Tremendous

An angel investor's take on life and business

  • Your First Cybercab Ride

    A sleek automobile glides to your front door. You lower yourself in. Let’s ride.

    On October 10th, Elon Musk revealed the new Cybercab at the We, Robot event. I’ve been salivating over it ever since.

    This morning, I dug a little deeper to find out what our first rides will be like…

    Taking Your First Ride

    The Cybercab only has two seats. They’re big and spacious. There’s plenty of leg room, partly because there are no pedals.

    The ride is smooth and pleasant. Headroom abounds, which we six footers really appreciate. I used to nail my head constantly inside NYC taxis — one of the reasons I take Uber now.

    Let’s say we’re stuck in traffic. What’s the difference? The robot is doing the work.

    A New Way to Build a Car

    Tesla will build the Cybercab in a completely different way from how Ford builds a truck.

    The Cybercab’s design is incredibly simple. Its exterior contains just 80 pieces, compared to hundreds on a typical automobile.

    In a fascinating interview on the FutureAzA podcast, Robert Scoble breaks it down:

    “They can make these on shorter lines, with fewer people, less complexity, less problems, less supply chain complexity.”

    Tesla’s likely goal is to have robots do all Cybercab assembly. Robots making robots — that’s when the pace of technological change goes exponential.

    Uber, Tesla and Waymo Win

    Tons of people are predicting the end of Uber once the Cybercab rolls out. They’re wrong.

    Demand for rides is very spiky. There are big peaks during the morning and evening rush hours. There’s another peak on weekend evenings, when people go out to socialize.

    The rest of the time, demand is much lower. But who can afford to buy a ton of Cybercabs and have them sit idle most of the time?

    The solution: put Cybercabs on the Uber platform.

    Cybercabs, owned by new fleet managers or by Tesla itself, will be available on Uber. You’ll also see self-driving cars owned by individuals who aren’t using them at the moment. And for the foreseeable future, there will be some human drivers too.

    Waymo already has its self-driving cars on the Uber app. Tesla will do the same.

    I used to think that robotaxis would kill Uber too! Kudos to Bill Gurley for explaining why that won’t be the case.

    Legacy Automakers and High Speed Rail Lose

    Tesla, Waymo and Uber all win in a world of robotaxis. The biggest losers will be legacy automakers.

    The first to hit hard times will be the Big 3 and Volkswagen. With their quality problems and dated technology, who will want their cars anymore?

    Next in line are the Japanese. Honda, Toyota and Nissan make better products, but they’re nowhere in the robotaxi race. They will become increasingly irrelevant.

    High speed trains are another loser in a self-driving world.

    Tokyo Station to Shin-Osaka Station (308 miles) takes 2 hours and 22 minutes on Shinkansen. I’ve taken Shinkansen — it’s a fantastic experience.

    Philadelphia 30th Street to Boston South Station is almost the exact same distance (306 miles). On the Acela, America’s fastest train, it takes 5 hours and 12 minutes.

    American trains are slow as heck. We know that.

    But building bullet trains is incredibly expensive. The recent extension of the Hokkaido Shinkansen is costing about $15 billion at current exchange rates.

    And that’s in Japan! I think we all know it’s going to cost a lot more here. The California high speed rail project is projected to cost as much as $128 billion.

    Maybe a car takes longer, but if you’re watching Netflix or taking a nap, do you care? And it’s kind of nice to save $128 billion, especially when our country is deeply in debt.

    Wrap-Up

    “This is a beautiful future, man.”

    That’s what Shaul Nakash said when he took the first-ever Cybercab ride with Elon (see the video at the top). I couldn’t agree more.

    When I was a kid, we didn’t have a car. My mom was born blind in one eye, which makes driving difficult.

    In our tiny town in northern Wisconsin, we were at the mercy of buses that stopped running at 6pm. And no bus on Sundays.

    When we couldn’t get a bus, we used a payphone to call the one cab company in town. We had to call over and over to find out where it was. Sometimes, we waited over an hour.

    This was a massive pain in the butt. The difference between the world of the 90’s and 2000’s and the world we’ll see this decade is incredible.

    I’m just grateful for men like Elon. He’s doing what few people can.

    It all comes down to founders.

    What do you think of the Cybercab?

    More on tech:

    Which Jobs Will AI Replace? Which Jobs Are Safe?

    Lessons From My 3 Most Challenged Investments

    Learning From My Top 3 Investments

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • Is A Financial Crisis Brewing in CRE?

    Note: This is not investment advice.

    Martin Selig owes $800 million. He can’t pay.

    The major Seattle real estate developer is defaulting on a $379 million loan tied to 9 downtown office buildings, according to the Seattle Times. Selig has defaulted on several other large loans recently, totaling over $800 million.

    The Maturity Wall

    Selig is not alone. The national office vacancy rate cracked 20% earlier this year for the first time on record.

    Commercial real estate loans aren’t like your usual, 30 year mortgage.

    CRE loans last an average of just 7 years. When the 7 years is up, you refinance the property with a new loan.

    A “maturity wall” of over $1 trillion worth of loans is coming due between now and 2027. Property owners will have to refinance their properties at much higher interest rates.

    A higher rate means a higher payment. Meanwhile, income from their properties is declining due to vacancies, especially in the office market.

    Why This Isn’t 2008

    This weekend, a post on CRE defaults went viral on X:

    This post has over 300,000 views, but it’s a little misleading.

    The author compares the value of all CRE loans coming due over the next 2 years to the value of subprime residential mortgages leading up to the 2008 financial crisis. But this isn’t comparing apples to apples.

    Porter is comparing all CRE loans to subprime residential specifically. The apples to apples comparison would be poor quality CRE loans to poor quality residential ones.

    Extend and Pretend

    The picture isn’t quite as ugly as Porter says. But it’s bad enough — there will be many more defaults like Selig’s.

    I expect lenders to “extend and pretend.”

    Banks love to do this. They extend the duration of the loan to avoid taking an upfront loss.

    But when you extend loans on bad assets at below-market interest rates, you’re losing money anyway. You’re just not coming clean about it.

    When banks extend and pretend, they often don’t take a loss on their books. That can help keep investors off their back, not to mention regulators.

    But it doesn’t change the facts: there’s a half empty office building and a loan the borrower can’t pay.

    Muddling Through

    My prediction is that everyone will muddle through. Here’s how it could work:

    1) Banks extend the loan durations
    2) Property owners find some new tenants, especially as some companies return to office
    3) Everyone makes less money for a while
    4) The Fed keeps cutting rates
    5) Most lenders and property owners avoid catastrophic losses

    Despite the bad CRE loans, American banks are well capitalized right now. They can afford to take some losses, so long as those losses aren’t catastrophic.

    Wrap-Up

    When we see the problems in CRE, our brains jump straight to 2008. But history does not repeat itself.

    These CRE problems are different.

    Today’s defaults are more driven by temporary interest rate changes. What’s more, the office market is much smaller than the residential real estate market.

    We’re going to see some gnarly losses. But don’t expect another 2008.

    What do you think is next in commercial real estate?

    Note: This is not investment advice.

    More on markets:

    Why I’ve Never Owned Bitcoin

    America Outspent Europe During COVID, Fueling Prosperity

    The ServiceTitan IPO

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • The ServiceTitan IPO

    Note: This is not investment advice.

    “They watched their fathers get up at the crack of dawn, work all day, and then spend all night going through invoices, setting schedules, and other mundane business tasks.” From these humble beginnings sprang a $9 billion company.

    Yesterday, ServiceTitan went public on NASDAQ. Markets have welcomed the LA-based SaaS company, giving it a healthy $9 billion valuation and a 12x ARR multiple.

    Bessemer Partner Byron Deeter led the Series A and wrote a great piece on how ServiceTitan came to be, which I quoted above.

    The intense founder-market fit really stands out. To work nonstop on a problem for over 10 years, you need to care deeply about it.

    Founders Ara Mahdessian and Vahe Kuzoyan are laser focused on their customers.

    During COVID, they even gave webinars to tradespeople to help them with safety protocols. This helped the tradespeople keep their businesses open.

    So, how does ServiceTitan stack up as a business?

    The company has $772 million of implied ARR, based on their latest quarterly results. They’re growing 24% YoY and haven’t reached profitability yet — their net loss over the last 12 months stands at $183 million.

    Net dollar retention is strong at 110%. But the burn multiple concerns me.

    It’s sitting at 2.6 for the latest quarter, a little high for a company at this stage. Reducing those losses will be a priority.

    If the stock holds up over the next few months, more startups will have the courage to IPO. And that’s on top of strong performance by other recent IPO’s like Reddit and Instacart.

    Some day, I hope to have my own ServiceTitan, ringing the bell in Times Square.

    Congrats guys!

    What do you think of the ServiceTitan IPO?

    Have a great weekend, everybody!

    Note: This is not investment advice.

    More on tech:

    Why Most Startups Suck at Enterprise Sales

    Lessons From My 3 Most Challenged Investments

    Learning From My Top 3 Investments

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • Why Most Startups Suck at Enterprise Sales

    On Monday, I spoke with a wonderful founder we’ll call Jim. He was telling me how he sells to big companies. His approach was totally different from most startups — and brilliant.

    Why Startups Fail to Sell to Enterprises

    Most startups try to get big companies to use an out-of-the-box product. They don’t want to customize it much because they’re afraid of becoming a dev shop.

    The enterprise buyer takes one look at this product and says “I need these 37 changes.” The startup says “Sorry, we don’t do that.”

    End of meeting.

    Jim was doing something different.

    He was willing to make changes if a huge customer needed it. He even brought engineers to the customer site to make changes on the fly and ensure the product worked for the customer.

    This is the level of service the giants expect. If you won’t give it to them, someone else will.

    Simple Software vs. Complex Software

    “But enterprises use off-the-shelf software all the time!”

    I bet you’re yelling this at the screen right now.

    That’s perfectly true. Big companies use products like Notion every day. And Notion doesn’t customize the product for a big customer.

    But Notion is also a pretty simple piece of software. It stores documents — not a lot to it.

    Let’s compare that to a company like Palantir.

    Palantir sells large-scale, complex software to governments and huge companies. They expect white glove service, and they get it.

    This software runs their operations. The ACV’s are in the tens and even hundreds of millions.

    How Palantir and Epic Do It

    Palantir sends deployment engineers to customer sites. They learn the customer’s workflows, customize the product, and make sure it works for them.

    Epic is the largest producer of Electronic Medical Records and one of the biggest companies in SaaS. Despite operating in a different field, Epic’s approach is the same as Palantir’s.

    They send staffers to customer sites to customize the platform. Every hospital does things a little differently, and selling them a one-size-fits-all product is impossible.

    I actually used to be one of those staffers. Epic called us “implementers,” Palantir calls them “deployment engineers,” but it’s pretty much the same job.

    I worked at Epic right out of college as my first job. Then, I worked in consulting in the same field for many years after that.

    Based on that experience, I can tell you that if you think you’re selling a big hospital system some out-of-the-box solution, you are wrong. It’s their way or the highway.

    But It Doesn’t Scale!

    Startups are schooled in the one-size-fits-all approach.

    They’re told to avoid customizing their product. If they do, they’ll become a dev shop, and dev shops don’t get venture funding and fat revenue multiples.

    This approach works fine if you’re selling a simple product and/or selling to smaller customers. In fact, it’s the way to go.

    But if you’re selling complex software that will run a massive organization, one-size-fits-all will not work.

    The Fortune 500 are used to being catered to. You either roll out the red carpet or go home.

    Despite all the cookie cutter “It doesn’t scale!” advice from VC’s, the bespoke model has scaled just fine for Palantir and Epic.

    Palantir is worth $169 billion in the public markets. Epic is private but I estimate the valuation around $50 billion.*

    Notion is a great company, but I doubt it will ever be that size.

    Wrap-Up

    Unlike most founders, Jim has figured it out. He knows the big boys demand white glove service, and he’s giving it to them.

    And lo and behold, his little startup is starting to close huge contracts.

    I told Jim about my experience working on Epic’s software and how it worked just like his:

    “A lot of startups probably tried to sell one-size-fits-all products to big hospitals. They’re dead and Epic is still here.”

    Jim ignores the usual startup advice and goes with his own judgment. That’s the kind of independent thinker I look for.

    Once a couple more of those sales close, I just might have to slide a little check in here…

    How do you approach enterprise sales?

    More on tech:

    Why It’s Easier to Raise $3 Million Than $300,000

    Lessons From My 3 Most Challenged Investments

    Learning From My Top 3 Investments

    *Epic is private, never raised a penny of venture capital, and has no plans to go public. So, coming up with a valuation is difficult. But the number two company in EMR’s, Cerner, was acquired by Oracle for $28 billion in 2022. Given that Epic is number one and valuations are much higher today, I’d estimate Epic is worth around $50 billion. This would make it the 14th largest SaaS company in the world if it were public, just behind Datadog.

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • America Outspent Europe During COVID, Fueling Prosperity

    US growth is trouncing Europe and most of the developed world. While other countries are still struggling to recover economically from COVID, America is racing ahead.

    Bold federal spending during COVID is a key reason why the US is outpacing the rest of the world. Mark this day — I finally said something nice about the government!

    US GDP has been on a tear in recent years, growing 27% from 2019-23. Meanwhile, the Eurozone GDP grew just 15% (data from the World Bank).

    The US has rebounded strongly. But it’s taken major government investment to do it.

    US national debt as a percent of GDP went from 104% to 120% from 2019-23. Meanwhile, the Eurozone’s debt actually fell as a percentage of GDP.*

    America’s debt is high, no question. But Europe’s policy during the crisis makes no sense to me.

    COVID sweeps the world, the economy collapses, and their debt goes down? What are they thinking?

    If ever there were a time to stimulate the economy, it’s when lockdowns are putting huge numbers of people out of work.

    It’s no wonder that years after COVID, the Eurozone still hasn’t recovered to its historical trendline. Meanwhile, the US recovered by 2022.

    Government spending is not the only factor in higher US growth.

    American tech companies are crushing it, minting multibillion dollar profits. Meanwhile, Europe produces few new, major businesses of any sort.

    The combination of bold spending in a crisis and a culture of innovation are keeping America on top. But now that we’ve recovered from COVID, it’s time to get that debt under control.

    What do you think of American and European economic performance?

    *Unfortunately, the Federal Reserve only has Eurozone debt data going through 2022. I wasn’t able to find another reliable source for this figure, so I’ll go with these numbers, even if they’re not as current as I’d like. If you see a better data source, let me know! 🙂

    More on markets:

    Why I’ve Never Owned Bitcoin

    Lessons From My 3 Most Challenged Investments

    Learning From My Top 3 Investments

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • Why I’ve Never Owned Bitcoin

    Note: This is not investment advice.

    “Have fun being poor!” I’m pretty sure someone is going to say that in the comments. But to invest in Bitcoin, I need a reason. Let me run through why the possible reasons to own Bitcoin don’t hold up.

    A Store of Value — Gold

    There will only ever be 21 million Bitcoin. This fixed supply leads many holders to treat it like digital gold.

    But why not just buy actual gold?

    Both are assets with a largely fixed supply. Gold, however, has been recognized as a store of value for over 6,000 years. Bitcoin has only existed for 16.

    And if storing bullion is a little too much work, there are gold ETF’s that hold physical gold and regularly have auditors verify their stores.

    Me Want Yield!

    Gold is a better established store of value than Bitcoin. But neither one comes with an income stream.

    If I wanted safety, Treasury bills would be a good alternative. They’re backed by the US government and pay interest.

    Today, 1 month Treasury bills yield 4.4%. Even if you think the US government will go bust, I doubt it will happen in the next month.

    DeFi platforms have offered some yield on cryptocurrencies. But they have a habit of turning out to be scams — see the recent conviction of the founder of Celsius.

    An Inflation Hedge With a Yummy Income Stream

    I like gold and Treasuries more than Bitcoin. But I actually have $0 in any of these three asset classes.

    For a store of value and inflation hedge, I like real estate.

    A house is a house, whether prices go up or down. It is likely to retain its value, since someone can live in it.

    Real estate comes with a tasty income stream. In multifamily, that averages around 6%. In industrial or retail, it can go even higher.

    The risk owning real estate is definitely higher than a Treasury bill. That suits my risk tolerance, but may not suit yours.

    What’s Left — Speculation

    If Bitcoin isn’t the best store of value and has no income stream, what is it for? Speculation, pure and simple.

    People buy Bitcoin because they think it will go up. Most people’s rationale is no more complicated than that.

    The problem is, it’s very hard to make money speculating. It comes down to a quote from Benjamin Graham:

    “In the short run, the market is a voting machine but in the long run, it is a weighing machine.”

    When we buy an asset because it’s popular, rather than because it has intrinsic value, we tend to lose big. Asset prices have a way of reverting to their real value over time.

    Wrap-Up

    I don’t see value in Bitcoin. And the correct allocation to an asset that lacks value isn’t 10%, 5%, or even 1% — it’s zero.

    Seeing the price at nearly $100,000, who doesn’t wish they’d bought at a dollar, right? But chasing yesterday’s gains won’t make me money.

    Maybe you own Bitcoin. And maybe I’m wrong and it goes to $10 million. Then you’ll make a fortune, and I won’t.

    If so, I’ll be happy for you! It’s not taking anything away from me.

    What do you think of Bitcoin?

    Note: This is not investment advice.

    More on tech:

    Lessons From My 3 Most Challenged Investments

    Learning From My Top 3 Investments

    Why It’s Easier to Raise $3 Million Than $300,000

  • A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers

    “It was like 24,992 people making dough and 8 losing it.”

    On September 15 2008, Lehman Brothers filed for bankruptcy. It was the largest bankruptcy in American history at the time.

    Larry McDonald had a front row seat. In the book A Colossal Failure of Common Sense, the former Lehman trader gives us the inside story of how the 158 year old bank collapsed.

    Number One at Any Cost

    When McDonald joined Lehman in 2004, it was a dream come true.

    He had grown up in a housing project. For years, McDonald dreamed about being a Wall Street trader.

    Working on the Lehman trading floor was exciting, electric. But soon, McDonald began to see signs of trouble.

    Chairman & CEO Dick Fuld desperately wanted Lehman to be the number one bank on Wall Street. But Lehman was smaller than rivals like Goldman and didn’t have the deposit base of a bank like JP Morgan.

    Nonetheless, Fuld went on a buying spree.

    Lehman bought trophy commercial properties all over the world. It also bought scads of securities backed by subprime mortgages.

    Fuld did any business available, whether it was profitable or not.
    Second tier banks often make this mistake. Credit Suisse collapsed last year under similar circumstances.

    Disconnected Management

    Fuld ruled the bank with an iron fist. But many Lehman employees had never even seen him.

    He used a special elevator and seldom left the executive floor. Even many Managing Directors had never met Fuld.

    Fuld didn’t have much time for his people. He was busy pursuing a lavish lifestyle.

    Fuld owned mansions all over America. He left early for the weekend and spent much of his time away from New York.

    The Lehman CEO reminds me a lot of Jimmy Cayne, former CEO of Bear Stearns. Cayne too was disconnected from the day-to-day, favoring long weekends at his various homes.

    Compare Fuld to Elon Musk. Musk has 5 minute one-on-one meetings with every single employee at xAI.

    The great CEO’s are deeply involved in the details. The rotten ones behave more like monarchs.

    Falling Apart

    Many of Lehman’s best traders and bankers tried to sound the alarm. Time and again, they warned Fuld and his executive team that the firm was taking on too much risk.

    Fuld ignored them.

    By the end of 2007, Lehman was leveraged 44:1. A 2.3% loss would wipe them out.

    And sure enough, the losses started coming.

    As subprime borrowers began to default, the value of mortgage backed securities fell hard. Lehman had tons of them on its books. Now, there was no buyer.

    Lehman began to take one huge loss after another. Mortgage backed securities, commercial real estate, credit default swaps — the losses just kept coming.

    Lehman began to look risky. Counterparties demanded more collateral, eager to protect themselves.

    As summer turned to fall in 2008, JP Morgan began to demand billions in cash. Lehman didn’t have it.

    Without that money, JP Morgan wouldn’t extend any further credit to Lehman. This meant Lehman could no longer operate.

    The 158 year old bank filed for bankruptcy.

    Wrap Up

    Mismanagement is what killed Lehman Brothers. Reading this book, I couldn’t believe what I was hearing.

    A 2.3% loss would wipe them out. How could you think you’d never take a 2.3% loss?

    Fuld is the worst case of Manager Mode I’ve ever seen.

    He had no idea what was going on in his company. He pushed for growth at all costs, and the cost was Lehman’s existence.

    To add insult to injury, Fuld turned down repeated, firm offers from Korean Development Bank to acquire Lehman throughout 2008. The bank could’ve been saved, but Fuld blew it.

    Reading this book makes me appreciate founders who are deeply involved in their companies. My job is to find the Elons and avoid the Fulds.

    More from the blog:

    Street Fighters: The Last 72 Hours of Bear Stearns, the Toughest Firm on Wall Street

    Lessons From My 3 Most Challenged Investments

    Learning From My Top 3 Investments

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • Meet My Latest Investment: Recall

    “Yes, that, give me that!” It’s funny how greedy I get when I see a startup I love. And when I saw Sanks pitch Recall at LAUNCH Accelerator Demo Day, that’s exactly how I felt.

    Recall helps you store online content, see connections, and retain information better.

    I listen to a zillion podcasts. How much do I retain?

    Realistically, probably very little.

    But with Recall, I can add the episodes to my knowledge base and get summaries saved for me to use later. Recall can also quiz me periodically on what I learned, helping me retain information better.

    Recall works for YouTube videos, articles, blogs, PDF’s, Google Docs, and a lot more. It’s so helpful that it even won Product of the Month on Product Hunt in June!

    Recall does nothing less than change how humans learn and know things. That is a massive vision.

    Sanks and her co-founders Paul and Igor must be working overtime, because Recall is growing really fast. And because they’re builders, they launch new features at a pace that leaves most startups in the dust.

    I never invest on the European Continent. But I made an exception for Recall, which is based in Amsterdam.

    We are in a business of outliers. I think Recall is one of those outliers.

    So I tossed out the rules and made the bet. Check out Recall and learn something new! 

    Have a great weekend, everybody!

    More on tech:

    Meet My Latest Investment: LedgerUp

    Why It’s Easier to Raise $3 Million Than $300,000

    Lessons From My 3 Most Challenged Investments

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • US Stocks Are Extremely Overvalued

    Note: This is not investment advice.

    Every day, my Vanguard account seems to hit a new all-time high. I’m loving it, but it also makes me worry — are we headed for a crash?

    A Tour of Indicators

    This morning, I looked at four valuation indicators for the US stock market as a whole. Every one of them says stocks are overvalued.

    Let’s start with the Buffett Indicator.

    This indicator measures the aggregate market cap of all stocks in the Wilshire 5000 divided by US GDP.

    The Wilshire includes almost every publicly traded stock in America. Dividing their total value by GDP shows us how stocks are valued relative to the economy as a whole.

    The Buffett Indicator is flashing red. It indicates stocks are extremely overvalued right now, by far the worst since at least the 1970’s.

    Scary. But we shouldn’t go based on one indicator alone.

    Let’s look at the S&P 500 PE ratio next.

    This measures the total value of all stocks in the S&P divided by their total earnings. It’s a great way to see if major US companies are overvalued or undervalued.

    This one is looking pretty bad as well. The current PE is roughly twice the historical average, although lower than during the dotcom bubble or the housing boom of the 2000’s.

    Next, let’s check out the Shiller PE ratio.

    This figure measures the current value of the S&P 500 divided by the average inflation-adjusted earnings for the last 10 years. The Shiller PE smooths out short-term deviations in earnings, which helps us see long term trends.

    The Shiller PE is also flashing red.

    It’s not saying that current prices are unprecedented, the way the Buffett Indicator is. But the Shiller PE still indicates that stocks are almost as overpriced as during the dot-com bubble.

    Finally, let’s look at the Equity Risk Premium (ERP).

    This number shows the earnings yield of the S&P 500 minus the real (or inflation-adjusted) yield on bonds.

    The earnings yield is the inverse of the PE ratio. It tells us what percent of the money we put in stocks we get back in earnings every year.

    If we’re going to own stocks, we need to be getting paid enough extra money to accept the risk. Keep in mind, we could always put our cash in risk-free government bonds instead.

    The ERP also indicates a steeply overvalued stock market.

    All four of our indicators are saying the same thing: US stocks are significantly overvalued right now. The indicators differ on how extreme that overvaluation is, but they all agree prices are way too high.

    American Exceptionalism

    These days, America is the prettiest girl at the dance.

    We’re growing faster than any other developed market. Our companies are crushing it, churning out earnings in the tens of billions.

    All over the world, people are wondering how we do it. And they’re piling into US stocks.

    No wonder they’re pricey!

    But if we look at markets around the world, we get a very different picture. The PE ratio of stocks in many major countries, like the UK and Germany, are far below the American level.

    Granted, many of those countries aren’t growing much, if at all. But that’s bound to change eventually.

    Today, America is up. But there will come a time when we’re down.

    This is why when I need to sell off a little stock to fund an angel investment, I sell my US stocks. I’m holding on to my shares in overseas index funds — they’re priced right.

    Wrap-Up

    We never know whether stocks will go up or down. But we have enough data to say that US stocks look significantly overpriced.

    So, am I dumping all my US stocks? Hardly.

    Over the next 10, 20, or 30 years, American companies are going to keep innovating and growing. In the very long run, US stocks are likely to continue to rise.

    So I’m going to sit tight. Sometimes, the most profitable thing you can do is nothing at all.

    We’ll get back to startups tomorrow. I have an exciting new investment to announce!

    What are your thoughts on the market today?

    Note: This is not investment advice.

    More on markets:

    Lessons From My 3 Most Challenged Investments

    Learning From My Top 3 Investments

    Is the Consumer in Trouble?

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

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    Misfits Market

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    Use this link to sign up and you’ll save $15 on your first order. 

  • Is the Consumer in Trouble?

    I paid $6.79 for 18 eggs recently. No wonder the consumer is in trouble.

    For fortunate people like me, inflation is just an annoyance. But for people of modest means, it’s a crisis.

    “How long can people keep going like this?” I wondered. So this morning, I dug into some data…

    Falling Behind

    Americans are falling behind on credit cards and auto loans. Balances 90+ days delinquent have jumped significantly since 2023.

    Some of the wildest stories are coming out of the auto market. People bought cars for above sticker price during COVID and now owe more on the cars than they’re worth. This creates a debt spiral.

    The Struggling Working Class

    Americans as a whole have reported worsening finances since 2021. But the biggest drops in financial health are among people with a high school diploma or some college but no more.

    In other words, the working class.

    Before inflation, many working class people were getting by and perhaps able to save a modest sum. Now, with prices through the roof, they’re being pushed into the lower class.

    A Two-Track Society

    Why are things going well for people like me, but not for blue collar Americans? It all comes down to the money supply.

    The government has increased the money supply by 38% since the beginning of COVID. This money has chased two things: assets and goods.

    The price of both are through the roof. But the higher asset prices primarily benefit the well-off, while the rising prices for goods crush the working class.

    Inflation is beginning to fall, which should make things a little easier for the working class. But prices are still over 20% higher than before COVID, and that’s not likely to change.

    Regardless of what you think of the man, is it any wonder Trump won given these stats?

    What This Means for Businesses

    For those of us who run and invest in businesses, financial stress among consumers is a serious problem. If you sell your product to the working class, sales are probably getting harder.

    Take Buy Now Pay Later (BNPL) providers like Affirm or Klarna, for example.

    Consumers who use BNPL are poorer than average. I expect BNPL delinquencies to rise just as credit card delinquencies have.

    Wrap-Up

    It’s a hard time for working class Americans. While fortunate people like me benefit from an asset bubble, blue collar folks struggle to pay their bills.

    Declining inflation will help the average man. But it’s going to take a long time to make up what they’ve lost.

    Are you seeing more people struggle financially?

    More from the blog:

    Which Jobs Will AI Replace? Which Jobs Are Safe?

    Why Manufactured Housing Won’t Fix High Housing Costs

    Lessons From My 3 Most Challenged Investments

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order.