Joseph Honescko: The faith driven investing movement always starts with heart change, but it shouldn’t ever end there. Christians are called to take action. We put our hands and feet in motion and response to God’s transformative work in our lives. A lot of faith driven investors believe that. But many of us still struggle with the practical question where do we start? We never want this podcast to be hyper prescriptive. But in this conversation, we do want to hone in on some of the themes and ideas. Leaders around the movement have been talking about at various gatherings this year, and we want to give some practical, actionable takeaways. John Coleman will join Richard Cunningham for an in-depth look at how investors around the world can start to get in the game. You’re listening to the Faith Driven Investor podcast. Let’s dive in.

Rusty Rueff: Hey everyone. All opinions expressed on this podcast, including the team and guests, are solely their opinions. Hosted guests may maintain positions in the companies and securities discussed. And this podcast is for informational purposes only and should not be relied upon as specific investment advice for any individual or organization. Thanks for listening.

Richard Cunningham: Well, hello everyone, and welcome to the Faith Driven Investor podcast. We are grateful you are tuning in from wherever you get your podcasts. Glad you’re here. My name is Richard Cunningham. I reside in Austin, Texas, and I have the great privilege and joy of serving on the Faith Driven Investor staff, and I am actually going to be your podcast host for the next season ahead of the FDI podcast. And if you’re wondering, whoa, whoa, whoa, where are my normal guys, my mainstays John Coleman, Luke Roush, Henry Kastner? Not to worry, there’s still very much going to be involved in the life and the future of the FDI podcast. We’re just shifting some things around here internally so we can actually hear more from them. I’ll kind of start manning the host responsibilities, and we’re going to move folks like John Luke Henry into that color commentary, expert insight and kind of guidance role as they have just so many years of experience across this FDI space. And so we’ve got John Coleman here with us today. And John thrilled about this new season of the FDI podcast. And welcome. And I know you’ve been on the road a lot. Everything going well?

John Coleman: Well, Richard, I’m doing pretty well. Although I would say FDI listeners should know that despite Richard’s kind introduction and thoughtful introduction, this is a coup. It’s actually quite tense on the podcast right now. I only wish you knew. Now, Richard, I’m really excited for this season. Obviously, I’ve known Richard for quite some time, and, it’s just such a privilege to get to work with him in this new season of the FDI podcast. And I can’t wait to dig into the topics that we both care about. Invite some great guests on. So I’m very much looking forward to the road ahead.

Richard Cunningham: Absolutely, man. So we’ll call this episode one phase one of the coup. That is our play here.

John Coleman: The revolution.

Richard Cunningham: That’s revolution. So so yeah, recording this at the end of February 2024. And John, today we’re hitting on man, it’s been a red hot start to the new year in the faith driven investor landscape. And specifically there’s been some seminal events that have taken place. So today specifically, I think we kind of want to hit on. Whereas Justin and Henry last week talked a lot about the heart posture themes that came out of each of those gatherings. Today, we want to pull out some of the threads in the themes, specifically from the FDI conference, kind of talk about some of the tactical, practical applications of them. It’s a John. We’re going to spend most of the time teeing up some topics for you. But before we start diving into the conference and some of those threads, just generally speaking, your thoughts on just all the momentum in the hot start we’re off to here in 2024?

John Coleman: Yeah, I’m really encouraged by, you know, I’ve only truly been a part of the faith driven investing community for three years now. I actually just had my three year anniversary at Sovereign’s [Capital] this week, and before that, I was kind of aware of some of the dynamics but not fully invested in those. And I would say there’s been almost a step change in the level of engagement, the quality of engagement, and the breadth of engagement around faith driven investing. You know, the FDI, conference, broadly speaking, was very broad. Tons of direct investors, very global, a lot of high net worth investors and institutions, a mix of asset managers, the FDI fund manager gathering for those not familiar is really about professional investors, fund managers. That was in Palo Alto hosted this year as Richard had a lot of venture capitalists, private equity folks, real estate folks. But this was a session for those who are every single day living and breathing the professional investing world from big firms like some of the mainstream firms that you would know, to specialist firms like ours that are in faith driven investing and in Kingdom advisors. You know, it’s kind of the Super Bowl of the faith driven financial advisor community. And it’s just always an encouragement. They had several thousand people this year. They have this massive exhibit hall. They’ve got these great mainstage speakers, and there you’ve got several thousand wealth managers, financial advisors coming together with asset managers like us with other third parties trying to think through. How do they get their clients in the game for faith driven investing, and how do they counsel their clients with biblical wisdom? Right? Which is also an important part of the advising thing. So I was deeply encouraged on all fronts, although, I would like to travel a little bit less. So if we could have fewer conferences over the next couple of months, that might be better.

Richard Cunningham: Yeah, we we certainly start the year off hot, to say the least. So let’s go specifically to the first of the gatherings we were talking about. The FDI conference kicked off with Luke Roush, your managing partner with you at Sovereign Capital, Henry Kaestner, also Sovereign Capital, talking about this idea of, hey, when you are done with today’s conference, hopefully you’d be able to see that faith driven investors are at work deploying capital in predominantly one of three ways for market rate return, for concessionary and maybe impact investing, as often has been referred to or deploying for philanthropic or just pure giving purposes. And so when you hear that, why was it so important that Henry kicked off the FDI conference kind of through that lens?

John Coleman: Well, I think especially given how much we talk about the values of faith driven investing, anytime you talk about values investing, it’s very important to clarify with those with whom you’re speaking, where you stand along that spectrum. Right, because you do want to be honest and transparent about the return and risk profile that you’re seeking alongside those values. And there’s a legitimate spectrum from pure philanthropy to pure high return investing, whatever asset class that is that you can what you just need to be transparent about where you are on that. I think we’re values based investors, whether Christians or advocates of ESG get into trouble, is when they claim to be investing with the values lens in a way that doesn’t dampen returns. But in fact, there is some structural reason why returns will be lower, and there’s no problem with that if people want to make that conscious trade off. But you got to be conscious of that trade off. And in fact, as professional investors, you then have to be thoughtful about what you can accomplish along each of those points in the spectrum, because I’m a big believer that the private sector can actually solve many of the problems in the world. I think that philanthropy is suited to certain types of problems, but not others. And so we’re constantly trying to think through how can we use market capital to solve the world’s greatest problems rather than philanthropy? But there remain things that have to be philanthropic, right? And it’s important to identify those and figure out how we fund those and put capital against them. And in fact, Jesus called us very directly to engage in those charities, right? For the poor, for the widow, for the orphan, and those those causes still hold true. There are another category of investments that we could get into, things like, charter school financing, for example, maybe low income housing financing and certain constructs that do have a return profile. But you’re making something of a conscious trade off on that profile in order to have the type of impact that you want to have for the risk return profile that you’re getting. And we firmly believe there are elements of the high return spectrum where you’re not at least seeking to trade off returns. You can never guarantee returns, obviously, but you’re seeking high returns alongside a deep integration of cultural values or redemptive mission, etc.. And so we always think as professional investors about where we stand on that spectrum and how we communicate that well to and investors. And I think anyone dealing in values, whether ESG or faith driven investing, really has to be thoughtful about that as well.

Richard Cunningham: John, you captured it really well. But I want to talk real quickly specifically about the story of Dana and Bill Westerman. And this is a situation where Dana’s father, about 12 years ago, left them an inheritance check, a meaningful inheritance check. That kind of rocked their world. And so, John, I think it’d be helpful if someone in your seat who interfaces often with LPs and investors of all sorts, when you see these kind of liquidity events or windfalls or moments like this across the faith driven investing ecosystem, what steps do people take initially? What pitfalls do you potentially see people fall into? Maybe contrast that a little bit with kind of some of what you see Dana and Bill do in their story?

John Coleman: Yeah, and Dana and Bill are such an inspiration. Right? They’ve been mainstays of the faith driven investing ecosystem. They’re one of those families who really put up risk capital to get into areas that innovate for faith driven investing. And so I personally just have a ton of respect for each of them. And I’m really grateful for the impact that they’re having. You know, it’s not uncommon that people come into large amounts of money. And one of the interesting things, Richard, is that when people suddenly come into big amounts of money, it’s often destructive, right? There are a ton of studies that show that lottery winners, after winning the lottery are more likely to go bankrupt, are more likely to suffer from various mental health challenges, are even more likely to take their own lives than those who haven’t won the lottery because they don’t have the habits, mindsets, values surrounding infrastructure to manage it appropriately. Becomes destructive for them. We see it all the time with things like professional athletes, right? A kid who’s never had financial resources comes into something. Or young person at 19 or 20 or 21 years old, they’re in a millions of dollars suddenly, and they just have no framework through which to manage that. There are people who try and take advantage of them all over, right? And they don’t have the infrastructure, other people, frameworks for investing that allow them to steward that well. I think, you know, if I offered some advice to fate driven investors, I think resonant with what Dana and Bill talked about. The first is to make sure right out of the gates that your heart posture is right with regards to these things. You know, we can talk about it further. The Bible is very clear that the love of money is the root of all kinds of evil, but money itself is just a tool. God actually bless the number of people in the Bible. Abraham was one of the richest people of his day, right? David and Solomon, were both extraordinarily wealthy, which actually led to the downfall of at least one of them over time. But that was a blessing as long as they used it for his purposes. And so really digging into what the Scripture says about the use of money and capital, thinking about the mindsets and values that turn that from a totem to a tool, they turn it from an idol to something that you use for kingdom purposes. That’s the first step, is to get that mental framework right, to really understand what you want to do there. The second is to be very practical about pausing. When you come into those resources and really thinking about what is the level of lifestyle that I need in order to live, and what is the level of lifestyle that I can live when I come into this money. And then secondly, you know, how am I going to steward those resources? I think Dana and Bill laid out a framework. For example, I believe it was 60-40 where they were going to do faith driven investing, where they think maybe I got that number wrong, but 60% of it in philanthropy with 40% of it, I believe, you know, some framework like that where you know exactly what you’re setting aside for philanthropy, what you’re investing for the future, and then within that investment and philanthropic pool, how are you going to determine the framework by which you’re going to distribute that capital, and who is going to be your partner in doing that? And that’s one reason I still think it’s incredibly important for most people to have a financial advisor, for example. Right. Someone who has total transparency to what you have, who can keep you accountable. And I think it’s important that person be values align like I have a financial advisor, even though I’m a professional investor, he knows what my will says. He knows what all is in my portfolio, he knows what our goals are, and he shares my Christian faith and my values. And so he’s equipped to step in and make sure that I’m living up to the standards that I established upfront, as well as offering me wise advice. And, you know, second person is speaking to that. And I think those elements are really important for anyone stewarding capital, but particularly if you come into that quickly.

Richard Cunningham: I mean, that’s really good. And I appreciate you bringing up the leg of the stool that is the outside counsel, the financial advisor, the outside wisdom. Appreciate your humility and sharing about your own. You also mentioned something when you said 6040 and you specifically spoke to faith driven investing versus philanthropy, but you say 6040 to start thinking asset allocation might be helpful to help people orient around this conversation of sometimes people think faith driven investing, they only think alternative markets. And there’s totally a lot of spiritual integration there. Other times they think, hey, it’s screening out sin stocks in the public markets, maybe talk about just for an investor out there listening in, asset allocation, a personal balance sheet and briefly kind of maybe orient people. Like how do you think about an asset allocation. It’s you know, it’s really hard to get to why if you don’t first know where you are at X. And I think that’s something you’re talking about is taking a moment, stopping, pausing and understanding. Hey, God, we want you to use these things. But we first need to kind of reflect on, hey, where are we currently?

John Coleman: Yeah. And you know, Tim McCreadie got into some of this later in the conference as well. So I’ll kind of blend some thoughts from the two of those I think. Yeah, yeah. There’s the basic topic of asset allocation. You said 6040, which is the classic stock bond portfolio that people talk about. Right. People used to recommend the average person should be 60% stocks, 40% bonds, etc.. The truth is that asset allocation is just a framework by which we think about how to put our money in different instruments stocks, bonds, money markets, bank account, cash depository institutions, alternative investments based on a few things. Our risk tolerance, right. Which is obviously quite important. How much risk can we take our timeline for investing? Am I 20 years old or am I 90 years old? How long can these assets stay put where they are and our liquidity needs at the very least, right? Which is how much capital do I need now? Which is why most people aren’t 100% in private equity, for example. Right. Which is quite illiquid. You know, I might need some cash now for daily living, for emergencies, for things like that, or to meet my liabilities over time. That’s the basic type of asset allocation. Usually work through that with a financial advisor or even if you’re an institution like I sit on a couple of endowment ICS and we constantly think about what is the asset allocation that matches our lives. Abilities so that we can make sure that we support the institutions those endowments are intended to support in a proper way. And we have consultants who help us think about that in a very rigorous, analytical and quantitative way. And that looks different for someone with $200,000 or $200 million. But each of us have to pick that. I think in the same way, we’ve all got to think about our asset allocation within faith driven investing to the types of points along that spectrum that you and I talked about at the beginning of this call. I think it’s really healthy to have giving goals, for example. So the tithe, that’s the most basic example of that in the Bible, which Dana and Bill talked about as well. But for many people with a lot of financial resources, you can actually go above that tithe, right? You can set aside a bigger pool of capital, or you could even have a goal that, you know, over time, you want to give away as much as you spent, right? And you set a number for that for your lifetime goal, saying, I’m going to give as much as I spent over the course of my life. So something like that where you deciding what your philanthropic capital is and then based on the capital that you actually need to support your lifestyle versus what’s in philanthropy, you’re choosing, where do I want to play on that spectrum of concessionary returns, of high returns? How comfortable am I taking high risk? You know, typically people with more capital are better able to take big risks, and that has tactical implications. And so you have to start thinking about based on your own profile, where are you going to play. I think that deciding that upfront and pushing yourself to think about impact, equivalent to the financial returns you want to get, is a really important part of that equation, though, because it’s very easy to default into just doing a me two portfolio what everyone else would do. And I think for us, we have to be reminded that we’re called to steward that capital in a dramatically different way.

Richard Cunningham: Yeah, I’m really glad you talked about that, and I’m glad you brought up Tim McCreadie too. So Tim, to kind of catch up here speaks later on in the conference. And he does a wonderful job of essentially kind of making the point that, hey, the product on the shelf, the momentum in the movement, the number of assets that are pouring into faith driven investing, the excuses are starting to go away one by one, for why someone would be hesitant to step into faith driven investing for a long time. And John, I’ll have you riff on this real quickly. It was, well, hey, I’m not an accredited investor. And so for legal reasons, there’s no reason I could ever be involved in the faith driven investing movement. But what’s coming to bear is remarkable opportunities in the public markets for your everyday retail investor to lean into faith driven investing and financial advisors are receiving more and more product outside expertise consultation that shows them well. There is competitively cost effective products with competitive returns for someone in their everyday stocks and bonds portfolio. Speaking of that kind of asset allocation to access faith driven investing, and then I would hope that anyone hears this and says, hey, this is a conversation I can have with my financial advisor or this as I engage at work. Maybe you work in the asset management space or the financial services industry. You can kind of start to push the line a little bit and say, hey, have we thought about mainstreaming, if you will, the concept of investing that is inspired by our Christian values? ESG certainly pushed to the forefront and found its way kind of, you know, at mass, it feels as if because of the number of Christ followers out there, this is something where there can be ground up demand that causes the intermediaries to act.

John Coleman: Yeah. That’s right. And when we communicate that with the intermediaries, I don’t think they’re bad people or anything like that. It’s just this structural kind of momentum of intermediaries. Right. They’re typically cautious and conservative with their clients assets. The ESG or mainstream values investing framework is a helpful one because they’re accustomed to that. They already make exceptions for values based investments within frameworks with which they’re more familiar. What we can now push on is to say, hey, this is just a different category of values based investment. It’s important to me, and I’d love it if we could begin to at least explore adding some of these options to the platform. And it’s easier to start with things like ETFs and mutual funds because they’re more broadly available. But that can extend to private equity, to venture capital, to real estate. And I’ll tell you, Richard, you know, one of the encouragements to me is I am seeing quality, faith driven options now in almost every asset class. You know, one of my propositions coming in with Henry was there are very, very few asset classes that can’t be done with some element of spiritual integration. I’m not sure what that looks like for gold. I know there’s a very vibrant debate about Bitcoin, but you know, for the vast majority of stuff stocks, bonds, real estate, private credit, direct lending, asset based leasing, music, REITs, movie studio content, investment, venture capital, private equity, all these different things that we think about. I’m seeing emerging opportunities to do it in a faith oriented way at one level or another, and I think that’s quite exciting to me as well.

Richard Cunningham: Absolutely. Really well said. Well you tee up a good kind of transition. And so we’re going to move a little bit down the balance sheet here and kind of go from one asset class to the next as we did that in the conference. And so now here we are in the real assets kind of category. Chuck Welden of WeldenFields and his real estate investment company has really spent some time thinking on, hey, what could spiritual integration that term, John, we’ve used number of times look like in our multifamily real estate investing. And so we’d love to invite you just I know Sovereign’s has some real estate kind of activity inside of what you all do as an asset manager. Have you kind of speaking to this particular asset class for a moment?

John Coleman: Yeah, and getting to know Chuck over the last few years has been a joy. Obviously they’ve got WeldenField, but he’s also been instrumental in Lion’s Den.

Richard Cunningham: Oh great. Call out in.

John Coleman: A number of other just pieces of infrastructure in the faith driven investing movement. And in many ways, he’s been right there, shoulder to shoulder with Rob West and with Henry Kaestner and with Ross Robinson and so many others who’ve just been in this for the long haul. And it pioneered it. And so my respect for Chuck as a person, it’s just extraordinarily high. I think real estate is one of the most interesting areas that faith driven investors should be thinking about. If you think about the context of real estate, you are operating in a space where you touch individual people a huge percentage of their time, or in commercial real estate, you know, where you’re getting people or even industrial where they’re producing things. You have this opportunity in the lived environment to be where people are all the time, right? To really people that are one of the greatest callings that we have in the Bible. Is hospitality, right? For strangers, for enemies? We are to extend love and hospitality and greeting to those people. You go all the way back to the Old Testament and just think about the people who were spared because they invited strangers into their homes to provide them protection. You think about the way that Jesus behaved, inviting people in when his followers were gathering. You think about all of these examples. The Good Samaritan, if someone who was willing to take someone in, who was willing to take them to an end and take care of them, another opportunity for hospitality, right? I think real estate is one of these exciting areas where we get to practice our faith deeply in a lived environment that contains people for such a huge percentage of their time. Multifamily, I think, is particularly exciting for that reason, you think about the opportunity to welcome in people who are often in unstable situations, and yet through their lived environment, you can try and provide a safe space. Surround it with people, including the property managers, those who are working the property, even the maintenance staff, the folks working landscaping. You can prepare them to extend Christian hospitality to these people. There are these opportunities to take people where they live, and instead of them having to go seek out hospitality, and instead of them having to randomly run across this idea of Christian love, you can bring it to them where they live. And so I’m extraordinarily excited about that.

Richard Cunningham: Man. Really well said. One of the things to the faith, true investors listening, who maybe aren’t in the real estate space but are thinking, I’d love to see some of these fund managers. That’s John talking about. Or just like, look at a website and see how people are communicating this. That’s the beauty and FDI groups and that’s the beauty. And just kind of poking around our website is you’ll bump into some of these names. And so now we’re talking culture and entertainment. But John, you actually conducted this interview in the FDI conference with Dallas Jenkins. And one of the things you guys talked about is so much of what happens in our world is downstream of what we see in the arts and what we see in entertainment. Talk about that more. And what Dallas Jenkins, creator of The Chosen, has done. But just more broadly, I think when people think of faith driven investing, they think of what we’ve talked about today stocks, bonds, real estate, maybe some one off private equity fund manager. They might think of crypto or something like that, but they don’t think of entertainment or movies or values investing in that regard. So maybe help kind of people look at this asset class.

John Coleman: This is one that’s kind of a personal hobby horse of mine. I’m super impressed. I love it. You know, I think there are very few things that Christians could do to influence the culture for human flourishing. Then create culture, movies, television shows, music, the written word books, you know, all of these sorts of things. You think about it. The United States in particular, exports almost nothing else as much as culture, right? You go everywhere else in the world, and you are listening often to American music and movies and TV. We are surrounded by it. Your kids, between that and social media, are spending hours and hours a day in front of these things. It is having as great an influence on our ability to flourish, our ability to come to know truth, and just the way that we think about ourselves in the world around us as anything else. And again, it combined with social media in particular. And so I think Christians have an obligation to be engaged in culture. I think historically, Christians have done, at least in recent history, a reasonably poor job of that. We often haven’t made product. That’s it, the quality standard of the mainstream product that was out there. And that, honestly, is one of the things that was so revolutionary about the chosen and what Dallas did with The Chosen Dude.

Richard Cunningham: I think I’m betting a thousand on crying during every episode. Just oh my gosh.

John Coleman: And you know, we rewatch all the episodes. We make our kids watch them with us and they love watching them, right? Because they’re really good. And that’s the test, right? When your kids want to watch something with you, because my kids would love to go watch all these other things because they’re good, they’re really good, and we want to make content like that. And I think Dallas has really done that. I’m a huge fan of a guy named John Erwin who’s done that with Jesus Revolution and American Underdog. And I think there are an emerging set of opportunities to invest in that type of culture that are really taking off. One of the ones that we did, and I’m not trying to promote us recently, alongside a number of others, was Help John and Dallas launch a new movie studio called The Wonder Project, which is intended to do exactly that. They’ve recently announced a partnership with Amazon. They’re producing a TV show now called House of David that will hopefully do for the story of David. What the chosen has done for the Gospels is the aspiration. It’s also kind of a cool story. It’s going to be like Lord of the Rings or Game of Thrones for the story of David, which I think is really neat. And we think that just like The Chosen that can reach hundreds, millions of people, the chosen is such a hundred million people. But in order to do that, you need capital because this stuff is expensive. Go look at what Netflix or HBO or Amazon or any of the studios Lionsgate are putting into movies. You know, they don’t cost $1 million. An independent film will cost 15 to $30 million. Some of these giant studio productions are $200 million or more. So they take serious capital. And that’s why I think Christian’s opening that up as an asset class to invest in beginning to Marshall Capital, conscientious, as long as the creators can match that with great creation is an exciting opportunity. The scary thing about the space is a lot of folks have gotten burned there historically because it is a different type of investing, like venture capital. There are winners and losers. You really have to understand the industry in order to do it well. And that’s why I think professional investors who are faith aligned, getting into the space is essential right now, because it is easy to get the economics wrong. If you’re not familiar with the studio system, Dallas and John are obviously quite familiar with that. So they’ve been able to craft something that I think can be positive for investors. Other creators can too, but I think professional investors leaning into the space, starting to raise funds, really learning the system and helping individual investors and institutions get in the game is important. And as I think about the impact investing side, you know, somewhere in between kind of high return and philanthropy, there are very few things I think we could be doing that would touch more people and help to make their lives a little bit better every day.

Richard Cunningham: Man, that’s fun to hear you talk about. And, you know, you mentioned John Erwin’s name, and this is someone we’ve had on multiple faith driven investor events. Speaking of conferences, just so much of what they do is of such excellence. So I’m going to go on a little bit of just a kind of rampage here to close us as I look at the remainder of the conference and just say we went to emerging markets, something near and dear to one of the feature investor founders, Hearts and Henry Kaestner. And we showcase the story of Christeen Rico and how she left an executive level role at Apple and moved to her birthplace of the Philippines to start an accelerator and joined up with the venture capital fund. And then Tim Macready kind of reigned us back in and said, hey, it’s not just about the alternatives market. There is an opportunity, as we’ve kind of hit on here, to think about the mainstream implications and opportunities of faith driven investing in your traditional asset allocation and your stocks and bonds portfolio. As you look to Stewart ETFs and mutual funds as you need liquidity. And Tim did a great job. And we’re going to have him on the podcast here in the weeks ahead. Talking more about his research around growth of the movement, the products available, some of the spiritual integration metrics he’s looking at in his team at Brightlight are looking at. And that was great. We showcased a wonderful story of green hope out of Indonesia with Tommy Tjiptadjaja and Sugianto Tandio, which was just super powerful talking about investing and partnership. And I want to tease this one out a little bit as our final story was a practical hey, what next for faith driven investors? And it was the story of Potomac Angel capital. And we’re going to have Patrick Farrell on our very next faith Driven investor podcast talking about Potomac, the application of investing in community, not going at this alone, and the opportunities at play for spiritual integration as you think of really early stage investing and partnering with entrepreneurs and incubation in the formation of their companies. So with all that in mind, John, before we sign off here, as we think about this next season, season’s FDI podcasts, any closing remarks or thoughts from you?

John Coleman: Yeah, I would just say to this community, first of all, be really encouraged by what’s happening in the marketplace. There is a lot of innovation happening. We talked about some of it today. You’re seeing it at the FDI. I mean, the FDI fund manager gathering, Richard, which we didn’t talk about too much. We had investors from some of the biggest venture capital and private equity firms in the world, CEOs of some of the biggest asset managers in the world who are Christians, who are trying to think about redemptive uses of their capital that may look a little bit different than Sovereign’s. It may not be able to go quite as far in some of those institutions as we would go on the spiritual integration. Inside, but we also have to let a thousand flowers bloom. And it’s important that people get engaged where they are. I think secondly, I would encourage people to not let the perfect be the enemy of good. I think it’s easy to throw up your hands if you can’t do your entire portfolio is faith driven, or if you don’t know how to do that and say, well, I’m just going to stick with what I got, not do anything. And my point of view is like, just dip a toe in the water, get started with one thing, move cautiously and deliberately. Do a second thing once you get comfortable with that. Just get in the game. Start trying to do it thoughtfully. Get an advisor who can help you do that in a way that doesn’t sacrifice returns. It keeps you safe, and then spread the word. We talked about spreading the word to gatekeepers, trying to get them more amenable. We want to get the word out about FDI and FDE, certainly just so more people are engaged in the movement so that more folks are considering doing this with their capital. But spread the word. And certainly as we launch into the next phase of this podcast, we would love your feedback on how to make this as engaging as possible. You know, we want to make sure we’re telling stories that are impactful, that we’re giving people educational materials that make a difference, that we’re making the faith driven investing ecosystem practical for people that they can actually get in the game, Richard. And it’s not just a hypothetical. It’s not just theory. And we want you to push us on who you want to see on this podcast, what topics you want to see, what things are confusing, what we can help clarify, and how we can make this as engaging as possible so that we can be a part of that movement that you all really you all are leading.

Richard Cunningham: Yeah, absolutely. Really well said. John. This is a movement that is led by those of you actually out in the field. And John, you said a key phrase that I’m so pumped that you said because it was the theme of the overall 2024 FDI conference, and that was get in the game. Take that opportunity to go from spectator, go from passively kind of digesting this, like you said in theory and moving it into practical application. And it’s just one fateful step at a time. This is not prescriptive or presumptuous. This is in faithful obedience. And Joey Honescko, our producer behind the scenes, reminded me that, hey, if you ever to John’s point, you have that suggestion, you have that guest we need to talk to podcast at FaithDrivenEntrepreneur.org . So John Coleman, thank you so much for your time today. We will see you folks next time with our good buddy Patrick Farrell on to talk about Potomac Angel capital.

Henry Kaestner: We are grateful for the opportunity to serve this community and see listeners come in from more than 100 countries. Faith driven investing can be a lonely journey, but it doesn’t have to be. The best way to stay connected is to join a group study with other investors looking to get the same answers to questions you have, and find great community as they do so. There’s no cost, no catch in person or online. You can meet an hour a week with other peers from your backyard or the other side of the world. You can also stay connected by signing up for our monthly newsletter at faithdriveninvestor.org . This podcast wouldn’t be possible without the help of many of our friends. Executive Producer Justin Foreman intro mixed in, arranged by Summer drags. Audio and editing by Richard Barley. Our theme song is Sweet Ever After by Ellie Holcomb.

Joseph Honescko: Have you ever been bit by the church parking lot deal? You know the situation. A well-meaning believer with access to capital wants to support another well-meaning believer with a business idea, since they worship alongside each other on Sundays. The investor feels that it would be right to help the prospective entrepreneur out. So they shake hands and agree to work together. And that’s about when the problems start to arise. Without proper expectations, setting agreement upon terms, due diligence, strategy, planning and execution, the business fails and the investor loses money. These situations are often far too familiar amongst faith driven investors, so much so that many have separated themselves from investing in these risky early stage ventures, which makes it difficult for these potentially impactful businesses to find the funding they need to survive. So what if innovative investors could redeem this type of investing? Today, on a special episode of marks on the markets, Richard and Luke are joined by Patrick Farrell, the co-founder of Potomac Angel capital. The group connects like minded investors with mission driven entrepreneurs for mutual financial benefit, lasting impact and meaningful relationships. In this episode, Patrick is going to dive into the unique opportunities and challenges that come with angel investing. He and Luke will also highlight some of the specific market trends to be aware of. For anyone thinking about early stage investing. You’re listening to the Faith Driven Investor podcast. Let’s get started.

Rusty Rueff: Hey everyone! All opinions expressed on this podcast, including the team and guests, are solely their opinions. Host and guests may maintain positions in the companies of securities discussed, and this podcast is for informational purposes only and should not be relied upon as specific investment advice for any individual or organization. Thanks for listening.

Richard Cunningham: Well, hello and welcome everyone to the Faith Driven Investor podcast. We are grateful you are tuning in from wherever you get your podcast from. If you were not with us in our most recent recording, I am Richard Cunningham, I’m on staff with FDI and I have the great privilege. I don’t know if it’s a good thing or a bad thing. Luke Roush of taking over the hosting roles in this next season of the FDI podcast, and the heart behind it, is we want to get you and John Coleman and Henry Kaestner out of the host seat and into that kind of expert analysis, color commentary seat. John Coleman last week said, hey, this is a coup. And he wasn’t very happy about it. I haven’t gotten the opportunity to publicly comment on this yet. So here’s your opportunity before we welcome our man, Patrick Farrell to the show.

Luke Roush: Hey, have you this is a major upgrade, major upgrade to have Richard Cunningham in that seat. Let’s go buddy.

Richard Cunningham: Man, I just I wholeheartedly disagree, but your words are kind. Today is going to be a lot of fun. We’ve got a very close friend, leader in the faith driven investing landscape, and our buddy Patrick Farrell, newest resident to my hometown of Austin, Texas, which I’m particularly excited about joining us today, talking about kind of in the series that we’re doing post FDI conference, where we zoom in on particular stories that we shared in the 2024 FDI conference back in January, Potomac Angel capital being one of those. And the work Patrick’s doing leading that charge. So we’re gonna get to hear from that. But then today’s also a unique marks in the market podcast. So we’ve got Luke and Patrick also providing some insights on, you know, what is relevant to this conversation being early stage investing, direct investing, Luke and their work out of the sovereign venture funds, Patrick and his work with Potomac Angel capital. So you’ll get a little bit of market commentary as well as we think about this conversation with Patrick Farrell. Welcome to the show, man. Grateful you are here. How’s it going.

Patrick Farrell: Man? It’s great to be here just about 75 yards from where you’re sitting, Richard says. Super fun to be live from Austin, Texas. And man, been a fan of the podcast for years, so it’s such a joy to be on it.

Richard Cunningham: May. We’re pumped to have you here. So let’s dive right in. Patrick Potomac, Angel capital. The story was told at the very end of the FDI conference, this incredible representation of what it looks like for faith driven investors to get in the game. For those who couldn’t join us for the FDI conference, maybe give us a little kind of response and commentary of what it was like to have that story told in the FDI conference, but also catch those up who maybe might not be familiar with the work of Potomac and what you guys are doing.

Patrick Farrell: Yeah. Well, I mean, it’s one thing to be sort of living that story day to day, but then to see it on video production and, you know, broadcast across hundreds of cities with such a blessing. But I found myself kind of sitting there at the watch party here in Austin going, man, guys are really up to something. And obviously I know that because I’m living it. But it really struck me just to see it up there and just to be humbled by how God has been building this thing and that I’m along for the ride. So that was so awesome to have it featured on the conference. Yeah. So a little bit of background, Potomac Angel capital. We’re an angel network based out of Washington, DC. We invest in mission driven founders from mostly in the United States, but also some internationally. And all of our investors are based in DC. They’re all faith driven investors, and we’re doing early stage angel investing. And so our our angel investors are part of a group that invest together in these early stage companies. And we’re investing really for three things. One is for meaningful impact. So these companies that we’re investing in, our mission oriented and really participating in God’s redemption of all things we’re looking for. Founders are open to relationship. We want to walk alongside founders for the tumultuous journey that is entrepreneurship. And then obviously, we want to look for we’re looking for financial upside. So we want to make sure that these ventures are providing profits and returns to their investors. And so we’ve been doing that for a couple of years now, and it’s been super fun to kind of engage in that space.

Luke Roush: One of the things that we talk a lot about, Patrick, is this idea that it’s not a bad thing to be wrong for like 95% of investors are entrepreneurs, as long as you’re the absolute right thing for the other 5%. And some of what came through, I think, in your video is, you know, a real filtration of, hey, we want to be known for being different and having a different approach in terms of how we engage on both sides of the ledger, maybe speak a little bit more of that just in terms of like a real niche that you have carved out, feel like God’s called you into.

Patrick Farrell: Yeah. Great point Luke. I mean, I think part of it is we’re going to be doing excellent deals. So that’s the foundation being excellent investors. Part of what we’re up to. We’re not making any concessions there. But ultimately what we’re saying is at the end of the day, what we want it to be is like a facilitator of relationships, relationships between the entrepreneurs and investors, relationships between entrepreneurs and entrepreneurs, investors and investors, and ultimately facilitating the relationships between all those stakeholders and God the Father, the son, and the Holy Spirit. And so there’s like this relational focus. And so we. Specifically and intentionally structured our processes, our conversations, the way in which we’re engaging with founders to say, hey, relationships are going to be at the center and at the core of this thing. And if you’re open to that and you want us around for the ride good, if you’re not, that’s okay. But we’re probably not a great fit for you. And so we’ll do things like be really transparent in some of our feedback, where we know a lot of our peers are a little bit more hesitant to do that for a number of good reasons. We’ll make sure that we’re trying to bless entrepreneurs in our feedback as well, where we’ll support them even if we don’t invest in them. Really just trying to create that sort of relational focus. And that’s really what’s built a community on top of the deal flow that’s been so powerful to see and how it’s blessed the DC area.

Richard Cunningham: I love it. Well, Patrick, one of the things we talked about and we talk about often here on the podcast, but both just broadly across kind of the faith driven ecosystem, is this concept of getting in the game. And for investors everywhere, kind of wherever the Lord is uniquely positioned them. Hey, what does it look like for you specifically to get in the game? I think we’ve got two great exemplars here, represented in both of you and what, you know, Luke, the work of Sovereigns Capital and what you guys are doing. And Patrick, what you guys are doing to Potomac Angel capital in the opportunity you’re offering for investors in DC and coming soon to Austin, I think, is what you’re going to get into a little bit later on the opportunity to get in the game, maybe kind of from a definitional standpoint here. I think people here, early stage investing, they hear angel investing, they hear venture investing. And a lot of these terms start to mean the same things to people. Would you both kind of maybe distinguish your approaches, what makes them unique, and maybe just educate a little bit about, hey, venture investing out of a fund what sovereigns is doing along with other venture capital funds, angel investing, and kind of this community oriented approach through Potomac and take us to school a little bit guys.

Patrick Farrell: Yeah, for sure. Well, I’ll start Luke. And then you could kind of add some color on the fun side. Typically when, you know, early stage companies are starting to raise capital, oftentimes they’re a little bit too early stage, a little bit too risky for institutional capital. And so what ends up happening is they have to go to family and friends or high net worth individuals, folks that they’re in relationships with or folks like us, angel networks to try to raise that sort of really early capital. So typically we’re working behind companies when they’re just getting to market, just building their team and really getting behind them and hoping to and not only see them take it all the way through exit or acquisition or IPO or through profitability, but also hoping to get in and kind of create that bridge between where they are right now and where an institutional investor can get behind them. And so typically we’re writing smaller checks in a fund would. Right. We’re taking a little bit more of a minority position. We’re investing on instruments that are facilitated to make the deals run faster. So there’s not a ton of legal. And we’re really jumping in early early stage with these entrepreneurs. And then hopefully if we’ve made a good bet the company grows and as well. And then a firm like sovereigns is able to kind of hop in and provide some more fuel to the fire. So that’s where I’d kind of create the bridge to you Luke.

Luke Roush: Yeah. You know, I think that the red thread that runs through everything that we do is really centered on leadership. And our view is that, you know, faith driven cultures are not just created, but also stewarded and perpetuated over time by the right leadership team that continues to make that a priority and really living out, you know, what does it look like to love your neighbor in and through a company? We have tremendous influence. And, you know, in a lot of ways, Patrick, you’ve got even more influence as an early, early stage investor. Maybe one of the first, you know, checks into the business, and that comes with an incredible amount of influence. And that influence can be shepherded, for better or worse. So capital equals influence and that influence. If you find not just alignment around the what we’re doing, but also why and how we’re doing it, there’s real power in that. And I think that that creates an environment where the entrepreneur feels more free to be able to share, not just on like, hey, this great thing happened or that great thing happened, but also, hey, here’s some challenges, here’s some real struggles that we’re having because it’s not just about the what, it’s also the why and, the how. And so for our work, you know, we’re looking for companies that have demonstrated product market fit. They have some number of customers that are already coming in the door. And we’re looking to, you know, find individuals, leaders that we believe in, the vision that they’re casting. They understand the problem they’re trying to solve. There’s enough of a market fit validation to feel like, all right, this isn’t just a total flier napkin. And then, you know, but both of us, you know, an area where I think both of us can find a lot of commonality is patience. It almost always takes longer and takes more money than you think it’s going to take. And also just that, you know, hey, great companies are usually built over, you know, a decade or more. And so this idea of kind of quick in and out or, you know, pulling up a plan every ten days to figure out whether the roots are growing is not a great way of keeping track of businesses. You got to be able to let that stuff, you know, ride a little bit and be patient. So I think that’s how we fit together.

Patrick Farrell: Yeah, as Luke said like this is a long game that we’re playing. We’re not investing in really liquid assets. These are companies that are growing and scaling and hoping that, you know, within 5 to 7, sometimes even ten years to provide an exit to investors. So we’re thinking about the long term redemptive impact and upside financially, which means that for our investors, they have to be willing to kind of weather that long period of time without having that sort of liquid option. And they also have to understand that at our stage, it’s a very risky game. We’re talking about a point in time where there’s no guarantees that companies are successful, but that’s also what makes it really, really fun and makes it really, really valuable to walk alongside entrepreneurs, because that process is such a roller coaster and can be so emotionally stressful and puts stress on their families. And so we want to walk alongside for that journey because they got to make it out of the early stages. They’re going to get to the later stage. And so yeah, just wanted to add some color on that Luke because I think, as you.

Luke Roush: Well know, it’s like, you know, a lot of times people will say, you know, it takes a village to raise children, but if you really want to build, you know, an angel portfolio of investments, it’s probably going to take more than just you. Right. And so I get pinged all the time by hey, would you look at this deal for me? Tell me if you think it might be a good angel. Deal. And my response is always, well, you know, how many angel deals have you done or do you expect to do? Because if you really want to build a portfolio of angel deals, because of the risk in the timeframe that you described, Patrick, you got to be prepared to write 15 or 20 or 30 checks, and the likelihood that you individually can diligence that many different types of companies that are likely to come across your plate, it’s very low. That’s going to be much better done in community with other people, where you can rely on one another and a close knit circle of trust and rely on the strengths of the group. And that’s that’s what you guys have really leveraged, I think.

Patrick Farrell: Yeah. Luke, we’re going to have to get you out there doing the sales pitch for me at some point, because that’s exactly right. It’s really about the community doing deals in community, reduces the risk for the investor, but also just having somebody else to get eyes on, having me and my team around to help diligence the opportunity to help filter those opportunities. Man, it just makes doing it so much easier. And so yeah, 100% with you on that one.

Luke Roush: Yeah. And it’s like after you write a check. Right. So like we always kind of laugh when firms will put out these press releases of like, hey, we wrote a check, right. That’s awesome. Like, it takes a lot of work to originate a deal, to diligence a deal, and then actually, like structure a transaction and wire the money over. But like a lot of the hard work, particularly in this early stage of venture investing, is still ahead of you. And so it’s not, you know, something to be celebrated with, like, hey, we raised all this capital or we invested all this capital. What’s really to be celebrated is how do you walk alongside, you know, the team, as you said, it’s a lonely journey and the work of actually monitoring performance and being able to help founding teams look around the corner and like what’s coming next. You know, you, Patrick and the folks that you have a chance to work with and invest with, you know, you guys have a lot of pattern recognition collectively amongst the group. So helping founders kind of look around that corner and figure out what’s coming. I mean, it’s extraordinary intelligence that founders are able to bring in through having the right investor pool.

Patrick Farrell: Yeah, yeah, 100%. And especially since, like a lot of the folks in our group are either entrepreneurs that are like in long term businesses that are just cash flowing in their investing out of that, or they’re former entrepreneurs who have had an exit or multiple exits like they’ve been there, done that. And that sort of experience is huge when you’re walking around, you know, trying to help a founder look behind the next curtain or the next stage of growth is just having somebody who’s been there. So that’s a huge value that we bring to the table as well.

Richard Cunningham: Love it man. You guys, I could just put a quarter in and watch you go. This is great. We need to realize that the NPS score of the FDI podcast will be a lot higher the less we hear the Richard Cunningham voice. So, hey, while we’re talking maybe methodology and kind of, you know, some of the uniqueness, nuances and similarities between angel investing, venture investing, maybe give us some color on just what you guys are seeing right now, some trends, commentary in the markets. I know, I mean, on a public markets front, we’re potentially about to close here recording this on Leap Day. Just so everyone’s oriented of where we are February 29th, 2024. We’re about to close with maybe S&P 500 and Dow Jones being up the highest they’ve been as a first two months start to the year since pre-COVID levels. So stock market kind of persists on that. We’ve been down a couple of days this week having a positive start to the year, but maybe bring us down to the earlier stages in the venture kind of sandbox fellows, and give us some kind of what you’re seeing.

Patrick Farrell: Yeah. Well, especially it was almost a year ago when SVB collapsed and that was I think, a marker in the market for us because 2022, I think if you look at the data, was a record high in terms of valuations, money pouring into the early stage, and all of a sudden SVB collapses, market starts to take a turn. And we saw a lot of companies that typically would have moved quickly to institutional capital end up going back to angels and kind of re raising and trying to kind of weather that storm. And so also and we had this kind of flood of deal flow, flood of quality entrepreneurs because all that institutional capital sort of dry up. And so we’ve seen in the last year or so just a ton of high quality, amazing deals. And our investors are starting to be like, man, we’ve got an opportunity cost. We cannot invest in everything. And so. Subsequently because so much of supply, maybe if you were to use it in a sort of economics term, has flooded into the angel stage. We’ve consequently seen valuations come down a little bit in a later end of last year, early end of this year. But now I think that the market is starting to open back up a little bit. Capital is flowing a little bit easier, and some of those entrepreneurs that are in that kind of middle ground are starting to be able to raise capital, which is awesome, because that’s what we want companies to be able to kind of increase and improve in stage and kind of grow and of course with their timelines. But it’s been a flood of interest and the angel stage that we didn’t quite anticipate, and that’s coincided with Potomac Angel capitals brand. And just the fact that we’re doing deals has also kind of gotten out there a little bit. So some of that might be intertwined. But yeah, we’ve seen a lot of folks coming out of the pandemic starting businesses hitting that Angel stage right around now. And so it’s been really fun to see what folks are innovating on out there. But Luke, just curious if you agree with that, what you’ve seen on your end.

Luke Roush: Yeah, no, I do. I think when you start a firm deal, flow is at first it’s harder than it should be just because people don’t know who you are and at times you don’t even know who you are. You’re kind of figuring out you’re building the plane or building the car while you’re running it. I think later it actually is almost easier than it should be because there’s a recognition of the brand and there’s a recognition of the relationship that you built with founders and with your investors. And so the more differentiated you are, the quicker you can build that differentiation and really attract deal flow. And so this is why, you know, a handful of firms in Silicon Valley that have really built expertise, whether it’s fintech or whether it’s AI or whether it’s software as a service. And then once you kind of have that reputation, then everybody’s kind of coming to you. And I think on an angel stage basis that’s done more locally, regionally than it is, like monolithically in a market, like a Silicon Valley or Boston or someplace like that. So I think that is actually encouraging. Should be encouraging to founders everywhere that you’ve got an opportunity to you don’t have to get on a plane and go out to Northern California to be able to attract early stage capital. There are groups that are more local, regional trust based, with real deep roots in a market. And that’s what you guys are doing. I think what we’ve seen in terms of deal flow is because some of the funds that were investing, you know, five, six, seven, eight, even ten years ago, the public markets effectively shut down. So some of the companies that grew up during that period and would be responsible kind of counted for to be able to return capital back to the original investors, which would create an kind of virtuous cycle of them. Redeploying all of that liquidity in the public markets has kind of gotten locked up or at least put on hold. And then, you know, when you think about M&A transaction volume, right, the two major ways for a company that is one of your investee or one of our investee to exit is either go public or get bought in. The M&A volume over the last 18 months has been really, really slow. We are seeing that start to change. But I think that over the last year or so, that has resulted in a lot of companies that are needing funding in some of the pockets that they might have gone to for that funding are still kind of waiting to get liquid on their stuff from 5 to 10 years ago. So it’s a long road and there are kind of like ebbs and flows and deal flow based on things that are entirely outside of a founder’s control. So I think I agree with what you shared.

Richard Cunningham: Good words. Thank you both. Yeah, I’m looking at an e y study right now. And it said in 2023, venture funding kind of accumulated at $140 billion, which was low and down from already declining levels in 2022. And there’s projections that 2024 might be a sub $100 billion in kind of total venture funding type year. So Luke, that sentiment you have about just what’s taking place in the public markets, though, we’re seeing that IPO market and kind of engine ramp back up. There’s still kind of interest in the hangover that trickles all the way back down all the way to the you know, even the pre-seed and seed levels that you two play at. All right I want to kind of make a transition here. You are an incredibly humble dude. I love your vulnerability and transparency. If anyone you haven’t heard the Patrick Farrell story, you need to watch the Potomac Angel capital video because you just you get to see his heart shine through. You also get to see his just wicked awesome parents, Paul and Leonard. Just special people that are in DC. Some of the founding investors alongside friends like Bill and Dana Wichterman at Potomac. But Patrick maybe in humility, there’s some cautions out there about angel investing. Like, you know, there’s the famous line of like, I’ve been burned by the church parking lot deal. But just because we share the same faith, people, you know, walked into a deal with, you know, poor expectations around terms and people get burned and lose a lot of money. It’s highly illiquid. So you have to view it. And, you know, you guys are hitting on this earlier just in terms of full blown asset allocation. And there is also this thought to is, you know, Proverbs 15:22, while there’s great wisdom in a multitude of counselors and angel investing situations, can get a play where there’s groupthink and more people around a deal actually isn’t helpful. It just slows down the process. People aren’t actually willing to talk honestly about maybe what’s going on there. So maybe in just humility, talk a little bit about this. Some of the things you’re seeing, some of the pitfalls for people to be aware of when it comes to. Angel investing. There may be honestly, some of the rebuttals or different ways you guys are trying to kind of counteract some of these thoughts as well.

Patrick Farrell: Yeah, 100%. I mean, where my mind goes to first is a lot of entrepreneurs experience angel networks as highly unprofessional, hard to get a hold of. Take a really long time to invest. And so the way we’ve really fought that is just by me and my co-founder, Mike. With the time that he has putting all of our weight behind the network. So that is my full time thing. And that allows me to do is just try to be excellent as to how we set up our processes or systems. A lot of my job is running around trying to get in touch with people, bringing people into the fold, kind of, to use a colloquial term, herding cats. And so if you’re willing to put that sort of work in, you can really make an angel network run efficiently and effectively and really be founder friendly in that process. So we do our best, but that also doesn’t always cover some of the downsides of an angel network. The angel investors are spending their own time, precious time from their family or from their day job to engage in investing. And when things get busy, it’s typically not going to be a priority. So sometimes things can slip in terms of timelines. Obviously, one of the things that can be pretty difficult to is just when founders are looking for checks that are going to want to come within, like a certain time frame, sometimes it’s hard to meet those timeframes. And so we’ve seen a multitude of things. And you mentioned groupthink. I think Potomac Angel capital, we do it better than most by trying to encourage lively debate, different opinions on certain things, and making sure that all of our investors kind of get heard when we’re having discussions about deals. But by and large, you know, sometimes there are folks in network, they’re just coming up to speed on angel investing and somebody with a lot of clout, a lot of experience at the table will say, hey, I don’t like this deal. I think I’m out. And they’ll feel maybe insecure about their interest in a deal or moving forward. And that can kind of circulate throughout a network. So, you know, we’re not immune to groupthink, even though we’re believers, even though we’re trying to do this in a really redemptive way. That is certainly a downside to the structure. And we know that. So really for us, it’s just about being as transparent and effective communicators with entrepreneurs as we can. So we blessing them throughout the process. So we’re not setting unrealistic expectations and just encouraging and educating our investors on some of the pitfalls of our structure and process so that they can be thinking through it and be acting in accordance with the Kingdom as we’re doing our work together as well.

Luke Roush: There are two things I mentioned real quick. One is just the importance, and Patrick nailed it on communication. You know, it’s okay if you gotta communicate bad news, but just make sure you communicate the bad news. Don’t just kind of sit on it. You know, we tell our team is that in the absence of communication, everybody assumes the worst. And so if it’s going to be another two weeks, call people and tell them, hey, it’s going to be another two weeks. And I know you wanted to happen yesterday, but we got two weeks, you know. And so that way at least they know where they stand. And and then the other thing I think is really, really important is, you know, a lot of the bad stories that go around about angel investors or venture capitalists or private equity folks is where people will substitute getting to the right price on a deal with terms. And so there’s a lot of structure on the deal. And certainly the saying in Silicon Valley is I’ll let you set the price. Just let me set the terms. And what that means is that, like, you know, you can overcome a lot of things. And but what happened, you know, just to make sure that entrepreneurs aren’t confused about this, newer investors, you know, what structure is doing is it’s creating situations where the interest of the investor and the entrepreneur are maybe not totally aligned. Sometimes structure can be used to create alignment, but sometimes it can be used to basically give a higher price, but then create situations where there’s potential for a win lose. And so I feel pretty strongly that the earlier you’re investing, the more clean you want term sheets to be, and not just trying to overcome poorly negotiated price points with structure that creates a lot of strife downstream.

Patrick Farrell: Yeah. And I would even say at our stage look like with our limited resources and time, sometimes if we get like an 80 page, you know, lunch purchase with all sorts of terms in it. Yeah. Here’s some of our investors off, even though we’re going to do the work to kind of run through that. And like our best, it can definitely scare folks off for sure.

Luke Roush: I agree.

Richard Cunningham: All right, gents, I want to close with this. And kind of our final topic that we’re going to wade into is Patrick, you’re clearly here in Austin, as we just talked about. Potomac, though, started in Washington, D.C. you’ve got this flourishing healthy network there, and you might be able to correct me on some of the particulars, but 14 deals done already with something like 20 members. So, you know, be sure to brag a little bit on all that’s taking place there and the Lord allowed you guys to accomplish and the early life of Potomac. But hey, what’s God doing in your story? What’s he teaching you in his word? You’re now here in Austin, Texas, so there’s clearly some kind of physical work taking place as he’s taking you to a new location. And then Luke would love for you to also chime in of just like, hey man, what’s the Lord teaching his word? What’s he showing you right now? And encourage those that are listening on the Faith Driven Investor podcast.

Patrick Farrell: Yeah, well, this is what’s really fun for me is just to kind of share stories about how God is moving in this space. So obviously we started Potomac Angel Capital in January 2022. In D.C., a really heightened focus on locality and investors faith driven investors in community Together in person, which created a really unique blend and allowed us, especially with me putting all of my time behind it, allowed us to kind of accelerate quickly and start doing deals fast. That alongside just a very willing group of investors who were partnering with God and listening to him and saying, yeah, we want to invest in these companies. So it was super fun to watch. It kind of really blow up in the first year. And then after that first year, we started talking to folks in our networks, folks that we knew, and they started to say like, hey, you guys have got something kind of unique in D.C. there’s some awesome angel networks out there, but you guys have kind of taken a different approach, a different model. We wonder if your model would work well in other cities. And so we started to explore that. And like any good entrepreneurs, me and my business partner, Mike Grubbs, came down to South by Southwest last year in Austin, just to do some market validation to figure out whether there was some demand down here for this, for the people wanted it, whether there was anything like what we had in D.C. here in Austin. And literally the first day in my quiet time here in Austin, I just felt like God was inviting me to move here, which for me was an incredibly impractical thing to think that you’re hearing from God. Mainly because I’ve been in DC for ten years. I’ve grown up in the area. I left for college and then came back. All of my investors were in DC. I had deep community church roots, all of it. And God’s like, let’s go to Austin where I don’t know very many people. And Richard, we were kind of acquaintances before then, but I didn’t have very many relationships in Austin. And so what that did is it kicked off sort of a discernment process with some of the people that were holding me accountable, walking with me in my life, and turned out that everyone was thumbs up, even my parents who were sad to see me go. We’re like, I think this is what God’s doing. And so I came down here in the fall to Austin, moved to Austin full time. I still go back to DC about a week, a month just to manage the relationships and all the good stuff that God is doing at Potomac Angel capital, and that’s still my day job. But I’m down here creating relationships, casting vision, hoping to plant a new network of investors down here with a similar ethos to Potomac in local community faith driven. What does it look like to do this thing together here for the good of the city of Austin? And then obviously all the companies that we’re founding and walking alongside. And so that’s kind of created this is sort of an adventure for me down here in Austin, just following Jesus on every next step, letting him lead the way. And man, it’s been really, really fun. And so, Richard, as you know, we’re co-hosting pitch event and panel next weekend at South by Southwest Sunday service, which is going to be unbelievable opportunity, such a huge conference, but also just to to put faith in the marketplace on display. And Richard’s going to be joining us on a panel for that particular event. So that’s super fun. But just see what is up to here in Austin. And I’m droning because it’s so exciting. But man, this city is really, really taking off. God is doing some awesome things, moving some great people here. And so it’s been really fun to just be on this adventure, with Jesus so far.

Luke Roush: That’s great. Yeah, I think for me, I’m just going to pump like one book that I got and I’ve been going through, same as ever that’s written by Morgan Housel. And it’s just, you know, the tagline is a guide to what never changes. And that takes me to Hebrews 13 eight. Jesus Christ is the same yesterday and today and forever. And so I think that there’s a whole bunch of things in business, in the marketplace that, you know, we somehow kind of like discover a new every 5 or 10 years or so. But the reality is that the fingerprints of kind of lessons learned that we should be applying to the work that we do every day are all over the last 100 or 200 years. But the only thing that really is consistent throughout all of human history and will always be true, is what is the character and nature of God, and who is the Son Jesus Christ? And what is the relationship that His Son wants to have with each of us, because he loves us all equally. And so anyways, I’m excited about that. Appreciate the opportunity, Patrick, to have you on, to hear your wisdom and just, the work that you guys are doing with Potomac Angel, it’s awesome. It’s inspiring. And, I think we need more organizations like it. And, super excited to see how God uses you, not just in the DC area, but also down in, the great state of Texas.

Patrick Farrell: Yeah, for sure. And this will be my plug to say thanks to you, Luke and you, Richard, for the work they are doing at sovereigns and FDI that are really paving the way for folks like me to step up and say, hey, I got this idea. I think that can fit in this in this faith driven ecosystem. And so it’s been inspiring to follow y’all’s lead. And I appreciate all the work you’re doing.

Richard Cunningham: Awesome. Well, Patrick Farrell Luke Roush, what a joy to get to do this. Friends. We will catch you next time.

Richard Cunningham: You’re listening to Fate Driven Investor, a podcast that highlights voices from a growing movement of Christ following investors who believe that God owns it all and cares deeply about the heart posture behind our stewardship. Thanks for listening.

Hey everyone! All opinions expressed on this podcast, including the team and guests, are solely their opinions. Host and guests may maintain positions in the companies of securities discussed, and this podcast is for informational purposes only and should not be relied upon as specific investment advice for any individual or organization. Thanks for listening.

Richard Cunningham: Well. Hello everyone, and welcome to another episode of the Faith Driven Investor Podcast. My name is Richard Cunningham. I have the joy of being on staff with Faith Driven Investor. And I’m your host today, joined, as always by one of our incredible mainstays in John Coleman, managing partner at Sovereign Capital. And John, if we’re doing a marks on the markets episode, I couldn’t think of someone better than newly appointed president and CEO of Crossmark Global Investments, Bob Doll, formerly the CIO of Crossmark for the last three years. Bob, I’m pretty sure you’re supposed to be retired as of 2021, but here you are having quite a busy last three years. What a joy to have both of you on the show. How are we doing, gentlemen?

John Coleman: Man, I’m just excited to be here with Bob. I mean, he’s someone I’ve known about for many years. Since my, since my last position in investment management had a lot of admiration for him over the years, the various firms he’s worked at, and, of course, just one of the best guests on a podcast out there. Bob, you’re on TV all the time. Everybody’s looking for your insights. We’re pretty fortunate to get him today. Thanks for coming on.

Bob Doll: Richard. And John. Thanks for those kind words. They’re humbling because we know markets are the great equalizer. If people aren’t, the markets certainly will, hit us across the face from time to time. So it’s a thrill to be with you folks and share things as we find them at this moment. On the retirement bit, I was eligible for retirement, so took retirement, but had no intention of retiring. Making the decision to move to a faith based money manager was a joy. And since I’ve done that, I’ve looked in the mirror literally several times and saying, what took you so long? So it’s been a joy.

John Coleman: Man. I feel the same way. Bob, you and I are in the same boat in that we spent most of our careers in kind of mainstream investment management organizations, and I’d say the last three, you and I came into this space about the same time. Actually, you came in just a bit after I did, I think. And, it’s been the most fun three years of my career, so I’m glad to hear it’s been the same for you.

Bob Doll: Sure has. It’s as I know you will agree. Yes, it’s a job and it’s a career and it’s investments, but it’s a ministry as well. And that is part of the joy for sure.

Richard Cunningham: Awesome. Well, for just anyone who doesn’t know Bob’s background though, you can look it up and it is quite detailed. This is a guy who spent time at Blackrock, Merrill, Oppenheimer, Nuveen and then to kind of paint the story for you there as a listener. Bob retired in March of 2021, but then it didn’t take long for him to join back up into the workforce with Crossmark Global Investments served as the chief investment officer for three years, and then now as the newly appointed CEO and president. Crossmark is a Houston, Texas based $6.2 billion asset manager investing out of the Stuart family of mutual funds across equity, fixed income, liquid alternatives and derivative income asset classes. And so it is some retirement you are enjoying, Bob, but what a joy to have you on the podcast. We are grateful the faith driven investor ecosystem is grateful. And so to kind of set today up because this is a marks in the markets episode. If you didn’t know Bob Doll every year does this amazing thing where he releases ten predictions for the upcoming year. And so coming into 2024, Bob released these ten predictions he had for the markets and kind of the broader economy for 2024. And, Bob, if I’m not mistaken, before I get into reading off those predictions and you and John respond to those and we kind of have some kind of commentary now that we’re one quarter into the year, what’s the story behind those predictions? Am I not mistaken that these started like 30 years ago or something like that?

Bob Doll: Yeah, I’ve done them for at least 30 years. Richard. You know, a blog I had at the time was doing it, got tired of it and said, Bob, you want to try this. And I’ve been doing it ever since. I think among the things that have given us some credibility is every quarter we write up how we’re doing and then get someone to score us at the end of the year. I don’t change them during the year. I’m not a strategist like so. Side strategists change their mind and evolve over time, so we live with them all year long. We get some right, we get some wrong. And, hopefully we learn from them.

Richard Cunningham: I mean, that’s awesome. I mean, you, John, and I all come from kind of the asset management space. So my respect and admiration that you do this is high because we know how leery compliance and marketing can be of predictions that get kind of put out there. And then you have to explain them. If they didn’t go, you know, perfectly correct. How did 2023 go before we go into 2024?

Bob Doll: Not great. I tried my worst. I think it was the third time I got only five right. You know? So I despair of the year when I get three right. Three out of ten and, you know, come here. What Bob says about next year, that’s not going to go over well. We’ve average. The good news is 72% over the many years we’ve been doing it. So the problem is we never know which seven out of ten we might get. Right. If we did know which ones, we could all make a bloody fortune. I guess.

Richard Cunningham: That’s incredible. Well, I mean, it kind of reminds me, I think I’m in, like, the fifth percentile in my March Madness bracket. So as we record this, it’s March 25th, Monday of Holy Week. This will be released after Easter in April. So I hope all of our listeners have a wonderful Easter celebration. But, you know, I’m down there in the March Madness rankings. But I believe these year’s predictions and we’ll show you just how astute Bob is. So I’m going to read off the ten predictions, and then we’ll dive in letting you to kind of respond where you are first, kind of feeling compelled by. So here are Bob Doll’s ten predictions for 2024. Number one, the US economy will experience a mild recession as the unemployment rate rises above 4.5%. Number two, the 2 to 3% inflation ceiling of the 2010 becomes the 2 to 3% inflation floor of the 2020s. Number three, the fed cuts rates fewer than six times suggested by the fed funds futures curve number four credit spreads widen as interest rates decline. Number five earnings growth falls short of the double digit percentage consensus expectation prediction number six stocks record a new all time high early in the year, but then experience a fade number seven. Energy financials and consumer staples outperform utilities, health care and real estate. Number eight. And this is a final one that will return to kind of Bob talking about his movement to a faith based asset manager. This is faith based share of industry AUM rises for the eighth year in a row. Number nine geopolitical crosscurrents multiply but have little impact on markets. And number ten the white House, Senate and House all switched parties come election time in November. So there are Bob Doll’s ten predictions for 2024. Bob, as you hear that, what immediately kind of jumps out to you and allow you guys some time to just respond to those.

Bob Doll: Sure comes to my mind is the theme that envelops all these, and then I’ll let John figure out which ones we want to go after. In particular, the theme is Goldilocks remains a fairy tale. What do we mean by that? Coming into the year and to some degree, still, the expectation by the consensus is that we’re going to get double digit earnings growth. That is, the economy is going to be good and earnings are going to grow nearly double the normal rate. But on the other hand, and at the same time, inflation is going to continue to fall and the Fed’s going to cut rates. At the start of the year, the expectation was six times. Our view is one side or the other or both get disappointed. Goldilocks remains a fairy tale. Or you can have your cake and eat it too. That’s the theme for these predictions that caused us since the beginning of the year and still now to be cautious. Not bearish, but cautious. We are in a momentum driven bull market, and predicting the end of the momentum is a fool’s game and therefore you ride the momentum. But you have, you know, short leash on the market or stops not too far below the market should, in fact, the high risks associated with PE ratios of 21.5 times be a concern for the market, which I think they will become at some point. So that’s the broad panoply of this, set of predictions.

John Coleman: Yeah. You know, as I think about that, Bob, if I think about my own position at the beginning of last year, I was probably a bit too pessimistic. I thought going into last year, the chances of recession were much higher. I thought the fundamentals of the economy were likely to deteriorate in a more substantial way. I didn’t think we’d hold as strong as we have, honestly, and I certainly didn’t predict that markets would rebound in quite the way that they did. Obviously a lot driven by the Magnificent Seven. And we’ve seen technology trends and we can come to that. Now it does feel like markets are potentially overshooting a little bit, or getting too optimistic that there is a little bit of a Goldilocks syndrome. And what I’m wondering is, you know, is the fundamental economy able to continue to chart a relatively positive course this year? Maybe not in line with the expectations that you’re mentioning, but at least continuing positive momentum. And there I tend to maybe have, maybe chastened by last year or more optimistic view, which is it doesn’t seem like we’re going to have a serious recession. You mentioned a mild recession here, and maybe that’s a place to dive in. It doesn’t seem like we’re going to have to dramatically raise rates anymore, although I am skeptical that we’re even going to be able to lower them at all, potentially the Federal Reserve. And so maybe as we dive into this, Bob, let’s start with the fundamentals of the economy. You’re predicting kind of a mild recession with unemployment rising, which is not where we are right now. I think we’re effectively below frictional unemployment right now, are below what you would predict for frictional unemployment. How do you see that beginning to kick in? And are there any early warning signs that that might materialize?

Bob Doll: Yeah. First of all, 4.5% inflation, as you know, is still a very low number. In fact, in the slides I used to back this up, I show long term unemployment rates. And four and a half is barely above.

John Coleman: Right. That’s right.

Bob Doll: As you, both probably know, when inflation has moved up one half of 1%, 5/10 following that has always led to a recession. We’re up 4/10. So there’s not much room left. Of course we can break the rule. Nobody sets their rules in the economy, in the markets. But you ask, what signs are we seeing? The unemployment rate has ticked up modestly. I think we will see more of that. I would point out, while the government measures lots of things, one of the things that they do not measure well is people working multiple jobs. Yeah, a lot of people that were working three jobs and believe it or not, they’re a bunch of people are only working two now. Many are working, two are only working one now, not because they’ve chosen to, but because the job is not available to them anymore. And what I would add to your good question is the bifurcation we’re seeing in the economy and with the consumer. High end consumers are doing just fine. They’re loving life. Stock markets up a bunch, their home prices up a bunch. And, you know, taking money off the table in those areas to live if they need to, which most of them don’t is quite good. Lower level consumers clearly struggling. Their Covid money is gone and there’s evidence they’re upping their credit card balances to live. And recently in the last month, evidence that they’re taking money out of their 401 case with a tax penalty in order to live. So, again, I don’t want to be a bear on the economy, but I think there are increasing number of signs. Maybe I add this, John, if I might. Most people, myself included, expected a recession last year begging the question why didn’t a recession happen? Yeah, I think there’s several answers one, most of us. I know I did. Underestimated how much the Covid cash kept the economy going. That is money that hiring consumers accumulated because they were in their pajamas for four months and didn’t go out and spend money, or at the other end of the spectrum, got a lot of checks from the government. Took a while to spend those. Second reason is even post the Covid stimulus. Last year, the government put a lot of money into the economy, more than most of us thought. And thirdly, and this is the one I’m still researching. Private credit. Private credit exploded kind of from a decade ago, almost 0 to $2 trillion in half that expansion in the last two years. Those three things provided so much cash for our economy. That’s mainly why we didn’t have recession. So yeah, we’re going to get a recession this year. Yeah. Who knows. I do think we will get a slowdown, perhaps a noticeable slowdown that will cause this double digit earnings expectation not to make it.

John Coleman: Well, and I think just in terms of the unemployment rate, Bob. And check me if you think this is wrong. I do think some of the deflation in in the unemployment rate or at coming down was related to a decline in labor force participation during Covid as well. And all of the trends that you just highlighted would lead us to believe that that will begin to take up again. People are burning through savings. They’re having to live more on credit. Those who left the workforce are getting impacted by higher prices and by inflation and by a real affordability crisis, not just an inflationary crisis, but in things like housing, you know, a real affordability crisis spurred by continued constraints in supply. And so it does feel like more people are going to get back in the workforce. Fewer people are going to be dropping out of the workforce. And unemployment is likely to increase, at least because of that. In addition to the idea that there may be some frictions in the economy spurred by artificial intelligence or by firms continuing to cut their workforces to kind of lean up for potential troubles that could cause that number to rise.

Bob Doll: I fully agree with all of your points. There are good points to me, and underscoring what you just said is a bigger picture thought Covid has stressed and strained normal relationships. So economists have really struggled because the rule book does not include a pandemic and the experience pattern. So it’s really difficult to understand sometimes what these relationships are and what they have done and what they might do.

Richard Cunningham: Up in real quick. Bob, one of the predictions is prediction number six. Stocks record a new all time high earlier in the year, but then experience a fade. We are once again recording this at the end of Q1 2024. Has that checked out? Too early to tell to my knowledge, feels like things have been marching on and everyone’s kind of sitting there. As you guys have alluded to, scratching their head at the momentum that’s at play.

Bob Doll: Yeah. You know, the jury’s still out. We don’t know if the stock market continues straight up for the rest of the year. We’ll have to mark this one wrong. But my guess is at some point here in the first half, our guess might have been the first quarter, although we didn’t state that explicitly. We see a high for the year and then a fade. And it doesn’t mean a big bear market necessarily. And I come back to earnings probably aren’t going to make the double digit percentage gain. And we’ve already moved from six down to three expected fed cuts. And some people now are moving to two. And they’re even some people say we’re not going to get any and all of that for a PE of 21.5 times, you know, if the PE was 15 or 16 or 17, I might say that’s okay. But when PEs are, you know, in the 20s, I’m an old man. I’ve only seen PEs over 20 – 3 times. Tech bubble, Covid and now and the first two times the outcome wasn’t pretty. Let’s hope it’s different this time. But valuation when it’s this high demands almost perfection and we don’t have perfection. There are a lot of flies in the ointment.

John Coleman: Can we talk about. I do want to circle back to this idea of the interest rates and inflation in a moment, because I think, you know, that’s an important topic to touch on. But one of the things we’re monitoring. If you go one click below in the market right now is this divergence between the Mega-cap stocks, especially the Mega-cap technology stocks and small cap and mid-cap stocks. And you mentioned this price to earnings ratio at 21.5, I think was what you were talking about. And obviously that’s substantially higher for some of the Magnificent Seven or those that have been driving markets right now. For those not as familiar. There’s a group of stocks that people refer to as The Magnificent Seven lately, which is almost always a harbinger of doom. I think when you get a label like that, but includes firms like Nvidia, meta, Apple, Amazon, these big technology players that have rapidly grown, that people view as safe technology stocks with really strong earnings and revenue that have been almost all of the upside performance of the S&P 500 from an asset weighted perspective recently. And those mega caps have diverged quite substantially from the small and mid-cap stocks. What’s your perspective on that and how sustainable is that? I know on our side, we’ve been predicting that small and mid-cap have to make up some of that difference at some point, seeing that there has to be more of a return to norm. But these mega caps keep running. What are you seeing right there? What do you think might happen?

Bob Doll: You know, several observations. First of all, November, December when we got the big fed says I’m done quote unquote rally. We got a good broadening in the market and down cap or equally weighted portfolios or small cap certainly did better than we come into the new year. And it fades again. So we’re having this tug of war of late last few weeks. Small is doing a little bit better again. I agree with you. For the market to be sustained to the upside, we need more broadening, which we very well might get. And where I thought you were going, and worth pointing out, is the PE of the 493 in the S&P, those seven is lower, noticeably lower, but still not low. And that reminds you when people bring that up is you know, the stock market is always cheap. If you take whatever the bubble is out of the bull market, you know, he will do that all the time. So I tend to look at the overall and then understand the differences inside. To The Magnificent Seven. John, we’ve obviously seen some splintering. Tesla has been an awful stock. It’s had some fundamental problems and some valuation compression. And my guess there’s more to come. Apple Amazon. Those stocks have flagged a bit. They’ve broken some technical uptrend lines etc. so it’s no longer monolithic as it was for much of last year for the Magnificent Seven, which I think is healthy for the market, meaning we need that broadening to take place. So I think that, look, technology and AI is certainly among the reasons the stock market has done well. It is among the reasons bulls on the economy think it will do well. And look, AI is making a difference. It will continue to make a difference. But I wonder a bit if the stock market’s not overdone that theme.

John Coleman: You know, maybe we could touch on this topic of interest rates and inflation really quickly because inflation has come down, although it remains persistent. And the history of inflation tells us it’s always more persistent than we think it will be, or it’s almost always more persistent than we think it will be. And count me among those who thinks the likelihood that we don’t get an interest rate decrease this year is pretty high, that actually the fed has to maintain rates, I don’t know that they’ll have to raise them, but they’ll have to maintain them. And the only thing that causes me to question that a little bit is the possibility of political pressure headed into an election season where the fed will be under enormous pressure to keep the economy humming, rather than allowing it to slip into a recession because of the electoral process. Say, a little bit more just about what you think will factor into the Fed’s decision of whether to raise or cut rates or hold them steady, and whether you think inflation is actually kind of stamped out now, although it may stay a little bit higher or whether there’s real danger.

Bob Doll: So let’s put some numbers on it. As we all know, headline inflation got to 9%, core inflation to about six. Let’s stick with core inflation. Core inflation has come from six to just under four. Remember the Fed’s target is 2. It’s a lot easier to get inflation from 6 to 4 down two points than it is 4 to 2. Two more points. So I like you, John. I’m dubious. I don’t think we’re going to get to 2% inflation. If we do, we will be in a recession. Now, can it go a bit lower? We’ve just had two months of disappointing inflation numbers. Many economists argue that that would happen. And maybe that’s ending. And now we’ll begin a downdrift again. And I’m in that school. But I think we’re not going to get below three. And look is there a big difference for two and three for interest rates and PE ratio. You bet there is for the economy to some degree. It will the fed get it to three and wave a checkered flag and say yeah it’s close enough. That’s not out of the question. You know the dual mandate is firmly in their mind. Keep inflation under control and watch the unemployment rate. So like you sounds like doubtful. We’re going to have many if any cuts this year. The fed would love to cut rates for a whole bunch of reasons. And with foreign central banks beginning to cut rates, the pressure will be more from that on the fed than it will be from the politics of the U.S. election, in my view. So fed funds rate probably a little lower at the end of the year, but not much.

Richard Cunningham: What about looking at things like geopolitical crosscurrents? You know, we’ve seen, you know, a pretty devastating headline in Russia. And what could that result in, in terms of just tensions and disputes kind of in foreign markets? What does that looked like in terms of what’s going on here in our local economy, but also on a global level?

Bob Doll: It seems like every time you make a list of geopolitical issues, every 2 or 3 months, it gets a little longer. So why is that happen? My thesis is because the U.S. has lost hegemony. My analogy, is like way back when when you went out at 10:00 in the morning for school recess, you had 15 minutes to go play on the playground. It was the three of us. And John’s the big guy, the bully. We hold back a little bit from our misbehavior, because we’re just a little worried about how this bully might react. Conversely, when there’s no bully on the playground, everybody does what they feel like. And that’s where we are. The world is a messy place. And yo, Russia of late. And where did that come from in the U.S.? Warns Russia? I mean, it’s just an amazing and complicated world. So I think that list will continue to grow. And so far it’s not affected markets any way at all. A lot of the reasons, because the guts of the economy has not been touched. Take the Middle East. People said, oh, conflagration in the Middle East. Oil prices are going to go through the roof and the economy is going. That didn’t happen. And it doesn’t mean it won’t happen at some point. But most of these things have been contained not to affect the economy of the world, and therefore markets have been fine.

John Coleman: Yeah. You know, I think this is super fascinating, actually, because we’ve had these two proof points in the Russian invasion of Ukraine as well as in the war in Israel, obviously, the terrorist attack in Israel and then the war in Gaza. And they have been contained to those regions. Right. By and large, I mean, there have been some impacts. Part of that is I think world energy markets are a bit more stable, especially with the US energy output being so high right now. I would say the one conflict I think that could throw the international markets into more disarray would be if something happened with China and Taiwan. I don’t believe there’s an incredibly high chance of that. But because of the Taiwanese centrality to processors at the moment, because of the role those play in artificial intelligence and in a lot of the other operations that we’d see. And to your point, the US losing hegemony, we really live in a bipolar world right now between China and the United States. I think Russia is a player. You know, there are other players, but if you think it’s superpowers, it’s really the United States and China at the moment. Absent that, I think I agree with you. I don’t think these international conflicts, unless something super dramatic happens, are likely to play a role. I do want to get your thoughts on domestic politics, because obviously that tends to have a much bigger role in markets. I’m interested in the switch parties comment because we have a one seat Republican majority in the House right now. That obviously could be expanded in November. It could switch. We’ve got a strange white House race right now where there’s broad dissatisfaction with both major candidates, honestly, particularly because of the age issue. And the Senate, structurally, is the one that looks a bit more straightforward in that it’s a friendlier GOP map than Democratic map right now, just in terms of the states and the seats that are coming up. Talk to us a little bit more about your prediction that all parties switch in November. I’m interested. Does that mean you think it’ll be a Democratic House and a Republican White House and Senate, or is it a is it a broad based Republican? And what’s driving that? What impact do you think that will have on markets if that materializes?

Bob Doll: Yes, I think we’ll wake up in November after the election. Republican president, Republican, Senate, Democratic House, all three switching. And that’s not just, you know, reaching into the air. Nine of the last ten elections in the U.S., we have booted out the incumbents. That kind of string has not happened since after reconstruction, which is a long time ago. We are in the mood in this country that whoever is in the chair. I don’t like him or her. I’ll take the other guy, the challenger. And so we’re booting regularly those folks out. Yes. You have to right the Senate. Given the GOP friendliness, I would put 70% chance that the Republicans take the Senate, maybe 75. The House and the white House are obviously much more difficult. I think with the number of Republicans retiring and being frustrated with the operations in the House, some of the demographics, etc., I think it’s, you know, 55, 60 that the Democrats take the House, the white House. Obviously, you use the word strange election. That’s one word I can think of. A bunch of others do. It’s a crazy world in which we live. And nobody wants either guy. You’re absolutely right. Look, if anybody strong or medium was running against, I’m going to use the phrase a doddery old man who has trouble finishing sentences and has a record on a lot of things that are suspect. You’d think that guy would be winning in a landslide, but not the case because Donald Trump has his problems just like Joe Biden does. So this probably goes down to the wire back, connecting this to the last subject about geopolitical things. Donald Trump has made it clear that if he gets elected, he’s going to put a 60% tariff on Chinese goods. That. It’s like a massive tax increase to Americans. And I think that could exasperate the domestic economy, not to mention the geopolitical issues that would come from that. So keep your eye on this space.

John Coleman: Well, and I’ll make one prediction that’s not on your list. That’s just perpetually on my mind. And then Richard can get us back on track with additional predictions. I actually think there’s substantially more weakness in China right now than people believe. I’ve been in China bear for some time, and part of that’s just a structural conviction that it’s nearly impossible to have a dynamic economy or political system as restrictive as China’s. They’ve tried to split the difference in having more of a free market approach to the economic system, with more of a totalitarian political system. And I just think that leads to a lot of stasis in the way in which resources get distributed in autocracies means that they’re much more fragile than we think. And I think there have been some early warning signs that the Chinese economy and political system is weaker than we think. Obviously, data is difficult to trust. That comes out of China at the moment. But if I had one prediction this year, I’d say over the next 12 to 18 months, I wouldn’t be surprised if real substantive weakness in the Chinese economic and political system begins to leak out. And then the way in which that manifests in the broader world, whether that’s hostility towards Taiwan, whether it’s domestic political turmoil, I’m not exactly sure, but I wouldn’t be surprised if we start to see that soon. Given what I think are some headwinds that the Chinese economy is facing.

Bob Doll: Richard, let’s add that is prediction 11. I agree with John. I’d, I just add two points. One, short term or this could last for a while is the real estate problem. Yeah. There’s too many 100 plus story buildings in China that nobody’s living in, and they’re financed on debt. I mean, how do you square that circle? And then the long term demographic problem. Demographers argue that China’s population at the end of this century is likely to be about half what it is today. Hard to fathom. You know, the one birth policy, even though it doesn’t exist anymore, has become a way of life. So the Chinese folks fewer get married when they do. It’s later in life. Many of them have no kids. If they do, it’s one. If you have two, you have a big family. Crazy.

Richard Cunningham: Well, John Coleman, let the record show you made the Bob Doll 2024 predictions […..]

Richard Cunningham: Well, gents, I want to. First off, a blast to hear you guys riff on all of this. I want to close here because, Bob, you’ve got this really compelling prediction number eight. And that is faith based share of industry. AUM rises for the eighth year in a row. So first off, I think it’d be fun to hear you kind of. Paint the picture of how that prediction is created, what we’re measuring like, you know, kind of what’s the baseline, what specific industry AUM is it just public markets, as you know, include private markets and things like that? I mean, just talk about kind of that trend we’re seeing in this faith based space that all of us are really passionate about.

Bob Doll: Yeah. It’s curious that folks that ask about this are not just people of faith. I have a lot of people go through these predictions and that’s where they go. Tell me about this one. So depending on who you talk to, most argue that faith based money management is 40 to $50 billion, which is a tiny little speck in the overall asset management industry. So we are part of a very small industry. But when you look at the market share of that total, well, it’s a very low number. It has grown seven years in a row. So the prediction is based on the fact that I observe more. And you guys, do too more and more people and institutions wanting to line up their investments with their beliefs, whether they’re faith based or not. And, that cause I think getting this one right is going to be like shooting fish in a barrel. I think this will continue to grow. And I think part of our collective opportunity and you both know this is education. A lot of people are not aware that this little sliver of the money management industry even exists. And when they do, light bulbs go on. In my three short years at Crossmark, one of my biggest surprises is a how much education we have to do of strong faith based people, and b how many non faith based people are willing to do business with us. And when I ask why, they say something to the effect that, you’re good people, we’ve been watching you. We trust you. Would you manage our money? Which is just a real joy and an opportunity and frankly, a mission field.

John Coleman: Yeah, what I add to that. So I think we’re both a little bit biased here, Bob. So it’s always, challenging to make predictions where you’re heavily incented on one side of the prediction. But I do think you’re right. I mean, I’ve been really encouraged. The growth over the last few years has been extraordinary. I think there’s more interest than ever in taking a hard look at the values of investments, partially because there’s been this reaction against a relatively monolithic set of values that had been a part of the industry that people are now questioning, and they’re taking a look at how their providers match up with that and whether they really reflect their values. So it’s just putting a ton of money in motion. And the faith based share of the marketplace is so small that there’s almost unlimited amount of upside right now to that asset growth. So I think all that works in the favor of growth in this faith based market. I think the other component of that is just the number of quality providers or the supply of faith based asset management that’s out there right now. I know Richard and colleagues at Faith Driven Investor have been central to trying to encourage people to get in the game, to try and get really good people in the game. And frankly, I think the more people like Bob Doll we have come over, the more that that increases the credibility of this space. I mean, you were a legend in your own right in the mainstream world, and the fact that you’ve contributed your talents and time to the faith driven world, I think, is exactly what we need across the board in multiple asset classes to just increase the quality and the reputation of the space. And the more that we have that, the more the supply improves, the more incredibly talented people move over to try and make this a priority in their own work. I think inevitably people will be drawn to the space and hopefully the performance of the space will warrant continued growth.

Bob Doll: Fully agree. And you folks have faith driven investors. Sovereigns capital more generally have been to contribute to that as well. You’ve educated people, you’ve brought people together, and we just need to continue to do that because, together we can grow the pie separately, will sub optimize our individual and collective opportunity.

Richard Cunningham: Man, that’s really well said. Yeah. There’s a lot of pie out there as John, you were alluding to. And so let’s not get so siloed in kind of our own individual lanes that we’re running in and just remind ourselves that, man, this is kingdom purposes here. What an opportunity. What a privilege. All right, Bob, let’s close with this. One of the questions we love to ask. And I’m sure we’ve asked that before, as I believe this is your third ever official FDI podcast appearance is just man, we’ve covered a lot of ground here, a lot of it, you know, rightfully sober minded in terms of just what’s happening across markets and across the world, but maybe share a little bit of encouragement with us in terms of what’s God has been teaching you personally, just whether it be in your work, in your quiet times with him, that’s folks. Tune into this post Easter. What encouragement might Bob Doll share about what the Lord’s been teaching him lately in his word?

Bob Doll: You prompted me on this, so I thought for a bit. And the simple but profound concept of God’s sovereignty struck me. It’s been ringing in my mind, in my heart, in my devotional life. My job, as you pointed out, the front end. You know I have more responsibility than I intended, asked for or wanted. God had a different plan. Family. We have three kids. Two walking with the Lord. One not the one that’s not having professed faith and a lot of fruit earlier in life, but walked away and my wife renewal time. Bob stopped trying to be God. God is sovereign. He knows what he’s doing and personally the same thing day by day. So that leads to greater peace, greater joy, which comes out of the peace and contentment that the day by day. He knows the future, and we just need to attempt to understand and walk in his will. And then God’s sovereignty just rings loud and clear.

Richard Cunningham: Amen. Well, friends, thank you so much for tuning in. This has been Bob Doll on a marks on the markets Faith Driven Investor podcast episode. Bob, what a joy and a privilege to have you on. Thank you for your incredible work, John. As always, thank you for being such a key part of this show. And friends, we’ll catch you next time.

Richard Cunningham: You’re listening to Fate Driven Investor, a podcast that highlights voices from a growing movement of Christ following investors who believe that God owns it all and cares deeply about the heart posture behind our stewardship. Thanks for listening.

Rusty Rueff: Hey everyone! All opinions expressed on this podcast, including the team and guests are solely their opinions host and guests may maintain positions in the companies of securities discussed, and this podcast is for informational purposes only and should not be relied upon as specific investment advice for any individual or organization. Thanks for listening.

John Coleman: Welcome back to the Faith Driven Investor podcast. This is John Coleman hosting solo today without my co-host Richard Cunningham, but with a very, very special episode. Today we are going to explore faith driven investing in the Catholic world and in the Catholic Church. And we have two extraordinary people to help us do that today. The first guest is Tony MInopolI, who’s the president and chief investment officer of the Knights of Columbus Asset Advisors. In that capacity, Tony oversees all elements of the investment strategy and operations for the Knights, predicated on nearly two decades with that institution and a prior career in investment consulting with the Valuation Associates. Through his role with the Knights, he’s also helping the Catholic Church more broadly continue to advance its thinking on faith based investing. Secondly, we have Andrew Abela with us today. He’s a professor of marketing at the founding dean of the Bush School of Business at Catholic University. In addition to a storied academic career, which we may delve into, Andrew has worked with institutions like McKinsey and Company and Procter and Gamble publish broadly, and is a leading thinker on faith based and principled entrepreneurship and investing alike. Andrew and Tony, we are really grateful to have you on today. Welcome to the show.

Tony Minopoli: Thank you. What glad to be here.

Andrew Abela: Thank you

John Coleman: Awesome. Well, to kick off, I was hoping that we could just level set a bit on what this looks like in the Catholic Church today. You’re each working on that in your own ways, in your different spheres. But maybe you could start off by just setting the table for what is the Catholic Church’s current approach to faith aligned or faith driven investing? And maybe, Tony, we could start with you and then you Andrew.

Tony Minopoli: I was going to defer to the professor among us first, but I’m happy to take a shot at it. You know, for us John, the key is, is that the Knights of Columbus is an entity. We don’t create Catholic doctrine. We never have. We followed Catholic doctrine very closely. And as a result, particularly for our investment strategy, we’re not going to talk about our funds individually. But in the sphere of managing a family of Catholic compliant mutual funds, we had an anchor to something, because among Christianity, there’s a wide different range of beliefs and acceptances among the different groups of Christians. But the Catholic Church, still 51 million people in the US claim connection to the Catholic faith. It’s in varying degrees, but within that church. And Andrew knows this better than I. There’s even a wide array of attitudes and beliefs, even among those that are supposedly in the more narrow defined Catholic faith. So as a result, we had an anchor to something, because the last thing I could do was try to explain, you know, well, we’ll do this for this here. What we believe this here that’s different. So we essentially work and we’ve worked very closely with Catholic view to take the teachings of the bishops and define them into investment rules, into a usable, screenable methodology to which to invest. But in a nutshell, and and Andrew certainly could speak more to this in broad terms, things to do with abortion, contraceptives, embryonic stem cell research, human cloning, weapons of mass destruction, things of like cluster bombs and landmines, things of that nature. Pornography doesn’t really come in. There’s not many opportunities to invest in pornography in the publicly traded market. So that really doesn’t weigh in. And then for profit health care that really pays for any of the others, I would say from a practical matter. And I’ll end on this hand it to Andrew, is a practical matter. The things that we run into most often, whether we’re managing the Knights of Columbus assets or the mutual fund assets, are things to do with abortive action and contraceptives and an embryonic stem as it relates to biotechnology. Those are the real sort of places we can delve into this more as we chat today. But I would say those are the areas where you run into the most things that you have to review. So, Andrew, I’d turn it over to you for your view on that.

Andrew Abela: Thank you Tony. Yes, everything Tony said. And in terms of what’s driving our interest now, about 20 some years ago, the Conference of Bishops, which is the group that brings all of the Catholic bishops in the United States together, published their kind of guidelines on faith based investing, and then they updated those in 2021. The first set of guidelines was mainly about excluding the kinds of stocks that Tony was just talking about this time around this in 21, they also asked the faithful to not just exclude stocks that would be compromising, but also to exercise your votes and to engage with management to try to kind of move people in the right direction. And so there’s a big conversation now about how to do that. So Tony and I have been working together with a few other asset managers to figure out the best way to do that, the most practical way to do that, and that is the state of the art. I would say at this point in the Catholic investing world.

Tony Minopoli: Andrew would it be worth, maybe if both of us took a second? And the most recent white paper, the main summum bonum white paper that came out for the […] So John, one of the […] within the Vatican, wrote a paper, and I had forgotten all the Latin I learned when I was in Jesuit prep school. But then summum bonum, which translates to the good measure, was a paper that came from the […] of Science within the Vatican, and really took this notion of investing in a way that is not detrimental to the environment, investing in a way that is helpful to the less fortunate. Also engaging it’s not just about negative screening, and that is a lot of the work that Andrew is mentioned, that we’re teaming up together with some other really fine professionals is how best you engage, you know, the proxy voting, which any shareholder can think about. But do you do a, you know, a shotgun approach of just carpet bombing letters to all these CEOs, or do you really try to get engaged in meaningful engagement with individual companies? I think most of the people involved at that conference and involved in this thought process are not so naive is to think that they’re going to move publicly traded companies into the realm of acting like good Christians, but if we could just get them to be neutral. Right. Sell your product, sell your service. But don’t be antithetical to Christianity. From my corner, I think that would be a win. And there’s a lot of companies that go a lot further and are espousing things that are sort of antithetical to Christianity. So this was interesting because to my knowledge and Andrew, please correct me. This was the first time the Vatican was as sort of forceful on this topic by issuing the main summum bonum and white paper. So just another thought to add into the conversation, John.

John Coleman: Yeah. And, you know, there’s a parallel conversation happening in the faith driven investor movement that we’re most familiar with that’s exemplified by this podcast. And people frame it a couple of different ways. And then, Andrew, maybe you could react to some of this one. It’s a very simple framework that a lot of folks use, which is avoid, embrace, engage, avoid being more negative screening, embrace means positive screening or leaning into certain thematic things, which Tony might even be environmental concerns like you just highlighted. And engage means even where something’s not explicitly faith forward or positively screened. Since you have a voice as a shareholder in that company, how do you encourage positive movements in that company? Something we’ve seen lobby for quite a lot lately, for example, or adoption benefits in the midst of the noise around abortion as a topic, you know, how do we encourage companies to include adopt adoption benefits in their health care? Another framework we’ve leaned into a bit, trying to span both public and private markets is exactly what you highlighted. You’ve got negative screening. You’ve got positive screening, again, where you do thematic engagement according to something you think is redemptive, right? A redemptive purpose either in public or private markets. The third we talk about often is cultural formation. So as private equity investors or venture investors, we often have an opportunity, not just invest thematically, but to lean into the actual culture and operations of business, to shape it in a way that’s more faith aligned, which could include the supply chain, making sure that that’s properly accounted for and handled appropriately, including chaplaincy in the company or organization, employee resource groups that are religious family friendly policies like maternity and paternity leave, adoption benefits. But you get to shape a culture in a way that encourages human flourishing. And then we’ll often talk about all of those can be done with a high return. But there is this concessionary impact space right where you may choose to engage in things like Microlending or, we’ve seen charter school financing, for example, in the US, where you may trade off some return in order to engage in something you find particularly redemptive. So it sounds like the Catholic Church is having a debate right now about the various ways you can positively lean into faith and investing. That’s very similar to the one that we’re seeing carried out more broadly in Christianity. But, Andrew, I don’t know if you’re seeing some of the same things that we’re talking about now in the research that you’re doing.

Andrew Abela: Yeah, there’s a lot of parallels. And in fact, the parallels are such that I’m so glad we’re having this conversation, right. Because we just need to work together more. What we have heard from, CEOs and executives is it’s helpful to them to receive the countervailing pressure from our side. So, as Tony said, even if we just get folks to being neutral on the cultural issues, that’s a big win, because too many corporations have been advocates for a very sort of secularists kind of anti-life perspective. And so kind of pushing back against that. And the more we can be kind of working together, I think that really helps. The, employee resource group movement has become really strong. We’re happy to host every summer since its initial launch about five years ago, the Religious Freedom and Business Conference, which is the annual gathering of all the leaders of the ERGs that are focused on religious liberty. And so it’s like a very ecumenical gathering, not just all flavors of Christians, but also Muslims and Hindus and so on, just arguing that corporations need to make space for people of faith in a corporation. Which I think is a very positive move. I know that, John, you and I have had this conversation already about the role of virtue in the workplace, a very Christian idea that is nevertheless rooted in Aristotelian philosophy and so accessible to pretty much any thinking person, you know. So this is another area that we want to encourage and help, because I think it’s not just our society, but our corporations are realizing the consequences of living in a post-Christian world where things we used to be able to take for granted, like basic human decency, honesty, and so on just seem to be eroding and need to be those back. So I think this is an opportunity for people of faith to say, hey, we have some good ideas here to share.

John Coleman: So would you say a bit more, Andrew? And then I’m going to come back to you, Tony, about this concept of virtues, because we also have the faith driven entrepreneur organization that we work with. And it’s we talked about we have a very strong belief that for the performance of a company, culture is the greatest competitive advantage in business, that top performing cultures will regularly outcompete others in the marketplace, something that’s been affirmed by research from McKinsey and company, from the London Business School and others. And we think that this idea of virtues and values in a business are essential to that culture. Say more about what you mean by virtues and why that’s different than values in a business.

Andrew Abela: Yeah. So we make a big distinction between values and virtues. So many businesses talk about their corporate values, but values are just talking the talk. Whereas virtues are walking the walk. The virtue is the action or particularly the habits specifically. So you could value honesty, for example. But to have honesty as a virtue means you’re in the habit of always acting with honesty, always speaking the truth. To have self discipline as a value is one thing, but to actually be in the habit of acting with self-discipline is another thing entirely. I remember so I was last at McKinsey 25 years ago, so it’s been a while. But even back then we were talking about the power of corporate culture as a competitive advantage. You could imagine a corporation’s, we often referred to it when we were talking to our students, the set of human virtues as the human operating system. Right? Particularly the four big ones, the cardinal virtues. So practical wisdom or prudence, justice, fortitude or courage and temperance or self-discipline, those four together make up, if you will, a sort of a human operating system. And just like the operating system on your iPhone, if you don’t updated regularly, things start to slow down or not work or crash, you know, same with human beings, same with a corporate culture. If a corporate culture has a particular vice or defect, and I say a lack of honesty or a lack of justice, then that’s going to undermine pretty much everything that the corporation tries to do. And the execution of your strategy could be terrific, but the execution is not going to be as effective because you’re missing an essential part of human flourishing.

John Coleman: I love the way y’all are approaching that in the intellectual history. For nerd like me, dating back to Aristotle and the discussion of habits and virtues, and obviously to the Israelites before that, I think it’s so incredibly rich. Tony, I want to dig into the Knights a little bit more, if you don’t mind. One, I would love for you to just tell people who are the Knights of Columbus for those who aren’t Catholic and what’s the history? And then maybe secondly, dovetail into what does this look like in a portfolio as large as yours? How do you just think about tactically bringing this in to the work you’re doing in asset management?

Tony Minopoli: Sure. So without reading all the pages of history, the Knights of Columbus was founded right here in New Haven, Connecticut, in 1882 by, Blessed Michael McGivney. In our world, in the Catholic world, blessed means he’s one miracle on his way to his second miracle of being canonized a saint. And on another podcast, we’ll talk about those. But father McGivney started this because at the time, there were a lot of Catholic men in the area that were building a lot of the infrastructure and a lot of blue collar folks that were dying and leaving widows and orphans. And as a man of action, as a young man in his 30s, he thought he would create this organization that started off literally as a mutual benefit society. And we became what you would call an actuarially based life insurance company, probably around 1900 and 1901. So we now boast over 2 million members worldwide. We’re the largest Catholic lay organization in the world. We have about 1.4 million members in the US. It’s our biggest jurisdiction and we’re basically men of service. So the thought processes is that we work in our local communities to provide charity. In a typical year from the parent, we will donate about $40 million to a variety of charities, our subsidiary councils. We have 10,000 councils here in the United States, but our subsidiary councils collectively donate about 140 million. So across the order, it’s about $180 million of actual dollars pre-COVID. And now we’re working back up to it John. We were donating as a fraternity north of 70,000,000 hours of community service. So we’re now knights of action, I would say as well. So I’m very proud to have been a knight since 1994. I joined the company in 05, so I didn’t become a knight for the expediency of a job, but I was very swayed by the work that we do. The general account for the Knights of Columbus on a market value basis, about a $27 billion portfolio. Right outside of my office is our bond trading floor. We manage about $25 billion of fixed income. We have our equity team up in Boston managing north of a billion in equities. And we have followed the USCCB teachings for longer than I’ve been here. One of the things I brought to the Knights when I was an advisor, I served when I was in evaluation Associates. The Knights were a client, which is how I ended up getting here. But one of the things I brought was to bring a bit more rigor to how we screen company. So we brought in a third party to help us decipher the USCCB teachings and to develop screen lists. We now work with a professor, Professor John Grabowski from Catholic You, who’s on retainer to the Knights. Where else can you have a moral theologian and your team when you’re investing? But at the Knights of Columbus. So we really do incorporate what John helps us to do. Again, he’s not writing Catholic Doctrine, but our screening advisor is a consult, and they’re not Catholic, but they’re they have a very good screening program. So John sometimes serves as an umpire calling balls and strikes. If we determine that, hey, this company actually shouldn’t be screened out, John will help evaluate it. Between us, the screening agent and John will determine what the right move is. As I said earlier, you know, John, the challenge, if it is one, it’s really in biotech and health care that we find the most in. Typically, it’s a big pharma company that may have had an abortive fashion or contraceptive. Then they divested the drug. Many big pharmaceutical companies find the most efficient way to develop a pipeline is to go acquire a smaller company. So then they acquire a smaller company in their drug pipeline. And when you go down the list, you may find a they have a drug that’s now out of bounds. So out they go. And we go through the screening rigorously every 90 days. So as I tell our board, whether it’s for the general account of the insurance company or our shareholders of our mutual funds, you’re never more than 90 days for scrubbing the portfolio. And in equities it’s easy, you know, if it’s a big cap company, you can move out of it quickly. You know, if it’s a middle sized bond, you know, post a financial crisis. Wall Street doesn’t have proprietary trading desks anymore. It can take you a little bit longer to divest. We try to keep a foot in both camps being critically adherent to the faith. But also, you know, I guess in a doctor’s sense, trying to do no harm to our shareholders. So we’ll develop a plan to move that security out. It’s never taken more than a few weeks, but, you know, you develop a divestiture plan. I have to say, in 18 years of being here 18.5 years now, it’s never caused a problem to where we could not evaluate another name or a different way of investing or a different company to purchased. And one of the things I’m very happy about is that we’ve been able to compete in the return space, but while also adhering to the Catholic teaching. Today, as I say to our board, all the way we are walking the walk, but we’re living proof that you can do well and you can do good all at the same time. So maybe it takes a little bit longer, but you eventually get there. We’re very, very proud of that.

John Coleman: Yeah, I love to hear that, Tony. And we tend to have a firm belief in that. And I want to let you in on this as well, that when you’re behaving in a way that we believed in the truth of our faith, and we believe that it’s in touch with something really important about human nature and what creates human flourishing. And then if you’re leading companies in alignment with that, that those companies can actually perform, that they can succeed because they’re in touch with something deeply true about people, about the people that work within a company, about those who purchase their products and services that allow them to perform even greater than those who are anchored in some sort of truth or who are detached from that. But, Andrew, I think I cut you off. You were going to jump in.

Andrew Abela: Not at all. So you’ve heard the old joke about the professors who argue. Yes, that may work in practice, but it doesn’t work in theory. You know, that used to be the argument about faith based investing, right? That portfolio theory says if you’re going to exclude a bunch of stocks, then your returns are necessarily going to have to be lower. You’re both experience [….] that’s that’s not true. And I’m a little hesitant because we’re not done with the research yet. But we’ve been working through a study looking at portfolio returns of faith based portfolio versus non and over extended period of time. And I’m finding that in theory, yes, it does work that you can be selective and screen out certain stocks and still not cost anything in terms of returns. Which sort of makes sense. There’s a there’s a beautiful line in the letter of Pope Leo the 13th from 1887. We remember him fondly because he was the founder of Catholic University. So. He wrote when Christian virtue is observed. That leads to a measure of prosperity, in a sense, because we’re behaving in the way God intended. So of course things should work out right. So it’s not a terrible shock, but it’s good to say to the average Christian investor, you don’t have to take a big hit, or you don’t have to take any hit on your returns. To be a faith based investor. Now, you might want to, as you pointed out, because there are certain sectors that you might. But now that becomes part of your charitable giving in a sense, right. By taking out a reduced return. But that’s a that’s a particular deliberate choice.

John Coleman: Yeah. We always think of the uses of capital, not literally black and white, but on a spectrum between pure philanthropy and high return investing. And as long as you’re conscious of where you’re playing there, it’s a conscious decision and you’re behaving in a way that’s aligned with the wishes of those whose capital you’re stewarding. It’s open, that spectrum is open, and you can really just Tony, as you would play in a risk return spectrum in fixed income to equities, to private equity. You can kind of choose at what point on that spectrum between philanthropy and return to play. One topic that we haven’t explicitly addressed, I’d be so curious to get your feedback on is ESG, and a question that we get frequently, if you’re willing to address it, is, is ESG aligned with faith driven investing or where are they align and where are they different? And so I’d be curious, as you all have reflected on specifically Catholic, faith based or faith driven investing and the points of similarity or difference with ESG? Just how do you view those intersections right now and whether that’s an active discussion or not for y’all, or you just have your own approach that’s completely different from that, and it’s not really a topic of discussion.

Tony Minopoli: I’ll kick off just how we thought about it particularly, you know, the environmental concerns I think are aligned, particularly with the current pope. Pope Francis is very concerned about the environment and has spoken extensively about it. Not to say that past popes weren’t concerned about the environment, but Pope Francis has written and spoken about it extensively. Some of the things that fall under the s are not necessarily aligned with the Catholic faith, so it’s a little difficult to align purely with them. And on the governance side, in many cases, a lot of the things that come up under governance, you know, single type of shared class, making sure things are disclosed properly. Those, I think are just common sense investment themes. But broadly, the way that we think about ESG, our first priority is Catholic social teaching. We need to be compliant there. ESG in the capital market sense. You need to understand how a company is perceived. So all of our securities, right, whether it’s debt or equity, we do think about the ESG factors. And greatest example as an energy company, just because an energy company is an energy company, it doesn’t mean it’s necessarily you can’t touch it. Because if you think about a company that manages their industrial or environmental impact well and follows all the governance rules, they may score poorly, but they may actually be a solid investment. So in broad terms, we will not invest in something because it scores high in ESG. We will not avoid something purely because it ranks low on ESG factors. But as a prudent investment manager, it’s incumbent upon me and my team that we understand the context of how a company is perceived with the real I, John. Is that company going to have an ability, for example, to tap the capital markets? Will they can they raise capital or have they violated environmental regulations in so many states that now their management is going to be tied up in lawsuits. And, and I always it’s a tired and old example, but I use it all the time and not to pick on GE. But when GE got in trouble all those many years ago for the PCBs in the Hudson River in New York, it took them forever between law, the lawyers and regulators and fines and then shareholder lawsuits. So management was management able to truly execute on their management strategy? No, they were distracted. So that’s we want to understand the context of ESG in a company. Because again, somebody that follows the right way, they’re going to be able to execute their management strategy. And we think that will lead to a better investment outcome. But for us, Catholic social teaching outtrump ESG. Andrew.

Andrew Abela: Yeah, couldn’t agree more. We have vigorous debates both within our school and with colleagues outside Catholic and other Christian, about the purpose of a business. The classic debate between sort of stockholder stakeholder. This gets a little more abstract. You know, professors like to talk about these. Abstract. Okay. So it’s what we do, you know, we bring it back to practice. And my perception is that we went from one extreme to another, where in the 80s and the 90s, we were all talking about profit maximization as the o, the sole goal. You know, it’s kind of like a, you know, an extreme form of Milton Friedman, kind of that the purpose of this is to maximize. Profits and nothing else. You know, he did go on to say, but to stay within the norms and, you know, and rules and so on. People forget that part. And ESG in some sense has gone to the other extreme where, you know, set aside the fact that, you know, one reading group can agree with another about what exactly ESG is, you know, said so totally agree with Tony, is you don’t abandon a stock just because it’s rated low, or you don’t buy it because it’s rated high, because those ratings can often be close to meaningless. But with the reason we think Catholic social teaching is so helpful is you’re looking at the good of a business. And is that not limited solely to profitability? But it doesn’t exclude profitability in the way some kind of ESG kind of perspectives take. So if you asked us kind of [….] what is the purpose of a business, we would say the purpose of a business is to do some good for some group of people and to do it profitably because you’re not doing it profitably. You’re just not a business. You’re yet another organization that has to be funded philanthropically or through taxation. Right? So business is the only self-sustaining, self-funding enterprise. And so to do that, you have to basically have a clear vision of the good that you’re doing, and then you have to do that with virtue to do that virtuously. And if you follow through on that, all the evidence is that you would be very profitable, successful. And so you would satisfy both the shareholder and the stakeholders is that’s kind of that’s the win win aspiration. I think that we should all have, instead of pitting kind of social justice versus profitability, you know, makes one good and one bad. No, those things don’t have to be in opposition.

John Coleman: Yeah, I think I love what you’re saying there, Andrew, because I do think there’s a way in which the free enterprise system, upon which capital markets rests or upon which investment rests, actually does contain kernels that can promote human flourishing. Obviously, it can be used for bad, it can be used for good. But actually embracing the right principles combined with that system can help to unleash human flourishing, which is one of the reasons we’ve seen this explosion in, people escaping poverty, for example, around the we’ve seen an explosion in the ability of people to escape their circumstances if they’re born into poor circumstances, economic mobility, the ability to pursue their own talents and merits. And so we think that certainly the system can and often is used to promote human flourishing, but it also has to exist within a set of values or virtues, as you would say, that allow it to function properly. And with regards to investments around here at FDI, we often say all investing is impact investing. Every dollar you put to work has an impact on the world for positive or negative. The only question is what kind of impact will it have? And I think the pushback against ESG has been a good thing, and that there are many valid criticisms from both the right and the left. And we don’t have to get into those. But it’s also forced, I think, Christians to say, what is our distinctive set of values that we want to pursue? What is it unique about the Christian faith that we want to see expressed in investment capital? And how can we now define something that’s distinctively Christian faith aligned, rather than simply falling in line with framework? That to your point, Tony has some similarities, but some differences, I think, from what dominant Christian doctrine, would be. I have a question. It may be on our listeners minds because, I’m a Protestant. We are notoriously hard to organize, I would say, as it’s a set of church denominations, you both had mentioned that you’re working with various denominations or orders within the Catholic Church to forward thinking about what this looks like. Could you explain to us what is collaboration look like within the church, across the various pools of assets that you all have? And how does that work? I mean, you’re both in the center of it. What does that look like for y’all?

Tony Minopoli: Andrew, please kick this off. But, John, I’ll just say, if you can visualize herding cats and wild cats, that’s sort of the start of it.

Andrew Abela: Tony is exactly right. Because here’s this is just a descriptive statement. Yeah. So the Conference of Bishops guidelines, which I mentioned before for faith based investing, faith driven investing, apply to the funds of the conference itself. Now. The conference is made up of the 200 and some bishops of the United States. Each has his own diocese. Many of them have their own foundations which invest their own association. The conference’s rules don’t apply to the to the bishops own, foundations. They are purely voluntary. So some bishops well, as a matter of course they will follow those others would say we have a better way to do it. We’ll do it differently. So even among the brother bishops themselves, there are some differences. But I say that purely descriptively, to say that there is coordination, but it’s not monolithic, you know, and in some sense, I think I would rather have it that way than have a top down. Usually I’ll do it this way, because when it’s that dictatorial, you can make some really, really big mistakes, right? Whereas when it’s more distributed in this way, if you make mistakes, they tend to be a bit more localized, you know? So I think there’s room for more collaboration, not just among Catholics but among all Christians, you know, because goodness knows the forces of secularism tend to sometimes seem to be really coordinated. And so if we’re going to provide any kind of countervailing power, but I think the best way to do that is through communication, kind of sharing of ideas, kinds of meetings. John, that you’ve organized, that we’ve organized, that the Knights that Tony, you participated in, in several of ours. Right. The more kind of discussion we have, the more aligned we can become around the same vision. It’s kind of how I would put it.

Tony Minopoli: The few things that I mean, one of the joys working with these disparities is it brought me into Andrew’s orbit, and the Knights have had a close relationship with Catholic University forever, but it’s allowed me to collaborate with Andrew. Andrew has become a friend. We chat about these kinds of things all the time. We’ve done. We’ve done a lot of work together, and there’s a lot more work that we’re planning on doing together. But Andrew makes a very key point that even across the various Christian denominations, the commonality of whether it’s an Episcopalian Catholicism or the various different parts of Christianity, of the Protestants, there’s a lot more similarity than there is difference. And if we leave the differences to the side, the core things matter, right? The things on life, the things on family. So I always joke, I have a young man, he’s not so young anymore because I’m not so young anymore. But he used to work for me. And when I was organizing the Knights of Columbus mutual funds, he and I were chatting, and he’s an Orthodox Jew. And he said to me, you were talking about the diocesan structure. And he said, if we ever had that structure in the Jewish faith, we would have raised $10 billion before you even open the door. And it struck me, because certainly as Catholics and I’m going to take the rest of my Christian brothers with me in the canoe, we never act in concert and imagine the change that we could forge if we actually did. Because again, though, there are differences in the faith denominations. Man, the similarity is a heck of a lot stronger than the differences. And I’m hopeful. And Andrew is right. I think the fact that there’s room for interpretation may bring more people into thinking about faith based investing, because it isn’t this dogmatic thou shalt do this and thou shalt not do that. But it allowed for us to say, you know what? We’re going to anchor to the central tenants of the bishops. We’re going to work with those clients. We have clients with separate accounts that’ll be a bit nuanced. And as my former pastor said, Tony, it’s a very large church with many different people in it. And I think when you move beyond Catholicism into Christianity as a whole, man, it’s an even bigger tent with a lot of very disparate, disparate opinions. But we can do better together.

John Coleman: Amen. I couldn’t agree more. And we’ve often had this discussion that man, the people who believe deeply in the Christian faith, we share so many of the same commitments. Right? I mean, we really believe in the dignity of all human being. We believe that every person on earth is created in the image of a loving God, and that everything that we build should be oriented towards helping those folks connect with their creator, live out their human dignity, really pursue something that can bring them well, having purpose and flourishing. And there’s really a crisis for that in the world today, right? If you look around the world, people are struggling, they’re unhappy, that are lonely, that they’re disconnected from that sense of purpose. And we have an opportunity as investors and business leaders every day to either help bring them closer to their creator and to understanding their own dignity and purpose or further away from it. And if we could just work together in concert more, to try and forward that shared vision, I think it could be really powerful as we wrap today, because that was such an inspiring call from both of you. I would love to just maybe ask a personal question, which is obviously, both of you are men of deep faith. You’ve been motivated by your faith, even in your careers, what you’ve pursued. Maybe just each of you individually. Tell me, what is it in your personal faith life that keeps you motivated about this, that keeps calling you into your profession, that you’d want to share with others.

Tony Minopoli: Quickly for me, John, my my younger brother has special needs, and he is in. I have to stop at my parents. We still have my mom and dad. They’re 85 and 83, and I have to stop at my dad’s house to sign a piece of paper for an investment that he’s making, and I’ll go in there this evening to go see my parents and have my dad sign this paper. And my little brother is literally the living, breathing, walking embodiment of Christ’s unconditional love. He’ll want to know, how did my day go? He wants to know that you’re okay. If he met you, John, chances are you probably give you a hug. And secondly, he’d want to know how your day went. Is everything okay? And watching the Knights of Columbus, its Special Olympics with him when he was a little boy is what motivated me to say. There’s something to this faith piece that needs to be part of my life. And when I got to work at the Knights of Columbus at the time, I had two competing offers one from a mega, mega large hedge fund that will go unnamed, and the Knights of Columbus. From an economic standpoint, I made probably the least wise decision of of a guy pursuing a financial career, but knowing that the money that I helped generate allows Patrick Kelly, our Supreme Knight, for wheelchairs, for coats, for kids, for food, for families, for disaster relief, and a very good friend of mine that works at a big Wall Street firm, said, it must be nice going to work someplace every day where the purpose for why you make money is just not to make someone that’s wealthy, wealthier, and people that know me well know how important my Catholic faith is and what a part of my identity is. And frankly, to come to a place where we have a chapel on the fourth floor and I can go to mass when you know it’s available, I can go down there and spend a few minutes in quiet, contemplate a prayer. It means an immense amount. And, and to be able to live my faith in my profession and, and know the good that comes from the work that the Knights do, it pretty much makes it makes it a life worth living. And I got to grow with it for, for many years. And my first job was working for the Knights of Columbus and Council 16 at their duckpin bowling alley when I was a ten year old as a pin setter, and hopefully my last job as CIO of the Knights of Columbus. The second job paid better than the first. But, I’ve had an involvement with the Knights of Columbus for for a long, long time Andrew.

Andrew Abela: That it’s hard to top. But whoever says that Catholics can’t share about their spiritual life, you just proved them wrong, Tony, so I do. So mine comes to a different place. I as a teenager, I fell away from the church, was a practical kind of atheist and went through some kind of dark and meaningless times. You know, it just kind of reached a point where I was very successful. I as you mentioned, I started my career at Procter and Gamble. I was at the time the youngest brand manager worldwide at Procter and Gamble. I thought I had the world ahead of me. I was a McKinsey, traveling around the world, working for them in Russia, just after Russia opened up, when when we all thought that it was going to become a great democracy and so on. And then a certain point, I just realized the emptiness of it all and was called back and kind of gave my life to Christ, came back into the church. And that was almost 30 years ago. And life just keeps getting better each year as I get closer to him, you know, everything makes more sense, everything works out better, and you just start to realize that this is the way we’re supposed to live, you know? So 11 years ago, I had a dream come true, and the university asked me to start a business school. And I’d had a vision of what? What would it be like to have a business school that was from the very ground up, focused on teaching and doing research about what does it mean to be a Christian in business? And that’s what we’ve been doing for now, 11 years. We’re 700 students and growing. We’ve been actually double digit growth the last four years, which is not rare in higher education, you know, nowadays. And that’s just been a real treat. And so just being able to work with folks like Tony and others and then to kind of bring them to the younger people and say here, this is what you’re striving for, is you want to go out and serve Christ in the world of business. You know, it’s been a real gift to me, I have to say. Yeah.

John Coleman: Well, gentlemen, that was an inspiring way to end Andrew Abela of Catholic University. Tony Minopoli of the Knights of Columbus Asset Advisors. We’re really grateful for you guys for being on the podcast, for the work that you’re doing every day on behalf of our shared faith. And, just really encouraged by this conversation and hopeful to see what’s next. Thank you so much for joining the Faith Driven Investor podcast today.

Rusty Rueff: Hey everyone! All opinions expressed on this podcast, including the team and guests, are solely their opinions. Host and guests may maintain positions in the companies and securities discussed, and this podcast is for informational purposes only and should not be relied upon as specific investment advice for any individual or organization. Thanks for listening.

Richard Cunningham: Well welcome everybody and hello. And it’s episode 171 of the Faith Driven Investor podcast. We are grateful you’re here. My name is Richard Cunningham. You find this recording this at the end of April 2024. John Coleman, as always, one of our mainstays is here in the studio with us from Atlanta, Georgia. And John, we’ve got a great one today is it’s a marks on the markets episode. And one of our guests is someone we admire greatly. A Denver, Colorado native, Matt Monson. Someone you get to work pretty closely with. Matt, we are so overjoyed to have you in the podcast studio.

Matt Monson: Yeah, thanks for having me.

John Coleman: Oh, man, it’s so great. We haven’t had Matt on since 2022, I think was what we said. And look, I just have a ton of respect for this guy. I’ve gotten to work for him, with him for the last three years and just towering intellect in the public equity markets in particular, Matt, and always well prepared. So I can’t wait to hear your thoughts on what’s happening right now.

Richard Cunningham: Oh man, I’m equally excited. Let’s see that intellect on full display today here on this marks on the markets episode. And so without further ado gents, let’s dive in. Equity markets have just made a monumental run. We saw last week a pretty tough week in terms of drawbacks for the equity markets, specifically The Magnificent Seven. But Matt, maybe how did we end up here? How has there been such a soft landing? Is there still upside in these markets. And just kind of orient our listeners as to where we are currently?

Matt Monson: Yeah, that’s a good question. You know, I would say the greatest opportunity for sure is in small and mid-caps and then some select large caps. So remember that seven stocks are driving a lot of the move in the stock market today. So the other 793 stocks in the S&P 500 are not actually all that expensive. So many people know that when they buy the S&P 500, that 34% of their dollars are actually just going into ten companies. Many of those companies were up 50 to 200% last year in 2023. And they’re up significantly again in 2024. So this type of concentration is in these top ten companies is actually the same across many different large cap indexes. So one of my thoughts is just that, you know the labor market here has been surprisingly strong, especially after these monumental rate hikes have taken place. I mean, this was the third largest set of rate hikes in the last ten tightening cycles ever since the 50s. And it could have broken the economy, but it didn’t. And one of my thoughts just share on why that might be is you see it in the surveys. The Small Business Survey for NFIB shows that 40% of small businesses weren’t able to fill the seats that they had open. So even if that tightening reduced demand and someone lost a job along the way, there were so many unfilled jobs just waiting for them that we didn’t end up seeing it result in unemployment rates ticking up.

John Coleman: Hey Matt, I want to dig into this soft landing topic. But before we do, can we pause on this magnificent seven kind of top ten topic for a moment? Because I’ve been trying to think this through, because it’s been a historic run for the last couple of years with those seven stocks in particular, particularly things like Nvidia, Apple, Amazon, Tesla, it’s obviously pulled back quite a lot of those Magnificent seven. And I’ve been trying to understand, you know, how much of this is momentum, how much of this is a flight to quality in those stocks. Because whatever we’d say about them, you know, they are seven of the most successful companies in the world in terms of growth, in terms of profitability. So it doesn’t look like the.com era where there’s this completely inexplicable rise in certain stocks. I mean, these I get why people want to invest in Alphabet or Meta or Amazon or Apple, because the structural growth in those companies and financial stability, those companies actually has been very positive over the last several years. So help me think through just how to read those Magnificent Seven, because I keep thinking there will be a reversion to the mean, and that small caps will catch up to those large caps. Or frankly, 99% of the market will catch up to that 1% of the market. And yet that 1% continues to kind of outpace. So how do you think about the success of those seven stocks, and how much of that is legitimate and sustainable versus how much of that is kind of momentum driven?

Matt Monson: Yeah, I think if you unpack the business models for the seven, they all end up with one common theme in place. They have a technology based monopoly, and we can walk through each one one by one. But for the most part, the business models are really good and they don’t have a lot of competition. And so when we look at companies that have done. Really well over time. Limited competition was always a key factor. And so I don’t think when we looked at them last in, you know, call it months ago, I don’t think the valuations look incredibly stretched even across the Magnificent Seven. And so you’re seeing a lot of the stock price performance being driven by earnings growth and a combination of earnings growth and valuation expansion. But you know that multiple expansion isn’t the standalone reason for stock price performance on those seven.

John Coleman: Yeah that’s my read is they’re actually fundamentally healthy stocks. They may be overvalued relative to some of the competition. But what I wouldn’t expect from them, given what we’re discussing is a dramatic pullback or it doesn’t feel like the same type of bubble atmosphere that you would have gotten during the.com era, right? So you may see a drawback, but my impression is that’s on the order of kind of a ten, 20, 30% reversion to small caps in mid-caps or other large caps rather than, you know, some sort of dramatic, collapse in those securities.

Matt Monson: Yeah, that’s why I see it. And, you know, there’s another theme there, too, is that AI is driving a lot of the growth that we’re seeing in The Magnificent Seven. And, you know, we all maybe have a different view on what I could be, but if it’s going to be the next penicillin and an airplane and the internet, then you’ve got something much bigger on your hands. It’s, you know, at best in the beginning of the first inning here for AI. And so if that’s the case, it’s going to be market size expansion. I mean, it’s really an arms race, right? Because you have so many different CEOs right now that will get fired if they don’t invest in and explore AI. And I’m not talking about the people who are selling it to the rest of us. I’m talking every business is looking into it, and we don’t even know what the financial ROI is going to be from that yet. But no one’s going to be penalized for overspending. People are only going to be penalized for not diving in headfirst at this point.

John Coleman: You know, in the last craze in technology like this that I remember was blockchain, obviously, because cryptocurrencies were linked to that. And there was this distributed ledger technology that was for use in other things. And there was a period of time, maybe 5 or 6 years ago, where everybody was like putting blockchain in their latest earnings release, and they were getting huge bumps for that. If they talked about it. To me, the AI thing seems a lot more legitimate. You know, we had a pullback in that blockchain craze a few years ago. The difference here is that blockchain really required fundamental shifts in the infrastructure of business. And it was almost like the fax machine. A lot of use cases for it required every single counterparty to get on the same blockchain so that they could operate together. AI is interesting because the computing power is obviously much greater than with something like blockchain, which is one of the bottlenecks right now. But it doesn’t require all the counterparties to operate. And we’re seeing tons of interesting use cases come up for that, whether that’s diagnosis in health care, whether it’s cybersecurity applications where you’ve got artificial intelligence, you know, enabling those, you know, just this host of use cases that are springing out of these large language models. And my biggest question is whether those, you know, can continue on pace and whether we can move past the large language models, indeed, to something more like artificial general intelligence, which is, you know, and people stand in different areas. Obviously, Sam Altman is very optimistic about the continued progress of those. I recently saw a podcast, I think it was with Mark Zuckerberg, who was much more skeptical about the near-term movement into AGI. So I’m with you. I think the AI thing is quite interesting, and figuring out how it fits into the way that companies do business is a big part of how they’re likely to succeed financially moving forward.

Richard Cunningham: Well, you guys can already tell we’re off to a fast start. Matt Monson is on full display, and what a joy it is to kind of listen to you guys riff on this. You know, Matt, let’s back up for a second just to kind of remind everyone. So you are a public equities investor. You run a couple of really neat funds at Sovereign Capital, the Omega Fund and an ETF that maybe you can tell us more about later on. And you’re kind of distinct approach. But as we look at this disconnect between the run up of large cap stocks compared to small cap stocks, you guys have gotten into the AI conversation already. You know, how are you maybe responding to this as you kind of evaluate markets in your role specifically?

Matt Monson: Yeah, that’s a great question. So we actually just ran a bunch of data last week. So I’ve got a fresh off the top of my mind. You know, we’re all cap investors, which means that we are one third large cap, one third mid one third small caps. And so we don’t have a bias towards talking up anything specifically. And we can kind of move between them. But what I’ll bring to the conversation is that large caps right now are trading at a 33% premium to their 18 year pre-COVID forward earnings multiple. And so right now they’re trading at 20.7 times forward earnings. Small caps, however, are trading at a 20% discount to their historical multiple. And they’re only trading at 15 times forward earnings, say small caps, for reference, have typically traded at a small premium to where the large caps have traded. But right now, at a 25% discount, it’s a historically wide discount. And so let me remind folks of a few different things from 2000 to 2016. Small caps were up 410%. Mid-caps were up 370%, both of which significantly outperform large caps, which only rose 112% during that time period from 2000 to 2016. And then the tables turned so 2017 through present. Large caps are up 152% versus small up only 67 and mid up 92. So the recency bias inherent in all of us over the last seven years has shown that large caps have won. So I run into clients all the time who only want to own large caps, and they’re forgetting about that 16 year stretch before that, that small caps and mid-caps absolutely dramatically outperformed large caps. So I just find that to be interesting. And so we love being in the all cap space because we’re able to access all of them, not knowing when and to what degree one cap will turn and will be the leader for the next 16 years.

Richard Cunningham: Wow, that’s some good data. I worked for a premium investor that sought out specifically small cap and value premiums for a number of years prior to move it over to faith driven investor. And it was in the midst of that, you know, kind of unprecedented large cap outperformance and growth, outperformance of small in value. And so it was a tough couple of years for the firm, to say the least. But there is so much reference back to the historical basis for small cap and everything like that. So gentlemen, any closing comments. Kind of as we look at the public equities market and everything, as before, we get into kind of the interest rate conversation and go that way.

John Coleman: Well, I would say my overall comment and perhaps Matt hasn’t been surprised, but he just listed those numbers. You know, 2001 I think was through 2016 and then 2016 to present. And what continues to surprise me is just the incredible momentum and resiliency of US equity markets. I would have expected a dramatic slowdown in the current environment. I would have expected much more fear in the equity markets because of all the instability, inflation, etc. and yet US equities have just proven remarkably resilient in this environment. You know, that’s one of the things I continue to be curious about, because it several times over the last 3 or 4 years, I would have guessed that we were in for a prolonged pull down in markets because of Covid, which came back very quickly because of the fear of recession, because of rising interest rates and inflation. And yet US equities have continued to plow forward. And so I’m cautiously optimistic that they’ll continue to improve because of the fundamentals in the economy. And I know we’re going to get to some of those here in a moment. Matt mentioned those, but it’s been such a curiosity to me that they have been so resilient and we’ve had such a soft landing, despite all the moves of the last couple of years.

Richard Cunningham: Good comments, John. So maybe let’s do this before interest rates. I think this is key to go into as well. Matt, any thoughts on maybe how what you’re seeing play out in the public equities markets, how it’s affecting things in the venture and PE space, and then also kind of that big question of, you know, what is it going to take to open IPO markets back up now that equities kind of have improved stabilized. Yes there’s been the pullbacks. But let’s go venture in PE markets maybe IPO markets. Prior to us commenting on just the interest rate environment and things like inflation.

Matt Monson: Yeah that’s a wonderful question. I would say it depends. You know for some private equity and venture capital shops they own large cap names. And if you own large cap names that are now looking at comps in the marketplace that are trading north of 20 times earnings, you know, now you’re going to see elevated mark to markets in your funds. Fund performance is going to go up. Your opportunity to exit into the public markets, whether to a strategic or in an IPO will be a lot better. Now the other side of that coin is if you are a venture fund or a private equity fund that owns a smaller mid-cap, you’re not seeing those elevated valuation multiples. As I mentioned before, you know, you’ve got small cap forward earnings multiples at 15 times, which isn’t going to create the kind of juicy backdrop that you’re going to see in the large cap markets right now with regards to IPOs. You know, I think there’s a lot of talk right now that, hey, you know, the IPO market slow. What’s going on. You know I was looking at the historical data on it. And actually 200 IPOs a year is a fairly average number. And right now we’re running just below that. So back to the recency bias in 2020. You saw a record number of IPOs in the US for 80. And then in 2021 a record above and beyond that at 1035. There are no other years like that. In the last 20 years the average is really around 200. And so I think we’ve got a pretty healthy IPO market right now.

John Coleman: That is fascinating, Matt. I would not have guessed that that is recency bias. And I guess we all forget. We been in the markets for like 20 years. But it’s so easy to forget the. Prior eras. And Richard, what I would say I’m seeing in the private markets is fundraising is still a little bit slow in private markets, because people are still not getting distributions from their old private equity and venture holdings. I think selling positions has slowed a little bit. I do think the IPO markets, even if they’re more back in an historical average that represents such a slowdown from the prior era, from the prior several years, that you haven’t seen the liquidity mechanisms for some of these venture backed and private equity backed companies at the pace you would have seen them before, which slows down distributions. My perception is that the venture markets have bounced back in terms of valuations quite rapidly. You know, there was a dramatic pullback in venture valuations, which seems to be heating back up again, not at the 2021 levels, but we’re seeing pretty aggressive valuations in the early stage. Venture markets and growth equity markets again whereas private equity has stayed somewhat deliberate. And I think part of that is because of the high interest rates, which we’ll get into, you know, the private equity model, the LBO model is predicated on debt financing for many firms. And I think the inability to access cheap debt has kept valuations in those markets a bit more tame and has made them a little bit slower to inflate. That’s my perception right now. And so the private equity valuation market has come back but a bit more slowly. And I think that will only continue to increase as some of these IPOs do you pick up I mean Matt said we’re slightly below the historical average. You know, you’d like to see some liquidations, either sales in the private markets or IPOs of these private equity backed companies, or if interest rates start to come down, which I think would ignite, you know, the debt markets for IPOs in a pretty significant way.

Richard Cunningham: Right on. Well let’s get right into that. So interest rates what do we think in gentlemen 2024 2025. There’s been you know, maybe some tempering of expectations on what was supposed to be a rate cut heavy year by the fed. Matt, any thoughts on your end?

Matt Monson: Yeah. I mean, if we zoom out for just one moment, inflation has been a little stickier than people expected it to be. You know, running just a little north of 3%, depending on what data you want to look at. And because of that, the expectations for rate cuts have come down. You know, maybe it was going to be a handful earlier and now it’s going to be still there’s expectations for a little bit that may happen in the second half of the year. And as those expectations change it causes interest rate volatility. As there’s interest rate volatility it impacts cyclicals. It impacts financials. It impacts small caps. And so it really ripples through. You know I think a lot of this is just on the heels of the labor market strength that we were talking about earlier. You have so many small businesses that have open racks that they can’t fill and order magnitude. And that’s around 40% right now. And so even with rising rates that have crushed some of the consumer demand, you still aren’t seeing those job losses and an increase in in the unemployment rate the way that you maybe would have expected. And so just a remarkably strong labor market, I think, is really underpinning what we’re seeing in terms of the overall economic strength, which has led to, you know, that persistent inflation around, a little north of 3%.

John Coleman: You know, and to Matt’s point, I think inflation is almost always stickier than people think it will be. Right? I feel like historically, almost every time you think you’ve beaten inflation, it lingers a little bit longer than you think. And I do think there are still inflationary pressures on the economy, particularly the fiscal side of spending. You know, the United States government continues to pump liquidity into the economy, whether that’s student loan debt relief, etc.. The second observation I would make, though, because Matt has mentioned several times the historical ratios and how recency bias is throwing us off. I would say we’re suffering from a lot of recency bias around interest rates and inflation and employment as well. I had the privilege to one of my friends is now the president of the Ronald Reagan Foundation out on the West Coast, and I was touring the Reagan Library with him recently, and I saw some stats where they were trumpeting Ronald Reagan’s presidency, 1981 to 1989. And I’m not getting into the politics of this, but just listen to these stats. They were saying how impressive it was that during Reagan’s eight years, inflation fell from 12.4% to 4.6%, right, which is a little north of where we are today. I think unemployment fell from 7.4% to 5.2%, which is north of where we are today. And Matt, I remember when 5% was basically considered structural unemployment, right? The federal income tax rate, the top taxpayer rate was cut from 50% to 28%. So taxes were much higher. And the mortgage interest rate in the 80s dropped from 15.4% to 10.3%. And so if you actually look at the economic numbers today. The real aberration was the great financial crisis. Until two years ago, it was historic, global, low and negative interest rates, which drove just insane numbers around the economies of the world. And now we’re at a point that’s more like the historical averages with inflation. Unemployment’s sold that low. I think with interest rates, mortgage rates, etc.. And so I wonder if part of this soft landing is just that. Despite our recency bias, the actual real impacts of the economy, of the interest rates that we’re experiencing now are more in line with historical impacts than something really injurious, like the interest rates that were present in 1981, for example.

Richard Cunningham: Man, I don’t know that about Reagan’s presidency. I mean, kind of a fertile soil, if you will, to come down and and a lot of those numbers and metrics John. That’s interesting.

John Coleman: Yeah. I mean, it was wild to me to to see the numbers and see that, you know, even in 89, which I don’t even remember that. Well, mortgage rates being a 10.5%. You know, you think about what would happen today if we announced that mortgage rates were going to go up to ten and a half. I think we’re sitting at about eight right now, and it’s totally frozen. The mortgage markets, because of all these people locked in to kind of two and a half to 3.5% rates, but we’re actually living in a relatively normal interest rate environment right now. And it’s a little inflationary, but it’s not actually as inflationary as a lot of prior periods.

Richard Cunningham: Good historical precedent. Well, something else, gentlemen, that I think we need to just have a really sober awareness of and have our eyes on and, and I’d be curious to hear you guys thoughts on implications as it relates back to the markets as just time of conflict. We’ve seen what’s going on in Ukraine and Russia now for an extended period of time. There’s even, you know, recent updates to the conflict in the Middle East with Iran and Israel. You know, as you guys think about these international conflicts, what type of implications have there been on markets? Do you expect there to be on markets? Is that stuff priced in? Where are we at currently and what what kind of comments do you guys have there?

Matt Monson: That’s a good question. I think, you know, from my perspective right now, the direct implications are limited to the energy markets in terms of our funds. However, if this spirals into a broader conflict in the Middle East, you know, then we’re going to start to see a change in demand. And so one comment that one of my colleagues always uses is that threats to freedom are threats to growth. And we’re not seeing threats to freedom yet on our side, but we’re actively monitoring that.

John Coleman: Yeah. You know, apart from the obvious human cost. And I think we’ve all seen that and been praying for that over the last couple of years, whether that be Ukraine or, in Israel and Gaza. What’s been surprising to me is how markets are basically assuming these will stay contained, regional conflicts. I think we’ve seen brief periods where they assumed there was a possibility of a broader outbreak right at the beginning of the Ukraine invasion by Russia. I think we saw more market movements like this could break out. Right when Iran was sending missiles into Israel, there was a pullback, I think, because there was a fear of a broader war with Iran. But right now, my impression is the markets are assuming that these will stay regional conflicts. And especially with regards to the most recent activity in Israel, I think a part of that has been the surprising partnerships that have arisen during that. You know, I think if Iran had attacked Israel and there had been no regional support, I think the chances of all out war would have been higher. To see the Jordanians giving the Israelis airspace and the Saudis offering Israeli support was pretty surprising in the area. You know, traditionally, Iran has been an enemy of many of the Arab states in the region, and they’ve often viewed Iran as a much greater threat than Israel because it’s larger, it’s been more historically powerful. It’s obviously a different branch of Islam than the dominant Arab powers in the Middle East. But the fact that those Arab powers came to Israel’s support in the midst of the Iran bombardment, apart from the obvious conflict in Gaza, was a surprise. And, you know, I’m an amateur at this, but one of my observations is that might have muted some of the reaction, because even the Iranians probably weren’t expecting that kind of response from their Arab neighbors. And that probably caused them to be a little bit more cautious in the way they continue to react to the conflict. But right now, it seems like markets are just assuming these will stay regional. And like Matt said, unless there’s some indication that this breaks out more broadly or it turns into China invading Taiwan, or something of that nature, which could have real implications on broader U.S. markets. I don’t see this having a great impact if it doesn’t escape regional conflict.

Richard Cunningham: Well, gents, thank you. I know we’ve hit you covered a lot of ground, and we’re going to go in a fun direction here next because I want to kind of get into the Matt, you are such an admired leader and look to leader in the future of an investing space. And. So we’re going to get here into a second. We hear a lot in the news about corporate engagement, proxy voting and things like that. And so I want to go there as you kind of think about that. But before we do that, I want to provide you both just maybe a opportunity to tie a bow on summarize kind of as you look at the economy, markets, all of it, just maybe the Matt Monson John Coleman kind of state of the Union 30 seconds type. Just tie a bow on all of your thoughts as it relates to interest rates conflicts going on. AI disconnect between large caps and small caps, all of it for our listeners.

Matt Monson: Thanks, Richard. You know, one thing we didn’t touch on earlier that we’re watching closely and we think is really interesting, is that on our team, there’s been a lot of work that’s been done to look at the impact of shrinking M2 and the impact that we think that’s going to have on CPI. And so we think a lot of the M2 that’s come out of the system right now, you haven’t seen the full effect of that yet on CPI. And so we think that there’s actually going to be a reduction in inflation going forward based on actions that have already happened, because there’s typically been an 18 month lag. And so we think inflation is still heading in the right direction. You know, given some of my comments earlier around what we see on valuations, we don’t feel that the companies we own are stretched at all on valuation. And that’s just, you know, you’re going to hear that from other active managers as well, because we’re not passively deploying dollars into an index and you get what you get. And then we pick each one of our exposures, and we think there’s plenty of companies that have really good demand drivers for growth, fair or super attractive valuation. And so we’re really constructive on the public equity markets. And then just the greater backdrop of the US economy, we don’t see any big risks right now that we’re scared about, and certainly not the way that we’ve had things to talk about over the last 5 or 10 years.

John Coleman: Matt, how do you think about the upcoming election? That’s one of my instincts, is that markets will be a little bit muted as the US election plays out because of all these other risks in the economy, so it’s hard to see people getting too bullish or bearish absent some sort of shock globally, like we said, a big conflict or something like that. How do you think about the election in 2024 and its impact on markets right now?

Matt Monson: Yeah, when it comes to elections, usually there’s an unknown party, and a known party, and in some cases after a president’s been there for two terms, it’s two unknown parties. We have an interesting dynamic right now. We have two known parties. We had a former president, a sitting president, and we’re going to end up with one of them. And so I think that there’s less risk and less uncertainty heading into this election than there have been. And, you know, many, if not all previous elections.

Richard Cunningham: Interesting. Well, thank you both, gentlemen. So, Matt, let’s talk about kind of John, I’ve been in this season on the FDI podcast of talking about how to how can investors truly get in the game? How can we take more proactive steps forward and be faithful with what the Lord has called us to steward? And I think it should be helpful for listeners at home to hear a little bit about kind of what is your approach been, as you guys think about public equities, investors, corporate engagement, proxy voting, maybe provide a little bit of education there for what this can practically look like for your faith driven investor audience.

Matt Monson: Yeah, I love that question. You know, historically, public equity investors have just bought shares and been along for the ride. Worse yet, many investors don’t vote their own shares. They allow someone else to vote their shares for them. And you can guess what happens. That third party has their own set of values that they exercise when they vote your shares. So for faith driven investors, this is particularly problematic because if you own any ETF from a non faith driven ETF fund manager, you can almost be sure that your vote is being cast in conflict with biblical values. So in the world, we focus on how we give away our wealth and we focus on how we spend it. But most people don’t think about investing their wealth in line with their values. The faith driven investing industry is taking big leaps forward right now with corporate engagement, which means reaching out to companies and letting them know there’s another voice out there. Companies are responding with more neutral agendas as a result than some of the socially aggressive agendas that you maybe are hearing about in the headlines. And so there are multiple different paths to corporate engagement. And so I can outline them. I’m really I’m thrilled with what we’re seeing right now. So there’s a number of different firms out there that are reaching out to companies and moving their agenda in a really positive way. We have a little bit different approach at Sovereign Capital, so we’re engaging with the CEOs of publicly traded companies to bring them together around roundtables and to meet one another to learn best practices from one another. But we want to see them do is hear from their peers about what’s working well to enable human flourishing and what works really well to build better cultures, because we want to see those companies installing chaplaincy, installing employee benevolence funds, and really changing the face of what public companies look like.

Richard Cunningham: Man, that’s really encouraging. So for those at home listening, wondering, man, I just I feel so disconnected from my investments. There are practical steps you can take as a shareholder and how encouraging also that there are, you know, shareholders that are running ETFs and these other kind of fund structures who are engaging large company CEOs. And you heard Matt talking about it, bring them together to kind of be inspired and encouraged together. And Matt, you know, maybe help, you know, kind of orient people around the sovereigns public equities approach. You guys specifically invest in Christ following leaders of publicly traded companies, correct?

Matt Monson: Yeah, we do. If I sum it all up in just a few quick seconds, we believe that culture is the greatest competitive advantage in business and that if you invest in a company with a faith driven leader who’s building an exceptional culture to love and care for their people, that you’ll end up attracting and retaining some of the best talent in the marketplace, and that if you have a company with phenomenal talent, it looks like a sports team with all the best players, you should be able to outperform the competition. And so that’s the thesis behind what we do. We believe that there’s no trade off between culture and performance. And in fact, the greater the culture, the greater the performance.

Richard Cunningham: That’s awesome. Well, gentlemen, before we go to Matt and kind of have Matt share a little bit of a personal encouragement, I just what the Lord’s been teaching him in Scripture. Any closing thoughts, any any kind of saved rounds before we exit today’s episode.

John Coleman: I’m reminded, you know, we’re recording this the week of Passover, and it started yesterday, which is April 22nd as we’re recording this. And I am in a unique seat in that I have a number of family members who are Jewish and a lot of friends who are Jewish. And in the news right now in the United States, we’re seeing actually a rise in antisemitism across the country. And I think that’s caused me just to reflect on the importance of Judaism in Christianity and the important ties between those two groups, and just the important humanity of refusing to kind of discriminate against people on the basis of their race or religion or other things. And just a real heart for this. What should be an incredibly special time for Jewish people right now? But I know in the US at least, it’s been marked by a lot of fear. If you look at university campuses, etc. and so without weighing in on the conflict in the Middle East too much, it’s just been on my heart how tied Judaism and Christianity are, how important it is that the Jews in our country feel welcome and safe, and that during this Passover season that they feel celebrated and welcomed by those of us who are their brothers and sisters. So I know that’s not exactly a reflection from Scripture, Richard, but it’s been on my heart a little bit this week of Passover with some of the images that I’ve been seeing in the news, just, on university campuses and elsewhere.

Richard Cunningham: Thanks for sharing. John, appreciate that. Matt, what is Lord been kind of teaching you in Scripture lately.

Matt Monson: Yeah. There’s this verse. It’s so countercultural that I just want to bring to the forefront for everyone. It’s first Thessalonians 5:16 to 18. It’s what I call direction for living. It says, rejoice always, pray continually, give thanks in all circumstances, for this is God’s will for you in Christ Jesus. What would it be like if we all did that every day, every time something bad comes your way? If that was our response.

Richard Cunningham: Man, that’s so good, so good. Well folks, this has been a marks on the markets episode with Matt Monson of Sovereign Capital. Matt, what a joy to have you on. Thank you for sharing. You just kind of profound wisdom and insight on the capital markets. John, as always, what a joy to get to do this alongside you and folks. We will catch you next time.

Richard Cunningham: What’s going on, everybody? Welcome to another episode of the Faith Driven Investor podcast. We are grateful to have you joining us as we record this. It is Monday, May 13th, 2024. This episode will actually drop on Monday the 20th, but whenever or wherever this faith driven investor podcast finds you. Thrilled to have you listening. My name is Richard Cunningham, joined by one of our faithful mainstays in Luke Roush, co-founder and managing partner of Sovereigns Capital. And Luke. We are in for a treat today, my friend, aren’t we?

Luke Roush: We are indeed. We’ve got one of our great friends who’s on today and someone who I’ve got a personal relationship with […] together with him, we’ve served on boards together. We participate in things like Christian Economic Forum together. And I really appreciate his generosity. And actually jumping on the podcast today, I was worried he might still be in mourning since Saban’s retirement from Alabama, but he’s come out of, mourning to, spend an hour with us, and we’re grateful for it.

Richard Cunningham: Yeah. Chuck Welden out of Birmingham, Alabama. Weldenfield the lion’s den. You know, Chuck, I had the privilege of joining the faith driven investor movement in May of 2021. So three years ago. And I’d be willing to bet that there hasn’t been a week that’s gone by since I’ve been involved with Faith Driven Investor, where the name Chuck Welden wasn’t mentioned. And I think it’s just because you’ve been blazing a trail, leading so much of this kind of conversation around what is faith driven investing, living it out yourself. And so we are overjoyed and thrilled to have you on the podcast, and you find us in this season, Chuck, where we are going back to folks who were featured on the 2024 Faith Driven Investor conference that aired in January. Whether they were a speaker, there was a video story on them, and Faith encoded this just masterful job telling the story of Welden Field, the real estate investment company that you helped run there in Birmingham. And so catches up, Chuck, who are you? What is Welden Field all about? For those that maybe didn’t get to see the conference feature, and we’re just so thrilled to have you on the pod today.

Chuck Welden: Well thank you. Chuck Welden from Birmingham, As you have already said, one wife four kids and ten grandkids. So that’s that’s the way you want to do that as far as ratios. Thanks for having me on the show. It’s pretty risky, you know, handing me a microphone. I assume you have some ability to turn me off or edit at the right time. And by the way, if you want to hear any Luke stories like, when he shipped his new […] to my office by accident, if that would be helpful, you know, to help set the stage. I’ll be glad to tell you the rest of the story sometime. You know, in Birmingham, we’re big fans of FDI. Eversource has a watch party every year, and we all go to it and love it. So thank you all for really investing in the whole country in the movement. I really appreciate what y’all do. I would like to start with 2 or 3 quick comments though. I like to say when I get a situation like this, one is, you know, if we’ve accomplished anything, it’s only because God’s been about it. We just basically, where’s God involved? And let’s go jump on his bandwagon. Number two, if you think you’ve been accomplished just because of all the folks that have invested in us. I mean, Birmingham is a backwater town, and yet we’ve had so many great people come here, invest in us, befriend us, teach us, mentor us. And it’s really advanced our thinking. We could not have done it without that. And third thing is, I know I’ll butcher whatever you say today, so I really prefer […] to watch the SPU video or the little five minute animated video that we made. They both do a great job explaining the fund and why we’re doing it and what we hope to accomplish. So if they sent Richard, we can refer people back to that. That’s probably the best thing we can do at the end of the day.

Richard Cunningham: Yeah, we absolutely can. And when people hear SPU, it’s Seattle Pacific University. They’re the crew behind Faith and Code that did this remarkable feature of Welden Field. But yeah Chuck hand it over back to you.

Chuck Welden: So maybe I’ll just give a little context for who. Weldenfield is basically my father, my uncle and another gentleman, Mr. Field, hence Weldenfield. They created the company back in 1977. And we’re active in property management in both multifamily. And then also we do development and redevelopment of hotels, multifamily, single family land and do good bit of private equity investing, including sovereigns, which has been a blessing for us as far as kind of a scale of our operations. I have about 850 employees, 14 states. We manage about 200 properties, about 20,000 units, and we’ve developed well over 12,000 units of multifamily, 3000 units of single family, you know, several hotels. So that doesn’t mean that we are smarter. That doesn’t mean that we make less mistakes. In fact, it probably tells you that we’ve made more mistakes because we’ve done all that. But we like to fail forward and try not to repeat the same mistake again, but we always assume it is. So that’s kind of a background of, you know, Weldenfield in a nutshell.

Luke Roush: The idea of actually failing forward and, learning from past mistakes. In the early days of sovereigns, we had something called RMD, which we, aggressively tried to avoid. And RMD stands for repetitive Mistake disorder. And, we suffered from RMD in the early days. But to your point, there’s opportunities to just process together as you bring new team members on. Sometimes they experience the same mistakes that you made before, and that really means that you are, in this case, me. I failed to appropriately train them on some of the mistakes that we had made. And so this idea of continuous learning and improvement, not just for existing staff, but new staff, you know, you’ve forgotten more than a lot of people will ever know about real estate Chuck. So maybe speak a little bit about that. Some of the things that you guys learned in the early days, that they really want to make sure that you’re avoiding in the current moment.

Chuck Welden: Yeah, we have lots of theories going into this, and it’s like, where’s the Tysons? That everybody’s got a plan until they get in the mouth. And so it’s true in real estate too, you know, we to about five properties of the fund in a variety of locations but for different demographics, all things that would help expand our knowledge base so that we could do a better job going forward. And we’ve learned some things. I mean, learned lots of things. For instance, we basically have 3 to 6 people volunteering ten hours a week that live on site. They get a rent stipend, and basically we provide a fishing pond. That’s kind of what we do. We give them a fishing pond. They want to love their neighbor, serve them, be involved in activities and social events that have a chance to lead to a gospel presentation. We call it connect, share, gather, train. That’s what we provide. We were we’re a fishing pond. And here’s some of the things that we learned quickly in the fishing pond. One is when you buy a property, you think you own it, but people who have lived there already, they own it. You’re visiting their house for the first year. After a year or two, it becomes your house. And so we have to be less aggressive the first year or two than we thought we could be. We thought we could be more aggressive, and really, we have to be more cautious and really go deep in those relationships. Number two, we started off thinking we’d only have 2 or 3 people per site. We realized quickly if somebody leaves or if two people leave, all of a sudden, all those relationships you’ve created, all those time spent, you have to start over again. If you have 3 to 6 people there, then or two people leaving doesn’t put you back to ground zero again. The third that we found out is ministry is messy. You got to be ready for anything to happen.

Richard Cunningham: That’s awesome. Chuck, maybe back up for a second and talk to us about how you kind of got to this investment thesis or methodology. So we’re really talking multifamily real estate investing here, buying apartment buildings. And then you’re talking about thoughtfully deploying people into these apartments. And you mentioned volunteers. So I’ll be curious about how that works as well from an economic standpoint with the fund and returns and what all that looks like. So thoughtfully deploying people into these communities to go spread the gospel and be on mission.

Chuck Welden: Let me tell about how we get here first, and I’ll come back to more details about what the program looks like.

Richard Cunningham: Yeah, give us some of the breakdown.

Chuck Welden: So basically, if you go back 20 years, I’ve been on about 20 missions trips, 12 countries, multiple times in my whole family or different members of my family. You know, one of those missions trips one day in Honduras of building another school building and, you know, wondering how many mistakes did I make today and what’s going to happen next Monday when we leave? Who’s in to come fix all the mistakes we made. And by the way, the four guys sitting on the hill watching me, I wonder how many of them would be working on this project if I wasn’t here volunteering today. So all of a sudden, Austin Hug here induced me to the concept of job maker versus job taker. So I set on a path, a journey to find out is there a way for me to use my business skills, my legal skills, my financial skills, real estate investment banking, those kind of things in a way to advance the gospel by being a blessing in the country instead of taking jobs or volunteering. By the way, vision trips are great. Volunteering is great. I don’t want anybody misinterpret me how important that is for family and for us as Christians, but in my case, I feel convicted. I need to do something a little bit different. And so we just covered business missions. So we then invest in 40 companies in about five continents, in about 15 countries and largely businesses. We knew nothing about honey bees, cattle, it, bookstores, dairy farms, insurance, whatever it was. And then one day, several of our investors, including Luke’s partner Henry and the McLeland Group and, Tom Phillips, 3 or 4 guys came to me and said, hey, why are you doing this? You’re on these boards of these companies around the world, your gallivanting around, why don’t you do your own real estate business? And by the way, [….] Ramones said, Chuck, I know how to make money. I don’t know how to give money away, but can I make money and be a blessing at the same time? And so I got challenged to see if we could figure out how to take real estate. And figure out a way to have impact investing within the real estate compounds. And so that’s really what the challenge was. So we started the fund raise about $20 million, about five properties. And that’s what we’ve been doing for four years now. It’s still only about 5 or 10% of our total business, but it’s a growing piece of our business. And think about all the different people out there that are actually activating this space in the ecosystem, including sovereigns and FDI, you’re a large part of this. But as a result of that, we’re getting more and more investors asking is, can we have a positive impact instead of a crazy impact?

Luke Roush: Maybe speak a little bit about. So one of the things we’ve talked about, Chuck, is kind of being known for what we’re for rather than what we’re against. And when you talk about resident impact on the folks that you have a chance to minister to maybe talk a little bit about what that looks like, you know, and how you’re for people who live in the apartment complexes that you guys have.

Chuck Welden: Yeah. If you think about it, in multifamily, the average person only knows three people in the whole community. I mean, it’s lonely and Covid only added to this, but it’s already there before Covid. Yeah. How about your own neighborhood? How many people in your own neighborhood do you really know that you’ve had supper with or similar sandwich? It’s just not true the way it was in the 60s and 70s. So what we realized is, if we can bring these 3 to 6 people to come live on the site, not parachute in, they live there. They’re part of the community. They create relationships. They earn their right to be heard because they’re working out at the gym. They offer to babysit for the mother who’s sick. They offer to bring food for the husband who’s out of it doesn’t have a job. We act as a social and service community, and then we do events and parties, and we create a social fabric. And that leads for an opportunity for these folks who agree to give us ten hours a week for the fact that we give them a rental reduction. They volunteer and use those ten hours, and we create a program of activities. They turn in. We’re very big into measuring things Luke. And, you know, KPIs are huge to you and to me. We measure 12 inputs all the way from prayer walks. How quick do they meet the resident when they move in? When do they have their first spiritual conversation? When do people come to events? How many people came to the events? How many events do we hold? We measure 12 to 15 things and we measure three outputs as well. We measure outputs of people returning to returning to faith, those coming to faith, and those attending Bible study or churches. And we trust God for the outputs. And, you know, we think we’re in control of the inputs. We’re really not even in control of the inputs, but we constantly evolve and change our inputs. If we don’t see outputs that match the effort we’re putting in. So it’s all about KPIs for us. We have a business plan and we have a spiritual plan, and they both have to be prioritized for what we’re doing.

Luke Roush: It’s good.

Richard Cunningham: Man I love that. Now you had a line that was you don’t treasure what you don’t measure. And then I believe you guys have hired for a position called a chief spiritual officer. Is that correct?

Chuck Welden: Yes. What do you think? That if you don’t have somebody responsible and that lives it every day, then it won’t get done? As one of the team members said, years ago, the spiritual was number five on my list. I had to set about fixing the roof leaked. We had to get the survey finished. I had to interview a manager, and so was number five. Back in the day was number one, but the next day started back at number five again. Because tyranny of the urgent always allow spiritual and important things or priorities, or spend time your kids or your wife to always be […]. It can be done them all. And these urgent things had to be done today that aren’t always the priority. So we said if we didn’t dedicate somebody, no one would really focus on it. In the end, we hired two guys, both 50% of their time. Calling priority is the chief spiritual architect. He’s designing the system or, designing the training, the recruiting methods, the discipleship modules, the evangelism training everybody. And Randy Wilson is the chief spiritual officer. He’s implementing those things they both can do either job or both are better at their respective jobs.

Richard Cunningham: That’s awesome. Yeah. And and Randy has a line in that video in the conference that I thought was so good where he said, if there is profit and no spiritual impact, we failed. If there is spiritual impact and no profit, we’ve also failed. It is finding kind of the tension and the lever to balance. And so talk about that a little bit as you approach investors. And I love how black and white you got in the video where you said, hey, in a traditional multifamily investment strategy, here’s kind of an expectation around the return profile. If you want to kind of ratchet up the spiritual integration and deploy these people into these communities, here’s where the returns might change and what that looks like. And so talk about that side of things and kind of how you guys have all process through that.

Chuck Welden: Sure.  And of course, anything I say today is subject to the fact that we’re in a transition point right now on returns in almost every industry, particularly real estate, have cap race, interest rates and insurance number. Traditionally, I would have told you that in our value add program, 15 to 18% internal rate return over a 3 to 5 year period, we decide in the fund. First of all, we would go longer. Instead of three five years, we would go 7 to 8 years because our investors wanted us to go deeper with our roots, so that when we leave one day, there’s a chance somebody’s still living there, somebody still living on the property. That still carries on the mission for some time period afterwards. So that’s one thing. Secondly, we sort to charge 200 basis points, which is basically 2% of the equity on an annual basis. So we told everybody your return would be approximately 2% less than what we’d get in a normal deal. So instead of 15 to 18, maybe 13 to 16. Now the numbers are being redefined right now because of there’s nothing trading right now. So we’re just use relative numbers for this conversation. And all these investors said, great, if we can get that return and have this kind of impact. We’ve had about 60 people either come to Christ or recommit their lives, most of them after 10 to 20 years. I mean, they have a church in ten years, maybe 20 years in some cases. So that’s what we did. And, they accepted those returns and we’ve accomplished those returns. So everybody seems to be happy so far.

Luke Roush: You know, here’s the way I kind of think about it, Chuck. And you and I have talked about this extensively before, but I kind of think of this journey that you’re on with the Weldenfield fund. It’s kind of being a first mover risk, right? Like you’re trying some new things. You’re going to make some errors of commission, in terms of what you try from a spiritual integration and both evangelism as well as discipleship perspective. But ultimately, you know, to the point that you were alluding to a moment ago, if you’ve got 5 to 7 years to demonstrate the results of this risk that you’re taking in terms of community member retention, right. The churn that you see or maybe see less of in your communities. I like to think that actually, buyers will appreciate some of the things that stem out of that. You’re not doing it for that reason, except, you know, that output is a byproduct of really caring for and loving people well, where they are. And so, you know, is there any idea that, hey, actually, at the end of the day, maybe the property is worth more than it would be if we hadn’t done this? And so what you give up along the way, you kind of get on the back end again, not the animating reason to do it, but it is kind of it’s interesting, you know, it seems concessionary in the early days and yet maybe not over time. Any thoughts or perspectives here? A few years in.

Chuck Welden: Yes, we have a lot of debates internally and with other investors like you and Tom Lowe particularly the challenge me the most in this area. You know, big picture wise, you know, apartment life, which is somebody we used on over a dozen properties over the years. They’ve done several studies to say it’s actually accretive, that the money you spend actually pays you back like 3 to 4 ratio. We decide just to be conservative in our underwriting. My father is a pretty hard man. And so I’ve been taught to under-promise and overdeliver. And so I really instinctively really in the end, the 2% that we’re spending in, by the way, it’s a maximum of 2%. Sometimes we spend less. And I’ll come back to that. We spend sometimes less than 2%. But I believe that in many cases. It’s costing us nothing because people are staying longer. We’re getting great reviews. We’re having people tell us that they moved in specifically because of friends of theirs that enjoyed that. We’re there are. So do you think you’re happier residents that stay longer? The turnover expense is less. They leave the apartment in better shape when they do leave, and they give you better ratings on their net. That’s really kind of like the perfect thing is, I guess there’s this guy 12 years ago. Let’s talk about being a good neighbor. So maybe it actually works. And so I do believe in the end that we’re not spending that whole 2%, maybe half and maybe none. I don’t know if it really will ever give you your performance. Certainly gives you a better in a Y a better T 90 trailing 90 for, you know, for purposes of selling on the back end. So certainly on the back end you may get a benefit also because you had lower expenses. But as you said, that’s not the reason we’re doing it. But I think at the end this is not costing anybody very much at all.

Luke Roush: That’s good, that’s good. And, you know, I think that there is this, this idea of trying new things. Right? Anytime we invest in an early stage company, they’re taking risk. Right. And there’s inherent risk in the process. But, you know, there’s an opportunity for believers who want to be more impactful in how they shepherd capital to take some of that risk. Right. And as you demonstrated and more people jump in, it’s just like the standard adoption curve. And I think your point about, you know, managing expectations, we always say expectations minus results equal satisfaction. And so the message is, you know, manage expectations. So I think it’s good.

Chuck Welden: But you maybe think it’s only I probably would like to touch on, you know, just like we one day had that aha moment that the […] kids had no shoes. As I was telling you, we invest in all these […] businesses that weren’t doing it with our own 850 employees and our own 20,000 units, we had that aha moment that our kids have no shoes. So I like to point out that we think we have 4 or 5 customers or clients or whatever you want to call it. We drew a, archery bulls out in the bulls, our residents. That’s our most important clientele that we believe we are called to minister to. But the next circle for us is our employees own site. Just because we’re Christian owned doesn’t mean that everybody that works for us is a believer. So we’ve had them also come talk to us about things because of what they saw, how we treat people. The other group is the construction crews are largely Hispanic Latino construction crews, and they come for 30 days to six months and often don’t go home very often. They once a month. So we’re now hiring Spanish speaking pastors to come in on a weekly basis and minister to those gentlemen. Soccer match, or come to the restaurant and have some beers and hang out and eat. So we realize that’s an opportunity we didn’t think about in the first three properties. So look at this example of mistakes we made or being an early adopter. We didn’t have a playbook to go back. But yet we’re realizing that. But the two people that we’re most excited about, maybe that is really interesting looking. Probably the same thing is the operator and the investors. We want all our investors to be so excited about when they get our spiritual report. They say, I can elevate, I can do this at my manufacturing plant, I can do this at my car dealership, I can do this at my bank, because at some point, demonstrating something is better than arguing. I mean, I don’t matter, arguing I love arguing, I’m a lawyer, but I don’t win any people with a lot of arguments. But I do want people to try new ideas when they see it and they experience and they taste it. So we think our investors and and secondly, other operators. We’ve had 15 other operators from around the country come to Birmingham. We did a person with eight of them about a month ago. We have two guys, including Nick Bonner, Luke, who, you know, he’s bringing a guy from California that he thinks he’s got lined up to think through how to do some of this. And they’re coming to Birmingham for two days just for us to invest in, them, we learn from them as well. I don’t I mean, we always learn from everybody comes, but he’s really coming to see what we’ve learned. So operators and investors are two other great people to have an influence on.

Richard Cunningham: Man, that’s good fun to hear about the multiplication. And it’s also gets back to Chuck that laser sharp focus you guys have on the KPIs. And you know, you treasure what you measure to use the word you use and focusing on those engagements. And it’s not just to feel good, hey, let’s write a check to the good guy so that it feels like we’re winning in our investment portfolio. But you’re actually coming back and saying, here’s how we are focusing on gospel progression and gospel impact inside of our community. So that’s deeply inspiring.

Chuck Welden: Enriching. Every company has a certain missional potential. And we think that if you don’t sit down your eyes, look at your balance sheet, your eyes look at your checkbook, your eyes, somebody evaluate your handicap on your game. You’re looking to see how many pounds I lifted this week. What’s my personal best this week? I’m talking to Luke, not me right now, but so everything else we keep score in life. But the one thing we don’t keep score on is this we say God’s and everything we do, we pray before meetings and those are all wonderful things. But for me, those are cop outs. I want to get my hands dirty and figure out every intersection point that exist, and try to capture every intersection point that we financially can capture. So that’s how we look at it.

Richard Cunningham: I love it, it’s motivating. Hey, there’s another thing I want to get into here, Chuck, that you’re also pretty passionate about. And that is this tension of raising rents and affordable housing and just the situation we’re in right now. It just, you know, cost of living in America is just growing, whether it be inflation, interest rates, you name it. But specifically on the rent side of things, how do you guys wade into those waters as a real estate owner and operator?

Chuck Welden: You know, I think the last time I cried was when I watched [….], so I don’t cry. I mean like once every 20 years, but I almost cried. And here’s the story. The first property was under contract. John Ray told me to go look at it in Pensacola. I walked in. There’s older gentleman. He’s paying rent with cash and managing 20,000 units. I knew what that meant is he can’t afford to pay his rent by the 10th. So as he gets checks from Social Security or wherever else, pensions, whatever, he’s getting his money, he’s paying weekly. And I said to myself, this is going to be an unintended consequence because we rehabbed the property and renovate it, raise the rents in order to give your investors the returns that they would like to have. You’re gonna raise rents 100 and $400 per unit per month, and some people will not be able to afford that change. And that was on Saturday. I came back on Monday, our weekly meeting. I said, guys. The homie, today’s about one topic. What are we going to do here? Because this man Joe won’t be there a year from now. And his story got worse. He got dementia, his wife get dementia. And our residents found his sister, who he had talked to in 20 years and moved him to Atlanta, where he finished his days. But I was so humbled by that situation. So we now try to look at the rent row and go talk to people and let them know what’s going up. In some ways, we should do this. We should not want people to leave. We should want everybody to stay as long as possible, and then they just get kicked out when they can’t pay the rent. We said, no, no, we’re going to talk to people and we’re gonna go help them. If they’re lower income, we’re going to help them get on the waiting list at the local housing authority, or we’re going to help identify some of the properties in town. But they’re so full right now and so that did not solve all the problems. So we took some of the money and used a little bit of a benevolence fund to help transition people a little bit. Basically, we took the investors moneys, and that was part of the reason we have that money is to serve our residents. And thirdly, Wilson has let them stay a month or two longer at the lower rent. But I would be lying. If I said we solved all the problems and then we did have people get hurt through this process. But there’s no somebody else gonna buy that property. And we came to the conclusion that we would just do the best we could and try to do more than anybody else would have done. But, Richard, there are consequences. There’s always unintended consequences.

Luke Roush: Have you thought Chuck where you own properties. And it may be just it’s a different market segment and it’s not what you guys do, but have you thought about going down market in a similar zip code so that you’ve got a place to transition people into? Or is that just kind of out of scope for what you told your investors you do with the fund?

Chuck Welden: Yeah. We purposely designed this first fund to be a medium fastball down the middle of the strike zone, where we knew that we had a chance to hit a double or triple and not strike out, because we know that if we fail, we don’t know anyone out there. There’s other people doing great stuff. Launch. Careful. There’s there’s 3 or 4 of the great funds out there. Sovereign’s has its own real estate foundation. Great guys out there, but largely is. We’ve met with everybody that we can find. We haven’t found many people doing very much like what we’re doing or like Launch or Sovereigns is doing. So we purposely decided to not take hardly any risks. Looked like that. But you have to hear the roots of it. Weldenfield is for the first 15 years was affordable housing. Section eight tax credits 202 for former home. So we have a heart for that. And our team has a heart for that. And so that is something we hope. But here’s what happens. Every time somebody brings us up to me I’ll say, okay, let’s talk about let me tell you what your returns are going to be. And they say, well, that’s not really the return I want. I wanted X. And I said, well, then you don’t want to do affordable because affordable does not make as much money. It’s a tougher market. You’re not going to make as much. But we’re still praying and hoping that some investors migrate into the affordable world so that we can do some things like that Luke. But these funds are just, you know, you see us being a mass properties. Really.

Richard Cunningham: Chuck, you said a line earlier that when you guys leave, you know what happened. There’s another tension to manage there in terms of Weldenfield comes in, buys the property, holds five, seven, ten years, whatever it might be. Cash flows in the interim and then ultimately sells to the next owner. What does that look like? Talk to us about the kind of the tension to manage as you leave a property.

Chuck Welden: Great question. And you’ve really hit on the two biggest tensions that we’ve discovered so far. I mean, there’s other business challenges, but those are two structural tensions in our mind as far as leaving. We know we’re leaving. Even Nasser, who built that big statue, it fell down eventually. Nothing lasts forever. And so what we’ve done is we’ve tried to bring in local churches and local ministries where we can. I mean, use example Bellevue Baptist have of Memphis, Tennessee is right down the street from one of our properties, and they never have 2 or 3 people from the church living on the property. And we’re encouraging that. We’re thinking that we have local in Huntsville. We had a guy that came up to us when he saw his prayer walking or saw Randy prayer walk and said, who are you? Why are you here? Explain what we’re doing. This guy goes out of the neighborhood and I walk my neighborhood in this apartment community, I think every week for like 15 years, hoping something would change, hoping that. And so we’re trying to find those persons of peace, those people who care about their neighborhood, churches that care about their neighborhood ministries, like No Place Left or the big life that care about their neighborhoods and their towns and get them to move in. With the idea that even when we leave, maybe they’ll stay 2 or 3 years and Weldenfield even talked about and like, we have a property we may be selling right now, and we’re talking about taking some of our part of the profits and trying to seed the property for another year or two. Because once somebody moves in there, they can keep doing all the activities. It’s not like the new company is going to kick them out. Now, they may not be as cooperative, and they may not let them hang the sand inside the elevator and people, things like that. But overall, once you’re a resident, you know people, you still get a chance to talk to them.

Luke Roush: So this whole idea of community, I think is really, really interesting, Chuck, because one of the things that I’ve never appreciated before, getting to know you and understanding the work that you do and others do is, you know, Class-A apartments. There is no community. People want to be able to go home, retreat into their apartment, and they’re kind of not looking to know anybody on the hall or anybody down the way. You know, class B, class C apartments are very different. A lot of folks that are hanging out and spending time in community with others, and they really are hungry for friendship. And so I think that’s something that you guys have really cute in on that, I think, is it’s indicative of a broader need that our society has to know and be known. And I love what you guys are doing there.

Chuck Welden: Yeah, I think you’re right. And I mean, there’s another verse on that one as well. harder for rich man to go through that eye of a needle than a camel. So the whole idea is that if you’re wealthy you don’t think you need anything. So we our residents have real problems. They have depression, they have drugs, they have broken marriages. And these are all opportunities for us. We had a lady whose husband was so mad at her. He wouldn’t go to her birth of a second child. He didn’t show up to the birth of his second child. So two of our team members, two girls from our team, went and stayed with her for 48 hours for a C-section delivery. She becomes a Christian. Her 12 year old becomes a Christian. I don’t know how I, you know, if I care about the guy, I don’t know where he is, but, I mean, these broken relationships. These are opportunities. And there’s same things exist in the eight properties. But we had it so much better. We can had things so much better.

Luke Roush: You talked about it, man. Being a good neighbor. Some guy 2000 years ago to use your line talked about that. Hey, Chuck, this is not a marks in the markets episode. Will be really brief here, but would be remiss while we have you and your just deep tenure in the real estate investing field not to get such some quick comments on. State of real estate market. I know we’re talking multifamily primarily today, but and I saw something in the news about a Fort Worth office building that sold for a 140,000,000 3 years ago, sold in an auction the other day just for 12 million, and say that it feels like there’s a little bit of doom and gloom, whether it be this interest rate environment, you name it. But any comments from you on kind of just the state of real estate investing and where things are?

Luke Roush: I’m not a math major, Richard, but that property in Fort Worth carry the one. Okay. Yeah. That’s a bad investment.

Richard Cunningham: That’s that’s not going to feed the kids.

Chuck Welden: When you take zeros off, it’s bad. We put zeros on. Yeah. Office has got a very tough road. I mean, office isn’t going away, but it’s going to totally be be a new bottom for it. We don’t know where that bottom is right now. Retail has come back a little bit. But the neighborhood, you know, not the big box but the neighborhood where you can eat and get services that’s becoming stabilized and actually growing right now, a little bit industrial, has been the darling along with multifamily for the last ten years. Industrial starting to slow down just a little bit. I was with some industrial guys all last two weeks and they talked about how things are slowing down the pre leasing. It’s really slow right now in particularly in even Dallas and Austin in Houston, multifamily reason we like multifamily is that people have to live somewhere. I mean, all these other things you still do in your house, are you at your house right now when we do this? Richard, are you at your house?

Richard Cunningham: I sure am.

Chuck Welden: Okay, so two out of three of us are at our houses, not me. So multifamily is here to stay? There’s a shortage of housing. 3 to 5 million. There’s a projected 45 million people living in apartments. That’s the size of Canada. So that’s not going to change anytime soon. I think there’s record delivery coming on, and 24 in the first half of 25. We’re looking at some new development opportunities, trying to deliver them in 2026 because that’s when there’ll be no deliveries coming right now. So multifamily is, I think it’s a good place to be right now. There is a correction being made. Properties are probably go down 10 to 30% of what they were worth at the peak. And some of those recover that very quickly over the next 2 or 3 years. Some won’t I would just say that whoever talks to you may find somebody that has some scars, make sure they have some scars, because so many of the guys who are going broke right now. I mean since 08. And they’ve never had a bad day in their life. They’ve never seen a day in which they didn’t make money and things went up in value. Yeah. That’s, that’s that’s is somebody who’s been around a while and have good track records. But I think multifamily will settle back in and probably be in the 13 to 17% returns over the short time period. Which is, you know, compared to 15 to 18 traditionally. There was a few years where was in the 30s, but that was just a that was a freak accident where everything happened just right. That was never sustainable. So that’s my projection of multifamily right now.

Luke Roush: That’s good, that’s good. And it’s relevant. And I think a lot of people are trying to figure out what to believe, both in terms of the underlying asset class itself and then also in terms of the rate environment, which is. Yeah. Any thoughts on that?

Chuck Welden: Yeah, interest rates are very tough and cab rates course are directly related to that. Ten year Treasury and B bonds really drive up cap rates because that’s kind of the alternatives. If you wanna look at a risk adjusted valuation that’s kind of how people compare. You know the ten year get down to 380 jump back to before 50 maybe. I think it’s in the four 40s. Now, the question is what would be long term? I think it would be in the 350 to 400. I don’t think it’ll stay above 400 forever, but I don’t see it going below 350 anytime soon. I mean, is I think that, and the idea of inflation, trying to get that down to 2%, I think is impossible. They should just say 3% or 4% and just go with it. There’s too much consequences to what they’re doing right now. You know that thinks cap rates. I think it’s a good time to be buying because I do think there’s a possibly some rate cap reduction. I think there’s a possibly some interest rate reduction. And insurance has already dropped $5, went from 800 dollars to 2000 is probably back down to 16 1700 now. Probably will continue to come down. And it’s just a great fear pendulum. All these guys left because they get burned. And then people made so much money that the guys who lost money were coming back because they realized, oh, these other guys are making the money that they lost. And so we call the greed fear pendulum. You can’t ever stay on one side, the other. You always run back and forth.

Luke Roush: Yeah, maybe just wrap us up, Chuck. We always like to finish with one question, which is, what is God been teaching you in and through his word? Recently. So, over to you on that.

Chuck Welden: Well, I’m in the Psalms right now, and I guess maybe the theme I see over and over again is faithfulness and obedience. There’s so many songs by David and the other writers that talk about somebody attacking them, or somebody persecuting them, or sickness or whatever these things are that they’re experiencing. But it seems like those who are obedient and faithful. As they said, I think it’s Psalm 73. And then I walked into the temple and it changed everything. I mean, walking to the temple and seeing God’s goodness and grace reminded them that they could be obedient despite the situation. And so it’s so hard sometimes to even I mean, our business is tough right now. It’s been tough for a year and a half to two years. But, I think every time we’ve had a downturn in the economy, I’ve been through four of them. The only thing that made me feel comfortable was just being obedient and faithful and treating the investors money, just like you would treat yours doesn’t mean you always win. You’re still gonna lose. But that’s how we sleep at night.

Richard Cunningham: Amen. Well, Chuck Weldon, just from the bottom of our hearts. Man, thank you so much. What a joy to have your tenure and your expertise involved in the faith driven investor ecosystem to have you today, specifically on the podcast. And so, friends, this has been the Faith Driven Investor podcast episode with Chuck Welden of Welden Field at a Birmingham, Alabama, key leader in the Birmingham Lion’s Den movement and just a longtime friend of the ecosystem. And so thank you all so much for listening. We will catch you next time.