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Once a month, we take a look back at what God is doing in the world of Faith Driven Investing and the global markets. We also spend time looking at current trends and outlooks with great interest and discernment in hopes to identify God’s redemptive work in the world. Bob Doll, Chief Investment Officer at Crossmark Global, and David Spika, who leads the GuideStone Investments Line of Business, have both served as guests and contributors to media outlets such as CNBC, Bloomberg TV, Moneywise, and Fox Business News. They join us for a look at market activity from July 2022. This is Marks on the Markets.

Episode Transcript

John Coleman: Welcome to the Faith Driven Investor podcast. This is our monthly Mark’s on the Market podcast, where we hear from experts around the world who are leading faith driven investment firms, who are people of faith and who are intimately familiar with the operations of markets, and can help us to understand what’s going on day to day in the financial markets around the world. Today, we’re really privileged to welcome two legends in the space. David Spika is the CEO of GuideStone, the largest faith driven investment mutual fund manager in the world. And Bob Dole is the CEO of Cross Smart Global Investments. Faith Aligned Institutional Investor. And both of these gentlemen also have long and storied careers in the investment industry. Hopefully most of you have heard from them before and they offer a great perspective on markets. And we’re just so pleased to have the two of you with us today. So thank you, Bob and David, for joining.

David Spika: Happy to be here.

John Coleman: So we’re going to kick off. It’s been a busy week. It’s been a busy month and it’s been a very active month in financial markets. To start off, Bob, I wanted to talk to you. We actually just had the GDP numbers come out today as we’re recording. And the question I have for you is, are we in recession? Which used to be a simpler question maybe to ask. But we’ve heard recently from Janet Yellen in the White House that maybe two negative quarters of GDP wasn’t actually a recession. So in this context, how are you thinking about recession and are we in a recession right now?

Bob Dole: You make a great point. That is, we’re not sure about the future, but we’re going to argue about the past. I think the headlines have just started. Many will say two down quarters in a row. Well, that’s a recession. Other people say not so fast. The truth is, the National Bureau of Economic Research declares when we have a recession, typically months after the fact. So there is nothing magic about two down quarters. Although I went back in my history books and found out the last time we had two back to back down quarters and there was no recession was 1947. So it’s been a long time. So typically when you get a couple of down quarters, you know, somewhere in that zone there’s a recession. So my view is that the weakness we saw in first and second quarter were the most volatile parts of GDP. First quarter it was trade, second quarter it was inventories. And the more traditional, possibly more stable parts of GDP were okay down in the first quarter from the record. GDP we saw last year is strongest since 1984 and of course even slower in the second quarter. My guess is forget the numbers and recession or not, we will continue to slow. That was in place already after the strong year last year, aggravated now by inflation, interest rates and attempts to quell growth, if you will. Let me add one more point. The reason I think we may escape a recession or if we have it, is just going to be short and shallow is the strength of the things that make up our economy, the US consumer not perfect and weakening for sure, but still has lots of excess savings on the balance sheet as a result of COVID either money not spent or money nailed by the government. Secondly, the corporate sector. Cash. Cash flow. Balance sheet strength. All pretty good. Not uniform, but pretty good. Profit margins are still high, albeit under a little bit of pressure. And then most importantly, the job market, we still have twice as many job openings as we have people looking for jobs. That’s a very strong job market. We’ve never had a recession in the US before with a strong job market. Now it’s beginning to weaken. We’ll see where it goes from here. So weakening for sure. Recession. You tell me what the definition is.

David Spika: Can I? If I could jump in. I think we’re asking the wrong question. I don’t think the question is, are we in recession or not? I think the question is how are consumers faring? Consumer spending is 70% of our GDP and consumers are hurting today. No question about it. Just look at Wal-Mart’s results from this week. That really is the key. And if we’re not in recession today, we fully believe we will be, because the Fed is going to have to continue to be very aggressive in raising rates and letting the balance sheet run off in order to bring inflation down. We’ve never seen inflation come down meaningfully without a recession, and we’ve never seen inflation come down meaningfully if we didn’t have a real positive Fed funds rate. And we’ve got a long way to go before we get there.

John Coleman: I want to circle back to the inflation question, but before we dig there, assuming we are entering, Bob, as you said, a slow down or David, as you said, there’s a recession on the horizon. How are the two of you thinking about which economic sectors or asset classes are likely to perform well in that type of environment? And how are you thinking about those that you’re trying to avoid as we enter those two potential situations?

David Spika: I think it is becoming a good opportunity to buy bonds, particularly high quality bonds and treasuries. Obviously, the first half of the year was absolutely horrible for bonds, one of the worst periods you ever seen for the Barclays AG. But with rates where they are and starting to go lower, they will continue to go lower as we move into recession. We’re going to have credit spreads widen. But if you own high quality bonds and if you own treasuries, you should be okay. We’re also going to see at some point an opportunity to see risk in the equity market. We don’t think that time is here yet, but at some point we don’t get these times very often. Very rarely do we get a chance to buy stocks 20, 30, 40% down. We’re going to have a chance to do that. But today, bonds and even cash, cash is yielding better than two and a half percent. What the heck? Let’s put some money in cash. Let’s increase our cash holdings, have some dry powder. So when that opportunity to re-risk comes, we’ll be ready. And on the bad side, I would be very leery of non-U.S. exposure, particularly risk exposure, whether that’s emerging market debt or equities, because the dollar’s likely to continue to remain high. That’s the flight to safety that we see in a volatile environment. And as long as the dollar remains high, you probably want to stick with U.S. assets. And the other thing I would be a little leery of is commodities. Obviously, energy has been great, but commodities are very economically sensitive. We’re seeing oil prices come down. Copper is down about 25% from its high. We need to be leery of those as long as we believe we’re going into a recession.

John Coleman: Bob. Anything you’d add to that?

Bob Dole: Yeah, largely in agreement. I’ll go in the same order. And our fixed income funds, we have length and duration. We’re still below our benchmark, having been way below our benchmark at the start of the year. So while we’re down for our clients, we’re down not nearly as much as the benchmarks. We think, as it sounds like David does that. At worst, we’re in a trading range for, let’s say, the ten year yield. It’s 280 ish as we speak. Could we move down that to 70 to 60? Sure. Could we move back to three? Possible. But the threat, the big negative sign in front of the bond mark is probably removed as the economy slows and we see less bad news on inflation, on equities. You know, the question is, was June 16 the low? It is the fifth close trading where we got a big bounce afterwards since the bear market started. I think we saw off that bottom the best news so far. But I still think we’ve not seen the capitulation that is typically as a bear market. I’m talking about, you know, volatility up the VIX over 40. A big explosion in put to call volume. We’ve not seen that a pick up in volume generally kind of, if I might, puking it out. We just haven’t seen that yet. So we probably have a lower low, but we are opportunistically and only on weakness beginning to accumulate some stocks, commodities. I agree. They had a huge run. Oil’s down. Copper is down for among the reasons we think inflation’s going to get less bad, if you will. And I guess maybe the only area I might put up a little difference is international. International stocks beat the U.S. by 300 basis points in the first half of the year. Very surprising to a lot of people. Despite the dollar’s strength, we expect there might be more of that to come. Non-U.S. markets are a whole lot cheaper than the U.S., although value never gives you a timing tool. And if the economy is weak, this flight to safety and the more defensive nature of the U.S. market could help us do better. So I think the jury’s out on that one. My guess is there’ll be some good stocks in both geographies and some bad ones in both, too.

John Coleman: And maybe before we move on just to zero in those, have you mentioned that there might be further room to the downside in U.S. equity markets? I think, David, you said you’re not ready to kind of start buying aggressively yet. Bob, you said something similar. I believe on our side we’ve been thinking the same thing. We’ve seen a lot of multiple compression back to more historical averages, but haven’t seen the weaknesses in earnings materialize, which could provide further downside if you have thoughts on it. We’d love to know. Maybe starting with you, David, just how much further are you looking for stocks to decline before you think it’s a buying opportunity? Is it 5% or 10% or more? And what would be your sign that we might be hitting the bottom of that trough and that it might be an opportunity to begin getting in more aggressively?

David Spika: Great question and several ways to look at that. We’re trading at about 18 times forward earnings today. Markets have historically bottomed at 11 times. Do I think we’re getting to 11? I sure hope not, because that’s a long way from here. But you hit it on the head. We haven’t seen earnings degradation yet. And if we’re going into recession, earnings are going to come down. So we need to start seeing earnings estimates go lower. Historically, in a recession, earnings fall by 30%. That will be the next leg down and that will create additional multiple compression. That 18 times is still not where we should be if we’re going into recession. So those two combined are likely to take us down further. The average decline for a bear market when going into a recession is 36%. So it wouldn’t surprise me to see us broach that 30% level. We’re down about 14 or 15 now. We did hit the 20 mark, so 30% would not surprise me in terms of when the bottom is in. As Bob referenced, there are certain signs, technical signs, 90% of the market trading above its 50 day moving average is one of those. But one of the things that we think will be a pretty clear signal is when the Fed has ceased raising rates. Now we’re not on board with the Fed cutting rates in the first quarter of 23, but if the Fed’s pausing, that means we’re likely at an inflation level that is somewhat palatable and the market will respond well to that. Now, that doesn’t mean we’re back off to the races, but it does mean that major headwind, which is rising interest rates, tightening financial conditions, is probably in the rearview mirror.

John Coleman: That’s excellent.

Bob Dole: Again, not a whole lot of agreement, maybe a little less bearish than that. I give it one in four, one in three that the June 16th low was the low. So the majority case by far is it wasn’t. And I have said that absent a significant recession, the risk is probably a 5% move below where we were then and we’re up ten since then. So that’s 15% from here. Kind of what we’re down from the high not too far from that. We’ve narrowed that gap. So I was saying the lion’s share of the bear market from a price standpoint is in the rearview mirror with this nice rally we’ve seen. Perhaps not now if we’re going to have a more significant recession with imbalances that we don’t see today, it could either be worse and or last longer. And I agree with David with those technical signs. Fundamentally, we’d like to see that we’ve had a peak in long term interest rates. Perhaps that’s in we’d like to see the end of earnings estimate cuts. We’re not there yet. We’ve only started. And I’d say the Fed thinks slightly differently, visibility on when the end of Fed tightening is likely, and I don’t think we’re anywhere near that yet.

John Coleman: I want to pick back up now on the topic of inflation. We’ve talked about it throughout here and obviously it’s high on people’s minds. There was recently a stop inflation bill. I think it’s come out in Congress, for example, or titled that, you know, as we think about this, inflation is obviously a policy issue as well as an economic issue. And I’m wondering if you could talk about what you’re looking to see from the Federal Reserve as well as from the US government as we seek to tame inflation and how you see that inflationary environment developing now. And perhaps, Bob, if you don’t mind, we could start with you.

Bob Dole: Sure. Be happy to. So, first of all, a little bit history. Put it in context. It seems like inflation was a topic we didn’t talk about forever because inflation was two or lower for years. And then all of a sudden, you know, we wake up and inflation’s, you know, eight, nine, approaching 10% because remember, inflation is transitory. That’s a joke, obviously. And we move on from there. Look, we have said since the first of the year, we think second quarter will register the peak in inflation. And I think that’s the case. Obviously, a couple of weeks ago, we got that June inflation number that was just so devastating after the negative surprise in the month before. So, you know, we’re at some levels that are reasonably high reasons. We think that we’re likely to have lower inflation in the next bunch of months. One, the slow down the economy. Two, as both of us have already commented, declining commodity prices, oil from peak to trough down more than $25, copper down 25%. Dr. Copper tells us a lot about both the economy and inflation. And then three, the supply chain problems. I’m not making the case for solving them, but I think they’re a little less severe and will be as we go forward than where we’ve been. All that takes the inflation rate down some. My guess and that’s all these things your hope, their educated guesses is by the end of the year, we’ll be registering monthly inflation numbers that annualized around four or 5%, down from your 8 to 10 where we speak. And that’s a problem because the Fed says they want too I think they’ll compromise at some point at three, but 4 to 5 is not two or three, which means there’s more work to do. And I think that could create problems for stocks and bonds somewhere down the line. Maybe not until next year.

David Spika: Yeah, I would agree with Bob that we’ve probably seen the peak a sure hope we don’t go above 9.1%, but I’m not quite as optimistic on the decline. You have to consider what the Fed is able to do to mitigate inflation. They have no control over the supply chain issue. The only thing they can have an impact on is demand, and they’ve got to take the consumer out at the knees. How do they do that? By reducing consumer wealth. We’ve already seen that financial assets, housing next and they have to reduce consumer incomes. We’ve got 3.6% unemployment today. Consumer real incomes are not good, but obviously nominal income is very good. Second quarter nominal GDP was over 9%. That’s too high. So the Fed is going to have to continue to raise rates until we start to see some weakness in the job market to really have an impact on consumer demand to materially bring down inflation. And we think that’s going to take a while. We think that could be another 12 months. The belief that the Fed is going to be cutting rates in the first quarter of next year, which is really why the market was up yesterday. And today they perceived Powell’s comments as dovish, which I don’t get. We just don’t think that’s likely at all. And if inflation’s running at four or five, as Bob says, if it’s running at six or seven, regardless, the Fed’s not cutting rates there. They may pause, but they’re not going to be cutting rates. And as long as they’re not raising rates, they’re not doing the damage to consumer spending and consumer incomes that they need to do in order to bring inflation down. So to us, it’s a longer cycle that we’re facing.

John Coleman: Just to pick up on a couple of those themes, because you touched on really interesting things there. One is just very simply, where do you see interest rates going over the next 12 to 18 months? Obviously, the Fed funds rate, but also how those filter out into the economy. What’s your outlook for the interest rate environment over the course of the next year, year and a half? And maybe, Bob, if you don’t mind, we’ll start with you.

Bob Dole: Sure. So let’s start with the Fed press conference yesterday. Chairman Powell, you know, if you read between his lines, he’s basically suggesting there’s 100 basis points to go. They have the luxury of no meeting for a couple of months here. And, you know, 100 basis points probably means 115 and 225. Reading between the lines, what David said, I think both of us believe that’s not the end. That’s just not going to do the trick. So I suspect the market reacting to all that positively yesterday and today probably get smacked across the face again at some point when people realize that’s just not going to do the trick. So I think the Fed’s got more to go. It’s going to take longer. I didn’t say it when I comment on inflation. I should have. David said it. Well, you know, the Fed has little control over inflation because they only can influence the demand side. That’s why the commodity price thing the of solving some of the supply chain problems is so key. If inflation is going to come down regardless almost of what the Fed does out the curve, I think that for now interest rates have found a level we got to that 349 intraday. A few weeks ago. I don’t think we’ll see that level any time real soon. But if I’m right, 4 to 5% end of the year, if David thinks six or seven, even more about what I’m going to say will come true, interest rates will head back up. It’s just not enough to have these big negative real rates in order to have an impact. David said this earlier Getting real rates to be positive is almost always required to tame the inflation. So I would expect they will have out the curve higher rates again starting, you know, months from now, but enough to be painful.

John Coleman: So, David, as you pick up on that question, I’ll raise a potentially frightening question, which is, you know, in some ways, this economic era looks a lot like the late 1970s, right, in terms of the rapid inflation, in terms of action in commodity markets, etc.. I know there are differences, but at that time, interest rates climbed to a truly phenomenal level. I think at some point we’re at 20% or something like that in the late seventies, early eighties. Do you see any risk of that type of interest rate movement? And if not, what do you think moderates this era versus that one?

David Spika: Yeah, I was in high school then, so fortunately I didn’t feel it as much as maybe my parents did. But my first mortgage was nine and a half percent and I recall being lucky that I got that. But in any event, I don’t think we get to that point. The economy, the global economy is much different today than it was then. The Arab oil embargo was a big component there. We weren’t producing the energy we produce today. We didn’t have the global trade then that we have today. And the Fed was, I think once Volcker took control, he really had to work hard because they were so far behind the curve. Now, this Fed’s behind the curve, too, but I don’t feel like it’s the same situation. All that said, one of the things that does concern me and I mentioned globalization, one of the things that is a likely byproduct of the war in Ukraine is the fact that countries around the world, economies around the world don’t want to be dependent on other nations for their needs, for their products, services. Look what’s happening in Germany right now. They’re in a world of hurt, given what the Russians are doing with regard to natural gas distribution. And so that reduction of outsourcing that becomes on sourcing, right? In-Sourcing producing more goods at home is going to create some structural inflation that we’re not used to. Now, that doesn’t mean we get double digit rates. I think the economy would react much more quickly today than it did then to a significant rate hikes. And again, we’re starting from much lower level today than we were there. I can’t remember where we started then, but we weren’t at zero. So on an absolute basis it’s not going to have to go as high. But there are some similarities between then and now that do give me a little pause. And it’s that globalization feature that has been a real positive for inflation over the past 20 years. That may be coming to somewhat of an end at this point.

Bob Dole: Yeah, the three reasons in my view that we had such low inflation for so long were technology, demographics and the issue of globalization. Globalization, as David has said, is disappearing. The nationalism around the world and lots of politics is causing that not to be the negative inflation pro growth thing it was before population. The all the developed world has dangerously low population growth, some places negative. And of course, a technology piece I think is alive and well. So that is among the reasons I agree with David that we’re not going to those crazy inflation rates that we saw before. This is a phenomenon that is painful now, but we should get it under some control. Doesn’t say we’re going back to 1% inflation, but I think we with a lot of work, probably a recession, we can get this thing back to three ish.

John Coleman: David and Bob, you’ve both touched on international markets. I think, Bob, you started by talking about some of the opportunities in international markets over the course of the year so far. And David, you touched on this idea of global supply chains, etc., in your recent comments. Obviously, the Russian invasion of Ukraine was a really negative shock to the global economy. China’s decision to pursue a zero-covid policy has been a negative shock to some extent, continuing to constrain supply chains. Just quick thoughts on what are the risk factors that you see now in the global economy that might impact investors here in the United States or around the world? And. Where do you think there might be opportunity in the global economy right now? And David, maybe you could start us off.

David Spika: Yeah. What’s going on in China is very curious and very alarming. The Zero-Covid policy, we’re hoping this is something that Xi is going to suspend once he’s reelected as lifetime ruler. But it just doesn’t make any sense for a country of a billion and a half people to expect a zero-covid. And that has that been a huge factor. You know, it’s funny. COVID was a black swan and it has spawned other black swans. Right. It’s born this runaway inflation. It’s spawned, I would say, to a degree, the war in Ukraine. It spawned what’s happening in China today. And so it’s almost like this continuous black swan. But to me, what’s happening in China is the biggest concern. China is the second largest economy in the world. They’re a huge factor in the global supply chain, a huge factor in production of goods and services. And to the extent they cannot get back to a level of production that is appropriate for the rest of the world, that could create some headwinds. The other thing to recognize when it comes to Russia. If Putin were to walk out of Ukraine tomorrow, the world not going to say all is forgiven. We’re going to start doing business with you again. He’s a pariah. As long as he’s in office, which is probably going to be an extended period of time. So those two things, which are a couple of the black swans that occurred this year, I think are going to continue to be headwinds to the global supply chain.

Bob Dole: I agree 100% with everything David just said. I’ll add just one point to it. That is a continued risk and that is a supply of energy. You know, I think one of the events I’ll call in an event that has not gotten enough attention is the curtailment of supply in the country that has the most opportunity to create incremental energy. And that’s the United States. If you go back to January of 2021, we were coming out of covid, the demand for oil was rising quickly. And in this country, we canceled the Keystone pipeline. We put a moratorium in many ways on new drilling and made it difficult on the permit side. So economics one on one demand for something. In this case, oil is going up. Supply has been curtailed. What happens to price? Definitionally, it goes up and we’re still struggling with just not enough of this stuff. As the global economy recovers, post whatever recession we’re going to be in. So that remains a risk, in my judgment.

John Coleman: And Bob, just to pick up on that briefly, you know, energy markets have been highly volatile recently. And to your comments, some of that is based on policy decisions. If you have a magic wand right now and could try and convince the federal government to enact policies that you felt like would restore a semblance of normalcy to the energy markets, what would you advise the current presidential administration or Congress to do in order to support energy markets?

Bob Dole: I’ll try not to be political in my answer, but, you know, I think, look, if I were the president and I believe big time in the environment and green this and green that, I think I would say, hey, folks, I believe in green just like you do. But can you give me a couple of years where I can address the problems we have right now, in particular inflation? And just I’ll put it this way, open up the spigots for a while and let’s let the supply try to meet the demand, bring the price down, and a lot of our inflation problem eases up. Not all of it, but a lot of it does. And then we can worry about the green stuff later. That’s why I would advise the administration.

David Spika: The only issue I have with that, Bob, I agree, but the only issue I have is if I’m an oil and gas producer and if I think it’s a two year window, I’m not committing billions of dollars of CapEx into development. Heck no. I produce tremendous cash flow today. My shareholders love me and I’m sitting right where I am today. I love $100 oil, so we need, quite frankly, a change in tone on the energy industry as a whole in the United States. We support you and we are going to we are going to provide what you need to be successful.

Bob Dole: You went one step beyond me. I’ll sign up for that in a nanosecond. Yes.

John Coleman: It’s really interesting and it will be really interesting to see how it plays out practically. Obviously, we’ve got elections coming up. There are two very different platforms at play and there’s the chance of a divided Congress and presidency. And I think that will be one of the interesting questions along with spending as we enter that potential environment, just exactly what happens. I’ll note that on the supply chain question you know in our firm will often be invested in or own companies that have supply chain considerations. One of the things we’ve started to look at with our CEOs, they’ve been struggling in an environment for two years where the supply chain was constrained and where it’s been very difficult to get inventory. Therefore, everyone’s been trying to get in the queue for additional inventory as they can. Everyone’s been ordering. They’ve been telling customers that they’re developing backorder lists, and we’ve been trying to get as much inventory as possible. One of the concerns we’re continuing to navigate is what if that supply chain can stretch and continues? The other, however, is what if that loosens more than we think in the near term and we actually get a glut of inventory, which I know is something that some consumer companies are beginning to worry about as well. And this uncertainty around supply chain could create problems in either direction. Right. You could see people with a glut of inventory with working capital management problems. You could continue to see people not be able to get the components or equipment or goods that they need. And we’re not certain which way that will go at the moment.

Bob Dole: Yeah, I’ll comment and then let David pick it up. Look, the GDP report, we just got 200 basis points of GDP negative as a result of inventory. So it spoke loudly and clearly in the second quarter. I have to go all the way back to the pandemic. When the pandemic came, we shut down the economy. We turned it off. We’ve never done that before. And then we turn it back on. I think the assumption naively was I turn it back on and everything comes back to normal. Well, it’s just not the case. It created all kinds of dislocations that we are still dealing with today, and that’s going to take time to unwind. And my comments earlier, I said, I think some of the supply chain problems are easing a bit and I don’t want to be too Pollyannish here. So I think we’re solving some of them, but we got a lot of them left. Semiconductors, you know, a little less bad than it was, if you will. But we got a ways to go. And this is not going to be smooth and easy. And then if we try to layer a recession on top of it, it’s going to set us back a bit in figuring out how to balance supply, demand and lots of markets. So I think there’s a multi-year solve that we can’t underestimate.

David Spika: Yeah, I agree completely. Just like we’re feeling pain with regard to a significant increase in demand coming out of the pandemic. There’s going to be pain on the supply side and we’re just going to have to work through it. And quite frankly, I would just as soon see the supply chain issue clear up sooner rather than later and deal with those issues today as opposed to an extended period of stagflation.

John Coleman: Yeah, I agree with that, David, for sure. If I could bring it back onshore for a minute. One thing we haven’t talked about directly yet is the housing market, which is deeply related to interest rates. We were with Jonathan Reckford, the CEO of Habitat for Humanity International recently, who quoted a statistic that I hadn’t heard before. That right now is the greatest gap between median income and median home price in the history of the United States, that homes are less affordable for the average American than they have been at any point. And certainly we’ve been living through an incredibly hot residential housing markets. Interest rates are beginning to cool that, it would seem. What are your expectations, David, for the housing market over the course of the next 12 to 18 months? And what are some of the risk factors at play there?

David Spika: I’ll begin just by saying that my daughter is going to be 30 next month and her husband of two years are looking for a house here in the Dallas area. And I said, why don’t you wait another year? I don’t think the time is right yet, but I do think we’re going to see and we’re starting to see it. You’re seeing mortgage applications at 22 year lows. You’re seeing sales start to decline. Prices are leveling off, not falling yet, but with mortgage rates where they are and with the point you mentioned about the disparity between house prices and income, you’re going to see house prices come down. There is no question in my mind one of the good things about recessions that we all think recessions are bad and they generally are, but they tend to do a good job of reducing imbalances in the economy. That’s what recessions are for it’s like pruning the crate, modeling your front yard. You got to prune it back to get new growth. We need the same thing in the economy, and so that’s likely to happen. The good news is, in my mind, this is not like 08, 08 was a hugely demand driven run in home prices as a result of very easy credit. This run feels like, at least here where I live in Dallas, to be more of a supply issue, we just don’t have the supply that we need to meet demand today, and not just on the residential side, but if you look on the commercial side and talk about multifamily, my gosh, is there demand for multifamily? And so that demand is likely to keep a floor under prices for a period of time. But that’s a regional issue. I don’t think it’s going to be the same here in Dallas as it is and say, northern California or someplace else. There’s going to be some differences there. But bottom line, yes, there’s going to be a decline in house prices. It needs to happen. It’s part of the Fed’s plan to eliminate to reduce the wealth effect. But we don’t think it’ll be anywhere near what we saw in LA.

Bob Dole: I fully agree, a business cycle one on one. The most interest rate sensitive part of our economy is housing. And so it typically is the first to go this way and the first to come back out. It is part of what the Fed does when they stimulate to get us out of recession and you start seeing life in housing. So we are in the early days of the downturn, including the price of homes, as David said.

John Coleman: I want to touch on briefly. You know, we’ve gotten a lot of great macroeconomic thoughts here that you’re both extraordinary fund managers and you’ve been investing in companies for a very long time. David, I think it was you who mentioned up front that you were selectively looking at securities that might be worth investing in at companies that you thought were well positioned right now as you’re both looking at specific investments. What are the types of traits you’re looking for? Maybe starting with David that indicate to you that a company is ready for investment or something that you’re willing to bet on through this cycle. And what do you think our listeners should be looking for?

David Spika: I think if you’re going to be moving into the equity market, you need to be very focused on high quality companies, companies with good, strong fundamental characteristics, strong free cash flow, low debt. And really importantly today, pricing power, costs remain high, labor costs, input costs. Companies need to have the ability to pass those through to their customers in order to grow their earnings. Top line growth is great for everybody. It’s that earnings because we’re getting operating margin compression. So that high quality aspect to me is absolutely critical today. Being somewhat defensive makes sense, and that doesn’t mean you just buy health care and consumer staples. There are high quality companies with defensive characteristics in every sector of the market and companies that have good earnings visibility. Right. Not your cyclical companies, but companies with good earnings visibility. That’s where I would be playing today.

Bob Dole: We do not compare notes, but I would have said and I will say quality, quality, quality. And we define it three different ways. One, quality of the income statement earnings. Is it predictable? Are they measurable? Are related to cash flow? And we can call them quality of quality. The balance sheet. Can they service the debt that’s on their balance sheet? Do they have debt? Will it strangle them? The things really get bad. And the third and the hardest to measure is quality of management. Have they done it before, through a cycle? Have they demonstrated they know how to cut costs, the right costs when it’s time to reinvest? Can they do that intelligently? So quality, quality, quality. Now, I will say we’ve been on that theme for a while and as we approach a market bottom, we’ll have to root out some of that quality and with put some low quality in the portfolio, because when the market turns, you don’t want quality, you’ll be left in the dust. You want to own the junk too soon, but start doing your homework.

David Spika: Absolutely. Agree. 100%, Bob.

John Coleman: Yeah, we were just talking here. We’ve had the same advice to people with regards to fund managers quality, quality and quality. Because if you think about it, it’s been 15 years since we had some sort of dramatic correction. Obviously, we’ve had years where the markets were down marginally, that the last dramatic correction was the great financial crisis. And an extraordinary number of company leaders and fund managers really haven’t had experience at the top of the house in leadership positions with an economic cycle like this. And so you’ve got to look to your point to those leadership teams, both at fund management houses and at individual companies that have seen cycles like this before, are intellectually prepared for it, and know what types of steps to take and what type patients to have during periods like this.

David Spika: Can I make a quick comment on that? Because I think you struck a nerve there. It’s been 40 years since we’ve seen inflation at this level, so most people have not experienced this. But I’ll tell you what’s even more important in my mind, it’s been 12, 14 years since we’ve seen a market truly react to fundamentals. A lot of people in this business have only seen a market that’s been driven by monetary policy. They have no idea what happens when the Fed turns the other direction on monetary policy. They don’t understand about quality, as Bob saying, and that fundamentals should be driving stock prices. And to me, that’s a little concerning. And I think that’s one of the reasons why the market is rallying here this week. On something that I don’t think really has any merit. Oh, gee, the Fed’s going to cut rates at some point. Powell told us that. So let’s get back in. Well, that doesn’t make any sense. We haven’t even seen the earnings cuts yet. So to me, that’s something that I think we need to keep an eye on.

Bob Dole: I’ll extend that first of all with agreement. But we’re in an environment and should be for some time where fundamentals really do matter. We have basically a decade where all you want to do is buy high duration stocks with long tail growth. Because like in the bond market, when interest rates fall, you want to own the long duration paper. What’s a long duration equity? One that might earn some money and pay a dividend ten years from now. To exaggerate, to make the point. Now it’s which companies are delivering the goods? Which ones aren’t. And you know what the first outperforming the last don’t. But that’s not been normal in the last decade. It should be a year when those who do their fundamental homework have a better shot.

John Coleman: All right. I want to ask one final question before we move to our true final question about what you all are learning from scripture. Because in addition to being great investors, you’re great men of faith. And I know we would all benefit from hearing what you’re thinking about and what God is teaching you right now. Before we do that, I’ll just ask a 10,000 foot question, which is for those investors who haven’t lived through the cycle and for all of us who haven’t lived through it in a while, what’s your general advice to someone hoping to navigate this well and to steward their financial resources well over the coming couple of years?

David Spika: I’ll go ahead. Jump in. I would say, first and foremost, for believers remember who’s in control? The Lord’s in control. Don’t get caught up in what you’re reading on Facebook or hearing on Twitter or seeing in the mainstream media the Lord’s in control. The other thing I would say is recognize that it has been since 2008, since we’ve had a true recession. 2020 wasn’t a true recession. That was self-imposed. And as I said earlier, recessions do a modicum of good for the economy. They reduce imbalances and they cleanse the economy so that we can have growth again. The third thing is recognize that valuations were way too high and we’ve seen a significant decline in valuations. So we’re closer to the bottom, much closer than we were six months ago. And at some point, we’ll be there. And if you’ve got some dry powder, you can benefit from that.

Bob Dole: You prompt us on this question. So I made a list of five. One recognize that what we have is not ours. It’s the Lord’s. And not just our money, our everything, our minds, our bodies, our relationships, everything two. Therefore, it’s an awesome privilege, but also an awesome responsibility. You know, if the money is really mine. Who cares what I do with it? But if it’s God’s now, all of a sudden I better take care of it and be smart about it. Number three, don’t get caught up in the noise and the emotion of the day. If you name the name of Jesus, people are extra watching you in periods where it’s noisy and bumpy and controversial. Try to have that compass four this is for anybody, faith or not long term view. We’re talking a lot about the near term. But, you know, if your time horizons 20 years, there is no 20 year period in history where stocks haven’t gone up. So, you know, I don’t be stupid about it, but keep that sort of thing in mind. And finally, number five, sentiment. We haven’t talked about that at all. When everybody’s bullish is generally a good thing to be bearish. And when everybody’s bearish, which they have been being a little more constructive makes some sense. So they’re the five points I would consider.

John Coleman: That’s awesome advice, gentlemen. And before we wrap up, you’ve already started to go down this path. But even apart from financial markets, we’d really benefit from just hearing what’s on your mind and what God is teaching you through Scripture right now. David, I wonder if you could kick us off just any wisdom that you’ve encountered lately in your Christian walk?

David Spika: Yeah, this has been a challenging year for me, personally and professionally, and so there have been periods where I’ve gotten a little bit discouraged. But as I’m in my quiet time, a verse to come to me recently is Galatians six nine. Let us not become weary and doing good, but at the proper time we will reap a harvest if we do not give up. Now, that’s very encouraging to know that God’s there. He’s going to help me through the challenges I’m facing. And my part is to be obedient to him and to continue to strive to glorify him in everything I do. And I know that, GuideStone, we’re doing good. We’re serving those who serve the Lord. We’re providing retirement for people who spend their entire life preaching the gospel. And that’s important. And even when we have rough periods for 6 to 12, 24 months, it doesn’t matter. Ultimately, serving God will reap rewards for us as long as we continue to be obedient to Him.

Bob Dole: Mine’s not a whole lot different. I put it under the word patience in tough times. Personally and professionally, having perspective and having the patience. The patience of Job, as we often say. But even the patience the Lord showed us. I remember in the garden he was sweat and drops of blood. But, you know, he maintained his center Lord, not my will, but yours be done. So they’re the kinds of things we try to remember. Look things happen in markets very quickly, but in the real world they tend to happen more slowly. And I sometimes think those of us who are in the markets taking a patient’s pill once in a while will help us do a better job for our clients and not trying to anticipate every jot and tittle, but to get the longer sweep. So patients, my friend.

John Coleman: That’s a, I joke all the time. We’ve got a couple of our fund managers. The problem with the ticker moving every second there as you’re watching it is you can get tied up in the moment. And that idea that we’ve got faith obviously in something else and that we should be patient and think longer term is incredibly important. Bob and David, a tour de force. I would expect nothing less. I know that everyone benefited not only from your knowledge of markets, but just from your wisdom and maturity as believers. We’re grateful for the work that you do in markets and on behalf of clients. We know we’re stewarding resources for God’s kingdom, and we’re grateful to you, particularly for coming on today and sharing your thoughts. Thank you very much.

Bob Dole: Our privilege. Thank you.

David Spika: Thank you. Enjoyed it.

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Keren Pybus is the Co-founder of Ethical Apparel Africa, an impact-driven company based in Ghana and Benin. Ethical Apparel Africa was founded based on the core belief that all manufacturing can and should be done ethically. And they work with international brands who are interested in growing a manufacturing base in Africa with a positive social and environmental impact. Keren joins us on the Faith Driven investor Podcast to discuss the importance of leading a company that is committed to more than just looking good.

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David Wills is revolutionizing charitable giving by leveraging the power of investment and donor advised funds. He has spent his career helping donors navigate the legal world of giving and now serves as President Emeritus of the National Christian Foundation. In this episode of the Faith Driven Investor Podcast, David discusses the changing landscape of charitable giving and what it means to use your capital and influence for God’s Kingdom. 

Episode Transcript

John Coleman: Welcome back to Faith Driven Investor podcast. I am here with my partner Luke Roush today and we’re very excited to welcome a very special guest. Luke, how are you today?

Luke Roush: I’m doing great. I’m excited to be on with David Wills, who is our guest and long time friend of Henry and myself, and just the broader Faith Driven Entrepreneur and investor movement and just grateful to have him and his wisdom with us today.

John Coleman: Indeed, it is exciting. So, David, for those of you who don’t know, is the president emeritus of the National Christian Foundation was a co-founder of Generous Giving, a board member of various organizations involved with the Impact Foundation, author of multiple books. A truly interesting guy and a leader in the faith driven giving and faith driven investing spaces. And we were just really privileged to have him on today to talk about a number of topics which he’s uniquely qualified to introduce to this audience and to address. So, David Wills, thank you so much for joining us today.

David Wills: Well, it’s a privilege to be with you guys. Looking forward to this.

John Coleman: Well, why don’t we just start with the basics? For those who don’t know you, David, would you mind just given us a little bit of your background and what led you on this unique journey?

David Wills: Well, certainly just a quick introduction, kind of who I am. I have a dear friend when they’re asked this question, has a special way that they answer some of the news. Her method, if you’ll allow me. So I am the son of Don in Sioux City and the husband of Chris, the father of Jonathan, Maggie, Chuck, Luke, Josh, Drew and Sam and the father in law of Abby and Courtney. That’s right. There’s seven. And then now we have plus two and soon to be the grandfather of a bouncing baby boy who is arriving in the next month. I’m also blessed to have some of the best friends in the world, but most importantly, I’ve been delivered from the domain of darkness and transferred to the kingdom of his beloved son, in whom I have redemption and the forgiveness of my many sins. So that’s kind of who I am. My wife and I both grew up in Wichita Falls, Texas, and I’ve known her since she was five and I was nine. Now, we didn’t start dating until we were in her twenties, just to make sure that’s clear. We now live outside Waco, Texas, after having spent about 25 years in the great state of Georgia. So let’s see. The last question was, how did I get to where I am today? I think, as you might imagine, that’s a people centric thing as well. So I’m a lawyer by profession. And in 1991, I, I actually met a stranger who spent some time with me, and neither of us even knew there was such a thing as half time. But he essentially was challenging me to go into half time and leave my litigation practice to move on to a tax practice and help Christians become wise stewards. And his name is Greg Sperry. That’s how Greg has been my mentor since the first week of 1992. We talked day before yesterday, so we are constantly engaged to this day. And I sit at his feet both from a professional and a spiritual standpoint. And then a few years after we got together, we met a guy named Terry Parker. And when we crossed paths with Terry, Greg and I both ultimately landed at the National Christian Foundation. That was about 25 years ago. So along with that and my wife, he’s been my best friend and counselor through it all. That’s kind of the path that the Lord has brought me on.

John Coleman: David That’s awesome. And I think you’ve won the intro sweepstakes. I have to say that’s the best one we’ve had so far. You know tons of topics to dig into there. Maybe just to start and I know Luke wants to get into some questions about donor advised funds. You’ve been involved with two organizations that have just been central to giving within the Christian movement, to innovating on giving, which is the National Christian Foundation and the Impact Foundation. Could you just tell us a little bit more about those and how you became involved with them?

David Wills: Well, I like the Impact Foundation at first. The Impact Foundation is a relatively new entity, really set up to meet a need that just was constantly increasing inside the NCF world and outside as well. And so Jeff Johns and Aimee Minnich founded the Impact Foundation. I’m honored to serve them as a board member. And really the simple purpose is to use charitable capital to invest in for profit impacting ventures, which of course in the world we live in now, it’s like, well, we do that all the time. Well, we didn’t used to do that ever. So it’s a new thing. And the Impact Foundation is growing like a weed and it’s just fantastic. So I commend it to anybody. NCF has been around a little bit longer and it’s kind of helped to in partial ways, birth these kinds of generosity entities. But this is our 40th anniversary this year for the National Christian Foundation. And a couple of weeks ago, we granted our $15 billion in grants, which is just crazy. We serve 25,000 plus families. And so at this point, they’re granting. About $1,000,000,000 every seven or eight months. So we keep the money moving. As I mentioned, we were founded by Terry Parker, a lawyer from Atlanta, and he had two clients 40 years ago, a guy named Larry Burkett, a guy named Ron Blue, who really nobody even knew who they were except for Terry. And the three of them were the founders. Larry is now in heaven, but Ron and Terry are both in their eighties now, and they are both going as strong as ever. Incredible role models.

Luke Roush: So David, thank you for that overview of where Impact Foundation has been and where NCF has been. Love to go back to the origin story of NCF, which really involves the concept of donor advised funds which are familiar to many of our listeners but not all. Be great to get a definition of what a donor advised fund is. And then maybe also just have you walk us through history of how they have evolved as a structure for givers over time.

David Wills: Sure. So donor advised fund, I’m going to take that kind of in reverse order. They’ve been around way before. NCF was around. So maybe over 100 years there have been donor advised funds and really kind of donor advised fund started in the community foundation world. And there are well over a thousand community foundations around the country. And it’s a tool that sort of is a cross between a charitable checking account and a low cost personal foundation is the way I would describe it. And of course, nowadays they’re all driven by technology, so the use of them is turnkey and simple. You can click and contribute into your fund. You can click and grant out of your fund right off your phone. And so it is it’s a very simple way, I guess, to describe it also, I could kind of give you my own personal experience. My wife and I have used a donor advised fund since before I worked with NCF. So maybe 30 years we’ve been using a donor advised fund and the first reason we did it is because we got bombarded with literally maybe a hundred receipts per year for our charitable giving and the donor advised fund just eliminated that issue. So now we get one receipt per year for all of our giving. So that was just, you know, kind of an administrative advantage. We also love to give anonymously. We do have a pretty high percentage of our giving goes out anonymously and a donor advised fund is unique and that can let you do that. And we’ve also given a piece of real estate, piece of a commercial building that we owned. This was gosh, before I was in NCF, I think, and we gave it to NCF. They sold it and we took three or four years distributing out the proceeds to probably six or seven different organizations. So it’s a tool and it just really simplifies the giving process. And as far as where they are today and where they’re headed, donor advised funds continue to be used in more and more creative ways to help simplify giving. To help collaborative giving. Lots of giving clubs are coming around because of donor advised funds, and also donor advised funds are under the umbrella of a public charity, not a private charity. And so the flexibility is much greater to do investing inside the donor advised fund we’re on. I know we’re going to talk about that in a minute.

John Coleman: So why don’t we pick up on that last topic. David, you know you mentioned that donor advised funds have obviously revolutionized giving. They truly have. They’ve made the personal family foundation available to anyone effectively. An NCF was a leader in that, particularly in innovating the way that that could happen. But as you touched on towards the end of your answer there donor advised funds, whether NCF or the Impact Foundation are innovating also the way that people invest. Talk to us a little bit more about those blurred lines now between investing and charitable giving and how that plays out within the context of the donor advised fund marketplace.

David Wills: Hmm. They use a little bit of a pejorative word, blur the line. I’m not sure exactly what you mean by that. But, you know, any time you have a donor advised fund and any time anybody’s ever had a donor advised fund and there were excess funds sitting in there, they were invested in some way somehow. It’s just that the sophistication is growing in what you can invest inside of a donor advised fund. But really, from my perspective, the divide between giving and investing is diminishing. So let me go back 30 years ago and maybe getting a little bit off on a tangent, but so 30 years ago, you know, you have your non charitable personal capital in one bucket and your charitable personal capital in another bucket. It used to be that your non charitable personal capital was either completely passive in its investment or if you were really sophisticated you screened out bad things and that’s just where it was. And then with your charitable capital, you put it in a money market fund until you gave it away, and that was about as sophisticated as it got. Well, those days are over on both sides of the coin. Giving and investing are now a very commingled, holistic endeavor. So actually when I hear you talk about the Faith Driven Investor, my mind goes to two buckets, not one bucket. So I don’t just think about the Faith Driven Investor investing their personal non charitable capital. I see it as one big thing. It’s just a matter of whether it’s this return your tax exempt or whether they’re not. And so it’s opened up a lot of doors that I think are really, really exciting.

John Coleman: That’s awesome, David. And we we obviously agree with this idea that, you know, if you’re going to keep a pool of capital for giving, you might as well use that entire pool of capital for impact rather than just waiting for impact until the time you can give it away. You mentioned that people are moving beyond where it started with negative screening into other types of investing. Could you say a little bit more about that and what that looks like within the context of the organizations that you’ve worked with in the DAF marketplace?

David Wills: Well, I’m going to broaden your questions if you’ll let me a little bit here. So let’s go back to that left hand bucket. That’s your personal non charitable capital that used to be passive that’s going away. So both giving and investing. The concept of social change is now melded into all of it. And so no matter where you invest, whichever capital you’re talking about, you are affecting social change. And if you’re faith driven, you’re also the social change has a spiritual aspect to it as well. But I would think if you went to the CEO of Apple and said, okay, if you have to give up one or the other, which one are you going to pick? The valuation of your company and the returns to your shareholders or the social impact that your company is generating. I believe he would say I’m unwilling to give up either one of them and they are both completely interlinked with each other. That’s exactly what’s happening on the giving side as well. So when we give our charitable capital, we are very intentionally now becoming investors. We used to kind of call it donors, but we don’t use that language anymore because donors are they? How do I describe it? They give away their resources and they move on. Requires very little effort. It’s actually the most common identity that I even have as a giver, is a donor. But that is diminishing. And so people are becoming what I would describe as Faith Driven Investor. And the reason they turn into investors is because they care, they’re accountable for the results of their giving and they’re investing. And so that requires a great deal of effort. But people are embracing that. But keep in mind, this isn’t new. This is not a new thing. This goes back to the time of Jesus, where in the parables of the Matthew 25, Luke 19, the parable of the talents, the terrible, the mind is, it’s exactly the same thing. So I think the day of kind of bifurcating these worlds is starting to go away, which is really exciting. NCF has been kind of processing and dealing with that for over 20 years. And one aspect that we can talk about if you’d like, but hope that answers your question.

Luke Roush: So when you talk about just kind of this shift and you described it well, we often describe one on the spectrum. We find donors trying to become more sustainable in the way they give or the way they invest. To use your language, which I like. And then also on the investing side, people are trying to become more thoughtful about the impact that their capital is having beyond just purely kind of dollars and cents. As you think about the shift in mentality that’s going on, on the giving side, becoming more investment, sustainable, focused. What’s driving that? Is that an intergenerational thing that sort of as millennials or kind of second gen, third gen folks are starting to act as allocators of capital. Are they driving that? Is it actually an awakening of the original donor advised fund account holders? What are the core drivers of why that shift is occurring?

David Wills: Yeah, I would say it’s a spiritual shift and in the past 20 years, at least in the world that we work in, which is not, you know, the massive amount of folks out there is more on the upper end of the scale. Frankly, we’re seeing a I don’t know if you would call it a revival of generosity or just an outpouring of generosity, but people are dramatically increasing what they give. And because it’s becoming a more intertwined part of their life, it’s now becoming a more important aspect of their life. And they’re not willing to do things the way they used to. This is double down with the younger generation, though it’s even more so. But it’s not just the younger generation. There are old people like me in their sixties that are caring as much about this. I mean, we now even have terms that we use on the generosity side called giving champions and giving evangelists who are using, you know, their influence, their spiritual giftedness of giving to influence their peers. And that’s another factor that’s really causing this to change because it makes sense. It’s actually biblical generosity is what’s happening here. Another factor, I’ll give you one more and there’s others. But I think that probably the biggest one is the issue of ownership, and it’s on both sides. So, you know, ownership that’s kind of like control. It’s an illusion. We think that we own things and we think we have control of things, but neither are true. And so as people understand more and more that they’re an owner that has the steward mindset, several things start to click. Scarcity becomes abundance. Caring about and being accountable for what happens with your giving starts to happen because you’re a manager, you’re responsible to manage. And so that ownership and manager role clarity is also another big reason that this is happening. So you’re kind of get me on a soapbox here, so I’ll step off.

Luke Roush: That’s great. I like the soapbox. Keep rolling. John, over to you.

John Coleman: Yeah, just a couple of topics I want to dig in before we leave this area of donor advised funds, David. One is, you know, if you look at the average age of a donor for donor adviced funds in the US is 65 years old and this is common across anywhere that you have pools of assets that it’s critical to get young people involved in these movements. And you touched on that a bit. How do you think donor advised funds can start to get young people involved? And what’s the purpose of a donor advised fund or what’s the use of a donor advised fund for a younger person with a lower account balance?

David Wills: Well, I’ll start with the second question first. As I mentioned, my wife and I started using donor investments 30 years ago and I was 30 years old. So I think I was a young person at that point and we had a little balance. So all of the reasons that I gave earlier perfectly, in fact, they actually primarily fit with people that are younger. The only exception might be the gift of the real estate, but even that’s not an exception anymore, because these younger folks are now either creating wealth much earlier than my generation did and or they’re receiving wealth much earlier than my generation did. And so I think that the younger and smaller is really just not as big of a deal as it once was. I think that those folks I also think that they’re more conscientious and they’re more holistic. The younger people are. So it’s the older folks that are more likely to bifurcate their lives. Younger folks are far less likely to do that. Everything. So they may be more interested in the social impact of Apple than they are the returns of Apple. Now, my generation couldn’t give a rip about the social impact of Apple. I wanted a higher return on my investment, and thank goodness I invested Apple a long time ago, but it’s a very different mindset. On the donor advised fund side. You know, these demographics are real and it’s the young people. I think they’re going to be giving more. I don’t think they’re going to be getting less and they’re going to be giving more conscientiously. And so these kinds of tools are actually going to become even more valuable for them than they were for my generation.

John Coleman: David Switching topics a bit. One of the one of the things I’ve noted is just the diversity of things that people give to you through donor advised funds. And I have a question about whether you think a donor buys one platform and the nature of a donor advised fund really matters depending on your values. For example, I noticed that one of the top five donor advised fund out there of their top three charities that they support. One was a major church organization and one was the country’s largest abortion charity. How should Christians think about that? And does the nature of the platform actually matter?

David Wills: Well, I’ll give you two points on that. The first one is the pressure on the secular donor advised funds, and that’s who you’re giving an example of, obviously is becoming very significant on their role in supporting religious organizations. And so we’re even seeing people move over to NCF from secular donor advised funds because they’re getting wind of this pressure, which is totally understandable and I think it makes a really big difference. So in the world of a foundation, I know that it feels like when you have a donor advise fund, that’s your fund, but you actually don’t own that fund. It is a part of a much bigger body of funds and you are under the auspices, under the fiduciary responsibility of a group of people. But even more so than that, I encourage people to, you know, there are many faith driven options out there for a donor advised funds. They should pick one because inside of the donor advised fund, most people on the outside that use them say that there’s fees, but there really aren’t fees at a donor advised fund. They’re actually grants to the operating fund of the charity. And I don’t want one penny of my grant making to go to the operating fund of a charity who’s going to make grants to the largest abortion provider in the country, not one penny. And so there are plenty of options now where you don’t have to do that. And so I encourage people to pick one of those options and dive all the way in.

Luke Roush: I love that. It’s a great remit. And to your point, there’s a number of good options that are available to folks. Let’s all pick one and I want to come back to something that you and I have talked about before. David.

David Wills: Hey, Luke. Before you. Should we make a disclaimer of your wife’s prior employment at the National Christian Foundation? You’re starting to talk.

Luke Roush: Yeah her first boss. It’s her favorite boss. I think she’d most certainly rather work for you than work for me. That’s. That’s for sure. But, yes, Brooke, once upon a time was the first marketing employee at National Christian Foundation who worked under the tutelage of David Wills. We would have attribute much of our marital success to David in his bride.

David Wills: Okay. Just wanted to make sure that that disclaimer was out there. So.

Luke Roush: Well, I’ll tell you, David Wills and Ted Day are two of her all time favorite people, and I am grateful for them.

David Wills: That’s wonderful.

John Coleman: Where do you rank in those all time favorite people Luke among those.

Luke Roush: I’m somewhere way down the list. It depends on the day. Depends on the day.

David Wills: Oh, come on. Top ten for sure.

Luke Roush: Top ten? Yeah, that’s good. Okay.

John Coleman: You have thrown off David. We managed to throw Luke off. This is a legendary day in the Faith Driven Investor podcast. We should mark this for posterity.

Luke Roush: Oh, so. Okay, I got it. I want to come back. David, something that you and I have talked about before is this idea of some significant or insignificant stroke of pen risk that exists around Christians ability to donate to Christian charities or to invest into to use your words Christian charities in a tax advantaged manner. And there’s been a fair amount of speculation, particularly in the last ten years, that that may or may not continue into perpetuity. Any thoughts from you on where we stand now regarding that issue?

David Wills: The issue of whether or not people that are using daughter bodies, funds are going to be able to invest?

Luke Roush: Going to be able to give to Christian charities. Is a Christian charitable exemption at risk? Oh, you come out of D.C. This is your old world. Your old stop. Yes.

David Wills: Okay. Yeah. That’s a very fair question. One of the great things I mean, it’s from my perspective, having spent a lot of time doing advocacy work in Washington, which is kind of like beating your head against a wall, but you have to do it. Is that the biggest fans of charity in Washington? Are they very conservative and very liberal members of the House and the Senate? And so, in fact, some of the biggest champions of charitable giving and who would never want anything like that done are on the other side of the political spectrum than you would expect. Now, there are some exceptions to that rule, and I’ve had the privilege of speaking with many of them. But by and large, the risk to the non religious sector is so great if they were to start carving off and picking winners and losers, I can’t really imagine that ever happening. But there are some that would like for it to happen. Of course, there are some conservatives that don’t think Greenpeace should be a tax exempt organization or Planned Parenthood. I disagree fully with that, and I believe that churches also churches are even at less risk because they actually are outside the cap. But anyway, I think that answers your question.

Luke Roush: It does. Thank you.

John Coleman: Maybe to pivot a little bit, David, to move to a new topic, obviously, you’re very experienced with both investments and giving. Given the nature of your history and experience in investments, we have a ton of metrics around the success of those investments return on investment, etc. Many of our listeners, I think, struggle with how to measure success in the charitable world or how to determine whether their gifts are having an impact. Could you talk to us a little bit just how you think about metrics for giving and how those who give can think about the return on their investments in charities?

David Wills: Sure. Yeah. Some of the metrics that exist in investing in any corporate environment apply to tax exempt corporate environments. So there are definitely some ratios that you can use to help you understand that. And it’s just like in the socially responsible investing world, there are social ways to do metrics on social change. It’s a little trickier when you get into spiritual change, but even that is something that can be measured to some degree. In some cases, sometimes it can’t. But, you know, one of the great things about the metrics from a spiritual standpoint is, is that the metrics on a spiritual side, though often more difficult to distinguish clearly, are so much greater return than any earthly return could possibly be. But there are a couple of things that when I’m talking with somebody and they’re asking, is this a good investment? Is this a good charity? There are some things that I would tell them to look for. I would tell them to look for, you know, tested leadership, good tested leadership. I would tell them to look for a crystal clear vision and demonstrated momentum. But that’s the same thing you would tell somebody to look for if they were looking at a for profit investment. You get all three of those and you’re now you’re digging. To the details to make sure that it’s a sound investment. And digging into the details is a little bit different. But the starting point, by and large, is very similar.

Luke Roush: So thank you for that. I want to dove into a topic that I’ve heard you speak before about in terms of asylum being on the move, and that is the concept of God sized projects. So particularly as it relates to the Great Commission, maybe just an example or two of organizations that have successfully embarked on a God sized mission.

David Wills: Okay. So I’m glad that you use that phrase God sized mission projects. So I’m going to rewind just for a second because I want to make sure that when we’re talking about metrics on the spiritual side, that most of it’s unseen. And so the angels in heaven rejoice when one soul comes to faith. Now, that is a God sized celebration right there, buddy. And so when you think God size, I want you not to just think quantity. I want you to think quality. So that’s a little caveat, but some examples. One of the things that’s happening in the I would say what it starts to feel more like an investment are extraordinary collective and collaborative efforts that are going on. And I’ll mention those the examples that you asked for as opposed to mentioning like specific organizations, though I definitely could get into that. So I’ll give you three quick ones. One of them is the Illuminations Foundation. And every tribe, every nation, this is a collective effort. And the goal is that every one, every language, every person will have their native language in at least some meaningful portion of scripture. Their goal is to see that happen by 2033. That’s a tough goal and resources are needed to make that happen. The next one is what I call the finishing fund. It’s actually a mutual fund that’s been started by giver a guy named Doug Cobb and their goal in Fund One. They’re actually getting ready to start fund two. And their objective is to see that all unengaged people groups are engaged with the gospel. And that sounds like that’s crazy. But to give you an idea of where we are on that, because that’s something we’ve been working on now for over 15 years. Collectively, in 2005, there were 3500 unengaged people groups in the world, 2005. Now there’s 12,000 total. Okay. So 3500 of them were unengaged today, less than 250. So if you want to invest and I consider it an eternal investment in this deal, you better get on it because this is about to close. I think it could happen in the next two years that there will be no such thing as an unengaged people group on Earth anymore. And I promise you, if you invest in that, you’re going to reap the returns when you get on the other side. Fund two is very interesting because as we have engaged those 3500 groups, there’s now a groundswell of what I would call marginally engaged groups, just slightly engaged. And we need to turn those into sustainably engaged groups and then see that they become reached, which is 2% of the population. There are almost 4000 of the 12,000 people groups that I would describe as marginally engaged with the gospel. There’s some presence, but we need to go deeper and we need to do it quickly. It’s like taking a hill in a battle. We’ve taken the hill, but our troops are thin, so we need to move in reinforcement so that we can hold the land. The last one that I would mention quickly is the Strategic Resource Group. It’s another collective group and its focus is simply in what I would call investment grade options in the Middle East and North Africa for getting the gospel in the Middle East, in North Africa, which is also a very difficult place. So those are some examples that are just there crushing it. All three of those are just crushing it.

John Coleman: David I love that and I love that you guys are taking big swings for the gospel, that you’re really trying to do things that have a kingdom impact and that have an extraordinary impact. One more question before we dive into our lightning round, which should be fine. You know, recently Hulu released a documentary about the rise and fall of We Work and We Work is just one example among many of big, big start up projects. You know, these big enterprise that people invested in but went astray with the ego of the people involved with deception, with people misleading one another, etc.. Certainly this has happened in ministries as well or in charitable enterprises as well. Have you ever had experience with that and what advice would you give to people to make sure that their capital isn’t flowing into ventures that end up going astray like that?

John Coleman: Unfortunately, I have worked with folks that have dealt with that. I will say that to some degree, some of what we’re involved in where I meaning all of the investing, but there are some angel investing opportunities that are out there across the spectrum of charitable and non charitable that are risky and we shouldn’t shy away from those. However, what you’re talking about is deception. And that’s a different animal. So I want to make sure that people aren’t hearing your example of we work and saying, Well, I should not be an angel investor. And these startup deals, people go into these crazy places that nobody else has ever been willing to go to. Absolutely not. We should be significantly supporting those kind of angel investment opportunities. But I would tell you have a herd mentality if you want to avoid that kind of stuff. Don’t go it alone. Those three examples that I gave you of the illuminations, the other two that I mentioned, it’s a way to not go it alone. So invest and give in herds. Don’t go it alone. It’s one of the powerful things about Sovereign’s Capital. You’re not going it alone. You can of course, anybody can go invest in we work if they want. But this is the kind of thing that happens when you go it alone. And also, I would encourage people to have very good faith aligned, faith driven. That’s probably the catch your term. But advisors have faith aligned advisors. So leverage your peers. Leverage your advisors, be faith aligned. And not only will you improve your game, you will help avoid some of these unfortunate situations. And it’s just more fun. And so that’s how I answered that question.

Luke Roush: That’s great, David. I want to transition as to kind of the last section here, which is affectionately called The Lightning Round. So these are a series of short questions, one at a time that we’re going to throw to you. And some of them are fun. Some of them are actually most of them are fun midsummer. Some of them are also serious. So I’m going to kick us off. We’re going to go back and forth. And your answers need to be 15 seconds or less or you call those terms.

David Wills: Let’s go. I’m ready to play.

Luke Roush: All right, let’s roll. So here’s the first one. What was the bigger deal for you personally? Baylor winning the Sugar Bowl or dancing it? March Madness.

David Wills: Oh, March Madness. Easy. Next question.

John Coleman: All right. I’m going to ask this is a native of the great state of Georgia. David, when you move back to Texas, is it true that you kissed the ground upon your return?

David Wills: Absolutely. In fact, I kissed the ground, Texas. Every time I came back to Texas, but especially when we moved back here.

John Coleman: Oh, it hurts. It hurts.

Luke Roush: Okay. Okay. So you can start one super niche charity. What is it?

David Wills: Yeah, I would support any of the three that I mentioned, which I believe are super niche charities. But the finishing fund resourcing, the completion of the Great Commission, engaging all the unengaged would be that I would knock out that 200. That’s not the right term. I would see that the gospel penetrates those 200 plus remaining unengaged people group and get it done.

Luke Roush: That’s great.

John Coleman: That’s awesome. So, David, more specific question. Who is the most interesting person with whom you’ve consumed a pie near Crawford, Texas?

David Wills: Oh, well, what you’re actually talking about is Georgian and Laura Bush. And that’s actually it’s the Coffee Shop Cafe in McGregor, Texas, which is just down the road from Crawford, Texas. And they sell the best pies. I mean, their peach pies are better than the ones in Georgia.

John Coleman: Oh, David. Oh, my gosh. This interview is over. Luke, I have to excuse myself now.

Luke Roush: Okay. Okay, next up, what is your favorite Bible story about giving?

David Wills: Oh, that’s easy. The widow in the temple who out gives all of the rich religious people by putting in two small coins. Is that not just fantastic? Everybody in the world knows about her. Everybody. It’s incredible.

John Coleman: All right, David, we’re going to tee you up for this last question to bring us home. How do you think the world would change if every Christian regularly gave to charity and other purpose first entities?

David Wills: Oh, yeah. Yes, that’s easy. You can answer that with a Bible verse, Matthew 24:14 and it says And the gospel will be proclaimed throughout the world as a testimony to all nations, and then the end will come.

Luke Roush: Hallelujah.

David Wills: But what happened? That’s what would happen.

Luke Roush: Maybe some last thing and then we’ll wrap where has gone taking you recently in his word. And how do you find God’s word speaking to you?

David Wills: Well, I kind of think I just answered that question, but I’ll I’ll do a bonus round. So, you know, Luke, we have our daily Bible texting group and today is Psalm 45. So we do a chapter every day. There’s a group of us that text each other about one thing we now know, one thing we know ought to be, and one thing we ought to do. In light of that chapter, the heading of this chapter says, What should I fear in times of trouble? What a great title for where we are today. And basically, it asks a rhetorical question. It says, Should I trust in wealth and boast in the abundance of riches? And the answer to that question is no. And the reason the answer to that question is no is because that won’t sustain you and it won’t last.

John Coleman: Awesome. David Wills I think I speak for both Luke and I. It’s always a pleasure to have you on, to listen to you, to learn from you. And we’re really grateful to you for sharing with the Faith Driven Investor podcast today and with our audience. Thanks so much for joining us.

David Wills: Honor to be with you. Thank you.

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Ronald Blue Trust advisors apply biblical wisdom and technical expertise to help the clients they serve make wise financial decisions when it comes to money, family, and generations. On this episode of the Faith Driven Investor Podcast, we talk with Scott Calhoun, Skip Perkins, and Kyle Kutz about the benefits of a family office and the  importance of finding balance in life, investing in the next generation, and leaving a godly legacy.

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Michael Eisenberg is a General Partner at Aleph, an equal partnership and early stage venture capital fund that has invested in more than 50 companies and has $850M under management. Michael is also an avid writer. Since 2006, he has been writing the blog “Six Kids and a Full Time Job” on topics ranging from politics to technology, Judaism and macroeconomics. We’re excited to have Michael on the Faith Driven Investor Podcast to talk to him about how he balances investing, writing, and life as a husband and father of eight.

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Once a month, we take a look back at what God is doing in the world of Faith Driven Investing and the global markets. We also spend time looking at current trends and outlooks with great interest and discernment in hopes to identify God’s redemptive work in the world. Public markets are down…what’s happening in private markets? Ben Erskine, managing partner at Callis Capital, and Matt Harris, on the investment team at Draper Associates, join us for a look at market activity from August 2022. This is Marks on the Markets.

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