Happy Friday! I am in Mexico for a weekend seminar before returning home to California next Tuesday. (I was supposed to continue on to Argentina to visit Doug Casey and the rest of the Casey crew and speak at their mini-investment conferences next week, but unfortunately had to cancel that portion of my trip due to Kung Fu Guy’s hectic travel schedule). But the good news is that I will be home and back to more writing and more good and hopefully valuable content for you next week! (It’s much harder to write when I’m traveling—too many distractions!) 🙂
Earlier this week I was honored to be interviewed by Jason Burack of a cool new site called Wall Street for Main Street. I was honored because Jason regularly interviews big-name luminaries (he also interviewed Jim Rogers this week!) and is a very smart guy. Jason is a former stockbroker and has a lot to say about that industry (nothing too complimentary, I’m afraid…we share the same view on that!) and asked me all kinds of interesting questions:
- My view of the macroeconomic environment
- What I’m buying right now
- My view on mining stocks—is now a good time to buy?
- …and much more
Jason is currently offering a free report on the oil industry at his website…head on over and check it out!
Have a GREAT weekend, and I’ll be back next week with some more kung fu finance love…it’s time to move on to the next belt-levels! I’ll be back with more QnA soon, too — I’ve received tons of your great questions lately and will answer them next week!
To your financial success,
— Kung Fu Girl
Hi everyone. This is Jason Burack of Wall St. for Main St. Welcome back to another Wall St. for Main St. podcast interview. Today’s special guest is Susan Fujii of Kung Fu Finance.
She is a former technology executive. She is an investor and she is an SEC accredited investor and she started the web site Kung Fu Finance. So, thank you for joining us today here, Susan.
Thank you Jason. I’m glad to be here.
Great, I’m glad to finally be speaking to you. Even during the storm that we’re having here in the D.C. area.
I can’t believe it is so powerful!
Yes. We’re hoping the power doesn’t go out during the interview. So, we’ll try to get a good interview here before the power goes out.
Sounds great. I’ll talk quickly. (Laughs)
(Laughs) So, Susan, our listeners are not familiar with you yet. You’ve gone to a lot of conferences, Casey Research and Stansberry Associates. Tell our listeners about your background as a technology executive and then what got you into gold and silver after that.
Sure, no problem. Well, I graduated college in 1996 and I got my degree in Computer Science. My first job out of college was a technology job working for Intel out here in the Bay Area, which is where I live now. Working for Intel was awesome, and I was there for about three and a half years, but what was interesting was it highlighted just how little I actually knew about investing.
As an Intel employee, even as a lowly recent college grad, you’re paid part of your compensation with stock options. They also have the employee stock purchase plan and you have this mysterious 401K and suddenly, you’re introduced to this brand new world of investing. So, I worked for Intel for about three and one half years and fancied myself quite the investor, because I was participating in the 401k and I was getting all these Intel stock options and the market at that time, from 1996 to about 2000 was just going up, up, up.
So, I thought I was quite the genius. (Laughs) But, I knew nothing, I mean really nothing about stock market investing; absolutely nothing. I didn’t know what price to earnings was, price to book, nor any ways of properly valuing a company and actually, back in that day and age, people had kind of thrown those types of valuations out the window anyway, saying, “Oh, those don’t matter any more because, it’s all about ‘eyeballs’. It’s who could get the most viewers online”.
So, I worked for Intel for about three and one half years and then I left and went up to San Francisco and joined a dot com startup, and there I was managing a team of about 70 people and making a great six figure income and riding the dot com wave up, up, up and then of course, boom—down! Down, down down.
When the Nasdaq crashed, I lost almost all of my money. Everything I had been working for since I graduated college was just gone—I mean, poof! At least, how far did it dip, like 60% or something. It was really terrible, and for me that was a huge wake up call. Huge.
Yes, and the thing about the whole internet bubble and this is something that Sir John Templeton talked about is the four most dangerous words in investing are “This time it’s different”.
Right. Exactly. So for me, it was a huge wake up call. I had literally thought that that’s just what you did to get rich, and that all I really needed to do was to keep investing all my money in the stock market…I bought Cisco shares at $70 and more Intel shares at $50 and $60, and those still haven’t come back.
My husband works for Cisco now, and those shares are still around $20. It’s so pathetic how dumb I was, but at the time, I had no idea and we were not taught about investing in school, and I certainly didn’t learn about it at home.
My parents are very conservative. They had CD’s and they thought the stock market was for gamblers and so, I really had no experience or exposure to how to invest at all. So, that was such a wake up call for me, and was definitely what motivated me to get started learning.
And, as the process of your journey—the discipline you started; you started building blocks, building a base and building a knowledge base and that’s what led you to the Kung Fu Finance web site then, and why you decided to name it the way you named it?
Yes, pretty much. I really sat down and I had kind of this “come to Jesus” moment with myself about “hey, what do I really want to do”, and (laughs) I’ve always kind of had expensive tastes and I thought, “this is ridiculous! I’m making a decent amount of money. Why can’t I keep it?”.
At the time, I didn’t even know how much I had or didn’t have. I wasn’t creating monthly personal financial statements.
I was doing the minimum. I was responsible enough so that I paid off my credit cards every month; my parents had instilled me with that. But even at that time, I had sort of gotten lazy and thought, “Oh, I’ll just send in the minimum this month, and I’ll make it up next month” and I discovered that I was about $10,000 in credit card debt and just thought “What on earth am I going to do?”.
Around that time, I was also taking a Kung Fu class with a girlfriend of mine in the City. We were taking Wing Chun, and I was living with this guy who was a total Bruce Lee fan, and so we would go out, come back, watch Black Belt theatre and it was really fun.
So, for me it was kind of percolating in the back of my mind; this whole Kung Fu idea.
Also at that time, that’s when I really started really focusing on building a base of education. I took a commercial real estate course at UC Berkeley, I took Intro to Financial Planning, I started reading, reading, reading; I read all of the books by Robert Kiyosaki. I read David Bach’s The Automatic Millionaire. I read all of the books that Robert Kiyosaki recommended and one of those was The Creature from Jekyll Island and that was an amazing book.
It’s the first book that opened my eyes to this idea that “Hey, maybe the Federal Reserve isn’t necessarily on my side; maybe the government isn’t necessarily on my side”. It caused me to question some of these long held assumptions that I’ve had, so that, I think was the start of it.
From there, those books led me to Mises and Rothbard and to Doug Casey and to hard assets and fiat money and all of that was really, really helpful.
I don’t have a cache of Bruce Lee Movies and all that stuff, but I do have a similar background. I worked in Financial Services for six or seven months and I trained and I sat in the sales meetings and they don’t teach anyone any financial education in there either.
That’s the funny thing. That’s the dirty little secret about the industry. Those guys get the accreditation, they get the licenses for studying, but really, it’s just a sales job.
You’re handed a piece of paper. You’re told to sell whatever the highest commission stuff is, and if you have a background like you and me; if you have an education and you want to learn and you want to know stuff, they’re going to fire you. So, that was my waking up period. That and the stock market crashing in 2008.
When my parents lost half their money, literally, half their investment capital in two years when the market crashed. Well, not two years, but 12 months. The funny thing is that while I was learning, I made them all the money back and then I produced a profit for them while I was learning, but I’m the exception to the rule and I did have to put in all the research work, similar to you.
I had to read over 50 books and thousands of articles, hundreds of podcasts, hundreds of documentaries trying to figure out what was going on. Yes, I had my wake up, too. It’s really refreshing to have the wake up moment, but unfortunately, it’s just so uncomfortable to have the wake up moment because you are surrounded by people who, when you try to ask them if they’re waking up too, they don’t want to wake up. (Laughs)
(Laughs) That is definitely true. I remember and this was many years ago when I started buying silver for the first time, and people just thought I was crazy. Even my husband, who you would think would be the first one on your side and he is. He’s very supportive. But, I remember having this discussion about “I want to go to the coin shop and I think we should buy some silver”.
He said, “Coin shop? Do they still have those? I used to buy baseball cards there!”. Just kind of like “You want to do what?”
So, yes I’ve definitely experienced that frustration myself of people not really wanting to wake up and still saying “Oh, it’s OK. The stock market will come back. Everything will be fine. Just buy it and hold. Wait it out”.
But, a lot of people, probably like your parents and, I know my own don’t have the time to wait it out. Right? They’re already in their retirement years. My mom turns 75 this year and she doesn’t have another 20 years to wait for everything to come back. She needs to earn some yield now and it’s so difficult for her.
Exactly. And the fed is destroying the easy savings, where in the past you could have gotten 5% to 10% of returns on a treasury or something like that. That’s being completely destroyed.
Exactly, and that is so sad. Like you were asking about Why Kung Fu Finance and I think I was so frustrated through my own learning process because, like you, I had to read the 40 or 50 books and all these different articles and all the on-line videos and just search and seek out all of this alternative news and there wasn’t really a site at the time I was going through it that taught you this stuff.
There’s no Investment University or how to become a good investor or how even just not to lose money. Right? I think the Motley Fool may have tried to be, but it was a lot more personal finance focused, like how to get the best mortgage on your house or how to get the best deal on this or that, but it wasn’t really about alternative investing.
They did do a lot with the stock market, I think, but that was about it. I was so frustrated, and so for me, that’s what helped pull it together and I thought I’ve got to help people.
Yes. You can help yourself and help others at the same time and that’s basically what I wanted to do, but what I noticed about the internet, and you brought this up as well, is that there’s really not one web site that has all the information in one place.
Even if you go to all the main street web sites, they might have a good amount of the information, but they’re not even going to talk about the Austrian School of Economics, they’re not going to talk about alternative asset classes that will get you out of the stock market and out of bonds and things like that and that’s very unfortunate, because the normal conventional asset allocation strategies, I think, that’s part of the problem.
Right. I totally agree—100%. We’ve gotten now so that the majority of our assets are in what you would call alternative asset classes and they are not in the US stock market anymore, and I’m very happy with that. Since we’ve moved away from that, we’ve done so much better—our returns have been so much better and I hope that more people will be able to catch on to that.
Okay. Well, transitioning here to the next topic. Before we talk about some of those asset classes that you brought up and where you still see value, let’s talk about your views of the economic situation, macro economic situation, and see if they differ from mine or some of the other people I’ve read. Do you see the world economy right now basically in a worsening stagflation, or do you see things differently?
Worsening stagflation is a good way of summing it up. I see the Fed doing everything they can to try to cause inflation, but they’re fighting some pretty powerful deflationary forces, so I think in the long term, I can’t see any other outcome than rampant inflation.
And, if you look around; if you ignore some of the government statistics, stated CPI, or whatever, and look at just food prices and gas prices and all commodity prices and everything is going up, up, up. Things are costing more, so I think that inflation is coming, but probably right now at this exact moment in time, I think that stagflation is a really accurate term, because we haven’t seen as much inflation as you would expect, considering the massive amounts of money that they continue to pump into the economy.
Is that how you see it too?
Yes. I see worsening stagflation for now, that’s all basically the fed can do right now.
Actually, they’ve done a pretty decent job of managing inflationary expectations and velocity of money. Unfortunately, so much capital is being misallocated right now, that the money is still going to the bankers to speculate with on derivatives and other investments that the money is not really going into main street which used to be the primary purpose of Wall Street was to grow productive main stream businesses and that’s not happening.
So, I don’t see the real economy improving any time soon, except for maybe a few sectors like technology is still doing pretty good and biotech and health care is still doing pretty good and there are a few other sectors along those lines that are doing pretty good, but the way the world economy is set up right now especially with the dollar pegs is that when the Fed creates inflation, the monetary inflation, almost all the inflation is exported outside the United States and it’s absorbed by all our trade partners and then it’s slowly imported back here to the United States in the form of higher priced goods and services.
Yes, I completely agree. It’s very sad. It’s really frustrating, because at the same time Seniors (you know we were talking about our parents), are being forced to chase yield into somewhat riskier investments so they can have the retirement they originally planned on. It’s such a difficult environment.
Exactly. And, unfortunately, the retail money, those are the ones that are woken up, are starting to go into dividend stocks, which are obviously better than owning bonds at this point. But there’s still a lot of retail money; the flow of money is going into bonds, so, I think they’re going to get slaughtered.
Yes, I know. Me too. I think we are reading the same reports. You see so much money is flowing into these bond funds and it makes me think…you know, they always talk and joke about the sheeple all of the time. But I’m thinking why, why? Why are people pouring their money into bond funds? It makes no sense to me, but you look at all the numbers, and that’s where the money’s going. Money is going out of equities. It is really astonishing.
I think it’s because of the conventional financial wisdom that the conventional financial advisors are trying to keep people in paper. It’s the inflationary statistics from the government. People believe them too much, so they’re still going to trust bonds because in a rational market environment, if the people were interpreting the real inflation rate, there is no way whatsoever, really, that stocks, bonds, commodities and everything should be going up at once. There is; that’s not the way that markets are supposed to work.
Right. They should not be this correlated. It is absolutely crazy. But, people are not rational. It’s astonishing to me. So, that’s what I’m trying to do with my web site, Kung Fu Finance, and what you’re trying to do, too. I love what you’re doing. Just trying to open people’s eyes and have them look at some other alternative data points and think for themselves.
Right. And let’s talk more about some alternative asset classes here. Including gold and silver, what’s your opinion of the mining stocks here at this point? Do you think the retail investor should be buying these individually or through an ETF or through a mutual fund or do you think this is mostly a professional market with all the volatility that’s being created in them?
Sure. I think that it’s a stock pickers market. So, when you say retail investor, if an investor is savvy enough to understand the difference between investing and speculating, and that person is savvy enough to realize that these mining stocks, particularly the junior exploring mining stocks, are highly speculative.
But, all of that said, if they do understand that and they’re a reasonably sophisticated retail investor, then I think that now is actually an OK time to be buying these junior mining stocks. I think that you should always buy in tranches. I bought the GDXJ several months ago, and I’m happy I did so, but I’m absolutely prepared for it to go down further. That’s just how these mining stocks work. They’re very, very volatile. So, I think it’s a good time. I really do. In the past history, especially back in the 70’s and 80’s, the mining stocks out-performed the actual metals themselves. But, they didn’t do that immediately. It took them until the end.
And I think in the past, Susan, that the mining stocks, the managers of the mining companies, the CEO’s were much better. Now, recently from what I’ve seen, I’ve been investing in this sector for four or five years successfully, a lot of the CEO’s have not done a good job getting good return on capital; they’ve wasted a lot of money drilling if they’re an explorer. They don’t manage their capital structure well, they give a lot of warrants out that are unnecessary.
The producers, the large companies like Barrick, I don’t want to just single out Barrick, but, there are plenty of other companies that will go out and massively overpay for some of these junior deposits; they’ll pay way, way too much money, then they’ll underestimate capex and then when the deposit is ready to go into production five or six years later, the return that they were projecting getting, it’s more than cut in half.
So, I think the industry needs to focus on production and cash flow and paying dividends and returning money to shareholders and I think that’s what will put the bottom in in the mine stocks and make them go up much higher.
Yes, and let’s hope that that happens soon. You and Rick Rule are on the same page. I talked with him a couple of weeks ago and he was exactly of the same mind set. He’s looking ahead to see if there might be a lot more M & A activity because these companies are just continuing to spend all this capital and they’re not able to raise money. It’s an interesting environment right now. It will be fascinating to see what happens.
Yes, it’s a most interesting environment. But, the most efficient business model that I really like, and we’ve talked about this company and the business model a lot to our listeners, is the gold and silver royalty and streaming companies. So, you’re basically buying a mining ETF of sorts and the company is picking out the streams for you and the cash flow is faster; it generates great cash flow and I’ve been investing in Sandstorm Gold for about two years now, and Silver Wheaton in just about the same time frame.
Yes, me too. I love Silver Wheaton, Royal Gold, etc. Those are great, I agree.
I have one more question before we let you go. Let’s talk about oil or some of the other contrary investments that you see in the market in terms of asset classes. Where do you still see value besides gold and silver in the market? Do you see it in other commodities or are you too worried about the hard landing in China? Do you see value in some consumer staple dividend stocks or some alternative asset classes outside of the market?
Yes. I’ve actually been looking in alternative asset classes outside the market.
I do see value in commodities, particularly in agriculture and farmlands. But I’m actually looking, I have a call later today with a friend of mine who is doing a site scouting trip to Uruguay. He’s looking at some productive farms down there, so, it’s commodities, sort of, but it’s more actually buying the productive farm versus buying it on the futures market.
But I do see value in that for sure, and with the recent drought and with the continued issues with food shortages, I do see some value there.
I also like rental real estate here in the United States. I think that with mortgages being at an all time low, the cost of money is so cheap and the percentage of renters is on the rise. People are not able to afford to buy a house anymore, so I think especially in certain markets where employment is good and people are moving into the area instead of away from the area, that you can really still find some great deals there, too.
So, that’s something that’s interesting to me. I’m looking at some new alternative income streams like tax liens and peer to peer lending that are kind of interesting and definitely outside of the “norm” for investing. I see some good value there.
Those are some very interesting ones you brought up. To talk more about the commodities, which is one of my specialties, I really like the oil stocks because the oil price is down, the experts on TV, the contrarian in me, the experts are talking about how oil and gasoline could go down another 20% and you have these large cap dividend paying oil stocks, some of them like Exxon Mobil is 3%, you have Total at 6%, and you can get them for a PE ratio around 9. You can get a dividend yield for 3% to 6% and for some of these Canadian Energy Trusts, you can pull in a dividend yield of 10% per year and some of them even pay over 10% per month. So, these are some things that our listeners need to take a look at. Some of these guys do have really bad exposure to US natural gas prices though, so, you’ve got to really do your homework on some of these to make sure that they’re not overexposed and unhedged to US natural gas prices.
Right, very interesting. That’s not a market that I’m terribly familiar with, so, it’s fun to get your take. Do you also invest in the MLP’s?
We’ve put our consulting clients in those. You can earn a really nice return on those instead of a bond. I think the MLP’s and the Canadian energy trusts are much, much safer to put a large amount of capital in instead of bonds at this point. We made a consulting final of six figures just putting a good amount of capital into that safely into an energy trust instead of a bond because she needed yield.
In wrapping things up here Susan, tell our listeners about some of the other; maybe you have a report available or some of your interviews on Kung Fu Finance or anything else you’d like to share with us.
Sure, absolutely. My site is focused on financial education and empowerment. I have a lot of courses and articles available on line and right now, they’re all free which is great. I am developing a White Belt to Black Belt Investor Education program which is really cool—a series of videos and an online investor community where people will be really able to exchange ideas and share and learn and talk with one another about how to become better investors. I am excited about that. There is a lot of information available there now, so people can definitely feel free to go check it out. It’s all free, like I said. I spend a lot of time trying to demystify finance for people, so explaining in concrete terms, just how big is the debt, what do all of these financial terms mean and why is yield so important and why do people care about the 10 year treasury yield; why does that matter, etc. I hope people will find some value there.
I think your web site is a really good starting point for our listeners out there who want to educate themselves; who want to teach themselves how to fish instead of being handed dead fish by Wall Street.
(Laughs) Great analogy!
Thank you very much for your time, Susan and hopefully, we can have you back on again soon for another podcast.
Great, thank you Jason, I appreciate it.