Ep. 020 | Surviving the Market: Lessons in Cycles, Risks & Resilience

In this thought-provoking episode of SOS Stories of Survivors, host Serina Dansker sits down with Michael Litt—a seasoned financial strategist with over three decades of experience navigating the complexities of global markets. From his years as Managing Director at Morgan Stanley to his role as a founding partner at the multi-strategy hedge fund FrontPoint, Michael has weathered economic booms, market crashes, and everything in between.

Drawing on his deep expertise in asset management, equity derivatives, pension strategies, and alternative investments, Michael offers rare insights into how cycles, risks, and resilience shape not only market success but personal growth. His story blends high-stakes decision-making with the human side of finance—shedding light on the psychology, discipline, and adaptability required to thrive in uncertain times.

Whether you’re an investor seeking wisdom, a professional navigating career shifts, or simply someone determined to survive and succeed through life’s ups and downs, this episode delivers timeless lessons on staying grounded, making informed choices, and finding opportunity in adversity.

To learn more about Serina Dansker, purchase her book S.O.S.: A Lesson on Love, Loss, & Survival, book her for a public speaking engagement, and discover more stories of hope, healing, and resilience, visit www.serinadansker.com.

S.O.S. Stories of Survivors — Where Survival Sparks the Soul.

Transcript

SPEAKER_01 0:34

Hey there, and welcome back to SOS Stories of Survivors. Today, we are talking about financial survival and mental survival. Picture this Washington, DC just passed this huge stimulus bill, so big that our national debt may raise to $53 trillion by the year 2034. That's absolutely mind-blowing. Today, here on SOS Stories of Survivors, we are welcoming my friend and financial guru, Michael Litt. Michael was the partner at the Front Point Partners, which is the hedge fund that was featured in the big short. He's been advising institutions and clients, and he's now sharing what he sees for the market going forward and what risks and pitfalls are out there. So please join me in welcoming Michael Litt. And also, something you guys should know, he is going to be premiering on SOSradio.live his show, That Guy Is Lit. So stay tuned to hear more about that. Welcome, Michael. So glad you could join us today.

SPEAKER_00 1:44

Thank you, Serena. It's good to be here. And uh it's a fun topic to talk about because there's a lot going on.

SPEAKER_01 1:51

Oh my God. I just want to get right into this. But first, I really I think our listeners want to know about you and your background. You've said you've been around the market since an early age, probably like 15 years old. Were you really running trades for your uncle on the Mercantile Exchange?

SPEAKER_00 2:08

Yes. I I remember this movie they had way back in the day called The Uh Oliver. And there was a character on Oliver called the Artful Dodger. And he took Oliver running around everywhere in London and taught him the streets. And, you know, sort of they were street urchins and they taught him the ways of the streets. Well, um, when I was 15, my uncle brought me down to the mercantile exchange and uh had me running paper around to different pits and putting trades in for him. And they were in like the Deutsche in the Deutsche Mark currency, which we'll talk about later actually, and uh financial futures, um treasury securities, and eventually the SP 500 futures, a lot of meats, you know, trading feeder cattle or pork bellies, things you hear about. But actually at 15, I was running around like the artful Dodger on the crazy loud, you know, sort of insane floor, learning how to trade at the age of 15.

SPEAKER_01 3:09

That's absolutely incredible. And and what lessons did you learn about risk and discipline in those early days?

SPEAKER_00 3:18

It's a good question. You know, it's interesting that markets moved what they call upstairs. So people were trading with electronic screens, which is how everybody trades now. And for a long time they'd call each other on phones and execute trades. Now they just execute, you know, electronically. But uh what I experienced there when my neuroplasticity was impressionable was the uh the body language of people as markets were moving. And so you could really see sort of into the soul of markets and how people behaved as markets moved. And so that's very much imprinted on me, and it helps me a great deal in seeing things that others might not be able to see.

SPEAKER_01 4:03

Wow. I mean, that that's I I was in uh financial advisor in my prior life, and when you say body language, you learn to read people, and body language is a huge defining characteristic. I I find that really um amazing and really impressive that at the age of 15 that you were able to connect with that. Um, I I I applaud you for that. I I have to ask you, I mean, you were on the mercantile exchange floor, then you went to uh Morgan Stanley and derivatives, um, and then to Frontpoint as a as a partner. Um, was there a thread that connected you between those positions in your career?

SPEAKER_00 4:44

Yeah, I it interestingly, the derivatives uh working in first asset management and then the derivatives group connected back to the financial futures and the options on the futures that were traded. So understanding derivatives came from that original um because futures by definition are derivative securities. And so that experience led to that and combining understanding what what we call non-delta one securities, which is an option. An option is not owning, say, Apple stock, right? Right? Um, you own an option on Apple stock, so it might go way up or it might go to zero.

SPEAKER_01 5:27

Right. So it's an option to either buy or sell, right?

SPEAKER_00 5:29

It's an option to either buy or sell Apple stock, but it has its own life. It's different than it's related to, but it's different than the stock itself. So there's a kind of mathematical relationships between those derivative securities and the stock or the bond itself. So that those were related. Um, going to front point had to do with understanding a lot of different securities markets at that point and being able to um write about write research papers and allocate amongst the different investment strategies we had. And that's what I was doing was allocating capital to different teams when opportunistically when their opportunity set was most attractive in our view. Now that was a judgment call, right? But understanding all the different global markets and the different securities in those markets was required to be able to make an informed decision on with respect to allocating capital. And we ended up ultimately, front point peaked out at I don't know what it was $13 or $14 billion, which was a lot for a hedge fund back in that that day, and made us one of the larger hedge funds um out there at the time.

SPEAKER_01 6:46

Well, let's let's talk a little bit about that. Frontpoint is um is the central character in that movie and book, The Big Short. So, what did that movie/slash book get right about Front Point and about um the analysis and structuring behind what went on there? And talk about your role in in all of this as well.

SPEAKER_00 7:11

Well, the first thing I would do is give Michael Lewis a lot of credit. He does his research when he's writing a book and he found out everything that we were thinking and doing, and I think he probably did with the other uh two funds. Uh, Michael Bury is at one, and the two guys in the uh garage, Browning Capitol, um, in Colorado are the other one. But he learned, he went and did his homework on. And I will say that the book uh accurately, quite accurately, reflects um a lot of what went on, not only at Front Point, but in the marketplace and with respect to how people were behaving. So I think the first thing is that the book got it pretty much right. The movie didn't stray that far from the book, and one of the interesting things is Michael Lewis said with Liar's Poker and Moneyball, they actually had him on the set, they had him involved in some of the script writing. With uh the big short he was not at all involved. But he said, in his opinion, it turned out to be the best of the movie, so he said maybe I shouldn't be involved. But um they had to they had to leave a few things on the cutting room floor in terms of details, but they pretty much stuck close to the book and executed, in some ways, capturing the excesses of the people in the marketplace and the regulators, um, the government officials, um, the origins at Solomon Brothers with Lou Rainier. I think they might have captured some of that even better than Michael Lewis did in the book. So I give them a lot of credit for for getting most of it right, frankly.

SPEAKER_01 8:48

Wow. Wow. I um I've got to like educate our listeners a little bit on the big short. I mean, this was during the financial crisis that took place back in 2000, nine. I want to say seven, but yes, 2008, nine. And um, you know, the big short really talks about what some of the catalysts were behind it and and and uh the housing market and and um there's a a story circulating out there that you actually authored a piece of research um that was one of the reasons why Front Point actually did the trade that they did. Can you explain a little bit about that?

SPEAKER_00 9:33

Yes. Um my partner Gil Caffrey and I had observed that there were a lot of excesses in terms of the way investors were behaving. And it's very you can see excesses when they when they are happening. The most difficult part of taking advantage of that is knowing when that's gonna end, when the party is gonna get broken up, if you will. Yeah. Um I we are we wrote a piece called The Great Compression, which was about the compression of risks, credit spreads, which is how much you get paid to take risk in owning a credit instrument or lending money to somebody.

SPEAKER_03 10:15

Right.

SPEAKER_00 10:15

So people were willing to lend money for very small incremental um returns, which didn't seem consistent to us. And it was really driven by these leverage securities. There was just so much capital being put into the credit markets that it was essentially driving up the price of the bonds and down the and driving down the credit spreads, hence the Great Compression.

SPEAKER_02 10:41

Wow.

SPEAKER_00 10:41

And we saw that this was going to end. We just couldn't didn't know when. And yes, that was a widely read research piece, and people still to this day go back and say it was the in the story was told in the Pete paper, The Great Compression, what was going to happen. But I'm telling you, we couldn't know when it was gonna happen. That was yeah, and we and we didn't, we were a little early. Just and in the in the real life and in the movie, Michael Burry's character or uh no, um the Michael Burry character, right? Um, who's Chris played by Christian Bale, right? Right, he is so early that he's you know he has to like like essentially block calls from all his investors, right? That's a real, that's the real risk of trying to predict something like this. That's more more real than anything else in the movie.

SPEAKER_01 11:35

Well, yeah, I mean, timing the market, right? I mean, you can the writing is on the wall a lot of the times, and you could see things, you know, going to happen and and but then you know, something else will come in blindsided or you know, a different uh something else will emerge sociopolitically or or what have you to alter the timeline on what you're expecting to happen. So it's that's a real concern. Um, is there a durable lesson that you'd want investors to take away or not forget from what happened between 2007 and 2009? Only because we all as humans we have short memories, you know, but history repeats itself a lot. And I'm just wondering if you have any any thoughts on that.

SPEAKER_00 12:20

It's a good question. I think there's a a general lesson, and then there's a specific lesson. And the general lesson is that excesses occur, and in the period building up to them, every bul everybody believes in whatever the mantra is in the marketplace at that moment. And everybody is willing to go along with the crowd. It's never any different. It really isn't. It was that way with the dot-com, it was that way with the credit markets, okay. Um, it was that way with growth stocks in 2019-2020. And people don't realize we had a crash in growth stocks in 2021. There are many growth stocks that went down 80 to 95 percent. Crypto went down, and a lot of them have not recovered anywhere near AI stocks and extremely mega cap AI stocks have, but that masks what went on between between 21 and today, 2025, in terms of the losses there. We may have excesses at this moment in time now, but again, people will still go along. In terms of the specific lesson, it has to do with housing. And we'll get to that today as we get into our discussion. I'm gonna make a point about the the very well-intended social policy driver that led to the excesses in subprime mortgages and the credit markets and how it relates to a housing market today.

SPEAKER_01 13:57

Yes, yes. Um, I let's let's start talking about. I mean, you have a slide up on the screen right now. Can you um talk about what this chart is showing us? I mean, I see, you know, it's referencing the new stimulus bill that was just passed. I see a lot of debt on there. So let's let's uh let's get down and and talk about this.

SPEAKER_00 14:22

Right. I mean, everybody knows about OBBBA, which was passed in in July uh by Congress and the Senate, and it barely passed. It was there were a lot of there was a lot of negotiation going on. Um even today, I learned about an element of this that was taken out at the last minute that had to do with uh drug pricing, right? There's um there were a million things in this bill. Some things stayed in, some things got taken out. Some things are good policies, some are bad. At the highest level, the blue bars in this chart represent the tax stimulus or cuts, the net tax stimulus or cuts that are estimated to occur because of the bill. So beginning in 25, there's a there's a small increase of 100 billion, but then there's a half a trillion dollars or 500 billion every year that are tax cuts. Those are reductions in revenues to the government. So they add incrementally to the deficit. In total, uh we are going to add, as we'll see in a moment, somewhere between two and three and a half more to the deficit over the next 10 years because of the bill. And the baseline additions to the deficit were projected to be $17.5 billion. So now they're projected to be $17.5 trillion. I'm sorry. That's okay. Uh and now they are projected to be $21 trillion by most estimates. And that could vary by a trillion or a trillion and a half, but you're you're gonna be somewhere between $20 and $23 trillion of incremental debt between now and 2034. Now, where does that money um go? Because it's going, some of it's going to households, and then we have another thing going on, which are the tariffs.

SPEAKER_03 16:18

Right.

SPEAKER_00 16:19

Right? So two big economic events occurred somewhat simultaneously. And so in this chart, the orange represents um the OBBA either increase in taxes, which is negative below the horizontal line, or OBBA at being a tax cut and more house, more net household income for the orange bar being above the line. One thing you'll notice about the orange bars, when you go to the right, there's a very large positive $12,000 per household, and that's for the top decile of income earners.

SPEAKER_03 16:57

Okay.

SPEAKER_00 16:59

The you would expect that to a large degree because they pay the largest amount of taxes. What is surprising is that tax benefits fall away pretty quickly as you go from right to left. So as you go from the ninth and eighth decile household incomes, they still do pretty well. By the time you get to the middle class in the fourth through seventh, they're getting a little bit, but the blue bars, which are the tariffs, are all below the line. So the tariffs which get paid at the customs house are going to be paid by the consumer.

SPEAKER_01 17:39

Oh, absolutely.

SPEAKER_00 17:40

And so consumers are paying, all of the consumers are paying for that. When you add the either net increase in taxes or and the um what you pay for tariffs, you get the black dot. So, net of the two, the only households that have a net benefit from the tariffs, the combination of the tariffs, and OBBBA are the top 10% of income earner households. The 80th to 90th percentage households basically break even. And the you know, the lowest income up to the 80th percentile are essentially going to be worse off.

SPEAKER_01 18:25

That's that's that's always typical when you see sometimes of these bills where they hide everything and it makes it appear like, oh, this is going to be great for everybody, but but really it's it's the it's it's supporting the wealthy as as these numbers show.

SPEAKER_00 18:45

This next slide actually just shows the incremental addition to the deficit. Now, you will hear some people who are uh I I always have to take a neutral stance politically because if you're in the business that I'm in where you try to have to make money by what you believe about the markets, right?

SPEAKER_03 19:03

Right.

SPEAKER_00 19:04

You ignore politics or try to ignore politics. You look at the data, you look at the impact of the policies. Um people will estimate that the incremental addition to deficit is $3.5 trillion over 10 years. Some people will say it's $3 trillion, a very uh uh administration-friendly group called the Tax Foundation. I put them on there because that's about as friendly a set of assumptions as you can make about OBBBA. There, they think it will add $1.8 trillion.

SPEAKER_03 19:37

Wow.

SPEAKER_00 19:37

So somewhere between a very rosy, you know, looking at the world through a rose rose-colored glasses, you could say, well, it's only adding $1.8 trillion. And a, you know, a lot of the other estimates by Penn, Yale, the Congressional Budget Office are more sort of three to three and a half trillion. So there's not a lot of argument, but we do get to $53 trillion in debt 10 years from now. And there's a little asterisk here because at the bottom, the Social Security Trust funds are estimated to run out in 2033. So we're gonna get to an intersection where we simultaneously are on a pay as you go with Social Security, and we have $54 trillion in outstanding debt.

SPEAKER_01 20:19

That just blows my mind, okay, because I mean, we've always suspected that we were gonna run out of money just based on the population, the baby boomers, and the amount of money that was going into Social Security versus the amount of money that would be coming out. But with all the growth in the market, uh I'm, you know, I know that they put some Social Security into the market or they've done some hedges and they've made it easier for people to save for retirement by increasing the minimums. But what does that mean for consumers or for the everyday person that's that's hoping to retire one day and um take some of the money that they put in their entire career?

SPEAKER_00 21:01

Well, uh what it means is that you have to save more for your retirement.

SPEAKER_03 21:06

Yeah.

SPEAKER_00 21:07

Because they are going the the we're gonna have to deal with this deficit, right? And the fact that Social Security will not have a funded pool of assets sufficient to pay for uh Social Security obligations beyond this date. Um one of the this consumer's actually very smart. And the consumer is sort of picking up on this now. And what we see in consumer sentiment surveys, which is one one of the things that I watch, is that they're quite low. In fact, the number between 55 and 65 that we've been seeing is sort of a recession level consumer confidence. We haven't we are not in recession, and the probability we're going into recession is still not that high, right? The economy and earnings seem pretty good, though we're seeing. Elements of the economy begin to slow down at the moment. Okay. So the consumer is seeing all this, and we've been in a good economy for like three or four years now, very good economy. And I'll talk a little bit about why that's true and why the consumer actually had been kind of in a pretty good place, but is now sort of reconsidering. Okay. One thing that you should keep in mind is that when we look at gross domestic product, and when the person on CNBC or the nightly news says, oh, the economy grew 2.3% last quarter. Right. What they mean is the gross domestic product on an annualized basis increased by 2.3%. Right. Now, the biggest driver is actually consumption expenditure. It's almost 70% of final demand. Investment expenditure by businesses is really only 13%. Government spending is 22%. And net exports are negative 3%. That's because we import more than we export. Right. So they subtract from they are a net reduction to GDP.

SPEAKER_01 23:18

I have a question. I mean, I do they exclude certain numbers from GDP to um to manipulate the numbers? You always hear the people say, oh, well, this is X gas and oil or or or what have you. You know, what do you what do you think about that and what's your take on that?

SPEAKER_00 23:37

The number, the numbers we publish on economic data on labor statistics. Um that was in the news as the person who calculates the jobless numbers lost their job over that. They're not political. They are the Federal Reserve and the Bureau of Labor Statistics, the International Supply Managers, the University of Michigan Survey, those are pretty clean data.

SPEAKER_03 24:06

Okay.

SPEAKER_00 24:06

There was data coming out of China that we had some questions about, and China has stopped publishing a lot of data because they didn't like the answers they were getting.

SPEAKER_02 24:15

Okay.

SPEAKER_00 24:15

And hopefully we don't go that direction because I use a lot of that data. So I will be disappointed if we stop, if we stop getting data. So the question is, how do we how do we pay back all that debt? And that's why the consumer's a little hesitant here. They're pretty intelligent as a group. Um, there was this movie uh back in the day with uh Chevy Chase called Fletch. Uh-huh. And there's a scene where he's at a country club and he walks into the he's not a member, so he walks in and he's he's uh he orders a drink, and the fellow says, Who, you know, what account is this? And he said, charge it. He says, charge it to the underhills. So it became kind of a running joke between my friends and I charge it to the underhills. Who's paying for this round? Um, well, but the underhills are gonna have to pay all this debt back. And the question people ask me all the time is, How are we gonna pay all this debt back? Right? It seems uh, but historically, the way they did it uh was they printed these coins, and each of these coins has the same glorious leader on printed on it. And they an unclipped coin was the one on the far left. And then over time, as it was in circulation, people clipped some whatever metal, maybe this was made of silver. They clip some silver off the edges um and round it out a little bit, and then over time they clip it a little more. So whatever saying was on the outside there in Greek or Latin uh got lost. And believe it or not, the coin on the right, it half of its metal is missing. So you could take that clip metal, melt it down, and make a whole nother, an entire another coin.

SPEAKER_03 25:53

Wow.

SPEAKER_00 25:54

Okay, and that is essentially clipping coins is the equivalent of what is called devaluing your currency. Yeah. So I borrow from you $53 trillion, devalue my currency, I borrow I borrow these from you. Right. Right. And then I pay you back in those. Right? Because I've got twice as many of them.

SPEAKER_01 26:18

Yes, of course you do.

SPEAKER_00 26:20

So it really only costs me $21.5 trillion to pay you back. That's the concept of devaluing your currency if you get too much debt. Um we've seen that historically. This is this is an age-old practice, but what's already happening?

SPEAKER_01 26:37

Well, wait, wait, I gotta, I gotta ask you this though. So you're devaluing the money, so someone's gonna have to pay for it. So of course we say the underhills tongue in cheek. But what does that mean for like Gen C and and and and let's just explore just for a second the mental impact on that, you know? For we are we have if our if our currency is devalued, and I know you're gonna get to that in a second, what does that mean for our spending and and and our children's generations and their children's generations? Right.

SPEAKER_00 27:09

I I I really think that the the the cohort that are the underhills that we've charged this whole thing to. And it's it's a demographic reality. The baby boomers were a population, um kind of like a rat moving through a snake.

SPEAKER_03 27:25

Right, right.

SPEAKER_00 27:26

Okay. It was a large population group. It's not just the United States that has experienced that demographic. It's in Europe, Japan hit it first, right? Um, Europe and the United States are hitting it contemporaneously. And even in a larger way, the rat is is bigger. It's more like, you know, it's more like a uh a raccoon going through the snake. China.

SPEAKER_02 27:51

Yes.

SPEAKER_00 27:51

China has an even bigger demographic problem that it hits a little later than we do, but it's a larger demographic imbalance. And that demographic imbalance uh ends up weighing heavily on the younger cohort. So the younger cohort in this case are the millennials and the and the Gen Zs. So the Millennials and the Gen Zs really need to maximize if they have qualified um uh retirement plans like a 401k, they really need to maximize those. Yeah. Okay. Those are tax advantage programs. And uh I think they also are uh one of the big dividing lines between how households that are wealthy and not wealthy is homeownership. So they really need to try to get into get on that ladder, that homeownership ladder. And we're gonna talk about that a little bit later. Um, one of the realities for them, though, is that the devaluation of the currency is their measure of wealth. It's how they get paid, it's mostly what they save their money in. Right now, households in the United States have the lowest exposure to non-dollar assets that they've had in like 35 years.

SPEAKER_03 29:03

Wow.

SPEAKER_00 29:04

Because we are so enamored with the SP 500 and the AI stocks and indexed uh US stocks that we have sort of turned away and we we really bel we believe strongly in our prospects against non-US dollar prospects.

SPEAKER_03 29:26

Interesting.

SPEAKER_00 29:26

And that may be that may be something that I allocate against.

SPEAKER_01 29:31

So I as I see, I mean, I see euro stocks on your on your chart here are are up 24% year to date, while the SP is up 7%. So how should our younger people think about a global diversification without feeling overwhelmed? Because it can be overwhelming with all the politics and the wars and everything else going on.

SPEAKER_00 29:54

So the euro has already gone up about 12.5% against the dollar this year. So the devaluation has already begun.

SPEAKER_03 30:00

Wow.

SPEAKER_00 30:02

And when you translate that, that is, as I said, that's your wealth.

SPEAKER_03 30:05

Right.

SPEAKER_00 30:06

That's the Gen Z's wealth, that's the baby, that's everybody's wealth who has all their money in US dollar assets, whether it's your house, uh, your checking account, your 401k and stocks and bonds, it it is a devaluation relative to another currency. Now, that doesn't feel like much to you, right? Because you're buying things in dollars and you have dollars.

SPEAKER_03 30:30

Right.

SPEAKER_00 30:31

But when you look at how the Eurostock 600 index has performed this year relative to the S P 500, it's almost 20% behind.

SPEAKER_03 30:40

Wow.

SPEAKER_00 30:40

Right. And as I said, US investors have the lowest allocation to those types of assets they've had in many, many years. So the Gen Z millennial baby boomers, if the risk is that we devalue our currency and we import inflation, devaluing your currency over time is one component of upward inflationary pressure.

SPEAKER_03 31:08

Yeah.

SPEAKER_00 31:09

Right. And you will need assets that hedge your wealth against inflation. Housing is one thing that has historically done well against inflation, right? Yes. Commercial real estate property has done well. Um commodities have done well. It's one reason commodities are doing well on a dollar basis right now because they're cheaper for somebody who owns Euros to buy.

SPEAKER_02 31:34

Right, right.

SPEAKER_00 31:35

Oil is cheaper, gold is cheaper. In dollars, gold has gone up a lot, but not in euros. Right? Yeah. To them, it doesn't look like gold is creating that much economic value. That's why a devaluing dollar is an asset you want, you want to hold some commodities. Stocks tend to do pretty well in inflation, except when you get stagflation, where both the economy is doing poorly and inflation is going up.

SPEAKER_01 32:02

Yes. So let me ask you this. So excuse me, for someone out there who you know is trying to build their wealth. Um, and let's say um they they want to be there by their first home or whatever, they see that the government's borrowing, borrowing, borrowing. So should families borrow too? What is the strategy or you know, uh between taking on debt and and what impact does having so much debt cause that that stress to repay? Because that's a big thing, especially when interest rates were starting to go up. And every dollar or every percentage point that the that interest rates go up equaled real money coming out of your pocket to pay those mortgages.

SPEAKER_00 32:54

Okay, we're gonna have to unbundle that. There's a lot there, Serena. Um the first thing, okay, I'm gonna talk about interest rates because interest rates will determine where you can borrow money and get a mortgage to buy a house.

SPEAKER_03 33:11

Right.

SPEAKER_00 33:12

Right? Absolutely because most first-time home buyers are gonna have to take a mortgage. Absolutely. They're not gonna buy a house for cash.

SPEAKER_03 33:17

For cash. No.

SPEAKER_00 33:18

Let's assume that, right? So this green the green line shows you the percentage of our 30-year bonds, the 30-year U.S. government bonds, that get bought by foreigners. Well, what's happened recently is foreigners have sort of pulled back from buying our bonds. It's actually at a very low percentage. They buy almost two-thirds of our the bonds we issued. So make no mistake about it. Our deficit is financed by foreigners.

SPEAKER_03 33:44

Right.

SPEAKER_00 33:45

Okay. Not just us. They realize that this currency devaluation strategy may be in play. They don't want to lend us those big coins on the left and get paid back in the little coins on the right. Right.

SPEAKER_03 34:03

Right.

SPEAKER_00 34:03

That's already happening. Now, well, what does that mean for me? Yeah. Okay, I don't, I don't, I don't feel so what? You know, what a yeah, they can go by their own. I don't care. Well, you kind of do care. I'll tell you why you care. The reason you care is the black line is the current yield curve. So on the left is one month, and then it goes three months, six months, one year, two years, all the way out to 30 years. And what you can see is that the black line slopes upward, right? Interest rates are about four and a quarter percent for shh in your money market fund.

SPEAKER_03 34:40

Right.

SPEAKER_00 34:40

But it goes up towards five percent as you borrow longer. That's called the term premium. Okay, you pay more for longer data. Now, interest rates a year ago when the Federal Reserve had the interest rates elevated because they were trying to slow down inflation, right? Then they lowered short-term rates, right? What's interesting about the blue line relative to the black line for those 10, 15, 20, and 30 rates, by the way, those are the rates that determine mortgage rates, not the short-term rates. It's the long-term rates. Why did the black line go up while the blue line went down? So the Federal Reserve lowered rates, right? The blue line on the left came down to the black line on the left side of the, but the black line went up for the long rates that determine mortgage rates. And mortgage rates have hung out around six and a half percent.

SPEAKER_03 35:35

Yep.

SPEAKER_00 35:36

Right. Well, the part of the reason is because those foreign buyers have stepped back.

SPEAKER_03 35:42

I see.

SPEAKER_00 35:43

And when they step back, right, this is part of the answer. When they step back, the long rates, which they if they're buying two-thirds of that, then the next buyer is gonna buy them at a little bit of a higher rate.

SPEAKER_03 35:56

Right.

SPEAKER_00 35:56

So there is a what we call a term premium, and the term premium for long-term U.S. government debt has gone up. The market is anticipating that all of this debt is gonna come to market, this $53 trillion, is gonna have to be financed, and that it's quite possible that the dollar is devalued. So that impacts, that's how it, that's how all of that impacts young people who are trying to buy a house. It makes the mortgage rates higher than they otherwise would have been.

SPEAKER_01 36:28

Wow. So just to, you know, are there risks or or or or um not risks, are there things where investors can guard against um uh having to pay substantially higher mortgages when they're purchasing houses? Or I guess what kind of time horizons should should someone who's looking to get into the housing market or be look housing market be looking at?

SPEAKER_00 37:01

That's a good question. Um one of the problems we have in this country right now is that the percentage of home transactions that are first-time buyers has declined to a low point. Okay, less than 25% of home purchases are first-time buyers right now, they're having a harder time getting into the market. Yeah, but part of it is the price of housing since um we've had full employment for a while, and we have had the cost to build a home. Land and the all the components to build a home have gone up. As we saw from the last chart, interest rates are higher. Yep.

SPEAKER_03 37:50

Tariffs.

SPEAKER_00 37:52

Well, tariffs don't play into the housing just yet, but they will because they're not gonna allow building costs to go down. Building costs will, on average, go up. Right, right. And as we saw, the consumer's gonna have less, not more money. Most households will have less, not more money when you net out tariffs and the OBPEA, right? So that's not gonna help this chart, which worries me. Because the truth is young savers need to maximize their qualified retirement plan 401ks, right? And they need to get into the housing market because homes do well against inflation. Yeah. And if you're devaluing your currency, there's a bias towards higher levels of inflation. Even though 6.5% might seem high, or six and a quarter or six, it's probably going to have been prudent to buy a house and sign up for a fixed-rate mortgage at that level. Now, remember, in the United States, we have a very unique thing. If mortgage rates do go down to four and a half or four and three quarters or five percent, you can refinance your mortgage at that rate.

SPEAKER_03 39:06

Right, right.

SPEAKER_00 39:07

Right with no penalty after a short period of time. I think people, you know, young couples, young families, they're gonna need to be aggressive about buying homes. And you have to realize going back to, we'll go back to a period of time in the 1970s.

SPEAKER_01 39:27

I was just gonna ask you about that.

SPEAKER_00 39:29

We're gonna go back to that and talk about it. And there's there's a little bit of a lesson there, but one of the things you wanted to own during that period was a home. Yeah, it was probably one of your best investments because stocks during the 70s were terrible investments.

SPEAKER_01 39:46

Does it does it matter what part of the country that you live in when you're talking about buying a home? Is it does it matter by city, by region?

SPEAKER_00 39:57

It always matters.

unknown 39:58

Yeah.

SPEAKER_00 39:59

But if you think I understand the micro housing markets, um, some markets are uh do do better than others at different times. And after the fact, you can usually explain why. Uh but uh there is no question that in some markets, I was looking at the Louisville market the other day, for instance, and home prices have gone the home, the cost to build a home in Louisville, Kentucky has gone up between 10 and 13 percent over the last 24 months.

unknown 40:32

Wow.

SPEAKER_00 40:32

Right? And so what was an affordable market is less affordable. Nashville is even worse. So markets that were affordable have become not unaffordable, but less affordable because home building in the United States, the volume of homes being built, has not caught up with the deficit that of homes that were not built during COVID. And because of the cost of building a home, right, and the labor and and components required to build homes, we're having a hard time catching up. So it's a very different scenario than 2007, 2008, 2009, where we had homes being built speculatively that weren't being purchased by the by families to live in. They were built, they were being purchased as speculative assets and they were empty.

SPEAKER_03 41:33

Right.

SPEAKER_00 41:33

Similar to China, where they have they don't have that many saving options, so they speculated on real estate and it ended up being a disaster.

SPEAKER_03 41:41

Right.

SPEAKER_00 41:42

We now have the opposite problem where we have this cumulative um supply shortage of somewhere between four and six million homes.

SPEAKER_03 41:50

Wow.

SPEAKER_00 41:51

We'll probably see more multifamily homes, more town homes uh that can be affordable. We probably need more of that type of housing, smaller single family homes, maybe on uh smaller acreage to make them affordable. But somehow we're gonna have to make that deficit up. And that deficit is the reason why owning a home is probably a smart strategy for the next decade. Because we do have a real supply shortage of homes in this country that was partly due to cost pressure, cost issues, uh partly due to the logistics of not enough home building resources, labor, coordination, logistics, and partly because of that we've been fully employed and demand for homes. We're also getting kind of a funny thing where millennials did household formation on a delayed basis, but Gen Z are doing it closer to on schedule. Yeah. So you're getting contemporaneous between those two generations, home household formation.

SPEAKER_01 43:01

Very interesting. I um I am really interesting to see where all of this takes us. Um we've talked a little bit about how um higher rates crowd out um you know priorities. So someone with student loans or mortgage uh debts are able to reset with with um uh with with uh refinancing their mortgages when interest rates drop. Um but you've also cited the 1970s dollar crash as a cautionary tale. Can you walk us through these thought processes that I am spewing at you?

SPEAKER_00 43:44

So uh similar to trying to derive the um issue with you know allocating money to subprime shorting subprime mortgages or shorting credit or hedging credit because credit was already standard, we learned from history. By looking back, these, you know, we were seeing signals, we were seeing signs of things. So one of the things that um really concerns me now, this is now we're switching to 2025, right? Okay. That's what concerned me then.

SPEAKER_03 44:13

Right.

SPEAKER_00 44:14

Housing doesn't concern me. There's the opposite problem.

SPEAKER_03 44:17

Right, right, right.

SPEAKER_00 44:19

What concerns me, and I keep saying this in all the interviews I do with with people, is the third rail is the independence of the Federal Reserve. We must have independent monetary policy, independent from the government.

SPEAKER_03 44:34

Right.

SPEAKER_00 44:35

Countries like Argentina don't have independent monetary policy. Right? And it ends, Venezuela doesn't have independent policy. Zimbabwe. These countries don't have independent monetary policy and central bank decision making that's completely independent from the government. Back in the 1970s, we did not have that. Arthur Burns was in charge of the Fed, and they refer to this as the Arthur Burns Fed. And William Powell, who runs the Fed, currently has actually made speeches indicating he does not want to be the Arthur Burns Fed. And Arthur Burns Fed was sort of told by Congress at that time, only mostly Congress was very powerful back then, that he could not raise interest rates above a certain nominal level. Like rates could not be above 4% or 5%.

SPEAKER_02 45:32

That's it.

SPEAKER_00 45:33

Forget about what's happening with inflation or employment. But you you can't be above that, right? It's not the constituents won't be happy. And that's it sounds innocuous.

SPEAKER_03 45:46

Right, right.

SPEAKER_00 45:48

But what it led to was runaway inflation in the United States.

SPEAKER_01 45:52

I remember that.

SPEAKER_00 45:54

So and and the funny thing is we're at about two and a half to 2.6% inflation right now, which is where it was in 1972 on the left side of this chart. But by 1980, it was over 12.5%. Wow. Mortgage rates went from where they are today, 6.5%, to 17, 18%.

SPEAKER_01 46:18

Can you just say that one more time?

SPEAKER_00 46:20

Mortgage rates when the Fed was not operating independently from Congress went to 18%.

SPEAKER_01 46:31

That's incredible.

SPEAKER_00 46:32

Now home home prices increased wildly in the 70s. You wanted to own a home.

SPEAKER_01 46:40

Yes.

SPEAKER_00 46:40

Because inflation was so high.

SPEAKER_01 46:42

But could you afford it?

SPEAKER_00 46:44

Cost of building a home was so high this there was no supply coming to the market. So it sounds, yes, your logic path seems like the right one. But what happens is that the supply gets shut off. The supply of new homes gets shut off, and household formation continues. So there's demand for homes, but there's not enough supply. And the cost of building one goes up and up and up because inflation is going up, you know, seven, eight, nine, ten, no, then over 12%.

SPEAKER_03 47:15

Wow.

SPEAKER_00 47:16

And this the economy was not doing that great. It had a few good years, had a number of bad years. There were a number of recessions during this period. And so the stock market really did kind of lousy. And that was a period referred to as stagflation, a stagnant economy with accelerating inflation. There are elements of that today that are present. Now I'll tell you why it won't get that bad. And the reason it won't get that bad is because back then wages were indexed to inflation.

SPEAKER_03 47:55

Okay.

SPEAKER_00 47:56

So you really had kind of a really a real negative feedback loop where inflation was high. So everything, all the wages went up. Today you don't have wages that are infl uh set to inflation. In fact, if we have a recession, people will lose their jobs.

SPEAKER_01 48:14

And and also our Fed is not our Fed is independent now as opposed to back then, right?

SPEAKER_00 48:22

That's coming into question under the current administration. Okay. There's been some the uh termination of the person who calculated the or it was in charge of calculating the jobs number and the conversations between the administration and uh chairman Powell have indicated that the uh administration would like to dictate where interest rates are.

SPEAKER_03 48:47

Oh boy.

SPEAKER_00 48:48

And that takes us back to the Arthur Burns Fed.

SPEAKER_03 48:51

Yeah.

SPEAKER_00 48:52

Now, what happened, and we didn't have the Euro back then, but we're now back to the clipped coins issue. And this is why having a larger portion of your portfolio in non-dollar assets, emerging markets, stocks, European bonds, and European stocks, things of that nature, the Deutsche Mark went up 47%, meaning the dollar lost almost almost half its value. Remember our clipped coin that was half the size? Yes. That's what happened. Interesting. That's exactly what happened. The dollar got clipped to half its size against the Deutsche Mark during that stagflationary period.

SPEAKER_01 49:34

Wow.

SPEAKER_00 49:35

And so And that contributes to inflation.

SPEAKER_01 49:38

Yeah, yeah.

SPEAKER_00 49:38

That because anything you have to buy from Germany, right? Sure. Or the Germans can pay a lot more for commodities. They'll drive the price of commodities up. But for us, with our our you know, little coin, right? We have to pay more of those little coins for uh physical commodities, whether it's lumber or soybeans, right? Right. Copper. Yeah. Just think of all these things. So this is uh this is sort of in play. This is something that I'm now starting to think about. And how do I invest recommend asset allocations against not this being a certainty, Serena, but this type of these characteristics being an increasing probability.

SPEAKER_01 50:31

Okay. So with that said, so so how so so this impact on currency and seeing how history can repeat itself and seeing where we're where the writing on the wall could possibly be headed. What could we do um to stay above this inflation? You know, can can wages like they had in the past, um, couldn't we just drive in interest rates down based on um uh on inf based on our wages? Couldn't couldn't we we we do something where we can change the course of things before it's too late?

SPEAKER_00 51:27

That gets us back to the um subprime mortgage crisis.

SPEAKER_03 51:31

Okay.

SPEAKER_00 51:32

The goal of the and it sounded also it started actually under George H. Bush, Bush One, was we really started focusing on that issue that I mentioned earlier where household wealth, household wealth can be divided into two categories, those that own homes and those that do not.

SPEAKER_03 51:50

Okay.

SPEAKER_00 51:51

And policymakers said, you know what, we need to have more people in that camp that own homes.

SPEAKER_03 51:55

Okay.

SPEAKER_00 51:56

So let's make it easier for them to buy a home. So let's reduce the stringency to get mortgage approval. Now it started out in kind of a small way, and there really wasn't that much uptake initially. Um subsequent administration sort of leaned into that policy initiative because it sounded good. I mean, it really sounded good. Hey, more people are going to own their homes.

SPEAKER_02 52:18

Yeah.

SPEAKER_00 52:19

This will improve neighborhoods, this will improve stability of the household, this will improve household wealth. And so we pushed from 63, 64% of home households owning homes up to 68, 69%.

SPEAKER_03 52:33

Wow.

SPEAKER_00 52:33

Unfortunately, that 5% couldn't pay their mortgages. Right? Yeah. And so doing something that sounds constructive turned out to be a problem. Now, what's going on right now is that, and this is unusual, US and European inflation expectations are diverging. Europe's are going down, and the US are going up. This is in part due to the tariffs. It's in part due to labor supply constraints we're going to have because of changes to immigration policy. It's due to, in part, the depreciating dollar. And so we have more inflationary pressures. They're going to show up on a delayed basis. It's more likely we see incremental weakness in the economy before we see the inflation showing up. But it's already out there in the expectations. And that's one of the reasons we saw those longer-term rates that determine mortgages, the black line and the earlier graph, being higher than they were last year, because we had expectations for lower levels of inflation a year ago on a forward-looking basis. Now we have expectations for slightly not the kind of inflation we saw in the 1970s yet. Yeah. But certainly a percent higher than we see right now. There's also a cost to uncertainty. And we've had a lot of uncertainty. The administration has had some policy changes, which people talk about, and after a while they stop talking about it because it happens quite often. I've noticed that there's almost sort of a numbness to it after a while. But some economists have looked at this line shows that remember that GDP number we talked about, which is our economic growth.

SPEAKER_03 54:27

Right.

SPEAKER_00 54:28

Uncertainty, and these are quarters, one quarter, two quarters, so these are three-month increments. But the longer you have uncertainty, the more you create lower GD, you subtract from economic growth. So if it only happens for one or two quarters, you lose about six-tenths of one percent.

SPEAKER_03 54:51

Right.

SPEAKER_00 54:52

But if it goes on for a full year, you lose one to two, one, one to one and a half percent. So the longer and what how does uncertainty manifest itself? It manifests itself in businesses not moving forward with a project.

SPEAKER_03 55:06

Right.

SPEAKER_00 55:07

What we're seeing in the labor market is that businesses aren't hiring. They aren't firing, but they aren't hiring.

SPEAKER_03 55:13

Yeah.

SPEAKER_00 55:14

And so those are what I would say decisions that are not being made. People in commercial real estate tell me that projects have been mothballed. They're not going forward with those projects. There are projects where the cost due to the tariffs, one of my friends is redoing a fancy store on Fifth Avenue. He ordered these big glass sheets because they sell a very high-end product, you have to show off with special lights. You know, the kind of bling you wears.

SPEAKER_02 55:41

Right, of course.

SPEAKER_00 55:42

Um, and the glass has extruded aluminum frames, and extruded aluminum has a not only is there a 15% tariff for that country in Europe where it's made, but aluminum it's an extra 25%.

unknown 55:57

Wow.

SPEAKER_00 55:57

So when he went to pick up the big glass frames of which he had millions of dollars of these, the tariff bill was 41%. That's insane. So he has people who have similar projects who are holding off.

SPEAKER_01 56:13

I I you you you can't sustain a business as you're continually losing money. I mean, you for so long to make up that deficit, it takes longer and longer and longer the longer you try and stay afloat. It's just just like, you know, as an individual with credit card debt, you know, if you keep just paying the minimum payment, that debt is gonna keep growing and growing and growing until you just are paying back hundreds of dollars more than you borrowed initially, or thousands, or depending on what the amounts are. But how how are we gonna fix this?

SPEAKER_00 56:49

Well, he had to pay the tariff and turn around to the customer and say, here's the tariff bill. Yeah, that's right.

SPEAKER_01 56:56

That's who's gonna pay for it.

SPEAKER_00 56:57

And so the customer had to pay for it. Yeah. Walmart's CFO said in no uncertain terms that the customers were gonna pay for the tariffs on the increase in prices at in Walmart.

SPEAKER_02 57:07

Right.

SPEAKER_00 57:07

And those are those lower income deciles we saw earlier, right? And they're gonna pay their their share of the tariff. So one thing that I'm seeing already is one of the things that was really sticky. Remember we had the inflation after COVID?

SPEAKER_03 57:25

Yes.

SPEAKER_00 57:26

A lot of it was what we call services inflation. Remember when the electrician and the plumber would come over and you you feel like you were getting absolutely railroaded. Yeah, it was a shakedown. Right. It was a shakedown. Those were services. And those were services inflation. And you were you were right to feel that way because services inflation was running up during that you know, two-year period, up close to those 1970s levels.

SPEAKER_03 57:53

Wow.

SPEAKER_00 57:53

Right. Um, goods inflation was actually um the grocery store and the cost price of goods was actually much more muted. Rents actually were a problem. Yeah. Rents went way up during that period.

SPEAKER_03 58:09

They're still high.

SPEAKER_00 58:10

Yeah. In certain markets, yes. In some markets, there was overbuilding in the southeast of the United States. They're actually falling.

SPEAKER_03 58:15

Oh, really?

SPEAKER_00 58:16

Yeah, a lot of people don't know that. But what we've seen recently, uh, the green line on the far right, is all of a sudden services inflations is are jumping up again. This is a forward indicator. This is the kind of stuff I look at. You don't see it yet, right? But you're going to see it because it's baked into the price of a lot of things that you buy or services you look for. So we're already seeing elements of that inflation starting to come back. And services inflation is really hard to get rid of once it sort of gets some.

SPEAKER_01 58:54

Interesting. I um all right. I want to ask you um uh a couple of questions. I want to I want to wrap this up and then I'm gonna ask you um some fun questions. But just in general, um, can you just give us your um your thoughts as to uh what we can expect next from the markets?

SPEAKER_00 59:17

The markets, right? You know what I always say, I when I speak at conferences, they have me get up at, you know, the what they do is they serve, they there's all these people in a room, you know, there's 10 or 12 people at a table, and it's an industry, or I might be the National Manufacturers Conference or the National Real Estate Developers. And I meet some of the people and I I always ask like who like the big personalities are, because then I can kind of razz that person from the stage, and that's kind of and everybody laughs. But I get to eat my salad, and then they say you gotta go up the stage now. So I never get to eat the chicken or salmon or steak, whatever they're serving. I never get dinner. I always just get the salad. So speaking is a good way to have be to have a diet. It's like a it's a really great force diet. Um, but the um see if I've got anything uh to talk about. Yes, I do. So the um people uh the uh when I get up there, they always ask me, you know, invariably I get through my little uh talk and my slides, make a lot of jokes, you know, Raz the the big the big wheel in the out in the uh outfit. And then they ask me, okay, what's gonna happen to the markets? Yeah. And I always make a joke and I say, you know, after the big short, I I had this crystal ball and then I dropped it and broke it. So now it's so much harder for me to answer the question, right? People do, they assume I have sort of a crystal ball.

SPEAKER_02 1:00:38

Yes, right, of course.

SPEAKER_00 1:00:40

Um, it really is triangulating all this information in my head, going back to the artful Dodger and 15-year-old kid on the floor of this exchange. I'm trying to get a feel for the body language I'm seeing in the marketplace. So we do see that uh services inflation is rising. We do see that the dollar is is going down. We do see that there are concerns about independence of the Federal Reserve. These are things I'm observing.

SPEAKER_03 1:01:10

Okay.

SPEAKER_00 1:01:11

Um, this chart actually shows earnings growth. The red and the blue line are roughly the same thing. You just adjust the uh blue line and you get the red line by subtracting the level of inflation.

SPEAKER_03 1:01:22

Okay.

SPEAKER_00 1:01:22

Um, but they're roughly the same thing, and it shows the growth of the S P 500's earnings year over year. So our earnings growing uh 20% a year or 10% a year, or our earnings flat year over year, or shrinking.

SPEAKER_03 1:01:36

Right.

SPEAKER_00 1:01:37

Right. So going in the into the end of 2024, earnings growth was accelerating. And it looked like we were gonna have sort of a 12% earnings growth. And that's kind of a healthy growth rate for earnings.

SPEAKER_03 1:01:55

Sure.

SPEAKER_00 1:01:55

Right? Um, earnings uh are still growing. We had a very robust second quarter report for earnings, but the forward earnings now are projected to only grow at 8%, not 12%. So it's the sort of momentum, earnings growth momentum is coming off, right? I think there was probably a lot of accelerated economic activity in the second quarter. Whenever I ask somebody, hey, did you buy something before the tariffs kicked in? And you thought the did you buy a bunch of stuff?

SPEAKER_02 1:02:30

Of course.

SPEAKER_00 1:02:30

I haven't talked to a single person who hasn't said yes to that question. I think in the second quarter we had a kind of a beat the con beat the tariff consumption.

SPEAKER_01 1:02:43

So it's more of an anomaly.

SPEAKER_00 1:02:45

It's temporary. It's temporal. And I'm thinking we're gonna get a slowdown, but we aren't gonna see it until we start seeing third quarter estimates and forward guidance on earnings. And that is what concerns me is that that blue and red line could start heading, start migrating down back towards lower year-over-year earnings growth. The stock market's trading at a pretty high multiple to earnings.

SPEAKER_03 1:03:10

Yeah.

SPEAKER_00 1:03:11

Which, if you're paying a high multiple of earnings, you should get a lot of growth. You should get a lot of earnings growth, right? If earnings growth starts to come down and disappoint, the level at which the market is trading is susceptible. Now, I think the market could go higher from here in the near term because there's as that economy, as the economy slows down, there's going to be reason for the Fed to continue cutting rates.

SPEAKER_03 1:03:39

Yep.

SPEAKER_00 1:03:40

One quarter point in September and one quarter in December. That's what's expected. I think that's probably a pretty good bet. Yeah. On balance, that will tend to support the market through the end of the year.

unknown 1:03:51

Okay.

SPEAKER_00 1:03:52

What concerns me is these other longer-term effects. The Fed cannot impact services inflation.

SPEAKER_03 1:04:01

Right.

SPEAKER_00 1:04:01

It cannot impact earnings dynamic. It cannot impact that consumer sentiment that, as we saw, is low. And they may pull back. They may know they have to save more if prices are going up.

SPEAKER_03 1:04:16

Yeah.

SPEAKER_00 1:04:16

And they can consume less. And everything's going to cost more at Walmart or at Tiffany's. Right, right. Every uh uh all along the food chain, the consumer's gonna buy, maybe they spend the same amount of money, but they're gonna get fewer units. And they're probably gonna have to shift more of their spending into what I would call non-discretionary things they have to buy. Yep, yep. So watching this, I think between now and year end, these interest rate cuts could probably that's why the market is staying elevated right now. Again, still far behind the Eurostock 600 because of the currency and the fact that Europe's inflation expectations are coming down. They have more room to cut, they have more room to do fiscal stimulus than we do. Um but that is something I'm concerned about. In the near term, I think you can be reasonably constructive that the markets aren't gonna crash medium and longer term, beyond the end of this year. Then I'm gonna get a little bit more concerned about owning a market that has declining growth prospects at very high valuation. They use the term another way of saying high multiple of earnings is high valuations. We are at the higher end of the valuation range historically. We're not way above it, but we're just at the higher end of the range.

SPEAKER_01 1:05:41

Um, I have a quite that's that's crazy. I mean, it's it's it's it's really enlightening to see where the markets can go, and I'll be really interested to see how things shake out. But I'm gonna lighten it up a little bit right now, and I'm just gonna ask you what the best money advice you ever got was.

SPEAKER_00 1:06:00

I had an answer to this once, but I forgot it. Um you know, I I people have told me some simple things. I think, I think there was this uh guy named uh he was this guy in San Francisco I worked with a long time ago, Morgan Stanley. Um and he was very proper. He belonged to the Olympic Club, which was like a men's club, you know, and he used to go up to uh this place up in the redwood forest with a called the Bohemian uh the Bohemian Club Retreat. That's what it was called. It's called the Bohemian Club. And it was like an old school club that'd go over there and have lunch and have, you know, the Jin Martinis. And uh and he said to me, You really have to just save and invest. Yeah. You're gonna have a lot of friends that are gonna live high on the hard. Live do some live reasonably but save. Really save money. Don't save money because you spend it, buy something that's on sale. Save money, buy a house. Um he said, You will have so many friends that think that the gravy, you know, whatever they may be having a good year, it's gonna go on forever and it won't. And you'll see that it's that old, he said, the old story about the grasshoppers and the ants, where the ants, you know, busy working, busy working, saving, putting away everything, building their house, and the grasshoppers are lazing around in the sunshine, right? And then the grasshoppers starve to death and die when the season changes and the ants survive. I think that advice, and I I kind of followed that path.

SPEAKER_02 1:07:49

Yeah.

SPEAKER_00 1:07:50

And I in in it had and it kind of translated to family stability and and everything else around it. I know you know, you talk about that all the time, right? So I think it actually spreads a lot of of uh uh positive things uh uh outward in your circle.

SPEAKER_01 1:08:10

I I I think that's amazing. And I gotta tell you, Michael, um, this was a master class. I've learned so much from you just in this one hour. And I have to tell you that we are so thrilled to announce that guy that that guy is lit. It's gonna be a new segment on SOSradio.live where Michael is gonna drop short takes on markets, risk, and opportunities that are available. And uh you should definitely subscribe to SOSradio.live if you're not already a member. And I want to thank you so much for joining our show. But I I like to close every segment with one of my son Scott's poems. And today's segment is or today's poem is called The Struggle. And uh gotta put my glasses on because I can't see it, but here we go. The way I feel can't be described into words or rhymes. Get with the times. The kids I once knew are developing, not relishing, and the innocence they once had. I can't handle the weight on my shoulders as heavy as boulders that pull me down to the ground, make me pin flat down. Losing air as lies fill my lungs. My body speaks the opposite of my mind. I can't take control of the situation at hand, for my body and mind don't communicate. They can't agree on a compromise, so therefore can't synchronize. I uh I still get blown away by how my son's poetry can transcend just different topics. I mean, you could take this and even put it into the market and how uh it can totally affect you and deflate you and really wreak havoc on your body. Um, but I want to thank you for joining us today on SOS Stories of Survivors, where survival sparks the soul. And um, please rate us, donate, and subscribe. Um, and we'll see you next week. Thank you, Michael.

unknown 1:10:07

Thank you.