Intro
Hello and welcome to Bridgeford Trust Company’s “Delivering Direction and Control Podcast Series.” Our podcast series is designed to educate, challenge and inspire listeners while keeping you updated on developments regarding modern trust law and powerful planning opportunities available, all in an effort to deliver direction and control to clients and their advisors.
David Warren (00:27)
Hello again. This is David Warren, Co-Founder of Bridgeford Trust Company and Chairman of the Board. Very excited to be here with yet another installment of our highly successful podcast series. And as I always say, when we begin, we’re always humbled and honored to have some of the people we’ve been able to interview over the last two years of doing the podcast and I always say that I’m excited when we begin, but in this case I actually am. I’m actually a bit starstruck. We have somebody who’s a bit of a celebrity, not just in central Pennsylvania, but really maybe around the around the country, maybe with around the world. And I’m referring to my new friend James Adams, who goes by Jimmy. He has an extremely interesting and illuminating background on the financial services industry, which I will touch on a bit, and then transitioned to the man of the hour because he’s going to impart some really, really interesting history and insight into the financial services industry back when he was working on Wall Street and his evolution there. But Jimmy has an MBA from North Carolina Chapel Hill and is a CFA chartered financial analyst, which is not easy to get. I always say that I think it’s harder, Jimmy, to get them than the bar exam. I think it actually takes longer than going through the bar exam. So congratulations for surviving your way through that process and I had the great fortune of connecting with Jimmy shortly after he developed a business which was called formerly called BSS Wealth, but now is rebranded with a name called Lighthouse, Lighthouse Wealth. And it’s very exciting. I love the name and anxious to talk to Jimmy about the transition into the new brand and really it sounds like a bit of a new company, which is a financial services company based on focusing on, I think, high net worth individuals, which Jimmy will talk about. But Jimmy, we’re thrilled to have you here and I really appreciate you taking the time to talk with us. And of course, our new friendship and the ability to work together going forward. So welcome to the podcast.
Jimmy Adams (02:40)
Thanks, David. I’m really excited to be here.
David Warren (02:43)
So, a little bit of background, Jimmy, and then we’ll kind of jump into some really interesting topics. But for those of our listeners who may recognize your name, it could be because of a book that you penned called Waffle Street, The Confessions and Rehabilitation of a Financier. And the book was, well, you can talk about when and the genesis of the book, but it really picked up a lot of attention in the media transitioning to the production of a movie starring James Lafferty and Danny Glover, because I think the book and its topic and its contents really hit a nerve, which really outlined a lot of what happened in the financial meltdown in the bond market, which Jimmy will get into in specific detail. So, Jimmy, again, thanks for being here. You know, Jimmy, before we get into some really interesting conversation here about the book and your movie and in, of course, your current career and where you’ve gone since, take me back to your background training. What led you to Wall Street in the first place?
Jimmy Adams (03:47)
It was my sophomore year, summer after my sophomore year of college. I was, you know, first introduced to Warren Buffett and I’ve read a lot about him and found his biography by Roger Lowenstein pretty interesting. And then I’d taken a number of accounting courses, and I wasn’t sure whether I wanted to do a five-year masters of accountancy at Wake Forest or, you know, focus more into finance. When it came time to declare my major and I had a professor asked me if I wanted to be a user of financial statements or a preparer of financial statements. And when he phrased it like that, the decision was pretty well made. I knew I wanted to do something more on the capital market side and not, do, you know, audit or tax with all respect.
David Warren (04:31)
Which is really exciting.
Jimmy Adams (04:33)
Yeah, well, yeah, it’s well, I’ll put it this way. The career, I think, maybe has been more colorful, albeit more frustrating and less remunerative in many years. So yeah, it’s, it’s been eventful.
David Warren (04:45)
So, from there, when you made that pivotal professional decision, what was your first role or role, your first position, I guess out of your training? Was it on Wall Street or did you would you take a stop before Wall Street?
Jimmy Adams (04:58)
Yeah. So, at the time I was graduating from Wake Forest in 2001, and it was kind of right in the wake of the tech meltdown when all of that stuff had been going on. And Wachovia was a big employer in North Carolina, and they were merging with First Union. And that was a whole deal where there wasn’t as much going on in North Carolina for new graduates. And then I was looking at the different jobs with, I guess it would have been first union, you know, doing like a financial planning consulting in one of the branches or things. And eventually the job that came up was with Protective Life Insurance in Birmingham, Alabama. As a credit analyst, it was a new position to assist the corporate bond portfolio manager. And my boss was a pretty young guy that had gotten his MBA from Wake Forest and basically just needed help monitoring a couple hundred issuers that we had exposure to. So that was wonderful training because you learn I mean, I was looking at financial statements all day, every day. I was able to knock my CFA exams out in three years and just get, you know, exposure to most of the S&P 500 because we let money to so many of those companies. And to really get sort of a, I’ll say, baptism by fire. My first business trip was to New York on 9/11, if you can believe that or not. It was Sunday, September 9th. I’m sorry. Yeah, September 9th in 2001. And they had this conference with JP Morgan in midtown Manhattan and I think it was Monday night, there was a Yankees game that had been rained out and we had gone with our Merrill Lynch rep. And I met him down at the World Financial Center. And I remember getting out of the taxi, you know, 6:00 and looking up at the Twin Towers across the street. So, this would been, you know, about 15 hours or so before the planes struck. And then, you know, sort of being stuck in the city for the week, you know, and kind of set the tone for a lot of things that were going to come down the road with, you know, Tyco, Enron, WorldCom, all of the corporate fraud and, you know, cutting my teeth in an environment where you had so many credit events. A lot of airlines, of course, went bankrupt. US Air, United and my company had done very, very well by comparison because of the underwriting. We had a very prudent and very, very wise man who was the chief investment officer. And he was very diligent about underwriting credit and making sure that he wasn’t taking risks, that he wasn’t getting paid for. So I was grateful to have that good mentorship early in my career and I remember him telling me at the time that it was an ideal environment in which to cut my teeth because, you know, you don’t learn a lot about credit and writing in the good times, right? You learn about it when the defaults start to happen. And, you know, no sooner had I started in the business that that happened. So that was my introduction to the bond market was 9/11 and WorldCom.
David Warren (08:10)
Well, talk about foreshadowing and in many respects in terms of what was what was to come. So then take me from there. So where was your next where was your next move?
Jimmy Adams (08:20)
Yeah. So, one of the bond salesmen that I played golf with at UBS, good guy, told me about this job with Jefferson Pilot in Greensboro, North Carolina. So, the thought was to go up there, get my MBA from either Duke or UNC-Chapel Hill. And, you know, kind of move along in my career. So, I had gotten, I think three or four weeks into my first semester at USC, and then Jefferson Pilot announced they were merging with Lincoln National. Right. The big, big insurance carrier. And I think of that organization, there were several thousand people in it, and the only department that had any headcount reduction was the investment department, because the general account for Lincoln was being managed out of Philadelphia at the time with Delaware investment. So it was like I had gone, you know, it made this move and they were going to cover most of my tuition. And, you know, just a few weeks into that semester that, you know, rug pull happened. So, yeah, it seemed to be a series of rug pulls. And then the good thing was because I had been at UNC-Chapel Hill, that tapped me into a pretty good alumni network, and that’s how I found out about the job with a firm in Chapel Hill. The offices of later relocated to Durham. There, a big fixed income money manager at Zenith, we were running about 33 billion in assets. We had accounts that we managed for numerous state pension plans, the Canadian Public Private Investment Board, the Bank of International Settlements and Basil, a consortium of Japanese banks, the state Sovereign wealth fund of Norway. I mean, they were huge global players. Our CEO was an old academic colleague of Ben Bernanke, the Federal Reserve chairman, and it was just it was kind of an intellectual brain trust where they had done a lot of the seminal academic work for valuing mortgages in the early eighties and then moved from a consulting role into an active management role in that asset class. And then they did a lot of things were, you know, what they call portable alpha strategies in the business, which is where you if you can outperform, you know, in a fixed income account and you can outperform, let’s say, you know, LIBOR or whatever the kind of the risk free rate is in fixed income, you can then take that outperformance and buy, you know, equity futures and basically you get a return. That is the S&P 500 plus however much you beat your bond benchmark. So, it was a huge area of opportunity for us. And the business is really going gangbusters. And 2006 when I got there and we knew that the mortgage market was going to go into a slowdown, we knew that the underwriting was crazy. There were a lot of, you know, Johnnys come lately and…
David Warren (11:17)
What do you mean by the underwriting was crazy.
Jimmy Adams (11:19)
For, you know, mortgage lending, right in ‘06, like, you know, no income, no job, or they called them like the name of your loan straight and the rates and everything. So, we knew the big one was coming.
David Warren (11:34)
Let me just pause because I’m so interested, particularly because of your technical background. So, you at as early as what you said, 2006, you started to see something was wrong with the underwriting and you thought you felt like this wasn’t sustainable. Yeah. Because I just think that’s really important. Go ahead, please continue.
Jimmy Adams (11:50)
Well, our firm, our firm did. I mean, again, these guys had been doing this for 25 years and, you know, they were shrewd and we had all of our own internal models that the PhDs had built and we weren’t, you know, deferring to the rating agencies. So, yeah. So, we got the story right and we got the timing right. It was it was very reminiscent of the late eighties where junk bonds had gone from being an inefficient asset class to one where everybody was getting in the game and you kind of knew it was too frothy and the piper was going to be paid. What we didn’t get right was the magnitude. We were ready for a Category five storm and we got hit with the tsunami. So it’s one of those things that illustrates what makes investing difficult, where you have to get the story right, you have to get the timing right and you have to get the magnitude right. Because if you’re too early, you’re wrong. And if you don’t place a big enough wager or position yourself accordingly, you know, if the moves bigger than you think it’s going to be, then it’s the same difference as being wrong. So it was a real lesson in humility. And, you know, we quickly became, you know, persona non grata with the consultants that that hire was the institutions used to do due diligence on institutional investment managers and because.
David Warren (13:10)
Because why? Because you didn’t call it right. Or because you were critical of the underlying underwriting?
Jimmy Adams (13:16)
Because when the market really started to turn south, we, you know, thought it was more technically driven than fundamentally driven. We don’t think we appreciated the level of fraud in a lot of these loan plays and the other thing is the way these models were built, they couldn’t handle a double digit price decline in the space of 12 months that whatever you thought the bonds were worth. If that happened, you know, it was like the wheels came off and nothing was worth anything. So that’s what happened. And we went from managing 33 billion down to 8 billion in the space of like 24 months. Oh, wow. Yeah, it was it was pretty ugly. So I almost had a nervous breakdown in the summer of ‘08” So this was a couple of months before Lehman Brothers because, you know, the cracks the dam had started to appear in, I think it was February of 2007 when the, you know, the ABX, some of these derivative indices started to get a little wobbly. And, you know, the analogy I used was being like Charlie Brown in the Linus in the pumpkin patch, right in the of the Charlie Brown special. Right. Don’t worry the break Great pumpkin is going to show up. Everything will be fine. And he just he just never comes. Right? And so, you keep telling everybody to just wait it out. It’s just technical. But these bonds are sound. And then, you know, somebody that’s hired you to manage basically a cash mandate or a short-term cash mandate never expects a double or triple a bond portfolio to drop by 20%, and certainly not in the space of several months, which is what happened. So, it was like Armageddon. And however, anybody thinks the stock market was miserable in 2008, multiply that by a factor of three and you get a sense of what bonds were doing. It was really, really bad.
David Warren (15:02)
So, Jimmy, if I could jump in, you know, you used the word fraud a couple of times. Could you expand on that? And I guess I want to I want to fix the point in time, 2006-2007 before the cracks were being noticed and all of that. Why? Why, why use the word fraud?
Jimmy Adams (15:20)
Well, if you look at the Big Short and maybe it’s too early to invoke this, but you know, the Michael Lewis book that kind of details everything that was going on there, the loans that were being given to people that just straight up lied on their applications. And then the mortgage brokers who facilitated I mean, there’s no other word for it, really, other than, you know, fraud. You’re submitting paperwork, right? Legal documents that contain false information. That’s the very definition of fraud. So that that all gets passed on to the, you know, the lenders and then it gets put into these securitized loan pools, which end up on the balance sheets of Lehman Brothers or some insurance company or some pension plan or…
Jimmy Warren (16:02)
I’m sorry, but where’s the watchdog on that? So, before these things become securitized, then flipped around and sold to the public, right. In the form of a bond, is there a mechanism somewhere along the chain of when these things become a security that this should have been caught before it hit the public as a as a security for sale?
Jimmy Adams (16:21)
Well, this is the part of the broadcast where I should probably remind the listeners that you’re the attorney, not me.
David Warren (16:30)
So, I don’t I don’t practice anymore. I refuse that.
Jimmy Adams (16:33)
I’m giving you a hard time. You’re not a securities lawyer per say. But I. I don’t know. I mean, the analogy I use is, you know, it’s like, who stabbed Julius Caesar, right? Was it Brutus, Cassius or the other 30 guys in the Senate? Right. So, kind of everybody was in on it. The realtors didn’t care. They’re making money. The mortgage brokers didn’t care. They were making money. The borrowers were putting no money down. And, you know, they were standing to collect on all the upside, if the house kept appreciating and the rating agencies were getting paid by the people doing these securitizations, and then the asset managers like us were getting paid, you know, as long as these things weren’t imploding. So, everybody had sort of an incentive to implicitly collude on this stuff. So I don’t know that I have a good answer, you know, legally. But I can just tell you nobody cared to ask the hard questions as long as there was money being made, right?
David Warren (17:23)
No, I think that’s exactly the answer I was going to. I’d like to read a quote that I found from you that and I think it really encapsulates what you’re saying. And what I find so fascinating about what you wrote is not only in your book with this quote, so I’ll just read it. Whenever anyone talks about the global meltdown, everybody’s finger pointing at everyone else. It was Fannie Mae, Freddie Mac. It was a Community Reinvestment Act, unscrupulous realtors. You talked about the bond issuers or whatever. But I love what you say here. The fact of the matter is everybody was in on it and nobody took responsibility. And that’s what drove you nuts about the whole thing. And I think that’s that. I think that, to me, is such a seminal comment about what happened. So expand on that for me please.
Jimmy Adams (18:07)
I was let go in the third wave of layoffs in January 2009. And, you know, again, it’s like something out of a movie. Right. And we’ll get to that in a minute. Well literally 12 hours before my wife and I, you know, decided, you know, we really need to start trying to have a kid. We married eight years. I’m you know, I’ve survived two rounds of layoff. I don’t think they’re going to cut me. I’m still working on a project internally. And I got my pink slip 12 hours later. I mean, it was like the timing couldn’t imagine any more dramatic, you know? So, I remember calling her and she’s bawling over the phone and everything and to your point, you know, I said, I’ve been watching this whole situation unravel, too, for two years, and nobody quite knew if the T.A.R.P. had been enough, if the banks were still recapitalized.
David Warren (18:56)
Can you define that? T.A.R.P. Yeah. Because I think, you know, this this is enough. Time has passed. There’s enough history that some of our listeners may forget the acronyms or even forget the full magnitude of this meltdown and how it almost took down the US economy. So why don’t you define T.A.R.P. and maybe kind of summarize a bit just how critical this was in the U.S. economy and how many billions of dollars the United States government had to pump into the system to keep everybody standing? I mean, everybody meaning the big banks. So, could you paint that picture for the listeners? This was a serious problem.
Jimmy Adams (19:29)
Yeah. So, I mean, the Federal Reserve, if you go back to 1913, it was really designed to stabilize the nation’s money supply. So if people got nervous about banks and they started withdrawing money en masse from banks, the Federal Reserve could step in and lend money to institutions that would otherwise have their vaults drained of cash and, you know, become illiquid and or insolvent. Right. So, with all of the subsequent evolution over the next number of decades, I mean, that’s basically the Fed’s job was to provide liquidity to sound financial institutions. And, you know, there were still kind of four main federal regulatory agencies that monitored these different, you know, banks and thrifts and trust companies and things. And the Fed was one of them. But really, it was designed to provide liquidity. It was not designed to do, which is to say cash for people that wanted their money back. Right. It went to the bank If their depositors or lenders wanted their money back, all of a sudden, what it was not designed to do was to recapitalize insolvent institutions. It’s not allowed to do that per its charter.
By that, what I mean is if your liabilities are worth more than your assets, you’re insolvent, right? You’re basically kind of a Ponzi scheme and it’s a fight for who can withdraw their money the fastest because there’s not enough pie to go around to everybody based on what the bank or insurance company owes. So the whole reason why the T.A.R.P. was so critical, the Troubled Asset Relief Program was they basically recapitalize the banks, which is to say that the United States Treasury became an equity partner in all of these entities like Fannie Mae or Freddie Mac or AIG, you know, Citigroup, whoever. So if that had not happened, you would have had even more insolvencies and bank runs, and it would have just nobody has any economic incentive to keep their money on deposit with an institution that is insolvent. Right. It makes sense to pull your money out of the bank, to panic and to be the first person there to get the money out. So, if the only thing standing between mass and solvency and these bank runs at this point was the U.S. Treasury, nobody else had the incentive whatsoever to be the person to shore up these institutions. So that got passed in late 2008. But you still didn’t know if there was enough capital in these banks or if, you know, we were still going to be getting sucked into this vortex of debt deflation. So, what really marked the inflection point in March of 2009 was when I think it was, I don’t know if it’s the Treasury or the Fed had done a review of these banks and said, okay, they’re all solvent now, but they suspended mark to market accounting on a number of these positions. And so even if you were insolvent by one metric, you weren’t solvent on another metric. And that’s what marked the nadir and the inflection point in the stock market. So, we’re getting a little bit technical. I apologize if…
David Warren (22:44)
No, no, I think it’s great. If I could jump in, though, because it’s important to understand pieces of the technical components of the crash. But let’s take it more macro. So, what was happening in terms of well, describe the seriousness and without a technical explanation as to what happened. But as somebody with your background, the dire situation that the nation was in, maybe most people, the average person, maybe never even understood answers or how close we were to a total collapse, right?
Jimmy Adams (23:14)
The short answer is we were on the cusp of Great Depression 2.0. Bear Stearns, a major brokerage house, had collapsed. Lehman Brothers had collapsed. AIG, the nation’s biggest insurance company, had gone insolvent. You know, the government had to step in and recapitalize that in the bank runs had started on Wachovia, which is one of the biggest, you know, commercial banks in the country. So, yeah, it was like 1930 redux. And I don’t think that point can be overemphasized.
David Warren (23:41)
Yeah, Jimmy, I agree. I think it is a point that cannot be overemphasized. And I continue to be amazed at how the average American or maybe the average world citizen didn’t realize just how close we came to a collapse and, you know, you read the quote where you said and you talked about how many people really were to blame for it. And I think what’s so striking to me, as I’ve read all of your interviews and the description of your book in the movie is how you’ve said in multiple contexts that you feel a certain sense of responsibility. Talk to me about that.
Jimmy Adams (24:15)
Well, yeah, I mean, as I discussed a minute ago, I mean, it was like sort of who killed Julius Caesar, right? And everybody was in on it. I think it was a pretty small actor in terms of the grand drama. Right? There’s people at Lehman Brothers or AIG or, you know, big brokerage houses that, you know, at the margin had a lot more to do with it. But at the end of the day, you know, it was a systemic problem. And I just felt like nobody that I had encountered anywhere, whether in private industry or publicly at the Federal Reserve or any bank regulator, had assumed any personal responsibility. They were always pointing the finger at somebody else. And to a degree, that’s understandable because there were so many culpable parties. And I thought that I would provide an interesting narrative. And in being like the one person seemingly who was willing to step up and say I was part of this problem because nobody else was doing it.
David Warren (25:11)
Yeah, well, and I have to say it’s noble and it’s something I think you should be celebrated for. If you don’t mind me saying that. You know, I know it’s easy to cast what happened and such. What is It was an awful thing that happened in American history. But the fact that so few people or maybe just one person was willing to not only say, hey, yeah, I’m part of this and let me tell you what happened and you were in search of redemption, no doubt, which I think that’s a heroic aspect of your story, which leads you to the narrative around your book and then ultimately the movie. So take us from your somewhat acceptance of some culpability and to the Waffle House.
Jimmy Adams (25:54)
That’s yes, it’s a long journey. I’m thinking, boy, this could be a really long conversation. Well, you know, in the wake of Lehman and AIG and all of that mess and then, you know, we’re waiting to see if Congress is going to come in and recapitalize these banks or whether we’re all going to be in depression 2.0. I felt like my job was a little bit secure at the firm because I’d survived two rounds of layoffs. I was working on a project there and kind of a one-off higher profile project. And so when I finally got my notice in January of 2009, it was actually somewhat, I’ll say, cathartic just because I was out of the industry after watching the cracks in the dam get bigger and bigger until the flood, you know, finally just burst the dam. So there was that kind of sense of emancipation a little bit. But when I looked at what I should do next, I went to the unemployed garment office in Raleigh, North Carolina, and I’d never been on unemployment before and actually didn’t end up filing a claim. Somehow I finagled my way into a conversation with the director of the office and he was telling me that the state was about out of money and they were going to have to appeal to Washington for more fun lifestyle. And I’m looking at the families and there were families there, right, with their kids to my right in my left. And I just felt like I was part of this big engine that made all this happen, that had it not been for this massive build up in Boston, the housing market enabled by, you know, asset managers buying all of these, you know, garbage securities, that the guy sitting here to my left wouldn’t be here with his wife and small child. I just I had a bad feeling in my stomach and I just felt like, you know, my wife’s a nurse. I don’t we’ve got assets, you know, I don’t have any children. My own. And I should not be compensated by the state for this mess that I was part of creating. I think that was when it really hit me.
David Warren (28:01)
Wow. That’s. That’s amazing. So, what happened next?
Jimmy Adams (28:05)
But what happened next? And I thought, well, my wife years before had asked me to write like a holiday letter to update everybody what we were doing every December. And within a year or two of that, it turned into my ruminations about everything and less about, you know, kind of what the two of us were doing as a couple and more about sort of Jimmy’s philosophical take on the world and to the point where she said, You know what, I can’t really say my name to this anymore. This is sort of your show, but I really enjoyed that exercise. It was my favorite part of the holidays. And I thought, you know, given all of this craziness, you know, I wonder if I could write a full-length book, right? Like a 300-page memoir and, you know, whatever. So, I thought, well, now is my chance. If I’m going to do it, it’s now or never. So I thought, well, I need to do something different from finance and I need stuff to write about, and I need time to sort of, you know, gather my thoughts to the extent that I’m going to write anything about the last two years and included in this memoir. But I need to step away from finance and get some perspective. So, I thought, well, what crazy things could I sort of do that would make for an interesting, you know, fish out of water narrative. And I talked to a woman about maybe becoming a Mary Kay representative, but she said, you know, men normally were sort of disqualified for that kind of work. And I thought, well, that’s the whole point of doing this, right? Could I make it as a male Mary Kay salesman? And then I tried to get on with McDonald’s a couple of times and they didn’t like take me seriously. And I was pretty tenacious about following up. I said, look, maybe I want to become a franchisee, but I need to know how the restaurant runs. And I don’t know if they’re worried about the competition or didn’t. I think I was a sincere actor, but I could not get the phone calls returned from McDonald’s. So, I’m driving down a Fayetteville road in Durham, North Carolina. I remember it very vividly. And I just I said, what the heck? You know, I pulled into the lot and I talked to the assistant manager for a couple of minutes. And, you know, do you ever work out in a restaurant before? And I said, no, I never had any, you know, food service experience. She said, do you have a pair of black pants? She said, I said, Yeah, she said, Black sneakers. And I said, well, I can get some. She said, are you going to steal from us? I said, no she gave me this three. This was like a, you know, a little like a note card, right? Like a three-and-a-half-inch note card. And that was like the application were like four questions on there. And I think two of them were about, you know, sort of criminal records and things. And you just give that back. And she’s like, all right, come back on Monday. And, you know, I got hired on the spot, so they made it easy for me.
David Warren (30:37)
Yeah. Congratulations. So, you so you walk in on your first day and two, two questions popped of mine. How did they receive you and how did you feel?
Jimmy Adams (30:48)
Well, you know, there was a surreal element to it. And I should add that when word got out, you know, a couple of weeks later, there were some of my former colleagues at the asset manager that would come in to see me. I think it was like I had sort of joined the circus or something or, you know, these rumors can’t possibly be true. And I want to revisit a comment that was made in a few minutes. But what was I think everybody was pretty accepting there because everybody at Waffle House had a back story, right? Like most of them had done time in a state or federal correctional facility. And you know what happens, particularly when you get paroled from Butner, North Carolina, where our friend Bernie Madoff was incarcerated, you get a job offer either from Burger King or from Waffle House, as the two places that’ll take paroled ex-cons. And if you get the job at Waffle House, they’re not going to put you on the Sunday after church crowd. You’re going to wait on all the barflies after last call at 1:30 in the morning. So, it was I had like three weeks of training before they assigned me to, you know, the honor shift or, you know, where they put kind of the higher caliber employees. At least that’s how they made it sound when they were pitching it to me. So, it was like me and three other ex-cons on that shift. And yeah, things get pretty colorful. And it was a rich milieu for anybody looking to describe the human condition or learn new things about it. I think that’s the most succinct way I can describe it. But for the most part, everybody, you know, when they found out I was involved in this, you know, you know, Wall Street type shop, everybody knew what was going on with the meltdown. They just sort of accepted me. I don’t know if I’d say it’s one of their own, but, you know, people who are down on their luck, you know, often go to Waffle House to start again. And that’s what I found, whether they had just been out of prison or somebody, the manager actually had been let go from a construction firm a number of months before. So, it seemed like, you know, almost like a like a halfway house or like, you know, just this the sanctuary for people that were trying to find their way in the world again.
David Warren (33:02)
Well, now I get it. How long were you there? I don’t think I ever know how long you were there.
Jimmy Adams (33:06)
Six months. Exactly six months.
David Warren (33:09)
And did they know you were writing a book? Was that. Was that discussed?
Jimmy Adams (33:12)
No. And, you know, I try to be pretty discreet about taking notes in the middle of the shift. I would put them on the back of an order ticket. But I think the only person that ever sort of really wondered why I was there was the cook who’s portrayed by Danny Glover in the film. He was definitely the smartest fella in the lot and kind of wondered, you know, what’s really going on with this guy’s psychology and his motivation. So, I think he was the one that was maybe a little bit onto me through this whole process.
David Warren (33:42)
So, tell me about the book writing process. And really in I certainly highly encourage our listeners to look for it and read it because it’s gone through about half of it and read all the reviews and it’s such a to me, again, a great story of redemption. But thesis…describe the thesis. Where were you going with this book? Was it an apology? Was it an exposé? I mean, what was it what was the genesis here? What were you going for?
Jimmy Adams (34:09)
Yeah, I think an apology is probably the best term. And it’s funny, we had to change the introduction when we did movie Tie in addition. But in the introduction of the first edition, I talk about my great grandfather, who was, of all things a bond salesman for the predecessor at a Citibank in New York City in the 1920s, and he was selling bonds issued by the Argentinean government that later defaulted. And it’s kind of interesting to see about some of the garbage bonds securities peddled by my ancestors, you know. Preceding the last major meltdown. And I thought maybe I had a genetic defect that I could use in the or something. I know. That’s exactly right. So, you know. It was interesting because my great grandmother, his wife, kind of ran a soup kitchen out of their house and hobos would actually mark the sidewalk to show, you know, where you could get a meal from a kindly matron. So he was able to keep his job at Citibank in the 1920s or in the thirties, rather, during the Depression. He wasn’t selling bonds, but that was sort of the way I think, like the Preston household kind of redeemed themselves for part of this build up to a global meltdown. So, I yeah, I think it played in Peoria, so to speak. I mean, I looked at like Bill Bryson in particular as another memoirist who I enjoy where he sort of alternates between the, you know, personal memoir and then kind of the academic or, you know, sort of historical facts. So that’s really how I approached it in that when I was creating the book or figuring out how do I piece all this together, I kind of used the principles of banking and classical economics to provide the skeleton, as it were. And then I used the anecdotes from Waffle House to sort of illustrate these different principles. So it was, I think, kind of an unconventional way to organize the narrative, but it worked out pretty well. That was really the, you know, the economic ideas were sort of the, as I said, sort of the bones and the sinews that held all of these other anecdotes in place. So, yeah, people responded well to it favorably. They seemed to think that it worked as both an apology and an explanation for how we got to where we did in late 2008.
David Warren (36:38)
Yeah, no, I agree. I love that. I saw the connection there and I was I loved reading the reviews and your interviews because I agree. I think that’s exactly how it was received. And I think it was also so illuminating for so many people. So, tell me about the movie. How did the happen and did you agree with that at first or did you like the idea? I mean, I think that I’m so fascinated by that, that transition. And so, when somebody said, hey, Jimmy, let’s make this into a movie.
Jimmy Adams (37:10)
Yeah. So, this gets back to my overarching thesis that for as much as we celebrate hard work in this country, providence or dumb luck, depending on how religious you are, I take your view has an awful lot to do with the way things materialize. So in this case, my publisher was based in Orange County, California, and one of her other authors was a screenwriting editor. She had not at that point had any of her proprietary scripts ever made into a film that she really liked the story, and she asked for my permission to adapt it. And I kind of rolled my eyes and said, Yeah, you guys, Southern California, do your thing, ha, you know, have fun with it. And eventually, I mean, she was pretty tenacious about marketing it. Eventually she got it to a fellow named John Kelly, who does a lot of production management for big blockbuster Hollywood hits. He worked on Deadpool with Ryan Reynolds. Yeah. So, he’s done some, you know, $100 million plus budget pictures, but he also produces his own projects on the side, you know, kind of more modest things. He just he loves the business. So, it was kind of a six degrees through of Kevin Bacon, right. To get this in front of this guy you know is really he was it was kind of the sixth person down the line till we got the connection made with John and he lent us the credibility we needed for the project. And it ended up that one of the other films that he was involved with was called 127 Hours with James Franco, the one where he is a hiker and gets his hands stuck in the rock. So they had a regular production crew that they worked with out in Utah and Utah for a variety of reasons, is a good place to shoot a film, you know, from a regulatory standpoint, from a cost of production standpoint, from a state.
David Warren (39:00)
Yeah, I just heard that, Jimmy. I mean, I just somebody just told me that, like how that’s like a mini-Hollywood actor. That’s really interesting. Yeah. Please continue.
Jimmy Adams (39:06)
Yeah. So, it’s and it’s proximate to L.A. So, you book your, you know, four or five name actors in California and they fly out and the rest of talent’s local and, you know, you kind of know who you’re dealing with in terms of the crew because they were sort of 127 hours alumni in the same producer, John Kelly. So it worked out real well. We, I can talk at length about sort of the optioning and production process, but as much as you want, as much time as you want to devote.
David Warren (39:37)
I’m sure well, I thought we’re going to do this for seven or 8 hours today. I thought so. Let’s keep going. Now, let’s switch gears a little bit. I mean, how much control did you have over the messaging? So, I think if I ever had written a book and allowed it to go to a movie, I’d be worried about that. So what kind of creative control or input did you have in terms of the final product?
Jimmy Adams (39:58)
Well, I think by the time we got to the sixth or seventh draft of the script, I sort of capitulated and I quit referring to the main character as Jimmy or myself. It was just the protagonist, you know, It was like, You get this, they’re more interested in getting the production consummated, seeing that come to fruition than you are kind of anything else at one at one point in one of the drafts, my dad was like the main antagonist, right? Because who’s the antagonist in the book? Really? It’s more like bad economic theory, right? It sort of makes for a difficult screen adaptation. So. Right. The narrative sort of evolved into me trying to buy the restaurant, which I’d certainly considered when I was looking at the McDonald’s stuff originally. But I think about month four or five in the Waffle House, I realized that wasn’t my cup of tea either. So the answer is really it depends on kind of the producer and directors you’re working with. I mean, you do sign away your life rights, but you got to make sure you get in bed with the right people who are going to, you know, say not defame you too much. So, it’s been interesting. I was more worried about my wife’s depiction than anything else. That was that was my overarching concern, because she’s a very private person. And so, when we got to the point where we all had to sign our life rights in order to get this thing greenlit, that was the last holdup. And I said, you know, we can’t get this get this done unless you sign this this piece of paper. And she said, I said, you know, you said you would. She said, well, I know, but I didn’t think you guys would ever actually get this far. So, I had to call her bluff. But that was that was kind of the big sticking point was how supportive was she going to be and how much pushback was she going to give? You know, Jimmy, during the film and when we had too many sort of men in the room, the directors are both male. They’re like, well, we got to. And then it was funny, my wife and the female producer and the casting director who also female, said, we got to give your wife some, you know, bigger muscles here. She’s got to push back harder and you in a few places. So, I think it was it was good having that male female collaboration there. Whenever you’re showing anything domestic. So, I was pretty accommodating as far as my depiction. I was more worried about protecting her. The one thing that was interesting, they said, you know, we’ve got to show you being a little bit ethically dubious at the beginning, just so you look like a much better person by the end of the movie. And they said, can you write something you did you know that that you did fabricate something that was a little bit dodgy. So, I said, oh, yeah, I’ll tell you what, you know, some other stuff happened at my former firm I wasn’t directly involved with, but you know, you kind of stick your neck out a little bit. Any time you you’re presenting yourself that way, even if it’s for dramatic effect.
David Warren (43:05)
Sure. Well, the story of redemption needs to be proven that you are going through redemption, right? I get it. I mean, this whole process is so fascinating to me. At the end of the day, we were happy with the movie and the response to the movie.
Jimmy Adams (43:17)
Yeah, it was. I mean, we got, when Netflix picked it up, I mean, we landed in the middle of the Netflix landing page, which for an independent film in 2016, you can’t get any better exposure than that. My book, I think, Gripe, was that after an hour of being uploaded on iTunes, you know, I don’t even think it took that long. You see these links start appearing on Twitter. Hey, here’s where to download a pirated copy the movie for free. And you know, it’s not Like, I mean the music and film industries have been just so decimated by piracy. I mean, people are still, you know, making pictures and making music. But it is it is frustrating. We had a really good thing going on because. James Lafferty I didn’t realize it at the time that we cast him, but he just had a massive young female following because One Tree Hill had been, you know, was a big hit with, you know, young women. And so, he hadn’t ever headlined his own feature film before. So, it was a big deal. We had sort of that built in, I’ll say, pent up demand for a feature film starring him. And then, you know, you’ve got all the Gen Xers and boomers that you know, have loved Danny Glover for the last 40 years, kind of caught lightning in a bottle on the cap. So, the short answer is I’m very pleased with the production, the distribution and the reception. It would have been nice to have gained a few more royalties absent the piracy. That’s my that’s my major gripe.
David Warren (44:54)
Yeah, fair enough.
Jimmy Adams (44:55)
I love the casting and the direction and the music. I think they did a good job with it.
David Warren (44:59)
Yeah, I enjoyed the movie very much. And for those who haven’t seen it, please do. It’s really great. I think really well done. A different question. You know, I’m glad to hear you were pleased. I would be, too. I love the story and I love what you were trying to say, which was really, at the end of the day, an apology for your part. Did you encounter any negativity? You know, did that spark or hit a nerve with people who maybe would have sent you some hate mail or given you a hard time if they realized who you were at a restaurant? Did you have any problems in that respect?
Jimmy Adams (45:32)
So, I think the one piece of negativity while I was still writing the book and working at the restaurant that kind of struck me was when a coworker came in and he was very supportive. But he mentioned that somebody at the office said that I shouldn’t have taken the Waffle House job because somebody else with fewer assets than I had probably needed it more. And that really kind of struck me. I mean, I understand kind of where they were, where they were coming from, but I thought, well, there’s a couple of fallacies embedded in that, right? Because one is costing the taxpayers rather than me working in producing something, it’s going to cost the North Carolina taxpayers to pay unemployment claims to me. So I think we’re neglecting that issue. The other is there’s massive turnover in restaurant industry personnel anyway, so you’re sort of, you know, neglecting that issue. And then thirdly, it’s the idea that there’s sort of a finite amount of work to go around, and that really is at the heart of the economic fallacies that underlined my I’ll say my economic discourses in the book is the idea that there’s a finite amount of work to be done, or there’s only so much demand the world for goods and services. And so, you know, we have to be careful about how we parse out the jobs because there’s only so many to go around. And that’s just absolutely fallacious thinking. But it’s interesting, if somebody in an asset manager can have that kind of a view of economics that shows you how bad the economic education is.
David Warren (47:16)
Yeah, that’s a great point.
Jimmy Adams (47:18)
So, I think that was the biggest thing as far as what I was doing in terms of working at the restaurant. My father and grandfather thought it was great because any time you talk to them about financial derivatives, it’s like this is all, you know, some kind of a farce, whatever it is you’re doing. So they thought it was real work and they were, you know, logisticians, warehouse men anyway, So they were happy to see me get some sort of dirt under my fingernails, so to speak. But in terms of the other negative responses, I, I don’t know that we got too many negative responses to the book. There were one or two folks that accused me of being, quote unquote, too right wing, which is absolutely baseless charge because I implicate private industry every bit as much as I implicate the government. I don’t know where they got that idea.
David Warren (48:06)
I wouldn’t have gotten that. That’s interesting.
Jimmy Adams (48:10)
Yeah. Say there was plenty of blame to go around to both politicians and businessmen. Oh, for sure. For sure. As far as the movie is concerned, you know, I think, you know, some people said, you know, on Netflix, you get more people reviewing you on Netflix than you do sort of reading and reviewing the most people were pretty sympathetic and tried to I think they appreciated the attempt at redemption. And there a very, very small minority but you know, a little bit vociferous about I think somebody said like the gallows would have been too good for this guy. So I thought I should have been hanged in public. That that struck me as a bit extreme. But, you know, I get that people were upset about 2008 and that the bailout had to happen. So, and I empathize with that. Right. But I don’t know what else you want from me other than to say I’m sorry. I didn’t realize what we were doing. And I think that was the difference between the book and the movie is in the movie. He’s sort of worried about the ethics of what he’s doing out of the gate. Whereas with me, you know, writing the book, you know, when I was in the middle of all this, I didn’t realize what we were doing and how reckless the underwriting was. And, you know, kind of how this whole machine looked when you stepped outside and from being one of the constituent parts to looking at it in aggregate.
David Warren (49:33)
Well, the whole industry probably did. And that’s maybe the only nice thing to say is, you know, everybody was making money to your point, like you said earlier, but it wasn’t until the cracks broke completely when everybody realized, oh, my God, look what we’ve done. Right? Because up until that point, how would you mean maybe some predicted it, as you said. But no, I hear what you’re saying. I mean, you didn’t know you weren’t let’s say it wasn’t premeditated and it wasn’t nefarious in your mind. While were doing it, right?
Jimmy Adams (49:57)
That’s absolutely right. I mean, it was really just everybody responding to their individual incentives. And by doing so, we created an absolute monster.
David Warren (50:07)
Yeah, it’s a perfect way to set it perfect. Well, Jimmy, the story is so fascinating. We appreciate you walking through it with us. I’m a I’m a big fan of what you’ve done. I think it took tremendous courage. I don’t think a lot of people coming out of that error or maybe any error in any crisis would have the strength and the confidence. And I said a moment a couple of times, this sort of heroic need to tell your story, to apologize and to find redemption. And I think it’s inspiring. But you haven’t ended your career on that movie because you couldn’t because you didn’t get all the royalties you wanted. So, you had to get a job right. Well. You know, it’s. Yeah. Well, tell me about Lighthouse. Tell me about lighthouse. What you’re doing now and how you’ve transitioned yourself into a whole kind of a different financial life.
Jimmy Adams (50:58)
Yeah. Let me let me talk about sort of the last ten plus years, sort of post Waffle House. It was funny. My next, quote unquote, real job with a W2 involved was working for a software company where they were, of all things. And I kid you not selling software to banks to help them mitigate underwriting risks. So, I had gone from. You know, buying all these. Bonds of blow things up to, you know, selling and training software that’s going to help banks not do that. So maybe my penance extended beyond the book in the North Shore. I did that for a while and I realized that, you know, software companies are not my cup of tea either. I would sort of get flak about wearing button down shirts and like slacks in an office where they had to live, dogs running around. And everybody, you know, sort of was dressed like a hobo or Steve Jobs or whatever. So it was that that wasn’t really my cultural fit. And I just realized, you know, regardless of what this this industry throws at me, I mean, there’s always it’s very much part of who I am. I like numbers. I like abstract problems. And if I can’t argue religion or philosophy all day, I’m going to have to be in this business in some way, shape or form. I missed the boat on law school. That’s the other thing I was told is I could have been maybe a good litigator, but that wasn’t going to happen. So, I got I moved from the institutional asset management side of the business to, I’ll say, the individual, you know, client facing side. So, I worked for a trust company for about four years. I worked for another registered investment advisor, focused on physicians and dental practices for about four years. And then I started my own operation two years ago. So, I’ve never enjoyed this industry so much as I have since I’ve been doing this out of my own. And now I’ve got a new partner. So it’s the two of us you’re affiliated with this accounting firm and we’re able to, I think, do a do a lot of good things in terms of helping people from a financial and tax planning perspective. And, you know, even help coordinate some of the issues with attorneys and legal estate planning. So, it’s nice to be able to provide a holistic, comprehensive solution to people and feel like you’re really adding value as opposed to worrying about the last, you know, 20 basis points on a fixed income mandate for, you know, state pension plan or something. This is more like let’s focus on all the big picture issues affecting, you know, one family and it’s very meaningful to them.
David Warren (53:40)
I think it’s such a natural transition, too, because, you know, you talk about how you felt when you were in the unemployment office in North Carolina and feeling like you were part of what happened to those families. And now ten years, 15 years later or longer, you’re working directly now with families, protecting them, perhaps from what it is you were a part of all those years ago. So I think that’s in my mind. Jimmy, if you don’t mind me saying, another step in redemption is that you’re in that now you’re sitting with these families and you now can protect them from, frankly, people like you all those years ago. Sorry, that’s a little harsh.
Jimmy Adams (54:18)
Well, it came off a little harsh. I know. Because, I mean, I want to be very clear that I worked with, you know, ethical people. I’ve never worked with unethical people. It’s just when there are systemic risk building, how do you protect people from that? And, you know, here’s another irony for you. So one of the things I’m really excited about, you know, with my new partners, we’ve got the ability to do more things in, you know, private investments, particularly some of these real estate securities where you can get people into big diversified pools of real estate. And it’s the only asset class that I’ve liked for the last 18 months and heir to four have not been able to do it. And, you know, the reasons for that are that I want to talk into so much about how I hate bonds, but I’ve been telling people, stay away from bonds, you know, because interest rates are way too low and inflation is high. And if rates move just a little, you’re going to get crushed. And darned if I haven’t been vindicated in spades this year through June. It was the worst first half of the year ever in the history of the bond market. So, I got that right. So, it was kind of funny that I was protecting people from bonds. You know, again, 14 years later. Right. But, you know, the one thing I’ve been telling people is, hey, you add some commercial real estate, you know, if you can own some apartment buildings or some warehouses, it’s a good way to diversify your stock portfolio and get some income and protect yourself from inflation. And you know, it’s funny because it was real estate that sort of drove everything in the tank in 2008. But so, I’m not a babe in the woods about things that can go wrong in real estate. But it’s funny now where, you know, Treasury bonds would have been the thing to use to protect you in 2008 from an event like that. Now what you needed was real estate to protect you from bad treasury bonds. Right. And it’s all a matter of the macro environment and responding to it so that’s what it is. But if you’re not if you don’t have that ability to transact for people at the household level, you know, it doesn’t really matter if, okay, I’ve really done well in bonds this year while being great in bonds is your means being down 6%, right? So now that I’ve got the ability to counsel with people on a household basis, I can add, I think more meaningful value.
David Warren (56:35)
Yeah, no, I get it completely and I’m excited about what you’re doing. I mean, Lighthouse clearly is going to be in already is very successful and we love the fact that we’re going to be able to support you when we can do the trust solution. And I’ll say, you know, as we as we wrap up, Jimmy again, I was being harsh only for dramatic purposes. But I have to tell you, I am very I am very inspired by your story. I know a lot of people are. And I’m really glad you took the path. You did. I’m glad our paths cross over the last year. And I think that, again, I know you’re going to great success. So, for our listeners, I’m going to say the name of the book and movie. Again, it’s Waffle Street, The Confessions and Rehabilitation of the Financier. And Jimmy is based in central Pennsylvania with Lighthouse and doing great things, taking all of his experience and putting it together and to work for average families and actually, you know, wealthy families as well. So, Jimmy, again, thank you for sharing your amazing story with us. I look forward to the great work together and a deepening friendship. And I would love to have you sign your next book. If you send me a copy of your next book that you’re going to write, you can sign it for me, alright?
Jimmy Adams (57:49)
Oh, when people ask me about the next one. Yeah, that’s a sore subject. I’ll say this and I will leave you with a little teaser. So, I have written another screenplay and we had some pretty good interest in that, and I could talk about that at length. It’s just a matter of finding somebody that wants to produce a lacrosse related picture. But I will say this to any of your listeners that might be in that demographic that we could get all of the top pop artists in the world on that soundtrack, that’s where we were at. So, we just need to just need to get somebody that wants to see lacrosse film made. But you’re not seeing as many sports pictures made. So maybe that’s my biggest lesson learned from all this is writing a book is an absolute bruiser. Writing a screenplay by comparison is not that onerous. So if we get that other screenplay made, maybe then I’ll book those royalties and think about writing another book. David, how’s that for a deal?
David Warren (58:40)
I’m all in support for all of your Hollywood producers and directors listening to this podcast today. Go to Lighthouse.com and look and contact Jimmy this has been great. I love talking to you. Thanks again for doing this with us and we’ll certainly stay in touch.
Jimmy Adams (58:55)
Thank you very much. David had a lot of fun.
Outro
Thanks again for listening to Bridgeford Trust Company’s, “Delivering Direction and Control Podcast Series”. Be sure to subscribe to our podcast to keep posted on when new episodes are added. And for more information, you can visit us online at bridgefordtrust.com.
