Making Sense of the Market

In today's highly competitive mortgage industry, building profitable relationships with the real estate agents is essential for success. However, finding effective ways to secure agent relationships can be a challenge. With so many mortgage loan originators vying for the attention of real estate agents, it can be difficult to stand out and establish meaningful connections. Our new case study featuring loan officer Chris Cogill is a must-read. Chris has closed a remarkable 36 million in funded loans from agent referrals. And in this case study, he shares his proven strategies for building strong relationships with real estate agents and leveraging those relationships to drive more business. To get your hands on this resource, head over to LOKestudy.com and download your free copy of the case study today. You'll find actionable insights and practical tips that Chris used to close 36 million in funded loans from agent referrals and how you can, too. Don't miss out. Go check it out right now, visit LOKestudy.com and download your free copy today. Hey listeners, Jeff Zimper, welcome to the latest episode of the mortgage market radio podcast. I'm so grateful you tuned in. If you're liking the content you hear, would you do me a quick favor? This is how we grow and reach other people. Just leave us a quick review wherever you're listening to this right now. If it's on Apple podcasts, Spotify, you grab your mobile phone, tap through this, go find the place to where you can leave a review. If you would mind taking about one minute to do that, I'd be grateful and appreciate it. And if you do, hey, jump into our private Facebook group, Jeff for podcast listeners, where there's more cool stuff going on there, more resources training and free stuff. And that's facebook.com, forward slash mortgage marketing radio. Check us out there. And if you did leave us a review, grab a screenshot of it if you don't mind. And I will share with you a very special gift just for doing that. Okay, before I bring on this episode's special guest, guys, one of the conversations we've been helping mortgage professionals have is with real estate brokers, real estate brokers. Why? Well, first of all, they're influential people, number one, number two, right? They have access to real estate agents, right? And number three is what do they need in today's market? They need solutions to help them with recruiting and retention, recruiting and retention. They want to continue to grow their brokerage. They're suffering attrition, right? Because of it's all about agent productivity. Their profit margins have come down. And so they're looking for ways to optimize their business model to increase recruiting, maintain retention, right? And minimize or mitigate attrition. Does that make sense? Right, you think about building a business? I mean, you always want to be adding new to the top of the funnel. You want to be keeping the ones in the funnel that you have, right? But there's always going to be a little bit of funnel leakage going on no matter what. And there is a side joke on that, but that's not for this time or place. That's for another time and place altogether. However, one of the cool things that we're helping our members do in the mortgage marketing broker community is hacks is have meaningful conversations with these real estate brokers. And what we're presenting is a platform to help the brokers have more value to offer to their existing agents, maintaining the existing agents, going deeper with the agents, providing more value to the existing agents, but also recruiting new agents. And so Nick and Chris and Glenda and others are leveraging the educational platform we have to have conversations with real estate brokers to say, hey, let me help you. If I could help you overcome the challenge of recruiting in retention, would you be open to talking more about that and learning more about how I do that? You know, seven, eight out of 10 times easily or more, you're going to get a yes, tell me more. I'm curious. And what we do is help them walk the real estate broker through the process of leading with an educational platform, equipping the agents with the modern day tools, skills, and strategies to build an audience, to create deal flow, to attract business to them. And all the things that are involved in that. And that is how you have meaningful conversations, impactful conversations, and you become more valuable. Does that make sense? So if you want to learn more about the mortgage marketing program, it'll simple. Go to mortgagemarketing.pro, tap the link here in the show notes or wherever you're listening to this and go watch the brief video, see the success stories, read the success stories. And if you're curious, you want to take the next step book, a call with me. Okay. So today's special guest is back for another session. And I always just kind of geek out when I get a chance to talk to Mr. Todd Ballinger. Todd has been in this industry for a long time and has a wealth of knowledge about markets, economies, about, you know, interest rates. And it's got this, this program over at Barrel Smart University dot com. There's links in this show notes to everything I've talked about here on the podcast. I also do his private Facebook group, which is a place for you to go to, I think get educated on being able to better articulate you becoming a debt manager, right? Not just a loan officer, but actually leveling up your skill set for being able to have a conversation and dialogue about the nuances of investing in real estate interest rates, inflation, markets, right? The inverted yield curve. I'm just looking at his blog here, AI tools for real estate lending, 30 year versus inflation, what's the next step on and on and on lots of great content. So I encourage you to go check out Barrel Smart University dot com and make sure you check the link in the show notes to join his free Facebook group. There's all kinds of free training that goes on in there. And so Todd and I just kind of geek out. We just kind of rip and riff and no specific agenda, but we talk a lot about what's happening in the current market and how to show up what to say in the current market. And then we talk at the end, stay tuned for a little bit of the impact of chat GBT and other tools, AI tools on our industry and generally on the future for directionally looking on the future of the job market and the economy overall. So I think hopefully you enjoy this conversation and check out his resources with thanks to the show notes. Without further ado, let's get into this week's show. Todd Ballad here, welcome back to the show. Hey, thanks for having me, Joe. Thank you for being here again. I wanted to have a conversation with you again because I think in times like these, we need context, right? And we need somebody who has, I think, a broad vision or both the ability to have a wide scope to take in all the information, provide some context, but then to kind of narrow that scope down to you, okay, what do we do today now over the next 90 days? So I think you have a skill set to do that. So that's all I wanted to have you today. Oh, thanks, man. Glad to be here. Okay, we just had a conversation on the day. It's a tale of two focuses. How do you maintain an aperture that's macroeconomic that says, here's what's happening, big picture and function on a day-to-day basis, which is a really small aperture of, I got to pick my kid up at school. I got to call this loan officer, this realtor back, because you can't live and either, you have to maintain both. You've got to be able to say, I'm calling this person for this reason, but also understand the broader macroeconomic dynamic of the markets and the fact that people have locked in interest rates that were below, you know, were 200-300% below historical norms, which we can kind of talk about that more, but you can't live in one of the other. If you live in the macro, you freak out because you don't get anything done. If you live in the getting done all day long and you're not aware of the macro, you're talking to people about nonsense. You know, hey, let's refinance your 2% mortgage to 7, that doesn't make sense. So you have to maintain these two focuses, which is a little bit of a different skill set, because I think some people are just used to head down in the weeds, grinding and not being aware of the broader, the headwinds and the trends and stuff that's happening. What do you think, whether what your consumer had on, loan officer, what do you think is, I'm trying to, so the mindset of a mortgage professional today, like, where should, what should they be paying attention to to help them not get freaked out, right? But just to stay in the right place of, there's a lot of movement or maybe lack thereof, but like, where should their mindset be, you think, right now? Hmm. So good question. I think you first have to address, we'll say, the macro, the rolling force, right? Like, you have to sell a boat, you have to ask yourself, which way is the wind blowing? That's a good thing to ask before you get in the boat and just say, I want to sail, right? So we, you know, we've just had a period of time where we pulled forward years of demand. That was experienced through some of the most prolific income statements at loan officers and numbers that they've ever put up in mortgage companies. And what happened to those companies, they grew and grew and grew. And they grew because it's so much excess cash flow and the problem was always resource constraints, so they could have done more, right? So now we're seeing all these mortgage companies collapse and go bankrupt and get sold for a dollar and all this kind of stuff's happening. Why is that happening? Well, because once all that demand got pulled forward, then there's no more demand. And then you have to suddenly think differently. And so for a loan officer, one that I know that, you know, made $2 million the year before last, you know, struggling this year and I'm like, I'm like, dude, you pulled forward. You didn't just, you didn't get 10 times better in one year, okay? So the macro allows you to pull forward five years of mortgage production in a year. And then you have to now understand that that demand is gone for now, right? People are going to let go of that 2% 30 year mortgage. You have to cry out of their cold dead hands if unless there's a life event. So now if I were to quickly go across the boat to the practical, tactical that we just took the aperture down, right? What are the life events? Almost 70 to 80% of all refinances last month and production was cash out refinances, right? And those conversations are happening again. And that's an old dead fry loan, but it's happening because, you know, I love you, Jeff, but we're going to break up. I can only only on the other side of the house for so long before 7% doesn't matter anymore. And then the 2% goes away. We've got to sell the house. We've got to split up the assets, you know, whatever we have to do, or I've got to refinance and pay my wife off or my spouse off or either partner off those life events. I've got a kid and they're screaming each other in the same bedroom. I want a new bedroom. So you have to start moving to how is demand going to get re energized and it's not going to happen with people on a rate in term refus and it may not happen on the purchase side because you've got inventory constraints that are keeping prices up right now, right? Because there's limited inventory and that's going to take time to work off, but go after people in the place that they're having those life events, build relationships with estate planning attorneys, divorce attorneys, you know, my state going out and see financial advisors because their whole planning world is around life events. You've got to have a kid and you're insurance, you're going to buy a house, you've got to save up, you've got to retire, you know, it's all life event driven, lenders are rate driven oftentimes and they kind of miss out on this macro life event dynamic that's happening. And you need to be having conversations with your client base about, you know, home equity lines of credit. We have a calculator's on our website and we use Google AdWords to direct consumers there and I always track, you know, what's our calculator right now that's getting the most traction. If it's the first time home buyer calculator or new home buyer calculator, that tells me something, right? Right now it's the heel calculator and that makes total sense because if I've got a 3% mortgage and I have a life event, which might just be, I have more month and money, right? I've got right now my month is too long. I'm running out of the money from my available cash flow. Where do I get that from? I could take it from the stock market, but my portfolio is down 20 to 30%, I don't want to do that. I could take it from my house. Boom. My house is up 20 to 30%. That's a better place to potentially access well and I can do that with a heel lock. So again, there's a lot of opportunity people like I don't make money on a heel lock. So I'm like it's not about the heel lock, talk every client you've got, ask them if they have a heel lock. If they don't help them get one, so they have an ability to be their own bank, right? And access that liquidity and if they do lose their job, I mean, Amazon's laying out 9,000 more and that is laying out now 22,000 people. This is happening. So if that became you, the day that happens, you can't access the equity in your home anymore. You don't have the conditional ability to qualify. But if you've gotten an equity line and closed on a day before, all that money is available to you, right? So do that right now. Get out there and have conversations that could lead to, you know, we've been thinking about buying that beach house because my cousins, you know, sell purse because they lost your job, but we could buy it rates of seven, but I don't care. I've been waiting about this house for 20 years. That's when rates aren't important anymore. The life event is driving the transaction. Yeah. I mean, there's a lot in there. First of all, that beach house example, we've got to remember, people are also sitting on tons of equity. And so they might be looking at a position of, you know, a situation of repositioning that asset to buy that second home, the dream home, the beach home, whatever cash out the scenarios. What you're saying is what, you know, what we talk about, I hear our mutual friend Dave Savage refer to as building your wealth team. And so the wealth team includes real estate agents, estate planning attorneys, et cetera, et cetera. And I think, you know, this, the market, the market will always, you know, force innovation, no matter what, as it always does. And so the innovations, it's laying upon us in the market industry real estate as well as that. Yeah. You know, it was, hold the bucket out and it filled it up with money, right? And now that's gone and we're like, well, shoot, what do we do, right? We have to now create, and I was saying this actually yesterday, I did a video about this, which is deal generation, deal generation is a skill. You've got to develop the skill of deal generation in those various ways to do that. You've mentioned a few. And you also highlighted something I want to share is that I was on a call a couple of weeks ago. And the loan officer had mentioned that in his company, I'm looking at the figure here. In his company that there was 300 cash out refides done at rates of 4% or less in the month. So to your point, it's being done. And those are the, those are the deals that have to get done because their life events are whatnot. And so full circle back to, for the listeners right now, man, I feel like I've been preaching this forever is conversations like, are you, you know, we've heard it all here before, whether it's the annual review, the six month review, the whatever, I don't know. But the bottom line is you better be having those conversations because, you know, dip in the technology pool, trigger leads, et cetera. If, you know, when somebody's right checking their credit or applying for credit, or there's all those things. And if you're not top of mine, obviously there's a hundred other companies that want that business. Absolutely, Jeff, you know, people say, you know, what's, you know, your network is one of the biggest leading indicators of your future income, you know, the old saying is your network becomes your net worth. So if you had a million people in your network right now, my guess is you would only need a very small percentage of them to transact and make your monthly production goals. If you've got a hundred people in your network, you need a much higher percentage engaging. So if you go back to, again, that lens discussion of two lenses macro, this is what's happening rates or it closes 7% right now and that the majority of people have 4% or low rates, then you have to build a bigger network. So if you have free time, and this is something one people, most people have in common right now, as they have time on their, on their hands, then my, my recommendation is you do whatever you have to do to grow your network. You don't look for opportunities that just look for growing the network, you know, it's like, I'm going to have a wedding here with I invite, who do I know at church, literally some of that old school stuff of just thinking about people I know that I can call and say, I want to reach out touch base, talk about some things that we're doing. And this is where I like to have one thing that I can talk about. And to me, if I only have one thing right now would be, I just want to make sure you've got a heal I can place because there's a lot of volatility in the market right now. You've got the average American has $256,000 in equity in their house. That's if you take all houses the average. So that's a all time record by far, used to be in the low 100s consistently. So if that's true, most people have 50, 100, 150,000 they have access to, right? If they set that line of credit up. So if you feel confident you've got something, a conversation worth having, I just want to check in, you know, I'm in the midst, I don't do, I don't make money on the heal lots. I can't even do them. Most people I thought they were like, we don't even have a heal. That's fine. But I want you to go to your bank and want you to get a heal lock for me. Would you do that? Because I think you won't care if you don't need it and if you do, you're going to think this is one of the best things that I ever did, you know, having that access to some liquidity in the market. So you know, if you got in the back pocket, that gives you enough confidence to have the call. If you have the call, magic can happen, you know, in someone, I mean, I got a call from a friend of the other day. He said, look, I'm splitting up, you know, and I just wanted to, I know you know this stuff and he gets like, what should I do, you know, about the house and so we started talking about it, right? But personally, I know you well enough to call you to have that conversation, right? But if you call them and you're asking to help them, you know, magic. I think this also has to do with identity and how do you identify yourself as a loan officer? You know, you're, you're, you're, how do you see yourself, did you see yourself as a law officer? You see your, you know, the old classic live and die by the refi. Um, I mean, now like this term debt management, right? I'm a debt management. I'm a debt. I'm an asset manager, right? Like I, my buddy, Ryan Grant, who talks about, you know, we help you get in. We got you into the largest debt of your life. It's on us to help you manage that largest debt of your life for the rest of your life, you know? That's where you need to change the mindset, the concept and the service level that you bring, uh, and, and architecting those touch points and conversations and engagement. So, you know, it, it's not weird to call Todd and go and try and fish for a deal, right? It's like, Hey, Todd, wanted to call you. I know it's been a while since we talked. Um, I just wanted to introduce you something myself and my team are doing now. We're actually, um, considering ourselves debt managers, right? And even use that line, I just gave you. Yeah. What does that, what that management mean is means is we're offering this, this, this, this, this, these various services or consultations for our clients and, you know, wanted to see if you wanted to talk further about that or maybe you know, so, yes, this is going to open up conversations, but this is back to that muscle building that skill set. Absolutely. And, and you gotta, you know, it's always mindset and skill set and sometimes we're tipped one way, sometimes the other, but just like the aperture, you got to have both balance. You got to have the mindset that there are things you can do right now that are meaningful and creative. And if you're building your net work and you can understand the compounding dynamic of that, that will build your net worth in time. It could be immediate, it could be a week, it could be three weeks, but just keep building your network. Have a good story to go out there and, and sell and absolutely expand the aperture from being a loan officer to being a liability or a debt manager because now you're looking at the entire, you know, left side of the balance sheet, you know, as we like to say, there's a three side of balance sheet, real estate assets and liabilities. And the realtor is out there, they play a role in this too, and it's really important, but they tend to sell real estate, not manage it. Financial advisors manage assets, lenders sell money, they can have it and become managers of liabilities, much like the financial advisor. And it creates a literally an enormous opportunity for them when they start making that shift. Let's, let's get got a little bit on some data, if you don't mind, because I'm looking at the Facebook group and we'll put links to it all in the show notes. So people, I would assume you would be open to some more folks joining your Facebook group. We got room for three more, man. That's it. Okay. So I'm, where are you at? Well, look, everybody's talking about, oh, rates are going to come down in May, right? Ish, ish. And the Fed's already done enough. We've seen the issues that's going on with some bank failures and stuff and everybody's pointing to, to aggressive inflation. Give me, so I'm a guy off the street, Todd, what, what the hell's happening with inflation? How do I make sense of this all? And considering that, I may want to be buying in the next six months. Let's see, we've got a couple of things there. What is inflation? We could start with it. What's happening with it? Yeah. Well, so M1 money supply, you know, the simplest, the way I think about it is Jeff, you live on an island, there's 10 people there, right? And you guys, you know, you trade in seashells, that's your money. Okay. And there's 100 seashells on the island. So your entire economy and all the people there, they have a finite bounded system called 100 seashells. And the richest guy has got the heart, the most seashells as a percentage of the population. But that creates constraints on what am I willing to trade my seashell for? Like I may have to work and fix someone's hut and they give me three seashells and I think that's fair. I traded my life energy for those seashells and now I got three seashells. I can just spend them on a ramen coat or I can go spend them on, you know, a nice facial massage. That's up to me to decide. But one day, you walk on the beach and there's a bag lying there and you open it up and it's fallen, it's washed up from a ship and has 100 seashells in it. What happens to that economy, right? The person that finds it becomes the richest person there, but they're going to transfer those shells in some way to get things that they want because shells actually are worthless. Money is worthless unless you can exchange it for something. So that 100 is going to make it into that system. Maybe this person keeps some of it so they can stay wealthier than others. But at the end of the day, let's say they keep 40 and the other 60 get dispersed into your economy. The people that are in the economy have more seashells. So what do they do? They can bid up the cost of the services and the goods and the things that they want. We have a society that has had an M1 money growth supply for all time. And this is the first year, the first month that there's a little hook at the top where money supply just shrank for the first time ever, right? So what that means is someone now is taking those seashells and throwing them in the ocean. And you can't find them. And suddenly what starts to happen, right? Things get more constrained and there's less liquidity. But there's still money. There's still that money in the system. But eventually, and what the Fed is doing is they are starving the system of liquidity and dollars to get inflation down. Because inflation, unfortunately, is unsustainable in a society where people can't buy food anymore. It gets you want inflation, but that's why if you look at the Fed, the engineer inflation at 2% and 3% a year. Why? Because if there's inflation, you're always incentivized to spend your money because it's always going to cost more later. So inflation is a monetary phenomenon that is engineered by the government and by the Federal Reserve, why wouldn't they say our goal is inflation target of negative 2%. That's called deflation and everything you want to buy is cheaper down the road. And so you're incentivized to save and not spend. That kills the economy. So inflation is something you want. You always want to have some inflation as an incentive to spend money and grow your economy. But if it gets to be six or seven or eight percent, something starts to happen. It starts to have a negative effect. You can't afford stuff anymore. And people start going into debt because now they're having to make up the shortfall for things like food and shelter and rent and things like that with debt. And that unfortunately is pulling forward their future to man to today so they can live. But now they're paying compounding interest and so this whole thing starts to get all mocked up. So you eventually get to a point where inflation is no longer tenable and you've got to get it down. Why is it not tenable because people get angry? They start overthrowing governments. Every single, if you look at Ray Dahlia's stuff, every major government that's ever fallen fell because the gap between the haves and the have-knots got too far apart. The Roman Empire collapsed because the wealthy and the non-wealthy gets too far apart. You have to have this sort of homeostasis and we are in a weird dynamic where everything in the middle is sort of disappearing. You have extremes of either wealth or you have poverty or you have massive two million dollar homes. You have starter homes. But it's just weird. Everything sort of in the middle has been getting kind of gutted. For whatever random reason, the inverted yield curve popped into my head and I thought I would tee that one up see if you want to briefly explain that because that's relevant of course to what's happening for you. On a simple level, when you're borrowing money, the longer you borrow money, the more risk there is. You're pricing in risk and right now you can earn more on a two month treasury coupon and you can on a ten year, more than on a thirty year. What the market is saying is the risk is being mispriced. The curve is being inverted. I would expect to earn one percent on something for a month and if I locked up for two years, two percent and locked up for thirty years, I'd get five or six percent for that because I'm holding that money and it's a long time and time is risk. You don't know if someone's going to drop a new curve, what's going to happen? But when everything gets inverted like that, the economy is saying, hey, something is really weird. This is what is leading and has led to the banking problems. No one expected the yield curve to invert this fast because when you buy future cash flow and you say invest in a bond is paying three percent, if interest rates go up, your bond is worth less. It goes down in value, because I could sell this right now three percent and buy four percent. What's happened is these banks that had all this money sitting on their balance sheets from deposits, they went out and said, I'm going to keep paying you, Jeff, one percent or one point or point two five percent for your checking account, but I'm going to go buy treasuries right now earning three percent. That's fine unless you want your money back because I can hold to maturity those bonds and I'll get a hundred percent of my money back. The bond will give me that money in time, but you take your money out of the checking account right now because you know what you want to do? You want to go put it in a money market and get your own three percent. I've got to give you that money back, but I put that money in a two year treasury at three percent, but the fed raised rates and that bond, if I sell it right now, is worth half of what it was worth before, but I have no choice. I've got to sell it at half the value, give you your money so you can go buy the same bond yourself, but I don't have the liquidity to do that. SVP, they had to take a two billion dollar write off, which was manageable, but that's the haircut because if you have a four percent bond, you can buy today and I've got a three percent, how do I make you right? I have to give you a four percent yield. You're going to make it. You get a four percent yield. I got a discount at 25 percent and take a 25 percent haircut and then you'll buy it because if you buy a three percent bond at a 25 percent discount, that's a lot getting a four percent bond in terms of your real yield, but I just took a 25 percent loss just to give you your money back so you could go buy your own bond and I'm going to get on my soapbox. We just want to minute here if I can, I'm kind of on it, but I'm going to step on the next thing, buy the house, date the rate, SVP was dating the rate. Some of these language that people are using right now is really dangerous because you're implying to someone who's going to make a 20 or 30 year commitment and buying a house and securing a bond, that's what mortgages are. They're buying a 30 year bond that they can get out and get into something lower. SVP thought they were doing the safest thing they could buy in US categories and rates continue to go up. They were dating the rate. So you've got to be really careful when you hear a cute term like that and you get into it too much, at least put disclosures and disclaimers on it and say, this is just a concept. Your rates may not go down. Your house value could also go down because I'm watching videos and TikToks and social media stuff and it's all like, hey, don't worry, buy your house now. You can refinance it for 4% in 10 years. You can't say that without a disclaimer. That's an implied guarantee without a disclaimer and I'm very worried that a lot of loans are right now and even realtors are trying to induce business opportunities that may come back to hurt them down the road. So that's a side more, but SVP was dating the rate. So I saw a quote, I won't remember the whole thing, but about that date, the rate thing was, yeah, marry the house date, the rate, but whoops, the rate got pregnant and it's going to be around for a while. Yes. And you've got child support for 30 years, so no form of your current note rate. Exactly. I love it. I love it. It was a good one. Anyway, I don't know if I got your stuff in there, but inflation is a dynamic. It's always a monetary dynamic. With too much money in the system, we still do. It's going to take a long time to work it out. The Fed is, think about it, interest rates are a tax on everyone, right? So I can tax all the way down because, you know, a small percentage of the population actually pays taxes. So you can raise taxes. You don't really raise revenues for the government. You don't necessarily put stress on people like you think, but interest rates do because credit cards, people that are in the lower echelons have credit cards, you know, ironically wealthy people right now can take all their money out of the stock market and earn 5, 5, and a half percent risk free and treasuries, whereas before they were earning 7 or 8 percent in the market, but it was incredibly volatile, right? So you're having, you have all these weird effects. You think raising rates is going to hurt the economy that it does. It hurts sectors of the economy like building, construction, real estate, but actually helps other areas. You would think it would help banks, but it actually hurts banks, you know, in some ways. There are a lot of unintended consequences when you start poking the bear, but when you jump in his cave and get on him at night and poke him fast, you don't know what's going to happen. And we're starting to see that now. We got cocaine bear going on in the markets and, you know, if people like, I didn't expect that to happen. I'm like, well, I don't know that anyone's ever given a bear a kilo of cocaine and, you know, the core, but that's really kind of what's going on, right? So how much of this, this, you said we still have excess money supply, right? How much of that is because of the COVID stimulation and all that? 50% of every dollar that exists on the planet has been printed in like the last eight years. Really? And yes, you're talking, think about that conceptually. I mean, if you look at the M1 supply, and you look at, there's a chart in my Facebook page on this. There's quite a few on the M1 and money-sponsed up. But one of them talks about money supply over time. So this is the other thing. Inflation is a tax on everyone that people don't understand, right? If, if I'm sitting here with 100 seashells, and that other 100 seashell shows up on the shore, my money's worth 50% of what it was a moment earlier, because there's a larger supply of the seashells. Because there's 200 now and I have about 50% of supply. So when the Fed keeps printing like they have been, they are stimulating the economy. But again, it's in the form of borrow. They're borrowing from themselves, creating new money and putting it into the system. That is also pulling demand forward in the way that we talked about earlier. That is meaning we are robbing our children. Someone's going to repay this debt, either in real dollars or in political capital, like losing supremacy to China and other places because you can't keep creating money. Eventually, people get pissed. The Saudi Arabia government says, look, you guys keep printing money. We have all of our oil and dollars. We're not going to stand for that anymore. We're going to party with China and Russia. I mean, you got to pay at some point, right? I know we're way out there in the weeds on the macro, but there's no free lunch anywhere. And if you keep creating inflation at 6% a year, you are losing 6% of your wealth per year because it's not, it's spending power that you care about. And if you go to the store, and I get a chipotle right now, one more time, and spend $48 on my wife and I to get a burrito and dinner, it's like, that used to be a really nice night out at the club or something. So all right, let's, I love that. Let's just play that snare for a moment here at the chipotle, 48 bucks. So when inflation pulls back and rates come down, does your chipotle become less, or does it stay? That is a great question. That's when you hear the words sticky. So the average fast food worker in America, as of last month, makes $18 an hour. Wow. A year ago, it was $12, and before that, it was in the 8 to 10 range, right, just two years ago. So think about that. Yes. Are you going to take that chipotle worker, this is the cashier, and say, sorry, we're taking you back to $10 an hour. No, you can't. And that's, that's what I think happens is that we get used to paying the higher fees for these retail, right, food, et cetera, the consumable goods, but it's not like these companies go, oh, hey, inflation's back down. Let's reduce the, our cost here, or rather our price. And that's why I do that. So the highest in history, corporate profits of the highest in history, because they front ran the inflation and the supply and other stuff. And then consumers didn't back, back down their spending. This is where the Fed is going nuts right now, because they keep raising rates, and people keep spending, and jobs, they're looking for some job destruction right now. They're not getting that either because people are still hiring for the most part, although we're starting to see that, you know, major shifts there in tech and other places, the construction industry still growing because we've got an inventory problem. So the builders are finally going, look, we can build it. People are going to buy it because the people that, what they're realizing is all these people that have existing real estate, if they sell right now, their 3% goes away. So anything that they do, they're swapping costs is 4%. I got to go pay seven. So if I go from a 400,000 dollar house to a 500 dollar house, it's like buying an 800,000 dollar house. Because I'm going from three on my current net, which I've gotten used to, to seven on the new though. So I'm staying here. I mean, we're not moving. We're going to remodel. That kind of stuff. So the builders are figuring this out. They're going, holy cow, the only way to get to solve this is to build more houses. If we build more houses, you know, we can sell them because of this inventory issue. So the government was hoping there'd be some construction, you know, destruction and things like that. And that's not happening. And why is that not happening? Is that still a supply? I mean, that's not been happening since the host number of numbers finally gone down and building costs and supplies have gone down. So the builders can start building again, very, very efficiently. And they can happen. Is it going to happen? I mean, yeah, just the last start I saw a lumber prices is where we're down below normal, like after hitting this crazy level, we're all the way back. Right? We're back down to normal for what? I'm reading where you have like a million, you know, houses short. Oh, you know, that's what I mean. The lumber prices are really down, the construction materials are really down, so the builders are trying to ramp up their sort of building and saying, look, if we build it, people will buy it because they don't have existing inventory out there to buy it, that's, you're not going to solve the inventory problem with existing homes because there's a rate problem. People don't want to give up that cheaper, right? But you think that regarding the inventory issue, right? Do you think that will ever be solved or at least kind of more in line? I think it will, well, all problems get solved if they're painful enough, and, you know, it may mean that we have to solve them in new ways, you know, you know, printed homes and in demand, you know, construction and going on in those tiny homes, those 3D printer homes. 3D printer homes, 80 years, California is trying to solve it by paying you $40,000 to build an additional dwelling unit on your property. Yeah, you get $42,000 in California. If you'll build an additional unit on your property for rent, or you can move into it and rent your main house, I mean, you start to see structural kinds of things that are trying to be done. We're going to build more high rises. Absolutely. But we also have a population problem, our population is dropping as well. So you've got other weird things going on there, you know, too, that, you know, take a little bit of the pressure off, you know, if you're starting to slow. You have a, you have an image in your Facebook group, and we will put a link up, but if you're reading it, right, listening right now, just tap the link in the show notes, right, to its Facebook.com forward slash N-I-F-E-C-L-A, this, this image, you know, the map I'm referring to, it's like 98% blue, and there's like the orange that shows the severe under supply is all west coast. Yeah, yeah, yeah. But every other area of the country, it looks like according to this map, it looks like there is adequate supply, but severe under supply. What are these? The growth states? Yeah. Well, people want to live on the west coast because it's beautiful, but then they're also fleeing because the prices have continued to go up so dramatically. So you're seeing sort of a migrations in the middle of the country. In many ways, I've certainly had friends, I've talked a lot off, so they have days leaving Portland and they're moving to Florida. But a lot of the loan officers, I know that we work within our group, they're expanding their reach to do loans for their clients, we're moving to Idaho and Michigan and places like that in the Midwest where they can sell a million-dollar house in California and buy a nicer house for 300,000 with lower taxes and everything else, and so that's, that could help with inventory, but it's going to create other issues, right? Migration issues always, you can lose those property, not property taxes, but income. That's what I did five years ago, man, left California in Nevada, so. Oh, I've had two friends move to Austin in the last couple years. I mean, they're just finding interesting places to move and relocate where the quality of life is there and you can become a king, right? You move the other side of the island and find the seashell, your king. There's always, that's a good example. There's always trade-offs, of course, and everything. Absolutely. All right, I'm looking at some of this more of this information here. You have a, I'm trying to see if I understand this graph correctly. Let me, it is a downward trend showing, and I can share it to you and I are on the same page here. I'm going to scroll back up. All right. So here, let me share it. So you're on the same page. All right. This is it right here. This will be good for the YouTube peeps. Yeah. All right. So this one right here, market expectations for Fed funds rate, and is this is forecasting out to January 2025? Yep. Yeah. So this is taking the way the yield curve is positioned stop and looking at futures and saying, hey, you know, we had seen, you know, you could go down some of the early charts and what you'll suddenly see is there was say, expecting no rate cuts until 2024 originally, they thought it was going to start in February of this year and they got moved way out. Now that stuff is starting to break, how do you take pressure off of companies, zombie companies that can't make their debt service payments and can't refinance right now? I think, but your company, any finance that's debt on a two year commercial note at 3%, and your company now is flatlined or it's seeing some decreasing stress. And you've got, what, refinance that note and the bank says it's going to be 5%. And you're like, that's, you know, one and a half times what we're paying right now or two and a half times what we're paying right now. That puts stress. So this is all of this stuff that they're doing, the slow becomes putting stress on the economy and things are starting to break. So people are saying, hey, the Fed can't lower rates because politically that will continue to fuel inflation. But right, if I, if I, if I stop raising rates and lower rates, I'm actually doing what? I'm creating more money. I'm people that my credit card payments go down, my auto payments go down. I have more, you know, cash for debt, you know, I can refinance and get cheap stuff. So they have pressure to keep rates high until the pressure is, say, the economy, which is what happened with SVP is what's happening with credit Swiss right now. It's what's happening with this, you know, FRC and these other banks, they're starting to break down because they're collapsing on the weight of these higher interest rate things. So then suddenly, the yield curve reprices and says, I believe we're going to have to lower sooner. So now you're starting to see expectations that, and tomorrow is the big day. This is probably the biggest financial day we've had in so much time because there's just a occasion for them to stop lowering rates and just stay where they are. There's just a occasion for them to start lowering rates to take pressure off the banks and the, and the ecosystem. There's, there's really a great justification to go bigger and raise rates more because inflation and job stuff's not happening. So you could go any direction and the direction we get tomorrow in this sort of Fed funds announcement, it's going to probably tell us a lot about where we're going to go over the rest of this year. All right. Todd, it's prediction time. What? What are you predicting for tomorrow's Fed meeting in regards to rates? I think the Fed will do 25 because there's sort of a moral hazard. Increase. Increase. Increase. All right. I think you're spending so much time and energy shoring up the banks because they want to continue to show their commitment to getting inflation down. If they don't get inflation down now, they'll be fighting it as we go into the election season and that's not a good thing. But they also don't want to tank the markets because they were in a recession, which will probably already end. That's the balance. If I told you, I'm going to stop raising rates, your question should be, wait a minute, why? Is there something else coming that I haven't seen you start an election, an election, but also that you may see stuff. I don't see that's happening that's much worse. And maybe you're doing that because you have to and maybe I should be really scared. Maybe I should pull my money out of the market. So you started to create these self-fulfilling kind of profits. Well, don't you think that the current administration, there's going to be a election in 2024, right? Next year, don't you, I mean, you want to go to that election with the economy doing well, right? So. You do. And yeah, and if people can't afford to put gas in their car and buy groceries and stuff, that's their economy, right? Like, you know, a 60-year-old wealthy executive, the economy to them is a stock market. The economy to your average American is, do I have more month than money? Right. Because if I do, I'm in pain and the mildly choice right now is to go get another job and work extra hours or use a credit card. So the economy and the base that you're playing to is going to be very different. But the bigger economy is those smaller Americans, the majority, 15% of all Americans have access to financial advisor. So it's not, that's the base, right? Most people don't have access to financial advice. Most people have negative real savings, most people that are going to put someone in office. And that's why inflation is really more important than the stock market and what we think of oftentimes is the broader economy. So you have another graphic from yesterday in your Facebook group about housing, right on track with overall inflation, 80% more expensive in the last 22 years. That means your house values have gone up and your cost of service that debt has gone down. Yes. So this is the thing that, it's one of my favorite things about inflation that the loan officer to especially should understand this in real terms too. So if you borrow money, $100,000, and let's say you bought it in your example 22 years ago, right? If you were to wait and today write a check to pay off that $100,000 note, you're paying $0.18 on the dollar because the property has gone up 80% in value, but it costs you because of inflation, inflation inflates assets, but it deflates loans. And this is why people kind of get confused. If you are the bank, you are the bank, Jeff, you loan me the $100,000 for the house. I pay you back in 22 years. Here's your $100,000, Jeff. You can only buy $18,000 worth of stuff, right? Because that money has lost 82% of its purchasing power. So when you have debt, inflation is your friend. It's allowing you to pay off the same dollar you borrowed 20 years ago with today's dollars, which are going up in value because most people make money over time index to inflation. You at least get a 2% or 3% annual raise. That's to keep your buying power the same. So your buying power is saying the same, but your real cost to paying that debt off is going down. So and people know this intuitively, if I said you I'm going to borrow $100,000 and pay you back in 30 years, you know that that's not a good deal for you. And so you say, well, compensate for that. I'm going to charge you something. It's called interest. So interest is a construct that was created to maintain buying power for people when they loan other people money. If you pay me interest, I'm not actually making money. I'm maintaining my borrowing power over time. As an interest is higher than inflation, I make money. So if you loan me money at 7%, and I pay you back at 7%, I'm not paying you back $100,000, I'm going to pay you back $225,000. But if inflation was 3% over that 30 years, you make that 4% spread, right? Because you're getting that difference. But if you loan me $100,000 at 4%, and inflation 7%, you're welcome to. And say inflation 6%, then I'm actually earning 2% to borrow from you. Yeah. Because you're earning 4, and I'm paying a negative 6, it's offsetting. So that's why borrowing is the best thing ever if there's inflation. And I wrote a whole paper on it, and there's on the blog post, if you search inflation, I wrote a 3 or 4 page paper on this, and I have a calculator that I developed. You put in your interest rate, your borrowing cost inflation, it actually shows you what you're repaying and real dollars. And it's a really important concept to help consumers understand that you don't get that benefit if you pay cash for a house. Yeah. It's going to be bar. Right. Which is why real estate is such a great asset class for investing for all the reasons. You just described, including depreciation, et cetera, leverage, right? But yeah, that's, I think what you just kind of walk through right there, when we talked about becoming a debt manager and being able to articulate that in today's world, like if it's a loan officer listening could get better at articulating why borrowing during inflation makes sense, right? And all the things you mentioned, like you're going to really level up your perception about being a mortgage professional. Absolutely. So when you can explain to someone that they're better off borrowing at 5% and an 8% inflationary environment, then borrowing it 4% and a 0% inflationary environment, you know, that sounds completely antithetical, but it's again, when you borrow money, you're pledging to pay it back over 30 years. That's the problem with renting. Renting is indexed to inflation. It's always going to continue to creep up. But I can pay for a house today, use it for 30 years and pay it today's dollars. That is cheating. It's one of the few facts that I find that most people don't understand why it creates wealth. It's not just the house going up. It's the fact that I literally indexed my cost of living to something 10, 20, 30 years ago, and if inflation's only 3% a year, in 30 years, I'm going to be indexing my cost of living, 90% behind where I was at 3% a year or 30 years, I'm paying in 30-year-old dollars. This is incredible, but you can't do that anywhere else that I'm aware of. Yeah. Of course, it does come down to for a lot of people they think in terms of payment and you still have to have that conversation. Again, listeners, I'm just saying add this skill set of being able to articulate that management and everything that it means when it comes to people investing, buying real estate. The common denominator is money, Jeff. This is a thing like realtors, lenders, and financial advisors, and their clients have something very similar in common, and that is money. All of their work, all of their energy is translated into money, and that's the common denominator in common language. Money literacy is literally where all, there's so much in common between the language of money because you're working for money, I'm working for money, I save money, I'm paid, my interest is in money, we have this sort of common language that we forget about that if you learn to speak that language, you realize, we're all doing the same stuff. Why do you want to lower rate because you want more cash flow? Why do you want a good deal on a house because you want to spend less on it? Why do you want to save for the future because you want your money to earn its own money in the form of interest? So what? At some point that money can support you when you're not making money and you're doing something else with your time. It's all sort of a common language that we all need to learn to speak in our way. Let me ask you this probably final question. Just just my own curiosity is, we've heard for many, many years about devaluing the US dollar and this goes back to what you said about us, the government borrowing all the time. And I've asked, I have a friend who's a chartered financial analyst this question a few years ago and at that point, anyway, this is going back at least half a dozen years. He was very bullish on the strength of the US dollar and the US economy and all that noise and China and everything, you know, all that kind of was just like the US dollar is just so strong, you know, that he has no concern about that. I'm curious if you had any input on that. The US dollar is strong because of our rule of law, because people understand that we protect our capital, we protect our dollar, but there are lots of other currencies, oil is a currency, but it's denominated in US dollars, right? Most of the world, you know, sort of ecosystem is based in US dollars and that's, again, go back to Ray Dalio's kind of stuff, which is really interesting on how powers change over time. And it's usually when you lose the reserve currency, you lose your world power. Now dollars, when I say rule of law, I'm also talking about military, right? Because we have a military, a strong military, you can enforce that rule of law against other countries. But if China comes in and partners and takes out our protection agreement with Saudi Arabia from the 70s and said, we'll protect you. But you have to denominate oil going forward in one, not dollars. You're going to start to see cracking in the overall ecosystem of the dollars reserve currency in which case it starts to get value. That's really bad for us because we can keep printing dollars because we make dollars. We have a dollar factory called the Federal Reserve. We can make these dollars, but when we print dollars, we're devaluating everyone's dollar on the entire planet and the planet knows that. So if you have money in Switzerland or you have money in Russia that you have a US dollars and we print dollars, your dollar value is down. If you have Chinese one and they print one, your value is going down. So there isn't awareness when you're spending power and you're still being devalued. And so the US government cannot keep printing to solve our problems because if we do that, we'll keep the valuing our dollar and we'll eventually lose that world reserve currency. But when there's a problem like you saw happen with this economy recently when you spank stuff, you immediately saw a flight to the US dollar because it's a safe haven and when there's instability, eventually they may fly to something else. If people thought it was going to be Bitcoin, people thought it was going to be this and that. Who knows? There's a lot of trust and that trust is military strength. It's rule of law with all those things that China hasn't had in the past, but they can bully their way there if they get enough other countries, India, Russia, other countries to say I'm going to play a new game with the one. Yeah, but we've been printing money for years. I've heard about this since, you know, I've been in the mortgage business in 2003 and I'm sure grandpa used to bitch about like the government keeps printing money and borrowing money and, you know, oh my God, if everybody we owe money to ever calls in that debt, right, we're screwed. So what's the answer? You say we have to stop printing money. What does that mean? How do we then the government has revenue sources? Does that mean we just raise taxes more or what? Well, there's a great chart in our flannel taxes. Anytime we get close to 18%, if we tax our citizens at 18%, all hell breaks loose, the economy goes into major recession and all the government gets thrown out a new, a new era happens. And so each time we keep trying to raise taxes, that's one way to do it, but again, you only get so much blood from an orange, you've already got inflation tax in me. Now you're going to try to tax me for my work and things are going up. At some point, the citizen says enough and they say that in voting and then we see a new power kind of come in. We sort of saw that in the last election cycle, we're going to see it probably again here happening. We've been talking about inflation. The most deflationary force in history just hit and it's called AI. So technology has been the great, the flater because it allows people to do more with less. And that creates productivity and more productivity means more money. And the US is the most productive economy on the planet because we're incredibly creative. Cat GPT and always due to AI tools are going to be much like the tractor. One tractor could do 100 men's work in a day. AI will allow people to do 100 times what they were already doing if they want to do that or to have more free time to spend money and do other things. That's the deflationary for the society as a whole because when you can do more with less, right, it just sort of over time starts to deflate because I can have fewer workers. That $18 an hour worker, I can't get rid of them until I can buy a robot. They can do it better for $4,000 as a fixed installation. And the AI is going to answer my questions and help me and push the buttons. That's how I get that's deflationary. It starts to completely change the way we think about work and other stuff. And I saw a great quote the other day that AI will not replace your job, the person with AI will. And I truly believe that. It's augmented intelligence. It's additional intelligence as I like to call it. It's a second brain. It's going to allow you to be incredibly effective. But that's deflationary. If I can now do the work I was doing in my system had to do before because I don't need her to do marketing anymore, I can let her go. That's deflationary in a good way for me. It reduces my cost of running my business. But now this person's now got to go find a new job and get retrained or whatever. So you're going to see a huge shift I think in our society. But we're at the epicenter of that, which could be a really good thing. It's just going to take time to work its way through the system, new economy. Yeah, thanks for bringing that up. I know we meant to talk about that. I saw the quote. I'm sure you would agree. I'm assuming you tell me we've got to put a put a bow on this one. But a quote, of course, Microsoft's invested 10 billion, right? So, but their comment or quote was that if this sounds obvious, I apologize. But that AI will have as equal perhaps greater impact on us as did the personal computer in the Internet. That's absolutely. This feels like ninth grade of me when somebody came into my office and said, I want to talk about the Internet. And I was like, what? You know, just make absolutely. I was like, what the hell are you talking about? It didn't make sense. I think this is the same kind of sea change. But exponentially, if you kind of look at a Moore's law, this is going to be exponential stuff. When co-pilot is in all of your documents and I start to build a spreadsheet. And I just say, hey, build me a rental comparison proposal for client on this and this. And the spreadsheet's built. And you can send it to him a custom sheet and the kind of stuff you can do right now with writing and a lot of the tools that we play around with. I've got a great little, got a post on this that I updated weekly. But I have my favorite tools in there by category. Writing, imagery, marketing. And it's in the blog if you want to play around with that. But I'm just, I'm really fascinated by the changes that I think are going to be brought about. Medicine, I mean, just short, I never need to wrap. But you know, they just, it's been passing every exam, every bar, every medical stuff. They had a simulation that they've been running for years on medical advice. And AI was 200% better than a doctor at taking the intake form and diagnosing what's actually going on, right? With this Chaggit beauty, when they did the same test, it was 750% better. Now, you think about a doctor, you're thinking about the schooling and the education. But you're also, you've got such bias, such, you know, this and that. And it's probably this, it's going around all that, the, the, the intake form with just the symptoms on it. What will that do for the medical permission? Right. When you come in, right? And someone can put that form together and it's got a five times better chance to diagnose it much wrong. And you start with the diagnosis and work backward versus having a conversation, trying to figure it out. You need less doctors, you need less, all kinds of things for that. And that's going to be between the mortgage industry, between the real estate industry, the job will go away. There's going to shift and, and, and, and, and be very different. Hmm, very interesting stuff. And thank you for reminding me of the blog, borrowsmartuneiversity.com. As we can find that, that'll be a link here as well in addition to the Facebook group. Man, we could, we could keep talking for hours. I know it's always great to have you on. And I really, really appreciate you sharing some of your knowledge and expertise with our listeners. Hey, I appreciate it, man. Again, we also get kind of a common language here. And it's just fun to talk about some of these different topics. It, it really, it's a difficult but also an incredibly exciting time to, to, to be alive. And encourage people right now, build your network. You've got time. Everyone was complaining. They were too busy, you know, a year ago to do it, to learn things now, like, learn, grow, develop yourself. My slogan right now is, grow yourself and your business will keep ketchup. You've got to keep growing yourself, grow yourself, your business will catch up. If you're trying to grow your business right now, you're going to struggle with finding ways to do that. You grow yourself. All of these ways start to appear and they become very, very obvious. And so you kind of have to flip the script a little bit and, and invert your thinking. Yeah, that's definitely a good advice. I like that tagline too. All right, so once again, people, links are in the show notes. Check it out. Todd, as always, thank you and listen to your junior to do. If you like this episode, you can leave us a review or share it with somebody. We'll see you on the next one. Bye for now. Hey, guys, what's up real quick? You've heard about the mortgage marketing pro membership before. And I just want to quickly remind you if that you're in a place in your business where you simply need more purchased loans. You need to fill your pipeline with purchase business. Let's just face it, agents are still a solid pillar of business and sources of purchase business for you. Well, good news. Our mortgage marketing pro membership helps loan officers like you close more loans without the hassle of chasing agents or cold calling. Done for you, agent classes, expert training videos, a marketing automation platform that automates the entire process for you, everything you need to build your personal brand in your local market, attract and convert agents into referral partners. 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