One weak link

The market proposes, the Fed disposes

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“For a successful technology, reality must take precedence over public relations, for nature cannot be fooled.”
– Richard Feynman

The Challenger Space Shuttle disaster was one of the darkest moments in the history of American spaceflight. The shuttle exploded on a cold morning, 73 seconds into its flight, and killed all seven members on board – One of them was a civilian, a woman who would have been the first teacher in space. But even more tragic was the series of missteps that led to this preventable accident.

Source: Kennedy Space Center

The Challenger wasn’t taking its maiden flight – It had been on nine successful voyages before. But it was just one faulty part that led to the disaster. The Nobel Prize winning physicist Richard Feynman was a member of the Presidential commission that investigated the disaster, and in a famous televised hearing, he showed how a small choice of material by NASA was the culprit. The O-rings that sealed the fuel tank shrank due to the ice-cold weather on the morning of the launch and broke the seal by not expanding in time. The fuel had leaked out and triggered the accident.

But what Feynman discovered about the decision-making processes in NASA was even more revealing – The risk of cold weather was known, but the chances of one weak link leading to the failure of the whole shuttle had been underestimated. The engineers working on the project had calculated the odds of failure at 1 in 200, but the management claimed that the odds of failure were 1 in a hundred-thousand! They were making decisions based on what they wished was true – and science didn’t agree. The commission’s report led to a 32 month hiatus in NASA’s space program.

When scientists make mistakes, they’re glaring and in plain sight. But when money managers do the same thing, it’s not so obvious. And I’m not talking about any specific failures like Silicon Valley Bank which didn’t have a Risk Officer, or Credit Suisse which didn’t see its demise coming – I’m talking about the economy of growth that was propelled by the era of free money for the last decade. A culture was fostered where it was not cool to talk about value investing, where growth at all costs was the aim, and where blitzscaling was the “in” business model. But it all depended on one weak link – Interest rates. And now that the Fed has hiked rates again, leading to the highest interest rates since the start of the Great Financial Crisis, the growth story is showing cracks.

This time, the market has crashed, and housing is turning around, and the story is unraveling – but it’s not like any other time before. Watch the video to find out where this is likely to go, and how you should respond to make sure your money is safe. Speaking of keeping your money safe…

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Banks under attack

I wish there was some good news on this front, but after the fall of Silicon Valley Bank, Signature Bank, and Credit Suisse, another titan’s name is being mentioned in the same breath – Deutsche Bank. But let’s not jump to conclusions without looking at the facts. The circumstances are a little different here, and things might not go the same way. More importantly, here’s what you should do to make sure your money is safe with the banks:

Even with all the trouble in the banking industry, I couldn’t get enough of people being irresponsible with their own money, so here’s what happened on…

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The Graham Stephan Show

I kicked off this week reacting to another fun video (depending on how you look at it) of a woman asking for more child support from her ex. I find Judge Vonda B’s videos really entertaining – but some have found these reaction videos triggering as well. Let me know which camp you identify with in the comments.

There’s only one thing I watch more than Support court, and that’s Caleb Hammer roasting millennials for their poor money choices. Here’s another woman under fire for her “immature spending” – and she’s a doctor no less.

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Starting YouTube at 43

You probably know Jason Nash from his YouTube channel, or even his Vine days – but his story reveals that there’s so much more to him. We had a talk about how you can use fitness to turn around your life, what it means to make $300k a year and lose it all when your platform goes down, how David Dobrik changed Jason’s life by getting him started on YouTube, and why Jason thinks 50 is his best age. Really inspirational stuff – it’s never too late to pick anything that interests you and make a success of it:

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So that’s it for my Sunday round-up. For the new folks here, in this newsletter, I give a quick recap of whatever you may have missed over the week on Sunday over all my different channels, and on Wednesday, I will be doing my deep-dive article on one of these topics.

See you next week with another bunch of exciting videos!

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