Fear and Greed with Vance Barse

Fear and greed drive many of our behaviors, including investing. Vance Barse talks about how to manage through external challenges like inflation!

Feb 24, 2024 | Podcast

About the Episode

We focused on the role fear and greed play in our finances and our investing, dealing with inflation, how to know what’s going to happen next, the challenges of high interest rates and higher home values, and how to find success, with Vance Barse, Wealth Strategist and Founder of Your Dedicated Fiduciary.       

Listen to hear a difference-making tip on how to start each day!

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George Grombacher

George Grombacher

Host

Vance Barse

Vance Barse

Guest

Episode Transcript

eorge grombacher 0:02
That’s to get us started. Give me two truths and a lie.

Vance Barse 0:08
Well, I hope you’re sitting down because I have some good ones. Truth Number one is that gravity is negative 9.8 meters per second squared. And if you don’t believe me, Google it. The second truth is that no matter what happens to us in life, our perspective and attitude of gratitude are really what materialized, whether that is a good or bad experience. And so a lie, is what I was told as a kid that adulthood would be like, because let me tell you, the expectations are a little different than reality.

george grombacher 0:54
But those are powerful right there. And I’ll just have to take your word for the gravity thing. positive mental attitude, I love it. What what, what about what you heard, as a young person led you to believe that that it was a lie?

Vance Barse 1:11
Oh, and I’m just making a joke. You know, really, it’s like, as a kid, you know, you think you got the house and the white picket fence, and everything’s just great and amazing, and like, life is good. It is it truly is. Adulthood with kids, and travel, and all of the different things can get busy. And we live in a very fast paced, urgent breaking news, social media trend type world. And it’s just different than what I expected as a kid. And I love it. It’s great. There’s good, busy and bad busy. And I’m fortunate to be on the first of those two. Yeah,

george grombacher 1:53
well said. I disliked the term adulting. What do you think about it?

Vance Barse 2:02
It depends on context, right, like, much else in life. adulting can be fun. adulting can be grueling. So we have four and six year old kids, my six year old came down with a norovirus and was sick all night, a couple of weeks ago. And I thought, Wow, this adulting is just brutal, right. And it took me back towards when I was a kid, and was up all night sick. And it really gives me appreciation for the great lengths to which my parents went to try and console me in those moments. But also adulting could be you know, taking a vacation to Las Vegas, or Hawaii. And so it really is a matter of perspective. And here we’ve come full circle. There

george grombacher 2:48
you go. Where your parents read about everything. That’s

Vance Barse 2:53
Ooh, so we’re gonna miss No, they were not right about everything. However, since I will be sending this to them at some point. Mom and Dad, you were 100%? Correct. I should have turned that music down. Because at age 44, I have such a hard time hearing in crowds, or restaurants. And it turns out George that my parents got much smarter as I’ve aged. Yeah,

george grombacher 3:24
it’s really interesting thing, you know, wonder that’s just, you know, kind of the age set that they’re in and how their DNA works or their genes is that they’ve actually gotten smarter as I’ve gotten older. They certainly weren’t that smart back when I was a kid. So it’s a great point.

Vance Barse 3:41
Yeah, my next step, by the way, is officially becoming the Hot dang kid get off my lawn guy.

george grombacher 3:49
Yeah, that’s, that’s a natural, natural progression from where you are from where you were, with the long hair and the beard and the motorcycle to your dedicated fiduciary. And now guy on porch yelling at kids to get off grass.

Vance Barse 4:06
Yeah, it’s, it’s interesting how the different chapters of life evolves. And for those that don’t know, between my former career, which was a decade of consulting, financial advisors all around the country, and much of that time period, living out of a suitcase. And founding my firm, I had a two year window in which I spent over a year riding around the country on a Harley Davidson that was owned by my dad, whom I never met, talked to a couple of times on the phone. And I had an amazing beard and long hair and it was quite liberating experience. And now that I have two kids, you couldn’t pay me to get on a motorcycle. But that was an interesting journey, and life is good.

george grombacher 4:58
Well, amen to that. All right, Vance, what is top of mind for you right now?

Vance Barse 5:05
inflation, inflation, inflation, clients are talking about it. Clients are, I don’t want to say complaining, but what they’re paying at a register, or pump. Not so much pump these days, but it’s front of mind, it comes up in every meeting, particularly as it relates to groceries and travel, doesn’t matter what their net worth is. Everybody is seeing it. Everybody’s feeling it. Yes, inflation has come down, we’ve had disinflation, but the cost of things now relative to say, 2019, early 2020, before the Fed, and the Treasury, pumped all that money into the economy, people still think of cost in the context of pre COVID. And it is a big pain point. So I love monetary policy. I also strongly dislike monetary policy, depending on the issue, and the implications thereof. But I will categorize myself as a huge fed head. I’m fortunate to attend camp Kotak, which is an economic retreat, that a lot of economists, approximately 40, if you will, will attend to really debate and discuss monetary policy, and the implications of what the Fed and the Treasury do and how it impacts all of us. So that’s what’s front of mind, because it comes up in conversations with clients, they all want to know, hey, when’s inflation gonna go down? Hey, when is the Fed going to cut rates to zero? And I think there’s this expectation, George, that, that the Fed is going to cut rates, and launch the printing press again, because we had that for 13 years, and I’m telling clients, it ain’t necessarily so.

george grombacher 7:11
It’s a fascinating thing. Like, so what? What do you tell them? Like, I don’t have a magic wand? I have no idea.

Vance Barse 7:20
Or I tell them, hey, good news. Literally, no one knows anything. No one, like find me an analyst, who, in December of 2019, or at any point in 2019, for that matter, was saying, You know what, I think next year, there’s gonna be this virus, and in the economy is gonna go through a forced shutdown. And it’s going to be all this money printed, and money literally forced into your bank accounts. And what are people going to do with it? Well, we don’t teach financial literacy in this country, people don’t really, typically understand time value of money and compound interest in the benefit of not spending today to save for tomorrow. So what do they do? They spend it. And there are consequences to that. And when they say, Well, what do you think is going to happen? I go, Well, literally, no one knows. Right? We can kind of guesstimate what might happen over the next three months as it relates to inflation, or a handful of other data points. But you get out beyond that. And, and nobody knows. But other than that, and clients will laugh at that. But say, my view is that the economy that we have now, is different than the economy, we became so conditioned to expect from the QE II era, the quantitative easing era, the zero interest rate era. And I think that’s done. And the reason I think that’s done, at least for now, is because if we look at the the number of people over age 55, who, during or shortly after the COVID regime, were able to retire, largely due to the largest of their nest eggs. And we look at the people who under age, call it 30, maybe 35, were able to go back to school and quit their jobs, we now have fewer people to do the work. And if we’re going to have the same output, one could argue that we have to have higher wages. And you know, the rest of that story. So this magical mythical 2% number that the Fed put out. I personally disagree with. And I think the Fed is either going to have to keep rates high enough to have unemployment hits a four and a half percent ish to start cutting or If the economy is, in fact structurally different, we might be back at a, say, three or three and a half percent core inflation number. And that’s not necessarily a bad thing. Because when we’re taught in credentialing within financial services, what’s the assumed rate of inflation over time? 3%? While we’re kind of there, so 3%, relative to 2%, might seem like a big change in the context of the 13 years of zero interest rate policy and quantitative easing that we had put 3% is what we’ve assumed for decades, insofar as inflation is concerned. And I don’t think that that’s a bad thing. I think the economy has to adjust, adjust, excuse me. And I think that investors need to update the view that they employ as it relates to investing, because we’re in a different interest rate regime relative to what we were in for that 13 year period.

george grombacher 11:08
I appreciate that. So what do you think that people are really looking for? When they say, you know, gosh, what’s, what’s going to happen? Are they looking for actual answers? Are they looking for certainty? Are they just saying it?

Vance Barse 11:25
Investing is behavioral. And at the core of the human condition? Is this duality of fear versus greed? Many of the questions regardless of how they’re packaged, ultimately, get at one issue, which is, do I have to worry about money loss? Do I have to worry about the implications of not having enough for retirement? Because people who are in retirement or near retirement today, they remember the pain of 2008, they remember 2020, they remember 2022. And a lot of advisors will argue, well, 2022 was different, because the Fed went from zero interest rates to five handle, meaning they went from zero to five plus percent. And that’s sort of the exceptions to the rule. But there’s this palpable sort of fear culture, if you will, as it relates to portfolios, because they’re worried that they might outlive their assets, or that they might go through some significant type of loss. So however, the question is phrased, in the context of our meetings with the clients who we serve, we get down to the root of the issue. Is it that a, you’re worried about loss? Let’s explore that? Or is it B, you simply want to maximize returns? And you’re trying to figure out, how do we best position the portfolio? If we are, in fact, in this sort of new world paradigm, which isn’t actually new, it’s just not QE.

george grombacher 13:18
I think that that’s really well said, and it makes a ton of sense. And in how you talked about people can sort of remember maybe, you know, a year ago, five years ago, 10 years ago, 20 years ago. And regardless of I remember, it, sometimes still feels new.

Vance Barse 13:39
It does feel new and experienced in capital markets, matters. The adult children of our retiree clients, when they buy a house and go, Man, this is crazy. 6% or 7%. This is this is just unfathomable. These rates are so high, and the parents will look at me and I’ll look at the parents. And I’m 44. And I’m old enough to remember as a kid where interest rates were, I mean, something that’s always fascinated me. But they go back to the early 80s. And they go You don’t realize how lucky you have it because we were paying 1617 18% on 30 year mortgages back then. And obviously, we’ve been in this macro cycle from that period, to when the Fed cut rates to zero and held them there for north of a decade. They did raise them up to about two and a half in 2018. If you remember q4 of 2018. The Fed came in and cut rates back down to zero because the stock market went through a 20% hiccup Steve Minuchin on Christmas Eve was in Mexico and he comes out and he’s on TV. He’s like, Don’t worry, I’ve talked to all the major banks, and we have no liquidity problem, and people are calling me going. Where’s this coming from? Like, that’s, that’s akin to a pilot. When you’re flying over a clear blue sky and California, zero turbulence, couldn’t have a better flying day getting on and going, Well, folks, no need to panic. I am very skilled at Crash landings, but we’re good. We’re totally good. So sit back, relax and enjoy the flight that’s going on here. Anyway,

george grombacher 15:41
you know, it’s it’s 1617 18% mortgages. It’s it’s different, it’s the same, it’s different, because home values were so much smaller back then. Do you see, I mean, mom and dad want to tell their kid to suck it up, because they remember that. And it is just different, though. Because the values are so much higher, or no or my ticket about that wrong.

Vance Barse 16:14
You are not thinking about that incorrectly in any way, shape, or form. So have you heard about the best bank out there? It’s B, O, M, and D. Have you heard about this? It’s the Bank of mom and dad, when when we meet with the the young adult children. And when I say young adult, I mean, somewhere between 18 and 32. Right, of the families that we serve, unless they are high net worth plus cohort or unless the generation two is very high income earning. And by very high income earning, I mean 250 Plus, right, if you have a job where you work for a tech company, and when you when you add up all of the stock options, and base and bonus, and so on, or if they’re in a high impact sales career, the affordability crisis that we have for that cohort in this country, is palpable. I mean, they they are angry, and rightly so because they were told this idea, maybe maybe this should have been my life at the beginning, they were told this idea, you go to school, specifically get at a minimum, a bachelor’s degree for your education you graduate, and you too, can enjoy the American dream. But when you add the student loan debt, which was just, you know, reactivated, if you will, a car payment, and I don’t mean, Mazda Rottie. But look, look at the expense of the car payments. I mean, it’s it’s not uncommon to see several 100 If not $1,000 a month in a car payment. I’m just like, wow, I’m starting to sound like my parents is ah, you take housing, you take food, and I don’t mean that, you know, avocado toast and the $9 coffee drink. It’s really expensive to live. And the American Dream is so far out of reach. And it fuels this anger. And I see it in meetings. And so what happens, these young adults rely on the bank of mom and dad to help and the asset transfer when the boomers fully transitioned the spiritual side. And then as a transfer to millennials, and even Gen Z, that’s going to be an event that will help those folks materialize this summer American dream, but it comes up in conversation. It’s palpable, you can feel the anxiety and the frustration. And you know, I remember when the Fed was in the process of raising interest rates, there was a lot of speculation that the residential housing market was going to crash. And what we actually have seen is that because people refiled and or bought in the pandemic era, they’re locked in at these two points, or three point something 30 year mortgages, and unless their employer is forcing them to relocate, who’s going to walk away willingly, I might add from a 2.5 or 3.1% 30 year fixed mortgage and sign up for a seven or 8% mortgage. Like what why I mean, the cost difference, or delta there is significant. And so we actually haven’t seen how Off prices sell off to the extent that many folks were projecting to happen. We just don’t have the volume of pre existing home sales. And a lot of the volume has come from new builds, particularly by the way in places like Texas, Tennessee, Florida, because of this migration that we’ve seen out of states like California, in New York, we’ve had many families leave the state of California, to move to Texas, Florida, Tennessee, Nevada. I mean, it just is fascinating. The behavioral change, if you will, or activity that we’ve seen as a result of COVID, because when you force people indoors for that amount of time, they really start to question the meaning of life.

george grombacher 20:55
That’s the truth. Well, that is a an excellent answer to that question. Thank you. events, people are ready for that difference making tip, what do you have for us?

Vance Barse 21:06
start each day with a gratitude list. And I don’t mean a mental list. I don’t mean talking out loud to oneself, no cell phone, no TV, if you’re inclined to have caffeine, grab that first cup of Joe, and sit down, bust out a piece of paper and a pen, like it’s 1987 all over again, get back to the basics of being a human being, and write out a gratitude list of the things which often are material by the way for which you have gratitude and appreciation. And by starting each day, that way, at least for this little old Bozo on the bus to dance bars. It has reinvigorated my appreciation for life because doors, turn on the TV, turn on the quote, news and quote, or open up the social media platform of choice. And it appears as though the world is ending and everybody hates each other. And it’s just, it’s just so negative. Yet when I go out in society, people are holding the door open for each other neighbors of all different races and religions. And all just everybody is nice. And I think that there’s a lot of good left in the world. And I choose to materialize that by starting each day with a gratitude list. So I don’t mean to answer that in a long winded way. But the impact and the optimism and fulfillment that it can bring is certainly worth exploring. Why

george grombacher 22:50
think that is great stuff that definitely gets Come on. 1987 Hmm, is that when pen and paper became popular, that’s

Vance Barse 23:00
I feel like there’s a Back to the Future reference there. But I don’t know 1987 There was a stock market crash. I was seven the world was.

george grombacher 23:10
Yeah, I think that that’s nothing but a good thing. And I love everything you said. So well, Vance, thank you so much for coming on the show. Where can people learn more about you? How can they engage with you?

Vance Barse 23:25
Ah, number one, our YouTube channel if you just go to YouTube and type in advanced Barston number two, LinkedIn and number three Twitter at Mance Barse. I certainly appreciate the engagement and look forward to positively engaging with listeners on those platforms. Love

george grombacher 23:45
it. If you enjoyed as much as I did show Vance, your appreciation. share today’s show with a friend who also appreciates good ideas. Find him on YouTube under Vance Barson LinkedIn, Twitter, link all of those in the notes of the show and connect with him and continue the conversation over somewhere else. Thanks, good bats.

Vance Barse 24:07
And George, thank you so much for having me back on the show it was a blast.

george grombacher 24:10
Finally, friendly reminder, never going to be anybody more interested in your financial success than you are. So act accordingly.

 

 

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