earnings

Apache is functioning normally

Last week, I wrote about a conversation with my investment adviser. In the article, I mentioned that my current income roughly covers my current spending except that I’ve been spending an average of $2,000 per month on travel. Because of that spending deficit, I’ve been drawing down my medium-term savings, which should last me until the end of 2014. Meanwhile, I’m exploring a variety of options to bring the income and spending into equilibrium.

Some GRS readers were taken aback by this.

“Maybe the name of this blog should be changed to Get Poor Quickly,” Marsha wrote. Brian from Debt Discipline expressed the common concern that withdrawing from my investments seems like a step in the wrong direction. And Greg wrote that this blog must be losing its way if I’m writing about “stealing from the future to maintain a current lifestyle of travel.”

Other readers, however, took a different view.

Frugal Scholar noted that there’s nothing wrong with taking withdrawals if my total savings can support them. The always-perceptive Sam wrote, “If J.D. is living a life of semi-retirement, which it seems to me he is, then it would make sense to pull money from investments as that is what one does in retirement.” And EMH was even more direct: “Why have all those investments and not use them?”

I spent a lot of time replying to comments on last week’s article. In doing so, I noticed that I’d done a poor job of sharing all the facts about my situation. I’ve been timid about total transparency, which means readers don’t have all the info they need to make a judgment. Today, I want to change that.

It also occurred to me that there are differing opinions about what savings are for. On some levels, those differing opinions are a result of each of us having different plans and priorities. But I think something that gets missed is that money is used differently at different stages of life.

The Stages of Personal Finance

In February 2009, I wrote a meditative article about the stages of personal finance. This then led to a series of articles on the subject. Here’s how I defined them:

  • In the zeroeth stage of personal finance, we’re fumbling in the dark. We have no financial skills and has no idea how to best use our money. We live impulsively, reacting to life around us.
  • In the first stage of financial development, there’s a candle in the darkness, and we’re drawn toward the light. We become aware that certain actions produce better financial results. We learn basic skills like frugality and saving and debt reduction. We still make many mistakes, but we now have some idea of where we ought to be headed.
  • During the second stage of personal finance, we can see the light at the end of the tunnel. We’ve moved beyond the basics to create a solid foundation for future growth. We’ve eliminated debt, built up our savings accounts, established emergency savings, and begun to set aside money for retirement. We learn that we are in control of our financial future and not at the mercy of some vast, uncaring universe.
  • In the third stage of financial aptitude, you light the way for others. (Boy, my metaphors were strained!) Our foundation is solid, and we now spend years (or decades) constructing a financial edifice that will support us for the rest of our lives. That generally means paying off the mortgage, supercharging our income (and thus, our saving rate), and preparing for the ultimate goal…
  • The final stage of money management is financial independence. At this stage, we no longer need to worry about money. We have enough saved to do whatever we please. Because we each have different goals, strengths, and weaknesses, financial independence means different things to different people. Financial independence is really just another way to say “retirement.”

When I started this blog, I had just progressed from the zeroeth stage of personal finance to the first. Over the next few years, I documented my progress as I achieved greater knowledge and control of my money. Today, I am fortunate to be in that final stage of personal finance. I am financially independent.

What do I mean by financially independent?

Some people believe you’ve achieved financial independence only when you can live off the dividends or interest your savings produce. Others — including me — take the stance that you’re financially independent if, given reasonable assumptions (4 percent inflation, 6.5 percent long-term real return on stocks, 4 percent withdrawal rate, etc.) you’ll also draw down your principal.

As I shared in the comments last week, I could stop working today and live off my savings for the rest of my life. In essence, I could choose to retire early — if I wanted. But I don’t want to, and for several reasons:

  • By continuing to work, I earn more money, which does two things. When my income exceeds my expenses, I add to my stockpile. When my expenses exceed my income — as they do now — income mitigates how much I need to draw down my savings.
  • Work gives me meaning. I enjoy writing about personal and financial freedom. It’s fun. Plus, the emails I get indicate I’m able to help other people pursue their dreams as well. So long as work gives me purpose, I’ll continue to work.
  • For me, work creates social connections. I get to meet readers and colleagues and financial professionals, which helps me expand my knowledge and learn about lots of other things.
  • And so on.

When people choose to continue working even though they could call it quits, they’re said to be semi-retired. I think that’s an apt term, and that’s how I classify my current state. I am semi-retired.

What Are Savings For?

Saving is a key part of personal finance. In fact, I’ve come to believe it’s the key part of personal finance. When we save money, we build smart habits today while protecting and providing for our future.

That said, saving plays different roles in different stages of personal finance.

For instance, when you’re accumulating or repaying debt, saving ought not be a high priority. Aside from a minimal emergency fund (of $500 or $1,000), your money is better directed elsewhere. That’s why in my beloved Balanced Money Formula — which urges folks to spend less than 50 percent of after-tax income on Needs, more than 20 percent on Saving, and the rest on Wants — debt repayment is actually classified as saving. There are few uses for money that provide a better return than paying down credit cards and other high-interest loans.

Once debt is eliminated, however, saving becomes a high priority. During the second and third stages of personal finance, we work to build three types of saving:

  • Short-term saving, such as in an emergency fund. Most experts urge people to save between three and twelve months of their current spending so that they’re prepared if something unexpected happens, such as a job loss or catastrophic illness.
  • Long-term saving for retirement. This is why we save in a 401(k), Roth IRA, and other retirement accounts. We’re saving for the far future when we’ll be unable to produce income at the level we can today.
  • Medium-term saving is what I commonly call targeted saving. For most folks, this takes the form of saving for a car or a house or a vacation or for college education. But other people use medium-term saving as a way to fund sabbaticals and mini-retirements. Others use this money to quit their job and take a chance on a new business or a new career.

We save money for two purposes: To protect against an uncertain future and to help us fulfill our dreams.

Short-term savings and long-term savings are generally defensive. They’re a form of self-insurance to shield us from the slings and arrows of outrageous fortune. Medium-term savings is used more for offense; it’s to pursue the things that provide us pleasure and purpose.

There seems to be a subset of people, however, for whom it’s never acceptable to spend savings. We’re all familiar with folks who spend too much and never save, but there are also people who save too much and never spend. They’re mocked in books like A Christmas Carol and Silas Marner. They’re demonized in movies like It’s a Wonderful Life. But for some reason, in real life, these types are often considered heroes. This puzzles me.

I see nothing heroic about dying with a fortune. I see nothing noble about saving and saving and never spending. Money is a tool. Its purpose is to provide comfort and pleasure for ourselves and for others. Saving isn’t an end in and of itself. We accumulate savings so we can do the things we want to do.

My Own Situation

In the past, I’ve been close to the vest regarding my financial situation. My attorney, my accountant, and my ex-wife all wanted me to keep things quiet. However, after some recent conversations — including one with Pat Flynn — I’ve decided to be more transparent. I can’t (and won’t) reveal everything, but I’ll share some broad info.

I’ve already shared that I’m currently outspending my income by about $2,000 per month because of travel. That’s what got some people riled up last week. I’ve also shared that I have enough medium-term savings to maintain this deficit until the end of 2014 (meaning I have about $25,000 saved for this purpose). I also have about $5,000 in emergency savings. Plus, I’m fortunate to have over a million dollars in long-term retirement savings.

Note: Yes, it’s true: While writing a blog about how to get rich slowly, I got rich quickly. This irony is not lost on me. One commenter last week suggested that this could cause problems since I didn’t have time to build the necessary mindset to manage the money. This is a valid concern, and one reason I’m trying to be cautious and make only “small moves.” I’ve read plenty of horror stories about people who squander sudden wealth.

In an ideal world, I’d be earning an income that meets my expenses. And, in fact, that was the whole point of last week’s article; I’m looking for ways to bring earning and spending into alignment. At the same time, I feel no shame about outspending my current earnings by $2,000 per month. Why not? Because that’s what my money is there for.

If I were still in debt, this $2,000 monthly deficit would be a concern. If I had only minimal savings, it would still be a problem. But I’d argue that even for somebody in the third stage of personal finance, deficit spending for a short time is perfectly acceptable. And if you’re in the final stage of personal finance? Well, then that’s actually how you’re expected to be living. When you’re retired, you’re drawing down your capital.

Note: Last week I wrote that Mr. Money Mustache would probably advise me to be more frugal. I was wrong. After reading the article, MMM e-mailed me to say: “Just enjoyed your latest post on GRS. I think you might be underestimating your passive income from savings…Since this is more than your spending by a wide margin, I would feel very confident that all your work income is 100% optional. Of course, you should still do enjoyable work because it makes you happy just as it makes me happy. But the paycheck is really just some icing on the cake.”

In fact, the fundamental problem of personal finance is figuring out how much to save so that you can live off your investments in retirement and die with a zero balance. (Or, if it’s your intention, to leave money to others.) A quick calculation (using conservative assumptions) shows that I could choose never to work again and even if I lived until 80, my assets would allow me to live on about $4,000 per month for the rest of my life. If I sold my condo, that number would climb to $5,000 per month.

And if I chose to spend $2,000 per month, which was the idea that created such a fuss last week? According to FIRECalc, my money will probably never run out! And, in fact, because of the extraordinary power of compounding, my savings will continue to grow forever.

The Bottom Line

Last week’s discussion was fascinating. If I were to draw down my savings in one fell swoop in order to buy a car or to purchase a house, I doubt anyone would object to my actions. After all, that’s how we think savings should be spent. But because I’m choosing instead to use my savings to fund travel and to buy time while I look for additional ways to make income, some people think I’m being foolish.

I suspect that even after this long discussion of saving and retirement, there will still be folks who believe it’s irresponsible for me (or anyone else, for that matter) to draw down savings for this sort of thing. If that’s you, tell us what you find objectionable. Under what conditions do you believe it’s okay to draw down savings? Does it matter which phase of personal finance you’ve reached? How do you decide when it’s okay to use the money you’ve saved to do the things you want to do?

Source: getrichslowly.org

Apache is functioning normally

This guest post from Ian is part of the “reader stories” feature at Get Rich Slowly. It’s the extended version of the story he shared in his prize-winning entry to this year’s GRS video contest. Some reader stories contain general advice; others are examples of how a GRS reader achieved financial success — or failure. These stories feature folks from all levels of financial maturity and with all sorts of incomes.

It dawned on me in college, having experienced several different summer jobs, that I really didn’t like being employed. Sure, the money is nice — but it’s just no fun at all to spend your days working to reach some boss’s plans or goals. I’m sure there are some folks out there who find a 9-to-5 job fulfilling, but that sure ain’t me. There’s too much fascinating stuff out there to learn and do to spend 40 years in a cubicle. The mere thought makes me shudder, and I wanted nothing to do with a career.

Most of the financial advice out there is geared towards building up a big account to retire on. I figured that I would enjoy taking a different route — reducing the total income I needed to live on. With a significant reduction in expenses, it becomes feasible to live very comfortably on a part-time income, or even just income from hobbies. How do you reduce your expenses that much? Live off the grid.

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Planning

By “live off the grid”, I don’t mean abandoning all your possessions to live in a shack in the woods. I mean taking control of your necessities and providing them yourself instead of relying on other to do it for you (and paying them to do so). Going offgrid requires a greater up-front payment, which is rewarded by great benefits in the long term (sound familiar?). Building a house yourself is a huge investment in time, sweat, and cash — but it allows you to enjoy freedom from rent or mortgage for decades. Like cooking at home instead of going out, but writ large (hundreds of thousands of dollars large).

Note: My decision to follow this path was not purely a financial one — I simply am happiest out in the boonies. There are too many people in the city, and it’s just not enjoyable for me. I want some space. You may be different — and probably are.

The more I looked at the offgrid option, the more financial advantages I saw in it. By choosing an earth-bermed home design, I could minimize heating and cooling expenses, as well as exterior maintenance. Having my own well and septic system eliminate the water bill, and having my own photovoltaic system for electricity cuts out another bill. My consumable fuels for the home are limited to some wood for winter heating (easily collected from the property) and propane for cooking (for which a couple hundred gallon tank is nearly a lifetime supply). Add some food production on the land, and you can also reduce grocery expenses.

Does this mean intentional poverty? Absolutely not. It means that I can have great quality of life, make $10,000 per year with a part-time or online gig, and have more disposable income than most middle income debt-ridden wage slaves.

Execution

At the time I put this notion together, I was in the middle of getting a fancy engineering degree from a fancy university. I had been losing interest in engineering as a field to work in, and opted to jump to a more hands-on field of study and get the fastest two-year degree I could. I judged that it would be better to leave with some sort of diploma than drop out altogether.

At the same time, I started looking for affordable rural land. I had a small inheritance from a great grandparent that I had been saving for something significant and meaningful, and a piece of land seemed like the perfect use for it. I eventually found a 40 acre parcel in the Southwest for less than $500/acre. I ditched school for a week to camp out on it, and fell in love. It had a good southeast facing slope for my passive solar house plan, and everything else I wanted in a parcel.


Ian’s parcel of land

On the third day, I signed a bill of sale, wrote a check for the price (10% off since I wasn’t financing it) and made it mine. And then (sadly) headed back to school. A year later, I came out with my degree and a $35,000 bill from Sallie Mae. That student loan was my only debt, and it meant a monthly payment of something like $250. Not bad at all, by most standards.

I packed all my belongings into my truck (a paid-for beater of a 1970s Chevy) and embarked to find a job in the little windblown town nearby and build my house. Jobs were sparse, though, and I wound up making less than minimum wage as a commission mechanic. That $250 loan payment was a massive chunk of my income, and it became clear that I wouldn’t make any progress unless I changed my situation. So I packed up again, and moved to the big city (ugh). Not what I wanted to do, but it was necessary. After a couple false starts, I landed a bartending job that paid pretty darn well. Now that I was finally making more than I needed to just scrape by, I set about making some real progress.

Saving was immediately gratifying, because I brought home my day’s earnings in cash every night. I budgeted out what I needed to live on (rent, gas, food), and put that much in my living expenses envelope each evening. The loose change (a couple bucks worth usually) became my “fun” spending money, and everything else went into the student loan envelope. Every time the envelope crossed the $1000 threshold, I took it down to the Post Office and sent a money order to Sallie Mae. I didn’t eat out, I didn’t go to bars, I replaced my big beater truck with a little beater truck that got much better gas mileage, I didn’t have a TV, and I split an internet connection with a neighbor in my apartment block. I grabbed every extra shift at the bar that I could manage. It paid off. In 53 weeks, I zeroed out that student loan. (I have the closure notice from Sallie Mae framed.)

Then came a big moment of truth. I’d been focusing intensely on paying off that debt, and the house plan was a bit of a nebulous thing that I would do later, after the loan. Well, now the loan was gone, I had the good-paying job, and I was used to living on not very much. I could go do anything now! I could buy a slick new car, or a bunch of cool gadgets, or anything I wanted. Or I could make the earth-bermed, offgrid house a reality. It didn’t take much reflection to conclude that the house was what I really wanted. So I replaced my “Loan” envelope in the closet with a “House” envelope and went right on with the same budget. Soon the envelope filled up, and I replaced it with a shoebox. Eventually the pile of cash in the shoebox started making me a bit nervous, and I got a safety deposit box at my bank.

When my second year on the budget netted me as much as the first, I crunched some numbers and concluded that a third year would be enough to get me enough money to build the house. I informed my manager at the bar that I would be leaving on May 31st of the next year, when it had warmed up and I deemed that building season was in full swing.

During that third year, I started spending some of my savings to pay for some initial infrastructure that I had to hire out, like the installation of my well and septic system and the kit for my house (purchased from Performance Building Systems — a company I highly recommend). When I finally quit the bartending job (on exactly the day I’d selected a year earlier), I headed back to the property with a wad of about $40,000 in cash and a sturdy pair of work boots.


Ian has his work boots on

I spent that summer living in a neighbor’s barn and building. The house I’d decided on was a monolithic concrete arch, 24 feet wide and 36 feet deep. It came to 800 square feet total, and would be covered with 2-4 feet of earth when finished. The sides would be completely underground, and the front wall would be fully exposed, with a lot of glazing to let in light and warmth (you can see photos of a bunch of these homes at earthshelter.com). I first needed to dig into my hillside and lay a slab foundation, then construct the framework of the the house, build the front wall with concrete block, and then have the main framework shotcreted (concrete sprayed with a high pressure air hose, to form rounded structures). Once the shotcrete set, I began building wall framing inside, and running water and electrical lines.

It’s not finished yet — some things cost more than I’d expected, and by the time winter really set in, I had a lot of interior work still left to do and had run out of savings. So I moved back to the city to find another job, and I continue to work on the house on my weekends.

However, the house is complete enough that I could live in it if I had to. I’m working my current job (I leveraged my offgrid experience into a position in the solar power industry) because of a conscious decision that the income is worth the time, and I have an alternative option should I decide that I really dislike the employment. That option makes a big psychological difference.

I can reflect on my job and know that I’m working it for a specific goal. I already have enough saved up again to finish the house interior, and what I’m doing now is saving up to build and stock a good workshop. With a good selection of woodworking, metalworking, and automotive tools I will be able to indulge in fairly technical hobbies. I can easily live on the proceeds of custom niche machine work, or have fun restoring and selling an antique vehicle from time to time. In addition, things like building my own furniture and maintaining my own vehicles will save a lot of money, and be more rewarding than hiring others to do the work for me.

Thanks to the planning and hard work, I will retire by the age of 30 — if not sooner. That doesn’t mean I’ll spend my time watching TV and playing golf, it means I will be able to actually live life instead of sacrificing all my time to a job making money.

Questions About the House

Living off the grid isn’t what many people expect. With the dramatic recent reduction in solar power costs, you can really have every modern convenience without a power pole. You really can’t tell an offgrid home from the inside. The keys to doing this effectively are putting more attention into efficiency, and choosing the right power sources. Electric heat, for example, is extremely inefficient. Propane is a far cheaper way to cook, and a wood stove is a great inexpensive, renewable source of heating. Thoughtful home design to utilize solar exposure, prevailing wind currents, and other environmental factors can significantly reduce the amount of artificial heating and cooling needed in the first place. Modern efficient appliances and lighting further reduce electrical needs.

Because of my high altitude and sunny climate, I chose to use a solar hot water heater instead of an electric or propane type. It’s a simple system with an 80-gallon tank (which should be able to supply comfortable hot showers through 3 days without sun), and it reduces my propane needs to just cooking. Internet can be provided by either satellite or wireless broadband (my cell phone reception is iffy at the house, but my Blackberry can get a pretty decent signal).

What about my social life? Am I going to be some sort of loner hermit? The answer is definitely not.

I’m not someone who needs constant social interaction, but you get plenty of it in the boonies. It’s clear from both my own experience and talking to other folks living in similar situations, that there is much more community socialization when there aren’t many people than when there are lots. I’ve never known more than one or two neighbors when I’ve lived in a city with dozens of people within shouting distance. But when there are only five families in a square mile, you know all of them, and their dogs, and often their friends and relatives who occasionally visit. It’s true for my house now — there are a few permanent residents and a few weekenders and we all socialize regularly.

The other question I always get is about family. The short version is that I have no desire for marriage or children. The house isn’t big enough for a family, and it wouldn’t be feasible to put on an addition. If I wake up one morning and suddenly can’t live another day without offspring, I’ll just have to build a new house. But I don’t envision that happening.

Tips

If you’re considering doing something like this, I’d like to offer a couple quick tips from my experience. Just as a good financial decision now can have magnified implications down the road, time spent planning a house can prevent huge problems in construction. An hour spent fixing something in the foundation can prevent a day’s work in construction or a week’s work in finishing.

My other suggestion is to not let the traditional rule your decisions. If you’re putting this much work into a place to live, you clearly plan to be there for a long time. So don’t worry about building a house that will be easy to sell — build the house you really want to live in. My bedroom is minuscule by most folks’ standards, because I like the idea of a cozy sleeping space. (I also ran a small water line and drain to the bedside table, so I don’t have to get out of bed for a drink of water at night.) The pantry is huge, though, because I will be growing and preserving food. I’m building a house to live in, not to sell, so I don’t care if it appeals to a real estate agent or bank loan officer.

Most of all, if you have a dream, you should do it. Stop fantasizing and start planning. No matter how many years it might take, it won’t ever happen until you start. And once you do start, you’ll be amazed at what perseverance and dedication can do for you. There’s no better feeling in the world than deciding how you want to live and making it happen.

Source: getrichslowly.org

Apache is functioning normally

Now might be a good time to buy.

That’s the takeaway from a recent Morningstar analysis, which reported in on a seeming contradiction in stock prices. The market as a whole, Morningstar writes, is expensive. But those prices are a bargain compared to what the underlying companies generally should cost.

At threshold level, stock prices have gone way, way up over the last several years. As Morningstar writes, its U.S. Market Index is up about 8.6% in 2023 alone and 16.2% over the recent low last October. That’s despite 2022’s inflation, which has largely but not yet completely abated, and ongoing concerns of a potential recession in late 2023.

“We still think the U.S. equity market looks expensive and has been getting more expensive since the start of the year,” wrote Morningstar while quoting Jim Masturzo, chief investment officer of multi-asset strategies at Research Affiliates. “The market is holding up well given the macroeconomic environment.”

So where can investors find the best bargains?

For hands-on help strategizing your investments, consider matching for free with a vetted financial advisor. 

For the Best Bargains, Look to Value Stocks

Look at the S&P 500, and you’ll also see lofty share prices. From an October 2022 low around 3,500, the S&P 500 is now back to hovering near 4,200 points. Even if you disregard the March, 2020 low as an aberration, this is a huge gain from the S&P 500’s pre-Covid value of around 3,300 points.

So the stock market is doing well, with high prices that are going steadily up. Much of that, writes Morningstar, is down to technology stocks that have posted huge gains in recent months and years. These are “the big technology stocks that dominate the weightings in broad market indexes, such as Apple (AAPL) — up 35% in 2023 — and Alphabet (GOOGL) — is up 39% so far this year. That, say some strategists, has left large growth stocks particularly expensive.”

Expensive is one word for it. At time of writing Apple traded for $177 and Alphabet for $123. Stocks like Tesla (TSLA) and Meta (META) traded for $197 and $263 per share, respectively. Although, to be fair, none of these compare with the likes of Chipotle Mexican Grill (CMG), which has a current share price of $2,064.

Yet despite these high prices, Morningstar feels that now is still a good time to buy. “[B]y Morningstar’s fair value estimate measures, stocks are actually undervalued by more than 9%, with value stocks looking particularly cheap,” Morning star writes. “That market discount, however, has been narrowing significantly since the October low.”

The key to this analysis is that term “value stocks.” Morningstar sees a market rich in value stocks.

Stocks are considered value stocks when they have a low share price compared with the underlying value of the company. For example, if you poured over the books of a company and decided that it was fairly worth about $20 per share, but it is currently trading for $15 per share, you would consider it a value stock.

Value stocks are generally considered a good buy for long term investors. Historically the market has been good at correcting a company’s share price to its fundamental value, a process known as “market efficiency.” Investors who buy a stock trading below the company’s fair valuation can generally expect that share price to rise over time to the level of its fundamental value. (some economists have criticized the market efficiency theory in the era of soaring tech sector valuations.)

The tricky part is figuring out that company’s underlying value.

How to Analyze a Company’s Underlying Value in Search of Bargain Stocks

Investors use a number of different metrics to decide what a company should trade for, including indicators like volatility (lower volatility tends to mean stronger value), dividends (higher dividends show stronger cash flow) and peer/competitor share price (higher priced competitors suggest a valuable industry). However the most common indicator that investors reach for is a company’s Price-to-Earnings Ratio, or P/E ratio.

A P/E ratio measures a company’s share price against its total earnings per share. For example, say that a company trades for $40 per share. It has released 1 million shares of stock total and it had $20 million in total earnings last year, giving it earnings of $20 per share. The company’s P/E ratio would be 2 ($40/$20).

The price to earnings ratio shows how much value you get for every dollar invested in a given stock. In our case above, for example, you pay $2 in share price for every $1 of company earnings. Or, to put it another way, every $2 that you invest in the company buys you $1 of value.

In general, across the market, 16 is considered an average price-to-earnings ratio. This means that with an average investment you pay $16 for every $1 of underlying earnings. Companies with low P/E ratio, whether compared with peer industries or the market at large, are generally considered value stocks. It’s likely that other investors will bid the price of this asset up because it offers better value than comparable investments.

All of which brings us back to Morningstar’s analysis.

As we noted above, Morningstar sees a market rich in value stocks. This is due to several different factors, including both standard P/E ratios and an adjusted form of this analysis known as the Cyclically Adjusted P/E, or “CAPE,” ratio. A CAPE analysis uses a company’s inflation-adjusted earnings over the past 10 years, rather than the firm’s most recent earnings report, in order to try and eliminated short-term anomalies in the business cycle. With both a standard P/E and a CAPE analysis, Morningstar writes, “fair value suggests stocks are undervalued.”

“Up 8.6% this year to date, the Morningstar U.S. Market Index sports a price/earnings multiple of 19.8 times based on trailing 12-month earnings,” Morningstar writes. “That compares with a P/E of 24.2 times at its peak in late 2021 and 17 times at the low in mid-October 2022… [And] value stocks are cheap relative to growth stocks [with] the materials sector trading at a P/E of 15 compared with an average closer to 18. Energy stocks are trading at a P/E of 7 compared with an average of 16.”

This is even true outside of the United States, where emerging markets are trading at a P/E ratio of 13.5.

Now, it’s important to understand that investors still do need to look for value. The large cap stocks out there, especially in technology, are expensive. “They are very high historically and relative to interest rates, liquidity, and inflation,” Morningstar’s analysis notes. What this means, in a nutshell, is that technology stocks have quite possibly met or exceeded their fundamental value. These companies have commanded a lot of growth, which means there’s not much of a gap left between their share price and their value.

The high-priced stocks that are demanding hundreds of dollars per share may grab headlines, but they aren’t necessarily driving the market’s value. Instead, look for the stocks with strong business fundamentals and a low P/E ratio.

Because despite the strong market, they’re out there, and now might be a great time to buy them.

The Bottom Line

A recent Morningstar analysis suggests that now might be a great time to buy into the market. Even though prices are high, they’re often low relative to the underlying value of companies at large, making this a strong moment for would-be investors.

Fundamentals Investing Tips

  • A P/E ratio is part of what’s known as “fundamental analysis.” This means that you look at the underlying company’s strengths and weaknesses to look for good investment opportunities. It’s an essential part of any long-term investor’s toolkit. 
  • You know what else is an essential part of your toolkit? Good advice. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

Photo credit: ©iStock/Blue Planet Studio, ©iStock/Galeanu Mihai

Eric Reed
Eric Reed is a freelance journalist who specializes in economics, policy and global issues, with substantial coverage of finance and personal finance. He has contributed to outlets including The Street, CNBC, Glassdoor and Consumer Reports. Eric’s work focuses on the human impact of abstract issues, emphasizing analytical journalism that helps readers more fully understand their world and their money. He has reported from more than a dozen countries, with datelines that include Sao Paolo, Brazil; Phnom Penh, Cambodia; and Athens, Greece. A former attorney, before becoming a journalist Eric worked in securities litigation and white collar criminal defense with a pro bono specialty in human trafficking issues. He graduated from the University of Michigan Law School and can be found any given Saturday in the fall cheering on his Wolverines.

Source: smartasset.com

Apache is functioning normally

California-based lender loanDepot has promoted Alec Hanson, the company’s senior vice president of production for the West division, to the role of chief marketing officer. 

In this role, Hanson will lead a consolidated marketing team and oversee the development of the brand, digital marketing, and the organic and digital lead generation campaigns, the company said.

Hanson will also be responsible for the company’s originator-led field-level marketing capabilities.

“I’m thrilled to be able to bring my sales-centric mindset and background into this role to further transform our marketing ecosystem both digitally and locally in the communities we serve,” Hanson said in a statement. 

Hanson’s promotion comes at a time when the lender is focused on propelling forward its Vision 2025 strategic plan, which includes rightsizing its operations as the company is in the red.

The Vision 2025 plan, announced in July 2022, also includes components such as increasing focus on purchase transactions; rightsizing cost structure; and launching an all-digital home equity line of credit (HELOC), which the lender rolled out in Q4 2022.

The lender closed its wholesale channel in Q3 2022 after its origination volume plummeted in the face of increased broker competition. In its latest Q1 2023 earnings call, loanDepot posted a loss of $60.2 million in non-GAAP adjusted net income, an improvement in margins and revenue from the previous quarter.

The company expects higher production and a further reduction in controllable expenses that will help the lender narrow losses in Q2.

“With his social media savvy and industry expertise, Hanson understands the evolution of today’s homebuyers and is poised to disrupt the traditional mortgage marketing mindset as he works to further differentiate loanDepot in the minds of its many stakeholders,” the company said in a statement. 

Source: housingwire.com

Apache is functioning normally

Inside: Many jobs are available in the early morning hours. This is an opportunity to make a bit of extra money before your 9-5 or when kids are at school with early morning jobs.

It’s a commonly held belief that working the early shift is not worth it. If you’re waking up at 4 am every day for work, your earnings will be drastically lower than if you worked a regular 8-hour day.

The idea of this article is to show why it could actually be worth waking up before sunrise and trying to earn more money by doing these “early” jobs in earnest.

For me, many of my jobs have always followed the non-traditional hours of a 9-5 job. Personally, that works great for me as it frees up my day for other things, pursuits, and kids.

The funniest part is I’m not a morning person by any stretch of the imagination! Yet, I make my money early in the day consistently.

So, if you are thinking, early morning jobs are not for me – wait until you actually give it a try.

In this article, you will find a list of jobs that are available for people who love working early hours as I do and want more money!

Hint, hint… It is the allure of making money that gets me motivated and out of bed!

How can I make money early in the morning?

There are a variety of early morning jobs that you can do in order to make some extra money.

You just need to find one that is a good fit for your lifestyle and personality. It’s important to pick an early morning job that you feel comfortable doing so that you don’t dread waking up early every day.

Additionally, many employers are willing to pay a premium for employees who are willing to work the early shift.

Making money early in the morning is easy if you put your mind to it.

How early is an early morning shift?

An early morning shift jobs start between 3 and 6 am and typically ends late morning or early afternoon.

This gives people the opportunity to work during the daytime and still have time for other activities in the evening.

Most start work at 5 am.

Why morning jobs are better?

Working the early shift has its perks.

For one, you’re done working by the afternoon and can run errands, schedule appointments, and socialize. Secondly, many employers are willing to pay a higher wage for employees who are willing to work during the morning hours.

Additionally, many people opt for an earlier start who want to avoid the rush hour traffic or those who have children they need to care for once the school day is over.

Plus some people work early morning hours because they want a flexible schedule, while others do it because they need the extra money. No matter your reason, there are plenty of opportunities to make money in the early hours of the day.

The 10 Best Early Morning Jobs

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The most common are shift work jobs, which require employees to work during hours that are not typically considered “normal” working hours. This can include the night shift, early morning shift, or swing shift.

There are many different types of early morning jobs. The most popular type is a full-time job, but there is also part-time, temporary, and freelance work available. Each type of job has its own advantages and disadvantages.

1. Warehouse Worker

Warehouse workers are responsible for ensuring that goods are unloaded from trucks, inspected for any damage or defects, and sorted and placed in the correct locations in warehouses or stores. They may also be responsible for preparing goods for shipment to customers.

Most of these positions are for early morning hours.

This can be a great opportunity for people who are looking for work and would prefer to work during the earlier hours of the day.

2. Barista

Barista is the term used to describe a person who performs coffee-related tasks, such as preparing and serving espresso drinks. Ideally, baristas serve beverages in establishments that offer coffee or other hot beverages.

Baristas are in high demand and typically have flexible hours. They can earn up to $15 per hour, depending on their level of experience.

Plus you have the flexibility of afternoons off after the morning rush.

3. Stock Trader

For those who want to work from their own home and have flexibility in their schedule, then you want to learn how to become a successful stock trader. Someone who buys and sells stocks to make income.

This is a highly lucrative side hustle for many people. In fact, how fast can you make money in stocks?

Personally, this is what I choose for my early morning job.

Stock Trading can be a full-time career opportunity if you have the ambition and patience to make it through the ups and downs.

Many people start trading with the hope of generating supplemental income, but it can become more than that with hard work and consistent effort.

Nowadays, the barrier of entry is very low to start trading stocks. However, you need to take the best online investing classes first.

4. Personal Trainer

Personal trainers typically offer their services at early morning hours, before most people go to work.

They help people achieve their fitness goals, whether it be weight loss, toning up, or building muscle. Personal trainers are responsible for creating workout routines and helping their clients stay on track.

Personal trainers are in high demand and the median salary is around $40,000 per year. If you have the time and availability, you can build a client base and the earning potential is endless.

5. Package Delivery

Another morning job hiring near me is package delivery drivers. These workers are responsible for the delivery of a shipment of goods from one place to another.

This position offers consistent and part-time morning hours. You will be responsible for package delivery in the area. Pay normally starts at $21 an hour plus.

6. Online Seller/Flipper

Side hustles are becoming more and more popular as people look for ways to make extra money.

One way to make some extra cash is by selling items online.

You could also get these items at local yardsales, estate sales, or donation stores and sell your items on Etsy, eBay, or Facebook Marketplace.

If this is something you are serious about, then check out Flea Market Flippers.

7. Freelancing

Freelancing is a great option for people who want to work on their own schedule. You can choose when you want to work and how much you want to work, which is great for people who want to get an early start on their day.

Freelancing can be a great way to utilize your skills and make some extra money on the side, but it’s important to keep in mind that freelancing is a business.

In fact, many people start freelancing as a side hustle in order to make some extra money but it may turn into a full-time career. In fact, according to recent studies, 1 in 3 Americans are now freelancing. This number is only going to grow in the years to come so don’t be afraid to start freelancing yourself. It may just lead to a more fulfilling career.

Learn how to earn money writing.

8. Baker

Bakers are often some of the first people to arrive at a bakery or shop. This is because many bakeries and shops open early in the morning.

Bakers are responsible for baking bread, pastries, and other items. They are required to have a fundamental understanding of baking as well as the ability to work in early morning shifts and afternoon shifts. They must also be able to handle flexible hours.

Bakers typically earn an hourly wage of around $14 an hour, but with experience and additional skills (like cake decoration), that number can go up to $20 an hour or more.

9. Online English Tutor

There are many opportunities for online English teachers to make money. One great opportunity is for early risers who want to work from home in the morning. There are many students looking for online classes at this time of day.

There are a number of companies that offer English teaching jobs to those who are certified in teaching English as a second language. The majority of these positions have you teaching students in China, Korea, or Taiwan. However, there are also opportunities to teach business professionals and executives in other countries.

If you’re looking for a way to make some extra money, becoming an English tutor for international students is a great option. You can typically expect to earn around $14-$22 per hour, depending on your experience and qualifications.

10. Flight Attendant

Flight attendants are responsible for the safety and comfort of passengers on an airplane. They must attend to passengers’ needs, provide information about flights, and ensure that all safety regulations are followed.

Flight attendants typically work long hours, often including overnight shifts, and earn an average salary of over $75,000 per year.

However, with more experience, they can make more money. Some ticket counters open as early as 4 am in order to prepare for morning departures.

Other Types of Early Morning Jobs

Those are not the only type of early morning jobs. There are plenty more morning jobs near me. You can find both part-time and full-time.

Here are more jobs to pursue.

1. Store Stocker

A store stocker is a person who stocks shelves in a grocery store. The stores they work at are typically open 24 hours and the job entails cleaning, restocking items that run out of stock, and making sure the shelves are neat.

This is typically an entry-level position in a grocery store or department store.

2. Childcare Related Jobs

Have you ever asked what are morning jobs hiring near me, then consider working with children. There are always plenty of open jobs to look after kids.

Here are some positional childcare related jobs:

  1. Preschool teacher
  2. Paraeducator
  3. Substitute teacher
  4. Daycare teacher
  5. Nanny
  6. Before and after-school programs

In all honestly, this can be one of the most rewarding morning jobs because kids will always make sure you laugh and smile.

3. Rideshare Driver

Yes, driving for Uber or Lyft can be a great way to make some extra money early in the morning. The hours are flexible and you can often make good money during those times.

The most popular route is heading to the airport.

Since many people book these types of rides in advance, you can earn a steady stream of income.

4. School Bus Driver

School bus drivers are responsible for transporting children to and from school. They ensure the safety of students on their bus as well as have a number of other responsibilities such as making sure all students are wearing their seatbelts and that the bus is clean.

Right now, we are facing a severe school bus driver shortage, which is affecting how children must get to school.

In many areas, you can find starting hourly wages for school bus drivers at $19 an hour.

5. Dog Walker

There are many ways to make money through Rover. You can provide pet care, pet sitting, dog walking, and more. You can also choose to offer services like delivery or house sitting. The options are endless!

This is one of the easiest ways to make money.

6. Truck Driver

A truck driver drives a semi-trailer truck loaded with freight. They drive the freight to its destination and unload it when they arrive.

For truck drivers who want to save money on fuel or have good mileage, the best time to drive is during the early morning hours. This is when there is less traffic and you can avoid rush hour.

Truck drivers can make a lot of money. In fact, they can earn up to $35 an hour. That’s a lot of money for early morning work.

Don’t want to drive? Then, become the middleman. Learn the exact freight broker salary.

7. Landscaper (Yard Work)

If you’re an early riser and you’re looking for a job that gets you outside, landscaping is a great option. It’s hard work, but it can be very rewarding.

It might be hard to get your services as there are already established landscapers in the area. If you don’t have a business, see if there is a business that needs lawn work done and if so, offer your services. You can also go door-to-door asking people if they need their yards done; just make sure you have a good sales pitch ready!

This seasonal job is great to do in the morning because it tends to be cooler and there’s more daylight. The pay usually ranges from $10 to $20 an hour, so it’s a good way to make some extra money.

8. Chef

Chefs are some of the most hard-working professionals in the culinary industry.

They often start their day at 4 am, preparing for the onslaught of orders and tasks that come with a busy kitchen.

While many chefs have formal training from culinary schools, there are also many ways to learn the trade. Some chefs start out as dishwashers and work their way up the ladder, while others may take online courses or watch cooking shows to learn new techniques.

The average salary for a chef is just over $50,000 a year.

9. Mail Carrier

Mail carrier and other postal worker jobs are excellent for early risers because there is a lot of work that goes on behind the scenes before delivering mail.

These types of jobs offer some excellent benefits that can be harder to find these days.

Mail carriers are nearly always employed by the United States Postal Service, but they can also be hired independently.

10. Factory Worker

Factory work can be a great option for people who are looking for full-time or part-time work. The hours are usually regular, and the job doesn’t require many if any formal qualifications. However, you may need some experience in the field and a high school diploma.

However, if you have practical skills such as forklift driving, you can earn more by picking up shifts in the mornings, nights, or weekends. The work is physically demanding so you’ll need to be in shape and stand or sit in one position all day long.

Working the early shift at a factory can be tough, but it also has its benefits. The pay can vary a great deal depending on the company, so it’s important to do your research. However, if you’re looking for work and don’t mind getting up early, then this might be the perfect opportunity for you.

11. Part-time Retail Employee – Early Morning

Part-time Retail employees working early morning shifts will be paid for their time. There are always companies looking to hire for early morning jobs.

These are great for stay-at-home moms. In fact, the employee discount can be a nice bonus for working there.

This is a perfect low stress job after retirement.

12. Gig Worker

Gig work is a term used for short-term, contract-based work. It can be a great way to have more control over your schedule and to make some extra money on the side. There are many different types of gig work available, so you’re sure to find something that suits your skills and interests.

Those who need to run errands or get an early start on their day may use gig work apps like Grubhub, Postmates, DoorDash, and Uber Eats. Additionally, you can increase your chances of getting gigs by downloading all the relevant apps and clicking on the one that seems to produce the best results.

13. Farm Worker

As you can imagine, farm work can be difficult, but if you’re someone who loves working outdoors and enjoys physical labor, then this may be a great career for you.

Farm workers are typically hired based on their qualifications and experience.

If you can offer the help local farmers need, you should be a great fit for the position. Farm work is often physical labor, so make sure you’re physically prepared for the job before applying.

14. Morning Radio DJ

Morning radio DJs reflect the lives of their listeners, who may be early risers or working professionals. The job involves playing music and talking about topics that are important to the listener in order to help them wake up and start the day.

The main goal of morning show DJs is to keep listeners tuned into their station while providing a fair amount of entertainment.

Starting out your career in radio can be a great way to get started in the industry. Many DJs start their careers at small community or college radio stations and then move on to bigger stations as they gain more experience. The morning time slot is from 6 AM to Noon, which is a great opportunity to reach a large audience.

15. Cleaner

There is a high demand for cleaning services and cleaners can earn up to $22 per hour, plus tips. Some of the highest earners are making over $1000 a week.

This is one type of service that is not going away and the barriers to entry are extremely low. The average cost a house cleaner charges are $50-90 for two hours of work.

16. Online Surveys

That’s the beauty of online surveys – you can do them at any time of the day that works for you.

You don’t need to focus too much on taking them, either; in most cases, you can do other things while completing the survey. This means that they’re a great way to make some extra money without having to put in a lot of effort.

The best surveys are normally released first thing in the morning and only available for a limited time. That’s why it’s important to do online surveys as soon as they’re available. This will give you the best chance of getting rewarded for your efforts.

Best Online Survey Companies:

Where to find morning jobs near me?

Some tips for finding early morning jobs include using job search engines, checking job boards, and networking with friends and family. It is also important to be prepared for the interview and to have a strong resume.

If you’re looking for a job that starts early in the morning, you’re in luck! There are many jobs available that start at 5 am, 6 am, 7 am or 8 am. You can find these jobs by searching online or by going to your local job center.

It’s never too early to start looking for a job.

In fact, many people start their job search well before they’re actually ready to start working. This is because it can take some time to find the right job for you. And remember, it’s important to keep learning and earning money so you can be happy!

The best way to find an early morning job is to search online.

What to do when you land an early morning job

So you’ve landed an early morning job. Congratulations! This can be a challenging but rewarding experience when you first start out.

Prepare what your days will look like with your early morning job.

If you are adding a second job, make sure you are fully rested to take on both jobs.

Tips for surviving the early shift

When you start your early morning job, the most important thing is to get a good night’s sleep.

In fact, most of the early birds actually follow the billionaire morning routine to get in their flow.

Here are a few tips to help make the most of it:

  1. Get plenty of rest the night before. It’s important to be well-rested for those early morning shifts.
  2. Arrive on time. Punctuality is key in any profession, especially so when working the early shift.
  3. Stay focused and work hard. Those early hours can be tough, but it’s important to stay productive and get the job done right.
  4. Take breaks as needed. It’s important to stay hydrated and quick breaks to recharge your batteries.
  5. Enjoy your free time wisely. The evening hours are precious, so make sure to use them wisely and enjoy your time off responsibly.

What morning time jobs interest You?

Early morning jobs are a great opportunity for those looking to make a bit of extra money.

They are also a great way to get your foot in the door with a company you are interested in working for.

Plus you don’t have to debate is a business degree worth it as many of these jobs don’t require one. In fact, find low-stress jobs that pay well without a degree now.

In the post, we detailed plenty of early morning jobs. Since you are getting up earlier than most people prefer, make sure you pick an interest that can become a life-long career.

You want to be passionate about what you are doing early in the morning!

Especially because you don’t want to start only to say… “I don’t want to work anymore.”

Be sure to dress for success, be punctual, and be prepared to work hard and you will be sure to land an early morning job.

Know someone else that needs this, too? Then, please share!!

Source: moneybliss.org

Apache is functioning normally

After a relentless series of 10 interest rate hikes within a span of 15 months, the Federal Reserve’s Open Market Committee is poised to pause or potentially halt the upward trajectory as inflation shows signs of subsiding. As inflation gradually inches closer to the Fed’s target average of 2%, the inevitable outcome looms: a subsequent decline in interest rates

That means that the relatively good times bank savers have been experiencing may already have topped out. A look at average rates for certificates of deposit gives a glimpse of how bankers are seeing the future. According to recent national surveys from Bankrate.com, the average rate on a 1-year CD was yielding 1.68% while 5-year certificates offered yields 1.23%. With short-term rates starting to equal or even trend higher than long-term rates, it’s a signal that bankers are betting on long-term rates declining.

Right now, however, savers can keep their good times rolling by locking in rates on long-term CDs. According to the SmartAsset CD comparison tool, savers can snag a rate of 4.4% on two-year CDs, producing an annual percentage yield (APY) of 4.5%. That’s only slightly below the 12-month rate of 4.88% (5.1% APY).

For help making the right CD choices for yourself, consider working with a financial advisor.

How to Get the Most Out of CD Investments

At TIAA bank, savers can find a 12-month rate producing 4.75% APY but sacrifice just a bit of yield to lock in a 5-year certificate at 3.95% APY. The online Bread Savings (formerly Comenity Direct) offers a similarly yielding 4.25% APY 5-year CD, with the yield trimmed just a bit from the 5.2% APY produced by the banks’ 12-month certificate.

It can seem tempting to grab a higher-rate, shorter-term certificate right now, but the question is where savers will be able to take their money when it comes time to roll over their cash. When a 12-month CD paying 5% now expires a year from today, the only option for reinvesting could be CDs with yields lower than today’s long-term rates. In the year leading up to the pandemic, the average 5-year CD rate was a meager 1.1%.

When it comes to comparing CDs, rates can be listed as the stated interest and as the annual percentage rate (APY), which calculates the compounded yield of the rate after 12 months. In addition to the stated rate, the APY calculation also is based on how frequently interest is compounded. If a CD compounds annually, the stated rate will be the same as its APY. If the APY is higher than the stated rate, compounding takes place more than once a year.

Since 2020, long-term CD rates have gone from averaging 1.14% for 5-year certificates to as little as 0.26% – close to a record low – at the end of 2021 before climbing back up to 1.17% in February. The highest rates recorded in the past several decades occurred during the 1980s, when inflation pushed rates well into double-digits, with six-month CD rates hitting a state rate of 17.98% in August 1981.

The Bottom Line

Certificates of deposit, along with other insured bank products such as savings accounts or bank money market accounts, are good places to safely deposit cash. In most cases, however, those types of accounts won’t provide the growth needed to build a retirement fund that isn’t drained by inflation or produce the earnings required to support a potential 30-year retirement.

Investment Tips

  • A financial advisor can help you put together a strong investment strategy. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • Fidelity recommends that you have 10 times your annual income saved for retirement by age 67. To find out if you’re on track, try SmartAsset’s retirement calculator. This free tool will estimate how much you’ll have when the time comes to retire.

Photo credit: ©iStock.com/Inside Creative House, ©iStock.com/Andrii Dodonov

Source: smartasset.com

Apache is functioning normally

Another crucial part of building the tech is having “a lot of people” using the system, which is an advantage for Blend, according to Ghamsari. Blend’s mortgage banking software processed 23.2% of the total market originations in the second half of 2022, up from 14.5% in the second half of 2021.

Read on to learn more about the opportunities and challenges that AI poses to the industry, what the company has to say about the risk of getting delisted from the New York Stock Exchange (NYSE), and insight into Blend’s roadmap for profitability. 

This interview has been condensed and lightly edited for clarity.

Kim: Blend has played a critical role in powering about a quarter of the mortgages that originated during the refi boom. It seems like the next big wave is artificial intelligence. How is Blend preparing for the era of AI in the industry? 

Ghamsari: I think on the AI piece, it’s about combining an understanding of what the client is trying to accomplish. 

Now that a system can understand the essence of the question the consumer is trying to understand, it (AI) can actually do that work for the LO in the background, and then when the LO shows up, that work is already done. 

Some of these borrowers have hundreds of products that they can choose from. How is an LO supposed to keep that in their head? It’s too much context, and this will be a supercharger for them. 

In order for that to happen, you have to have a lot of people using it, which Blend does. You have to be connected to all these data sources and internal systems to both the customers and etcetera — and we are. You also have to be something that the LO uses on a regular basis. 

So we’re in this position where I think we can really help the industry, and particularly LOs, who are trying to make things work for consumers.

Kim: Then I assume AI could also take that extra step in correcting some information for LOs that they provide for borrowers?

Ghamsari: I think there’s a separate piece, which is for efficiency. There’s a lot more opportunity to understand what’s required to be done on the loan file after it’s already gotten through the space.

Understanding those requirements and documentation, and actually understanding the data and saying, ‘we need this additional piece of information,’ or ‘we extracted this information, and now that loan looks like we need to change something about it to correct it for whatever reason.’

So I think that’s a separate opportunity that I think is also potentially pretty compelling. Almost think about it as like a co-pilot for an underwriter. That same exact capability could exist.

Kim: Are there any features that Blend is trying to build as the industry gets more involved with AI?

Ghamsari: Nothing I’m prepared to share today, but we are definitely looking very closely at the space. Blend has some unique things — like how many people use our system is very important, and all the systems we’re connected to are very important. All the history of data we have is very important.

So Blend is that interface between LO and the consumer today for a lot of our customers.

Kim: I’m curious how in what ways AI  can help with homeownership and tapping into a potential customer base.

Ghamsari: I think that’s the area of the market that will benefit the most from AI. Most people who are first time homebuyers, or in underserved markets, don’t understand all the products and all the things that a bank could help them do or a lender could help them do.

Imagine you’re a lender or an LO or a bank who is trying to serve the mass market. In order to serve them really well, you have to be able to do that work on every file, and it’s just not scalable to build something that requires LOs to spend 20 hours on every file bill to answer that question.

So that’s why I think the co-pilot model is especially important here, because you still want that borrower to have that LO. But you want that LO to be able to do a lot less work to serve that customer. 

Kim: The big issue when it comes to AI is getting rid of that bias in machine learning. How can we tackle that? 

Ghamsari: I think this is where having a human in the loop is important. There are programs – whether it’s the government, or banks – in place to allow for these higher LTV or lower-income borrowers to get access to credit. 

I think what this (AI) does is — in theory — this unlocks the ability to make every specific situation as personalized as possible, which is what an LO would do if they could spend 20 hours in every file.

Kim: Are there any other challenges you foresee other than the bias factor in AI?

Ghamsari: I think the technology is extremely difficult to build. It’s not just taking some large language model or adding open AI to your platform. Building something that can understand the complexity of a consumer’s financial situation and understand all the products and programs that are out there — and understand the intent of the consumer. All three of those things are actually extremely complicated.

Kim: I want to shift focus to the notice Blend received from the NYSE about not being in compliance with the bylaws. Blend’s stock price has been up since its first quarter earnings call, trending closer to $1 level led by revenue above target and shrinking operating loss. How confident are you that Blend can meet NYSE’s bylaws?

Ghamsari: We have a plan to meet it. I feel good about that plan.

Obviously, I think there’s just general challenges. We are growing market share a lot right now and helping our customers a lot. What I’ve always said is – first and foremost during times like this – it’s not about selling customers new things. It’s about being there for our existing customers.

I want everyone to use it (Blend) so they can benefit. Let’s get a prescriptive roadmap for our customers to help them, and all those other things will take care of itself.

Kim: I’m curious what the board’s response was when Blend received that notice.

Ghamsari: We knew it was coming. It wasn’t a surprise to us and we had a plan. We wrote a letter back to the Stock Exchange saying here’s our plan.

So we were prepared, we knew it was coming, and we had a plan to deal with it.

Kim: We are in a downturn of a cyclical business. I remember you saying that in Q4 of next year, Blend will have positive operating profit numbers. What are some of the crucial external and internal factors for Blend to recover its share price, which once traded above $20?

Ghamsari: We said net operating loss will be less than $20 million in Q4 of this year, and then we’ll be profitable next year. We’re going to hit that plan.

We have different levers in our business. We have a lot of discretionary investment that we’re doing for the sake of our customers. Blend has the balance sheet to do it. We have the customer base that needs it, and will stick with us. So we have to keep investing; that is our job.

If the macro gets materially worse, we’ll pull back on some investment. But we have now scoped it out to where we feel really good about that. 

In terms of getting the stock price back to a certain number, all I think about is, how do I keep making our customers get more value from us even for things they don’t pay for? How do I use that to get customers to want to do more with us? Because if we make them more successful, they’re going to want to do more with us. 

Source: housingwire.com