Stop Refreshing Your Portfolio App | Eshwar Prasad | Part 8

This episode isn't about which assets to buy. It's about why most people lose money on good assets - and the single behavior that guarantees it.

In Part 8 of this conversation, Eshwar - solo founder and long-horizon investor - breaks down the actual mechanics of why markets move, why currency dilution is the engine behind every asset price increase, and why watching your portfolio app is the most expensive habit a retail investor can have.

He also gets specific about his own real estate LP investments - the capital calls, the negative returns, the dead money - and walks through the no-leverage comparison he ran between multifamily real estate and Bitcoin that changed how he allocates capital.

This isn't a bullish Bitcoin pitch. It's a constraint analysis. When you remove leverage from both sides of the comparison and account for property taxes, HOA, capital calls, and systemic fragility, the math changes. He did the math.

In this episode: 

• Why Stock Prices Go Up - And What It Actually Has To Do With The Dollar
• How Three Percent Of Shareholders Set The Price For Everyone Else
• Why Real Estate Only Works Through Leverage And What That Risk Profile Actually Looks Like
• His Multifamily Lp Experience And What Passive Investing Really Costs 
• The No-Leverage Apples-To-Apples Comparison Between Real Estate And Bitcoin 
• 2008 Cascade Mechanics And Why Six Sigma Events Are Becoming More Frequent 
• Why Bitcoin Is The Only Asset You Can Carry Across A Border In Your Head 
• What Being An Aggressive Investor Actually Means At His Stage

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Chief Milestones is a video podcast featuring honest conversations with founders, parents, and investors about building real businesses, staying healthy, and raising families.

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Transcript

Money Printing And Asset Prices

Eshwar 0:00

The reason why stock market increases and uh and the assets real assets increase is not because of anything, it's only because of the government diluting the money. If you have hundred dollars, I can print another hundred. Now, now I have two hundred. Now that money is only valued at half. If I print another hundred, it's only 33%. When people think like uh you can invest in the stock market, you can make money. The reason, only reason why you make money is because the relative valuation against the dollar of that particular asset, you know, is higher. So that means that the dollar is getting depreciated. That's essentially what it is. It's just because of the the tools that we have that we have the ability to look at how much we made money today, how much we lost money today on an app. So you you kind of try to hyper um uh sensitive or sensitivise to it, and then you keep looking at it and you feel like it's going down. You don't do that with real estate or you don't do with it with home, home, sorry, that you buy.

Reshma Vadlamudi 0:59

Yes.

A Simple Way To Value Stocks

Patience Buy And Hold Leverage Later

Eshwar 0:59

Uh, because there's nobody bidding a market. There's no price for for, unless you put market on the home, there's nobody is coming to you and saying that this is the price I'm gonna willing to offer. So I think it's like you just have to have the mindset of not really, okay, at this point, in this specific juncture, uh if the stock market, if this that stock has probably um a million people that own the stock, a handful of people, maybe three, four percent of the people, are fighting on what the price should be. That's the end of the day, that's what that market making is. So only two, three percent of the people, somebody in that in the in that cohort, some percentage of that in that cohort want money tomorrow. Maybe they're they're uh you know they they they took a lot of margin and uh you know they they have to sell right now to you know to balance that counterparty risk somewhere else, and they're just put selling them on fire, right? Fire sale. Uh and then somebody is buying and that transaction is happening at that instant for that specific thing. And uh guess what? If one person buys at one price and the other person sells some price, then guess what? That's the new price for that off for that thing, right? Um, and people, and then uh, and uh that's gonna resolve itself and it's gonna go up. And as long as the company is making money and you they're growing at a at a decent amount of rate, uh on a long term, you're not going to do you're not you're going to do very well, right? So it's important to be patient and and and pick a pick a horse and uh and try to ride it unless and until you see something fundamentally changed with the business. Um, you know, where they're not the growth story is not relevant anymore, then you change your horse, right? You you put on a different horse, you bet on a different horse. So it's important for you to understand books, you have to understand their uh quarterly earnings, be able to you have chat GPT to summarize for you. So you don't really need to do anything, just put in the link of the earnings release, and uh, you know, it's gonna be uh explain you all the things. Uh so you don't need to do a lot of lot of research these days. Um, I mean you could you have to do research, but I think um you know it you it it used to be difficult, now it is easy. Yeah, so so you you you choose like you know, anybody, any company wants to make money, if they make more money and spend less, they have a surplus to invest on that money, right? So you have$100, and if the company is only spending 20, they're making 80 bro 80 dollars, and what rate are they growing? Are they growing 20%, 30%, 40%? And how much value do you put on that growth, right? So that's what's the stock price reflects. So it's simple. Uh, you know, there's all these girls, all these jargons of this, that, ibita, this, you know, it's like so many jargons that make you want to confuse. But at the end of the day, it's the money that they make and the money they they spend, whatever is left over, uh, you know, is going to be a stockholder value, right? And how much money do they make, and how much money do they expect to make in the next five years, and what is the growth percentage? And you play a multiple on top of that earnings, right? That's that's essentially just a simple, simple thing, right? For some companies, it's 20%, some companies it's 30%. Some growth companies are speculative, it's probably 80%, right? It's like Tesla and stuff like that. Um, but understand that the 80-90 price to earnings is only coming from their future earnings from you know robotics and uh you know self-driving and stuff like that. People are betting on it now for growth they anticipate and expect in the next six to seven years, or ten years even, right? So that's the premium you pay if you feel like that's that's the stock that you want to pick. Um, so pick a thesis, watch a lot of videos, you know, um, you know, ask Chat GPT about these questions, uh throw it, throw curveballs at it, give it five stocks, give it five uh 10K earnings reports, let it compare and contrast, uh, let it do read deep research and come back to you. You'll be amazed at how much you can get, uh, how much information and depth you can get on these things. And you and by doing that every day, you're learning something new, something new, something new. And then you you'll eventually get better at it. All you have to have is a will and an ability for you to learn and want the drive and passion, a hunger to be able to be um to be learning, right? That's what makes makes makes things easy. And then you invest and then you just stay. You just you just you know, Warren Buffett and all these big investors, they just don't buy and sell stocks. They just buy and hold, and they don't take leverage. They they create leverage later, right? So if you spend, if you put in$50,000 and if you become a million dollars, now you have million dollars that you can that you can um collateralize to to probably make, you know, depending on the stock, you can make another$50,000 and another$500,000 on that stock portfolio. Right? And you buy that$500,000 and you use that money to buy another rocket, right? Because you've already invested, you already made the thesis, and you have and and that's how you create your own leverage is by you know waiting for long, making sure it reaches your portfolio reaches a uh you know a certain percentage, and then uh collateralize that, probably take money, and because you are lending yourself, you're becoming your own bank, right? At that point, right? So uh and then you continue to do it over a period of time and you pick three good stocks, you never have to work anymore. And it's as simple and as obvious and as as anybody can do. But people don't do it because um because they don't know better and they don't are not they're not um they're scared and they're feared that they're you know they they have doubts and they just uh do silly things like buy today and sell tomorrow. So that's that's that's when you lose money.

Buying The Dip And Pricing Risk

Reshma Vadlamudi 6:47

Yeah. If anything you're seeing now as an opportunity, like when when the stock market is down, you would definitely would you buy today so you can hold on to the if you're if you're if your uh if your time horizon is uh you know five to ten years, you buy every day.

Eshwar 7:05

Yeah, you know, regardless of the price, right? I mean uh that's that's how you need to look at it. Uh today yesterday and today would be the re would be the reasons where you were able to buy an video at 80 bucks. I'm pretty sure it'll gonna reach 80 bucks tomorrow. So where you know it's it was 160 a couple of months ago. So it's about getting a 50% discount, and they're growing at a crazy, crazy rate, right? And uh and that's gonna be, you know, uh, you know, yeah, I mean you might probably you might probably buy it 80 and it might go to 60, you probably lose about 20, 25 percent. But that's fine, right? So never expect a stock to go after you buy. Always have an expectation that might go 30, 40 percent down, uh, depending on the beta. Beta is like uh, you know, the amount of months amount that might go down. That's the risk, uh risk metric. So you expect that return. Okay, if you're expecting to make 100% return, you're not gonna get it because the risk is risk to the downside is also 100%. Right? So if you're if you're expecting only 4%, you probably put it in uh you know put it in treasury bills, uh, you get 4% and you never will lose your money, right? So it's like if you you zero risk is four percent. And if you want 100% return in two years or three years or whatever, so your obviously your risk onto the downside is gonna be that much, that much higher. So understand that and uh just just not worry about when the market is down. Just don't for I don't even look at the market when the market is going down. Um because you know that it's gonna be short-lived, right? It's gonna be temporary, right? Um because you know, we don't think like the reason why the stock market increases and uh and the assets, the real assets increase, is not because of anything. It's only because of the government diluting the money. So so if you have$100, I can print another$100. Now, now I have$200, right? So now uh now that money is only valued at half. Because the new money, without anything, it's just got printed. That means it's only 50% worth. If I print another 100, it's only 33%, right?

Reshma Vadlamudi 9:22

Yes.

The Dollar Reserve Game Explained

Eshwar 9:22

Uh worth, right? So so now if you want to buy a home, it's going to be a reflective of that dilution. So so when people think like uh you can invest in stock market, you can make money. The reason, only reason why you make money is because the relative valuation against the dollar of that particular asset is is is uh is lower, right? I mean, uh you know, is higher, right? So that means that the dollar is getting depreciated. That's that's the that's that's essentially what it is, right? Um so so if you were to invest uh you know in some company in some stock market or some investment in India, you know, 10 years ago, you you probably are not even, you know, you didn't make anything because your dollar got even your Indian rupee got uh depreciated by almost 50, 60 percent. So when I remember I came here in 2007, it was 40 bucks, 30, 30 in the 30s handle.

Reshma Vadlamudi 10:20

Yes.

Eshwar 10:20

So today is almost touching 90.

Reshma Vadlamudi 10:22

Yes.

Eshwar 10:22

So if that okay, you might think like uh, you know, your property that you bought for 10 lakhs has become two crores uh or or uh are a one right, but but again in in dollar terms, it does not it it has not uh it has not given you good returns, right? Yes. So so I I don't invest in India. I don't invest, it's like you have the biggest market, the best market out there in in the US. I mean, you don't need to go anywhere else. Uh this is your opportunity to to to invest in this country.

Reshma Vadlamudi 10:53

Yeah.

Hard Assets And Real Estate Leverage Risk

Eshwar 10:53

Um because uh because it is it is the it is the it is the best country in the world still. It it it has uh uh the dollar strength and everything is denominated in dollars still. So countries need dollars and uh and uh you know the whole um you know trade uh deficiency is also at the heart of that problem because all these countries they buy uh they get all the money paid in dollars and they take the dollars and then they just buy the treasuries again here, right? They just recycle that money back to the back to the US. Um and then they devalue their currency so that they can artificially uh lower the lower the cost of goods for for Americans to buy, right? So so they're diluting their yuan or their their yen or their INR Indian rupee lower just to make it attractive um you know for them to uh you know for their for them to export it cheaper. Uh while they rack up uh the dollars and uh you know they they they have reserves of dollars and then they put it back in the in the US market and buy Indian uh US companies. So that's what the big governments do. And um and I think uh and I think part of what Trump is trying to do is is is is have them stop taking advantage of it that way. Um to have uh you know less trade surpluses. Because once you have a trade deficiency, that means uh if I am able to export a billion, a hundred billion dollars, and uh you know they're able to only export five billion, the 95 billion deficit, right? So that 95 billion, they have a US dollar that they can invest in in themselves, and they can invest in the stock market again here in the US for about 4% treasury bills, right? They're getting money. So they're so so the for the the developing countries like India, their dollar, their rupee is gonna go down slowly, slowly, slowly. It's gonna whittle away. That's the only game in town, right? So uh so when you have uh this this this idea of this this currency dilution, uh, and then things like um real estate, gold, bitcoin, all these, all these hard-to-get assets are gonna be the ones that are gonna outperform. Uh but I think real estate, I think where I I just feel very different about real estate is because it is all um levered at 80%, you know, most of the times. And then when you combine all of this with all the all the debt and uh and the risk of you getting a shock, sudden, uh sudden uh you know, catastrophic event like 2008, uh every every 15, 20 years is much higher. So if you're not careful to make sure that your leverage is in a very reasonable amount, that that one, yeah, you might seem like you're making money for the 10, 20, 15 years until that happens, and when that happens, you just lose everything. So, so uh so your timing is extremely important when you buy and when you sell. And the government is very, very clever in in and trying to get you to continue to stay in that same loop. Um, it's 1031 exchanges where you can buy something else without selling, and then you just continue the you create the same loop without actually taking things out. Um, and then they give you all these incentives from the tax benefits and the depreciation aspects of it that makes it very lucrative. Uh, but I worry about that one six sigma event that might happen like 2008. Uh, the more leverage in the system, the chances of the six sigma events happening more frequently are my much higher. Uh, which is why um, you know, I kind of stayed away from real estate. It's not I'm not seeing people that invest in it. They absolutely know what they're doing because I don't have the time and effort to go and and put in all the hard work. I've never cut out to do that. I don't even know how to have how to even put a bolt in a in a in a uh in a in a on a so I'm not handy that way. So I just I cannot do all that. I do all that. So when I cannot do all that, if I'm just becoming LP and investing in somebody else, and if I have an opportunity to invest in in Bitcoin or other assets that I know are going to have real res real uh real world use cases in the future, so then my my chat my my choice is very clear that I'm gonna pick that horse than then to this horse because because real estate you understand that better? Yes, best better, and I understand the risk of what might happen for a six event like 2008 for the for a for a housing market to crash, and uh regardless of how much money you have, everything is gonna go to zero at that at that point. You know, you'd have to write off.

Reshma Vadlamudi 15:42

For the 2008 crash, because we are talking about it, so the the crash was different. It's not because of the real estate market itself. Uh yeah, yeah.

Bitcoin Versus Real Estate Without Debt

Eshwar 15:53

I mean, because it's all it's all interdependent. Like when you have like a like a like an event where one bank or one big bank fail, when there's a bank run, bank runs, or any anything can happen because you know Japanese Japanese yen, the carry trade is because Japan Japan for the longest time have um you know created you know zero interest and negative interest rates for all the investors in Japan to take money for zero and invest in the US, right? For for the longest amount of time. That's it, you know, like an event like that, where the carry trade is unwinding and then the Japanese uh central bank is now raising rates, and now there's not, it's not, you know, if the rates, if they raise rates soon enough, when they you know, maybe two, three percent, there's no point in having Japanese invest in the US. And then once they start to pull out of the market, you know, that is going to cascade into other things, and somebody else is going to be shot naked, uh, and then they have to sell off of a sudden, that will then you know get into other things, and it just becomes a cascading set of liquidation events that will that that doesn't matter what happens, and then you just have to go unless unless Fed inter intervenes. But yeah, they can intervene for a far for a few years. Um, but I that's why I when I had this idea of wanting to value or at least say, like, well, I want to invest in real estate or invest in in crypto, then I had to say, like, okay, I'm fine. If I want to invest in, I want to take, I don't want to take debt, I don't want to take any leverage in both sides. So what if I buy buy real estate with no leverage? Uh, how much money can I make uh on a on an adjusted uh you know rate, right? Yes, and how much kind of money can I make in this based on the previous and even if I cut down by 80%, assuming that I'm only making 20% with with my Bitcoin investment, versus an investment without debt, meaning that I'm putting all the money 100%, right? And then compare between the two in like you pay, you pay real estate, you pay property taxes, you pay HOA, you pay like so so you almost pay like almost every year, like you know, I've got a recent office space, right? Recently, I was looking at it. So I'm paying 3.6% uh property taxes, right? So you are already 3.6% negative, right? How much money you have to make to make money on top of it. So the only way you make money in real estate is through leverage. If leverage breaks, real estate investment is not profitable. Um, so that's why in India, you know, people leverage is not a thing there. So you will see like a lot of people buying with cash and everything else. So it's not such a lucrative thing in India to do it, uh, you know, um, unless you already have big amounts of money where you can buy a bunch of bunch of houses cheap, and that's a different strategy, right? I mean, um so so I feel like uh that's why I've decided to compare apples and apples, no leverage, no leverage. Real estate, what's is this? And I decided to just go go with go with Bitcoin because it's it's a free trade. You don't have to do anything, you don't have to go clean up, you don't have to go, you know, pick up uh trash or or get a phone call that something's broken. It's patient, you wait patiently for five, ten years and do nothing, you get paid. So there's any simplest trade ever in this in this wall. I don't see any other trade that you can make that we can make, and then and you're confident enough to say like you'll be you'll be able to make 20% a year. So so it's a no-brainer for me because I don't like leverage and I don't want to take leverage. So um so I've invested uh you know, probably you know, in in three different LPs, uh probably in 2020 around that time when everything was crashing. Um so it's been what five years ever since. So I think uh you know I've invested close to a million dollars in those funds. And every year, every every year, uh, you know, I just get I get like negative, negative returns, right? I've just like, you know, that money is going down, down, and I get capital calls, right? Every time, look at they lost their, they're building some project and now they want more money. So now I'm sending more money. Uh so all my projects I've gotten capital calls in the last two, last one year, right? So so now I'm putting more money just to keep it going, right? Again, it's all gonna be working out. Uh again, that's where I feel like there's a lot of stress right now in the in the commercial real estate. These are all multifamily um units, and everybody is like so much.

Reshma Vadlamudi 20:30

Yes, multi-family during 2020, yes, uh they they were overbrought, and yes, now we are seeing everyone wanting to get out of the dead.

Eshwar 20:38

And then, yeah, so I don't think like, you know, even if they if I get out of the my that investment is probably dead money for me, right?

Reshma Vadlamudi 20:44

Because because by the time they come up, you know, they've especially multifamily right now is yeah, yeah, yeah.

Eshwar 20:51

So so in that sense, like I had I invested that money in Bitcoin, I would probably probably be some doing so much better. But um, but um, but yeah, these are the lessons that you learn. You take to show I'm I never was against it. I invested in it, looked at it, got experience of it, yes, looked at what it actually meant. I think it's a good investment if you're willing put willing to put your time and become a GP, I think it's good. Uh, if you wanted to just become an LP, for me, there are better opportunities elsewhere. So that's that's how I look at it.

Reshma Vadlamudi 21:18

Yeah, yeah. Makes sense. And also, I think there is there are different kinds of I uh where where were these multifamilies? Were they here in Texas?

Eshwar 21:28

No, I invested through uh funds, so I don't know where they are. Um I think it's it's mostly uh Texas, it's funny enough, mostly Florida, Texas. Um and and yeah, mostly these two places. And then and oddly enough, those are the two markets that are going down drastically, especially Austin and Florida, I think it's because of uh the oversupply right now.

Reshma Vadlamudi 21:49

Exactly. Yeah.

Eshwar 21:50

So again, you know, um, but I for with Bitcoin, I don't have to worry about it. It's only 21 million, probably four or five million is already uh people that have dead that are dead and lost their. Wallets and we're not going to recover. It's probably only 15, 16 million Bitcoin left. And that's never going to increase. So when the supply is limited and uh and then the demand increases, the companies buy, countries by, uh, corporations by, then, then uh then it's a it's a no-brainer, right? For me, especially for me, that's how I look at things.

Reshma Vadlamudi 22:18

Yeah.

Eshwar 22:19

Uh, because not only see the speculative nature of it, but I also see the actual use cases on the back end, how they can be used for multi- you know, uh microtransactions, AI agents. If you see all of that, um, and if you look at the the current world scenario, uh how the dollar is you know depreciating, and how the the macro macro environment is, how overlevered every everything is, um, and uh you know how long can they continue to keep this uh keep this going? So you get a holistic 10,000-foot view of everything that is happening, and then you the choice becomes very easy. You buy gold, you buy real estate, or you buy Bitcoin. Um gold uh is a great investment, but unfortunately you can't carry it with you, you can't do anything with it. Um, and uh and uh you know that's uh that's definitely the best option that is out there. But I think the pristine asset for me at this time, where you it's not controlled by any governments, you can control your control your own Bitcoin. Um and uh you can carry it anywhere. You just remember the 12 words in your head, and you just you just uh take a flight and be in Japan and you have your a billion dollars of Bitcoin in in your head, essentially, right? If you do have it. Um so so and then there is a market for it, and there is a 24 by 7, it's not like closed on Fridays, Saturdays, it's there every day. It is the most liquid asset that is out there for you to sell it and get it. The bid aspect is very, very reasonable. Um, and what other asset that you can tell that you can actually send uh you know uh 20 billion dollars uh to somebody for less than$50. There's no other asset that you can you can say that you can do that. Just imagine, like if you can send$200 billion for for whatever free let because you only pay the gas fee, so it takes about 30 minutes. Imagine sending a billion from here to India. Yeah, you probably you'll not be able to, it'll probably take six months just to fill out the paperwork, right? So so when that is the when is that is the case, and if there's wars or whatever the factors that then it becomes like this pristine asset that is outside of government control. If you have money in the bank, if there's a war, they can declare like an emergency, and then they can say like you need to, you know, they can do certain things, they have emergency powers to use in terms of wars. So uh there's many instances in Europe that people's monies were taken by the governments just to pay the debts off because you know, because they had to spend the money there. So you're not stopping anybody to for the government to do overreach and and take money from you, you know, in not only literally take away, but but dilute your money to so much that that it's not worth it's worthless, then then um the choice is very clear for me, uh especially, and then that's that's how I choose to invest my my my money. I'm always I'm on the um the riskiest of the riskiest types, like if there's a risk percentage of risk, I'm willing to take everything because I like to bet on myself. Even if I'm wrong, I know I can I can get out of it and then I can do something with it, right? As long as I I I have a shelter and uh and and a food at home, but nobody can beat me. So so take all my money if you want, I don't care, right? So so I'm that kind of uh investor, I'm an aggressive investor, and um and you know, time will tell.