Dentistry Uncensored with Howard Farran

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Howard: It is just a huge honor for me today to be podcast interviewing Dr. Harold Wong. Thank you so much for coming over. Dr. Harold Wong is a Tax Consultant and Financial Educator, whose primary goal is to increase retirement cash flow, reduce investment risk, and save taxes for baby boomers and retirees. Dr. Harold Wong PhD in Economics at UC Berkeley, is a recognized expert speaker to National Active and Retired Federal Employees, has appeared on more than 400+ TV and radio programs, published in Forbes, USA Today and a columnist on Money for the Arizona Republic for seven years with syndication over 1,600 news outlets. He just lectured at the Arizona State Dental Association. He gave two, hour and a half programs and everybody was mesmerized. You are beyond smart and it's such an honor for you to come over to talk to all of our homies today. So, you talk about how tax savings and alternative investments can help dentists retire early. We hear a lot that after the 2008 financial meltdown, a lot of dentists had to put off their retirement for years.

Dr. Wong: Absolutely true. In fact, I wrote a book that summarized 40 years of advanced tax and financial strategies I've used. It's just called ‘Why Tax Savings and Alternative Investments Beat Wall Street.’ Everything I do is based on research. There's no BS, there's no Wall Street hype. And here's one of the problems in retirement, whether it be a dentist or otherwise. 99% of all the advisers you would see are tied only to Wall Street. Which means they're selling stocks, bonds, or mutual funds from [00:01:54.05 unclear]. It's shocking. You've been told your whole life that you can average 10 to 12% on the stock market. That's what Wall Street has claimed for decades. And yet everything I do is based on research. If you start at the beginning of this century, Jan 1, 2000, what we had - if you look at the first 16 years of the century we had the Dot Com crash. 2000, 2001, 2002, the market went down. Then we had the fake boom in the stock market caused by the fake boom in real estate, caused by the government and I'll cover that later. And then we had the 2008 crash in the stock market caused by the collapse of real estate prices and now we have the fake boom in the stock market. But if you held on and you never panicked, for the first 16 years of this century in the S&P 500, you averaged 2.08%.

Howard: 2.08.

Dr. Wong: 2.08%. So, if I've been able to go back in a time machine like that movie Back to the Future, and I go back to Jan. 1, 2000 and I tell people "I'm from the future. I know exactly what's gonna happen. You’re gonna have two crashes and you’re gonna have two fake booms in the stock market. What you should do is just go into CDs and lock them in at 6 or 7% or loan to the US government on a 30-year treasury bond at 6 or 7%". You know what, if I talk to a thousand people, you’d find not one person would have done it. Here's why. The last 5 years of the century prior to Jan. 1, 2000, people averaged 25% in the stock market.

Howard: 1995 to 2000?

Dr. Wong: Exactly.

Howard: They averaged what?

Dr. Wong: 25%.

Howard: Oh, wow.

Dr. Wong: There's only two emotions in the world of money, greed and fear. And the average person would be insulted if you call them greedy. But if you actually look at their investment behavior, greed is more important than fear for the vast majority of people. And I'll prove it to you. Even the most degenerate gambler will tell you, no matter what casino game you play, blackjack, roulette, craps, whatever - the odds favor who?

Howard: Who knows?

Dr. Wong: Does that stop tens of millions of Americans from voluntarily entering a casino every year? No, it doesn't. And they go to the casino for two reasons. Greed - hoping to make some quick money and entertainment. And it's the same thing with the stock market. Except people are hoping to have enough money to retire. Make money with their money but guess what? They have very few choices. Sure they're thousands of stocks, bonds, mutual funds but it’s all the same asset class. If you go and Google,  ‘traditional asset classes in Wall Street,’ they're only three asset classes. It's cash, its stocks and it’s bonds. And cash is only a holding pen until the broker can sell you either stocks or bonds. Every 401K, every traditional IRA is tied only to Wall Street investments. Wall Street loves it. Trillions of dollars of going in over the last years, since the 401K basically took place in 1980. And people's money for baby boomers primarily in 401K all goes to Wall Street. People don't realize, there are many asset classes besides stocks and bonds. There’s all sorts of equipment. Leasing dental equipment, leasing MRIs, construction equipment like Caterpillar, farm equipment like John Deere, there's foreign currencies, there's precious metals, there's the farm sector, commodities from the grains, corns, soybean wheat, to the meats, pork bellies, cattle futures. There's all sorts of it there's all sorts of real estate foremost out there, from single family houses to apartments, office buildings, industrial warehouses, hotels. So, there's a whole world of investments out there that virtually nobody takes part in because every broker they go to is tied to Wall Street and Wall Street only.

See based on the research we did in  academia 40 to 50 years ago at UC Berkeley, Stanford, University of Chicago, Harvard, Yale and MIT. We found that Wall Street was a red game. In other words, we just took a 10 year period and we said, "Who can beat the 10 year stock market averages?" We could only find five people way back when. Warren Buffett was one of them. Sir John Templeton was the second. Sir John Templeton was way ahead of his time. After World War II, his thought process is- I’ll invest in big companies in third world countries on a concept, there is a whole world that has been devastated by World War II except the US and Canada. And these giant companies like the beer distributor, the company that owns the phone system, they have near monopolies. They will grow faster. Now it may take years before the world of investors realize that their earnings keep going up. Their profits are going up. But, eventually the world investors will recognize that and so the stock will go up and he proved right. Fact he sold out about thirty five years sold a- Franklin funds to San Mattel for three hundred million and of course Warren Buffett is known, acknowledged inside Wall Street, outside Wall Street as the single greatest stock market investor for the last fifty years. But what’s interesting is in 2016 last year, we had the Presidential primaries and elections.

What's interesting is Bernie Sanders on the left, Donald Trump on the right, said the same thing. They said Wall Street is a red game and virtually every big bank owns or is  connected to Wall Street firm so it’s the same thing. They told the truth. Guess what? Because neither one was receiving tens of millions of donations from Wall Street, like the democratic candidate, Hillary and the prior president Barack Obama, in other words, Wall Street plays both sides of the fence. They pay off both sides so they can get their way and it's a red game.

I’ll give you an example. The 2008 crash occurred. So guess what? The Secretaries Treasurer under Bush decided to push for an eight hundred billion dollar bailout. That bailed Wall Street and the big banks. But they screwed everyone on Main Street by lowering the interest rate to virtually zero. Taking away the one safe thing that Americans had for generations. If I don't want to take the risk of stock market, I can put my money in the bank and earn 4, 5, 6 or 7% in CD’s and never have to  worry about my 401k becoming a 301K or a 201K which happened each of the last two crashes. Because each of the last two crashes, the Dot Com crash and the real estate bust, the stock market dropped by over by 50%. So, it is a red game unless you put on your thinking and look at alternative investments. In fact we're gonna show in this podcast interview, if you just save taxes, generally that's enough to... if you can really save taxes over a twenty year period, there may be enough to fund your retirement.

Howard: Yeah. My dad used to always sing to me in the car. He’d say "Howie, an easiest dollar earned is a dollar in expenses saved. The second easiest dollar earned is a dollar in taxes delayed. And the hardest damn dollar you'll ever earn is gonna do whatever you sell another dollar's worth."

Dr. Wong: Exactly. In fact, I'm gonna say something that startling to folks and don't take it the wrong way. Because a lot of people immediately, based on their politics get riled up. But taxes actually are voluntary in America. They really are. You'll pay as much or as little taxes based on your tax knowledge or the knowledge of your adviser. And I always takes things to heart. 1985, many observers said I was a highest paid guy with a CPA background in California. I made over a million dollars, I paid zero taxes, and I did it legally. Now, it's not just me.

My first media appearance was two hours on KCBS, the CBS affiliate radio station in San Francisco. By some odd quirk I touched a public nerve. I got over three thousand letters and phone calls, set the all-time record, as a result of that, my rookie PR and the people in the next 2, 3 years got me 400 TV and radio appearances and I set records on over 50 radio and TV stations from San Francisco to LA. But here's what touched the nerve. In 1976, who was elected President of the US? It was a Democrat, Jimmy Carter. In 1976 Jimmy Carter paid zero federal income tax and he did it legally. And he also recovered all taxes paid in the 3 previous years. Most Americans leave the taxes paid in the last 3 years as a permanent donation to the IRS. Not knowing that you can recover that. Jimmy Carter did that. He did it with his side business. He was a peanut farmer. He borrowed 800,000 from Bert Lance, Head of the Office of Management budget. Bert was a Georgia banker who had to resign from his federal post of few months later due to a scandal. But back then we had a 10% tax credit. So if you buy a million of equipment and you got 10% or 100 000 off your taxes. And then you also got 200,000 depreciation. And you can carry that back. First you wipe out all tax in the current year -1976 ,when he was elected President, and you can recover all taxes paid in 3 previous years.

Now when I was on that KCBS interview around February of 1980, I realized you had to give equal time to each political party. So let's go to the Republican, who succeeded Jimmy Carter as President? In 1980, it was Ronald Reagan, the Republican but prior to that, he was the Republican Governor. In fact, on my PhD in Economics certificate that I earned in 1974, Ronald Reagan signed it. Because as Governor of California, you're automatically in the Board of  Regents.

In California we have a high state income tax  and I passed the National CPA exam in November 1979. In 1980, if your taxable income exceeded only 50 000 per household, husband and wife together, you got hit with the 11% state income tax rate. One of the highest in nation. Guess what? There are years as Governor of California where Ronald Reagan didn't pay any state income tax. How did he do it?

He had a side business. It was his cattle ranch. Now it’s virtually impossible to show a profit on what may be 20 head of cattle when you deduct the cars, the trucks, the equipment, and the housing. Now if you remember when Ronald Reagan was President, he would go back to the Western White House which is the ranch in Santa Barbara and he would bring his Secretary of Commerce Malcolm Baldrige with him. He would never be wearing a suit. He would be chopping wood. He'd have the Secretary of Commerce chopping wood, getting up the horse, off the horse. Even though it’s virtually impossible to make a profit. Guess what? He had a special thing. And for a side business, if you do it correctly, you can deduct part of your car, your truck, your entertainment but with the ranch, you have the special ranch [13:55 unclear] exception. You get to deduct your groceries because in a ranch in the old days, you're not close to McDonalds. So you got a cook and then cooky, the typical nickname in westerns for a cook, would ring that triangle to let all the cowboys know that dinner's ready. But think about if you can deduct your vehicles, your housing, your clothes, because you have to have certain working clothes for a cattle ranch. Your food, your entertainment, your trips, that's basically your insurance. That's basically what composes most of what Americans spend and if you can deduct at all that, your taxable income gets to very little. Now there are advanced tax strategies as well that work for dentists that are rarely used.

The Defined Benefit Pension Plan. What if I told you? If you're 55 and you wanted to retire at 65, that instead of being limited to 5,500 plus 1000 catch up or 6,500 annual deduction in an IRA or deduct 18,000 and if you're 50 or above another 6000 or 24 000 in a  401K. What if I told you that one of the secret tax strategies we use is a Defined Benefit Pension Plan. Where if you net 300,000 and say you're 55 or 60. I have clients that would deduct a 150,000 a year into that. So it makes a big difference. In fact the tax savings are huge.

Let's suppose you can earn. You can earn 7% - 7% in investments and let's say we only save 1500  of tax and do that for 20 years. That's gonna amount to 716,000 more on your retirement fund. If you can save 30,000 a year, that's gonna be 1.4 million. And for most general dentists, that's about all they have saved by the time they retire. We can do that just through the tax savings. So tax savings can be very important. And if you're a real entrepreneur as a dentist and say you - in fact just last week I saw someone, a very young aggressive guy, 38. It's no surprise he's from Asia. Asian immigrants are very aggressive because we see the opportunities in this country. He's bought 5 dental practices. Merger on a one side on the west side of town. So an entrepreneur like that. Suppose he can sell out, let's say when he retires, that each dental practice is  worth about a million. So he sells for 5 million. He’s depreciated out everything and let's say he got 4 million taxable gain. Normally you would have to pay over a million of federal tax that’d be 20% long term capital gains, 3.8% net investment, 0.9% extra Obama Care tax, basic extra social security tax, plus Arizona. Well guess what? When you finally cash in if you're an entrepreneur... What if I told you? You could sell and not pay any tax at all using advances concepts like a Rockefeller Trust. And people saying "That can't possibly be true." Let me give you one example and I don't want you get politically riled.

What if I told you there's a well-known political family known not just in the US but internationally for 30 years. In fact they used to live in the White House. It's the Clinton's. And what if I told you in the last 5 to 10 years they received 1 or 2 plus billion dollars. Much of it from middle-eastern governments that hate our guts and finance terrorists to kill us either in our countries or on the field of battle and not a penny of it was  taxable. It's the Clinton Foundation. So when people say advanced tax strategies don't work, it's just because they don't have a CPA and attorney that knows these advanced strategies. In fact, my experience is 99.99% of CPAs and attorneys have no idea that that these big boy strategies worked. How do I know about it? Well, I came to Arizona 25 years ago in September ‘92 for a two year research project. I came from UC Berkeley. I was funded by Prudential in a large stock broker's firm, to study Advanced Estate Planning and Asset Protection. And for a year I was lucky enough to write the column in a legal publication. It was a failed to attempt to educate 7,000 Arizona attorneys on advanced stuff. For example 1 month, I would write  on a Limited Liability companies, which had just become legal in California and were not yet legal in Arizona and rest of the country. Whether people realize it or not almost every trend starts in California. Good trends like Silicon Valley, it could only exist in the Bay Area. Revolutionary Bay Area where you could imagine a world that didn't exist and then got created, like Steve Jobs - his dream was to have a personal computer in every home. But it's also bad trends. Bad trends like Paris Hilton and Lindsay Lohan were all the kids think, that's the way, cool way to be. Take off your clothes and display that on social media. So we have both good and bad coming out of California.

And now for those dentists that have not saved and they're 50 or 55 and they say ‘how in the world am I a specialist? I'm making 300 000 to 400 000 a year but I've got almost nothing. I have two divorces. I'm paying two sets of alimony. Two sets of child support. How in the world am I gonna be able to retire?’ We’re just taking an example. If we can put  120 000 to  150 000 a year in the Defined Benefit Pension Plan, you’d save 50,000 a year and you earn 7% on that. That's gonna amount about 2.2 million. Just from the tax savings.

Howard: From age 50 to 65?

Dr. Wong: For age 50 to 70.

Howard: Oh, 50 to 70.

Dr. Wong: You need 20 years of saving 50,000 a year and earn 7% on that. That's gonna be 2.2 million.

Howard: Which do you think will bring you more happiness? Early retirement or divorce and delayed retirement?

Dr. Wong: Well here's - here's what I tell all of  my clients. Having a lot of money will not necessarily make you happy. Happiness is something internal. Comes from good relationships hopefully with family or good friends, hobbies that you’re passion about. Like only fisherman would get up at 3 in the morning and drive 3 hours to that fishing hole in the middle of the rain so that they’re the first one putting their fishing line in and they catch all the trout. Only golfers will get up 4 in the morning, raining, miserably cold because they got the first tee time at 6. They can play it and they’re not slowed up by amateurs, you know shooting 30 over par slowing him down. That's an example passion or causes that you believe in. Whether be a church, whether be an animal shelter, where you're saving animals. That's happiness and internal satisfaction. However I will tell you, not having enough money to where you can cover the basics of your existence, that will absolutely cause unhappiness.

I will give you a quote from Warren Buffett. I'm the only one in  town that gives a two hour seminar and lessons from Warren Buffett. If I could be frank and I'm always frank in particular, this is a sophisticated audience of dentists who’ve been around. Many of you have made bad investments, have been scammed by Wall Street. So let me be frank with you. Warren Buffett says, he knew a lot of people before they became rich and they were total assholes. Once they’d become multi-millionaires they became a bigger asshole, ‘Money is just like an amplifier. It amplifies your true character inside.’

Howard: Kinda like alcohol now.

Dr. Wong: Absolutely. And people say, "Well, I was out of my mind when I got in that fight and I hurt people." No, it was your true instinct. It's just that alcohol lifted the governor you know, and let your true instinct come out. Absolutely. So Warren Buffet's an interesting guy.

Howard: Yeah, I went to undergrad in Omaha.

Dr. Wong: Okay.

Howard: And he was in Omaha. And he came and lectured freshman year. I believed it was 1980 in the evening. I had to go to get extra credit points and we used to drive by his house. I mean the guy... The one thing I learned the most from Warren Buffett is, he lived below his means. I mean he still lives in that house.

Dr. Wong: He's lived in the same house he bought in 1958 since basically about 50 years. He paid 31,000 for it. About 10 years ago, he donated his own personal car to his daughter's charity. His daughter's cause in her life is to protect and help battered teenagers, women, and battered women. And his own personal car was an old Lincoln town car worth less than 10 000 and he - but he kept the license plate. The license plate said ‘Thrifty.’ For decades Warren Buffett bought his clothes at Goodwill and the Salvation Army. I use live examples of people that were out  from Omaha, that knew Warren Buffett's mom, his first wife, his second wife, knew Warren Buffet's kids. And they said, if Warren Buffett saw a certain item of clothing at the Goodwill Salvation Army and you want it, don't get in his way. It was just.. he would just run right over and grab that. In fact, the most recent documentary on Warren Buffet was HBO. Came out about 4 months ago. And Warren Buffett drives himself. He's about 86 years old. He drives himself to Berkshire Hathaway. Last year he was ranked the second wealthiest guy in the world. No chauffeur, drives himself, but he always stops at McDonalds. And his second wife Ingrid, puts exact change in and he would buy 1 of 3 items. Now you will see the cheapest is about $2.60, the middle is about $2.90, the most expensive is about $3.17, that's a bacon egg and cheese biscuit. The day they were filming the documentary Warren Buffett said, "The markets down so we got the cheapest item."

Howard: Ha!Dentists, Physicians and Lawyers are notorious for living above their means.

Dr. Wong: Absolutely. And...

Howard: Why is that?

Dr. Wong: If I could be frank again. The only reason people do that is because they have weak internal values. Let me explain. For decades, the standard and let's go back 40 years ago. The standard in blue jeans of a name brand was Levi's. And Levi's back then maybe cost $15. They were durable and there's a little red tag in the right side of the pocket. Normally you couldn't see the tag if you had a wallet in it. And I read an interview about 40 years ago from 3 Israeli guys that started Jordache jeans. People in my seminar, the baby boomer age, remember, the women say Jordache would charge over a hundred dollars for some of these jeans. Now here's the gist of the interview. And these Israeli brothers said, "Only in America are people so stupid that they'll pay 5 or 6 times what the standard is, which is Levi's, and wear a big billboard on their butt which is the Jordache label advertising their jeans." Well it's not true that only in America that people are that stupid. This whole designer craze is going all over the world including, Asia, South America, the Middle East, Europe. But that's why immigrants come to this country and it's a land of opportunity. It shouldn't be a land of hand out. It's a land of opportunity. So they come here. They realize how weak Americans are with internal values and they make a fortune. In other words, there's no reason to buy any designer brand of anything. The only reason you do that is you’re trying to impress someone else. That's the only reason.

Howard: They even do it in cars... the Lexus car is the same as the Toyota. What is it? A Toyota 4Runner?

Dr. Wong: No. I'll give you an example. I know that because I have a Lexus ES 300. In fact I wrote an article for 7 years. I wrote the only column on money in the Arizona Republic, community section about..

Howard: For years you wrote it. I love that column.

Dr. Wong: For seven years and about 4-5 years ago on Thanksgiving I wrote an article ‘If you buy cars like a Chinese immigrant you’re going to  have at least an extra $400,000 in your retirement account.’  So let's talk about the Lexus since you brought up. I owned a 1998 Lexus ES300 but 95% of the parts are the same as a Toyota Camry. But I didn't pay the brand new price. I bought it, right now it's 19 years old next year it would be 20 years old. I bought it when it was 8 years old. I paid 8,500 when you account for the fact that I didn't pay sales tax, my license fee, and tags are way lower and the insurance way lower. I paid 1/4 of what the original owner had paid for it. It was 8,500 dollar capital cost and it had 85,000 miles. And now it's 234,000 miles. It's engineered because I've research things carefully, it's engineered to go 300,000 miles on the original power plan which is your transmission and engine. So, now the car before that was- I was doing an immigration project in the late eighties that helped hundreds of thousands of immigrants and doing that for virtually no money it's just I had the right skill set when the immigration law tightened up. And if people did not apply for a legal status they were banned for either 2 years, 20 years or banned for life.

Now my 1984 Saab turbo that I bought new in San Francisco, died. I was doing this immigration project. I didn't have time to look for a car.  I met a guy  at Scottsdale Chamber of Commerce. He was selling 6 cars to raise 15,000 to buy a straightening machine for his body shop so he could straighten wrecked cars and be in that business and one of his cars he was selling, his mom’s car out of Minneapolis. It was a 1987 Volvo 240 DL with lots of dents. It had 110 000 miles on it. I paid 2,800 for it and I got it up to 255 000 miles before the motor mounts dropped so you couldn’t get the oil filter out. Luckily, to avoid the hassles of disposing it. I was able to sell it back to him  and he gave me $300. And he fixed it up and found a good home or he sold it to some student at ASU.

But let's look at the math. I went from a 110 000 to 255 000 miles, 145 000 miles my capital cost was the 2800 I paid for it , minus the 300 I sold it  for, 2500 and as I say in my seminars, when you work the math, I got like 62 miles to the dollar. Everyone else talks about miles per gallon of gas. I'm talking about capital cost.

So imagine your sons and I'm looking at your two sons that are taping this. Suppose it's Saturday and they need to borrow your car, Howard, to go on their day. So you reach into a couch and you find 50 cents, two quarters and you tell your sons, bring it back fully gassed up. But the capital cost for that 50 cents will cover you for 30 miles, which is more than enough for their day. So if you buy cars - This by the way the - the 84 Saab Turbo, the 87 Volvo 240 DL. And now the current car, the ‘98 Lexus ES300, each of those cars has gone over 200 000 miles. So again, if you buy cars like an Asian immigrant, you’re going to have at least a extra 400 000 to 500 000 in your retirement account.

Howard: I think a lot of the stress of the millennials is their going to work and they have to produce so much dentistry because they have 350,000 dollar student loans and then a lot of the older dentists have to go to work because they bought you know, a huge house and they got a Mercedes and their wife decided not to work. And they don't realize that all the student loan debt, all their personal spending debt really wreaks havoc on their happiness and their stress.

Dr. Wong: You're absolutely right. In fact, we're gonna cover exact numbers that.. in another podcast where I'm gonna show, if you buy two Toyota Camrys instead of a Porsche and an Escalade. You’re gonna have like an extra 1 or 2 million in your retirement account. It's the same thing [31:22 unclear]. We've got the exact numbers. This is a second talk I gave at the April 7th, Western Regional Dental Convention. It was called "Common Sense Financial Strategies for Dentists". The first talk, which is the material we’re covering now is called, ‘How Tax Savings and Alternative Investments Can Help Dentists Retire Early.’

Howard: And these are the handouts of that.

Dr. Wong: Yes.

Howard: How far are you into these? Are you gonna keep going over these?

Dr. Wong: We haven't gone over -

Howard: You haven’t started them yet?

Dr. Wong: Oh yeah. So we've got lots to cover. In fact, I'm glad you raised that point about the stress of debt. If you're in debt, you're a slave. In fact if you look historically, money lenders were always in bad repute. Now I'm not any Christian scholar but there's a famous passage in the Bible that  talks about Jesus, casting out the money lenders from the temple. And in fact, in most third world revolutions whether they be in Africa or Asia or South America, when the revolutions occurs, they line up the previous politicians in power, the bankers, and the criminals like the drug dealers. And they’re all shot or hanged at the same time. So that's the reputation that the money lenders have.

Howard: In the temple the - it was the - the exchange people, like when you going to the airport, you convert your dollars into euros, whatever. There was - So everyone coming into Jerusalem they’d have all these different coins and they would always do the exchange. And those were..

Dr. Wong: And the more naive you are, just like a foreign traveler now, the more naive you are you get taken advantage of with the bad exchange rate. Where they squeeze this extra money out of you. Again how good an exchange rate you get, depends on your knowledge. Just like how much taxes you either pay or not, depends on either your tax knowledge or the knowledge of your advisers. But can I tell you why most people aren't getting advanced tax strategies? Here's the reason. About 30 some years ago, the IRS said "we're gonna give up". 10% of  the economy is underground, like barter exchange, so we lost control of that. What we're gonna do however, is we’re gonna put in penalties. Severe penalties on Tax Preparers. Whether be CPAs or H&R block. So because of these penalties we're gonna turn Tax Preparers into unofficial, unpaid cross-eye agents of the IRS. Where they're gonna be afraid to help their clients save serious tax. So that's what the IRS did and it was brilliant.

Howard: Two things. Isn’t it true though that almost the entire government total revenue, isn’t it like most of it comes from payroll taxes.

Dr. Wong: Well it's payroll tax and income tax. Very little comes from corporate tax.

Howard: What percent.. do you know - what percent comes from?

Dr. Wong: I don't have that chart right on me so I'm not gonna guess.

Howard: Okay.

Dr. Wong: But payroll taxes by the way are essentially social security medicare. It's a total of 15.30% off the top. Now, for most people that are employees, they pay half and it's comprised, they will pay 6.2% and they will pay half of the  2.9 or 1.45%. So it's comes out to about 7.5%. A little less….a little more than that. 7.65%. So, the employee pays half, the employer pays half. But self-employed like me or a dentist, you're both the employer and employee. So you're paying 15.3% and every year they raise the wage limit where you’re subject. So it's not unusual that people are paying 15 000, 18 000 and with dentist’s, there's a wage cap of about a 127 000 where beyond that they can't collect the social security. But there's no limit on the 2.95% medicare tax. So for example, if you make a million over a limit because you're a real entrepreneur, you got 5 dental practices and so you net a million, you’re paying about $30,000 just on medicare tax above the base 15000 to 18 000 you're paying on your first 127 000 wage. So what we've seen for a number of middle income people that are self-employed, particularly home based businesses where they don't have a lot of overhead. They're actually paying more in payroll taxes, social security, medicare than they are paying in income tax.

Howard: And one follow, up when you said 10% of the US economy is underground. Do you think Bitcoin, based on that blockchain programming. Do you think that is a  serious thing of the future? Do you think it's more of a scam? Do you think it's more of a..

Dr. Wong: I would suggest everyone to stay away from Bitcoin. I'm no expert in Bitcoin but it’s basically computer algorithms that determine the value of it. We've had scandals like one guy, a big player in the Bitcoin exchange. The whole firm collapsed and then all  the monies disappeared. But let me tell you who and the biggest use for Bitcoin is. If you're a criminal, particularly the drug cartels, one of your biggest problems is , how do you move money around where it's not traced and it's not taxed. So if you're a terrorist or you're the drug cartels you’ll love Bitcoin. In fact, a lower level of that scam you see on the scams where people call up from Nigeria and they tell Americans you've won millions of dollars. You just gotta send us 1000 or 2000. They always ask for money order because if you go to bank and your missus, let’s talk about the grandma scam.

You're 75 year old Mrs. Jones, your husband died 10 years ago, you love your two grand kids, and the call up saying ‘Well we’ve got one of your  grand kids in Mexico and  he’s been kidnapped or he’s in jail and you need a bribe.’ And because of people posting their whole life on social media like Facebook. They know all the details, they know the birthday of your grandkids. Your grandkid put his trip to Mexico right on there. They know that he's in Mexico and they can be very convincing. So grandma sends 3000. We just heard about it on the news two nights ago. She sent 3000 but if she had to go to bank and get a cashier's check, hopefully, a banker if they even know you these days, might say, ‘why are you writing up this $3000 cheque? Why did you need the cashier's cheque?’ because they always ask, why do you need it? And they might intervene. But  if she goes and gets a money order, nobody asks. And then she mails that off. That money is gone. So, I would not suggest Bitcoin. Now let's go beyond Bitcoin.

Let's go to gold. In my opinion, gold is not an investment. Whether it is a hedge against fear. When the economy is collapsing, paper money is collapsing, the stock market is collapsing and people lose faith in their government, gold booms. Gold and silver. Precious minerals booms. But when the economy gets better, unemployment decreases the paper assets like the stock market recover. People don't have fear and then gold prices drop like a rock. I do have some history with this. Without going into details about almost 40 years ago, a small team of UC Berkeley, we did the largest precious metals trade on the C. O. M. E. X. That's were in New York, precious metals like gold, silver, platinum, palladium are traded. Unlike most commodity trades, we hedge forward by - so we bought New York, we hedge by selling the same gold on the London Metals Exchange. We did it for a giant client. I won't name who they are with their virtually unlimited resources. We were able to do a major tax strategy. They took the losses in the US, offsetting the tax of one of the wealthiest families in the world including one of the most major banks. In fact one of  3 giant banks that controls 70% of all of the deposits of Maricopa County which is the Phoenix Metro – Scottsdale area and we took the gaines in - I had all the warehouse receipts, they were in countries in languages I couldn't understand but what I noticed, Liechtenstein, Switzerland, places like that where the tax rate was either low or zero. So I do have history with that and I will tell you, just when you think you've got everything figured. The government can intervene and wipe out millions of investors.

We go back to the end of 70s, the Hunt brothers. Nelson Hunt and his brother. They were worth 8 billion out of Texas, try to corner the gold market and the silver market. Then the government said, enough with that. One weekend, the federal reserve tripled the margin requirement and it was limit down for twenty seven days and their goal was to wipe out the Hunt brothers. But the trouble is they also wiped out millions of small people. Now tripling the margin requirement and this is terrible - imagine you had a house that was worth 100 000.  And you just put       20 000 down. In the old days you had to, unless it was an FHA or VA loan And then over the weekend the government says there's too much rising prices, speculation on real estate. We’re gonna triple the margin requirement. So on Monday we're gonna announce if you do not put 60% down, you only put 20% down. If you can’t come up with another 40,000 by the end of the week or by the end of the month, we're gonna take your house. How many people could come up with the extra 40,000 on their house? Let's go to modern numbers. A dentist has a $500 000 house he put 20% down is 100 grand. And now the government triples the margin. How many dentists could come up with another  200 grand within a week? No, you can't. So when limited down... So we were affected at that time on my side accounts. We're group of us at the University of Illinois, PhD economics students used the main frame computer and each of us kicked in 2000. And a few years later, we got it up to over 50,000. Tremendous rate of return. We were one of the first to use computerized commodity futures trading strategies but when the government wiped out Nelson and Bunker Hunt, they wiped us out as well. So I just want to warn you. Even if you're worth 8 billion, no one is bigger than the government. They can imprison you. They can kill you. As we see with all these police shootings. They can kill your dog in Minnesota. Your two dogs that are friendly, that are comfort animals for your kids come wagging slowly and then a police officer, who jumped in your yard just shoots them in the face. And apologizes ‘ I love dogs too.’ Well if you did, then you wouldn't have shot them. So I'm just saying the government has far more power than even multi billionaires. And that's why multi billionaires spend lots of money, spreading around with the government.

The Clinton foundation because of the access to influence, that's why foreign governments in the middle east, they hate u, rouge billionaires and multi-millionaires all over including US gave them billions of dollars to get access to the inner workings of government. So anyway, all I can say without being political. Isn’t it amazing that after the Haiti earthquake and all the rockers and Hollywood people having fund raisers that rogue, rich guy from Ireland gives a big donation to Clinton Foundation and by coincidence he winds up with the cellphone franchise for Haiti. Isn't that pure coincidence I'm sure.

Howard: America is one of the most corrupt countries.

Dr. Wong: There is corruption all over.

Howard: It's extremely corrupt though. Many Americans thinks it's a truth, liberty and justice to the American way and it's usually,  ‘money is the answer, what's the question?’

Dr. Wong: People have no idea how corrupt it is. I'll give you another example of corruption. When the real estate prices started collapsing - by the way in Arizona, we reached a peak of our  housing prices in spring of 2006. Four years later, a totally biased observer had to admit that the medium price of a house had dropped 60% in Maricopa County. Maricopa County again being the Phoenix, Mesa, Scottsdale area. Why is he biased? He was a Maricopa County tax assessor. Because what is a tax assessor? You have a tax formula, you multiply it by the Real Estate value and that's how much tax you can collect. Even he had to admit it dropped by 60%. But the corruption., let me now explain an economics lesson to  you, you will not hear from anyone else and I have a chart that shows what the stock market did from basically and we’ll put it up on the podcast, from the beginning of the century in January 1, 2000 for the next 16 years. We had a five years of pure speculation, the last 5 years before January 1, 2000 due to the Dot Com boom. The average stock market returns were 25% for that 5 year period. 25% per year. And then January 1, 2000 then we hit the Dot Com crash. The stock market went down by 2000, 2001, 2002. The NASDAQ which is the index for high tech stocks had dropped by 78%. So if you had been a high tech speculator and  you are thrilled to have a million dollars and then 3 years later it had dropped to 220 000 but if you paid the annual 3% fees at Wall Street for 30 years of one of [46:05 unclear], now you're under 200 000. Can we agree that's getting wiped out to go from a million to under 200 000?

Well, the government did something short term, brilliant but diabolical long term. See there's only two places that people store their wealth. Unless you're someone like me that's started 11 businesses, bought into others. Like on the real estate side. My real estate company is an Inc. 5000 company. One of the 5,000 fastest growing private companies in America for the last 3 years but except for the rare bird like me, there's only two places people store their money, it's in the value of their real estate which is usually their primary home maybe they got a vacation home, maybe they bought a condo by Arizona State University because two of their kids are going to  school there. I had a client that did that. So there’s real estate and the stock market. Now, when the stock market loses say 7 trillion of value with the Dot Com crash, the whole economy’s gonna attack. The reason is the basic equation we learn and fresh from macroeconomics is C, see which is personal consumption plus I, business investment, plus G, government spending is a whole economy or gross national product or gross submassive product. We're not a nation of savers in America.  70% of our whole economy is consumption so, people lose half of their 401K. They don't feel like buying a big ticket item like a house, furniture. They don't feel like buying a $50,000 on a car. They don’t even feel like taking their three kids or themselves to Hawaii for ten days which would cost 5000 or 6000.

So the whole economy is gonna crater. So here's what the government did. I was in the mortgage industry at that time. From 2001-2006, they allowed liar loans. So if you had a high enough credit score, you could lie about your income. You didn't have to show tax returns, you didn't have to show of the wage statement. You could lie about how much your savings was and it worked temporarily. So let me give you a choice. If you had to qualify under the old system 30 years ago and put 20% down except for AFHA or VA loans, you had to prove your income with 3 years of tax returns. You had to even give personal references. You had to show job stability. And under the old system maybe all you could afford in 2003 was that 30 year old house in Mesa. Maybe it didn't have a garage. Maybe it had a car port and you could buy it for 200 000. Ok but with liar loans. If you had a high enough credit score, now the loan officer was going wink wink you said I  think I can only buy 200 000 dollar house. He’d say wink wink..’ let me show you what you qualify for’ and you don't have to.. wink wink…’you don't have to prove your income, you don't have to show me your wage statement. You don't have to show me tax returns. Guess what? You qualify for $500,000.’ So now here's the choice. You've almost [49:18 unclear] your dream home. Your dream home is the $525 000, 300 square foot, two storey, three car garage, brand new house in the gated community in South East Chandler Gilbert Mesa.

That's your dream home. Brand new, five bedrooms, three baths, or three and a half baths with the pool. And the loan officer’s looking at you and saying you qualify for that and you'll only have to put $25,000 down. Okay,  suppose you got the loan. How could you afford a $500,000 loan? We had  something diabolical. It was called the Negative Amortization Loan, pioneered by World Savings, a giant independent same as the loan that became a bank in Oakland California. Here’s how it worked. So you got a $500,000 loan and the true interest rate was 7%. But you only had to pay 2%. Have you ever heard of  interest only? So $500,000 loan. 2% interest only. Is only 10,000 a year. That's 833 a month. You can even rent a nice one bedroom apartment in a nice north Scottsdale location for 833 a month. So it's great. But guess what? The true interest  rate is 7. So you're paying 2%. The extra 5% you owe,  5% of 500,000, your original loan amount is 25,000 a year. So 5 years later, you owe 625,000. But now you have to amortize that loan over 25 years. It's a 30 year loan but 5 years along you’ve  got only 25 years left. And you got the amortize over  the true of the 7% interest rate. So your payments  will go up three or four or five fold. And how many people can afford even a doubled mortgaged payment? No. So tens of millions of people lost their houses. But it worked for 5 years. So from 2001 when the government allowed these liar loans, it created a boom in real estate in Arizona. In 2005 we led the nation. The medium price of house went up by 50% and everyone’s fat and happy. People were speculating real estate. And you remember the banks took out these big ads. ‘Don't let your home equity go to waste. Put it in a pool. Pay for your kids college, buy a car’ and people did. They used, particularly baby boomers used their fake home equity like an ATM machine. They took out money, they kept spending, the economy did recover, did not crater until 2006. 5 years later when these loans reset, that's when we reached the peak of our housing prices. Real estate crashed and that led to the 2008, to early 2009 stock market crash.

So now, you got 7 or 8 trillion of home equity that's lost. Where is the only other place people have  their money? - In the stock market. So the government lowered interest rates to virtually zero for two reasons. One, they wanted to take away the bank, the safe place to put your money because now on a $100 000 in a one-year CD in Wells Fargo, they pay you $50 interest at the end of the  year. Chase is even worse they’ll pay you $10 at the end of a year. So, you can't make any money at the bank. So they're forcing all the money into the stock market. And what happens when you have an empty vessel like a bathtub or container? You put more and  more liquid in, the level rises until the the pressure gets too great and it collapses. Well that's what it is. All the money is chasing you by going to the stock market. Bonds don't even pay anything. A 10 year treasury bond, loaned to Uncle Sam the average over the last 5 years is only 2% interest. Chasing you by putting money in the stock market and they also wanted to help the real estate market come back. So if you had good credit over the last 8 years, you could borrow 30 year fixed rate mortgage at 3 to 4%- unheard of rates. So this is what’s happening and it worked.

You know after the 2008 real estate bust, the stock market crashed, we reached a low on March of 2009, the stock market shot up for the last 8 years. But it's the false stock market because of all these money pouring in because it has nowhere else to go. So that's an example of how the government caused the real estate boom and the stock market boom that went up into early 2008. The crashed occurred which is the result of the fake liar loans and now they created a fake stock market boom. You got to remember, people particularly Americans never learn from history. The last two stock market crashes, the markets going down by, a little lower over 50%. When the next crash occurs people be whaling and moaning and they forget it was their greed that caused this. Now by the way, there's nothing wrong with trying to get a higher rate of return than a $10 interest on your 100 000 from Chase or 2% as average dividend unit in the stock market for the last 18 years, or 2% as the average over the last 5 years from the 10 year treasury. But what am I saying is you can get that through equipment leasing, you can get that from real estate depending on where you are in the fix and flip cycle. You can lend to fix and flippers that are specialists in doing this, where they buy a house underpriced, they know how to do the fix step at a bargain price and they sell for profit. Right now, you can get...if you don’t wanna learn about  real estate you just wanna lend to the fixed and flip crowd, you can make 8%, 10%, or 12% on short term loans that are as little as 4 months to 6 months of term to up to a year, a year and a half. So...

Howard: What’s that Jim Bells...the name of that company..

Howards Son: We buy ugly homes.

Howard: We buy ugly homes. How do you loan to fix and flip markets?

Dr. Wong: Well basically for years, I was the only one with a CPA background that was a member of the largest Real Estate Investment  Club in Arizona. And basically.  I don't mean you should lend to amateurs. Professional fix or flippers are ones that either buy before closure auction or they have teams that are people knocking on doors leaving a little door hanger saying  ‘If you're ever thinking about buying your house, we do that.’ In other words, they know how to find the deals. And one of the best deals is from divorce. The medium life of a marriage is only 5 years in America. Half of marriages last for more than 5 years half last less.

Howard: Mine lasted 20. I should get a gold medal.

Dr. Wong: Absolutely.

Howard: 20 years.

Dr. Wong:  Well, you have the equivalent of four normal marriages.

Howard: And my President  at  my company she just celebrated 19 years and she said her goal was to stay by my side for one more year than my wife.

Dr. Wong: Ok. Well...

Howard: So, mum made it 20 years and Lory is going for 21. Go, Lory we hope you make it.

Dr. Wong: Well for a lot of people in the medical field, doctors, dentists and so on. If you are lucky enough to have an office manager that takes care of the finances and who runs the back office details you're lucky. In the field, we call them, that's your office wife. Ok, whether they may crossover  and be romantic, that may be your second or third wife but that's your office wife. But yeah, so let's take an example of a big subdivision that's got 3,000 homes. Well by the way, people in Arizona it’s much more fluid transitory than even flaky California. So guess what the medium life of marriage is less than 5 years in Arizona. But let's stick with 5 years. So you got 3,000 homes there and people - the medium life of marriage is 5 years. 5 years into 3,000 homes. There's 600 divorces. A lot of them are bitter divorces where no one wants the house and they're not that worried about the price they sell at because they wanna make sure the other spouse doesn't benefit. It's terrible. So that's where a lot of the deals come from. So they buy the house but then they need money to fix it up or they need money to close at the foreclosure auction. If you have the winning bid, you not even allowed to bid unless you got a $10,000 cashier's check. But then you got to pay off the total price of the house 24 hours later. So they're people to lend. They're also known in insurance as hard money lenders. And they lend sometimes at 15% interest because they’ve got to have the money to close out the house. 15% interest sounds like a lot but if you’re a professional fix and flipper in a strong market like we have now, where there's a lack of houses to buy compared to the demand, you’ll fix that thing up in only 2 months and then you can - from the time you buy it to the time you sell it because houses  going to market, they don't last for more than a month or 2 months if they’re priced properly. You can be in and out of that house in 4 months. So even if you’re paying 15% interest, it's not that much.

So if you had to borrow for example. I’ll just throw in  a bigger number. If you had to borrow 100 000 and you're paying 15% interest, that’s 15 000 a year. If you're only paying for 4 months, that's a third of 15 000. That’s only $5,000 interest you're paying.  And you didn't have to go through all the closing cost. Every homeowner knows, just to borrow for normal mortgage or to re-finance, you're paying 5,000 of closing cost between title fees, points on your loan, title insurance all that stuff. So, yeah there's a whole industry where you can lend to fix and flippers. In fact there’s six different real estate formulas. With my company and I don't wanna talk about my company for any fully integrated creative real estate company or there's - you just lend to them. Or there's some staple, own a pool, single-family houses, they’re rented or there’s apartment  buildings, there's office buildings, there's mini storage and can I tell you, you make the most money on hotels. We can - my partners and I - control 57% of all the full service hotel rooms in the airport submarket. The Crown Plaza, The Holiday Inn & Suites, The Phoenix Airport Hill. We’re doing an...

Howard: In Phoenix?

Dr. Wong: Right in Phoenix. We're doing an 8 million rehab on the Tucson Hill and East. We got the Hampton Inn, the only hotel next to the Talking Stick Resort. You can enjoy everything at 101 in Indian bend/Talking Stick way. Talking Stick Resort does millions of advertising nationally, statewide, locally, takes up full-page ads in the Arizona Republic, which is the largest newspaper in Arizona. As I say in my seminars, they spend millions on advertising so we don't have to. We get all their overflow. And it's wonderful all the attractions there,  we’re next to Topgolf which is on Saturday you gotta wait 3 hours to give them money to get in there. They make a ton of money. So you can walk across the parking lot to the Talking Stick Resort, enjoy everything there then stay with Best for Less. You can be at Topgolf, stay with us. Just top the 101 is the Butterfly World, the new aquarium Odyssey, where you can swim with the dolphins. Just on the west side of the freeway, we're on the eastside, is the Salt River Field the new spring training facility for the local team there The Arizona Diamondbacks. We got all the attractions, we're the only hotel there. That's example of location, location, location - it's a cash cow.

Howard: What blows my mind about that, I did the Arizona Ironman three years in a row. And so my bike rides are usually 45 miles every other day and if I go south I go by that casino and I go north I go by Talking Stick. And we usually leave at dark like 5 in the morning and their parking lots are filled. I mean, no matter when you drive by those casino parking lots, they're filled with just people in there throwing their money, it's crazy.

Dr. Wong: Isn't it a great business? Even Topgolf. I worked with a young guy who works for a commercial data firm. That's how we get a list of those that own buildings that are  2 to 30 million. And he had his 26th birthday 4 months ago, so he and  some buddies, he's unmarried, went to Topgolf. It was a 3 hour wait to get in. Now that's a business where people wait 3 hours to give you money. But again, we are right there and - every - every - every deal has it's own story.

Howard: So, you're - you're website is Dr. Harold Wong, W. O. N. G. dot com.

Dr. Wong: D. R. not spelled out doctor,  drharoldwong.com.

Howard: Now, you have three locations in Arizona. You're up in Scottsdale, Phoenix, Tempe. What services do you provide to dentists when they go to drharoldwong.com? And is it mostly Arizona or do you take clients from the rest of the 50 states..

Dr. Wong: Right now, it's mainly Arizona for this reason. I'm not like the stock brokers where you call a call center, there's thousands there at Scottrade or Schwab or Fidelity. And you give them your life savings and you'll never ever  meet a live person there ever in your life.  I'm old-fashioned, I'm hands-on. The normal process we do for retirement planning is people will see me from anywhere from 3 to 5, 2-3 hour sessions. Now, I don't charge for this. And you're fortunate. 37 years ago in California, they’d give me 5,000 upfront just to sit down. You signed a 5-year contract, it was 20% of the taxes saved. That's why in 1985 there was only 20 clients and I was able to make  a million dollars and it would be unethical for me to pay tax when I showed my clients how not to pay tax. In other words - do what you should do, not just talk about it.

For example, the German guy that headed up Bosch. Bosch power plugs, Bosch fuel injectors. I saved them half a million of tax. So 20% of half a million was a 100,000 plus the $5,000 annual fee but he was able to deduct that. He was in a 61% tax bracket. 50% federal, 11% California. So it cost him less than 50,000 and that's why I said it then. Would you pay less than 50,000 to save 500,000? To me that's a ten to one return. Anyway, but my promises here in Arizona is, with a few exceptions is, we sit down for the first meeting. That's when I learn your situation, lasts 2-3 hours you tell me your story, tell me about your business. I learn about your financial situation, how much tax you've been paying. Generally, people send me the last 3 years tax returns of their dental business, their personal returns, all the latest copy of all their financial accounts. We figure out what your goals are. We may spend an hour just on your goals. We have 6 goals or priorities and I ask you to rank them. Then  I ask your spouse, if you're married, to rank them as well. Is your priority to increase spendable income. Is it the growing assets? Is it to leave a financial legacy to the kids or grand kids.

Howard: No.

Dr. Wong: Is it to never run out of money? Is it investments that don't lose? Or is it saving Income Tax? Of the first 3 or 4 dentist’s I've seen in the last fe months, by the way, number one for all of them is saving Income Tax. In fact, one prosthodontist that I saw, he's fortunate. Grosses at million and a half. Netts about half. This past year he netted about 816,000 and he paid 290,000 of Income Tax. So again, remember, taxes are voluntary in this country. You pay as much or as little based on your tax knowledge or the knowledge of your advisor.

Howard: So, the ADA is saying that the average dentists and specialists retire at about 69 years old?

Dr. Wong: Yeah. What's so interesting, it's, the latest statistics shows it is virtually identical. For general practitioners, they plan to retire at 68.7. For specialists, it's 69.0. But, here's what's the tragic thing is - only 2% of men who’re dentists and 0% of women believe that they can retire early. The reason is there's a little chart from Fidelity Investment, the giant Fidelity has got at least 2 trillion there. Is says by age 67 you better have, you'd better have 8 times your annual salary. So, what that means is if you're a general practitioner and you averaged 175,000 a year of earnings, you better have 1.4 million saved up by 67 if you want to retire. If you're a specialist, and I'm using the American Dental Association averages, and your average income is 322,000, you better have about 2.6 million saved up. Now, Dr. Farran, I know you've interviewed literally dozens or hundreds over the years, let me ask your experience. How many dentists have 1.4 to 2.6 million saved up at retirement? I would imagine it to be a fair number but it took them decades to do that. What's your experience?

Howard: Lot of variables. A quarter of the baby boomers never had children. I can’t say this in front of my 4 boys. They seem to do well. The number of times you're divorced, I mean, if you never get divorced, you never have children and you married a girl in your dental school class. So, you're double professional income, no kids, no divorce, my God! They - they can retire at 50. If they're a dentist and they marry a stay-home mom and she has a bunch of kids, then that pushes retirement  about 10 years.

Dr. Wong: And you have 2 divorces?

Howard: Yeah. And if you get divorced, it just keeps pushing up, by the time you're divorced 2, 3 or 4 times, you will die at the chair. So, my - my advice on dental schools is the best thing you can learn at dental school is to marry one of those chicks in the class. I always tease. I always say marry the Asian chick, because if they marry the girl from the United States, I mean - this is dentistry uncensored and I know this sounds horribly racist - but the people born in America, they don't work a fraction as hard as the ones born outside of America. Whether it's Latin America, Africa or Asia. And I always - I always tease them, don't  marry the girl born in Montana. Marry the girl born in Asia, Africa . I mean, the fortitude it takes to leave your country and leave your continent, leave your hemisphere and come here to go to dental school. I mean, they just work their brains off, I mean - unbelievable. But if they sit there and marry a foreign born spouse and don't get divorced, my God, they'll be as rich as they can be.

Dr. Wong: You know, it's absolutely true. I'll give you another example from Asia. Ever since World War II, it's Filipino nurses, by the hundreds of thousands that have come to America that has filled our nursing shortage. I do seminars for the VA, employees like the Phoenix VA, and August 5th I'm driving down to Tucson to do my first 2 test seminars. On Sunday, August 6th for the Tucson VA employees. And Filipino nurses are notorious in a good way for this. They’ll work a full shift, 40 hours, and they'll pick up an extra shift like on Saturday or Sunday. Or after working 8 hours, they'll pick up the swing shift for 4 hours and work 12 hours. So, 2 Filipino nurses working to, together, even in low-wage Arizona can have a joint income of 250 to 300,000.

Howard: And I'll tell you another thing my homies don’t want to hear. I mean, I talk to you like this 'cause I love you. I mean, I wouldn't even respect you if I didn't tell you the truth. Foreign-born dentists in hospitals, 8% of emergency room visits are odontogenic tooth in origin. Why? because all the American-born lazy entitled dentists work Monday to Thursday 8-5. You know who, the only dentists that does evenings on Saturdays and Sundays, in every major city from San Fran to Phoenix or whatever, you know who it is? Asian-born dentists. If it wasn't for Asian-born dentists, I bet the hospital emergency room odontogenic, it could be 15%. I mean, I mean, even in Phoenix, you can't even find an Asian - Asian-born dentists open on Sunday. But, by God, you go to San Francisco, the only people who work past 5 Saturdays, Sundays, foreign-born dentists. And they just have an incredible moral work ethic. Do you agree with that or you disagree?

Dr. Wong: Oh, absolutely. By the way, for those who view this podcast, we are taping this on a Sunday.

Howard: Right on. We are taping this on a Sunday.

Dr. Wong: I will tell you again, it's- it's not about me but I want to make an impact in life, and so snowbird season in Arizona has a huge number. In Mesa, the population doubles from hundreds of thousands of snowbirds coming in January or February, March. So, snowbird season is January first week of January to the middle part of April. And it's normal during snowbird season, I’m scheduled 10-18 hours a day, 6 days a week and Sunday. I don't do December, I don't see prospective clients, but that's research day, for over 7 years I was under the gun. Monday morning was a deadline for my article, it was a half-page in the Arizona Republic community section. If I got things done early, it'd be done at  4PM. If I was late, which was normal, I'd get it done anywhere from midnight to 2 in the morning, and then of course I'd be up at 6 on the morning of Monday to begin the week. So -

Howard: Yeah and I’ll meet a dentist I’ll say, it'll be my age, It'll be 55 and I'll say, you know, what is your problem ? ‘Well, you know, I'm trying to pay for my kids to go through college and I'm paying alimony and I get all this debt and, you know, I'm really struggling.’ second question, what are your hours? ‘Monday through Thursday, 8-5 and I close down for an hour at lunch from 12 to 1, no matter what.’ So all this struggling and you take 3-day weekends and you get off at 5? And then when you suggest, you know, they - they always want to go to the consultants that tell them bullshit like "Well if you don’t put fresh flowers in the waiting room and sing Kumbaya in the morning, you know, you'll - you'll be all successful". Maybe not. Maybe you should just try working your ass off for a decade. Work like no man has for a decade. Just try that.

Dr. Wong: Well, you know, unfortunately for many people in America and it’s probably because we have such, had a great economy, great political stability, but W O R K is a four-letter word for a million of Americans.

Howard: Oh, my God. They're entitled and they don't even know they're entitled. Like - like I told them, I'd say I only see this in dentistry and health, in dentistry and government. Like, you go into an office and they'll get there early. They won't even turn the phones on. They're ringing and going to voicemail then they start at 8:00 and then their 11:00 will cancel. So, they're all sitting around doing nothing. And they're going to lunch at 12, no matter what. They don't even sit there and think, well, maybe we should go eat a sandwich in the break room or something at Subway because we lost all this income, and maybe in the next 20, 30 minutes someone will call and will get here at noon and will work through lunch - there is - they won't even consider it, not even a concept. And then their afternoon, maybe they have a big appointment from 3-5, maybe it's a - a crown CAD/CAM chairside milling. And that person cancels. And everybody just sits around for - for 2 hours.

Dr. Wong: Well, where's a -

Howard: And then they're leaving at 5.

Dr. Wong: Yeah.

Howard: I mean, if someone calls at 4:30 to say, I broke a tooth, so now they could come in for that 2-hour appointment they’re like "We close at 5 because we're entitled". Because, and then, every time the sun, the earth goes around the sun, they're entitled to a dollar an hour raise. It's based on astrology, not even profitability.

Dr. Wong: Yeah. Well, like I say —

Howard: Are we just two old guys bitching, or are the millennials who all listen to us like, those two old farts just need a - they just need to go retire.

Dr. Wong: Well, let me - let me ask you that, do-doctor --

Howard: I know, that's what the fun is, they gonna go... They're just couple grouchy old farts on a Sunday.

Dr. Wong: Well, let me ask you, Dr. Farran. Did you raise, you say you have 4 boys.

Howard: Yup, there is two of them.

Dr. Wong: Did you raise them on the 3rd world plan where every month they'll be writing a cheque to you, which is a key part of your early retirement plan, or did you raise them on the American plan?

Howard: You know, I think the best thing I did is I took them with me to every lecture that was not in the United States. Greg, just say the country you've been to.

Greg: South Africa, Japan, Malaysia, Indonesia, Cambodia, Singapore, Australia, like, too many --

Howard: How many- but how many times has that opened your eyes to the real world? I mean, America's 320 million. There's a billion in Africa and they've seen Johannesburg and Soweto. There's a- they’ve been to Japan and Singapore, Indonesia and- and Cambodia and- and along with all of Europe, I mean, and I think, I think that really opened their eyes the most to reality more than anything, more than anything, college, books. So, I think world travel seeing where these hardworking, foreign-born dentists came from, you know. And when you- when you go to Cambodia and you go to Vietnam and you go to Thailand and you go to China, then you go to San Francisco and you see that Cambodian dentist working 7-days a week. You're like, "Yeah, I get it. I see where this mojo comes from".

Dr. Wong: So, let's- let's cover that because when people find out what my work schedule is, they say, "Well, don't you have any fun?" Well. Let's me explain this. What are the passions in life? I used to be Mr. Tennis in town. I took up tennis at an advanced age, age 37. Seven years later, I've made it to my first national championship '94. So, '94, '96, 2000, 2002 I did something that's considered impossible in tennis. I have two thirds, two other top ten finishes at the national championship. I never played my age division so in '96 in the quarterfinals, the last match of day 2 of the 3-day national tournament, by the way, you have to win your league, you have to win your city, you have to win your county, you win your state and you have to be one of 17 regional winners before you're even allowed to show up to national championship. So, I'm 46 and I'd throw a 23-year old, a hotshot of the year, undefeated all year, coming out of four-year tennis scholarship. 105-degree heat in Tucson at Randolph Park, the public facility. Against all odds, he's got me down 4-1 in the first set against impossible odds, I actually won the first set, I won the second set. He's so mad he smashes the place where you have the scores there and they're all over the floor. So, I got third in the nation that year.

Now, unfortunately tennis is very hard on the body. The body is not meant to pound on the hard surface 3-4 hours a day. So, after the 2000, 2002 nationals, I can't play tennis. It's called tennis elbow for a reason. Rotator cuff, my whole career had the left hip replaced, 2 knees needed replacement, bad back. So, since I can't play my passion, what am I supposed to do? I am financially independent, am I supposed to sit home and just count the cheques coming in from the hotels, apartment buildings, office buildings, mini storage, blah, blah, blah? No. That'd be a waste of life. I have the gift. The gift of the money and that's why I see people even on Saturdays. Even occasionally on Sundays. Why? Because I obtain great satisfaction for helping a family to never worry about money in their retirement years. To be able to help their kids, to be able to help their grandkids with college expenses. Since I have no kids, that gives me great satisfaction. And to me it'd be a waste of life if I didn't use my talents.

Howard: But I know where that tennis championship came from because you are a Taekwondo champion back in China.

Dr. Wong: Well, you know, it's a-

Howard: You were already a champion. You're already a Taekwondo champion. You just turned a karate chop into a tennis karate chop.

Dr. Wong: Well, it is true that I started martial arts with the brutal form of Shotokan karate with the special forces. And then it took me 10 years after I switched to taekwondo to work my way up towards coach on the national collegiate championship team. And then, yes, there's a picture in my office of me touring Asia with US Olympic taekwondo team. And my star student, Kim, who is Dutch, started with me at 15, weighs only 165 pounds and he grew to be heavyweight class and we trained in China, he did win 2nd in the world championship's heaviest weight class. So that was on the past, and after that, because the body can only take so much of that, 'cause I did full contact for a number of years. Full contact, I've absorbed tens of thousands of kicks and punches and delivered the same. So, that's when I transitioned from that to taking up tennis at 37 but if I could still physically be able  to play tennis, I'd be devoting a lot of time to that and I'd be trying to win the national championship, but at my age group. But since I can't, I love educating people and, whether it be dentists, whether it be the employees that take care of our veterans at VA facilities, whether it be high end real estate. People who have been lucky enough to have multimillionaire buildings and now their only choice is, do I sell a building and I'm lucky enough to have 4 million taxable gain? Do I pay over a million tax? Do I want to do a section 10/31 trade into a bigger piece of real estate? No. I want to retire and get rid of dealing with tax, or can we use some advanced strategy set? I never heard of, like the Rockerfeller Trust that I can cash in, sell it and pay no tax.

Howard: I want to ask you a very unfair question. Your idol Warren Buffett says no one can predict the stock market crash but you and I both know it's in bubble territory. Would you agree?

Dr. Wong: Absolutely. In fact, Warren Buffett has an index called the Buffett index. I do 50-70 talks a year and I survey the thousands that attend. In the last two years, I've asked who's heard of the Warren Buffett index, only one or two people have heard.  He has a chart that tells Warren Buffett whether stock markets are valued or not. So, you can google it and I'll just tell you what the Buffett index is. He adds up the value of all publicly traded stocks, whether be the Dow Jones 30, the NASDAQ 100, which is mainly in tech stocks, the S&P 500, the Russell 2000 which is smaller companies. And he just takes the value of all publicly traded stocks and he divides that by the gross domestic product. We are at levels of insanity. We reached the highest level of Buffett index, well, as the beginning of 2000.

Howard: Is that in your hand out?

Dr. Wong: No, it's not in the hand out.

Howard: Will you find it online?

Dr. Wong: And the beginning of 2000 we reached levels of insanity. We also reached levels of insanity at the peak of our stock market boom at the end of 2007. In October 2007, we reached the peak at that time with the Dow Jones across 14,000. And then we're at levels of insanity now. So, in each of these cases just before a major crash. Now, let me tell you how Warren Buffett, who's the single, most successful stock market investor for the last 50 years. It stuns people when they found out his rule number one is never lose money. Rule number two is don't forget rule number one. Now, how does he do this? Let me explain the Buffett formula and then I'll show you how an average person can do it even with a different formula. The Warren Buffett formula is very simple. Warren Buffett literally owns over 80 well-run companies. They are well-managed. He owns them lock, stock and barrel. Companies he's owned for decades are like Dairy Queen, See's Candy. GEICO was his biggest cash cow for decades. And here's how Warren Buffett looks at it. The Forbes 400 survey comes out every year by Forbes Magazine. It lists the 400 wealthiest people in the world. For the last 2+ decades, it's usually Warren Buffett and Bill Gates of Microsoft vie for number one or number two. And then occasionally someone else comes in, like about 10 years ago, the owner of IKEA came in as number 3. But, anyway, a year ago Warren Buffett was the 2nd wealthiest guy in the world. Now, he also, Brookshire Oil has also owns a 120 billion of stock where he doesn't own the whole company. He's the number one shareholder of Wells Fargo, IBM, Bank of America, as an example.

Now, his critics did know really nothing. So, when the stock market drops at 120 billion, drops by 20 billion, his critics said, "Warren Buffett, ha ha ha. You lost 20 billion". No, Warren Buffett looks at it this way. I get the net profit from many well-managed companies where I own the whole company. So, the temporary dip in the stock market just drops from number 2, when he was number 2 a couple years ago, it drops into the number 4 on the Forbes 400 list. He drops to the 4th wealthiest guy in the world. So, to Warren Buffett that's not loss because Warren Buffett says another of his rules of money- is do not own a stock for 10 minutes if you wouldn't own it for at least 10 years. By the way, if any goes beyond, my favorite holding period is forever. In general, he never sells. He will keep that company forever. So, eventually the stock market comes back. See, virtually everyone that invests in Wall Street violates virtually every one of Warren Buffett's rules. Think about a stock, a mutual fund. Does a mutual fund open and says our deadline is Labor Day of 2017.  Everyone get your money in, after that we're not going to have any trades, we're not going buy and sell. 10 years later we'll get together and see how well we did. No. Your mutual fund is trading every day, every hour, buying and selling, trying to justify their 3% fees of which almost all the fees are hidden in the mutual fund. So, you're violating Warren Buffett's rule there. So, that's how Warren Buffett, in his mind, says the rule number one is never lose money, rule number two, don't forget rule number one. So, now let me tell you how an average person can apply the Warren Buffett's rule number or rule number two. Obviously, the average person, even the wealthy person does not have a trillion dollars or half a trillion so you can go buy any major companies. In fact, what's interesting, there's not a single entity in Wall Street that has tried to duplicate Warren Buffett's formula. There's no mutual fund that holds a 100% of two companies, three companies, five companies, ten companies. No. So, let me tell you how you can implement the Warren Buffett rule. Even if you're an average person that has maybe 300, 400, 500,000 saved up, you're not even close to millionaire status. I'm going to use the example of Blackjack.

Blackjack is a game at the casino and they deal you two cards. And then I'm the dealer, I get dealed two cards. And if you have a better hand than me and you don't go bust, you don't go over 21 and ace and their different values for the cards, it's like a seven is a seven, three is a three, a king is a ten, okay? I want to explain how it works but you can look it up in Google. So, I'm the dealer. Now, if you have a better hand than me, I've got to give you money. And you got to place your bet before the cards are down. On the other hand, if I, the dealer, have a better hand than you, I take your money away, take it off the table. All the casino games whether be Craps, Blackjack, Keno, they're all played on the first floor. Huge crowds, noise, but what if we could play by the Warren Buffett rules. The Warren Buffett rules, we go up to the penthouse. And there's just you and your spouse, maybe one other better. So, there's three of you. We got three waiters, three chefs, get you anything you want and , I'm the dealer. Now the rules are -- by the Warren Buffett rules are you place your bet down. If I, the dealer, have a better hand than you I'm not allowed to take one penny of your bet. You're guaranteed you can't lose money. What do you have to give up in exchange? If you have a better hand than me, you win the bet, I got to give you money but I- I only give you 30, 35, 40, 45 or 50% of what the normal win is. So, I just looked at the first 16 years of this century starting January 1, 2000. If you started with a 100,000 in the S&P 500 but you're paying the 3% average fees of Wall Street, whether it be Mary Lynch or Edward Jones with the one-man stock broker in the strip shopping center. Their goal for the last three decades is to make at least 3% of your account. You're 100,000 sixteen years later will become 85,437 dollars.

In contrast, if you get 45% of what the S&P 500 did. But you get none of the losses, so the stock market stays stable or drops, you have no loss to your principal. If the stock market goes up, you get 45% of gain. You have a 187,827. It honors you a 102,000 head. There is a way to do this. It's working with certain option contracts, wherever year you take a one-year option at S&P 500 and if you don't want to figure out how to do it, there are entities that can do this for you.

Howard: I just want to make one point. The most popular thread on the Dentaltown, it's always on- it's called 3% can retire at age 60. It has 242,000 views. And I'm - it already had - it's, it's been going for years. I would give anything, I'll open this, it's called 3% can retire and - I'll forward this. What email do you want me to --

Dr. Wong: Send it to harold_wong@hotmail.com.

Howard: Okay, Harold.

Dr. Wong: H A R O L D underscore --

Howard: Okay, Harold Wong --

Dr. Wong: Harold_wong

Howard: @yahoo.com

Dr. Wong: No, @hotmail.com

Howard: Hotmail, oh, Microsoft bought that, didn't they?

Dr. Wong: Yes.

Howard: And I wish you would post on this. It's funny because you would think Dentaltown, well, it shows you where their  interests are - I got to tell you a couple things. It's- it's the most popular thread. It has a quarter million views. And it's on today active the topics every day.

Dr. Wong: By the way, I saw in my research to prepare these talks for the April 7th Western Regional Dental Convention- I saw an article from Dental Economics, it said only 4% of dentists believe that they can retire, well, at age 65.

Howard: And you know another trick I do, Ryan, I don't know if ever I told you this but when I'm on Twitter, I only follow people in dentistry, like dentists and hygienists. I never follow like political people or Fox News or anything non-dental because I want to see - my homies are retweeting so much of that stuff so I get with- with 21,000 Twitter followers, I get a good sense of what percent are pro Trump or what percent are pro- whatever. I- So, I don't want to bias my own opinion of the market. And that's what I like about Dentaltown, by seeing today's active topics. I mean, with  a quarter million dentists on Dentaltown on today's active topics, I know where the poll says 'cause I -

Dr. Wong: Could you say that again, when you said it's over 200,000 dentists read, what is it? An article that said only 3% of dentists--

Howard: No, no. 3% can retire at 60, it's on Dentaltown. It's a message board thread.

Dr. Wong: Was that an article or is it just--

Howard: No, no. That's -- that's a thread. I wish you would post it. So, it's a message board thread. This wasn't an article and we'd love you to write an article for Dentaltown magazine.  But, this is a message board. Are you familiar with message board threads?

Dr. Wong: Not really.

Howard: We'll have Ryan explain to us.

Dr. Wong: But I'm sure I could follow it. By the way --

Howard: If you're listening to him, dentists are smart. I mean, the average dentist, the general dentistry 8 years in college, specialists add 2, 3, oral surgeons add 5. And their serious as a heart attack. Dentistry is a hard way to earn a living. I mean, I was talking about, you know, my dad owned a Sonic Drive In and the customers were so happy. I mean, they were coming in eating cheeseburgers with onions --

Dr. Wong: By the way, nothing against your dad. I don't think that hamburgers are best but that strawberry slush with extra strawberries in, that is wonderful.

Howard: Yeah. And I just always saw the best side to people. I mean, you couldn't beat the smile off their face with a crowbar. Coming in to eat  Tater tots--

Dr. Wong: Whereas dentists is totally different. Everyone that comes in, it says Dentist Jones, I wish I wasn't here. I hate being here.

Howard: I know.

Dr. Wong: Whereas family practice, doctors get a much more positive thing -- I may be hurt but I know you can fix me.

Howard: Yeah, when they come in and say, "God, I hate dentists" I go, "Don't worry, I hate you, too". We're going to get along fine. We already hate each other. How can I help you?

Dr. Wong: There's a big debate on whether the dentists, like certain psychiatrists and psychologists have a higher suicide rate all, I can tell you unfortunately a dentists that usually show up for the drop-in tennis at Kiwanis Park in Tempe, he committed suicide. My own dentist only in his 30s from Vietnam had a thriving room but he committed suicide --

Howard: In Phoenix?

Dr. Wong: Yeah, right here.

Howard: I've been here since '87 and this is 2017, every single year for 30 years it's been two or three in just the valley that I- that I have either known or know of or whatever. And that's just the completed suicides, and I'm talking about the attempted suicides. And, but- yeah, it's a- but after the 10 years, when dentists say the highest is, they forgot about the Afghanistan war, the Iraq or- right now we have 26 veterans committing suicide every single day. So, dentistry isn't even a rounding error. And the other reason dentists, was so high is because, for physicians, they separated MDs and psychiatrists which makes no sense. And MDs have 58 specialties but psychiatrists were so high they pulled out psychiatrists, but that's still an MD.

Dr. Wong: Yes.

Howard: So, if they put a psychiatrist back in with MDs, everybody would have thought they were number one. But out of 50 specialties, I mean, they didn't pull out a dermatologist or OBGYNs, they pulled out the number one killing group, psychiatrists.

Dr. Wong: Do you know why psychiatrists have such a suicide rate? There's a preselection, many psychiatrists and psychologists went into the field because, to work out their own personal issues.

Howard: Absolutely. And I'm most proud of being Irish because I'm 100% Irish, and Sigmund Freud said the Irish were the only ones that couldn't be psycho analyzed. He said they were so crazy, so that's my bragging rights.

Dr. Wong: Also, allegedly you have the capacity, genetic capacity to absorb a lot of alcohol without having the normal bad effects, see. Chinese really can't handle alcohol. My dad had a bad experience at one company Picknicker around 1960 at the US Borax mine in Boron, California. He thought it was orange juice, and since, you know, 100 degrees in the desert and he did not know that it was- what, what do you call the drink where they put vodka in?

Greg: Screwdriver?

Dr. Wong: Yeah. He had no idea. Then after two of those he was feeling woozy.

Howard: So, you’re saying the Chinese. The Japanese are notoriously known for not being able to metabolize alcohols well. But the Chinese-

Dr. Wong: But the Chinese in general don't really drink that much. A traditional Chinese meal, for example. You don't have dessert. Even a 10-course meal like a wedding feast because I've been in Hong Kong for the big feast and they might have some slices of orange or watermelon at the end. I mean, it's- it's totally different. See, in America they always tell each other, save room for dessert. We had such a history of starvation in China, we're lucky enough to get enough normal food. You would never waste it on empty calories like dessert.

Howard: Well, how long have you lived in Arizona?

Dr. Wong: I've been here for 25 years. I came here for a 2-year research project, was going to go back to Berkeley but then-

Howard: The- the native- so one quarter of the land in Arizona is an Indian reservation. And you talk to any oral surgeon, almost all bilateral mandibular fractures are from native Americans. And it's because they were originally, they came up over the Bering Strait, so they came up over China, the Bering Strait came down. So, when I go to the Navajo Indian reservation and when you go to China. I mean, if you just look at the face and not the clothing, I mean, you literally can't tell them apart. And they-

Dr. Wong: Did, they have the DNA studies that shows there's, you know, whether be Central America, South America, US- yeah, they proved with DNA that when the land bridge was there 10, 12,000 years we did come over.

Howard: But my point being, they don't metabolize alcohol well. So lots of  times they’re drinking, and they just pass out, they fall straight forward and hit their chins square, in the parking lot of the bar and break both sides. And you talk to any oral surgeon, non-native Americans, you know, they might get a hand up or they might get something to break the fall and break it on one side. But, most bilateral fractures are Native Americans.

Dr. Wong: You learn something every day.

Howard: Because they can't handle it. So, basically, before we go on at the end of this podcast, basically the theme I'm getting from you is that there's more-

Dr. Wong: If I can finish up the answer to the question. Basically, when people see me for retirement planning, we have a minimum of 3 and it's not usually 4 or 5 meetings. The 1st meeting, again, there's no charge for this. First meeting we find out your financial situation and your goals, your hopes, your dreams. And I absolutely want the spouse to be there. Second meeting is I might give you a preliminary idea of the what the solutions will be. But see, unlike Wall Street, I want you to check it out. If it's a tax strategy and we need to see my team of actuaries, per se, one of the secret tax strategies, the Defined Benefit Pension Plan. As I said, if you're 58 or 60, you might be able to put a 150,000 or more a year into that. So, we might have a visit there. If you're interested in real estate, foremost is increasing cash flow, increasing rate of  return, decreasing risk, increasing tax savings then we might set up a half day or day or tour where we would tour real estate projects, whatever form you're really interested in. If you're interested in fix and flips, we might show you three different houses in different stages of fix and flips so you can check it out. This week I told a prospective client, a new client, they wanted the hotel formula so we had a tour of 3 of our hotel formulas. We're still accepting investors for it. So, if you're interested in equipment leasing, we might have a tour of the assembly plant. So, when you add it all up, it's not unusual we have 3, 4, 5 meetings but, you see, the difference is you actually get to check it out before you write a single cheque. Now, let me give you an example. You could have the most honest stock broker and he sells you Ford Motor Company stock. The broker has never met the CEO, the CFO, the plant manager of any Ford factory. He's never been on the factory floor, he would never be allowed. You're not allowed to do it. So, in stock market you put your money down, you read some report and then at that point you pray that it goes up. When you deal with me, I'm very conservative. I believe you should check it out. The first real estate deal I did was in 1981.  I met my real estate partner because I was giving a lecture to 350 realtors and real estate investors in an auditorium at Golden Gate University in downtown San Francisco. And in 1981, our prime rate of interest was 21 and half percent, 30 year  fixed rate mortgage was 18%. Can we agree, you can't do realtor, real estate? Because who can afford, who can get qualified for a 18% mortgage?

Howard: You said it was 1980?

Dr. Wong: 1981. Who could even afford to pay 18%? So, real estate market the whole economy was dead. Huge recession. So, the first real estate deal we did is my partner moved from San Francisco-

Howard: And during that time, Paul Volcker, the chairman we had, had to travel around in a full security deal.

Dr. Wong: Yeah.

Howard: There were so many attempts on his life.

Dr. Wong: Exactly. And 6 foot 8 Paul Volcker was head of the Federal Reserve’s then. And we can talk later why he raised interest rate, the highest level in history. It was to choke off the rampant inflation from the '70s caused by the OPEC oil embargo of 1973 when they invaded Israel, and I'll cover Yom Kippur and the second guess launched in 1979. It caused a huge rise in food prices because energy is such a key part of growing food and drying food, and price of soybeans worsened, quadrupled over 12,000 a bushes. But, to not digress, so basically no one can do real estate. In '81 we got introduced to a group of tough guys from the south, the southern creative real estate world. And they gave us a formal on how you could do real estate with 18% mortgages. My partner moved to Tucson, Arizona and between '81 and '84 we bought a hundred houses, rental houses on no money down. Now, no money down does not mean there's no cash. Husband and wife were my partners, we had to  hire  two staff people, a part time maintenance person and a  rented office. It's a pain in the ass to manage 100 rental houses scattered over Tucson. So, the investors had to put up 4,000 cash. It was literally no money down but they had to put up 4,000 cash per house to cover the cost of  the operation. Which is almost nothing. Again, coming from a bear where prices were high, the medium price of a house then was a quarter million and we're buying 28 to 40,000, the price of houses in Tucson. But, I'm so conservative that even on my first real estate deal I insisted that they had to fly in from San Francisco to Tucson. If you didn't like what you saw, don't do it. If you can't wrap your head around the fact you're not living in the $32,000 houses, this is a business. At that price ratio, it makes sense to buy cheap and we'll rent the blue-collar people. A very specific formula, if anyone of prospective tenant went to college, they can't rent. Those college people expect hotel service, ‘oh no, the light is not working, can you come and fix it?’ No. We gave this blue-collar people a slightly discounted rent, if they took care of all the small repairs themselves. I mean, on our 13-page rental agreement, one page was inventory of all their tools. Another page was an inventory of all their skills. And if they don’t have enough for either, they don’t qualify to rent. So, again, real estate has very specific formulas that once you understand, its logic. For example, on our Tucson Hill and East. What we learned in creative real estate is Denny's was our unofficial national headquarters because it's the only place who was open late at night. So, after real estate summer ends about 10PM, we'll go up to Denny's. And the napkins are this size, and the rule of thumb was, if you cannot describe the benefits of that real estate deal on two napkins, the deal is not good enough. If you need a computer to go figure out the discounted cash flow or nett present value, the deal is not good enough. So, our formulas are very simple. Every real estate deal has it's own unique formula. For example, in the Tucson Hill and East. Here's the simple formula. We bought it for 9 and half million, 232 rooms. We're going to do an 8 million rehab. That's going to get us about 75,500 per room. Hill says if you have to build it from scratch, replacement cost is 160 grand. So, it's the equivalent of after a complete rehab of getting it for 50 cents to a dollar. Next, we bought it, it was 29 years old. Average occupancy was 70% but we bought it from overseas, investors in Taiwan taking advantage by Lazy ass American management. What I mean by Lazy ass, the occupants there rent for 70% which is average for a hotel in Arizona. You are full in the winter and empty in the summer. But they're renting it for $25 a night under what they should. They're not booking weddings, you can't even buy a drink by the pool. There's not a bar there, there's not even a vending machine. They don't book enough groups so the business plan is very simple. If we can just, after an 8 million rehab, increase occupancy rent by 5%. Charge $25 a night more, they'll generate an extra million and a half of cash flow, divided by an 8 cap, that’s the average cap rate. It's a measure of price earnings ratios in stocks. A cap rate is for real estate.

Howard: We need a-

Dr. Wong: And, basically, we increase the value by 20 million.

Howard: We need to wrap this up because usually their commute to work is one hour, so we've already covered our commute to work and back home.

Dr. Wong: All right.

Howard: I really, really hope this discussion continues on the most viewed thread on Dentaltown which is 3% can retire at 60. So, Dentaltown has 50 categories and one of the categories is practice transitions, it's under retirement planning.

Dr. Wong: And you're saying 200,000 people have looked at this in what time period in the last decade or--

Howard: Well, it's- it's a, out of the last couple of years. Last 2 years.

Dr. Wong: Obviously, it's a huge issue.

Howard: Yeah. So, that's why we brought you out here but we got to end this for today and I really hope this discussion continues to, go to Dentaltown and then go to practice transitions, and underneath practice transitions is retirement planning which should have been under finance. What it is, is a lot of dentists believe that a lot of their retirement is going to be from selling their practice, so it's practice transition. I'm going to sell my practice and retire off all that income. That's why somebody started it.

Dr. Wong: Do you know it's not going to work based on the numbers because the average practice is worth 60-75% of your net billings. So, if you're grossing a million and you get towards 70% or 700 Grand, that's not enough to retire on.

Howard: Yeah, and a million is high number. Well, thank you so much for coming over and talking to my homies today. You're an amazing man and every single one of my Arizona dentists that saw you speak at the Western Regional loved it. You gave two one and a half hour presentations and today we covered one. I hope you come back and talk about the other presentations.

Dr. Wong: We have, and today we have only literally covered maybe 20% of what the first presentation was.

Howard: Okay.

Dr. Wong: Hopefully, It’ll become a continuing education course.

Howard: All right, let's do it. Thank you very much.