Finance

10 red flags I look for as an angel investor. I’ve invested in 50+ startups and seen what works (and what doesn’t). If you’re raising money, avoid these mistakes: ~~ 1. No real customers A deck, a landing page, and a “vision” don’t impress me. Show me paying customers. Even better, show me customers coming back. == 2. No path to profitability I don’t care if you raise $100M—if there’s no plan to make money, you’re just burning oxygen. Growth is great, but cash flow keeps you alive. == 3. Founders who won’t sell If you’re scared to get on sales calls, that’s a red flag. The best founders sell in the early days—whether it’s to customers, employees, or investors. == 4. No differentiation “Like X, but cheaper” isn’t a strategy. If your only edge is price, you’ll get crushed. What do you have that no one else does? == 5. No urgency The best founders operate like time is running out. If you’re “exploring ideas” or “thinking about raising next year,” you’ve already lost. == 6. Raising money before proving anything Too many founders try to fundraise their way out of bad ideas. If you need VC to get off the ground, you’re building the wrong business. == 7. No clear distribution strategy Product alone doesn’t win. First-time founders obsess over features. Second-time founders obsess over distribution. How are you getting customers? == 8. No ownership mentality If I hear “I need to hire someone to do that” too early, I’m out. Founders who win figure things out before they delegate. == 9. A CEO who can’t attract talent Your first hires are everything. If great people aren’t willing to join, either the vision is weak—or you are. == 10. No skin in the game If a founder won’t invest their own money or take a pay cut to make it work, why should I? ~~ Enjoyed this post? Follow Josh Payne for more content like this!

In much of the world, digital financial tools are a daily reality—used to process paychecks, pay for dinner, buy groceries, and more. But 1.4 billion adults in low- and middle-income countries still lack access to these tools.    This isn’t just an inconvenience for them; it's a barrier to economic growth and empowerment. According to a 2023 UN analysis, digital public infrastructure—including digital ID, payments, and data exchange—could accelerate GDP growth in these countries by 20 to 33 percent.    That’s where Mojaloop Foundation comes in: Their open-source software makes it possible for countries to build inclusive digital payment systems that allow anyone with a mobile phone to send and receive money securely, instantly, and affordably. This has the potential to drive economic inclusion—and open the doors to financial freedom—for billions.

There's more and more research showing that investments in affordable and attainable housing are win/wins for renters and for investors. The latest comes from a paper by my friend Greg MacKinnon at PREA. Here's what it shows: 1) You can do good for renters and for investors. Greg found a strong correlation between investment returns and rent levels among apartments in the NCREIF database. Lower-priced apartments "produced higher average growth in the long term along with higher average returns to investors." Note: Greg's research is based on what we'd generally call "lower case a" affordable housing -- not specifics to tax credits alone. Greg defined "affordable" as having an average rent below 30% of income for someone making 80% of AMI. 2) Lower-priced rentals see less volatility -- both on the upside and the downside. "NOI per unit for the most affordable properties is much less volatile over time and tends to rise at a slow, steady pace." Greg noted that higher-priced apartments outperformed in upswing cycles like 2010-2012 and 2021-1H'23. But the higher tier rentals "were also prone to pullbacks, such as during 2008, 2020, and the most recent four quarters." Put another way: There's a correlation between rent levels and stability of investment returns. 3) Affordability wins over the long haul More affordable apartments generate lower NOI per unit, but that was offset by materially less volatility. In 2009, for example, "the most-affordable properties lost the least in the downturn but did not gain as much in the upswing. This is consistent with the typical argument that affordable housing is less exposed to the economic cycle." If you time it well, higher-tier apartments can generate higher returns. But Greg's saying that over the longer haul, lower-tier apartments are the turtle that outlasts the hare. "Over the 26-year time period, the most affordable properties outperformed the least affordable by 239 basis points per year." -- Possible caveats and implications -- The study might be influenced by the higher-quality nature of properties in the NCREIF database. Indeed, Greg told me there's little difference in average building age between NCREIF's most and least affordable apartments (both 16-18 years). That matters because older properties tend to have more deferred maintenance. That drives up costs AND can make a property less appealing to renters if not resolved -- which, in turn, impacts NOI. So, to me, this makes the case for newer-vintage attainable and affordable housing -- newer and/or nicer apartments at price points that compete with older, inferior properties. For full disclosure: I love this data because it matches what we're trying to do at Madera Residential (and we're not the only ones, of course) -- investing in ground-up construction at middle-income price points via creative partnerships. There's still a need for more moderately priced rentals to serve America's "missing middle." #affordablehousing

Interest rate shocks, post-pandemic behavioral shifts, and banking system stress have all converged on the US real estate market. We answer 6 of the most burning questions that are top of mind right now: Q1: What are our views on housing affordability? A: Housing affordability remains extremely stressed—and right now its significantly less expensive to rent vs. own in 48 of 50 of the largest markets. Q2: Will housing supply and demand balance out anytime soon? A: The housing market is likely to remain unbalanced for the foreseeable future in part due to the “lock-in effect”—80% of owners have a mortgage rate less than 5%. Q3: Will home prices head higher or lower in 2024? A: The supply-demand imbalance should keep a floor on home prices, and we see potential for modest price increases in 2024 at a national level. Q4: Is the worst yet to come for commercial real estate? A: Although distress is likely to increase, capital remaining available from banks and PE dry powder on the sidelines should help prevent a meltdown. Q5: Could office conversions be an answer to supply issues in big cities? A: While this looks like an ideal solution on the surface, it comes with its challenges—conversion potential is likely limited to 10–15% of existing office stock. Q6: Where could we see the best opportunities in real estate? A: We see the best CRE investment opportunities in residential rentals, industrial/warehouse, and distressed real estate debt over the next several years. Read our full report from Jonathan Woloshin, CFA for more.

I don't want to hijack Blake Oliver, CPA's thread, so I started another one... A lot of my work as a tax attorney involves cleaning up. Sometimes, that means cleaning up after a taxpayer's mistakes, but it can also mean cleaning up after another tax pro's mistakes. While there are some great tax professionals out there, there are also some bad apples. Before you hire, do your homework. Here are some quick and (mostly) easy due diligence recommendations: 1) Check credentials. You can confirm CPAs through a state board of accountancy and tax attorneys through a state bar. EAs are licensed through IRS, so check with IRS directly (email epp@irs.gov). Not all pros have credentials (you don't need one to prepare a return), but if a tax pro holds themselves out as having a credential and is not currently licensed, that should be a red flag. 2) Pay attention to reviews. Ok, admittedly, this is a loaded suggestion. While review sites can be helpful, they can also be misleading since not every client leaves a review. That said, if reviews are lopsided with loads of clients suggesting they've been ignored or scammed, pay attention. 3) Google the person (not the company). You've probably heard me say this before, but it's worth repeating. Some folks simply start a new company when they get bad reviews, suspensions, lawsuits, or, in some cases, indictments or convictions (yes, really). Sometimes, changing the name of your company is for bona fide reasons like restructuring or rebranding, but constantly switching gears is often a sign that something more serious is happening. 4) Ask for referrals. In some areas, the tax pro community is pretty small. Treat looking for a tax pro the same way you would if you were seeking out another service like a hairdresser, general contractor, or medical specialist—ask your friends and family who they might recommend. 5) Ask the difficult questions. If someone you are considering (or currently) working with demonstrates red flags and you're not yet prepared to walk away, ask for clarification. Running a business is hard work, and I don’t want to suggest that a few small mistakes should disqualify anyone from earning a living—goodness knows none of us are perfect. But handing over your personally identifying information is a big deal, and you don’t want to be in a position where you’re subject to penalties or audits because your tax pro is constantly unresponsive. If you feel uncomfortable about something you’ve read, heard, or experienced, ask questions. There may be a reasonable explanation (busy season, medical issues, etc.) but it may also be a piece of a larger pattern of missteps. If the tax pro refuses to comment or sidesteps your questions, I think you have your answer. Working with a tax pro shouldn’t be stressful. We’re in a relationship business—that should be a good thing. But as with any professional relationship, don’t be afraid to walk away from a relationship that won’t work (or isn’t working) for you.

One of the most important financial decisions couples make in retirement is when to start collecting Social Security benefits—and thinking ahead is key. If your household expects Social Security to cover essential expenses, consider how your income may change in the future. When a spouse passes away, the survivor can only collect one benefit—their own or their spouse’s. That means a potential drop in monthly income. The smartest move? Have the highest earner in the household wait until age 70 to start collecting Social Security. By doing so, the survivor is left with the largest possible benefit—more than 75% higher than if benefits started at age 62. Planning ahead now can make all the difference later. #RetirementPlanning #SocialSecurity #WomenAndMoney #FinancialSecurity #LongTermPlanning

You've probably seen this stat making the rounds. Jerry Buss's $67M investment in the Lakers grew to $10B, but the S&P 500 would have theoretically yielded $13B over the same time period. At first glance, it seems like a misstep. But this is a classic apples-to-oranges comparison that misses the bigger picture of true wealth creation. It's the kind of surface-level analysis we help our clients see past. Here's what the simple math ignores: 1. Annual Cash Flow Opportunities: The Lakers weren't just a number on a screen; they were a cash-generating machine. The annual income from tickets, media rights, and sponsorships likely dwarfed any dividend from an index fund. That's money in your pocket, not just on paper. 2. Tax Advantages: Every business owner knows the power of deductions. From player salaries to stadium maintenance, the tax advantages of owning an asset like the Lakers are immense—benefits an S&P 500 investment simply can't offer. 3. The Legacy Asset: You can't teach your kids life skills by showing them a brokerage statement. The Buss family didn't just inherit stock; they inherited an empire, an identity, and the ability to handle executive-level responsibilities. That's a legacy. 4. The Next Venture: Selling the team wasn't the end. It's the beginning of the next chapter, unlocking billions in capital to deploy into new ventures, charities, or family projects with complete control. The S&P 500 is a fantastic tool for investing. But for building a multi-generational legacy and creating strategic wealth? Ownership is, and always will be, in a league of its own. For business owners, the best investment may very well be back into your own company. You need a financial strategy that enhances that growth, not one that fights it. If you want to work with an advisor who understands that your business is the engine, not the piggy bank, send me a direct message. Let's build a plan that fits reality. #FinancialPlanning #BusinessOwner #LegacyPlanning #TaxStrategy P.S. I believe there's a lot more to unpack here. I'm considering writing a full article detailing the nuances of ownership vs. market indexing. If that's a breakdown you'd like to see, just comment below.

Family offices are telling us something—loud and clear. According to UBS, 42% of the average family office portfolio is now allocated to alternatives. That’s more than cash, fixed income, and emerging market equities combined. What does that signal? → Yield is no longer found—it’s engineered. → Diversification now means private markets, not just 60/40. → Patience is a luxury retail investors can’t always afford—but family offices can. Breakdown within alternatives: • 22% Private equity • 11% Direct investments • 10% Real estate • 5% Hedge funds Traditional allocations still matter, but this chart makes one thing clear: institutions are betting long on illiquidity, complexity, and control. The average investor is told to keep it simple. The ultra-wealthy? They’re doubling down on bespoke and off-market.

…It has begun. Over the last year, I have made the strongest possible case for the Fed to be proactive. Rates should have been cut this week – indeed, the rates should have been cut in January. We have seen this movie before. The Fed was very late to take inflation seriously in 2021. They brushed it off as “transitory”. However, it seemed obvious that inflation was surging. Real-time shelter inflation was increasing at a double-digit rate. Shelter has the largest weight in the CPI. Shelter operates with a lag. Hence, it was easy to forecast the surge. The Fed was forced to react after the damage was done. The same mistake has been repeated – despite many warnings. The recent CPI print was 3% year-over-year (YOY). Nearly two thirds of this print was driven by one component – shelter. Shelter inflation is reported at 5.2% YOY. This number is far from reality. For example, Apartmentlist.com rents are running -0.8% YOY - a full 6% below the official CPI number. Suppose we believe the real-time shelter inflation is 2%, not 5.2%. This means the real-time CPI would be 1.8%. If you believe shelter is 3%, then real-time CPI would be 2.2%. These numbers are well within the Fed’s target. The Fed prides itself on making data-driven decisions. However, it is unwise to make decisions based on stale data. The shelter inflation happened in the past. Keeping rates high will not impact what happened last year. It is always best to look at forward-looking indicators for policy decisions. ·      My yield curve indicator has been inverted for 20 months. It is 8 of 8 with no false signals since the 1960s. The maximum historic lead time has been 23 months (before the great recession). Ignore it at your own risk. ·      The Sahm Rule has been triggered. This indicator is not necessarily predictive because employment moves with the business cycle – but it is useful in telling us whether we are in a recession or not. We know that hiring has slowed and unemployment has risen – though the absolute rate is still relatively low. ·      Retail sales are highly correlated with personal consumption expenditures. Retail Sales are flat. Many do not realize that Retail Sales are not inflation adjusted. Taking inflation into account recent sales growth as well as YOY sales are negative. ·      There is considerable evidence that COVID-era savings have been drawn down. A recent release from Philadelphia Fed carried the headline: “Share of Delinquent Credit Card Balances Reaches Series High”. (The same report shows an alarming plunge in mortgage originations.) People are paying 20%+ interest on a card because their savings have run out. Indeed, if people are cutting back on fast-food expenditures, you know this is serious.  Drawing down the savings has fueled consumption expenditures over the past two years. That source of growth has ended. Now the Fed will have to play catch-up and cut by at least 50bp in September. Any recession is a self-inflicted wound. 

Back on recession watch, Leading Indicator #2 – the FHA mortgage delinquency rate. This isn’t typically in lists of leading economic indicators, but it may be a proverbial canary in the coal mine in the current context. FHA borrowers have low to moderate incomes, with a median income of about $75,000 a year, and most are first-time homebuyers. Judging from the recent increase in the delinquency rate on FHA loans, these households are under mounting financial stress. This is despite the exceptionally low 4% unemployment rate and goes in part to the credit characteristics of the borrowers, including lower credit scores and downpayments. Even more important may be their high debt-to-income ratios. With mortgage rates and house prices as high as they are, borrowers have to shell out a big share of their income to their mortgage payment to get into a home. They may have gambled that rates would fall and could refinance, bringing down their payment. However, the Fed’s higher-for-longer rate policy and quantitative tightening have forestalled that exit strategy. Combine this with higher homeowner insurance premiums and property taxes, and borrowers struggle to make mortgage payments. What happens when the job market wobbles even a little bit? Thus, why this is a good statistic to include in our recession watch. Not that the financial troubles of FHA borrowers are enough to push the economy into recession. Indeed, high and middle-income mortgage borrowers are having no trouble making their payments at this time – the gap between the FHA delinquency rate and those on Fannie and Freddie loans has never been as large. But if the economy is headed for trouble, it is FHA borrowers who will signal it first. And they are. #rates #FHA #income #recessionwatch #fed