Richard Cunningham [00:00:00] You’re listening to Faith 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.

Intro [00:00:17] 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 [00:00:44] Friends, welcome back to another episode of the Faith Driven Investor Podcast. Great to have you with us for episode 198. John Coleman, we are creeping up on 200, which is really exciting. It’s Marks on the Markets. It is technically the month of June. I will admit it is May 20th and we are recording this episode a little further in advance than we like to record our Marks on the Market episode. But that just means life is full and there’s a lot of good things going on, gentlemen. And the nice thing is we’ve got a couple of juggernauts here to talk markets. And so these insights will still be relevant, regardless of us being seven business days away from this podcast releasing.

John Coleman [00:01:19] Well, fortunately, we live in a really slow news cycle.

Richard Cunningham [00:01:23] Absolutely.

John Coleman [00:01:23] So what could happen over the next 10 days that would make our comments outdated?

Richard Cunningham [00:01:28] Literally nothing, absolutely nothing. So there’s the voice of John Coleman. John, we’re joined today by our great friend Matt Monson out of Denver, Colorado. Matt, I pray the weather is better where you are than where I am in Austin, Texas. We’re feeling summer.

Matt Monson [00:01:40] Richard, it is always beautiful. Thanks for having me.

Richard Cunningham [00:01:42] We’re pumped to have you, man. Guys, let’s start with this. A couple days ago, the US credit worthiness was downgraded. Did you guys see this? So we went from AAA down to AA1 from Moody’s, and this now joins S&P and Fitch, where they have long had the US rated back, that’s back to 2023 and 2011. Markets haven’t really kind of responded in some like big downward way. What do you make of all the spent, Monson.

Matt Monson [00:02:09] You know, I think there’s room for someone who’s wittier than I to come up with a new phrase other than the risk free rate because it seems like there’s a little bit of risk now in U.S. Treasuries. It’s the slightly risky right now. That’s right. I mean, you know, big surprise, right? If we spend more and keep racking up the debt like sooner or later, we’re going to end up with a whole lot more debt than we can support. So I don’t think anyone should be surprised by it. And that’s probably why the markets didn’t react is a lot of folks in fixed income space saw this one coming. Yeah. I mean, this.

John Coleman [00:02:42] This has been on the horizon for a long time. I think probably the US rating was slower to drop because the US dollar is the world reserve currency, and it was the most stable of the currencies. And what’s interesting about all of these, right, is the US is definitively in an unsustainable fiscal condition. I think the debt is at something like $36 trillion. We’re not having to refinance it at higher interest rates. The new budget, which I know we’ll talk about, leads us to something like an eight or nine percent deficit. So not government spending, an eight to nine percent annual deficit adding to that debt. There’s just no way that makes sense. I think one of the reasons markets have kind of priced that in and one of reasons the dollar has remained somewhat strong is because when you look around the world, this is a problem almost everywhere, right? Almost everywhere in the developed world. Has an unsustainable fiscal condition right now. I think the Japanese prime minister recently went public and said that he thought their fiscal condition was less sustainable than Greece’s, particularly because of their decline in population. Germany is the only place in the EU right now that seems to have a somewhat sustainable fiscal situation. China doesn’t report real numbers, but everything that we hear coming out of China is that their economy has slowed, that they’ve got. Internal debt as well as their national debt. So internal debt, meaning different provinces, the different state controlled companies, etc. And here in the US, we got the same thing. The states are typically very indebted, many of them unsustainably. So our entitlement programs can’t be paid for even under the current deficit spending that we have. And it’s got to be a wake up call for national governments because this is unsustainable. And one of my hopes is that Moody’s taking action and downgrading. The U.S. Credit rating is a wake-up call for the people of the United States who will always have to lead their elected representatives who have really very little incentive to reduce spending, given that spending produces votes. And I think, you know, hopefully this is a time for us to take it seriously because markets have not reacted, but over time, the markets are going to have to react more dramatically to this if we can’t solve the unsustainable government fiscal situation that we’ve gotten ourselves into. That’s my position at least.

Matt Monson [00:04:58] Yeah, that’s right, John, no one would run their personal lives like this. So why should we run the country like this? That’s well said.

Richard Cunningham [00:05:04] It’s a moody-sided U.S. Government’s failure to implement measures to reverse the trend of large annual fiscal deficits and with growing interest costs because as the debt racks up higher and those interest payments come due, then they just start to kind of snowball on yourself. And without adjustments to taxation and government spending, the federal budget flexibility is just getting too tight. It’s too limited. And so that brings into the question this big, beautiful bill. John, I know you’ve spent a lot of time recently talking and helping the listener get into kind of the Trump kind of administration’s head on how they’re thinking about tariffs. This bill doesn’t necessarily show a kind of return to pre-COVID levels or let’s stabilize spending if anything, the deficit would grow. You know, you hear both sides, there’s proponents of it. There’s defenders of it, there are people who are up in flames about just more and more spending kind of on a congressional front. Matt, what do you make of all of this and kind of where do things go from here, kind of siding some of the budget deficits we’ve already talked about?

Matt Monson [00:06:01] Yeah, I think it’s hard to say that you want to reduce a budget deficit at the same time as what we’re talking about with the big, beautiful bill. I’m just not sure that we’re going to accomplish what Trump has set out to accomplish over the longterm. So I’m as excited and as interested as you are to have a front row seat and watching this unfold.

John Coleman [00:06:20] Honestly, I’m not an expert on what’s in there. It is a big bill. The early signs are that it doesn’t dramatically enough take steps towards reducing the deficits that we’re talking about, particularly with us having to reset many of our interest payments at higher rates, which is hundreds of millions of dollars that will go out the door for no additional programs. Congress has had a very difficult time even getting to slow down in some of the spending in some of these areas. Even moderate reductions. I think there was great hope that with the DOGE initiatives. And with more restraint that we could reduce spending enough to really start to get to, I think, what people have rallied around as a potential stable long-term situation, which I might disagree with on the margins, is a 3% deficit. So people say they want to get to 3% inflation, 3% economic growth. At least that’s what Scott Besson has talked about. Ray Dalio has rallied about the 3-3-3 plan, which would be those three numbers. And this bill obviously, from what we’ve seen so far, does not seem to get us there. And what’s surprising to me is, you know, if we were to just cut spending to pre-COVID levels, we would actually be in a much better fiscal situation. I think people don’t understand how dramatically the fiscal deficits have expanded because initially the COVID situation, which maybe was explainable, but where many of those things persisted after COVID. And the number of these benefit programs that have expanded in an unsustainable way and aren’t being addressed right now from what I can see in the midst of also trying to cut taxes and things like that. We’ll have to see what the final bill says, but if the early indications are correct and it really keeps our deficits in the seven to 9% range. I think we’ve got a long year ahead of us to try and get something more accomplished over the course of the next year because it obviously doesn’t do anything to slow the deteriorating fiscal situation that we’re in right now.

Richard Cunningham [00:08:20] So Matt, you’re a markets guy, public equities manager. You’re perceiving all of this as you make kind of buy sell decisions inside a portfolio. So let’s kind of shift over there as we’ve now kind of laid the land of the economic landscape and maybe just go back to start at 25 for us because there has been a lot of action that has taken place. You think of early April liberation day, S&P 500 reaching an all time peak in February, but then just, you know, a 20 plus percent kind of crash after liberation day. And now we’re back to. Pre-liberation day levels, if you will. Some markets have rallied. What has been kind of your annual take thus far on where things have started, where they’ve come? Where does the market sit today? Kind of some of your outlook that you guys have.

Matt Monson [00:09:00] Yeah, for sure. So I’m actually surprised the market recovered as fast as it did and as much as it did. And part of it’s because when tariffs get announced at 145% on Chinese goods, it’s a huge number. So, I recognize why markets sold off as fast and as hard as they did. But now that we’ve settled at 30%, at least for the next 90 days, I don’t think people are really internalizing how big 30% is on Chinese goods coming into the United States. And consumers haven’t seen it yet on the shelves. And so I think as those moments start happening where item A coming off the shelf might be up to 30% more expensive than item B, I think you’re gonna start to see it in markets again. And so that’s one thing I’ve been thinking about in terms of how markets have recovered and just valuation multiples. You know, I hear it every day that folks will say, gosh, large caps seem expensive. Well, if you back out seven companies and you- pretty sure you can guess which seven from the large cap index. The large cap the index doesn’t look expensive. It actually looks like it’s trading right on top of its historical trading multiple. And same with mid and small caps. They typically traded a premium to large caps, but are right now trading at a significant discount to large gaps. So just to put some numbers to that, and then I’ll hand it back over to you Richard. When you look at the median forward PE of the Magnificent Seven, I ran this this morning, it’s 31 times. The S&P 500 is 23 times. And to give you something to compare against when you’re an active manager who’s going out and picking companies with the same expected earnings growth as the Magnificent 7, you can pick them at 16 times. And so it just gives you a sense for how much price-to-earnings premium there is on those seven companies and how much that drags the entire index up. Hey, Matt, a couple.

John Coleman [00:10:50] Of follow ups on that. I’d love to get your perspective. One is we’ve been in this growth cycle for a period of time. We go through these different cycles of value and growth. I know you put out research how up into the great financial crisis, effectively, we lived through a period where small and mid outperformed the large cap and outperform some of the growth stocks. We’ve been at a very long cycle now where the largest stocks have perform small and mid. First question is just kind of are we seeing any reversion to the mean there? Are we seeing a potential turn in the cycle? I know people have talked about that for a long time, but the timing has been difficult to pinpoint if we are gonna see a reversion in that cycle. Have you seen any early indications of that, or is it still a continuation of the cycle we’ve been in?

Matt Monson [00:11:36] Yeah, I haven’t seen a turn. I mean, you’ve seen a little bit more sell off in the mag seven this year than in some of the other names in the market. And I think it’s just because they had a whole lot more PE multiple that could come out and that, you know, they had further to fall. You know, using what you just mentioned over the last decade, large caps were absolutely the winner. But what people don’t think about is that the decade before large caps significantly underperformed, not just small and mid cap equities, but they underperform US treasuries. And when you add the two periods together and you look at the last 25 years, large caps have still underperformed mid and small caps. And so I think there’s just so much recency bias to the performance of the S&P 500 that people are hung up on that index. I mean, likewise, you’re seeing that across, you know, different data points as well. You know, people wanna see rates go back to zero. Well, people don’t remember that even though Fed funds spent more time at zero over the last decade, the 20 years before that from 1990 through the end of 2009, the average was a little over 4%, which is where we’re at now. And so I think that, you know, people just get hung up oftentimes on looking at what the last decades has brought and not remembering the 20 and 30 and 50 years before then. Well, I’m looking at the-

John Coleman [00:12:52] seven Matt, one of the things that keeps going through my head is there could be various reasons the mag seven are valued at a premium over the others. Right. And I’ll offer a couple that you reflect. I mean, you’re in markets every day. One is just a flight to quality. They’re big, successful companies. This is not the dot-com bust in the early 2000s where it was kind of vaporware. These are big cash-flowing successful companies and just like people flee to U.S. Treasuries in times of crisis because of their safety, that could be one reason. The second could just be this increasing holdings in ETFs and passive holdings, all of which seem to have exposure disproportionately to the MAG-7. So I think it’s something like 30% plus of the S&P 500 asset weight right now is in those seven stocks. They’re also in growth-oriented passive holdlings, et cetera. And so there’s this self-fulfilling cycle where these passive holdnings, which have grown up so much over the last 15 years will reinforce the valuation of those. And then the third, which I haven’t totally discounted, is that those seven stocks actually are positioned, or at least some of them are positioned to take advantage of what I think is the biggest technological revolution of our lives, which is artificial intelligence. You know, if you look at some of the big names and we’re not making specific securities recommendations here, I’m just mentioning companies, but if you look at Google, if he look at Tesla, for example, which has a lot of AI embedded within its hardware for driving, for robotics, et cetera. If you look it Apple, if look at Microsoft, certainly. All of these seem poised to use their cash to seize on this growth in artificial intelligence. And so it could be that their near-term earnings don’t reflect that, but people are betting that these biggest companies are best positioned to take advantage of this technological revolution. Maybe there are other factors. I mean, why do you think there’s so much of a premium on, we’ll call it these seven stocks, but these seven, eight, nine stocks right now, which are all clustered around those technological advancements that we’ve been seeing.

Matt Monson [00:14:53] Now, going back to something you mentioned a minute ago, every dollar that flows out of active management and into passive, I think, in general, benefits the magnificent seven. And it’s because I don’t know that many active managers that put 30% of their money to work in seven names. And so if a dollar comes out of Active and it goes into passive and that means 30% goes into seven names, you’re right, you’re gonna incrementally buy the names that are already really big. And there’s good reasons to own them too. Like you said, if AI ends up being an arms race, and if you have to spend a hundred billion on hardware in order to get an edge, I think that there’s something there. Now, if DeepSeq can be replicated across a whole bunch of small kind of tier one players that can spend a smaller amount of money to build an incredible large language model that can outmode some of the other bigger, more established, let’s call it $100 billion large language models. Then I think it starts to break down that thesis. I wish I was an expert in whether or not that was true. I don’t think anyone knows. I think we’re gonna see as folks continue to spend and we figure out whether or not you can be small and win in AI. One more thing just to reflect on is that the Magnificent 7 do all have one key thing in common. And it’s that many of them have technology monopolies or in some cases duopolies. And When you’re looking at Google and the talk around whether or not pieces of their ecosystem need to be broken up or pieces of meta need to be broken or Apple is too fiercely guarding their ecosystem. I mean, the EU doesn’t have any of these companies headquartered there. They don’t seem to like any of them. And so I think that folks are taking risk in a sense that they’ve got 30% of their cash or invested capital in the stock market in these seven names. And yet these seven names actually share risk factors in common, and so it’s just something important to draw to listeners’ attention if they haven’t thought through it before.

John Coleman [00:16:52] Yeah, and that’s one thing I’ve talked a lot about with people, and Richard, you can direct us where you want to go, is if you just think about your risk budget, I think intuitively a lot of day-to-day investors think of the S&P 500 or similar indexes as a low risk way to get into the markets. They think this is broad coverage of the markets, I’m in the index, quote unquote, I’m investing what others are investing in this is like a safe bet I mean, it’s performed extraordinarily well over the last five years, right? So I’m not saying there’s not some validity to the performance of that index, but from a risk budget point of view, it’s worth people knowing you’ve got 30 or 40 percent of your exposure in these seven names, and because the risk factors are correlated, even more of your risk is in those names, right. And so you may think of it as a lower risk bet, and it’s certainly returned really well over five years. But that level of concentration with aligned risk factors. It creates more risk than a more diversified pool of holdings would be, whether that’s in private markets or commodities or a broader array of public securities. I think the average investor probably underestimates the risk that they’re taking by going into just the big passive indexes like the RUSP 3000 or the S&P 500 and the concentration in those asset-weighted indexes. In those in a few number of small names with correlated risk factors what that introduces to their portfolio and so that is something I think that investors need to grapple with with their advisors is you know this seems like the safe bet but actually do I need to diversify my holdings in some way so that I’m not entirely risk-adjusted to these largest names.

Matt Monson [00:18:35] Absolutely. And my favorite is when someone says, Well, I own five different ETFs. Well, within each of the five, you might still have 30% of your exposure in each of the five in the same seven stock.

Richard Cunningham [00:18:45] And just to tie a bow on kind of the Mag-7 conversation, looking at those seven specific names, you’ve got your positive performers on the year, Microsoft, NVIDIA, Meta. That intuitively makes sense. Microsoft has had strong earnings growth. NVIDia continues to kind of ride the AI demand and just the demand for their products. And then your negative performers, Apple, Amazon, absolutely tariff-related, Alphabet, you know, which is Google, a lot of talk about Search and OpenAI and ChatGBT possibly replacing. What is the Google ad revenue that is traditional search and then Tesla and just all the volatility they’ve experienced with Elon kind of floating between different positions. And so there’s your kind of three positive performers, four negative performers. And then overall, when you look at the indices that we’re talking about here, NASDAQ, S&P 500 that are heavily concentrated, Mag-7, both are about flat year to date. We’ve talked about the increase, the sharp decline, and then kind of back to pre-liberation day levels. Speaking of AI arms race, gentlemen, Once again, we’re recording on May 20th. How about Trump’s kind of tour of the Middle East and the big conversations with the kingdom of Saudi Arabia. One of the things he promised was foreign direct investment to the U.S. Just massive announcements around AI investment from UAE, KSA into the U S and the reciprocity there. And just kind of some of the forward momentum as we look at what was traditionally very tough and kind of hesitant relationships and now becoming kind of big time. Commerce, pro-commerce relationships between the US and these Middle East partners.

Matt Monson [00:20:17] Yeah, we’re thrilled to see this taking place because if the U.S. Wasn’t there striking those deals, someone else would be there striking those deals six months after. And so I’m thrilled to be as a member of the United States to be partnering with those countries around the future of their investments in AI hardware and software.

John Coleman [00:20:34] Yeah, I think if you go back far enough in history, Richard, some of those partnerships, and they’re not alliances because we’re not formal allies with those countries in the technical sense of the term, but we had been deeply partnered with countries like Saudi Arabia and the Emirates on multiple fronts, particularly through the Clinton and Bush administration, which was an extension of some of the prior policies before that. I think those relationships. Got a lot shakier during the Obama administration and subsequently, again, during the Biden administration. Two thoughts here. One is I do think constructive engagement with those countries, which actually have been liberalizing quite a lot. If you look at what’s happening in Saudi Arabia, I lived in Saudi Arabia for a few months, once early in my career. And if you look the country today versus when I lived there almost 20 years ago, it’s a dramatically different place. So it is good, I think, to build our partnerships abroad with economic ties, and especially to diversify those economic ties so that we have a broad base of countries where we’re getting that foreign direct investment. I think our economic relationships have become a bit too concentrated in places like China, which are now adversaries, at least on some fronts rather than partners. And then like Matt. I think this idea of getting quote-unquote friendly countries or countries with which we have broad-based economic partnerships, investing in U.S. Infrastructure, building those economic ties is something that we should seek. I think that will help to power U. S. Companies which are using that infrastructure to develop things that we can sell abroad. And I think those economic partnerships at least traditionally have mitigated the possibility of conflict. They’ve mitigated the possibility that things. Escalate in a military way or in a foreign policy way, and economic ties have tended to dampen escalation of various other types of conflict, which are obviously worse, even than economic conflicts. And so I think it’s good news, particularly as we need to, Matt mentioned it earlier. We’re gonna have to pour hundreds of billions of dollars into energy infrastructure in order to power all of these AI capabilities into semiconductor plants, into related technologies in order fuel this technological revolution. And I think seeking that investment abroad is actually a pretty smart way to seek it if we do that on terms which are friendly to the US government. I say we speaking as an American. I also think it’s pretty good for the world if we can get a handle on some of these technologies which could potentially make life better, potentially make it worse, but the technological revolution is coming and the question is whether we can keep pace with other countries with which we might have less trust like China in the development of energy and artificial intelligence or whether we fall behind like Europe has. And I think it’s good for America to keep pace, especially with some of the Asian economies like China. Where we are in an arms race right now on both energy and artificial intelligence in the broader technology ecosystem.

Richard Cunningham [00:23:29] And so as we talk in international relations, let’s go over to the tariff conversation. I know we’ve hit this the last couple of Mark’s episodes as it’s been an enormous headline over the past few months. Matt, where do you kind of stand? What have you seen in your portfolio, the companies that you’re monitoring? Mark, it’s hate uncertainty. And I know this conversation has bred a lot of uncertainty. We’re starting to see kind of some light at the end of the tunnel, if you will. There was a China deal kind of announced or at least the next 90 days. We saw a UK trade agreement come to fruition. Pretty friendly, favorable terms to the U.S., if you will. How are U. S. Companies responding to all of the uncertainty? What are you seeing within your portfolio? What’s kind of your general take and outlook with the tariff kind of broader conversation?

Matt Monson [00:24:10] Yeah, we had to build a whole framework based on analyzing the risk from tariffs, both on revenue and cogs. So I’ll just break down how we thought about it from a public equity’s perspective and how we analyzed all of our holdings for this type of risk. So first, figuring out how much of each of your companies that you own, how much they sell into China specifically, is the easiest part of the equation. Because thinking back only a few weeks ago, if there’s 125% tariff on a company sales going into China. That’s going to make that good less attractive than a substitute good, if there is a substitute. So what we did was we quickly figured out which companies were selling a material amount of their revenues into China. And in some cases, we reduced or we sold out of those positions. But we didn’t have a lot of those. The other side of the tariffs equation that is more common that people have been talking about a lot over the last few weeks is… So many of our companies in the United States get their inputs from or their cogs or cost of goods sold from China. Now, companies don’t break those out as cleanly in their disclosures as they do their revenues. So it’s actually been a really big research undertaking for us to try to identify which companies we have that source a material amount of their inputs from China, and now once you identify which ones do that, now the next question. Is where are the company’s sales, the U.S. Company sales? So I’ll give you an example. One company I was on the phone with said, well, we manufacture about a third of our goods in China, but half of our sales are outside the United States. So we’re never going to bring those goods manufactured in China into the United states. We’re going to sell those to our customers in Germany and in the UK. And so it’s actually a very complex spiderweb of. Components to be able to figure out how much gets manufactured abroad and whether or not that needs to come through the United States. And so that’s been a really interesting undertaking for us over the last few weeks. But going back to something I said earlier, even at a 30% tariff rate for goods coming in from China, I think that number’s a lot bigger. We started with something that was even larger, 145%. So now 30% looks relatively small. But if we would have started from nothing and gone to 30% It’s actually a much bigger number than what I think folks can appreciate.

John Coleman [00:26:26] That’s one of the things that is making the Fed’s job hard right now because the tariffs kind of by definition, if not absorbed by suppliers, which I don’t think they can be fully absorbed even at the 10% level, will be inflationary. Now, it’s a one-time step up in inflation, assuming those rates stay stable. Not everything is subject to a tariff including input costs because we don’t get everything abroad but we do get a lot abroad so it’s only a portion of the input costs that we’re talking about but even at a 10 percent level you’re talking about an inflationary impact and certainly at a 30 percent level with China you are talking about inflationary impacts. A lot will depend on where these bilateral negotiations go. We’ve got this 90-day pause, which I believe might be extended beyond 90 days from when they announced the 90- day pause, depending on how those negotiations are going. But if the conclusion of the UK negotiations are any indication, the Trump administration likely will stick to wanting to have an across-the-board tariff with almost every country at or around the 10% level. And I think if you’re the fed… You’ve got a very difficult problem right now because the U.S. Economy, at least the latest I’ve seen Matt, doesn’t seem to have slowed dramatically. The equity markets have recovered. Employment is still very high for those participating. Labor force participation is low, which we could talk about, but employment numbers are still relatively high. And we’re looking at the likelihood of inflation somewhere between two. And 5%, 6%, 7%, at least in a one-time step up because of tariffs, depending on how you calculate all the input costs. And so if your Fed mandate is full employment and low inflation, it’s really hard for you to drop interest rates right now. And I think we’ve seen a lot of the rates rise over the last few days. We saw mortgage rates top 7% again. And so I think, we’re in a sticky situation right now for the Federal Reserve where we can’t inject a lot monetary easing at the moment or drop rates. Because all of these other factors are making it difficult for the Fed to achieve its objectives given the broader policy framework. And so we are in a precarious economic position right now as we try and figure out what’s going to happen in these bilateral negotiations from a macro perspective. And then at the company level, you’re even more confused right now. You’re slowing investment. You’re trying to stockpile cash to figure out how you’re going to navigate the tariffs. Think about, I talked to a company the other day, a smaller company that sources 100% of its goods from China. 100% percent of its goods just went, a fairly large company went up 30% in price. They are struggling to figure whether they can pass that to consumers. That would be quite hard to pass to consumers, so they are in a very precarious cash position right now to see if they can survive the year. And that single example is happening in tens of thousands of small and large companies all over America, all over the world right now. And so I think the chances of a general economic slowdown have increased dramatically. The cause of all the uncertainty and the conservatism that that’s inspiring in companies, apart from the unfavorable rate environment, which makes borrowing more difficult, et cetera. So we are in this kind of difficult economic situation right now, where there’s not an easy way to relieve some of the economic pain that these companies are feeling.

Matt Monson [00:29:51] Yeah, and I’ll just say too, it’s self-reinforcing. When one company wants to pull back a little bit and reduce investment because they’re not sure what the future looks like, well, that reduction of investment is a reduction in revenue somewhere else, which means that they’re now forced to reduce their own investment. And so it’s a dangerous circle once it starts.

Richard Cunningham [00:30:11] That’s what we got into on our last Mark’s episode. If you hadn’t checked that out was Deirdre Gibson got into kind of the behavioral finance side of all this too. It’s just a human component that comes into the large macro response. Yeah, originally, it looked like a lot of the tariff impact was just going to kind of come in margin compression. And it was this, hey, how long can we hold without having to pass along significant price increases? And John, to your point, it’s eventually going to come and hopefully doesn’t come in one massive wave. Maybe that takes to my next question, both of you guys. Is Trump seeking an off ramp in these kind of new negotiations, these 90 day pauses, is he accomplishing what he set out to accomplish? Like I look at the efforts of Doge, I think we all can intuitively see the intention of the tariff revenue, which will enable kind of certain, you know, tax breaks to go in place that is helpful for the flourishing of the American people. But then you look at things like the big beautiful bill, which is possibly more spending. Where are you guys at right now as you kind of look at the overall approach in game plan? Are you still buying stock in the long term kind of philosophy or are you having kind of some questions about reconciling some of the decisions that have been made?

Matt Monson [00:31:18] So John, I’d love to hear your view on, you know, just the reworking of the tax base, you know, similar to what we saw historically.

John Coleman [00:31:27] Look, I’ll be honest, Richard. I would be pretending if I knew where all this was going to land. I don’t know that the administration knows exactly where it’s going to land right now, right? I’m not in those rooms at the moment. I don t know where it s going to land. I do think they are aware of the distress that these tariffs, especially at higher rates, were likely to cause, particularly in the small business community. And I would not be surprised if we see a series of measures to ease the pain, particularly on small businesses, maybe businesses broadly, but small businesses. Secretary Besant has hinted at things like accelerated depreciation schedules, maybe even rebates on some of the tariffs. I don’t think Secretary Besent has said that, but I’ve heard for small businesses there might even be limited rebates of some of tariff increase in price. There might be some measures to ease. The oncoming set of tariffs that are coming, I do think they understand that if we don’t reach the right bilateral negotiations in these trade agreements and get to a more predictable place, that we risk economic jeopardy in the economy. And so I do think they’re trying to work expeditiously to get those deals done. And I do think foreign countries are quite engaged right now. The US is still the world’s largest consumer. This has really upended the global trade ecosystem in substantial ways. I think this is priority 1A for many countries right now. But we don’t know where it’s going to land over the next three, six, 12 months. And I think the outcomes of that will matter a lot. Look, if we settle on lower trade barriers for American producers abroad because of the reciprocal nature of some of these tariffs and if we settled on something like a 10 percent tariff and it’s predictable and it stable and people can plan three, four or five years out. That the pain could be limited to businesses. If the uncertainty persists for a long period of time or if the tariff rates go beyond that or if we do get into a trade war with major counterparties like China in a significant way, I think that will have ramifications both for us and for China or from the other counterparties that we’re acting with. And so, look, I think my position is typically to stay invested, especially in assets that tend to appreciate with inflation. Like equities, like real estate, et cetera. Holding cash can be the right thing to do in any given moment, but it can also be risky in the sense that if you miss the big updates in equity markets, for example, that’s risky. If the dollar were to depreciate because of an economic slowdown, holding cash is risky rather than assets that tend to appreciate with inflation. And so I tend to stay invested. But I do think people have to be really thoughtful about the diversification of their portfolios right now so that they’re mitigating risks in their own portfolios that help to manage the exposures they have across different parts of the ecosystem. And part of that might be diversification even within the public equity markets where you get exposed to a variety of industries so that you’re not wholly contingent upon a certain area or industry that might get disproportionately impacted by some of these moves.

Richard Cunningham [00:34:36] Matt, I want to open up the floor to you a little bit and just kind of say, hey, broadly, what else are you watching with a close eye? You know, it could be the FDI landscape. It could be IPO and M&A markets. It could something on an international front. You know just what right now, as you think about your role as an allocator, engaging with companies in just some remarkable ways, which you’re obviously of course welcome to speak to as just a general encouragement. What do you have your eyes on?

Matt Monson [00:35:01] Yeah, we’re watching the 10 year closely. So historically there’s been a really well laid playbook where the moment that we come into volatility, the moment people are fearful, it was a buy US treasury, sell anything else kind of playbook. We’ve not seen that this time around. We’ve actually seen the opposite where people are saying, well, what are good safe havens other than the US dollar and everything else is really small Swiss francs is really small. Gold is small, Bitcoin is small. And when I say small, I mean, the asset class is just small. Like the amount of dollars you can put to work is small so if ever there’s a day where a significant buyer is buying any of those safe haven assets, and I’m not trying to say that I think that they’re safe. I’m saying in general, some folks in the market have claimed that they are safe. So I’m endorsing them. But they’re just such small asset classes that you can see their asset prices spike on a day that folks buy them. And so this is the first time that we’ve seen that this playbook hasn’t worked to go by U.S. Treasury. So the problem there is you’re seeing the 10-year yield tick up. And when that happens, I think that I believe that the administration is also watching that closely and keeping their eye on that as they determine which path they want to take forward and how long they have to negotiate when it comes to tariffs. Do you think we’re gonna go…

John Coleman [00:36:21] Rate cut this year, Matt, what are you thinking about the rates?

Matt Monson [00:36:25] You know, I was around looking at rates when they were averaging 4%. And so I think a lot of folks want to see low rates of 0% because they maybe want to seem mortgages. They want to seed demand pick up, but I don’t think that we’re necessarily going to see rates back at 0% unless you have an economic scenario that demands that we drop rates. And I don’t think any of us want to that economic scenario that needs to take place in order to get rates significantly lower. So maybe they go down 25 basis points. I don’t know if that’s what we’re going to see this year, but I’m certainly not calling for.

John Coleman [00:37:01] A significant rate cut. Yeah, I think it’s gonna be modest, if anything. A few weeks ago, I mean, by the time this airs, I might have a different.

Intro [00:37:08] I don’t know if any of us…

John Coleman [00:37:10] A few weeks ago, I thought we were headed for a rate cut, probably, honestly, when the equity markets were declining and it looked like they were predicting an economic slowdown, which is probably the one thing that could trigger a rate cut on meaningful economic slow down. Absent some fundamental indicator moving in the wrong direction dramatically, if I’m the Fed, I have a really tough time cutting rates right now, right? I don’t think they’re going to hike them because of the signal that that Good sin. But my best guess at the moment would be they take a wait and see approach to see what the fundamental economic indicators are for the next few months.

Matt Monson [00:37:44] I agree. And, you know, double back to something you said earlier, too, John, like there’s been really strong growth in the United States. However, think about your personal household budget and your neighbors and your friends who went out and made a purchase when tariffs were being highly rumored or maybe announcements had just come out and they pulled forward some of their purchases. So I’m actually really curious to see what’s going to happen of growth rates in the month of May and in the month of June and July. So we shall see.

Richard Cunningham [00:38:15] That is an interesting thought, Matt. Yeah, and just as a reminder for folks out there, as Matt kind of said, he’s got his eye on the tenure. It’s hovering around four or five right now, climbed pretty steadily in these last couple days. And then the rate cut conversation that John is speaking to. As a reminder, 50 bits cut last September, followed by 25 bits cut in November and December, and there has been no cut in 2025. All right, gents, let’s pivot one last time here to the broader FDI conversation. Matt would be remiss not to talk about some of just the things you’re seeing. As it relates to just the broader framework that we all know, which is avoid, embrace, engage and some of the inspiring work you’re doing or you’re seeing colleagues and peers do in the broader FDI space as you think about loving on companies, shining a light to companies, challenging them to kind of go further on some of their spiritual integration or human flourishing practices.

Matt Monson [00:39:04] You know, there’s a few big themes right now in the faith-driven investing movement that I think are getting people really excited as they become aware of that theme and then really get their arms around it. So I think for the longest time, Christians who had their money invested in the market felt that their money was only going to have a positive impact once it was taken out of the market and it was given away to a charity of your choice. And so what we’ve really seen happen in the Faith-Driven Investing Movement, you know, and pick up steam over the last few years. Is the recognition that your capital can have impact while it is invested in the market before it is given away. And so being able to be part of that ecosystem where we’re encouraging people to give yet delivering an incredible amount of impact along the way has just been such a thrill for me to be a part of. And then when it comes to the companies, and I’m just speaking from a perspective of what we do, the companies that we invest in. That are having the greatest amount of impact by way of creating just these exceptional cultures for their employees, are also the companies that generate the best financial performance. So I think historically there was this thought in people’s minds, a bit of a paradigm, whether they were consciously aware of it, or it was just subconsciously in the back of their minds that impact investing must require some trade-off and the trade- off must be returns. And so it’s been really fun to be part of this story and sharing with folks. That impact investing can drive better returns. And so if there’s no trade-off, then why wouldn’t you pursue it to let your capital have impact over those 60 years while it’s growing before it’s given away?

John Coleman [00:40:43] You know, pivoting from the prior conversation, I am incredibly optimistic on two fronts. One is I’m just optimistic about the environment I’m seeing where company leaders, real estate developers. Are thinking a lot more about the way in which they run their company, about the advantage of culture. We see companies every day, CEOs every day trying to adopt practices which are good for their people. I think there is a broad theme right now that morally people just feel that they should try and help their employees to thrive, that they should trying to help their customers to thrive. And then financially they’re starting to really believe in this idea that great cultures outperform. There’s a lot of data around that that Matt and team have been great about. Alex Edmonds out of the London Business School has put out some, McKinsey’s put out, some our team, you know, Matt and Justin have put out. Some there’s real evidence that great cultures can outperform over time companies that have poor cultures. And so we’re seeing people both realize they have this. Moral commitment to people to try and create thriving workplaces to address this crisis of purpose and meaning that we have to help their employees flourish and thrive. And I think as a part of that, we’re also seeing a re-evaluation of the impact or values-based investing ecosystem. It was so dominated by the ESG framework for some period of time, for better or worse. Now I think people are looking at that differently and they’re starting to think about the impact on individual employees and customers within company. There’s a shift from some of the macro issues that ESG might have focused on into employee care issues, for example. We’ve recently encountered a guy named Terry Teeley from Impact Evaluation Lab, who’s doing a lot of good work on this, trying to evaluate how different fund managers are approaching this, how they’re thinking about their companies, and there are a lot other initiatives. And then on fate-driven investing specifically, I think we’re seeing a lot really positive movement among the managers that we’re saying rise up in the ecosystem for adopting some of these practices, a lot interest in it. Companies really wanting to be partnered with capital partners who can support them and the efforts to build great cultures. And so I am, if I think about when I joined. Our sovereigns capital four and a half years ago and really got introduced to faith driven investing versus now, even over that four and half year time frame. I just see way more clients, companies, fund managers talking about creating flourishing with the dollars that they’re putting to work and how they can create cultures that can both outperform and treat people well. And so I think we’re at the very early innings of a really transformative period in the economy where people are focused on that. I’m very optimistic about that at the moment.

Richard Cunningham [00:43:22] Yeah, to summarize you guys’ points, I don’t know who said this, and I wish I knew who it was so I could give them credit, but they said, hey, when you think about kind of the movements of God across the investing or like financial landscape within the church, someone said it started with the bad debt. The debt is bad movement. Think of like Dave Ramsey and just avoid debt at all costs, credit cards of the devil. And then it went into this kind of recent movement, which is the generosity movement. Matt, that’s what you were talking about. Make as much money as you can in one hand so you can give the rest away. And I think the point you guys are speaking to that we’re stepping into is this balance sheet movement. And when capital is in motion, what is on your balance sheet can also be leveraged for kingdom impact, not because God needs us because we get to participate. Matt, you’re about to say something.

Matt Monson [00:44:01] Yeah, I just really wanna lay this out that let’s use a hypothetical household that makes a hundred thousand dollars a year in income. And let’s say they’re tithing on that. So they’re giving away $10,000 a year. Let’s say, they have a million dollars saved. And this just is our hypothetical couple, right? The million dollars that they have saved is 100X greater than the amount they’re tithing every year at the 10,000. So back to your balance sheet example, Richard, this is why I wanted to jump in. The balance sheet is 100x greater than the amount that’s being given every year. And so the impact that that can have is phenomenally larger than what’s being given away every year and it’s being left aside and not focused on.

Richard Cunningham [00:44:47] Not to downplay giving, because it absolutely has a role. But there is an exceptional opportunity now to lean in with the balance sheet. All right, fellas, take us home with some scripture. Let’s go to God’s word. John, we’ll start with you. What’s the Lord been teaching you in and through his word lately? And then we’ll let Matt close.

John Coleman [00:45:01] My gosh, thank you for starting with me. We’re just testing you making sure you’re on top of your reading You know, I’ve been thinking about the Psalms a lot lately and reading through some of the PsalMS I think maybe on a prior podcast. I mentioned my favorite new Christian music is this song called still waters That’s about Psalm 23 and there are just so many Psalms where David in the midst of uncertainty Is seeking a sense of peace, right? He does want to be led by still waters, right He’s asking God to be a good shepherd to really help reduce his anxiety, to stand up against his enemies, to give him a sense of comfort. And when life is moving so quickly, I think our natural predisposition is to take things on our shoulders. It’s to try and be in control of the outcomes that we can drive. It’s become anxious about the future. Matt and I live in a pretty anxiety-inducing industry at the moment to some extent, but it’s to be anxious about it. And David was so good, I mean, he was also anxious. He lived in uncertain times at various parts of his life, obviously, and he just kept returning to this idea that God is the good shepherd, that he can lead us beside still waters, that he could calm our souls, that even in the face of death, that we should have no fear, that God’s with us, right? And as I return to those Psalms, it’s just such a great reminder for me that I’m neither the first nor the last person that’s experienced that kind of uncertainty and anxiety. It’s a permanent part of the human condition, often far more serious than the type of anxiety or uncertainty I experienced working in financial markets. And God is a God of peace, right? He’s a God that cares about us individually. And that if we really return to Him, if we trust in Him, if we submit ourselves to Him that He can give us a peace that surpasses all understanding. Right. And I think that should be a hallmark of us as faith driven investors is that even in the midst of uncertainty, we focus, we pay attention, we’re detailed. You know, we strive for excellence, but in the midst of that, we have a sense of peace because we serve someone greater than ourselves and because we’re promised that the God we serve is in control. And our momentary anxiety or uncertainty is not something that dominates the rest of our lives or certainly in the grand scheme of eternal life. And so those Psalms have just been really comforting to me lately as I’ve kind of thought about David’s own journey and how he had to process the things that he dealt and how God was able to give him comfort. In even the most uncomfortable situations.

Richard Cunningham [00:47:27] Leanna Crawford, Still Waters.

John Coleman [00:47:29] It’s a great song, so no security recommendations today, but if you haven’t listened to Leanna Crawford’s Still Water, song 23, you absolutely should, wonderful song.

Richard Cunningham [00:47:39] I think that’s compliance approved too, which is a good recommendation. All right, Matt, what a privilege to have you on and join us today. Thank you for your commentary. What would you say? Has you been kind of spending time in God’s word?

Matt Monson [00:47:50] This has been really fun. Thanks for having me. You know, it won’t surprise anyone that all scripture seems to rhyme with other pieces of scripture. So what I’m about to say is just really dovetailing off somewhat John said. So I think that one of my weaknesses can be putting together big to do lists and checking things off the list and feeling like I’m in control and solving problems. And so. You know, you read a verse sometimes and you maybe have heard it a hundred times but it just talks to you in a different way. And so for me, over the last few days, this Proverbs 3, 5 to 6, you know, the part I’m gonna highlight for you here is trust in the Lord with all your heart and lean not on your own understanding. And this, and lean on your understanding part is the hard part for me because it’s really easy for me to default and do that and then to finish it out and in all your ways submit to him and he will make your path straight. So if anyone can identify with me and using this first, just to serve as a point to get you back on track, I’ve really been dwelling on this one over the last few days. Thanks, Richard.

Richard Cunningham [00:48:58] Well folks, thanks for joining us for this late May recording of a June 2nd Marks on the Markets, but I think you’ve probably enjoyed this and found the insights refreshing like I have. For John Coleman and Matt Monson, I’m Richard Cunningham, and we will catch you next time.

Speaker 5 [00:49:12] 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 a monthly newsletter at faithdriveninvesting.org. This podcast wouldn’t be possible without the help of many of our friends. Executive producer Justin Forman, intro mixed and arranged by Summer Draggs, audio and editing by Richard Barley. Our theme song is Sweet Ever After by Ellie Holcomb.

Richard Cunningham [00:00:00] You’re listening to Faith 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. 

Intro [00:00:17] 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 [00:00:44] Friends, welcome back to the Faith Driven Investor podcast. And today is not a normal episode as it is a time for celebration. We have reached a milestone. It is episode 200 of the Faith-Driven Invester podcast. And I have got a couple of the OGs with me. The two guys that helped start this ministry. Well, we’d love to have John Coleman and Justin Forman here with us as well. A couple of mainstays you always hear. I’ve got Henry Kasener and Luke Rausch. And gentlemen, we’re celebrating. We have hit 200 episodes. HK, let’s start with you. Do you know when you recorded your first ever Faith Driven Investor podcast? Nope, no idea. 

Henry Kaestner [00:01:17] 200, that’s incredible. Richard, that is amazing. It’s amazing. And it’s been so much fun. You know, in the early days, Luke and I would do them and hang out and celebrate the mission that God put us on and had some fun doing it. And, I mean, I remember the feeling. I remember really looking forward to doing them. And as we started, as I started spending more and more time on faith-driven entrepreneur and faith-drive investor and Luke continued to. Run Sovereign’s Capital as we did a divide and conquer. I remember really looking forward to hanging out with Luke and just joking around before the mic went on and joking around while the mic was on. And then, you know, coming back together, it makes me feel like 200 is a long, I mean, it’s a lot of them, but really it’s just celebrating what God has done through the movement. It’s just awesome. But you know they come back and now we’ve got the video going, Luke’s got the dignified gray in the beard. You know, I think when we started doing these, you were in like second grade and now look at you and- It’s more salt, more salt and pepper these days. That’s for sure. There is. I’d do it. I’d invest in you though. I mean, you look like you know what you’re doing. Hey, a little gray in the beard is good when you’re raising capital, and so that’s helpful. We’ve already established I need a haircut. I don’t know how many of you are going to be watching this on video, hopefully none of you. 

Luke Roush [00:02:30] It’s Gavin Newsom’s Doppelganger right now on the pod. 

Henry Kaestner [00:02:34] I don’t know how I feel about that. 

Luke Roush [00:02:36] Hey look, he’s not 

Henry Kaestner [00:02:37] He’s not a bad looking guy. He’s a good looking guy, he’s got great hair. He’s got a great taste in nice restaurants, right? I mean, let’s look at the positives. 

Richard Cunningham [00:02:46] It’s an edgy reframing you guys always talk about. Well, Henry, to answer the question, it was July of 2019. So we’re almost six years to the date of when the first FDI pod was launched. But I know the story goes back even further than that of kind of launching faith-driven entrepreneur, faith- driven investor shortly after. I’d love to hear, I mean, and travel back both of you guys as far as you want. Cause today’s the day of celebration. We’re kind of going back to the origins and we’re gonna talk about where God might be taking all of this next, of course, and celebrate some of what’s happened along the way. But go back as far as you’d like and tell us kind of how your paths crossed, how this idea of faith-driven investing kind of started. And I know faith- driven entrepreneur may have proceeded it a little bit, so it’s worth maybe getting into some of that. But Henry, we’ll start with you. Go back as the story needs to go to kind of orient us to where we are today. 

Henry Kaestner [00:03:33] Well, we could go really far back. A great friend of ours, Luke and mine, is a guy named J.D. Greer. And J. D. Is the head pastor of Summit Church and co-author of the Fate Journal and Osprey Book, and just a great encouragement to both of us. And this is going back probably 16 or 17 years. He called me up and said, hey, I’ve got this guy in a Bible study I’m doing that I think you’d like a lot. What would you get together with him? And he probably said a version of the same to Luke, and J.T. Grear was… Matchmaker just said, you know, this is somebody who’s really serious about using his guests in the marketplace is trying to figure it all out. I know you’re trying to do the same. And so we got together and went to a place called Joe’s Diner, downtown Durham, North Carolina. Great hot dogs. That’s right. It’s famous for the hot dogs that you could have a hot dog with mustard. You can have a Hot Dog with chili. You could have. A hot dog would hot dog. So we had the hot dog and it was just like, I really like this guy is awesome. And then he was living in the same neighborhood as. My best friend, business partner, as we were running bandwidth at the time, David Morgan, and hung out, mutual friends. And then over time, we really just had this sense of shared mission, that there’s actually, rather than just talking about faith in the workplace and the struggles we had and the challenges and the opportunities, what might it look like if we actually got together and did something about it? And this is the point in time where… Through the grace of God, bandwidth was having some success and I’d meet some other Christian business owners, but most of them felt uncomfortable in sharing their faith in the same type of way that Dave and I felt liberty to do so because they had outside venture capital and what they’re doing. And we’d gotten together along the way with another guy that JD introduces to, Andre Mann. And Andre had also had this thought that there’s an opportunity to blend work and investing in business excellence. And so we got together and decided that the way to… Really seize the opportunity that we saw was to start a fund whereby we would be an encouragement to faith-driven entrepreneurs coming alongside them. And yes, absolutely helping them with customer acquisition and intellectual property distribution channels and things like that, but also encourage them as they encouraged us in our faith. What does it look like to have a chaplain? What does look like to pray with non-believing employees? And so Sovereign’s Capital was started. And then life went on for five or six years as we endeavored to start a fund and run it with excellence, believing that you could get great returns, spiritual and financial bottom line, not at the expense of biblical values, but because of them. And through the grace of God and some great deal flow and some great entrepreneurs and great advisors and great investors, oh, my goodness, you know, six or seven years into it, we were finding great success and that we could throw it with some of the biggest venture capital funds. And deliver good results. But then we saw another opportunity. 

Luke Roush [00:06:26] Yeah. So, you know, just to jump in to break up the monolog. 

Henry Kaestner [00:06:32] Please. 

Luke Roush [00:06:33] The reality of our work is that we were looking at all these companies and we’d look at 100 companies and there’d be like one that really fit the right stage, the right geography, the right industry, something that we felt like we could bring some value beyond just down stroke and a check. I think all of us were a little bit troubled, but Henry probably most of all, that like the other 99 people that we met, many of whom were running really great businesses, But it just wasn’t in the right sweet spot for us. You know, they were looking for something a little more than some prayer on the way out the door, you know, and like, don’t call us, we’ll call you, let us pray for you and you know send you on your way. There’s an issue with that in that it felt as though even as we were called to kind of build sovereigns capital and focus on the investing work and reinvesting time and energy in the companies where we invested, we had all these other companies that were looking for community, like they needed content. They needed a place to be able to come together and collaborate like with other entrepreneurs who were like them trying to build something for God’s glory, but like wanted community in that. And so Henry, I think really identified that like we’ve got to do something for these folks because the sovereign’s team at the time or even now today, like we can’t pour into every entrepreneur that we meet. And yet every faith-driven entrepreneur needs someone or something to pour into them. And so FDE was really born out of this. Kind of heartbreaking for all these entrepreneurs that we were turning loose because we couldn’t invest in them and we couldn t spend as much time with them as we wanted to. And then Faith Driven Investor came a couple of years later because we were really trying to say, all right, ultimately these builders are looking for ways to tap capital markets. They need help in being able to re-envision what they’re building. But as they build, there’s capital requirements for for creating new things, right, for scaling growth stage companies, for… Facilitating transitions in multigenerational family businesses that are more mature. And so Faith Driven Investor was a way of actually creating some content, some lexicon vocabulary for how do we actually educate people on how they can reflect their faith in the way they invest to complete the other side of the market. Henry’s great analogy that I reuse weekly is that in the early days of sovereigns 2012, 13, 14, our industry was a little bit like the Eastern Black Bodega. But at least with an Eastern Block Bodega, there was a line wrapped around the block. In our case, there wasn’t really much product on the shelf. What had been there was mixed in terms of quality, and there weren’t really many people shopping in the store. And so with FTE, we started to actually develop more product in terms of companies that were being born. And with FDI, we actually started to develop a queue that started to form outside the building. But it’s still early days.

Henry Kaestner [00:09:26] Today is a Spanish term for like a little Latin American market, and they probably have a different word for Eastern Europe. 

Luke Roush [00:09:33] And mixed metaphors have never stopped me. 

Henry Kaestner [00:09:34] No, me neither. I think it was awesome. You know, one of the things that I remember about that is there are these kind of these infamous stories of Anatole Melanchier coming in, who’s a fate-driven entrepreneur that want us to invest in and he’s from Moldova and we said, I’m so sorry we can’t invest. But then there’s John Porter, who came in after we’d started fate driven entrepreneur. And we thought, gosh, you know, we’ve got these resources, this content and community. By then, gosh fate driven entrepreneur probably had watch parties in 300 different locations around the world. And John Porter wanted to look for capital. And I said, well, I’m sorry, we can’t invest in you because we’re not investing in Africa. But we have all these incredible resources and really realize and talk to them that we weren’t scratching his itch. But I went to Luke, we’re talking about what does it look like to open up our LP base to invest in somebody like a John Porter. We knew that we had some LPs that had been to Rwanda, which is where this guy was running this company, Misaka Creamery. And this was not Luke’s problem, this was my problem. I was just like, you know what? Gosh, if 80% of businesses in America fail, what are the chances of the business in Rwanda working out? And it’s just, I don’t know what it looks like. And if we refer this on to some of our LPs that have been to Africa, have an interest in Africa, maybe that just doesn’t work well, and they’re gonna assume we did some discovery and diligence on it, and this is just like a no-win, so we’re just not gonna do it. But really, as Luke and I were processing that, it was really a Holy Spirit moment where we can realize that that was not for us to decide, and that we were being tight gripped. On our LPs and we weren’t thinking first about the kingdom of God and that let’s leave it to God and the Holy Spirit to help lead these LPs about where they’d allocate capital. And while we’re at it, maybe we’re not the only game in town. By then we’d had some success and we thought, gosh, if somebody is motivated by their Christian faith and they’ve got investment capital to deploy, of course, they’d choose sovereigns. But we never really just thought like Who else is God calling to the same thing that he’s called us to? Is there anybody else out there? And there are lots of people, especially in real estate. And so we just said, gosh, we need to get out there and expose our investors to other fund managers motivated by their Christian faith. We did the first one in partnership with Chuck Bentley out at the Christian Economic Forum, which that year has been held in Deer Valley, Utah. We invited our LPs to an event. We found some. Faith-driven real estate fund managers that were very much started and run by their Christian faith, delivering incredible financial returns and incredible spiritual impact to their LPs by including things like chaplaincy in the way that they invested. And we said, all right, this needs to be a broader movement. This is not the sovereign’s capital story. This is something that needs to much broader. And so that was this moment where we said all right here’s an opportunity. To instead focus on just sovereign’s capital, to instead, focus on a broader movement of the body of Christ looking to steward their investment capital in a way that built God’s kingdom under his power for his glory with men and women who were driven by investment excellence. And that was the beginning of FDI. That’s awesome. And somewhere around that, we decided let’s talk about what we’re discovering and let’s interview some of these other fund managers and let’ look at what spiritual integration looks like across investing in a bunch of asset classes. That we didn’t have any any expertise in. I remember talking to a guy who was running a natural gas and an oil fund. I’m like, guys, where’s the spiritual integration in that? I mean, how do you evangelize like a, you know, a barrel of oil, right? Because like, how about all the oil field workers? Like, oh, yeah, of course. And then we had a guy on the podcast early on had written the book, Thank God for Bitcoin, Jimmy song, I still haven’t figured that completely out. But you know, there’s spiritual integration and that or at least the guys completely convinced of it. But it really just, you know, part of this whole movement has been about just a personal quest of mine to just see God at work, to see God working through other fund managers. And you know it’s the C.S. Lewis thing, right? It’s like, I thought I was the only one that cared about this, but Luke and I have had the opportunity to interview really literally now hundreds of people that God has also given a calling to to start his capital with excellence. And so every time we talk to somebody, we hear more about just another one of God’s image bearers doing some incredible things all around the world. And it’s instead of this feeling like, oh my goodness, gosh, another competitor. It’s like, oh my gosh, Luke and I and the team at Sovereign and the Team at FDI get to be involved with some unbelievable men and women. And it has been really cool. 

Luke Roush [00:14:19] Well, I think actually like one of the things that was a shift is that the early days of the faith and work movement and the early days of what was traditionally called biblically responsible investing. So the faith in work, and this is actually first time Henry and I have actually talked out about it out loud. So it’s kind of fun to process this together with him. But my sense of the early faith and work movement was largely about personal transformation, right? How am I going to actually contextualize my faith in the way I show up at work? And it was really more kind of internally focused, heart posture, head posture, stewardship, a lot of focus on generosity, but less focused on like, how do I actually leverage my business to change the way I build product and service, change the ways I engage with my community and actually be salt and light in a more catalytic way, not just individually being transformed in one or two people that I might work with, but actually more broadly. Like, how do I actually take this idea of what was originally called business as mission, which is more ministry people trying to become more sustainable in their work? How do I flip it and actually take red meat-eating capitalist pigs who are by the grace of the Holy Spirit being awoken in their faith and now actually looking to take their business and reshape it or take something new that they’re trying to build and build in a way that is very, very catalytic? That’s actually, I think the shift is actually moving away from. Early days of kind of faith and work, how do I see these two things come together in my life? No, no, no. How do we actually take a business and think about transforming the industry that we’re playing in by virtue of the way we develop product and service, the way deliver product and service to our clients and engage with the community? I think the other thing that I would say is that going back to sort of the early days of faith-driven investor, before we waded into this and again, like all by God’s grace for his glory. I think that the emphasis was more on like, what do we want to avoid? So biblically responsible investing was very much around what are the things that we really probably shouldn’t own and profit from because they’re antithetical to human flourishing and they rely on some form of addictive behavior in humans to make the business model work. So gambling, adult entertainment, you know, things like that. I think what Henry and I and Andre all got aligned on early is we want to be known not just for what are we against as believers, but more so what can we fall in love with? Where do we see human flourishing occurring in the marketplace? How do we want positively screen for businesses that are making a difference? Let’s focus on that. That’s the main narrative. There will be some things that we want avoid. There may be some other things where we want a presence on their cap table and then with management to see if we might reframe some of how they do their work. Primary motivating factor in the early days of the phase of investor movement, certainly sovereigns, was very much of like, let’s be known for what we’re for. 

Henry Kaestner [00:17:18] This is a good time, so I really wanna make sure that I highlight some of the other influences. A lot of it was God speaking through His Holy Spirit to Luke and I, and then a whole bunch of others. Justin Foreman, who was running the Featured Entrepreneur at the time, was an early contributor, of course. But there’s also a group that we got together maybe six, seven years ago at a French bistro after a Sovereign’s Capital LP meeting. And it was people like Josh Kwan from The Gathering, and Mark Wesson from Eversource, and David Wells from the National Christian Foundation, And there may be a 25 or 30 getting together and just saying, okay, so what does it look like for there to be a broader movement in the way that we’re able to hit at some of these themes that Luke is talking about right now, about what are we for as Christ followers? And that’s really important. So it just has not been the Luke and Henry show by any stretch, although the team at Faith Driven has been nice enough to let us be on the mics a lot at the expense of the overall quality of the podcast. But there have been a lot of great. Great people that have really sown into our lives, prayed with us, for us, inspired us. You think about the redemptive work that Praxis does in helping to reshape the way that people think about how they’re running their businesses. Lots of folks. God has removed the scales from lots of our eyes to include the listener to this podcast. And this is a movement. If you’re listening to this podcast, this is something to bring to your community. One of the things we have been able to do over years is with the faith-driven team put together a community group course of six weeks that explores some of these concepts. And you do that in a peer-based community of 12 to 15 folks and with a great facilitator. So this is something that God is bringing us all into. 

Luke Roush [00:18:59] Well, and two things that I’ve learned from Henry, one is we serve a god of abundance. We don’t serve a God of scarcity. The early years of my career were very focused on direct competition and a bit of a zero-sum game. That’s kind of how I thought. And that is not the reality of the world that we live in. And one of the things I’ve learnt from watching Henry is that like, now we need to be rooting for rivals. Like we need to be rooting for people who are doing work well. And there’s a bunch of people, you know, even as the movement has evolved that went before, right? You think about Praxis, you think about Timothy, you think of Ave Maria, you think a whole bunch of other early movers that were down the road, at least wrestling with this question of what does it look like? And that work continues. You think of Eventide, you think Robert Netslade inspired, a whole of bunch of different people that have actually been circling on this area for a long time. And one of the things that I think has allowed. The movement to flourish is that broadly speaking, with maybe a couple of exceptions, broadly speaking the movement is for each other. Like there’s obviously places where there’s direct competition kind of A versus B, but by and large, like the movement has grown and rising tide raises all boats. I think people have kind of leaned into that. And also the broader idea that like, it is not about any one of the private equity firms or any one to the advisory firms, RIAs that are in this arena. It’s really about like, what does God want to do? And Lord willing, He does it through us, but if He chooses to do it through someone else, we need to be excited about that because the mission is fulfilled. It’s not about us individually, it’s about the mission. 

Henry Kaestner [00:20:34] Well, and it is a broader movement. I mean, maybe nobody better to speak about the expanse of the movement and the growth of movement than you, Richard, right? You know, so you’re providing leadership for the fate driven investor, institutional investors summit. And gosh, how many folks did you have out at the Rosewood? 

Richard Cunningham [00:20:52] I mean, what you guys are getting at is there’s multiple expressions of what this can look The answer is 180. 180. You had 180 out. It was awesome. I like giving indirect answers, Henry, and kind of arriving after a nice monolog. Well, thank you guys for all of that. But yes, we’ve gathered- Keep on going. I’m sorry. I should have let you go. 150 to 200 the last couple of years of private equity and venture capital. 180. Managers. 180 is the round number. Gavin Newsom, thank. The desire is like you guys said, is hey, they all have a unique expression of faith-driven investing. There’s a hundred plus trillion dollars in managed assets across the globe. Only a couple hundred billion of those are in explicitly faith-aligned products. But there’s, Pew Research says there’s 60% Christ followers in the U.S. Or at least people that identify with a Christian faith. And so just the numbers don’t add up in terms of the number of assets within faith- driven investing made a couple 100 billion. There being a hundred trillion in managed assets in the US. And there’s just such an opportunity for Christ followers to keep leaning further and further in. Like the math just doesn’t make sense. And so the desire here is to say, hey, private equity and venture capital managers, you probably have an outsized opportunity to rethink the shaping of your portfolio or the spiritual integration practices you have. Not that a public equities manager can’t. I mean, Luke could speak to that extensively in terms of the influence you can have on a public company CEO. Henry, you took a company public. Private equity and venture in particular, and private companies, when you have direct influence on the owner operator of the company, there’s just an opportunity there. And so that’s why we gathered those folks. 

Luke Roush [00:22:22] Well, and to your point also, like, you know, I think that just to tie into that, one of the things that we’ve said since the beginning, and I think it continues to be true, is we want to be descriptive of what faith-driven entrepreneurship, faith- driven investing looks like, but not prescriptive. One size fits one, you now, and, I failed to mention Bob Dahl, now over at Crossmark earlier, but he’s been thinking about this for a long time in different contexts, really active within the kingdom advisor community, think about Rob West and the whole K.A. Crew and the journey they’ve been on. So I mean, there’s a plethora of different ways. To represent faithfulness in the way we do our work. And it’s important to not become too myopic on our particular flavor of what it looks like. What is important and what I think is a mandate is you gotta be seeking Godly counsel. You gotta be on your knees in prayer and you gotta look at God’s word. If you’re doing those three things as you interpret where God’s calling you as an entrepreneur or an investor, you’re gonna end up in a good spot, but it’s gonna be different. And I think that giving some grace as we all figure this out together is important. The good news, here’s the good news. We’re probably in the top of the second inning of a very long baseball game. So it is early. It feels like at times like we’ve been at this forever. But the reality is in the long arc of history and sort of what are we trying to build together for God’s glory? Like really, really early innings still, still a wonderful time to jump in. 

Henry Kaestner [00:23:45] Thousands, thousands of podcast episodes in front of us. 

Richard Cunningham [00:23:50] I love a good baseball analogy, Luke. Thank you, guys. That’s a lot of fun coverage. I guess the question that has to be asked next is what happens next? Luke, you mentioned we’re in the top of the second inning of a really long baseball game. Where do you guys want to see this go? And I know, is this a domestic thing? You know, Luke, You spent a season in Indonesia building out sovereigns capital over there, making some Southeast Asia investments. Henry, we know about your passion for Africa, the school of hard knocks video that just went viral. You reframed kind of. What stewardship can look like in talking to Africa. Justin Forman is currently on the continent of Africa. As you guys think about where faith-driven investing goes next and broadly just kind of faith- driven movements, how do you frame up the global kind of domestic conversation? 

Luke Roush [00:24:33] I’ll comment super briefly and I’ll turn it over to Henry, but I think our view from the beginning is that this is a global movement. The pacing, the way it shows up around the world is going to be a little bit different. But if we believe capital has influence to be able to shape culture, then that’s an important opportunity, I think, as Christ followers, to be salt and light all over the world and to be to find ways to reflect our faith in the way we put capital to work and help shape cultures, many of which are still in the process of being born, developed, shaped. So I think it’s a global thing and we’ve seen that at work very much in Southeast Asia, which is the only place outside of the US that we currently invest. But Henry, I mean, you’ve been much more globally exposed. Your thoughts. 

Henry Kaestner [00:25:15] Well, from a movement perspective, and this is as you’re saying, this is outside of what sovereigns capital as an investment fund does. But from a moving perspective, the singular thing I’m most excited about is the development of a faith driven investment industry in Africa with some unbelievably talented men and women with great investment backgrounds, Ivy League educated, Wall Street, 10 years. Real assets under management, really great performance. And then just a spiritual integration that is really almost unparalleled. Just the development, the maturity of an industry. As an investor, I get excited about the macro environment too. You’re talking about a place where there is an average age of 19. It’s gonna be the only continent that’s gonna to be growing. Average age of cross-country is 19.2 years. The number of producers and consumers coming into a marketplace is astounding. There’s been some great political stability. As much in Africa as anywhere, any other continent in the world. And you’ve got this incredible sense of just individual economies growing, six of the ten fastest growing economies in the World will be in Africa and yet only 0.5% of the world’s venture capital and private equity are going on to that continent. Now I get excited about it from an investment perspective that’s one that’s seeking alpha, you know, you want to steward the capital that guys entrusted you with with excellence. But I also get excited about it because I also know that in a world in which USAID is pulling out, but believing that trade, as opposed to aid, works. Now that’s not to say that the way that we pulled out has not been very, very shaky, and I would have done it differently, to be clear. And yet, as a Christ follower that is stored in individual capital, or maybe institutional capital, to look at an opportunity in Africa where there are hundreds of millions of people living on less than $5 a day, believing that as we… Invest in that marketplace, providing employment, and doing that with faith-driven entrepreneurs, faith- driven fund managers. There’s a chance that 20 years from now, that is a vibrant marketplace, that it’s all about spiritual integration. You know, one of the things I love about Africa is that when I go and speak to faith- driven entrepreneurs in Africa, I don’t have to tell them that the work matters to God. When I’m here in America, in my hometown, there’s some amount of work for people to just kind of lean into the fact that God has glorified through our work in the marketplace. And this is something I picked up from Brian Fickert. We had the vestiges of this evangelical Gnosticism, right? Which is a thing that comes from the Greek faith, which is the separation from the secular with the spiritual. They don’t have that in Africa. So like, of course we should pray before our board meetings. Of course we shouldn’t pray for the healings of our employees that are sick. And of course, we should have a winsome witness to those who don’t yet share our faith. Of course, of of course. And so we have this opportunity as faith-driven investors to be able to put capital and encouragement and in prayer support. Behind these entrepreneurs as they in turn develop relationships with us and they pray for us a big part of the reason I get excited about Africa is this selfish thing as I do that as I get involved in these stories of these African fund managers that are doing this with excellence I come to know God more fully myself you know it’s all about me right I get more as I stored capital now. To be clear, this is not about an Africa story. This is about a bigger, broader thing. It’s about us as the body of Christ getting on our knees and just asking God how he’d have us steward the capital he hasn’t trusted us with. And for some of us, it will be check out what’s going on in Africa, it’s amazing. For others, it’ll be let’s look at innovative ways to continue to think about real estate investing across multifamily or retail or office, incredible things going on and co-working. There’s more of an opportunity to expand what’s going on in the lower to middle market. Incredible things that are going on the venture side. Think about all the just incredible technologies and artificial intelligence and the opportunity to come alongside investors like a Mark Sears that’s coming up with a novel approach, the redemptive way to do domestic AI investing. So there is incredible opportunity all around the world, but this is one that’s not to be prescriptive. As Luke said before, it’s meant to be descriptive. Opportunities virtually in every asset class, in every geography, but it’s an invitation to us all to just ask God how he’d lead us and with a hopeful expectancy that as we ask that question, he’ll answer. 

Luke Roush [00:29:38] And here’s the vision. The vision is that every Christ follower, independent of net worth, independent of asset class, independent of geography, has an opportunity to reflect their faith in the way they put capital to work. That’s the mission. And so back to kind of what does the store shelf look like, still really, really early, there’s tons of opportunities. And there’s areas of the world, there’s different industries, there’s different types of businesses, where you can have more or less impact. Doesn’t make one better than the other, but there are highly catalytic parts of the world. And sectors of the economy where I think that, you know, the impact can be multiplied. So super exciting about where things are going. 

Henry Kaestner [00:30:14] Guys, it’s been great to do this with you. I’m just, I’m grateful for you, your friendship, your partnership. I’m thankful for all of our listeners. My request is that as you’re listening to this, this is a movement of God and it’s not meant to be consumed, it is meant to be passed along and encouraged and maybe you get together, a group of people there in your small group and just wrestle with things like this. But thank you for tuning in over these 200 episodes. We wouldn’t have a podcast if we didn’t have listeners and we wouldn’t a movement if God wasn’t. Inviting others to participate. So you as the listener are a big part of what God’s doing. 

Richard Cunningham [00:30:47] Well folks, this has been episode 200. It’s coming out on June 30th as you listen to this. Going forward, one of the things I wanted to say from a housekeeping standpoint is that the Marks on the Markets will continue as every other episode for Faith Driven Investing podcast and the video podcast will start to be more and more normal. We’ve seen a couple teased out with Brent, be sure. Henry thought today was a video podcast and so we’ll see, there might be some social clips of Henry today. But going forward, the actual in-studio live FBI video podcasts are coming to kind of match more of the Fates of an Entrepreneur podcast. But pump for the next 200, Luke, pump for next 200 Henry, thank you guys for your time today. What a joy to celebrate the FBI pod together. 

Henry Kaestner [00:31:26] 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 faithdriveninvesting.org. This podcast wouldn’t be possible without the help of many of our friends, executive producer Justin Forman, intro mixed and arranged by Summer Draggs, audio and editing by Richard Barley. Our theme song is Sweet Ever After by Ellie Holcomb. 

Richard Cunningham You’re listening to Faith 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. 

Welcome: Hey everyone! All opinions expressed on this podcast, including the team and guests, are solely their opinions. Hosts and guests may maintain positions in the companies and securities discussed in 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 Welcome back, everybody, to another episode of the Faith Driven Investor podcast. It’s episode 181. We are closing the book on Q3 2024 as when this releases, it will be September 30th. Hard to believe we are entering into the last lap of 2024 as it relates to quarters at least, and we’re talking marks on the markets. We’ve got our resident expert, John Coleman, in the podcast studio. And before we welcome John onto the pod, just a couple of quick things I want to note. If you haven’t yet, listen to our most recent FDI podcast that dropped a couple of weeks ago, episode 180 with Richard Garnett. It was a special tribute to his life. I just cannot recommend enough after you get your marks on the markets. Phil here, to go back and listen to that episode. It was unbelievably fantastic. I promise you, you will end up sharing it with a friend or someone you love. Just the wisdom and the principle shared in it are timeless and it’s worth a listen. And the final thing I want to say is, I know we’ve got a lot of cross-pollination in the faith driven investor and faith driven entrepreneur audiences. And on Friday, the 20th FD hosted its annual conference. And man, it was a big hit. I know I got to attend a watch party here in Austin, Texas. There were dozens, if not hundreds of other watch parties across the globe, and I say that to tease out that if that was a really special experience for you, the FDI conference is coming up in January, which is hard to believe. It’s only three and a half ish months away. And so it’s conference season. It’s the fall of 2020 for John Coleman. We’re talking marks on the mark. It’s great to have you guys on the podcast. How is Team Coleman. How are you guys doing. How’s your summer. How’s the fall kicking off. 

John Coleman Yeah Richard, thank you for having me. Obviously fun to be on this side of the mic. With you interviewing me, the fall is off to a good start. We love the fall. Atlanta, like Austin, can be a little bit hot. And so it’s starting to cool down just a little bit. We’ve got kids. Richard knows we’ve got four kids between 3 and 11. And so I was telling him a lot of my life is is unpaid Uber driver at the moment or chauffeur. And so, you know, but the kids are having fun. It’s super fun to get out and watch them play sports or do their theater performances. You know, this age range is just really special. So the Colemans are having a lot of fun right now. 

Richard Cunningham Great. Fantastic. Well, John, this pod comes at a great time because I feel like we’ve got kind of one of those organic stopping points in the calendar where it’s the end of September, Q3 is over. And that’s going to kind of be the theme of today is that’s, you know, we’re in an election year. We’ve got three fourths of the year covered. We’ve had some massive kind of markets and economic headlines. And so we’re just gonna kind of go subject by subject on a few big items and let you kind of provide some commentary and some thoughts and always that kind of redemptive and biblical perspective on things. And let’s start with the big one from just this past week, September 18th. The fed cut rates, and it is a long expected, long anticipated rate cut. They’ve been at, you know, multi-year highs, I think as a 23 year high cut rates down to 50 basis points. And so what has kind of been the storyline. Why did we go on this rate hiking situation and kind of cycle in the first place and kind us kind of some of the commentary and background as to the decisions the Fed’s been making. 

John Coleman Yeah, obviously huge news this week, Richard, in softening in the fed rate. You know effectively we started this rate hike cycle because of inflation. So we went through this uniquely long period of low interest rates globally after the great financial crisis in 2008. And we’ve talked about this on the podcast before that period, 2008 to 2000, 22 or so was really one of the more unusual in economic history. You know, we began to think of that as normal because for most of us in our adult lives, that was kind of normal. But if you looked at the prior hundred years, for example, the interest rates that prevailed during that time were unusually low. Our current rates are actually more in line with historical averages. If you were to look back in the 60s, 70s, 80s, 90s and before, in fact, in the 70s and 80s, interest rates were obviously quite, quite a lot higher than they are right now. And so that period after the great financial crisis was unusually low. And what happened at that point was in order to avoid a Great Depression, you know, a repeat of 1929. In the 1930s, the central banks around the world, not just in the United States or around the world, felt the need to drop interest rates artificially low. And when you drop interest rates, that obviously spurs economic activity because money becomes cheaper to borrow, you can borrow money to buy a house, you can borrow money to buy business to finance new capital. And so it’s stimulatory to the economy. As we rolled through Covid, right, interest rates were still unusually low in the United States and around the world. But then we got hit with a ton of fiscal stimulus. Right? So we went into Covid. The federal government just dropped from a helicopter a ton of money into the economy that was warranted at the time because it felt like in the initial lockdowns, we could risk going into a severe economic recession and then coming out of that, what a lot of people believe is the federal government, they can continue to stimulate the economy too far. So the Biden administration’s so-called Inflation Reduction Act, which was like a very Orwellian term because it was actually a very stimulatory inflation causing act, dumped a ton more money into the economy. They continued Covid stimulus long after the lockdowns were over as a reality. And what happened on the backs of that is massive inflation, which we’ve been living through for the last couple of years. Right. And I say massive inflation. I mean, this wasn’t like Argentine style inflation that we experienced as the United States, but it was very high inflation relative to what we’d experienced for the couple of decades prior. In response to that, the fed had to go through one of the most aggressive tightening cycles of our lifetimes. And tightening means they’re raising the federal funds rate, which is the rate at which they loan to banks, which raises interest rates all over the economy. Right. And they did so up until we got to kind of like 5.5%, which was much higher than where we had been previously, or almost 6%. So what’s happened most recently is the fed has now begun to loosen the economy. So inflation has slowed. There are some signs that the fundamental economy might be softening a little bit. You know, what was really interesting about this tightening cycle is usually when the fed raises interest rates, you slip into recession and they basically break the back of inflation by forcing the economy into a recession, which kills inflation, hopefully. And that’s kind of what happened coming out of the 1970s. In this case, we never actually slipped into recession. We never actually saw unemployment rise to the level. You could characterize it as problematic or outside of historical norms. And we never actually saw at least the official growth rates of the US slip into recession territory. Although we’ve seen there there’s been some funny business with those numbers over the course of the last 18 months or so. So it’s difficult to tell. And so now the fed is living in this interesting period, Richard, where the economy is softening a bit, but it’s not yet that the inflation is coming down and more under control, but not yet at their target rates. And yet they’re anticipating problems. And so the fed is now trying to cut rates to get ahead of those problems so that they can have a so-called soft landing where, you know, the nirvana here is that we get inflation under control and then we start to lower rates in a way that keeps inflation under control, but avoids any sort of dramatic rise in unemployment or dramatic recession in the economy. And that’s what they’re targeting so far. It seems like they might have achieved that. It’s a bit too soon to tell. We’ll know in a year. But this week they dropped rates by 50 basis points. The prediction markets would tell us that most people are anticipating they’ll drop it by another 50 basis points before the end of the year. So a full percentage drop between this week and the end of the year, which would be a fairly dramatic cut and would get us back to even below historical levels at like 4.5%. I think, you know, the fed is probably targeting getting to something like 3% by 2026, which may be the new normal for interest rates. More what we’ve lived through previously. If they can keep inflation under control. 

Richard Cunningham Well, man, that’s a fantastic run down. And so just to recap kind of some of the actual rate numbers behind it. So in March 17th, 2022, as John alluded to, the hiking began and it rates were down in the 0.25, 2.5 50% range to 25 Bips to 50 Bips, and they aggressively spiked them over the last two and a half years. And finally, on September 18th, 2024, we saw our first cut. And we’re back in that 4.75 to 5% federal funds rate as John was speaking to John. Fantastic rundown. And so here’s kind of, you know, hindsight’s 2020. And I know it’s as you’ve kind of mentioned right now, it feels like the fed has navigated us to a spot that is digestible. But there have been nine rate cutting cycles over the past 30 years that have taken place. Three of those nine have began with a 25 bips cut, and six began with a 50 basis points cut. As we just saw, history suggests that after the 50 basis point rate cuts, we tend to see recessionary periods and markets the S&P 500 declining on the back of that recessionary period. Do you think that is a possible outcome here, or would you kind of say, hey, I think we’re heading in the right direction? This was the move that needed to be made. Recession is just TBD. 

John Coleman Yeah. No one knows. For sure. But I do think there is a correlation causation issue there that we have to be aware of. So typically rate cuts are because we’re already heading into recession. Right. So if you think about it, the rate cut itself might not be the causal factor throwing an economy into recession or increasing unemployment, right. It could be that the economy is already sliding into recession, unemployment is spiking and the fed cuts rates as a response. And so it would be natural that as the economy deteriorates, even if the fed is cutting rates, that it might continue to deteriorate. Right. And that that might be what’s actually causing the recession or causing a decline in markets. I think that’s entirely possible here. Right? We don’t know how deep this slide and underlying the slip in underlying economic indicators is. I would say it’s tough to parse the data right now because a lot of the economic growth in the United States, I think, is currently funded by deficit spending, by government spending, because we’re still running massive historically high deficits and running up a huge, unsustainable debt, which we could talk about. We we also see employment information is a bit off in the sense that, a lot of it is spurred by immigration. And so, citizens in the United States, the employment data is a little bit weaker than in the economy overall, which would include a wide variety of workers. And so without any judgment on any of those underlying trends, it can be tough to parse just how strong or weak the underlying economy really is. I would say, given the way that this has played out, our chances of avoiding a significant recession or a significant rise in unemployment feel to me better than in the past. I think the economy, the fed, is really trying to get ahead of significant deterioration right now. So I think the real economy has a decent shot of maybe, maybe a mild recession, maybe some continued deterioration, but potentially not getting that bad. Markets are a little bit more difficult to predict in my mind, Richard, because they are at such high levels of valuation right now. So particularly at the top end of the market in large cap growth stocks, the Magnificent Seven, we are at much greater than average price to earnings ratios for those biggest stocks right now. And in fact for that top I think it’s like quartile the Russell three 3000. The price to earnings ratios are above historical averages in significant ways. How that interacts with this rate cut with some softness in the underlying economy. I don’t know if I were to tell you what I’d really be predicting is that if it looks like we’re going to get a soft landing, that small caps will likely appreciate some, that The Magnificent Seven and some of the other large caps are likely to return to historical averages of price to earnings ratios, or that they’re going to come down a little bit. The overall impact on markets is likely to be slightly negative on, kind of market cap weighted index perspective, but that’s because the valuations of those are so high right now. So there’s a lot going on in the economy right now. I don’t think anybody has exactly the right picture of what’s going on. But if I had to predict the next year, it’s kind of a sluggish economy that’s not quite in recession, where we’re kind of chugging along the chance that markets kind of come back to historical averages for price to earnings ratios or decline a little bit would be somewhat high. And the fed is going to continue to be relatively cautious, do a 50 basis point cut, I think by the end of the year, and then take a wait and see approach in the new year to see how much of an impact that had. 

Richard Cunningham Fair, fair, really good breakdown. Let’s go to that next because I want to talk about how what’s taking place in the economy with the fed is kind of dovetailed into markets and how they’ve interacted. So you spoke to Magnificent Seven. As we all know, a large part of the S&P 500 performance is attributable to those seven largest market cap weighted stocks. And so you’ve got the S&P is up 20.57% year to date. We’re recording this on the 24th of September. So barring something massive happens between now and release date that’s kind of where we are. Nvidia up 141.35%. Meta up 62.99%, Amazon 29%, Apple 21%, Google and Microsoft, respectively. Almost 17% Tesla, who’s kind of that seventh member of the Magnificent Seven who had been on a really tough slog. Looks like they’ve benefited from the rate cut. They’re back up and 64 bips on the year, but that is up almost 5% in the last five days alone. And then compare that to the Russell 2000, which is kind of the representative small cap universe, if you will, not having a bad year up 10.31%. But comparatively to what’s taking place in the S&P 500 and with kind of the mega-cap stocks, if you will, still lagging far behind. So that’s kind of one. Realm is the public markets and their interaction with what’s taking place in the economy. But John, you’re investing across multiple asset classes. And your role at Sovereigns Capital, whether it be private equity, venture capital, real estate and elsewhere, what have you seen kind of on a on a macro perspective with where the economy has been, what’s been taking place and how it’s kind of permeating into multiple different markets? 

John Coleman Yeah. Great question, Richard. So to start with public markets, I think you highlighted the trends perfectly. We’ve been on this crazy run in stocks generally. I think people are starting to assume like I get 20% a year in stocks and that’s not true. You know, the historical rate is like 7 or 8% in public markets if you look over time. And I would expect that at some point we kind of get back to that 7 or 8%, which means we’ve got to have some sort of significant decline for averages to start to take hold. There’s really, as people have been fearful of a potential recession and also very enthusiastic about the rise of artificial intelligence and other technology trends. There’s been a flight to quality at the top end of the stock market in these technology enabled stocks. And I would say that Google, meta, Nvidia certainly we could talk about that separately. Amazon. These are all stocks that are not just quality stocks. You know they’re performing. They’re profitable. They’re growing. They also intersect with artificial intelligence quite a lot. Tesla is that story too in a very different way. They’re not large language models, but Tesla is trying to develop artificial general intelligence for driving, for physical spaces and for robotics. And so you’ve got this thing where at the top of the market, there are these high quality stocks in a growth market where people are flying to quality, and they all intersect with the biggest trend in markets, which is artificial intelligence. And so they’ve been bid up above historical price to earnings ratios. And people have been a bit nervous about being in small and mid-cap because of the fears of recession. Again, I would expect if we hit a soft landing for some of that to normalize. I think that enthusiasm around artificial intelligence is also likely to normalize. I firmly believe that artificial intelligence is at least the biggest trend since the internet. I mean, it has the power to be incredibly transformative, especially moving beyond the large language models like ChatGPT. If you start thinking about like what Tesla is doing, trying to develop artificial intelligence for physical spaces, for driving, for robotics, that’s where I think we take a leap where this begins to dramatically impact the economy, even as large language models are, you know, revolutionizing certain areas of the economy, like customer service or some legal tasks, things like that. And so I think those underlying trends are somewhat likely to continue. But I do think we’ll see a normalization in public markets. I think in private markets you are seeing continued sluggishness. Right. And that has a few sources. One is we’ve just seen fewer exits in private markets lately. And private equity and venture capital real estate is its own segment, which we could talk about in a moment, because I think that’s a totally different set of trends. You know, the FTC in the United States has been very aggressive about restricting acquisitions and mergers in the United States. So Lina Khan has been particularly aggressive about that, meaning the lot of potential options for venture backed companies to exit have not materialize. They haven’t been able to be acquired or to go public with the public market. IPO market and the Spac markets have been quite slow lately, and so there haven’t been as many opportunities for exits, which means that if you invest in in a venture capital fund ten years ago, you might not be getting your money back in the way that you thought, which means you can invest it in a new thing. Right? So I was listening to a very good podcast, the All In Podcast, last week, and they had a stat which I haven’t had a chance to verify independently, but they had a stat where, you know, typically over the last period of time, first time venture funds, about 50% of them are able to raise a second fund. Right now, the stats are that about 15% one 5% of venture funds are able to raise a second fund after the first fund. Because it’s been so difficult to fundraise, it’s been so difficult to get returns. The vintages have been really challenged for 2019, 2021 because of the collapse in venture markets and the slow period to get liquidity. And I would say from my point of view, we’re seeing that I think our team that looks at different fund managers, I want to say this statistic was something like the average fund manager was only raising about 60% of its target, according to the broad based indexes that we look at, which is resonant with this idea that most venture funds, that sort of fund one are not getting to fund two right now. You know, a lot of clients pay to invest in their new venture and private equity funds by getting DPI or distributions from their old funds. Nobody’s distributing capital right now, which we’ve seen. People are not selling positions they bought at inflated rates. Financing is more expensive right now, so leveraged buyouts are more challenged at the moment because rates are higher. And so that’s generated real sluggishness, I think, in the private markets, both for limited partners and general partners. What that hasn’t meant is that the underlying companies are necessarily doing badly. You know, some of these fast growing tech stocks in the venture markets have obviously had a difficult time because there aren’t many exit opportunities. And there’s been this, you know, 2021 was this weird upcycle in venture where everything was really over bed. So valuations have come down from that. But if you look at like real companies in the economy, a lot of them are still doing pretty well. And you know, we see that across the companies that we look at. Employment was really tied a couple of years ago. It’s hard to get good people still hard in certain skilled trades, but that softened a little bit. So hiring is a bit easier right now. Borrowings expensive but not out of control. Expensive like it was in the 70s, for example. So you can sell finance equipment and things like that. A variety of private lenders have sprung up in the private market, so it’s a little harder to get bank loans right now because of some problems in banks where they’ve got exposures they’re trying to manage. But there are private credit markets where you can get loans. So we’re still seeing reasonable health in the underlying economy itself. But transactionally things have slowed. And that means that the funds markets have slowed. And again, I’ll pause there. We could talk about real estate a bit if you want, but that’s what we’re seeing in the private company world. 

Richard Cunningham Yeah, it’s a great recap. And I’m looking at a couple of charts here that relate to what you’ve just talked about. And so going back to the venture and kind of the market for exits in the IPO market, you mentioned that wild year of 2021. And then there’s kind of the Spac craze and everything like that going on. But there was and U.S. stock markets, public markets, there is 1035 exits that took place. And then in 2022, it dropped all the way down to 181 exits. In 23, it was 154. We are at currently 145 exits here in U.S. kind of IPO markets. And so, as John was talking about for these high growth tech companies that venture capital funds back, you know, it’s either get acquired by a strategic to get distributions back or take the company public. And when those exit markets have dried up, as we’ve talked about, not fully dried up. These aren’t crazy off of historical averages. It’s just in 2021, everyone, when they’re seeing companies go exit hand over fist, decided to launch a venture fund and said, I want to get in the game. We can go take this company public in a matter of months. Things have just come back to reality. And then additionally, John, you were talking about private equity and private credit and things like that, and just the difficulty for fund managers to raise funds. And there’s just been LP hesitancy because of the lack of DPI or liquidity coming back to them. A vintage year is when a fund launches and ultimately, you know, kind of classifies the year that fund was launched and how their performance ranks amongst their peers. That also launch that year, 2023 vintage private equity funds are down 8.85%, venture capital funds are down 6.22%. This is a chart from PitchBook 2022. Vintage funds are a little better, private equity is roughly flat and venture capital is down 6%. And it takes you going back almost to kind of 2020, 2019 realms to find that kind of outsized market performance in terms of IRR amongst private equity and venture capital funds. 

John Coleman And one thing to be cautious at there, you know, is the J curve. So I would expect that 20 2223 tight private funds, maybe even 2022 would be a negative right now because of. So for listeners unfamiliar, there’s some called the J curve in private markets where money tends to go out quicker than it comes in, there are transaction costs to it. And so if you hold a private equity fund, it’s not unusual to see it go negative for a couple of years and then come out of it. What I would say is like, you know, we were looking at venture funds that were posting 4,050% paper returns, IRR, you know, with no DPI, but 50% paper returns a few years ago. Some of those firms are still posting pretty good paper returns IRR. There is no DPI, right. Or there’s very limited DPI and funds are stretching on past their like ten year windows and things like that. And so one of the challenges, particularly in venture private equity is a bit different is are the paper returns really real if you can’t get money from them? And how are you going to start to get DPI? How are you going to start to get liquidity if the exit markets are not so good, that’s where you can start to use secondary markets, which has come into favor. But secondaries are trading at deep discounts right now. So you’re taking a hit on your IRR. So I think it’s a bit too soon to tell how these most recent couple of years of vintages will turn out. I’m actually optimistic that the vintages starting in like 2022, where they’re investing end of 2022, 23 are going to end up being positive. Typically, when you see a big dip like we saw in 22 when the rate cycle started, it hurts the vintage a few years prior to that, but really helped. The vintage coming out of that. So if you went back to the great financial crisis, I think it was like 20. 2006 vintages were really bad, and then like 2009 vintages were really good, or ten vintages. I’m maybe beginning that just a little bit wrong. You might see something like that here, but certainly, you know, the returns are going to be flatter than they looked for these like 2016 vintages that were just killing it in 2021 overbid. And we really don’t know how the venture funds are going to turn out until we start getting real cash back. Right. These paper returns are much more difficult to assess. 

Richard Cunningham Well said, well said. Yeah. And our actually two podcasts ago we had Chris Kim on who is from a secondaries firm breaking down just what it looks like to be a provider of those liquidity solutions where they come in and buy, you know, LP interest and private markets position. So definitely worth checking out. And if you’re curious about kind of some of these exit solutions John is talking about and what a secondary is. All right. Let’s quickly hit on real estate because we’ve alluded to it a number of times. It’s, you know, acutely affected by the rate environment. And then let’s go on to after we talk real estate, just some of the election year stuff. You’ve made a few nods to government intervention and activity throughout this podcast. And so I want to talk about that. But real quick on real estate, John. 

John Coleman Yeah, so on the real estate markets, it’s so pretty dicey right now. Honestly, Richard, you know, some of the more attractive segments like industrial or warehouses etc. got a little bit overbid. And so there’s still a lot of demand for those as we have this kind of secular increase in the need for those types of facilities in the US office is still very precarious. I think any of these real estate cycles can sometimes take some time to work through because of all the lease agreements. You know, we’re still working through leases that were signed five, six, seven, ten years ago sometimes. And so it’s not a cliff. You know, those tend to roll off over time as rates reset, etc.. I would say office is still somewhat weak. We’re seeing a lot more return to office, but I don’t think we’re seeing anything like the demand for office that we saw in 2019, for example. I mean that structurally things have just changed in the way that people work. And I think that’s going to stick. And then residential is in this odd period of time where because a lot of people locked in rates for their properties that are renting a few years ago and rates have gone up so dramatically, it is much more expensive to buy an apartment condo house right now in most areas than it is to rent. There’s been this inversion where, you know, the natural order of things is it’s a bit more expensive to rent and to buy because landlords are getting rewarded for basically their outlay of risk capital. So you pay a premium to rent, not outlay any upfront or risk capital. And then if you buy something you kind of benefit from that over time. Right now there’s an inversion of that where it’s much cheaper to rent than to buy. I think because of the movement in interest rates over the last couple of years. I saw a chart recently where, you know, cap rates on rental properties right now, which is which is obviously the income from that property divided by its value are lower than the mortgage rate. So there’s an inversion in that because mortgage rates are higher. And that’s just caused a lot of sluggishness in the home market. Rates are coming down but they’re still high. You know mortgage rates I think for really good credit score like six a little over 6% right now. Many people are locked in at like three, which is, you know, almost twice the cost on a monthly basis. I mean, not quite twice the cost. And so people aren’t selling. A lot of people aren’t buying. A lot of people who stocked up on these kind of rental properties, Airbnb, Vrbo that’s coming back down to earth. And there’s been some not distress in that area. But I think you’re starting to see that space more challenged. And it still just doesn’t make sense to buy a new property right now to rent. Right. That’s inverted at the moment. And so that continues to be sluggish. The other thing that’s been true for more than a decade now is sluggishness in new home starts, a lot of which never really recovered to pre great financial crisis levels. I think that’s continue to be sluggish, although I think the August numbers said new home starts were up just a bit. Obviously there’s a secular shortage in housing in America. Our population is growing faster than our housing stock, especially when you include immigration. And so there’s a shortage of housing right now, whether rental or purchase. And so you would think that would lead to more construction. It’s helping to lead to higher prices, right? Where there’s the highest gap between the price of a property and the average median income in history, basically over the last couple of years. So that shortage is driving up prices. You would think it would drive up new home starts or new construction. And maybe that’s starting to happen, although that’s a pretty sluggish indicator. And so housing right now is still continues to be tough. The mortgage market continues to be tough. And if I were, you know, to predict I don’t. I think that dramatically changes in 25. Even with interest rates coming down. Although if we come down another 50 basis points, and especially if the fed were to bring things down another full percentage point next year and we get in the kind of threes again on the fed funds rate, mortgage rates get down in the force. We see that starting to loosen up quite a lot. But I think that remains to be seen. 

Richard Cunningham That’s a really good analysis. I know the season of life we find ourselves in, it is friends and family. Friends and all that situation are looking to be that first time homebuyer. And they sit there and they say, man, my rent payment as you’re talking about, would double because of where interest rates are and mortgage rates are, even though I can afford a 20% down payment. And so why go under that duress or that stress when you can rent it below market rates, if you will? And I know people are feeling that acutely. All right let’s pivot John. And we’ve got a few minutes left here. And we have got an election coming up in a month and some change. We currently have a Democrat controlled Senate, a Republican controlled House and a Democrat controlled white House. Obviously, you’ve got Kamala Harris running and the Democrat Party, you’ve got Donald Trump running on the Republican side. We are in debate season. We saw the debate a few weeks back, and it feels like the tension and the temperature is up, as always in an election year, but maybe help kind of bring us back down to earth and steady us as you kind of provide some of the maybe economic commentary on both candidates or some of the things you’re seeing and what the bigger issues are as we head into November’s election season. 

John Coleman Yeah. I mean, anybody who tells you they know what’s going to happen right now is lying to you. This has been and this continues to be like the craziest political environment of my lifetime. Certainly, you know, we’ve had two assassination attempts. We’ve had a president be revealed to be in cognitive decline, ousted from office, a new nominee basically appointed by the party without a process, massive reversals in polls, obviously, just a number of kind of crazy policy proposals. And I think more than at any point in my lifetime, too, we’re also seeing candidates just throw spaghetti at the wall in terms of policies. They think we’ll get them votes right. So every day some new promise comes out to try and for lack of a better term, by a vote, right up. Student loan forgiveness, no tax on tips, no tax on overtime. You know, mortgage, first time homebuyer assistance. I mean, we’re running trillions of dollars in deficits. And every day I wake up and there’s some new handout that people are proposing. I think, look, this won’t be revolutionary analysis. I think that in general, it’s likely that markets would react better to a Trump win than a Harris win at this point. What do markets not like about the Trump candidacy? I think and this is one man’s opinion. I don’t think they like some of what they perceive as the volatility of that, not knowing exactly what might come of that, not knowing exactly how the administration will behave in certain circumstances. What I think they favor versus a Harris administration would be a lot of kind of traditionally conservative policies that would be positives for the underlying economy. Right? I think a Trump presidency is staked out pretty clearly that it would try and slash regulation, that it would cut down on the regulatory burden of the business environment in the United States right now, or at least that’s what they’ve stated they would do. They did some of that last time. That would be very stimulatory for business right now in a positive way. I think the Harris administration has signaled in alignment with the Biden administration on some just absolutely insane policy proposals on tax. To be honest, a lot of people now are saying, well, you know, she kind of doesn’t mean it. She’s just appealing to her base. But this idea of taxing unrealized capital gains, for example, even if they’re only doing that higher income people of dramatically raising capital gains taxes at the federal level, of dramatically raising income tax rates, all of these would range from slightly negative to catastrophic for markets if they were to be implemented, and seemed so poorly considered that a lot of people are basically saying they don’t mean it, they’re just appealing to people. I think that with regards to potential negative shocks in the international environment, you know, we’ve obviously got very volatile situations right now with China, with Ukraine and Russia with a widening conflict in the Middle East, where Israel is now effectively, openly at war with Hezbollah in Lebanon, which has been a breaking thing this week as they’ve stepped up that conflict, moving beyond pushing back on the terrorist attacks that occurred out of Gaza. I mean, so that’s very volatile. I think people are very split on which candidate would be positive for that. I think there are wide contingent of. Folks who believe that a Trump presidency would potentially change that environment a bit, that Russia and China would be a bit more cautious during a Trump presidency than during a Harris presidency. And there’s a lot of fear, honestly, right now, with Joe Biden seemingly not as engaged as president, as he was before that something could happen between now and inauguration, right where it’s kind of unclear how the power structure is operating at the moment. So I do think there are some near-term risks to that. And then, you know, one thing. I’ll make an overarching comment, Richard, and it kind of goes back to this. You know, we’re in the handout stage of the election process where everybody’s just trying to announce new policies. They think people will vote for neither candidate, neither party has in their platform any significant way of addressing the structural deficits and debt that we’re accruing right now. Early in the next year, our interest payments on the federal debt are going to go over $1 trillion, effectively, no matter what happens with rates, you know, our entitlement payments for health care and for Social Security in our interest rate payments now eat up the vast majority of the federal budget. They dwarf defense spending. They dwarf spending on the apparatus of the federal government itself. And I heard a stat the other day that almost half of the US economy in some way touches government spending, meaning either is directly a federal agency or state or local agency, or is reliant as a private sector business on funding from those. Right. So we’re reaching this point where the government has just become an enormous part of the federal, state and local economies. Right. And that used to be a platform of the Conservative Party, the Republican Party, that was a loser electorally, because no one likes to hear that we’re out of money and we can’t spend anymore. And everybody wants to know that you can. No one likes higher tax rates, which is the other way to solve that. Although higher tax rates at this point, a lot of people think would be negative for the economy. You reach a point at which if you tax more, you actually hurt the economy. And some people think we’re there, and I just don’t know who’s going to actually begin to fix that. It might be a significant crisis with our debt that forces us to do any sort of cuts or reform to things like Social Security and Medicaid or Medicare, which are really the only ways to fix this imbalance going forward. So I think the next couple months are going to be nuts. Honestly, next month and a half, whatever, it’s in the election. I think it’s going to be pretty dicey all the way through inauguration, because I think the likelihood that we definitively know who won the election on the night of the election is as low as it has been the case since Bush versus Gore, and I think we’re going to see a lot of tumult no matter who wins. And so I would just be prepared for a ton of volatility through at least the inauguration. And then after that, you know, I do think Trump would be initially better received by markets, especially because of the tax policies that have been proposed by the Harris administration. But I do think the long term health of the US economy will be contingent upon whether either of the parties faces up to this deficit and debt problem that we have in a responsible way, and help the United States kind of fix the imbalances that are going on there, which it doesn’t seem like either party or the voters behind them have any appetite to deal with right now. 

Richard Cunningham Like one double clicking on the the debt problem is Donald Trump’s proposed a government efficiency commission, if you will. And he’s specifically and maybe this is just social media world, as you know, called on Elon Musk to be the person to come in and almost clean house and just let’s evaluate where overspending is taking place. And to be clear, there’s some phenomenal people that do incredible tasks for the US government. But as John has kind of alluded to, there has been some just wild overspending which has led to our debt levels. Any thoughts on just kind of that approach, if you will, instead of kind of looking across just government inefficiencies and waste of money, if you will. 

John Coleman Look, I think it is I won’t comment on the Elon thing. I won’t comment on that specific circumstance. I would say, obviously government spending is inefficient right now. Right? I think there’s been a lot of news recently about this, like Federal Broadband Initiative that put forward $45 billion and has not connected a single user to broadband, right? The cost to build infrastructure in US cities now is often two, three, four times as high as it is in European cities, which shocks a lot of Americans. The American government is not working well right now, and we need significant reforms to the way in which we spend to the structure of the federal government structure of state governments in certain circumstances, and there is huge opportunity for efficiency in that. I think it is a no brainer to try and take that on. I think it’s quite difficult to take on because of various employment rules around the federal government. I think it’s needed. I don’t think it fully solves our debt or deficit problem, and I don’t say that in a dismissive way, in the sense that I think we should do it. But ultimately, you don’t solve the federal deficit problem unless you either dramatically increase taxes. And again, I’m skeptical that you can do that to fix our current deficits, because I think it would flip us in. To negative growth territory, or you have to rein in the entitlement programs Medicare, Medicaid, Social Security and have positive interest rate movements, which would lower the interest rate on the debt a little bit. And there are some straightforward mathematical fixes to that. Like, you can mean Social Security, you can raise the retirement age, you can do some other things on the health care side. But right now, neither political party has expressed an interest in anything, which I understand because they’re deeply unpopular with citizens. And so I think it’s a no brainer to try and do efficiency in the federal government. I don’t think it gets us all the way to fixing the structural imbalances that we have. 

Richard Cunningham Fair enough. Well said. Well, as we’re talking election volatility and just the chaos that is likely to ensue throughout the month of October and into November. Let’s rein it back in with kind of the eternal and redemptive perspective and close here with just kind of man. What’s the Lord been teaching you lately, John? And and through his word and just kind of in your time with him? 

John Coleman Yeah. Apropos to this kind of discussion, Richard, I think I’ve mentioned it once on the podcast here. I’m writing this book on money at the moment for my publisher, Harvard Business Review. And the idea is like, what are the principles for money that can make it a tool for human flourishing rather than something that’s destructive? And I just wrote a Substack about this particular point. I have this Substack on purpose, and I wrote about this passage from First Kings, about Solomon, you know, the passage where God asks Solomon what he wants, basically as he emerges as king and he asks of all things for wisdom. And because he asks for wisdom, God gives him wealth and power and those kind of things, at least out of the gates. And then, of course, we know Solomon kind of lost his wisdom over time, but it really made me reflect. In this latest piece, I put up on wisdom as a precursor to getting those other things right. I think one of the errors that we make in modern life is to turn means into ends. So power and money, for example, should be a means to doing something good in the world. You know, in the Christian world, we think of that as stewardship. Did that power money belong to God? He doesn’t need us, but he can entrust us with those things to do his purposes. And the way to use that well is to do what God intends for it, right? To use that as a steward, not to think of it as ours, our money, our power for our purposes, but his money, his power for his purposes and to submit ourselves to that. A lot of people today confuse that as an ends. I want money for money’s sake. I want power for power sake. That is the end of itself. And I think that’s obviously distorting point of view. And the wisdom of Solomon was to ask for the right judgment and discernment in wielding the authority that was going to be given to him. And, you know, that’s something that’s natural to us. But I think we do lose sight of that in day to day life, right? That wisdom is an end of itself. It is good to be wise. It is a means to stewarding all these other things because it’s discernment for God, but it is also an in. It’s good to be wise regardless of anything else. It’s good to be wise for wisdom sake. And so it’s encouraged me to think a lot more about praying for wisdom, for discernment, for judgment. Many of the folks listening this have been blessed with financial resources. They’ve been blessed with professional position. They’ve been blessed with political power. They’ve been blessed with an audience like you, Richard, on this podcast. And those things aren’t good or bad in themselves, right? They are only good or bad, depending on what we do with them. And so it should be each of our prayer every day for wisdom, discernment, judgment so that we can see the path God has for them and that we don’t ask him to join our path, but we ask that we see and join his path, that we see his will for that, and that we align ourselves with it. And so that passage in First Kings about Solomon has caused me to just reflect more and more on am I seeking and praying for wisdom enough for discernment, for judgment in every area in which I’ve been given authority, so that God may trust me with that authority and whatever else he chooses to give me, that I would be trustworthy of that, and I would have submitted myself to his will for that, and that I would have the discernment to see it. And I think all of us could potentially lean into that. 

Richard Cunningham Man, that’s fantastic. Especially relevant to me as I turn the chapter this morning out of first Chronicles, and Samuel in the first Kings of David is handing over kind of the throne to Solomon. So historically relevant to me in my own scripture time. John Coleman, thank you for that, man. How fun to keep kind of this podcast inside the FDA host family this time around. And he remarks on so many things from the fed to the economy to markets to the US election, and just always grateful for your wisdom and your timeless kind of insights that apply on this podcast. And so, folks, thank you so much for joining us. We will catch you next time. 

We are grateful for the opportunity to serve this community and see listeners coming 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 Faith Driven investing.org. This podcast wouldn’t be possible without the help of many of our friends. Executive Producer Justin Foreman intro. Mixed and arranged by Summer Driggs. Audio and editing by Richard Braly. Our theme song is Sweet Ever After by Ellie Holcomb. 

We believe this podcast is especially valuable to you for two reasons. One, you get to hear about an incredible business venture in Apartment Life. There’s no doubt you’ll be hearing more about them in the future, and we’re glad we get to share about them early on in this podcast. And two, you get to hear the heart behind the business. Pete Kelly is one of those business leaders who puts his heart into what he’s doing, and it shows in this interview.

We’re excited for you to hear about Apartment Life and the potential they have in the real estate market. But even more so, this podcast gives you the opportunity to hear from a business leader about how his values affect his business and how everything he does serves other people. Tune in and enjoy!

Useful Links:

Apartment Life

Best Resources for Real Estate Investors

Interview with Pete Kelly

Neighborliness on Faith Driven Investor

When Trae talks about his relationship with God, you’ll hear both his personal faith journey—what it means to imitate Christ as a venture capitalist and how Silicon Valley opens the door for him to share his faith—and what he thinks about the global Christian movement. He invites listeners to consider what it would look like to be co-creators alongside God, with references to how God and Adam interacted in the Garden of Eden.

Our team had a blast catching up with Trae, as it felt like he covered dozens of topics with the fluency of an expert. His intellect and skill are on full display in this interview, but so is his spirit and heart behind what it means to be a faith driven entrepreneur and what faith driven investors can do to create value, not only for themselves, but for the world.

We hope you enjoy this episode and pray that it encourages you on your journey!

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Rene Girard Explains Mimetic Desires 

Founders Fund

Trae Stephens Interview with Fortune