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- The Borrow Smart Chronicles - Cycles Cycle and Reset
"NOW is the only capital you are born with."
Weekly Spotlight: The cycles are resetting. As people retire and pay off their houses, as they divorce and find new homes, as they move to a new city for a new job, as new families have children and trade up, as elderly couples sell larger houses and trade down—the life events play out and the existing coupons are retired and often replaced with new coupons. The chart below elegantly shows that dark blue (low-rate coupons) are being replaced with dark red (higher-rate coupons). As rates move up and down, so will the purchase and refinance cycles ebb and flow.
charts from: GRoditiD
a BORROW SMART CONCEPT
Mortgage Mistakes
Here are some questions a client needs to be able to answer if they are going to Borrow Smart! How would you answer them?
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LIABILITIES
What’s Happening?
the mortgage market itself is getting bigger; it is compounding like assets.
surprisingly, purchase business in 2023 is almost identical to 2020 production and that trend should continue up as inventory comes online
the majority of debt is clearly under 5.5% - under that, it unlocks a refinance boom
the trouble with low credit scores didn’t get repeated this time around
mortgage, auto, and credit card debt delinquencies on the rise...
rates are getting higher on credit cards, leading to delinquencies, which lead to higher rates on credit cards
just as balances are at all-time highs
commercial liabilities are defaulting at the intersection of
COVID work from home and higher rates.
REAL ESTATE
What’s Happening?
It typically takes us having an excess supply of 6 months of unsold houses to see house prices decline; right now, we are still running around 3 months.
inventory continues to be a driving factor in supporting house prices, unless forced selling occurs (deep recession and job loss) values have support
more consumers are paying cash, but we haven’t gotten back to record levels yet. - this will also create an opportunity when rates drop again
the peak homebuyers in Millennial territory need help figuring out how to buy a house; they’ve struggled more than most generations
“One martini is all right. Two are too many, and three are not enough.”
ASSETS
What’s Happening?
the government is a business, and it generates income from payroll taxes and personal income taxes. - if those go down (recession), it has to borrow to make up for spending needs, just like a consumer would with credit card debt.
that savings reserve is being depleted from COVID stimulus
about 7% of the population is getting close to the $1 million mark
- a long way from $5M
wealth is still on a steep grind; the gap between the
haves and have-nots is getting larger as well.
in major market down cycles, it takes time to recover, typically 15-20 years
(chart from Bob Elliott)
if you divide returns by the amount of money in circulation, you have the gap we feel in buying power that is known as inflation
(chart Liz Alden)
stocks follow cycles; even annual probabilities are sometimes spot on
stock idea - PFFA - paying 10% dividend - this is a CEF that buys preferred stocks
“The effect you have on others is the most valuable currency there is”
ON BEING HUMAN
What’s Worth Sharing?
“Life is simple.
Everything happens for you, not to you.
Everything happens at exactly the right moment, neither too soon nor too late. You don’t have to like it….
It’s just easier if you do.”
DOPAMEMES
And Other Inspirations…
Dutch designer Maarten Baas has created a 10-foot high art clock in the newly renovated Amsterdam's Schiphol Airport that features a video of a man in a work uniform behind the translucent clock face painstakingly painting the time minute by minute.
How the banking system really works:
Playing God:
AIdeas
Future Hacks…
A favorite AI tool for quick logos and graphics:
https://ideogram.ai/
Also, I trained my personal GPT to be more personable with Magic Words - it now asks me better questions.
Magic Words – “Exactly What to Say” Phil M. Jones
“I’m Not Sure If It’s For You, But”
“Who Do You Know?”
“Open-Minded…”
“Help me understand …” (why, how, your experience…)?
“What Is Your Experience…?”
“What Do You understand…?”
“How Important Is It…?”
“Tell me what you know about…”
“How Would You Feel If…?”
“Just Imagine…”
“How Certain Are You…”
“Could It Be Possible…”
“Help Me Understand...”
“When Would Be A Good Time to…?”
“I’m guessing you haven’t…” gotten around to…?
“You Have Three Options” then “What’s going to be easier for you?”
“There are two types of people …” then “Which one are you?”
“I Bet You’re a Bit Like Me”
“If…then”
“If I Can, Will You…? If I can prove to you that …. Will you….?
“Would It Help If?”
“Don’t Worry” its natural to feel that way
“Most People…”
“The Good News Is…
“What Happens Next”
“What Makes You Say That?”
“Before You Make Your Mind Up…”
“Just One More Thing”
“A favor..”
“As Promised”
“Just Out of Curiosity”
Lead In Phrases - Creates Pain & Urgency
Can you explain to me ….
Describe for Me
Share for
Tell Me More About…… so I can understand if I can help
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