If you don't know where you're going

Mortgage rates, FTX, and Friction

---

This month, US mortgage rates hit a 20-year high at nearly 8%, up about 5 percentage points from a year ago. For perspective, the last time we saw rates this high, Saddam Hussein was still in power, Tiger Woods was the #1 golfer in the world, there was only one Harry Potter movie, Barry Bonds hit #600, Lisa Marie Presley was married to Nicholas Cage (who knew?), and Ray Lewis hadn’t murdered anyone yet.

Having mortgage rates at this level completely erases the advances in pricing, underwriting and technology over the past 20 years. It’s a heavy-handed, ham-fisted way for the Fed to cool the economy by making it harder for people to purchase and afford homes. You might object and say that this kind of move is a good thing for the macro-economy. You’d be wrong … good policy benefits individuals first, society at large second. That family who has been saving their money, living in an apartment while home prices have soared out of reach and are now seeing some relief there just discovered they can’t make the monthly payments on a house because its better for the country if the middle class takes another one for the team.

Rising consumer concern regarding home affordability will likely exacerbate the ongoing housing market downturn and put additional pressure on companies offering mortgages, bridge loans, and home equity loans. We have exited every publicly traded position in this space with the expectation that we’ll come back when rates begin to fall again.

---

“Let the beauty we love be what we do. There are a hundred ways to kneel and kiss the ground.”

— Rumi

---

Last week, a cryptocurrency exchange headquartered in the Bahamas, founded and run by an awkward 30 year old vegan without a Board of Directors, who lived in a house with 10 roommates, borrowed $1 billion from a subsidiary of his company, and the second largest donor to the Democratic National Committee and Joe Biden, went bankrupt under the worst fraud ever recorded in the history of the world.

FTX Group was a scam from the first day of its founding, run by people who had no business in business, and a perfect example of how playing at business for those who don’t believe in the rules of business is bad for everyone. While I don’t think the loss of FTX will be the black swan that we are expecting for the economy to crash and reset, the stain this will leave on crypto for a generation to come. The SEC’s terrible master, Gentsler, will make sure of this and will totally obscure his own relationship with FTX’s founders.

---

“Objective judgment, now at this very moment;

Unselfish action, now at this very moment;

Willing acceptance, now at this very moment,

of all external events.

That’s all you need.”

— Marcus Aurelius

---

According to Ken Burns new book Our America: A Photographic History, the first photograph taken of an American by an American was a selfie.

---

"Power is influence over external events. Peace is influence over internal events."

— James Clear

---

Justin Su'a who’s the mental coach for the Tampa Bay Rays offers a fascinating idea:

“Take a look at the system that you’re living in, that you’ve created for yourself. And where could you create friction to avoid doing bad things? And where could you avoid friction or diminish friction to do those things that you should be doing?”

As soon as I read this interview with him, I began examining my personal system and started building friction into it. I started by delegating the ability to veto spending to my CFO. Historically, I’ve spent what I want in the business without much concern about how we would pay for it, because we always find ways to pay for it. I tend to be impulsive and so in the last 45 days, I’ve reconsidered spending in the amount of $45k that I’ve decided not to pursue. $1k per day? That’s a good habit to look for!