RX Podcast_Gurpreet Padda: Audio automatically transcribed by Sonix

RX Podcast_Gurpreet Padda: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

John Shufeldt:
Hello everybody and welcome to another edition of Entrepreneur Rx, where we help health care professionals own their future.

John Shufeldt:
Hello everybody and welcome back to Entrepreneur Rx. OK, this will be a little unusual because I've got Gurpreet Padda on, who is, it's the second time he's on so you'll probably remember him from before, and as we were kind of logging off last time, we dipped our toe a little bit into crisis investing and we were just starting talking about it, wanted to bring him back on to talk further about crisis investing and about kind of physicians and how we deal with money now. It's unusual today because the market today, it's the day after Thanksgiving, I know this will be delayed a little bit but the market today took a giant nosedive after reports of COVID in Africa, a rapidly developing concern there. So Dr. Padda, it's great to have you back on, timing could not be more prescient, so thank you. What can you explain to us?

Gurpreet Padda:
Yeah. So my background is that I came from a war-torn country. I came from an area of financial instability. I came out of India and this was after, well after partition. But I came out of an area that was experimenting with socialism and communism and was experimenting with capitalism. So I've always had an outsider's perspective on econometrics, and I have an MBA in finance, I work with GEE and I worked in the currency arbitrage division, so I have a decent understanding of macroeconomics. So I think you have to realize that almost all real money is made in niches, in small areas. You don't rise and fall in the mediocrity zone. You don't go up and down just with everybody else. If you're really going to try to make a lot of money, you go to niches and make that money. And when you start to really look at niches, then you start to ask yourself prospectively. You know, I want to buy when things are cheap and I want to sell when they're expensive, if you're in business. And so that's one of the underpinnings of good business sense is buy cheap and sell expensive. When you start to apply that in a more global sense and you ask yourself where is something cheap at and where something expensive at you start looking across countries. That's what you get into when you start looking at crisis investing. And I've been doing this for a long time because I started my world thinking about macroeconomics and currency arbitrage. But then I have started to apply it more and more, and I realized that it was highly applicable. And then I had to go back and ask myself, what are the demographic trends that can predict things? So let me give you an example. It was 2019, mid-October of 2019, we really didn't declare our COVID pandemic till March of 2020. I was sitting with my business partner, we were literally looking at our restaurant portfolio, and she said to me, she said, you know, we're not making that much money, our margins are really thin, we're making about three percent. A little tiny knock point could really throw us off and we would lose money. And just as I was doing that, I was looking at a Google heat map and I was looking at nitrous oxide emissions. I was looking at this and I said, you know, it's really interesting. This area in China has a dramatic rise in nitrous oxide emissions over the last four or five days, it's gone up seven hundred percent. The only thing that causes nitrous oxide to go up that high is biological waste, so they must be having a epidemic of pigs, is what I thought. I said what happens usually is that they have these pig things that go around, they have pig viruses and they have to demolish the entire pig population, which then puts an economic threat, and it could be something like that, and which means that our pig prices will go up. And if that happens, then our cost of acquisition of pork is going to go high and we're not going to be able to pass that cost onto the consumer so we're going to go upside down. I said and the other thing, I just incidentally said to her, I said, you know the other thing is it can be biological waste like they're just burning hospital waste or something, and that's not good, either. But let's try to get out of the restaurants, that was our decision point. We got out of the restaurants within four weeks, three weeks, really. Sold them and we didn't think much of it till January of 2020. And I'm in L.A. and I noticed people coming off of LAX on the international terminal, all wearing masks. And I was back there again a few weeks later and I noticed the Chinese New Year, which is supposed to be banging for box, there's nobody in the shops. And the Chinese are not coming to the U.S. And now I'm starting to pick up from near sources that the Chinese are locked out and this hasn't hit the general public yet. So it turned out it was COVID and those weren't pig bodies, they were burning, that was medical waste. But it got me out of three restaurants. And then the restaurant industry collapsed in March. So crisis investing is the ability to look at data points that you're analyzing and predict what's going to happen. For example, four days ago, the Turkish lira dropped like a rock. Erdoğan, who's not well-liked by the U.S. government, is using the same policies as we are in the U.S. He's printing a bunch of money and he's debasing his currency because he has to pay debts. When he did that, the Turkish lira dropped by 20 percent in a matter of a few hours. Now, other people would go, Oh my God, you don't want to be in Turkey. And for me, it's like, Oh my God, I want to go buy assets of hard companies that are going to be in Turkey because I'm getting 20 to 40 percent off. And so crisis investing is the ability to sit back, take a deep breath and ask yourself when shit's going bad, when it's all hell in a handbasket, what's the advantage that is plainly obvious? Because things are, you want to have asymmetrical risk, you want to get a value for something and you don't want to take as much risk and people's mentality as they move in herd. And so when they think that something is going bad, the entire herd runs one way. When the herd is running one way, you should ask yourself, is the herd running one way for a good reason? Maybe you should be ahead of the herd and have already run there? Or maybe you should wait, let them run and then figure out what to do. So it's the concept of value investing, it's the concept of observing your environment and making certain that you know what's going to happen and then constantly monitoring your environment. So we have other major financial threats and this is what I'm looking at right now because we're at a very unusual inflection point. We have a new COVID variant that came out. It has about 30 mutations on one virus, highly unusual, the spike protein is significantly variant. I don't know how it's going to turn out, but it's a very significant variation because the World Health Organization may say shortly and I'm saying may say because we don't know what they're actually going to say, they may say that the vaccination program may not have worked as well as we had hoped. And if they say that we really don't have a vaccine against a 30-base pair alteration in virus, so it's going to be a significant thing. We may be going through another shutdown in a month or two. But this just came out. That's why our stock market crashed this morning. At the same time around 2:00 a.m. Eastern Standard time, I just noticed that the cryptocurrency markets also started crashing. I have alerts that, it's not that I'm up at 2 A.M. I get up a little bit later, but I have alerts set up, so if something massive happens in the market, I use my technology to alert me because I can't monitor everything. So I use Telegram and I use all kinds of alerts to tell me what's actually going on. And so I suspect that we're going to have another major event financially. And I think what's going to happen is the U.S. has debased its currency. Everybody's talking about that we have inflation. But if every currency is having the same inflation, you don't really have inflation, you have market debasement. And so then if you ask yourself, we're having a market debasement, how does that play out? I'll tell you, what it tells me is that the fiat currency that we have, which is the dollar or the lira, the pound or the euro, if they're all being inflated, you have debasement. So what's the outside currency? It's going to be one of these cryptos. And so that's why you're seeing bull runs in crypto. Even though the crypto is dropping because of uncertainty, that's where people will run and hide, too. So I would expect that that's going to have some massive effect. So you don't have to go out of your own country to do crisis investing, you can do it right here. A lot of times I'll buy real estate in a B location that is a de-grade piece of real estate. I'm going into it because I know I can modify that real estate, I can make it work better, I'm doing a crisis investment, I'm taking an asymmetrical risk, my risk is relatively low, my reward is pretty damn high. And so that's, that's how I approach all of these things. I look at it as how do I generate an asymmetrical return and how do I minimize my risk and look at where the herd is moving and ask myself, is the herd right? And that's what I wanted to convey on that. It goes even beyond that. You know, I used to be the goofball that would go into countries after, after they had a civil war, civil strife, and I would look at buying assets. At that point, I was investing in antiquities. You know, we would go in and we would buy antiquities from all the stores because they didn't have any currency. They didn't have any way to make money. And so we would buy up wholesale, large amounts of stuff, and then we would try and ship it and sell it in a place where people wanted it and could afford to pay. I did that with Mongolian yurts and bought and sold a ton of yurts in LA. Bought them out of Mongolia, but sold them in LA. And I was shocked at how much wealthy people in L.A. would pay for a tent, upwards of 40 thousand dollars for a tent that I was paying two hundred dollars for. So that's the concept of crisis investing.

John Shufeldt:
Yeah, why were people in L.A. buying yurts?

Gurpreet Padda:
Because they wanted to put it in their house. They thought it was really cool and, you know, it's not truly an antique and this is stuff that these people, you know, people would throw away. I did the same thing with, I was living with Aborigines in New Guinea, in the Highlands, and what I basically did was at the end of the ceremony, they take all of their stuff and they burn it and they throw it away and they have these beautiful masks and they burn them. And they do that because they just don't want them anymore because for them, it was a functional, cool thing for their ceremony, but they don't need it after that. And so I made a deal with them. And, you know, instead of burning it, how about if I trade you some BIC pens and give you these BIC pens and you give it to me, and I'll sell it? And so I was selling those particular objects in Amsterdam. I would try and ship them and send them to Amsterdam. So I was taking one man's trash and turning into another man's treasure. And that's, that's essentially crisis investing.

John Shufeldt:
So what advice do you have? Because I know physicians are listening to this and say, well, that's good for you, you've got an MBA in finance, blah blah blah, what simple advice, if there is such a thing, do you have for physicians to start approaching the market this way?

Gurpreet Padda:
Yeah, I think that the concept is what they should approach. There's a book by, I think Green: Richer, Wiser, Happier. He does amazing on his explanation of fundamental investing. There's also a book by Mohnish Pabrai, and it's called the Dhando Investor. They are essentially fundamental investors who do crisis investing in a local area, and it's very straightforward. What you're trying to do is figure out the inherent value of something and determine what that is and then acquisition that thing, even if it's a stock, if it's a piece of real estate, if it's, you know, whatever it is, figure out what the inherent value is and buy it cheaper than that inherent value. Those are two valuable resources. They're both relatively new books, but the concepts are amazing. So I would look at that and that's what someone can do in their own stock portfolio. The other thing is do not ignore cryptocurrency, it seems like it's a fad. The reason why it seems like it's a fad is because we see all these young kids, millennials investing in it. During the lockdown, they got these checks from the federal government. They got a couple of thousand-dollar checks from the federal government, they got money to sit at home. They didn't know what to do and they couldn't spend their money anywhere. So their best option was to take those small checks and to parlay it, to gamble with it a little bit, and they parlayed it in altcoins and crypto. If you don't have some position in crypto, you're not going to be well protected from currency debasement. So I would recommend that you learn everything that you can about this emerging world, and that means maintain a high level of education. Constantly educate yourself on a particular thing. Understand that there are certain assets that are relatively well-protected from currency debasement that historically have been well protected. People talk about gold and silver, but the thing is that you don't really grow wealth in gold and silver. Maybe in silver you do. But in gold it's more of a stabilization of wealth. If you're going to grow wealth, then you're going to want to pick another asset that has a cash flow stream. And that typically is something like commercial real estate. You can partner with other people and they can actually do the work and you can reap the rewards of it. And so there's all kinds of syndications and stuff that you can do. But that's not what I'm pushing people to. I'm pushing people to truly just educate and understand the environment, but don't limit, you know, triage or risk. If all of your money is in the bank, you're losing money because the currency inflation rate is high. If all of your money is in the stock market, you have a lot of volatility. If all of your money is in real estate, that city may go dark. If all of your money was in New York and it was in commercial real estate, you probably lost money in the last two years. If all of your money was in Texas, in Austin, you probably made money, but you're about to lose money now because there's been a demographic shift. And so you want to triage your risk. You don't want to put all your eggs in one basket and you want to look forward. I actually concretely develop a plan and review my plan like every three months and say, you know, is this the right capital allocation? Most people spend more time planning their vacation than planning their retirement. Most people spend more time trying to figure out what outfit they're going to wear to a particular party than spend analyzing their investments. And so, you know, we're going to live a while, you know. The people that have, we're not going to be dying at the age of 70 or 75, most people will live at least 85 to 100. And so you have to have the resources for that. We have some amazing stuff coming as in terms of changes in our health expectancy. If you're well educated, you're likely to live a lot longer, but you don't want to end up outliving your retirement. And that's one of the biggest fears that physicians have. And that's one of the biggest things because they know about the prolonging of health, and they also know how expensive it is to live. And I think that that creates a tremendous amount of fear in them. And it creates an incredible amount of anxiety. And so you don't want to be that person having to worry about that.

John Shufeldt:
Yeah, that's actually sage advice for ..... As I mentioned before, I've had some friends and colleagues who are 70-year-old physicians who have not saved for retirement yet.

Gurpreet Padda:
It's scary. You can't live your whole life working. You know, the other reality is throwing money into something that's going to grow at five or six percent is not going to get you anywhere if inflation realistically is running at 10. And so you need cash flow, you need you, need assets that will throw you cash flow and you need de-risking of those assets. And so that's when you have to look at it and you probably need to get advice from people that are not being compensated by selling you that asset. And so that another, it's an issue because a lot of our financial planners do a lot of self-dealing and they can really manipulate your emotions and show you beautiful graphs, but they're really self-dealing. And that's a problem.

John Shufeldt:
Yeah, I know, I've given up on that greed for that very reason. That's, I've never known any so much life insurance and so much all sorts of things like, yeah, let's see how the game played. Gurpreet, I'm going to put these books in the afterword for this, this has been hugely valuable. Anything else people should read other than Richer, Wiser, Happier and The Dhandho Investor?

Gurpreet Padda:
I think those two are amazing. I probably read a book every two weeks. I think that educating our brain even after we're already educated but in a field that we're not educated in is critical. You don't have to read the entire book. I mean, I got to tell you this, that's the other thing, people make the mistake of saying, oh, I'm going to read this book. That's the mistake. What you want to do is you want to read the content that's relevant for you.

John Shufeldt:
Exactly.

Gurpreet Padda:
And you don't have to read the whole book. You know, you don't have to get that checkmark saying, I read the entire book, you want to pick out the content. And so I typically will skim books and then I will highlight the areas that I'm really going to dig deep into. And then I'll go research the same information on YouTube videos. You know, I'll pull that information. There's a great YouTube guy, I think it's called a Swedish investor and it's on YouTube, and you want to talk about somebody who makes life way simpler. He has probably one hundred plus videos on different books and different concepts in investment. And his name is, I think it's the Swedish Investor. Amazing, amazing guy and super, super sharp. I recommend people take a look at that. There's another YouTuber that I really love, Minority Mindset, mis name is Jaspreet Singh and super sharp guy, just very straightforward. The millennial ... crowd really follows him, but he has value for everybody. And if you want to learn about crypto, there's a guy named Raoul Pal, R A O U L, Pal, P A L, I think. And he has a ton of amazing information. He's in our 50 to 70-year-old vintage group and super, super, super sharp. I think that those are good places to start. I really, you know, you always want to be a little contrarian. Physicians by a very nature are contrarian, we don't believe people. And so that's good, but you want to, you want to maintain that contrarian healthiness. And but then you want to educate yourself to understand, recognizing that you're not going to have to do all of this, but you have to educate yourself enough to ask the right questions. Because you can't ask the right questions you will get taken advantage of.

John Shufeldt:
Yeah, very true. Well, Gurpreet, thank you so much. This is, I'm so glad we did this again because this is added a tremendous amount of value for folks out there, who I think probably don't know where to turn, and you've given us five places to turn, I'll put these on the show notes, I'll make sure we have links to establish. Gurpreet, thank you so much. Great seeing you again.

Gurpreet Padda:
Yeah, thank you so much. I appreciate it.

John Shufeldt:
I appreciate it. Thanks.

John Shufeldt:
Thanks for listening to another great edition of Entrepreneur Rx. To find out how to start a business and help secure your future, go to JohnShufeldtMD.com. Thanks for listening.

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