s most turbulent economic and political periods to break down why the future will likely be different from those we’ve experienced in our time… but similar to what happened long ago. Many people look 50 to 100 years ago, to find a pattern. Ray looks even further into the past.

Here are our top 10 takeaways:

(07:50 – 11:50) Short Term Debt Cycle

(11:51 – 14:24) The Greatest Empire

(14:25 – 17:17) Long Term Debt Cycle

(17:18 – 23:19) The Most Important Measure

(23:20 – 27:29) Inflation

(27:30 – 33:00) Wealth Production

(33:01 – 37:12) Scarce Assets

(37:13 – 42:00) Decline Happens Gradually… Then Suddenly

(42:01 – 45:58) One Answer Is Real Estate

(45:59 – 49:25) History Rhymes

Tweetable Quotes:

Humans are really bad when things are good… to look forward and imagine a world where it’s not going good.”  – Anthony Vicino

“When there’s a passing of the Baton to the next world power, that’s not necessarily meaning that it’s from one country to the next… it’s just from one paradigm to the next.”  – Dan Krueger

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five rules of investing

The Five Rules of Investing

** Transcripts


[00:00:00] Anthony: hello and welcome to multi-family. Investing made simple to podcast. It’s all about taking the complexity. Of investing specifically in multifamily real estate so that you can take action today. I’m your host, Anthony Pacino oven Victus capital joined as always by Dan. We ain’t talking about real estate today.

Krueger aren’t we,

[00:00:32] Dan: we aren’t we’ll see about

[00:00:33] Anthony: that. Are you going to try and you’re going to try and bring this back full circle. Don’t be, well, this is, if you, if you just try and talk about real estate on today’s podcast, I’m gonna be very upset because I came completely unprepared. I came prepared to talk about books and literal.

And, and feelings and emotions, some of your favorite top. Thanks. Oh, I love it.

[00:00:52] Dan: Mm mm. Not mine. I’ll talk about yours. I don’t wanna

[00:00:54] Anthony: talk about my emotions. I’m going to tell you my emotions, my, my feelings. Um, [00:01:00] I’m on a roller

[00:01:01] Dan: coaster. Um, pick clamped.

[00:01:04] Anthony: Yes. Because a lot’s happening in the last I feel here, this is funny.

So I listened to this podcast called Bankless, which is about crypto, right? Like that whole web three world. And every week on Friday, they do a kind of like a recap. And so I’m a week behind and I’m listening to the, the week recap from last year. And they’re like, sell will know. They’re like, oh man, it’s been the worst week ever.

Like things are dropping like flies. It’s crazy. It’s so bad. And I know living one week in the future from where they are, I’m like, yeah, it gets worse. Everything’s going down. Everything’s dropping like a flood. It’s it’s the end times people. So I think the day, the book that we’re going to be diving deep into is, is could not be more.

Pertinent. Very apropos. Yeah. So Dan, do you wanna take a shot at the title of this book? It’s a, it’s a, [00:02:00] it’s a mouthful.

[00:02:01] Dan: The book by Mr. Ray Dalio is called principles for dealing with the changing world order subtitle.

[00:02:10] Anthony: Uh, how it’s really how nations rise and fall or something to that effect.

[00:02:17] Dan: That’s what we’re talking about, Ray.


[00:02:19] Anthony: If you are not familiar, is the principal at bridge water. Yeah, it is Bridgewater, isn’t it? Yeah, we also do. We also take bank loans from a bank called Bridgewater, different unrelated. Um, he’s uh, one of the considered to be like an all-time great investor. Um, but what I find interesting about him is this thoughtful approach to looking at the past and history, and then trying to take that information and correlating it to try and project into the future.

At least as much as we can. We’ll get into why this doesn’t always work. And some of the complaints that I have with this book in particular, but I think there’s a lot of really good takeaways here.

[00:02:54] Dan: Yeah. Yeah. I think one of the soundbites that you hear a lot from Dahlia was him talking about how one of his [00:03:00] first, uh, negative experiences working on wall street was a result of, I think it was probably black Monday or something like that, that, uh, that took him down and hurting pretty bad.

And don’t quote me on that, but something in the eighties, something. Um, and, and it made him look like a fool. It made them look like a fool and he realized that, although he hadn’t seen that thing happen in his lifetime, that thing had happened many times before. And so this I think is probably the root of this kind of historical lookback strategy that he has, where he goes way deeper than I know.

And then I know of anybody else having gone, I mean, back to Chinese dynasties and finds these repeating patterns that are perfectly applicable to us today, even though the world’s a very different place, the human behavior. That is driving. The markets is pretty much fundamentally it’s. Yeah,

[00:03:44] Anthony: well, yeah, what’s interesting is we talk a lot about, um, looking back on trends and cycles specifically within the U S and say like, oh, this has never happened in the last 50 years or a hundred years.

And Dahlia’s like, what about over the last. [00:04:00] What if we, what if we 10 X that and go even deeper and look at the, you know, Chinese dynasties or the, the Roman dynasties and like go through all these different phases of human civilization to understand, and like, just stretch out the timeline. Like we’ve talked about this before, um, to de-risk and investment stretch.

The time horizon, the difference between billionaires and millionaires is the time horizon upon which they think about things. And I think Ray Daleo is a good example of that as a billionaire, he’s thinking on thousand year timelines and saying, what are. What are the cycles that we notice over and over and over as a result, not of like the infrastructure of that particular nation, but as a result of the psychology of the individuals running it, which, I mean, human psychology hasn’t really changed all that much.


[00:04:44] Dan: the matter between our ears is the same stuff that was there a thousand years ago, it’s stuck in

[00:04:49] Anthony: us and all sorts of trouble. And what’s interesting then is because our, our psychology is, is fundamentally on change. It does lead to these repeats. Um, [00:05:00] behaviors over and over, even amongst like completely different nation states and empires.

You see these same trends and the cycles that he, he talks about three, three cycles in particular in the book. I can’t remember exactly like the big debt cycle. And then like the two other ones. I can’t remember what they are. I assume that you’re going to. Yes. So I did not write them down as part of my, my five to dive into.

I tried as I was going through mine, I was like, I’m going to try and hit on some things that I don’t think Dan

[00:05:23] Dan: will. Cause, I mean, there’s some pretty big pieces that

[00:05:26] Anthony: this book has massive, by the way, we are doing use such a public service by breaking this book down because like I dropped this book at one point and S like Brooklyn, It’s so big in dance, it takes so long to get through.

It took me like two months to read this book. Yeah.

[00:05:41] Dan: If you stack is kind of three books up, which are principles, uh, the first one that I think he’s probably most well-known for, and then, um, uh, big debt crisis crisis and change your world order. If you stack them up, I think you’re dealing with a good 8, 9, 10 inches of book is big material.

[00:05:57] Anthony: Coco could stand on those. Onto the top [00:06:00] shelf and she could get access to a lot of things. We’ve missed an opportunity when he named big debt crisis, it should have been big debt. Energy

[00:06:08] Dan: is going to throw that out there, like, like. Um, his

[00:06:12] Anthony: is big money, big money, energy. Yeah. I have not read that. I probably won’t.

I like his energy, but I’m not going to read his book. That makes it sound positive. That’s true. All right. So let’s, let’s get into it. Let’s get into some of these, some of these takeaways as always, um, two public service announcements here for people is just re realize, um, we are creating what we’re calling the sophisticated investor notes for these, uh, episodes where we’re.

Deeper into these books. If you’re interested in getting your hands on those, they’re beautifully designed by Reed. Um, with just quick takeaways that you’ll actually have to read the book, and if you don’t even want to listen to us for the entire podcast, you can just go get their, uh, the cliff notes version.

Just shoot me an email. anthony@invictusmultifamily.com. I’ll send you the link to the folder where we’ll be updating that. And I think that right now there’s like five or five books, maybe six books in there. [00:07:00] Um, and then two. Two is we just launched the passive investing masterclass, which is the, the, the online course companion to passive investing made simple.

So if you’re interested in the book and the concepts that we go into there, but you want to go even deeper, you want to spend over eight hours with us and going deeper into it, then go pick up the course you can go to, I think it’s Invictus, multifamily.com backslash masterclass, and that’ll take you to it.

So I love it. That’s those are, those are all my. Now let’s get into the, what we’re here to do. Let’s do the worst, the

[00:07:35] Dan: meat and potatoes. Don’t you? Yeah,

[00:07:37] Anthony: but I just had cake skipped lunch, so. I’m really not hungry.

[00:07:44] Dan: I’ll take a nap.

[00:07:45] Anthony: I want a sugar, sugar crash.

[00:07:48] Dan: I it’s happening as we speak. Let’s do it. Who else to go first?

How much? Five each. How about you go first. I’ll go first. Um, short-term debt cycle. As Anthony alluded to, a lot of this book is about, uh, [00:08:00] cyclical. And the first one that, uh, Dalio dives into this book, deep dives into in this book is the short term debt cycle, which typically lasts about eight or 10 years.

It’s not really cut into stone per se, but roundabout once a decade or so, we’ll have a. And so the point he wants to make here is this is probably the most recognizable business cycle to most people, because you’ll see a handful of these cycles take place over your lifetime. And I think a lot of people might think that the, you know, are commonly referred to as bull markets or bear markets, that these are just kind of random that they just happen, whatever.

And sometimes you’re in a bull market and sometimes you’re in a bear market, but I think Dolly has pointed these trying to make here is that this is almost like this. Um, you’ve got your summers and your winters. You’ve got your bull markets and your bear markets, and they’re a result of the death cycle.

Meaning how much leverage is used in the economy and how overextended people. And it pretty much repeats itself over and over again. Um, we go from low levels [00:09:00] of debt to high levels of debt over a period of time. And then at some point, um, people start to default on those debts and we go into a little recession, things get kind of sad for a while in the market.

And then we come out of it and then enter into another bull market. And this one is a. You know, the short one that we get to see a bunch of times. And we’re actually seeing this take place right now in real time. Yeah. We’re filming this in may of 2022. And, um, as most everyone is aware, I’m sure, uh, it’s been a Rocky, uh, for the last, for, for this year.

Uh, there’s been a lot of catalysts that have popped up and we’re seeing, uh, things shaping up to be, um, pretty much in line with that transition from the good times to the. Not so good times, depending on where you’re at, um, or what you’re invested in, I should say. Um, so we get to kind of witness this happening in real time as, as we talk about it.

And so I think the big takeaway here that is that this isn’t a random thing, and this isn’t something that isn’t predictable, meaning it is possible to spot these things and know roundabouts when [00:10:00] they’re going to be happening. If you know what to look at. Um, and the, you know, the big takeaways in this book are, um, how much debt is that.

Uh, lower interest rates, how high is inflation and how much runway do we have with the debt? You know, people are going to start defaulting on things. And as soon as that happens, that’s pretty much when the table starts to turn

[00:10:17] Anthony: the wheels fall off, the cart goes down and all our turnips fall out. Oops.

Yep. It goes our turnip truck. So it is, it is really interesting. The moment in time in which we’re living is, is like right at this fulcrum fulcrum point of. Uh, transitioning between these cycles, it feels like, and it’s interesting because like the last six years, since about 2016 is when I became like more.

Aware of people talking about, oh, we’re right at the cut at the top. Cause it’s like 10, 15 years or whatever. Like between cycles seems like 2016. That was about when we maybe would enter it at the earliest. And I never really planned out that way. Like it just kind of the trees cut [00:11:00] growing to the sky and everybody was like, oh, things are going good.

They’re going to keep going. Good. And some of the lessons that I’m going to share from the book kind of tie into this fact. Humans are really bad when things, when times are good to look forward and imagine a world where it’s not going good. Um, but we’re definitely in a period of time where I think like the writing’s on the wall and it’s really hard to ignore anymore.

Like a lot of things are going to be shaken up here in the near future. The fed is trying for a soft landing, as they say. Um, you know, when the, when the, when the planes crashing, the pilots always aiming for a soft landing, but it’s been


[00:11:34] Dan: lot of turbulence last week. See, it is interesting that people tend to, when times are good, people tend to think that it’s never going to end.

It’s just going to go on forever. And when times are bad people think of. You know, we’re never going to get out of this. This is, this is never ending. It’s really, they’re all, there’s a time limit on, on all this stuff. So,

[00:11:51] Anthony: yeah, and that, that actually ties into the first lesson that I’ll share here, which is, um, No system of government, no economic system, no currency, and [00:12:00] no empire lasts forever.

Yet. Almost everyone is surprised and ruined when they fall. So I think if you’re listening to this, there’s like a better than, better than 50, 50 chance that you’re probably living in the United States. When you’re part of, one of the greatest empires the world has ever known, it’s been going on for about 250 ish years now, which seems like a pretty long.

But Mo and you might entertain the thoughts occasionally like, oh, what happens if Americans know America is no longer the superpower and sure. Globalization of the world is kind of making the emphasis on a singular global power, like not so important, but it still is like, if you look at like Russia and what’s happened over there in the last year and realize that.

Yeah, as we get more globalized and connected, there are still bad players in the game. And as long as there are bad players in the game, there’s always going to exist. Like this fight for power. And right now the two big players are America and China. [00:13:00] And I think the book itself talks a lot about how the United States is probably at its peak just past its peak.

Like actually a bit past its peak on its way down now. Yeah. The trend for China is very much up on the, on the ups. And there’s going to come this inflection point where China will be on this current trajectory, the superpower in the U S will not. And so that’s going to be like a real paradigm shift if it does occur for people who have been living in the United States and kind of taken for granted, like being an American and having the U S dollar as the reserve currency and having the most powerful military and having the most powerful economic engine.

Is maybe you’re no longer have those things at your disposal. And I haven’t, I’ve never lived in a world where I haven’t been part of the ruling class, so to speak. And it’s scary to think about like what happens in the next, not just 50 years, but like what happens to the next 10 years where maybe that is no longer the case?

[00:13:58] Dan: I don’t know. Yeah. I [00:14:00] mean, I’m not that scared. I mean, London seems to be doing pretty well, even though they’re not. Have you been there? Have you seen. All right. Well, there go our limited listeners. Sorry. Thanks Scott. Offensive quickly. But yeah, I think that’s one of the key points. The

[00:14:13] Anthony: stereotype I can think of any assignment that bad of one.


[00:14:16] Dan: not the bracelets. Um, anyways, uh, I think that’s a good transition into my next takeaway because the point that Ray Dahlia made when he was talking about the short term cycles was okay. We’ve seen these a bunch there. This isn’t going to be anything earth shattering. Um, a pro tip. If you guys want to see a nice synopsis of these first two points of mine, he did a really great video a few years ago called how the economic machine works.

And he goes through my first takeaway, which was the short-term debt cycle. My next takeaway is the long-term debt cycle in about 30 minutes and sums it up beautifully and this little cartoony kind of way. Um, so it’s actually very entertaining to watch and incredibly well consolidated into a very digestible little 30 minute package.

But the, the point that you want to make was like, okay, we’ve [00:15:00] seen these, uh, short-term debt cycles, uh, multiple times and pretty much everybody’s lifetime, but the long-term debt cycle is one that you typically only see once. And when that pops up, it’s going to be, uh, earth shattering because you’ve never seen.

That happened before, like Anthony has mentioned the U S has been this kind of world superpower since about 1944. If you do the math on that, we’re getting pretty close to 75 years here. And so just looking at the, the averages over time that, that implies that we’re kind of nearing the end of our run. Um, so you can’t look at that in a vacuum.

You’ve got to look at how we fare against everybody else. And like Anthony said, um, we’ve got China, uh, gaining ground quickly from an economic perspective. Over here, getting soft and, and, uh, and lazy and not really producing any more. We’re we’re doing a lot of borrowing and we’re sending a lot of money overseas and that’s just not a good recipe for us longterm, but this long-term debt cycle takes place over about 75 years.

Typically, uh, when the change [00:16:00] happens, when there’s a handoff of the Baton, so to speak, it’s going to be brand new for everybody. And it catches a lot of people off guard, unless you are reading this book and taking a very long-term perspective and looking at historical trends and the right kind of data, you’ll be able to spot this.

But, um, this is a. No, this is a very interesting time, because like we said, we were actually at this kind of fulcrum point. And if you can recognize that and effectively make that transition with your assets and your capital, you could be okay. Even if you live in the U S your money, doesn’t have to be here.

Um, you can have your capital working for you in a place that’s going to be, uh, doing well for the next 75 years. So I think going to China,

[00:16:39] Anthony: so that’s all to say is that we’re expanding out of the twin cities and into Shanghai.

[00:16:45] Dan: Uh, since the announcement, we’re going to be doing a little bit of a rebrand.

Um, this is the Invictus

[00:16:50] Anthony: people leaving Republic of

[00:16:52] Dan: capital. Yeah, no, it’s, um, it’s, it’s just interesting because. Nine times out of 10, I feel like people aren’t in a position in their [00:17:00] life that they’re actually prepared to kind of deal with this type of thing. And you know, if you’re educated, you’re paying attention, you’re actively involved in the markets.

This is a really fantastic opportunity to either do really well or dig your heels in and tell yourself that America is going to be the best thing ever for the end of time until the time and see how that goes for you. Yeah. Oh, th

[00:17:16] Anthony: so this, this plays into my, my second point. You said something that was like, right.

Pretty much on the nose. Which is productivity is Ray talks about the most important measure of a country’s well-being and long-term ability to innovate its way out of disaster. And productivity is a measure of like how much can, how much work can. Output in a period of time. And historically the U S over the last 20, 30 years has been able to have a very high level of productivity for so many reasons from manufacturing, but then also transitioning to more thought work in more innovation.

Those things tend to carry a very, be a very big lever if you can pull them. And since we had, you know, Silicon valley and [00:18:00] the kind of the nexus of. Uh, technological innovation. We had a lot of productivity, but the rest of the world is starting to catch up and what’s ended up happening is my second point, is this that people in the leading country.

Become rich. And as a consequence, they tend to not work as hard to the point where they become decadent. And so I I’ve seen this in guilty. Elon Musk recently commented on this on Twitter just a couple days ago, which he was comparing American workers to Chinese workers because they just opened their Gigafactory in China.

And he’s like, they don’t just burn the midnight oil. They burned the 3:00 AM oil and they sleep in the factory overnight. He’s like, they’re just willing to work so much harder than their American counterparts. And that’s, it’s not saying that’s a good thing or a bad thing, or they’re being exploited or taken advantage.

It’s not that it’s that when you’re, when you’re on the up and coming, like you have to work so much harder to get to the top. Whereas once you’re at the top, Tend to coast. And I think culturally, this is pretty prevalent, um, in the U S right now, as you look around the, you could say like the great [00:19:00] resignation people not wanting to work, that’s a function of a lot of things, but generally speaking, when you’re doing well, you don’t have as much incentive to go out there and really grind and bust your butt.

And I think if you look at it, just from that one perspective alone, it’s like, it’s very hard to bet against China on. 50 year horizon because they do, they, they work harder and we used to be able to, as America be able to say, we’ll, we’re working smarter. I don’t think that’s the case anymore. I think they’re, I think they’re catching up on that front too.

[00:19:29] Dan: Yeah, we’ll see. Uh, we’ll see how this plays out because it’s really interesting. We’ve got, um, Right now, obviously China, we said there, they’re kind of beating us on a lot of the economic metrics that matter in this kind of thing. But at the same time, they’re taking an extremely aggressive approach with COVID with this kind of zero COVID policy, where they’re effectively completely shutting the country down for long periods of time.

And we kind of feel that, uh, with the supply chain impacts on our side, but that doesn’t really help them continue making progress if that’s what’s happening. [00:20:00] Their approach with that, I think is not really doing their economy any favors. And they do have this extremely unsettling, real estate bubble brewing over there.

It’s been brewing for a while. And either of those two, probably the real estate, one, maybe that combined with the COVID response that that could knock them back in the second place. You never know. I mean, we’re not at the point where it’s certain, but the way the things have been trending for the last 20 years or so it implies that there’s probably going to be shift, but it’s not guarantee.

[00:20:26] Anthony: I, I fully agree with that. I think what was that? Um, big Chinese company. Evergreen. I was going to say EverQuest, but that’s a video game, I think. Um, yeah, I think as you’re trying to catch up to the leader, you sometimes have to take risks that the leader doesn’t have to do. You have to kind of hang it out there a bit more and.

That’s the only way to make up the ground and hang it out there a bit more. Yeah. That’s, that’s not a weird phrase. That’s more like, like a car racing term. I think I kind of hanging out there a bit more,

[00:20:55] Dan: um, so that I can, I don’t know, I didn’t go to the cars, but,

[00:20:59] Anthony: uh, but [00:21:00] you, you got to take some risks to be able to catch up the difference in, in taking those risks.

There is the chance of them getting knocked back a bit still. So yeah, I mean, it, this is not, this is the big thing about this book. If you read this. It will make you feel as though everything is inevitable. America’s going to go down in a blaze of maybe not even glory, China’s gonna take over. And there’s nothing we can do about it.

Like that’s one of my big complaints with this book is he’s he extrapolates a lot from the past to make a few too many. Like black and white, um, PR conjectures about what the future holds that I just don’t think you can do. And that’s gonna get into my last point when we get there.

[00:21:33] Dan: Yeah. Yeah. I think that that’s definitely worth knowing because he made another point earlier that I think is appropriate to note, uh, it was something along the lines of around 2016.

You started paying more attention to the kind of macro economic stuff. And, and it, the, the picture that you saw was one that was a bit extended and it had started to look extended for a decent amount of time there, whether it’s 20, 15, 16, 17, 18, anywhere in there. But one thing that’s always going to be the same as that.

[00:22:00] There’s always going to be. On the way up in a good market, trying to call the top. And there’s always going to be people, um, on the way down and trying to call the bottom and they’re all wrong until one guy just happens to be making that call at the right time. So take it with a grain of salt. Whenever, whenever somebody is trying to call it.

Or a turning point or, or inflection point or something, um, take it with a grain of salt because that’s just something that’s always going to be happening just because somebody’s on TV or on Twitter saying a thing that kind of makes sense. Like if you look at the history of these people, not Dahlia in particular, but, um, Robert Kiyosaki,

[00:22:32] Anthony: Robert, I made it, I made a tweet about Kiyosaki today to, as responding to somebody’s message and it was effectively like Kiyosaki is really good at predicting recessions.

Um, he’s never right, but it’s a, it’s a qual, it’s a quantity over quality thing, right? Like,

[00:22:47] Dan: yeah, these guys do it constantly until they’re right. And then they claim that, that one time that they nailed it, they nailed. It’s like, no, you’ve been saying the same thing for 10 years. You’ve just been wrong

[00:22:56] Anthony: and broken clock is right.

Twice a day, unless it’s a digital clock. And then it’s just a blank [00:23:00] screen.

[00:23:02] Dan: Good point.

[00:23:03] Anthony: Yeah, somebody called. I realized that that is the other day. I’m like, oh man, people don’t have analog watches

[00:23:08] Dan: anymore. So like, if you’re I watch your apple watch

[00:23:12] Anthony: is if it’s wrong, it’s, it’s, it’s probably just a black very, very wrong.

[00:23:17] Dan: Um, anyhow, so, so number three, my next takeaway, it actually kind of feeds off of my, my second takeaway and I didn’t quite finish. Oh, I’m sorry. I missed what I just missed mentioning this one kind of key elements of longterm debt cycle, which. At the beginning of that longterm debt cycle, we typically have a currency that’s tied to hard money, hard money being some kind of high, hard assets like gold back in the day in the forties and fifties and sixties, the us dollar was tied to gold.

And so there wasn’t money printing going on. There wasn’t any of this. Shenanigans that we have today. And one of the early signs that there’s, um, um, trouble, a Bruin, very early signs is you see the [00:24:00] debasement of grunts, you know, back in the day, if you go back to Chinese dynasties and these old cultures, they didn’t print money per se.

But what they would do is they’d take a gold coin. They’d shave some off so that each coin eventually would have less gold or they would start watering down the minerals that are used. You’ve seen this in, um, uh, nickel coins. If you haven’t had any. They’re not actually solid nickel. There’s just a metal inside in a nickel coating.

So you’ll see these things start to happen throughout history, whether it’s shaving, um, metal off of coins or, or watering down the materials or now in modern society, when everything’s just digital. Right. Not

[00:24:32] Anthony: as much zero computer boom

[00:24:35] Dan: there’s money out of nowhere. And so one of the biggest things you want to look at is, um, you know, have we gone into that fee at currency world, which at this point, everybody around the world has.

And, um, how, how far are we. And that leads into my big takeaway number three, which is inflation. This is probably going to sound like a broken record these days, because everybody’s talking about it, but it’s an incredibly important factor in the timing of, uh, the, the turning point, uh, [00:25:00] because what you’ll typically see is, um, hyper inflation start to, uh, show up and the word hyper.

It’s objective it’s whatever, but I mean, we just got some numbers out on a couple of days ago. Um, and I think it was year over year. Gasoline’s up 60, some percent eggs are up over 25%. Um, and this is. At the same time that the fed has been saying for years, that they’re trying to target 2%. It’s like, okay, if we had eggs going up 25%, like, I don’t think people’s wages have gone up 25%.

So that’s not a sustainable problem. So they’re trying to counteract that now, but what ends up happening is that. Dollars or the currency that you have starts to lose buying power. And this really starts to eat away at the, uh, the, the, the lower, I won’t say lower class, but the lower income, uh, section of the population or people that live on fixed incomes.

This really hurts them. If you happen to own a bunch of financial. Respond well to this you’ll probably do okay. But the bottom half of the economic spectrum in [00:26:00] whatever country is experiencing, this is going to really feel the brunt of the pain. And just for context, I mean, we created $2 trillion, uh, in 2020, um, That’s a lot of extra dollars out.

And that just means that everything just all the dollars that were already there just lost pretty much most of their buying power for the last several years, I shared been doing this for a while.

[00:26:20] Anthony: So I shared a, a shared, uh, a graph, um, on Twitter again today of the last 40 years, in terms of wage growth versus earning, um, or like buying power and effectively though, there has been wage growth, nominally, what effectively is happening?

From the time the scrap has measured, which was from the sixties about 40 years until today, uh, 60 years, um, your buying power hasn’t fundamentally shifted. So we have just as much buying power today on a household basis, as they did in the sixties. That’s very problematic and it gets into, gets into my next point.

But I think you, did you have more that you wanted to dive into on the inflation side or [00:27:00] just, no,

[00:27:01] Dan: that’s pretty much it just kind of like the inflation. Thing is a really big red flag that you start to see at the end of most of these longterm debt cycles. Now it’s not necessarily saying that like this year it’s going to happen, but this is one of the many red flags that we see.

We see Fiat currency. Then we see the inflation and we see the rich people getting lazy. All these, all these factors start to converge and. Yeah, become more and more inevitable on

[00:27:27] Anthony: the wage growth side. The thing that my third point here is that the people who own the wealth are the ones who own the means of wealth production.

And this becomes very problematic, right? When you have a ton of money, you’re incentivized to keep the system, how it is. They have the ability to buy political, um, uh, power. I was going to say sway, but yeah, power. Um, and so they can continue to change the rules to continue benefiting them. And what we do see is that there is an ever-widening gap between the haves and the haves nots.

And [00:28:00] we’re very fortunate. I think. Put ourselves in the have category, but it is very problematic to realize that like, most people, it’s very, very difficult to jump that gap depending on where you’re starting the race. And I feel like we just barely made it. We barely made it.

[00:28:14] Dan: Exactly. We wouldn’t be set up quite as well to respond in different yeah.

[00:28:18] Anthony: Take inflation. Like it would have been, it would have been completely, completely different for even us, but like, but it is very problematic. There is just this very large gap. And as that happens, it’s to lead to more social unrest and a lot more political unrest, and we saw this, you know, you can blame Trump for a lot of things.

Like I’m not, I’m not a Trump fan. Um, but like you can see the, the political unrest that was occurring even, you know, just a number of years ago. And so it hasn’t gone away just because Trump went away. Like he just, he just allowed all the maggots and the roaches to come out and. And it scared a lot of people cause a lot of people went, holy crap.

There’s a lot more than we thought they were. And [00:29:00] as that gap of continues to expand, it becomes very problematic. And I think regardless of which side of the political spectrum you fall on to, like the thing that you have to realize right now is that it’s not healthy that we have this, this such a spectrum.

You’re either really hardcore on the left or really hardcore on the right. And there is no room for anybody in. And that’s as DeLeo points out in the book, that’s that is one of the leading indicators. As people become more polarized that a, a culture, a empire is going to collapse is because it becomes this battle between us and them.

It’s no longer a conversation of us. And that’s really scary. I think one interesting thing though, with this is the advent of crypto in the last time. Crypto. I don’t know exactly where it’s going to be world changing in so many different ways and it already has been. But when we talk about the people who own wealth are the ones who own the means of wealth production.

Crypto is very much interesting to me because it’s a means. [00:30:00] At least making it harder for the ones who have the wealth to, to leverage that advantage in a continuous way. So it might fundamentally change the playing field if everything doesn’t go to zero here in the next

[00:30:10] Dan: week. Yeah. I mean, I think that’s a very good point because the thing that, that dally wants to point out is that when.

Um, cycles are happening. And when there’s a passing of the Baton to the next world power, that’s not necessarily meaning that it’s from one country to the next it’s just from one paradigm to the next. So maybe it isn’t us handing the Baton to China. Maybe it’s a transition from Fiat currencies to crypto or something like that.

It just means that what we’ve been doing, isn’t good. I keep happening and we’re going to do something different going forward. So this might be a different iteration where it’s not like one country trades off with another, because honestly China is doing the same stuff we are. Right. You’ll just jump from one Fiat currency to another and hopping at the earlier part of the cycle and get a few more years, but we still have still the fundamental issue there.

So I think there’s definitely. [00:31:00] Something very interesting about the timing of crypto coming out, especially that around 2008, when it came out, which is right when this kind of a money printing kicked off. I mean, we were doing a

[00:31:11] Anthony: really response, I think, right. Like it was, I think, I mean, yeah. And his letters was like, we have

[00:31:17] Dan: to have a better, yeah.

The system’s broken, here’s something better and it’s perfect. And there’s all these really crazy conspiracy theories about not that you can go down a rabbit hole if you want, but it’s just really interesting that this kind of pop up. Exactly when things started to accelerate and they’ve only gotten worse and this looks like a little solution over here would that can’t really be debased or inflated and really, really interesting, but

[00:31:41] Anthony: it’s got a lot to be worked out still.

I think it solves for a lot of the issues that we see repeating itself. When we talk about these debt cycles, the reason that these things occur in a lot of ways is because we have the ability to change the rules on ourselves. Like whoever has like the reserve currency status, they get to change the rules suddenly.[00:32:00]

And. There’s there’s no quicker way to, to go insane than to play a game with another party who has the ability to change the rules at any moment. Like they will drive you insane. And so crypto web three, the whole, that whole world, I think it’s something to pay close attention to because I think it could, it could fundamentally disrupt this.

Then again, governments are very much incentivized to not let that happen because they want to control two things, military and currency, like. That’s what gives them their, their basis of power and control. So it’s going to be interesting.

[00:32:34] Dan: Yeah. I think it’s, again, extremely fascinating time to be alive in, because there’s so many things unfolding right in front of us.

And just being able to take the information from this book and from other sources so that you can actually understand what’s happening around you instead of just being caught in the middle of the storm that you don’t understand, I think is, um, really powerful, even if you don’t want to actually act on it and move capital and invest in.

Just understand what the heck’s happening and why I think that that provides a [00:33:00] lot of value, but, um, my next takeaway is, uh, invest in scarce assets. So the big thing is, um, everyone’s probably wondering after everything that we’ve said and everything that has said in his book, like, okay, what do we do? Uh, America’s about to implode on itself.

Do I just run, hop on a ship and go with China and start over? Like what the heck guys? Um, Dahlia says we’re about 75% of the way through our cycle. So, no, we’re not at. Peak where we’re about to crash, but the writing’s on the wall at some point in the next decade, probably there’s going to be definitely a paradigm shift.

So don’t jump out and sell everything tomorrow and, and book a flight. Um, we’ve got some time. This, the cycle is very slow moving, like a big tanker in the sea. It’s not just going to veer off course really quickly. So given that fact we do have a decent amount of time left and we know what’s happening.

Like what are we supposed to do? Investment scarce assets. Uh, that’s what you do. If we’ve still got a good decade in this paradigm and you know, what’s happening and the government’s printing money and they’re creating inflation, then we [00:34:00] know what responds well to that. So you can still operate in that, in that field.

Um, you don’t have to leave the game yet. It’s still going on as long as you know how to actually play in the, uh, uh, on the field that you’re on, which is an, a very inflationary environment. And. The key there is to have your money in scarce assets that actually do respond well to inflation. Uh, so not cash basically.

Um, you’ll hear DeLeo saying he hasn’t said a much least lately, but several years ago he started saying, um, I forgot where he was. I think it was. What’s up big

[00:34:34] Anthony: finance guru. Oh, the economic summit out in port. What is that Europe? Um,

[00:34:41] Dan: I forgot what it was, but around 20 16, 20 17, somewhere in there, DeLeo started saying Cassius trash over and over and over again, because up to that point, everything was all.

Davos. Yeah, that was, yeah, got there. Um, but yeah, he’s, he was actually getting a lot of press for saying that , [00:35:00] that cash is trash because up until that point, the same was always Cassius gang. Right? You got cash, you have power, you have liquidity, you could do whatever you want. But he started drawing attention to this inflation issue many years before it got really, really, really out of hand.

And the point there was that. The currency is getting inflated away. You’re losing buying power every year. The government’s been saying that we’re hitting, you know, 2% or 1.5 or whatever, which is BS. If you look at the stuff that matters, if you actually look at the price of your, your gas and your milk and your chicken and your meat year over year, if you actually pay attention to that, it’s more than 2%.

Sometime so cash. You want to make sure you’re not in cash? Um,

[00:35:37] Anthony: I don’t know, man, if I had a ton of cash right now with all the, all the blood on the market, like now’s a good time to be going up mine.

[00:35:44] Dan: Exactly. You’d be taking that cash. Yeah. But that’s the point is you invest in scarce assets, things that respond well to inflation.

And so what are those things? Well, there, is there anything you basically can’t. More of right. Um, so pretty much any financial product should respond well to [00:36:00] this, um, stocks, equities, um, real estate, obviously. Um, this is where your money should be. You don’t want to be sitting on cash. You don’t want to have your money in a savings account.

Um, this isn’t a good time to just kind of sit your hands and do nothing. Um, we don’t recommend you go out and start acting with no information. So if you need to take a pause and figure out we need to do. Get get, get your head wrapped around what’s going on here, but you do not want to be on cash. I mean, the inflation rate that they’re actually admitting to as of last week was like 8.3%, um, which is ridiculous.

Um, That’s crazy. And that’s the government’s measure and their math is off because like I just said, eggs are up

[00:36:37] Anthony: 23%. That means if you have, if you have a hundred case sitting in the bank guys and gals this time next year, it’s only

[00:36:42] Dan: gonna be worth 90. That’s the thing I don’t think people get crazy is that you’re losing bind.

At a ridiculous rate. So having cash is the equivalent of owning a stock. That’s losing 8% a year, according to government, really, it’s probably more like 15, 20%. Now that should change a little bit, but I just can’t really overemphasize how, [00:37:00] how bad of an environment it is just be sitting on cash in a savings account.

[00:37:04] Anthony: I agree. I agree. Um, I won’t belabor that one any, any more other than here’s my fourth point, uh, typically the reigning Empire’s decline happens gradually and then. So like the thing that’s interesting about that to me is, uh, what could be the inciting incident that would lead to just the implosion of the U S empire.

Like, and I don’t think implosions quite right word. I don’t think

[00:37:31] Dan: it had so many things that should qualify,

[00:37:33] Anthony: right? Yeah. Aliens aliens could do it. You know, I think my, my guess is it will be tied to political and social unrest, I think. Yeah. I think that that is just a tinderbox waiting to below and I don’t see any way that it ends well.

Um, and he talks about how this in the late phases of an empire, um, you start to entertain [00:38:00] conversations of civil war. It is really crazy to me. Maybe four years ago, when was it? Um, right before Trump, like w when Trump was right before Trump was in office, if you had asked me, like, what’s the likelihood of the America having a civil war in the next 15 years, I’d have been like zero, absolutely zero.

Like, it makes no sense why that would ever happen. And then if you were to ask me, like three years later, I was like, hi, I would say the, the, the op the, the eighth it’s a much higher. Uh, percentage chance now, now I don’t think it’s going to happen like necessarily Countrywide, but like you could, you could peg certain areas of the country where you’re like, I could see something getting, getting pretty dirty over there.

So. I don’t know, it’s, it’s a, it’s a crazy time to be alive and to be in the U S and I think there’s no easy solution to it because again, like, it’s, it is not okay to be a moderate in the world of today. Like if you’re not vehemently on one side or the other, you’re not entitled to a voice, or if you are, you’re just get shouted down by the people who are [00:39:00] so much more loudly than you.

Um, so it’s sad. It’s scary. I think public discourse and the conversation has disappeared. This is a book about economics and all those other things, but it’s interesting how Daleo ties in the social, um, uh, atmosphere as well and how that is a very large component of, uh, an empire success or failure. Yeah,

[00:39:22] Dan: it’s everything.

I mean, any economy is just a collection of a bunch of different people doing things. And so if those people are getting farther and farther apart and. Yeah, on completely different pages with respect to how things ought to be done. That’s pretty tough to deal with. I mean, it’s like. Dysfunctional team.

All right. If you’re playing a sport or something, I’m going to try a sports analogy. Oh my God. I’m so excited about this. Hang on, stay with me. I’m here. All right. So if you’ve got a ball playing a sports game

[00:39:51] Anthony: with your stick in this ball game, or is it

[00:39:54] Dan: just a ball game? Don’t know. Okay. Yeah, there’s a racket.

Okay. This is a racket and a ball. Okay. And no. [00:40:00] Um, so we were playing a team sport or something everyone’s working together. They get the thing done. They score points to win the game. If the team doesn’t function well together, there’s no chance that they’re going to win. Especially if they’re competing against the team that everyone works together and they support each other.

Right. Look at, oh, here we go. I watched the last dance. I don’t watch sports, but I did watch that. Damn. And they did well because Michael Jordan helped everybody around him do as well as possible. It wasn’t just a one man show trying to do everything, right. So that’s what you need to have a successful team.

And if, and if, if there’s disagreements in turmoil within the team, it’s only a matter of time before the thing blows up. So hopefully we can turn that around. Um, I think when Elan officially takes over Twitter will get a lot less polarity. Uh, cause I don’t think the social media landscape is helping anything at all.

I think it encourages the polarity that’s out there. So if you get someone like that, running things where it’s even, and you don’t have a more click, happy things, uh, pushed in front of you just because they know you’re going to engage with it because it’s [00:41:00] triggering. I think that kind of BS is

[00:41:01] Anthony: just sure.

Today he had put the, buy the acquisition on

[00:41:05] Dan: hold. Yeah. I think it was over the ban.

[00:41:09] Anthony: Over the band thing. No, not over the band thing. It’s over. Um, he needs to get certification for that. So Twitter claims that less than 5% of its users are spam or bots. And he’s like, I need to, I need to have that actually confirmed before we move forward with this, because he doesn’t believe it’s that low.

[00:41:25] Dan: And it’s not that well. And you still want to admit it because then their user count that they brag about. It’s actually a heck of a lot smaller. Yeah. Any who? Yeah, a little tangent, but the thing about this book

[00:41:35] Anthony: too, is you guys can think us for reading it for you and bringing you these snippets because by the end of it, like, you definitely do feel sad and depressed and like, oh my God, what’s happening.

It’s one of those books that kind of hits you hard.

[00:41:47] Dan: Yeah. It’s not a comedy. Yeah. All right. So

[00:41:49] Anthony: what’s your, what’s your fifth and final takeaway.

[00:41:51] Dan: That’d be the best one. I don’t know. I don’t know. It might piss you off, but I think it’s. Okay. Um,

[00:41:58] Anthony: I sense [00:42:00] a shameless.

[00:42:00] Dan: Oh yeah, it wasn’t in the book directly, but it’s something that you could extrapolate from the book kind of tying into my, my leg in between the lines.

Okay. What do we do now? Like we know where we’re at. We might have like a decade left of, of being top dog and a good, you know, decade of money printing and inflation and all that good stuff. Like how do you. How do you leverage that? And before the party’s over and you have to move on, um, like I said, investing in scarce assets, the thing that makes the most sense to me, well, biased is real estate.

No, I’ll surprise.

[00:42:35] Anthony: Oh my God. This is my surprise face. Who didn’t see that guy. If you guys can’t, if you’re not on YouTube, uh, go over to YouTube. Multi-family investing made simple where all these podcasts episodes are available in video format. So you can see my surprise face. Oh,

[00:42:48] Dan: Um, yeah, that that’s, that was a takeaway for me from this book.

It, it kind of reinforced a lot of things that I was kind of aware of because I’ve been paying a lot of attention to Dahlia and I’m bit of an econ nerd. So a lot of [00:43:00] these things, he’s just kind of reinforcing stuff that I already kind of believe, which is usually a fun read, but any who, so real estate would be an example of something that, that does make a decent amount of sense.

Um, it’s a hard ass. Uh, produces cashflow. Um, and you can’t, you know, it’s so cliche to say, but you can’t create more land. And there’s only so much real estate that can never be built. So it’s fairly finite and in a world of, uh, inflationary currencies, that’s, that’s a pretty good thing to be holding onto.

But the other thing about this is really tied into, um, the inflation and the interest rates and the fact that you can buy or yeah, you can buy a property now and put a mortgage. Um, even after the rates have been going up lately at around 4%. And if inflation’s over double that, um, that means that every year you’re going to be paying that, that loan back with pennies on the dollar roundabouts, 90, 95 cents for every dollar you borrowed in that first year.

And by the second year, third year, fourth year, you keep paying back your loan that you [00:44:00] got and put to work into a building. With less and less actual money with money that, that has less buying power than the, than you got in the first place. So that’s a pretty good setup right there. If you’ve got a hard asset, you can’t print more of it, produces cash flow that you can live on and your debt gets inflated away over to.

Not a bad scenario.

[00:44:18] Anthony: I think that’s actually a really important concept that we should probably do a separate YouTube video on and show the numbers because I think it’s, it’s not super intuitive even still, once you hear like, oh, if inflation is X and your debt is this much below it what’s that really mean?

It’s a powerful concept. And in the same way, like when you hear okay, if inflation say 10%, I’m just using round numbers here and you have a hundred K and it’s going to be worth 90,000 next year. I think that’s such a stark number. You’re like, holy crap. Let’s, let’s do a video on that. And, uh, if you’re listening to this and you want that copy of the video, once it does go out, we’ll, we’ll make it, um, just shoot us an email.

We’ll we’ll get it over to all right. Here’s my fifth and final point. And it’s [00:45:00] not really from the book. But it’s something that kept coming up in my head over and over and over. It’s a quote from mark Twain, which is that history never repeats itself, but it always runs. And so I think there’s a lot of value in looking back through the centuries and the millennia and saying like, what are these cycles?

Tell us. But at the end of the day, like it’s never going to happen exactly the same way again. And this is, I think, where in the last couple of years people were saying, oh, every 10 years there’s a recession. And so in 2016, everybody kind of started bracing for a recession. It didn’t really happen. It’s been five years since then.

It never, it doesn’t happen like that. And so everything that we talked about here and everything that’s in this book, the really great concepts and things to be aware of. And you have to collate the information into your framework to inform how you’re going to move forward in the world, but realize that at the end of the.

What’s going to happen is going to look nothing [00:46:00] like what we think is going to happen. It’s probably going to play out differently. Um, but it’s going to be in the same genre of music. So it’s going to be a blue song, but I don’t know what that blue song is going to sound like. And I like blues. I like blues tits.

It’s going to be sad, but

[00:46:17] Dan: it’s going to be, it’s going to be soulful. So those

[00:46:21] Anthony: are that’s. Okay. What’s the name of this book again? Principles for dealing with changing world order with a change with a changing world order. How empires rise and fall Ray Daleo. You need to work on your name and conventions, man.

Big debt, energies.

[00:46:39] Dan: Marcus’ name ever.

[00:46:42] Anthony: All right. So why don’t you, why don’t you ask the people for, for review these days? They just, they don’t listen to me. They don’t listen. I’m like over here, please, please, please go leave a review. And they’re like, ah, screw you, Anthony. So I want to make,

[00:46:53] Dan: maybe you ask, I am, am desk.

I need reviews. I don’t have any, we, we, we [00:47:00] got one that was like, okay, recently. And that just put into, into a funk fan. So I need like 10 good reviews on this podcast to make me forget about that one guy that gave us, what was it? Four out of five stars on the book and three out of five, three

[00:47:15] Anthony: to five,

[00:47:15] Dan: three out of five.

That’s a good D plus at best. So I’m really upset if you guys could help me out and really sad. Um, I don’t know, guys, guys,

[00:47:25] Anthony: look at you, you look at him like this. These are, this, this is better acting than Amber heard. I’m just saying,

[00:47:32] Dan: so they’re very true. Boom. There’s your pop-up pop reference, pop culture reference.

[00:47:37] Anthony: Oh, we should. We should do, we should get the popcorn out and we should get some bourbon and we should just make a town on that

[00:47:43] Dan: trial. This is better than anything on Netflix right now. It’s it’s

[00:47:48] Anthony: like the OJ trial of our, our generation.

[00:47:51] Dan: Yeah. It’s like more entertaining cause that died. So it was kind of like, it’s crazy.

But this one is like, okay, this is like that crazy ex that everybody’s [00:48:00] had. And everyone wants to be able to show the world how crazy this person is, but they just can’t giant Depp is actually doing it. He’s like putting on display for the world. This is how crazy she is. Yeah. Everybody wants to do that for at least one of their axes.

Yeah. Hashtag. Hashtag, what

[00:48:17] Anthony: have you seen that? No. So there was a hashtag me too, which is like what Amber heard was like riding the coattails of. Right. And so now this is hashtag men too, which is that men can be abused too. Men can be the victims of domestic violence and. Oh, are they called intimate partner violence?

Anyways, anyways, totally tangential to everything that we talked about, your guys and gals, this is what you get when you stick around to the very, very end. And, uh, you also get you also get this first. It can run to the very, very, very end. Um, thank you. I don’t say this very often,

[00:48:51] Dan: but thank you. He’s not a grateful person.

No, I’m

[00:48:54] Anthony: not. I’m surely not. So, um, so take that, put that in your, your gratitude bank and, [00:49:00] uh, we appreciate you taking some time to join us here today. We’ll see you. I don’t know some point in the future, hopefully soon, assuming the world doesn’t end. So check back in on us.

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