The SVB Collapse & Investor Personalities – Part 2
by SGL Financial
Our 2 Cents – Episode #132
The SVB Collapse & Investor Personalities – Part 2
Steve and Gabriel start off today’s show by sharing their thoughts on the recent collapse of Silicon Valley Bank and what it could mean for you. Then, they switch gears to wrap up our Part 2 of different investor personalities. Listen in now to this new episode of the Our 2 Cents podcast!
- The SVB Collapse:
- The 10-step timeline of events that led up to the SVB failure.
- Thoughts on what this means for investors and the broader banking industry as a whole.
- Understanding Investor Personalities – Part 2:
- The Doomsday Prepper: When you’re always concerned that the worst is going to happen.
- The Odd Couple: When your financial views and goals are misaligned with your partner’s.
- The Trend Follower: When the “fear of missing out” forces you to hop on the bandwagon.
- The Googler: When you’re searching all corners of the internet for information and become overwhelmed.
- The Model Citizen: When you’ve diligently saved money all your life but don’t spend it or enjoy it.
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Podcast Transcript
Announcer: You are listening to Our 2 Cents with the team from SGL Financial Building Wealth for Life. Steve Lewit is the president of SGL Financial and Gabriel Lewit is the CEO. They’re here to discuss all the latest in financial news, trends, strategies, and more.
Gabriel Lewit: Hello. Hello. Welcome to Our 2 Cents. This is Gabriel and we’ve got Steven with us.
Steve Lewit: This is Steve.
Gabriel Lewit: And we’re excited to be tuned in here with ya.
Steve Lewit: I’m excited the sun’s out. That’s what I’m excited about.
Gabriel Lewit: Yes, me too. It’s finally been getting sunnier, even though it’s getting snowier.
Steve Lewit: Yeah, that’s-
Gabriel Lewit: Oddly enough.
Steve Lewit: It is odd, and I am excited about being here and talking to our folks.
Gabriel Lewit: I’ll say That’s good to hear too.
Steve Lewit: Yeah, it is. that is good to hear.
Gabriel Lewit: We’ve got quite a bit of items here. Most notably, of course, as you’ve been hearing all about the SVB Silicon Valley Bank issue. Well, I’m assuming you’ve heard all about it because it’s been just about everywhere on all the news. So of course we have to talk a little bit about that here today and share with you some of our thoughts and what it might mean for you in case you’re wondering. Won’t spend too long on it, just because of course it’s been sort of beaten to death, I think over the last week. I mean, hundred again, hundreds of articles just everywhere. But it is a big deal. It is a big deal.
Steve Lewit: It is a big deal. And it’s not a big deal. I mean, that’s the-
Gabriel Lewit: Well, yes and no.
Steve Lewit: That’s a yes and no.
Gabriel Lewit: Correct.
We’re going to expand upon that so you know exactly what we’re talking about as we dive into that. And then the second part here, we’re going to continue with some of the investor personalities that we were talking about last time. We had a handful of additional ones there for you to take you through just to, I don’t know, have a little fun and talk about different people that are out there. And so if you relate to those. More importantly though, how do you overcome some of your maybe innate, what’s the word I’m looking for, challenges? That could prevent you from taking good steps for your financial future.
Steve Lewit: You got that out good. You finally got that out, but I liked it. I had a client come in and tell me he was a, I forgot which one it was, but he was one of them and he thanked me for taking care of him.
Gabriel Lewit: Oh, well, [inaudible 00:02:30]
Steve Lewit: What he actually, he said, I thank you for putting up with me.
Gabriel Lewit: Well, look, we’re all human. We all have our strengths and weaknesses and we all have our personalities. And it’s important to know who you are and then use that to your advantage and or know your disadvantages and know how to overcome those.
Steve Lewit: Well, you know the old story, our strengths are our weaknesses. So, you got to watch it.
Gabriel Lewit: Yeah, exactly. So that’s going to be our show here for you today. So let’s go ahead and unpack the Silicon Valley Bank situation, if we will. And again, with the flood of information that’s out there, what we wanted to do is basically unpack this for you in 10 bullets, 10 steps of precisely what happened. And then we’ll chat a little bit more about this and what it means for you.
Steve Lewit: You go first.
Gabriel Lewit: All right, so number one, here’s what happened. Here’s the timeline, if you will.
Well, it all started when interest rates were at rock bottom. This was, say a couple years ago. It had been an extended period of time where interest rates have been, well, little over a year ago actually is before they started to be raised.
Steve Lewit: But SVB, this is about seven years ago, SVB went in and bought long-term.
Gabriel Lewit: Well, so I was getting there. So interest rates have been low for a long time. And so along the way, as you just mentioned, SVB went and decided to try to squeeze as much yield as they could. They would buy long-term treasury bonds.
Steve Lewit: As did most other banks. Not unusual because long-term bonds, treasury bonds is safe.
Gabriel Lewit: Yeah. Okay. But as we’ll get back into here, in hindsight, there was perhaps a shortage of risk management and predicting what various scenarios could occur there. We’ll get into that.
But along the way, during the same time period, number two is deposits started to balloon. So SVBs deposits increased from 62 billion to 198 billion between the years of 2019 and 2022, as many, many booming startups parked their excess cash at the bank.
Steve Lewit: And that’s really important to understand that this is a very segmented area-
Gabriel Lewit: A very tech focused-
Steve Lewit: Tech focused bank in California-
Gabriel Lewit: … focuses on venture capital.
Steve Lewit: … in Silicon Valley, startups, so all the startups are running to this bank.
Gabriel Lewit: Or were.
Steve Lewit: Yeah. Were running to this bank.
Gabriel Lewit: Well, so part of why were all these companies sitting on billions of dollars as excess cash. Well, when interest rates were very low, capital was easy to come by. And so many of these venture capital backed companies were flushed with excess cash. And despite not needing it or knowing what to do with it, they needed to park it somewhere. So they parked it at SVB.
Steve Lewit: Exactly.
Gabriel Lewit: Okay.
Steve Lewit: All of which is very normal.
Gabriel Lewit: All this is very normal. Okay. Now we get to the interesting part of the timeline.
Number three is Fed began to raise rates. This of course started last year. And to tame rapid inflation, Fed began aggressively hiking rates. And as we’ve talked about before, they were actually the most aggressive Fed rate hikes in history. Yes. Which is hard, frankly, for someone to predict. The severity of those Fed rate increases
Steve Lewit: Impossible to predict.
Gabriel Lewit: Okay. So bank risk managers maybe thought, hey, Fed might raise rates, but the chances of it raising as fast as it actually did might not have been on their radar. Okay. So this is step number three in the timeline.
Step number four is when interest raise interest rates rise, especially when they rise rapidly, bond portfolio values will plummet.
Steve Lewit: That’s correct.
Gabriel Lewit: Okay. And we saw this last year because bonds had their worst year also in history, no surprise tied very hand in hand with the highest and most severe interest rate hikes in history.
Steve Lewit: Well, it’s an inverse relationship. So when interest rates go up, bond prices go down.
Gabriel Lewit: So basically-
Steve Lewit: Especially long-term.
Gabriel Lewit: So, bonds are a big part of bank portfolios, very often treasury bonds. And so SVB’s portfolio was yielding an average of 1.79% return as of last week. And of course the 10-year treasury was around almost 4%.
Steve Lewit: That is correct. Yeah.
Gabriel Lewit: Okay. So what does that mean? In short, it means the value of their bonds that are yielding 1.79% on average would be basically have to be sold at a loss to incur someone to buy them.
Steve Lewit: That’s right.
Gabriel Lewit: Or to encourage someone to buy them, because otherwise that person could go out and get 3.9% or 4% treasuries on the open market.
Steve Lewit: So, they had 92 billion is the number that I read in bonds, and they lost 15.2 billion with the rising interest rates. Now, this was all on paper, so that in itself should have been managed, but it wasn’t. But it’s still a paper loss.
Gabriel Lewit: And we’ll circle back hopefully if we have time. I mean, there was questions around the regulations that are out there and assessing balance sheets of banks, should it be factoring in their losses, paper losses, if you will, if they had to liquidate their portfolio. And there’s some additional discussions around that point.
Steve Lewit: Definitely.
Gabriel Lewit: Okay. So now similarly tied up with interest rates rising, while funding for new startups, venture capital funding in particular, began to experience more of a drought because interest rates are much, much higher. So it becomes much more expensive to borrow.
Steve Lewit: So, if you’re a startup company and you need more cash or you want to get funding and not use your cash, they couldn’t find it.
Gabriel Lewit: And so, if they then need to use more of cash to fund their operations.
Steve Lewit: Of their own cash.
Gabriel Lewit: They’ve then decided to use their own.
Steve Lewit: Which is parked where?
Gabriel Lewit: Parked at the bank.
Steve Lewit: At the bank. Yep.
Gabriel Lewit: Yep. Okay. So hopefully you guys are following with us here. This was number five of the timeline.
And then everything in step number six here kind of fell apart all at once. And there was basically, I was reading a separate article, there was a Twitter fueled bank run. In other words, the word started to get out.
Steve Lewit: Well, there’s a step, barely. There’s a step. It might be the same step. So they start pulling cash out like crazy. So what does SVB, I keep getting these letters backwards. Silicon Valley. SVB. What do they have to do to get the cash to the client, to the customers because they don’t have the cash sitting there?
Gabriel Lewit: Well, so more and more people are taking out money as we just talked about in step number five. So then to free up the cash to fund those withdrawals, they have to sell their bonds at a loss.
Steve Lewit: At a loss. There you go. Great.
Gabriel Lewit: This started to become public knowledge. And then basically the heads of many venture capital funds and firms were telling all their investors and or clients, you should remove your money out of this bank because there was concern about the bank. And this is what fueled then the bank run.
The word was spreading like rapid fire through Twitter.
Steve Lewit: What happened is SVB goes out into the marketplace and says, “Hey, we need to raise 2.5 billion because we have a liquidity crisis.” So they go out to raise money for the bank by selling shares of the bank. And that’s what got out, that this company is in trouble. They’re out trying to raise money. And everyone said, “No, we’re not going to wait for that. We’re just going to take our money out.”
Gabriel Lewit: So, this turns into basically what we call, there’s many examples of them in life, but a death spiral.
Steve Lewit: Definitely.
Gabriel Lewit: Once something starts going wrong, it starts going wrong faster because simultaneously, as they were trying to raise money to fund deposits, word got out that they were trying to-
Steve Lewit: Raise money to fund deposits.
Gabriel Lewit: I’m sorry, withdrawals.
Steve Lewit: Withdrawals.
Gabriel Lewit: Word got out they were trying to raise money to fund withdrawals. So then more people got concerned and tried to withdraw their money.
Steve Lewit: Exactly.
Gabriel Lewit: Which then created this downward negative spiral.
Steve Lewit: So, California division of something steps in, and then it goes into receivership at the FDIC and the bank is out of business. And then the government steps in and says, “Hey, we’ve got to do something about this because even though more people that are more aware of the business sense of this, this is an isolated incident, most people, all they’re going to hear is, what Gabriel?
Gabriel Lewit: Bank run!
Steve Lewit: Bank run! Let’s go get our money out.
Gabriel Lewit: Yes. Yeah, exactly. So we skipped a step. Well, we kind of merged a few steps together. And we also-
Steve Lewit: Sorry, that’s me.
Gabriel Lewit: … skipped a step, can’t talk today. I don’t know what, my tongue is tied.
Steve Lewit: Try saying SVB 10 times in a row.
Gabriel Lewit: My goodness. Maybe it is all the acronyms here. So their stock also be course began to plummet.
Steve Lewit: Yep.
Gabriel Lewit: Because as all this was happening. Their share price was getting just hammered, hammered.
Steve Lewit: Hammered.
Gabriel Lewit: So, all sorts of problematic commingling issues here happening all at once. Yeah.
Steve Lewit: Yeah. So it’s craziness. And you got to wonder where was, like you said earlier, where was the oversight? Where was the oversight?
Gabriel Lewit: By all accounts, there really wasn’t anything egregious that the bank had done, which is what’s interesting about this. They weren’t selling subprime mortgages that were poorly packaged or mislabeled. They weren’t doing all sorts of hinky dinky things.
Steve Lewit: Which is what happened folks in 2008 that was systemic, throughout the entire banking system, everybody buying mortgage-backed notes that were poorly rated by the rating companies. So everybody got in trouble. This is very isolated.
Gabriel Lewit: Now there were a few other banks that-
Steve Lewit: I’d just like to insert something here.
Gabriel Lewit: Yeah.
Steve Lewit: So, when I said where was the oversight, I was really thinking more about where was the bank oversight? Where was the leadership in the bank? Where was the board of directors? Where was the CEO? Where were these people? Because when you look back, they were making just dumb decisions.
Gabriel Lewit: Well, yeah, and hindsight, of course is always easy. But at the time when interest rates were rising, the bank, in theory the CFO or risk management team should have looked at this and said, “Okay, we’ve got a big risk here if rates continue to rise that our portfolio will continue to lose value.” And they should have started selling off more and more of those to free up cash in their balance sheets prior to the rapid spike.
Now to their defense, just to play devil’s advocate, they probably didn’t think it was going to rise quite as rapidly, perhaps as it did. We’re saying that now in hindsight, that they should have known that. But that’s the challenge that some of these bank risk managers face. And I’m sure there’s risk management teams at many, many other banks right now taking a look at all these different facets of their business.
Steve Lewit: Absolutely. Because they all own these bonds. Every bank has owned these bonds. But a more diversified bank that’s not dependent on a small sector of the economy.
Gabriel Lewit: Well, any business in any industry ever, if you have a smaller number of customers that all control a much higher value of your business, share of your business, you have a much higher degree of risk should something happen. So here you had not tens and tens of millions of individual customers with $250,000 deposits. You had a much smaller number of depositors with huge balances. So it was a much more dangerous, risky situation from that perspective.
Steve Lewit: Yeah. And if you think about that, so you own a company, a venture capital company, and you have 20 million of 42 million extra. And you say, “Yeah, I’m going to put it in this bank.” Now that’s not insured money. That’s not insured. 250,000 is insured.
Gabriel Lewit: Yeah. That’s your FDIC insurance limit folks per registration type per bank. It’s 250,000.
Steve Lewit: So many big-
Gabriel Lewit: The FDIC did come in and say they’re going to cover everything.
Steve Lewit: Well, these folks are really lucky, because what many companies do, because they have good risk management, is they’ll split their deposits. They’ll say, no more than 10% or 20% of our money goes to this bank. So they create a safety zone for themselves.
Gabriel Lewit: Yeah. Well, it’s interesting as well actually, because the first thought that came to my mind as some clients, I had a couple clients email me, “Should I be concerned, should I take all my money out of the banks?” And I said, in my head, I’m like, okay, well, if these companies are pulling out billions of dollars of their cash, well, where do you think they’re putting those billions of dollars?
Steve Lewit: In the mattress? No, no!
Gabriel Lewit: They’re just putting them in other banks. So they’re not sitting on duffle bags full of cashier that they’re paying their employees through. So there’s obviously hundreds and hundreds of banks that are out there. Some are bigger, some are smaller, some have different risk management controls. There’s all sorts of different components here to this. And so that’s a good example of why at the very surface level, this is not necessarily a sign that there’s going to be a huge system-wide bank collapse, even though there are some folks out there that are concerned that that might be the start of a much bigger banking issue that would affect us.
Steve Lewit: And you know what? I got an long email last night that was really an excellent overview of what happened and this person’s feelings about it and the fear. And the fear that this turns into something bigger that we don’t see coming just like in 2008. We didn’t see that coming. And that’s a legitimate concern. But when you and I look at it, Gabriel, from, because we’re steeped in this? Steeped or seeped? Steeped, seeped in it?
Gabriel Lewit: Think it’s steeped.
Steve Lewit: Steeped. Where’s, I don’t know, Katie, can you look up the right word?
We’re steeped in this. We do this all the time. We kind of don’t react that way. But for the ordinary person, ordinary, that’s not a nice word. For the common person. No, that’s not a nice word.
Gabriel Lewit: Come on, man, get with it here.
Steve Lewit: Here for the aver a no, I don’t like either. For a regular peep, a person, for a person that’s not steeped in this?
Gabriel Lewit: This, you’re doing okay over there?
Steve Lewit: Yeah, I’m doing fine.
Gabriel Lewit: Mr. Lew?
Steve Lewit: I’m killing time until you find what steeped is.
Gabriel Lewit: Yes, steeped. Steeped means soak food or tea in water or other liquids so as to extract its flavor or to soften it.
Steve Lewit: Oh, okay.
Gabriel Lewit: The chilies are steeped in olive oil.
Steve Lewit: So, let me put it this way. Most folks are not steeped in this kind of stuff. So it’s scary. It really is scary. Now, I personally don’t believe that, I think there would be two or three banks that, well, the Signature bank is-
Gabriel Lewit: Well, yeah. So there’s a few other banks that might be in similar situations. And there’s actually a phrase that I read somewhere that I liked a lot because it made a lot of sense. But basically it was saying that anytime the Fed raises rates, they break something, right? Because there’s all this cause and effect or ripple effects in the industry. And this seems to be what they inadvertently broke this time around.
Steve Lewit: And smaller regional banks, their stocks are getting hammered because people want to go to the bigger institutions that they know are safer.
Gabriel Lewit: Well, even, I think it’s more emotional, I think it all settled down. But even Schwab had a little bit of a hit to their bank stock price and they had to put out some notes to calm investors and let everybody know that their situation is very, very different. But this is why we wanted to talk about this here and bottom line, from our perspective, at least as of this moment, from everything that we are seeing and reading and hearing, this is not a broader risk that everyone should be worried about. Your money is very safe in banks with FDIC insurance. It’s important to make sure you’ve got sufficient FDIC insurance coverage. So should, God forbid, anything bad ever happened to one of your banks that you’ve chosen, your money would then be insured by the FDIC because all these banks are paying into the FDIC program. And that’s exactly what it’s there for.
Steve Lewit: And I would add to that, Gabriel, that if you own just bank stocks because they’ve been performing very well and don’t have a diversified portfolio, then you’re really getting hit. But if you have a diversified portfolio, like our portfolios, which have 22 different asset classes in there, then still, even though that part of it gets hit, you’re still have a solid portfolio.
Gabriel Lewit: Correct, correct.
Now can I use this as a transition into our other topic?
Steve Lewit: I think you’re going to do it even if I say no.
Gabriel Lewit: I am because we-
Steve Lewit: We got to get off this.
Gabriel Lewit: I didn’t want to go too deep into SVB. But guys and gals, if you have questions, give us a call.
Steve Lewit: Or concerns.
Gabriel Lewit: Or concerns or concerns, of course, yeah. Call us (847) 499-3330 or email us info@sglfinancial.com. We are here to alleviate your concerns.
Steve Lewit: This would be a time to buy a bank.
Gabriel Lewit: Maybe.
Steve Lewit: Yeah, I bet.
Gabriel Lewit: If you were a market timer.
Steve Lewit: I bet you it.
Gabriel Lewit: So, as we were talking about investor personality types, I think if you are one of the ones we were going to talk about today, which is my transition here, the doomsday prepper-
Steve Lewit: Here we go.
Gabriel Lewit: … Okay. You are probably saying to yourself right now, “This is it.”
Steve Lewit: “This is the end of it.”
Gabriel Lewit: “This is what I was preparing for.”
Steve Lewit: “The whole thing’s going to fall apart.”
Gabriel Lewit: “I knew it.” Right?
Steve Lewit: “It’s collapsing. Here it is.”
Gabriel Lewit: So, let’s talk about that investor personality. And just as a recap, last time we were talking about different personalities of people out there, and these are neither good or bad. They just are. And if you happen to recognize these in yourself, they present some challenges or potential difficulties for you in your own personal financial management and financial planning.
Steve Lewit: So, I was kind of making fun of the doomsday person, and I don’t want that to be misinterpreted.
Gabriel Lewit: Correct.
Steve Lewit: Because if you are that personality, that’s very real to you.
Gabriel Lewit: It is, yeah. But it also presents some real challenges. In other words, which we’ll get into. If you’re worried about big collapses, you tend to avoid banks. You avoid investing, you spend money on lots of other things. And if those things never materialize, you could in many ways set yourself backwards.
So we’ll dive a little bit more into that here. But the ones we talked about last time were the people that have been burned in the past. Okay. Some of the challenges that they face in trusting new people. We talked about the over analyzer, people that tend to analysis paralysis themselves and to never making a decision. I’m just going to do one sentence summaries of these. The do-it-yourselfer. This is of course, someone that buys or researches some advice and then thinks they’ve got it all figured out and can do just as good of a job on their own, which of course has some risks in doing so. You’ve got the price shopper, someone that goes looking for the lowest cost as their top goal. And sometimes you do get what you pay for. That’s the risk inherent there. And then we nicknamed it the ostrich, or someone with hope-itis, where the kind of bury your head in the sand and just hope everything works out okay. And of course, sometimes things do and sometimes things don’t if you just never plan for them or ignore them.
So those are some of the challenges that each of these different personality types face. And of course, if you didn’t listen to the last episode, you can rewind back to that on our website there and take a listen and hear about some of the suggestions we’ve made on how to address those.
Steve Lewit: Surely.
Gabriel Lewit: Okay. You like saying surely.
Steve Lewit: Oh, okay.
Gabriel Lewit: You know that was your mom’s name, right?
Steve Lewit: Shirley?
Gabriel Lewit: I didn’t know if there’s some connection there.
Steve Lewit: Shirl, Shirl the girl. Yeah. Surely. No, I don’t know surely-
Gabriel Lewit: Surely. Every time you say that, instead of thinking surely like S-U-R-E-L-Y, I think of you saying your mom’s name, Shirley.
Steve Lewit: No, no. It’s surely isn’t.
Gabriel Lewit: Surely.
Steve Lewit: Well, isn’t that reassuring?
Gabriel Lewit: Surely.
Steve Lewit: Surely.
Gabriel Lewit: Exactly. Okay, so we were talking about someone that is concerned about the future of the economy, the banking system, their money. And what they tend to do is they tend to be preparing for worst case scenarios.
Steve Lewit: Yes.
Gabriel Lewit: Okay or aka doomsday preparers. And so what are the risks here Dad, if you recognize this in yourself, that you’re always concerned about big systemic collapses, you can’t trust anything because it may not be here long term. What kind of risks does this investor face as they try to plan ahead for the future?
Steve Lewit: Can’t make good decisions. So what happens with fear? Fear is like a showstopper. It stops you from doing things. If you’re afraid of heights and you go up in a building, you’re only going to go so high. It’s going to stop it. If you are afraid that you’re going to get killed crossing the street, you’re not going to cross the street. Fear like stops you from doing things.
Gabriel Lewit: You from, and as an example, I mean, these have all come from real life conversations and experiences that you and I and I have had that we put our heads together here when we came up with this list. But I’ve had a handful of people, potential clients that have come to me that have said, “Oh, I don’t want to leave any of my money in the bank. I’ve got it in. I’m not going to tell you where, but I’ve got a stash somewhere outside of a bank where it’ll be safe.”
Steve Lewit: Well, it will be safe.
Gabriel Lewit: Well, maybe.
Steve Lewit: Maybe, you know?
Gabriel Lewit: You know, there’s risk in everything. If you bury it in your backyard, maybe you forget where you buried it.
Steve Lewit: Yeah.
Gabriel Lewit: If it’s in your mattress, there’s stories of people that threw out their mattresses with millions of dollars in them, or not millions, you know.
Steve Lewit: Real quick, I tell the story all the time. This is a real story, person, a lady in England turn 65, her daughter buys her new mattress. They come take the old mattress.
Gabriel Lewit: Yeah, that’s right.
Steve Lewit: There is a million.
Gabriel Lewit: That’s what I was thinking of.
Steve Lewit: There is a million dollars in it. She never got it back.
Gabriel Lewit: My goodness. Well, this reminds me of a story. Oh, this is a little different. I’m going to, I’m going to just say for two seconds. There was someone that had, I think it was something like a thousand Bitcoins that they had bought from way back when on an old flash drive.
Steve Lewit: Oops.
Gabriel Lewit: And then somebody like wife or somebody cleaning out the house and tossed out this flash drive with a thousand Bitcoins on it, a thousand times, $30,000 a coin or whatever it is today.
Steve Lewit: See you later.
Gabriel Lewit: So that’s no good.
Steve Lewit: No good. No good.
Gabriel Lewit: Yeah. Well, so the risk here, and I know I think we’ve talked to one person in the past that actually had built a bunker.
Steve Lewit: Oh yeah. We have a client that has a bunker.
Gabriel Lewit: And invested lots of money to build a bunker.
Steve Lewit: We have a client that has a bunker, that has fully stocked, has guns and ammunition. I mean, this person thinks it’s going to happen.
Gabriel Lewit: Now, truly, if something bad does happen, he’s going to be the smartest one.
Steve Lewit: Well, I know where I’m going.
Gabriel Lewit: Oh yeah. But the risk there is if you take all this money to, well, I’ll give you an example. Of course, I’m a financial planner. I was watching this show. There’s literally a show called Doomsday Preppers, and they talk about how much money they spent with their bug out location and all their supplies. And I’m thinking as the financial planner, I’m like, “What about their retirement though?”
Steve Lewit: They can’t retire. They’re too worried about everything else. They can’t retire.
Gabriel Lewit: Well, so that’s the challenge is if as you lose opportunity costs is really the challenge for someone that prepares for the future is you spend all this money, you lose opportunity costs.
Steve Lewit: But here, here’s the problem. Just like the doomsday person is the opposite of the ostrich. So if you have that fear in you, Gabriel, what do you do? Well you say, “Okay, this person is afraid of this, afraid of this, afraid of this, is kind of frozen, can’t make good decisions.” I have people in, no, I don’t have them, but we know people that have tons of cash. Why? We’re afraid the market’s going to go down further. What do we do to help those people?
Gabriel Lewit: Yeah. I think it comes with, it’s really hard because conversations I’ve had, their default reaction. Anything you try to say to alleviate their concerns. “Hey, banks are safe, they’re insured, government has got all this figured out.” They tend to immediately get kind of opposite perspective on it.
Steve Lewit: Well, they have a reason why what they’re saying-
Gabriel Lewit: Yeah. So it is a tricky one. it’s a tricky one. I think it just takes time, patience, trust with a good advisor and work through those. And as long as your retirement’s still on track, and this isn’t jeopardizing your other, and let’s say this doesn’t come to pass. Are you still okay and on track? Maybe there’s a balance there, a good mix of investments that you can do both, hypothetically.
Steve Lewit: Yeah. And I often say to people, look, if that happens, we’re all in trouble. What you do today investing your money doesn’t matter.
Gabriel Lewit: One last example that we’ll move on to the next one. This one I just got my client chuckled at it too when I pointed it out. So if he was here, I’d say it in front of him. But he told me, we’re here in Illinois, and he’s like, “I’ve got $50,000 in gold bars, real gold bars stashed in a fort somewhere in Delaware or Washington or something.”
Steve Lewit: Good luck with that.
Gabriel Lewit: And I said, “Okay, so just curious?”
And he said, “It’s in case the banking system goes under, I’ve got real gold.”
I said, “Well, if everything collapses, how are you going to get over? If there’s a zombie apocalypse, how are you going to get over there to get the gold?”
Steve Lewit: And will it still be there?
Gabriel Lewit: In the fort?
Steve Lewit: Where will the fort be?
Gabriel Lewit: And he was like, “That’s a good question.”
Steve Lewit: Yeah. Because the world knows you have your gold there, by the way.
Gabriel Lewit: He’s like, “Maybe I should take it and put it somewhere else.” It was kind of funny.
Steve Lewit: Yep.
Gabriel Lewit: He was laughing about it too. But, all right, couple more here before we wrap up our show here today. So we were going to talk about the, well, if you ever seen the movie, it was one of my favorites back in the day, The Odd Couple.
Steve Lewit: Oh yeah. Great. Great movie.
Gabriel Lewit: Yeah. Also, Grumpy Old Men just reminded me of Grumpy Old Men too.
Steve Lewit: Yeah. Yeah. Very good.
Gabriel Lewit: People that have differing opinions.
Steve Lewit: You mean like a husband and a wife or two partners or?
Gabriel Lewit: Pretty much anybody that’s ever married has probably encountered this. But you and your spouse don’t always agree.
Steve Lewit: Or even a life partner. I mean, as soon as you get into close relationship, there might be a little friction.
Gabriel Lewit: So, what happens when you’ve got one spouse that says, “Hey honey, I want to travel the whole world.” And the other says, “Hey honey, I don’t know. I just want to stay with the grandkids.”
Steve Lewit: Or one spouse that says, “I don’t want to lose any money.” And the other spouse says, “I really want to be aggressive.” Yeah.
Gabriel Lewit: Yeah. So this one, you joke quite a bit about us having Sunday therapy sessions.
Steve Lewit: Yeah. Right.
Gabriel Lewit: Right, here at the office, to work through these miscommunication challenges.
Steve Lewit: Marriage counseling every Sunday 1:00.
Gabriel Lewit: Don’t actually come here because we won’t be here.
Steve Lewit: We won’t be here.
Gabriel Lewit: But that’s the difficulty here. The difficulty for this personality type is really communication between two people trying to come to common ground.
Steve Lewit: And it all is about communication.
Gabriel Lewit: It is, yeah. 100%.
Steve Lewit: That’s a great one.
Gabriel Lewit: This is not always the easiest thing to come to agreement with. Sometimes it involves having a joint plan, but then also some independence, money that’s independent, so people feel like they’ve got some of their own control factors. Those are some of the things that you’ll see often with The Odd Couple. And then we’ve got our last one, well, I’m going to just talk about this one really quick. These two, the trend follower. Okay. This is the person that FOMO fear of missing out. So they hear that Bitcoin is, early 2021 was it? It started booming. Same with Dogecoin. Same with AMC stock. There was all the meme stocks they called them. And so the trend follower’s going to say, I got to get in on that.
Steve Lewit: Like a herd mentality.
Gabriel Lewit: Yeah. Well, I don’t want to miss out. Everyone else is making millions on this. I want to go make millions. And the risk there, of course, is the trend fizzles right as you get into it. In other words, by the time the trend is trending…
Steve Lewit: If you see the trend, you’re already late. Yeah.
Gabriel Lewit: Yeah. So that’s the funny thing about trends is usually by the time us average Joe’s and gals find them, the trends might be over. Okay. So you got to be careful there with your trend following. And many of those trends are sometimes very risky or not necessarily suitable for your financial plan. So you want to be very cautious with blindly following trends.
Steve Lewit: Surely.
Gabriel Lewit: Surely.
Steve Lewit: Surely.
Gabriel Lewit: There you go. Then we talked about the Googler. This is someone that Googles everything.
Steve Lewit: Drive yourself crazy.
Gabriel Lewit: Yep. You just want to be careful there. Basically, you should never Google anything.
Steve Lewit: It’s like Googling a health issue.
Gabriel Lewit: Exactly.
Steve Lewit: You’re always going to die.
Gabriel Lewit: And then our last one here, which we’re going to run out of time, so we won’t say too much about it, is the model citizen, the diligent saver. This is someone that just save, save, saves because it’s the right thing to do, and then never actually spends their money. And what do you and I always talk about? We want to give you a license to spend and feel good about the money you’ve worked so hard for.
Steve Lewit: I tell them, look, I’ll give you a spending, I’ll give you a note like a hall pass.
Gabriel Lewit: Yeah. So you feel good about going out there and enjoying. In other words, if you’ve been a model citizen, a diligent saver, when do you get to reap the rewards from that?
Steve Lewit: Yeah. Be a model spender.
Gabriel Lewit: Yeah. You want to enjoy some of what you’ve worked so hard for.
Steve Lewit: Surely. Absolutely.
Gabriel Lewit: Oh, you said surely again.
Steve Lewit: Life is about enjoying things.
Gabriel Lewit: I heard you say, you started to say surely.
Steve Lewit: Surely.
Life-
Gabriel Lewit: You changed it.
Steve Lewit: Life is about enjoying things.
Gabriel Lewit: It is. Yeah. Surely.
Steve Lewit: Surely.
Gabriel Lewit: Oh, sorry. I couldn’t resist.
All right. Our friends, thank you for tuning in to us here today. We hope you enjoyed the show. I know we covered a lot of ground here. And if you have questions on the SVB, other banks, any concerns of any kind, we’re here for you. If you recognize any of these personality types in yourself and want our help to chat through them and how to overcome some of those challenges and make good, wise, smart financial decisions for you, that’s what we’re here for. Give us a call anytime, (847) 499-3330, or go to sglfinancial.com.
Steve Lewit: All right, stay well, everybody.
Gabriel Lewit: Have a wonderful day.
Steve Lewit: Enjoy.
Gabriel Lewit: Bye now.
Steve Lewit: Bye.
Announcer: Thanks for listening to our 2 cents with Steve and Gabriel Lewit. For any questions about your finances, give SGL a call at (847) 499-3330 or visit us on the web at sglfinancial.com and be sure to subscribe to join us on next week’s episode.
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