Masters Series: How to Make Money Outside of the Stock Market, Part I

Editor's note: Stocks are trading near their all-time highs and the benchmark S&P 500 index is up more than 200% from its financial crisis lows. This has left many people cautious... and looking for investments outside the market. If you're one of those people, today's essay is for you.
 

Today's edition of our weekend Masters Series is adapted from episode No. 4 of Inside True Wealth, Steve Sjuggerud's new radio show. In it, Steve sits down with collectibles experts David Hall and Van Simmons to discuss what the ultra-wealthy are purchasing today... the cyclicality of these markets... and some timeless lessons for beginners looking to diversify their wealth...
 

 

How to Make Money Outside of the Stock Market, Part I
An interview with Steve Sjuggerud, editor, True Wealth
 

Steve Sjuggerud: The stock market has gone up for six years straight. At some point, you're going to need to do something else with your money outside of the stock market. Also, the U.S. dollar has soared recently, so it's probably time for the dollar to weaken and for gold to strengthen. Well, David Hall and Van Simmons are experts in gold and experts in investing outside of the U.S. stock market.
 

David, let me start by asking you. You've dealt with some of the wealthiest people in the world in your five decades in the collectibles markets. Now, I know you have customers from the little old lady around the corner all the way up to the world's wealthiest people, but I am interested in what the most successful people in the world are looking for now. Do they do something different than the average guy with their money? What are wealthy people doing right now?
 

David Hall: They're definitely looking for alternatives. There is a lot of money sloshing around in the world, you know, and, you know, it's all created with quantitative easing infinity in the U.S., now in Europe, and the yields are, of course, interest rates are sort of zero. Very wealthy people are looking for alternatives.
 

That's why some of the very high-end collectibles in many, many fields have gone way up. Didn't Christie's just have a modern art auction, not impressionist or old master, but modern art auction? It was almost $1 billion. So they're definitely looking for alternatives. Also I think they're long-term-oriented and looking for something that's going to be of value many years out, probably even thinking of their heirs.
 

Sjuggerud: You say people are looking for alternatives that are going to have value in the future, but how do you know what will have value in the future? Van Simmons explained it to me once. He said, "Steve, take a 35-year-old guy today. Twenty years ago, what made him feel rebellious and free? Now look ahead 20 years. What will this guy be buying? What will give him that feeling of freedom?" What do you think?
 

Hall: That's very good advice from Van. What is going to be valuable in the future? The things that matter to people, and that's both the things of their youth and also the all-time classics. You know, as we say in sports collectibles, the Hall of Fame is forever. Babe Ruth will always be Babe Ruth. Elvis will always be Elvis.
 

Sjuggerud: I think it's interesting. Yeah, there are the classics and then there are the ones that affected you in your life, the more modern things. And what's funny is that Van had really driven home that want to buy The Beatles. You don't want to buy The Monkees. You know, you want to stick with the quality.
 

An important point that I learned the hard way was in rare guitars. I'm a passionate guitar player. I bought some guitars that were one-of-a-kind, one-off, and I thought, "Wow, it's a one-of-a-kind." The thing is, I got such a great deal on it because there's no demand for that. Just because something is rare does not mean that it's valuable, and I think a lot of people, that's a big novice mistake when you start to look outside of the stock market and the real estate market and you're looking to make money. I personally failed in that. I learned that the hard way.
 

Hall: Well, a good example, Steve, let's say you collect surfboards. Let's say you bought a rare surfboard for $35,000 five years ago. If it went to $350,000 in the next five years, what would you do?
 

Sjuggerud: I'd hit the bid.
 

Hall: And there's somebody out there at $350,000. But where's his upside? Is it going to go to $3.5 million for a surfboard? You kind of wonder...
 

Sjuggerud: You kind of know these things, but does the customer? Think about the real estate market in California in 2007 or whatnot. Everybody is quitting their regular jobs to get into the real estate market. That's a sign. When everybody's doing it...
 

Hall: Yes. I can't tell you how many people I knew that were in the mortgage-refinance business in 2005 and 2006. It was ridiculous. These people are out of jobs now.
 

Sjuggerud: Exactly. It's hard to separate yourself and smell the roses or realize what's going on around you to see, "Oh geez, this is really getting a little crazy."
 

Hall: You have to do your homework. Real wealthy people do things other than stocks and real estate. They do their homework. And I found that a lot of the real wealthy people are contrarians. Maybe it's the sense of self-confidence that helped them be successful in business or whatever, but there's such a herd mentality. When gold was at $1,900 an ounce, we had people screaming on the phone that they had to have their gold today. Where are these people here?
 

Sjuggerud: The phone isn't ringing at $1,300, but it's ringing off the hook at $1,900.
 

Hall: Yes. So as you always say in your contrarian approach – and I've found that wealthy people have the self-confidence to – "buy when there's blood in the street." Now, it's not that bad, but you know, when things are a little out of favor and they're high-quality in terms of the condition and their importance, that's the time that you want to take a position.
 

Van Simmons: And taking a position is the hardest thing to do. For example, in 2010-2011, I called a couple of real estate friends. I said, "You know, I'm interested in buying real estate." They go, "Oh, you're out of your mind." And I said, "OK, well find me something." I paid $160,000 for a condo on a short sale. It rents for $1,600 a month. The bank loan was $425,000. Now, the thing is worth about $300,000 or $325,000. It has doubled in the last four years, plus I'm collecting 10% rent based on my investment.
 

Sjuggerud: These things go in major cycles. As you said earlier, gold hit $1,900 and the phones are ringing off the hook because investors are incredibly enthusiastic. Then gold hits $1,300 or $1,200 and the phones are not ringing because everyone's scared and hates gold.
 

You've been in this long enough to know where these cycles can actually go. You see these incredible cycles, and the thing about where we are right now is that gold investments are more hated than they've ever been.
 

 

Editor's note: If you're interested in diversifying your money outside of the stock market, you've probably started to consider Bitcoin and other alternative digital currencies. But some of the wealthiest families in America have found a much better option backed by real gold and silver. And Steve thinks this "secret currency" will prove to be one of the safest ways to protect and grow your wealth in the years to come. In fact, he believes you could double your money in the next six months alone.
 

Right now, we're offering a risk-free, four-month trial subscription to True Wealth. Plus it's nearly two-thirds off the regular price. For more on this incredible opportunity – and to learn how to gain access to Steve's brand-new report and all of his research – click here.