Episode 112 - Marks on the Marketplace—May 2022
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Once a month, we take a look back at what God is doing in the world of Faith Driven Investing and the global markets. We also spend time looking at current trends and outlooks with great interest and discernment in hopes to identify God’s redemptive work in the world. Tune in as investment professionals push the conversation forward about faith, investment philosophy, and the frontiers where innovation is happening. This is Marks on the Markets for May 2022.
All opinions expressed on this podcast, including the team and guests, are solely their opinions. Host and guests may maintain positions in the companies and securities discussed. This podcast is for informational purposes only and should not be relied upon as specific investment advice for any individual or organization.
Episode Transcript
Transcription is done by an AI software. While technology is an incredible tool to automate this process, there will be misspellings and typos that might accompany it. Please keep that in mind as you work through it.
John Coleman: Welcome back to the Faith Driven Investor podcast. This is John Coleman and we're introducing an exciting new segment today marks on markets where we get a series of experts from around the faith aligned investment space to speak about markets, what they're seeing in markets, and how you can begin to interpret what you're seeing in markets. This is the first episode in that series and we are super privileged to have an amazing group. Today we're joined by Dolores Bamford, who's the co-CEO of Eventide. In addition to a long and prestigious career. We have Jake Thomsen, who's the managing partner of venture capital at Sovereign's Capital, and we have Nick Stonestreet, who's the CIO and CEO of Ronald Blue Trust, a wealth management and advisory firm based out of Alpharetta, Georgia, just about 30 or 40 minutes north of me, although I think Nick is in a different area today. So we're really grateful to have you on and very much looking forward to speaking with you all today. So, Dolores, I'm going to go to you first. It would be putting it mildly to say that it's been another tumultuous month in markets. The last few months have been pretty tumultuous. What do you think are the major factors moving markets right now?
Dolores Bamford: Hi, John. I'm so excited to be here and to talking with you and being part of this podcast. And you know, first of all, as you said, it's been a very tumultuous month. It's been a tumultuous six months, I would say, in the markets. And there have been many really important, serious issues that have been impacting the markets. I would say the most significant issue that's been affecting the markets the most, in my opinion, has been a change in interest rates or this dramatic change that we've seen in interest rates and a dramatic change that we've seen in the Fed's position on monetary policy, just moving from a very aggressive easing policy to an aggressive, hawkish position and with plans of rapidly raising interest rates and going from quantitative easing to quantitative tightening in response to a lot of inflation and supply chain constraints. That's seen and it's in the markets. So if the Fed is watching inflation closely for its policies, then it's really important for us to watch these trends as well. The trends in inflation and commodity prices to gain insights into the future actions regarding interest rates and quantitative tightening. The positives that we see right now in the markets is that the markets are discounting a lot of fear right now over the Fed and a lot of fear over the inflation trends that have been manifesting themselves over the last 6 to 12 months and a lot of supply chain constraints. But for us, we see these trends in the supply chain constraints peaking and potentially rolling over soon and valuations becoming a lot more attractive right now. So the bottom line is that the markets have digested and discounted a lot of this action from the Fed. And there are a lot of opportunities right now for significant upside if one is patient and one has sort of a long term time horizon. So bottom line is we do recommend staying high quality and investing in financially strong and resilient companies because the storm may still continue for a while and the markets may remain volatile as the Fed continues its sort of more hawkish position. So that's going to be important, but also to remain invested and to stay patient and persistent in your investing philosophy because at some point the markets will turn.
John Coleman: Yeah. Thank you, Delores. And it has been a little bit of a perfect storm, particularly for prices with supply chain disruption, with gas prices going up, oil prices going up because of the war in Russia and Ukraine, I'm sorry, as well as other factors. You know, Nick, one of the questions everyone has right now is just how individuals are responding to this. Obviously, the tumult can lead retail and institutional investors to make dramatic changes in their portfolio. What are you hearing from clients and how, if at all, are you advising them to shift their portfolios?
Nick Stonestreet: Well, you know, John, there's always going to be a level of concern in tumultuous markets from clients. And, you know, we can talk about broad themes, but then now we're talking about it, you know, idiosyncratically what's happening to individuals. And really, one of the kind of themes that we have at Ronald Blue Trust is we think that, you know, the best portfolio for a client is the one they can stay in long term. And so going through and making sure that the client's objectives line up with their portfolio is critical. And then, John, we use time based portfolios. So instead of, you know, just kind of one pie chart, we'll have four pie charts over different time bases. You know, when the pandemic hit March of 20, we saw that kind of a shock and then a bounce back, right? So we saw that kind of a pattern. And clients could see, you know, it was their ten year bucket or 15 year long term, ultra long term part of their portfolio that got hit. And they know they have a long time to recover. This one's a little bit different because it dug in a little deeper because we've seen fixed income really struggle as well. And so if they're looking at time bases, their short term is held up reasonably well. But intermediate term, which is mostly fixed income, has taken a hit along with the long term. So some of our clients have been a little bit concerned, especially around fixed income and the kind of hit that fixed incomes taken. So walking them through their plan and understanding that they can still meet their financial goals is a great source of bringing peace of mind to clients. And most of our clients are planning clients. We have very few investment only clients. We kind of discourage it. And so if they can line up and look at their plan and see out over that horizon, even though it's a bit different this time because of how hard fixed income is getting hit, then most clients have been pretty settled. We haven't had a lot of issues, you know, we haven't been called into meetings where you just have to calm down clients. It's been pretty much business as usual. However, I do think as this persists, we get another down leg. Then we're going to start to see more and more nervousness out of our clients. But by putting in the portfolio, they can stay in long term and by having time based buckets. I think the methodology that we've used with clients has helped them stay extremely calm during a pretty tumultuous time.
John Coleman: Yeah, and I think one of the things that's probably helping on some fronts is just we have seen a remarkable upturn in markets over the last couple of years. And we're basically in the midst of a 15 year bull run right now. The danger of that is a lot of younger investors, even at institutions, have really never experienced a bear market or a downturn if they didn't live through the great financial crisis. The upside of that, however, is everyone's portfolios versus a couple of years ago were up so dramatically that even this pullback has often not eroded the value that they've gained since the pre-COVID levels. Jake, one of the areas that might be a modest exception to that in some cases is growth stocks. Growth stocks have taken among the biggest hits of the last few months. And I would love your perspective on why that is. Just why are growth stocks taking such a hit and how is that filtering into the venture and growth markets in private markets? Are you seeing those compressions in value materialize, for example, an early stage venture or is that still something to be determined?
Jake Thomsen: Yeah, thanks, John. It's a very relevant question because a lot of this is happening in real time. But it was kicked off, as you mentioned, by a lot of the adjustments in the public markets. You know, you see a lot of tech companies that are really responding to the forces that deliver some impact. I'd probably categorize those as the emotional response. And the more fundamental response is that the voting machine in the way machine that Buffett would describe. And on the emotional side, you have a lot of these macroeconomic factors, and you're dealing with an asset class that is very high risk, high reward. Right. These high flying tech stocks, many of them weren't around even ten, 12 years ago. There are VC back companies that now make up almost 75% of the market cap of U.S. public markets. So it's a big part that has grown very quickly. And when you start seeing things like inflation and like the war and Covid and the rest, they're just nervousness. So those are the kinds of stocks that have seen a lot of speculation that are going to adjust most quickly from an emotional perspective. I would also highlight on a more fundamental way to look at it. If I'm an analyst and I'm looking at a technology stock and I'm saying, what is it worth today? I'm using the classic method of just kind of cash flows, or I'm looking at all the future cash flows and I'm bringing them to a value today to see what they're worth. And geek out in corporate finance for just a second. Got a few variables that really matter. Right. And two of them are growth and the risk of a company that is proxy by the cost of capital. And so during COVID, we saw huge growth in a lot of these companies. We were doing life completely different. We actually thought that a lot of that would stick around, right? Whether it's exercise bikes at home or video recordings for work or e-commerce. All these companies saw huge growth that we kind of thought would stick around. But over the last six months or so, we started to see what turns out. When we come out of COVID and the lockdowns, we return more to the long term growth of those stocks. So this is a correction in our expected growth goes down, which impacts our guide today. And the second piece would be the interest rates, right? If you're looking at the cost of capital, well, it turns out as interest rates increase, that's a major factor, that cost of capital. So all those future cash flows are now worth less today. And so many technology companies, the major part of the value in the future, especially you look at SPACs, right? We're coming out of the golden age of SPACs where most of these companies did not have profitability. Right. That's one of the allure of SPACs. Much easier to do that. And so you have that basket of companies that's been hit even worse because of those interest rates. And again, those companies are now worth less. So you have analysts at are predicting less for value. Of course, the big banks are going to follow suit and that's going to compress the prices for those public companies. And your point, that does impact what we're seeing on the private side, because that's a bit of the canary in the coal mine for those those private companies. And it's very logical because if you think about the series C investors so later stage still private and I need this for a round numbers I need to get a 4x return on my investments all of a sudden I look my exit market has now fallen by say 50% while get my four x return my entry multiples now be half of what I was offering. Right? So I'm going to drop those. And when I do that as a series C investor, series B followed suits, then A and then C, so we're seeing that starting to trickle down. Q4 we really saw a lot of public stocks take a hit. Q1 We started to see either later stage multiples. You saw Fidelity and others writing down some of those big tech stocks we haven't yet seen seed and series a compression, although all the early indicators are there. Deals that used to take two or three days, literally are now taken four - six, eight weeks again, which is a really good thing. You can actually have a relationship and get to know somebody in that case. And so you're starting to see some of that change on the earlier stage too, not quite there yet, but everybody expects it to be in Q1, Q2.
John Coleman: One of the more fascinating pieces of research I saw out of my old team at a place I used to work. We had some venture investors there and they had done research at past economic downturns. So what happens when there's a market downturn in tech, in an economic downturn, and it's often in the period immediately following that, that there are a huge number of early stage companies launched that go on to be very innovative. So the research that they pulled together and it made conceptual sense. When public markets go down and even later stage venture markets go down, all the options that people had in these technology companies become effectively worthless, right? Because they're so far out of the money. And so you see the most talented engineers and business leaders will often lead some of these companies that have rewarded them in options because the cost of leaving is so much lower. And so they're actually a huge number of really innovative startups that can come on the back of these bear markets sometime. And so, you know, there could be a ray of light through the clouds in terms of the potential innovation in earlier stage startups. I think that come on the backs of these bear markets. Switching back to Nick and Dolores, maybe I'll ask both of you, maybe Dolores, if you wouldn't mind commenting first. We talk a lot about market movements and started talking about interest rates. I'm going to focus now a little bit on the the real economy, the actual underlying economy. And you started talking about inflation. Dolores were obviously keeping an eye out this morning. There was a jobs report where jobs had grown, but less than folks expected. And obviously first quarter GDP was down and people are potentially expecting a recession. How are you feeling about the real economy right now and do you think that's baked into markets?
Dolores Bamford: I can definitely answer that in two stages one on the economy and then on the markets. With respect to the economy in the US, consumer and corporations are in great shape financially in general. The economy is on a strong footing except for, I would say, the lower income part of the economy. Right. That is hurt more by inflation. Right. So people who don't have as much income or savings are really going to be hurt. More and more of their income is going to be for goods that now are going to be costing a lot more like gasoline, food, housing. So say the lower income part of the market is starting to hurt significantly with the higher income part of the market still relatively strong. But I do see the probability of a recession overall increasing because of higher interest rates, weakening equity markets in fixed income markets, geopolitical issues and the continuation potentially of higher oil prices that will continue to put pressure on the economy and economic growth. So I think there is definitely a probability of the economy slowing for sure. We do see the probability of the economy slipping into a recession less than 50% in the near term because of the overall strength of the economy in other places. But it's definitely going to weaken. And to be honest with you, it's actually very important that it weaken because the Fed is looking for that to maybe moderate its positioning in raising interest rates. So it actually will be a positive. I know this sounds contrarian, but it's actually positive for the markets to see the economy start to slow down and for these inflationary pressures to start to subside. So you can definitely see that in many commodities and many other types of spending reports that the economy is starting to slow down. And that is absolutely a good thing in the long term that we can get people to stop spending so much and that we start getting pricing on food and the essentials to slow down. Now, with respect to the markets, we think that a recession is baked in too many parts of the market. As Jake was talking about, some of these higher growth areas have been totally destroyed in terms of valuations. Many parts of the market, high growth stocks have been really hit hard. Other parts of the market that may be reflecting value stocks or more commodities may not be discounting a recession. They may actually be discounting the economy or their pricing to be very strong. So it's a mixed picture. But overall, I would say the market in general is discounting a recession.
John Coleman: Nick, I'd love to turn to you. Any any additional thoughts there? Or do you see it differently at Ronald Blue Trust?
Nick Stonestreet: First, I just want to comment with some of the things Jake said, because I have kind of a simplistic framework for sort of the sell off and growth. And I think it's just kind of useful for investors to think of that and also for venture knowing the cost of capital gets higher. Companies that consume capital are going to suffer. And so, you know, most of the earlier stage companies and a lot of the really growthy names, you know, consume capital. And so the cost of capital gets higher, those companies are going to suffer. So I think that's just a simplistic framework. I think, you know, for this discussion on the economy, one of the things that people maybe have forgotten because they haven't been through inflationary cycles in a long time, is that inflation is really stubborn. It's really stubborn. And I think even Janet Yellen was, you know, talking about how she kind of missed it on that and a lot of people missed it. When we look at what's happening with inflation, of course, the oil price, but then the supply chain issues, I mean, we always think, you know, what's driving up prices. And again, a very simplistic framework. I know that's like economics 101, but it's, you know, more dollars chasing fewer goods. Right. So why do you think housing prices are moving, more dollars chasing fewer goods? So I think that, you know, the theme going forward for a while, maybe the next 18 months to two years, is that you're going to continue to see the stubbornness of inflation bear out. There doesn't seem to be a lot of willingness to attack the oil prices by bringing align more supply. You know, there's a whole political discussion about that, too, but just the basic economic discussion. And of course, as we've mentioned before, war in Ukraine are issues, too. But I think what we're facing is going to be more stubborn than what people think. And then the question is, do that take us to inflation or not? Okay. Yeah, I think maybe we could tip into recession. Yeah, maybe in the next year or so we could. But I don't know that recession is as big of a risk, as stubborn, a longer term inflation. And I think that's where we're going to be for quite some time. You know, oil goes through every aspect of the economy. Supply chain issues don't seem like they're abating in some areas, but it seems like it's going to continue. And so I would say that's the biggest risk right now, is that inflation is here. It's going to be here for a while. And could it tip the economy into recession? Yeah, I think that's a possibility, but I'm less concerned about it tipping the economy into recession. I'm more concerned about how long inflation is going to stay at that level, maybe even accelerate from here and what measures are going to be taken to rein it in. I think people need to kind of buckle in for about of inflation that's going to continue for the next couple of years.
John Coleman: Yeah, that's super helpful. Nick. I think I agree. And maybe to come back to again, one potential source of optimism that Dolores touched on it at the beginning is supply chain, where it's been so constricted for a couple of years. We were with the CEO of a retailer yesterday, and I think he mentioned that the cost of a container from Asia has gone from something like $4000 to $15000 over the course of the last year. And I know that in a business we recently purchased in the heavy equipment industry, that we are on a two year backlog for some of the essential equipment right now because manufacturing has slowed down in places like China, where the Zero-Covid policy has persisted. So if that begins to loosen up, that could potentially both help fight inflation because goods would begin flowing again and also help the real economy maybe shifting from the real economy to the least real economy. Jake Thomsen Crypto markets have been absolutely crazy right now, and I think one of the biggest surprises for me coming in was Bitcoin, you know, has consistently been referred to as digital gold and could not have behaved less like gold over the course of the last couple of months. What's happening in crypto markets and where do you think we go from here?
Jake Thomsen: Yeah. Crypto markets are obviously incredibly strange and volatile and you know, Gartner's got the hype cycle. You've seen that where in the early stages of technology you have a whole lot of activity right shoots out. There's kind of hype, then it's quickly followed by what's called the trough of disillusionment, right? People realize, well, is this really applicable? Can we use this? And for years you can have this disillusion time. We're actually a lot of the most interesting projects come out and I'd say we're we are sliding quickly down into the trough disillusionment and a couple of things that I'd say, one maybe on crypto more generally and then Bitcoin specifically when we talk about Bitcoin because it's almost 50% market cap, there are 10,000 plus other active coins that are out there. And you're at best. Most of them don't have any real world use at worst, many of them are very scanny. And there's a lot of nervousness when you start to see, again, interest rates, speculative assets. People are selling those off. And it can't be overstated the importance of the meltdown of the terrorist stablecoin that Luna and Terra USD that that happened a few weeks ago where you essentially had a $60 billion asset go to zero because it showed all the weaknesses of a token and a blockchain that isn't maybe as rigorous or circumspect or doesn't have that product market fit as explained.
John Coleman: Could you explain stablecoin Jake, just for those less familiar, what's a stablecoin and why is that important that it collapse?
Jake Thomsen: Yes.
Jake Thomsen: Absolutely. So Stablecoins are very important because it essentially will be a proxy for, in this case, a U.S. dollar. So if I'm going to go, maybe I want to send you some money, John, but I want to do it very cheaply free on the blockchain. I can just send you those U.S. dollar proxies and you can go in cash flows into your bank, for instance, by their special use for transactions. So oftentimes you will buy Bitcoin with your stablecoin because you're not using a fiat U.S. dollar to go do that. You're transitioning your FIAT dollars into a stablecoin which can buy bitcoin, but it keeps that price relationship between dollars and Bitcoin. And there are some very good ones too, to be clear, right? There are ones that are 1 to 1 backed by U.S. dollars, and maybe it's a $20 billion market cap. You got $20 billion sitting in an account somewhere. But this coin in particular, what's called an algorithmic stablecoin where not to get in the details of it, but they had a mechanism where there's another part of it, a coin called Luna, that as the peg starts to wobble a little bit, you can burn Luna, which is that pegs to be an arbitrage opportunity to keep the peg at $1. But it's almost like basing it on the full faith and credit of a new blockchain rather than something with a real value behind it. And it's only been around for a few years. There was some chink in the armor with an attack, then it all just essentially had a run on the bank and went down to zero. And that was a huge shock to the system. That was $60 billion of value gone. It's estimated that led to about $500 billion in value over the next few days. And so you see shocks like that. And so all of crypto is going to be lumped in together. And so Bitcoin for no other reason would be sold for that I believe. But getting a Bitcoin more specifically, I think one reason you don't see it being an inflation hedge and maybe the case that it would be is that it's a limited supply. It's getting to be more widely adopted. Right. Some of the features of what might seem gold. But for something to actually be a good hedge against inflation, people have to believe that it's going to retain its value with inflation. And there's been so much speculation Bitcoin, that's just simply not the case. Right. That's almost a self-fulfilling prophecy. And one of the challenges of Bitcoin right now is there's no intrinsic value, right? Other good hedges, you have an intrinsic value, real estate, even gold for what you can make at it as an input value stocks. Right? There's a cash flow. There's something that you can turn into cash. Bitcoin doesn't have a lot of that yet and you're seeing a lot of development on the protocol such that you'll have various layers that you can transact in Bitcoin in different ways. So I think we're getting there. But until we have number one widespread faith in Bitcoin as it's action to keep its value and to some kind of intrinsic value from a cash flow. So you can peg almost a low watermark. I think without those two things, it's going to be hard to see it as a hedge against inflation and those things that I suspect will take several years, if not more.
John Coleman: That's fascinating. I won't follow up with any questions about Nfts bored apes or even Elon Musk's Twitter acquisition. Jake So I'm going to let you off the hook from a couple of additional questions folks might have, but I'd love the next couple of questions just to hear all of your perspectives, if that's okay. And Nick, we could start with you on the next one if you want. I want to switch to international exposure. So obviously the question of international exposure has come up dramatically in recent months as people have begun to divest of Russia, as many companies have begun to cease operations in Russia, and as the specter of a similar set of sanctions or divestments with China, if it were to invade Taiwan, has at least begun to be discussed with some credibility. I would love to hear how each of you were just thinking about your international exposure right now, and if your view of international exposure has changed as a result of the last several months. Nick, would you mind kicking us off?
Nick Stonestreet: Because we do have quite a bit of international allocation, our portfolios. One thing I'd say with the cryptos just quickly is that we only allow Etherium and Bitcoin on the platform and that's at client direction. So we haven't actually put crypto allocations in any of our models and we're watching the theorem very closely just as it moves from proof of work to proof of stake. So I think that's one to kind of keep your eye on. If you're Etherium Holder, I know you're probably thinking about that quite a bit, so we may deplatform a theorem, but we haven't made that decision yet. Yeah. So for international markets, we normally do our growth and inflation forecast and look out at different asset classes and value them according to probabilities based on growth inflation. And we do still see some value in some of the developed international markets. I know there's cautions around Europe. I know there's cautions around Asia. But I would continue to look at allocating into developed international markets. We're going to continue. We haven't reduced our allocations at all there. And then I do think too I know it's still I'm just looking at growth and inflation forecasts and we're looking at a ten year portfolio. We're not looking at, you know, how do we allocate for this year? We're looking at a ten year portfolio for these clients. And I do still think as much as it's been disrupted, there's value in emerging right now as well. And so we continue with our allocation to emerging and developed international and again as part of the ten year portfolio. And we feel like the valuations are starting to come back into play in US. So we may have to look at how we allocate across that because we did have a good bit kind of allocated away from the US just because on a valuation basis, on forward looking ten year, it didn't look as attractive. So we may have to look at dialing that back if the US continues to correct, but right now we still find value in developed international and in emerging.
John Coleman: Dolores, do you agree with that perspective or how is even tight thinking about that right now?
Dolores Bamford: Yeah, it's even tight right now we're mostly invested in the US. Most of our funds are all of our funds right now are US oriented funds. But we do have some international exposure in those funds and that exposure would be of are excellent companies that are sort of positioned really well and these strong themes of human flourishing that we look at and our sort of winners and leaders in those strong secular growth themes and those themes that we think are really serving society well and addressing society's or global world problems. So it's sort of a very selective and focused approach to investing internationally, and I would say it would probably be more exposed in the developed side and on the emerging side, more limited at this time. But I would say in general, you know, sort of reflective of our investment philosophy that kind of reviews all the stakeholders that are impacted by a company's business and product that we would avoid, you know, investing in countries where there's corrupt governments or unsafe conditions or there's exposure to human rights abuses and things like that, and have taken positions on that. So we would highly recommend that people be very careful when they invest internationally, make sure that your investments reflect your ethical positioning and their values because there's more risk there.
John Coleman: Yeah, Dolores, I think, and Jake, I'll turn to you. I think we have heard a lot more concern recently, both pragmatically about the long term sustainability of companies and regimes that are authoritarian, like Russia or like China, as well as ethically people raising more concerns just about the types of regimes that they're supporting or companies they're supporting. And so I think that's becoming a much more prominent topic, at least among the investors that we're speaking to, whether institutions or individuals. Jake as you're looking at private companies, at smaller companies. Do you have a dramatically different perspective on international investing right now? Particularly certain countries.
Jake Thomsen: No know very similar to how Dolores laid it out. Part of mine likes to say that all investing is impact investing. So press assets, hard questions, what is the impact? We're actually enabling this. You know, we invest across the U.S. and Southeast Asia. And I think it's worth looking at where is there a lot of tumult that is then going to translate into opportunities? I don't have a lot of good answers for where that is, but one very specific one is this time last week we were in Singapore and it was pretty amazing how Singapore is a beneficiary of a lot that is going on in places like Hong Kong and others where a lot of capital, a lot of entrepreneurs, they are open for business and they're making it really easy for a lot of these entrepreneurs to go and move their headquarters there. And so that's one economy particular that we're watching quite closely on the technology side, early stage tech, but I'm pretty bullish on them more generally.
Nick Stonestreet: And one thing I want to clarify a little bit, John, too, with international investing, you know, I do want to take off the table. Places that you think of that are, you know, Russia's a pariah state. They're going to be Iran and North Korea by the time they're done. You know, it's a disaster there. So they're off the table for a lot of our investors. China's off the table just because, you know, they're not going to side and put capital with a regime that, you know, suppresses religious freedom, does the things that China does that we're all aware of. So I think that's a good point. And I also think that there, you know, as you mentioned, Singapore and there's others and I think there will be more of a move towards LatAm as well as we start to think about manufacturing and where it should really occur, should we really be trusting this much of our manufacturing to China? So I do think there's going to be places internationally. The other thing I would say is, you know, the portion of your portfolio that is international. It's not unreasonable to go ahead and take the currency risk with that as well, because your whole life is in dollars, you earn dollars, your home is in dollars, most of your portfolio is in dollars. And by actually investing in countries that you think are going to have, you know, we're kind of on the bright side of the line. Not a Russia increasingly not a China, but countries that are moving in a good direction. Go ahead and take the currency risk with that, too, because when you look at not just your portfolio but your whole lifestyle, being in dollars, having some currency diversification isn't a bad idea.
John Coleman: And now we're getting closer to emerging market levels of inflation in dollars. So some of the difference there is eroded, you know, in every downturn there's opportunity. And so before we close out today, I do want to talk to you all about where you see the opportunities, whether that be an asset class, whether that be a particular industry or segment, whether that be a geography. Where are you shifting your attention that you think might be a great performer through the end of the year? And Dolores, would you mind kicking us off?
Dolores Bamford: I'd love to respond and share with you some opportunities that we're seeing. And as you said, you know, more opportunities are developing in a down market. And I think similar to what Nick was talking about with persistent inflation, if you think that we're going to have more persistent inflation, that will create general more opportunities on the half of this side of the world than on the consumption exposed industry side of the world. So, you know, I'm very focused on industries that are going to be solutions providers to a lot of these problems and inflation supply constraint issues. And I'm also very exposed to and concerned about areas that might be negatively impacted. And as I said before, and even though, we do focus on companies that are creating value for older stakeholders and companies in industries that we think will achieve attractive returns and strong growth prospects by contributing positively to their stakeholders and to society. And so we look at companies that are prospering within context of themes of human flourishing or well-being. And within that context, there are a lot of really positive things going on, a lot of opportunities to invest in companies that are focused on. If we just look at the energy crisis going on, companies that are contributing to clean energy, to energy efficiency, to energy security, to energy infrastructure, pipelines and such, and many companies that are helping the US energy sector contribute more to the global shortage that we have and natural gas and oil. On the technology side, there continues to be significant advancements in digital transformation, cloud based solutions, the need for security, cybersecurity, network security, cloud based security automation also now with shortages in labor, as well as increased solutions and innovation in 5G infrastructure. And then on what we call the restore side or well-being side, obviously continued increasing opportunities in health care and life sciences. And so they're just many different types of industries and companies that we're looking at that we think are going to be significant and adding value to society and at the same time adding to shareholder value. And very much in this infrastructure area, technology area, life sciences area, just to name a few.
John Coleman: Jake Thomsen Venture capitalists are eternal optimist, so I assume you see a couple of opportunities right now. What are you looking at?
Jake Thomsen: Yeah. Gosh, I hate to be so stinkin predictable, and yet I think technology is very compelling right now. So we've seen a lot of companies, as you mentioned, just really tanked. I think a lot of babies have been thrown out bathwater. You see some public companies that are at six, six, eight, four times p e ratio. That's a whole lot of cash. Right. And then on the private side, same sort of thing where if you're looking at the fundamentals of the tax base, well, a big constituent, part of almost any tech company is cloud computing AWS, as well as others, all those companies expanded their top line by about 40% year over year in Q1. So you don't yet see the slowdown in the fundamentals. This is surely could come. And yet I think it's a interesting place to be looking right now. You know, we think that will probably be on the private side, a barbell distribution where the best companies that are growing two or three or four times a year, year are always going to get funded. There's plenty of cash is out there. IPO markets are closing, but there's there's plenty of funding that is still there, whereas those that maybe weren't as successful didn't have the unique economics can't manage their they think what we'll do around but just at a lower valuation I worry that. They may have a really hard time finding around. And so those companies that are on the the former category, even though they're great companies, are still a little bit nervous, still taking in cash. And so I think there are a lot of opportunities to finance those companies. We're going back and even asking some of the companies over the last two years that we were really interested in and figuring out which ones might be one to proactively propose extending the rounds from 18 months ago was a good deal for them. We then maybe a little derisked compared to where they were just a few months ago. So I think there's an opportunity there. And I'll add, even if somebody is not a direct investor in early stage companies. Venture capital funds that have launched at vintage years in recessions tend to be the best performing asset classes. So I think we'll see that compression of valuation we mentioned. I think that's going to accrue to the benefit of investors in that space right now. So I go not necessarily crypto, at least not as a basket, and yet a lot of tech. I think there's some good opportunities.
John Coleman: I was always steeling myself for Jake to convince us to buy dogecoin, but.
Jake Thomsen: Oh my Gosh.
John Coleman: Slightly safer. Safer options, it sounds like Jake.
Jake Thomsen: Yeah. Back to the coins with no utility. Yes.
John Coleman: Nick Stonestreet, maybe we'll turn to you for the final comment here. Where you all seeing opportunities?
Nick Stonestreet: Well, I'm going to be so boring. So a lot of private investors who have had a ton of cash on the sideline. And you've seen such a move in fixed income that we are seeing a lot of private investors start to do bond ladders again. And it wasn't really something that we were pounding the table for when the yields were so, so low. But now that the yields have come up and we're looking at, you know, four or five handle on quality corporates, it's time to look at getting some of the cash off the sideline and getting into to bond ladders, understanding that, you know, the value can fluctuate. But if you have like a kind of that hold to maturity strategy, you know, I know that's not sexy. It's super boring. But the other part is the worst part of move, because the bond convexity is the first part of the move. So you take a lot more damage from 1 to 4% than you take if inflation keeps going and bond yields go from, you know, 4 to 5 and a half percent or 5 to 7%. So the worst part of the moves over and if you're holding to maturity, you're not going to have that kind of loss anyway. So I know it's boring, but I do think it's time to put cash to work in individual fixed income securities that are high quality just because there's been so much money sitting on the sidelines.
John Coleman: Yeah, it'll be fascinating. I mean, it's literally been 15 years since people were used to getting reasonable yields out of some of those assets. I'm very much looking forward to the rebirth of certificates of deposit now and a lot of instruments that people only remember from their earlier years of their childhood at this point. So. Dolores, Jake, Nick, we have all benefited greatly from your wisdom. I think your encouragement to stay strong in the midst of market turmoil and focus on the long term fundamentals is a wise one. And certainly for Faith Driven Investor who believe in the sustainability of companies and investing for the long term, it's wise advice and we're really grateful to you all for taking the time today. So thank you so much for coming on the program.