Can The Stock Market Bubble Continue Into 2026? | Sven Henrich

Summary

• Market Outlook: Sven Henrich expresses skepticism about current market valuations, suggesting that the market could drop 50% and still be richly valued compared to historical levels. He emphasizes a lack of interest in new long positions due to high valuations and potential risks.
• Economic Conditions: The podcast discusses the global economy showing signs of slowdown, with a particular focus on the weakening job market. The Fed's recent rate cut and the potential for further cuts highlight concerns about economic growth and employment stability.
• Valuation Concerns: The discussion highlights the unprecedented levels of equity valuations, with many stocks trading at historically high price-to-sales ratios. This raises concerns about the sustainability of current market levels and the potential for a significant correction.
• Investment Strategy: Sven Henrich advises against chasing the current market rally, emphasizing the importance of maintaining discipline and process. He suggests that investors should be cautious and wait for better entry points, particularly given the high valuation environment.
• Liquidity and Market Dynamics: The podcast explores the role of liquidity in driving market valuations, noting the impact of easing financial conditions and significant buyback activity. The correlation between the S&P 500 and high-yield bonds is highlighted as a key driver of market behavior.
• Risks and Opportunities: Potential risks include the possibility of a stronger dollar impacting asset prices and the ongoing geopolitical tensions. Opportunities may arise in European markets, which are perceived as offering better valuations compared to the U.S.
• Key Takeaways: Overall, the podcast emphasizes caution in the current market environment, advising investors to be mindful of high valuations and potential risks. The importance of maintaining a disciplined investment approach and being prepared for potential market corrections is underscored.

Transcript

Yeah, I mean, look, I not interested in new longs right now at all. Uh, and you know, if it goes higher, it goes higher. I I'm fine with that. You know, I zero FOMO. And if if people want to go wild and reckless, go right ahead. Have have at it. to want to chase something in in in the current backdrop um basically tells me my perspective have to abandon all discipline and process there's no precedence for the valuations we've seen right I mean this market could drop 50% and we would still be richly valued visav all of history right um and and you know maybe surprisingly we do get a recession and all these things actually do matter uh into next year. But, you know, I'm not shorting this. I'm not interested in shorting any of this. [Music] Welcome to Thoughtful Money. I'm its founder and your host, Adam Tagert. When Sven Henrik of Northtrader.com was last on this program in May, he stated that it was do or die time for the Bears. Well, they died. Since May, the S&P has rocketed to new all-time highs. We now see many equity valuation levels at their most extended heights in all of history. Though this is happening at a time when the global economy is showing increasing signs of slowdown. So, as we head into the end of the year, can the bulls maintain their dominance? Well, to find out, we'll now hear from the man himself, Sven. Thanks so much for joining us today. Hey, Adam. Good to be with you. I was, by the way, in the summer, I was desperately waiting for you to show up and it never happened. I I I deserve this. I deserve this. But I got to say, nobody was more disappointed than I, Sven. So, yes, folks may remember I headed over to Ireland uh to meet my daughter there for a bit. And the plan was then to hop over to the UK to go chop some wood with Sven. And I had to amend the plan right at the end and come home early to the US. So, I I left Spven in the lurch. Uh, but dude, I will definitely get over there. That's a rain check, not a cancellation. Well, now that you told me that you had COVID right after, I'm glad you didn't show up. Nothing personal, but Yeah, I'm You're glad I didn't show up. Really in retrospect. Yeah. Um, you you might have been stuck with me for a couple of weeks there. Exactly. Um, all right. Well, look, Sven, um, we'll we'll get into today's discussion in just a second. Um, I want to thank you a for coming on today, but also thank you for being a faculty member at the upcoming Thoughtful Money Fall online Conference. Um, and you're going to be creating one of your excellent uh chart deep dives uh for that conference, giving us your latest on where you think everything is happening marketwise. Then today, we're going to be at a little bit higher level. I'm sure you got some charts you might want to pull up. If you do, please feel free to do that. But I wanted to let folks know that if you if you appreciate uh Spven Henrik's TA and his uh his charting prowess, you're going to get that in spades at the conference. And so if you want to um register for the conference, just go to thoughtfulmoney.com/conference. You can buy your ticket there. You can still buy it at that early that lowest early bird price discount as well. Um and a reminder, the conference is going to be on Saturday, uh October 18th. And don't worry if you can't watch live because replay videos of the whole event, including Sven's wonderful chart presentation, will be sent to everybody who registers. Um, with that out of the way though, Sven, as I said in the intro here, um, really interesting time because, as you said, it was do or die time for the Bears. Uh, they rolled over and, uh, the bulls have been walking over them ever since. And so, I think we're at a point where the market has really gotten that hubris again that like it's just going to be eternal summer. it's just going to be an eternal bull market from here. Um, doesn't mean that it might not be for the next six months, year, whatever. What are you taking from this? Because I know that in your heart you have some skepticism at these high valuation levels, but I know in your mind you say doesn't matter until the market starts pricing that in. Well, we make market new market highs every single day. Uh, there's no more downside whatsoever. Stocks are riskfree and we will go up forever. Thank you for joining today's podcast. Have a nice day. Oh, we're done. Okay, thanks. Great. No, I mean it's it's you know, I have I have a few thoughts on all this and maybe I'll share just a couple of charts to start with, but you know, the the concept of new all-time highs here in in the fifth year of the cycle is is is not a surprise. I mean, we you and I have talked about this a few times. actually going back all the way to, you know, January of 24 when I put out this cynics guide to market and I put out this chart that just says the fifth year of this 10ear cycle just kicks in. I mean, it's it's actually quite amazing how simplistic everything is on on this basis, right? I mean, it's spooky and not just kind of spooky. Yeah, we've had troubles in a lot of part of the decade and we had troubles in the early parts of the decades, right? We all remember 2008, 2009. Not to say this is all perfectly lined up, but you know, we just had a major low in 2022, right? We had a low in 2003, right, after the recession. So there there's there's definitely some history. It goes all the way back to 1897. And for some reason that I don't know, but it just happens. And in that article back then, I outlined all kinds of fifth year examples. they just went up, you know, and it hasn't really changed on on that basis, right? And so here we are, you know, going back from the 2009 lows and and this to me is kind of the eye opener in in general and everything since. All right. And sorry, so I'm I'm really sorry to interject, but going back to the previous chart just for a second. Yeah. It's a recurring 10-year cycle on the Dow Jones, but it's a cycle that starts at the zeroyear. Correct. Yes. So at the beginning of each decade and then you're you know where we are now is the this the fifth year of that cycle which is most bullish 2015 2025 2035 that would be year five in this cycle chart. Exactly. And in fact 2015 was kind of a little bit of an exception. We did make new highs but it was it was all kind of little shaky in the latter part. And I'll get to that in a bit because the the you know if you're specifically asking about the end of the year run which is basically standard fair. Uh but of course now we're in the situation where we have the most highest valuations ever and some quite some amazing chart stretches that make you scratch your head a little bit. And I think it's really important to understand what is driving all this, where it makes sense, why it's happening, and are there any type of signals that suggest there may be some some risk actually building and absolutely clear at this point. So far, nothing has mattered. Okay? Abs, absolutely nothing. Not certainly not valuations, which which are at record levels. In fact, we just kind of keep running the same program we've been running since 2009. This is a quarterly chart of the S&P. It's actually quite stunning in terms of the one-way message of of markets. Quarterly charts. Basically, what it shows here is that red candles are so exceedingly rare and you have these big mega rallies that go on and on and on and once in a while, you know, the even a down quarter is not even a disaster. It's just basically reconnects with the quarterly 5 EMA and holds support. Since 2009, just ponder this. We only had three events where there was more than one quarterly red candles. This was year 2011 when they had when they were forced into the next QE program. We had then year of 2015 2016 remember this was when we had the kind of quick earnings recession but there wasn't really any major damage done here. Co is mere blip because obviously then we went to massive printing and then the 22 tightening cycle. I mean that that was the most extensive down move we had in terms of time. Three quarterly red candles. Well, now we're back to program here and every quarterly 5 EMA tag is basically support. Obviously, we had that blip here in April that was averted. Now, if you look at all of these guys in our quarterly 5 EMA are common, but sometimes we have like here during this peak printing time 2020, we just don't even have reconnects of that, right? But they happen quite regularly in in generally speaking. Okay. Now in terms of year end, if you look at all of these years, the only time there was some sort of trouble in terms of year end uh was basically here in 2015, which by the way was also fifth year of the cycle, but it did make new highs. And then 2018, right, that that was the time when the Fed was forced to flip-flop, right? They were PAL pivot. Yeah, the PAL pivot. Other than that, it's been basically, you know, if you get a five quarterly five EMA tag in in the September time frame, you know, it usually tends to hold a support. You know, we're not even even close to it yet when we may not tag it, but if if we were to tag it, you know, I'll call it roughly a 7 8% correction and then it probably sets up as a as a buy unless something completely structurally changes in in the current setup. Now if I look at all this from a valuation perspective, of course I can I can cringe on all this because we are so far extended and I can talk about this a bit more later. But I just want to also accentuate how since you and I talked there in May about do or die time for for bears because you know based on that fifth year cycle you could already smell all this coming. I want to highlight here weekly chart just to show how one way this market has been like with the quarterly red candle chart. Here on the weekly chart you can see how we barely had any red candles whatsoever. In fact here the last 13 weeks we only had one little red candle right and I I can't even call these previous three weeks down weeks because they didn't even touch the weekly 5 EMA. It was not even, you know, what downside, you know, it's just chopping in range, pausing at at the most, if if you will. The the one time we had a close below the weekly 5 EMA was actually just driven by one day. It's that's actually hilarious. And I I I'm mentioning all this to understand the control mechanics of what how this market has been running. And in fact, that that moved down that closed below the weekly 5 EMA. It was just a one down day and then just gapped right back up. And we've been on the same program. And the wild, this is a daily chart. And the wild thing I noticed, I don't know if you guys have noticed this, but you know, if you look at that in the last four months, when was the low of the month made? You're not going to believe it. first trading day each month. June, the low is in. July, the low is in for the month. August, the low is in. And here we are in September. We're basically repeating the same program. I mean, that that's just how straight and up obviously 45° angle, if you will, that we're going up here. It's it's it's quite something uh to to watch all this. Now of course and this is why despite all the valuation concerns I want to highlight as to what is driving all this and it's it's so important to understand um first of all this is a chart overlays S&P 500 with junk high yield bond ETF they're joined at the hip and to me it's it's one of the measures of financial conditions, easing of financial conditions. The low was in right here, October 2022. That's when we had peak tightening. As you may recall, this was the infamous Yelen concerned pivot when when things were just about to break down structurally from a technical perspective. And the entire rally since then with the occasional correction has been driven by ever easing financial conditions to the point this is a weekly chart. We now have a flatlined 98% weekly correlation between the two. It's just dominating everything easing of financial conditions. It's pretty wild. uh especially now in context that you know here we are with markets at record valuations, asset classes everywhere flying through and now the Fed wants to ease financial conditions even further with another rate cut. Right? I mean the notion is that that the Fed has been running some sort of restrictive monetary policy as they still try to cling on claiming with in regards to rates. Yeah, maybe in terms of rates, but in terms of what's actually happening in the market, that's just a big Fed lie, right? And so it's it's kind of stunning to see that we are now presented with this setup because basically it screams higher and higher. That's what everybody's counting on, right? The other driver uh besides aggressive easing financial conditions of course the RRP facil facility which is kind of linked to that because they've this was again here in 22 this one this peak and this facility has been drained to now a smidgen right so basically when the facility drains when you have the occasional spikes here that introduce some volatility in markets because it takes liquidity out. Usually we see this either quarter end or month end, but last month end there wasn't really anything there. But the major message is this is $2.5 trillion almost of liquidity that got pushed into these markets since 22. No wonder we're seeing this continued meltup in asset prices. So liquidity is massive and or has been massive. But you can also argue well this this well is run dry. What does that mean? Is there maybe a leg of the liquidity that's going to be missing going forward? Is that a risk to market? Question mark. Right. And sorry to interrupt, but it might not be just a missing leg. I kind of tell people to think of the reverse repo program like a sponge, which is um when it's saturated, you can squeeze it and that provides liquidity, right? That the money is flowing out of the sponge into the system. But if you decide you want to refill it, it acts like a dry sponge, you know, where it sucks liquidity out of the system. So if they decide to start refilling the RRP, it won't just be a missing leg. It'll actually be something that is is tightening the system. Yes. But, you know, obviously they're they're, you know, if they're now concerned about the labor market, they they don't want to talk about tightening. It's actually interesting to me if you think about it if the labor market is really weakening um based on the data that is available. You have to kind of wonder how that's possible structurally considering how much liquidity has been flowing into the system with with this much liquidity and easing financial conditions. Why are the trouble why why is there supposed trouble in the labor market? In the labor market, right? Um and and and and you know I I guess you know I've been bemoning the interventions obviously for years and we all have been subject to massive asset price distortions as a result of that and to many you know to many eyes I guess you can argue that the the regular natural business cycle has long been stunted because we always intervene at the first sign of trouble in in ever greater amounts, right? Um, is there still a natural business cycle out there that may be sending a warning signal? But I, you know, I don't have the evidence of of that yet. And of course, besides the easing financial condition, overnight overnight repo buybacks. This the money keeps getting flooded with buybacks. It's it's actually stunning here in 2025. Uh, JP Morgan has a potential 38% increase over last year. Um we had already record buybacks and obviously what this all does buybacks are reducing the available shares in the market right because it it reduces the float and it's also a clever mechanism to show nice earnings growth on a per share basis right I mean there's just massive money flooding through the system and so yeah you know that is keeping a bit under the market as as JP Morgan also points out and that's a 30 38% year-over-year increase in all the buybacks. Yes. For 1.9 $1.9 trillion in 2025 alone. That's kind of the potential that they see for this year. And they've they're saying they're already at a 1.5 trillion for this year. So this is this just goes to show um how much money is flowing in. And of course, you know, we have all we can talk about that separately, but this this whole machine of passive investing, right? Because you just about to bring that up. Yeah. Yeah. That's in addition to this. Yes. And and and now that we have not only the most valued market ever, we have the most concentrated market ever. You know, top six stocks are 40 I mean, excuse me, are 20 trillion dollars uh of market valuations. and they disproportionately obviously benefit from ETF buys. You know, people think that, you know, they put money into the S&P every every month that they're diversified. They're really not diversified. Top 10 holdings almost 40% on the S&P. On NASDAQ 100, the top 10 holdings are 52%. No one's diversified. You know, it's it's it's it's amazing. And so when this money comes in then the ETFs you know they have to just allocate based on the you know market waiting relative to each other. And so you know you with buyback shrinking the available floats you know you got more more money chasing ever fewer lesser available shares especially when there's low IPO activity and then on top of all of that because this is just not enough you know the the big big gorilla in the mist here is obviously the ongoing uh fiscal dominance that is taking place. you know, forget all the narratives and tariffs and this and that and the other. The same program that's that you I've been moaned since, you know, the last few years with uh these record budget deficits, you know, here we go again. You know, $345 billion deficit in August and that is despite what 30 billion odd in tariff revenue. So that would even be larger. And net net, you know, the the deficit's running basically close to two trillion. It's it's higher than even last year. So nothing's changed on that program. And in in my mind, the aggregation of all these factors rationally explains why markets keep going one way up because there's there's no other way for them to go. The liquidity has to go somewhere. And sorry to interrupt, but we're seeing correlation amongst assets get closer to one, right? I mean, everything is up, right? But you would sort of expect that with a with a rising flood like this, right? Yeah. But, you know, I mean, and we we'll I have some charts on on on the different asset classes as well. I mean, you looking at a lot of asset classes that are getting to the point where you kind of defy you know any reasonable type of historic comparison. Uh I think we passed reasoning a while ago for one man's opinion but yeah. Yeah. I mean this is this is the classic Isaac Newton type situation right I mean we all have to assess riskreward for us you know and obviously things keep me up and when these when these things happen as we've seen the last few years you know they they keep going up until they don't until something triggers them. Um but the the the the net effect is um because and obviously this started before CO but really kicked into full gear after CO in terms of the intervention aspect. I mean look look at M2 money supply at record highs again um which is $5 trillion higher than it was precoid you know when it absolutely went vertical. You know, we we're back back beyond actually where we were post the COVID printing and financial conditions are as easy in markets as they were when they ran zero rates and full QE. You know, it it it it ends up disconnecting all assets from ultimately any fundamental reality and that's always the concern. Now, the Isaac Newton example is, you know, here's a smart guy, probably one of the smartest guys ever. You know, he made money on on the way up on the infamous tulip bubble, right? And then he made good money. Yeah. Well, actually, it was the South Sea bubble. Excuse me. Correct. See bubble. Yeah, it was the cell bubble. It doesn't really matter. Bubble, they're all the same, you know. And then he, you know, he cashed in. He was happy. And then the thing just kept going up and up and up and all his friends became richer and richer and then he couldn't take it any longer and then he decided to chase. Right? And it you you get to the point where you know you you are asked by the market in a way to abandon discipline and process. And it's a dangerous time because all of a sudden the old rules no longer apply, right? and and and suddenly you feel psychologically left behind. You get infected right by the the the overall uh sentiment. I mean we've seen this time and time again. Now for us here is to understand are these liquidity factors that are clearly dominant in the price discovery equation. I guess the question is, and maybe that's a rhetorical question, but how far can they sustain a historic disconnect from everything? You know, can it can it still run into next year or in two years? I mean, remember, we we've seen this before uh even in 99200 where it can defy reason for a long time. Greenspan warned in '98. They ignored him for almost two years before the bubble ultimately burst, right? you know um but you just have to understand that these factors are supportive of rising asset classes and I want to bring up one more factor. Um, this is the US dollar on a monthly chart. And I want to highlight something here of of interest because the dollar has been crushed uh this year. It's down almost 11%. Actually, I think it may be down 11% today as we're recording this here, by the way, the day before the Fed meeting. Interesting time. And if you look at the S&P for example, which rallies and rallies and rallies, it's actually up around 12% this year, which on the surface is actually not all that dramatic. I mean, it it it now feels so dramatic because of the April low that we've had and the one-way rally ever since basically. But I want everyone to be clear on this. A lot what's happening here is currency destruction. While the S&P is up 12%, the dollar is down 11%. So you can argue on a net dollar adjusted basis we're actually only up 1% in the year. Mhm. Which is a lot less impressive sounding. Now if you're in America, obviously, you know, don't don't really matter to you. You're up. Uh if you travel elsewhere, then maybe your purchasing power is not as great. Um, but I want to highlight this because this is exactly what we saw in 2017. This was Trump's first term and there was also tariffs and this and that and the other and the dollar just dropped non-stop and that's what we're seeing now. In fact, there was a kind of a bounce here into kind of September summer time frame, if you will, and then it dropped lower into the end of the year. There was not and this is to your question about you know thinking about year end um there was not a proper correction in the market until January 2018. It was a when the dollar pivoted that's when we had a quick 10% correction and of course 2018 was a much more difficult year. It was that it was actually a down year and you know the the rising dollar was a big contributor in that. So, it's kind of interesting here because, you know, we hit a low in the dollar uh in the spring and then it bounced off of this key trend line and we're kind of on the cusp here again at a little slightly higher level. But basically, is it a double bottom? Is it a retest or what have you? In order for the equity rally to really sustain into year end without any hiccup, it needs to continue to see a lower dollar. Okay. Which means we'd have to punch through that trend line that's been in place for 14 years. Yeah. Since 2011. And then we had it here in 2021. And it showed a technical reaction here. So it's pretty clean. What's also interesting here is this because this is mentally defined even to me because I I could argue well maybe this is a giant bull flag. Probably everybody's going to laugh at me. Um and it may just invalidate for all I know. But it's it's actually pretty clean. Uh so what happens here is kind of key. Um because if if the dollar really drops below then yeah this this whole asset meltup can clearly continue if you will. But if you do get a surprise for whatever reason for whatever reason and this dollar currently is contained by the monthly 5 EMA notice I keep mentioning the five EMA on different charts and different time frames. It always matters. It's very important with resistance here on the bounce again. Uh if that were to drop up, uh then there's your case for a larger market correction because those things have been very much correlated in since the um the April lows in particular. Okay. So something important to watch in terms of year end pivot of control and we'll see what happens with the Fed tomorrow, right? because you know there's a lot of expectation obviously of at least a 25 basis point rate cut how much of that is priced in to be determined and also dependent on on their outlook but you know it I just find it interesting that we're basically seeing the same behavior as in 2017 and this is where it gets interesting because you know we all have obviously in our heads ingrained that there's typically some sort of volatility in the September October time frame. Guess what the oneyear exception was? It was 2017 because the dollar kept dropping. And if you look at 2017 from September 1st onwards, nothing but up. There were there were a couple like quick tiny dips into like the 30 MA or the 14 EMA and it just kept melting up. Now 2017, it sounds familiar. It's it's kind of the program that's been running uh since the summer. Um but of course the one big difference in 2017 is that markets are at a whole completely different valuation and concentration uh equation than we had then. But it is it is it is maybe the ultimate bare scenario because you know you see the daily five constant support you get a tiny dip and it gets immediately bought and that was it for the the rest of the year. And then as I said, there was a big 10% correction in in in January of 2018. Um, but in my mind, for that to happen, you really need to see a continued dollar crush. In fact, where I find myself at now, at this precise moment in time, and this is just looking at the S&P big big picture monthly chart, you know, I'm very curious to see where the month of September closes out. Uh the reason I say that is obviously you know as ridiculous as 2021 was uh you know the the monthly MACD extension just an absolutely uncharted history um massive divergence on on that and we're hitting a m we're pressing against this right now as we're recording into a major trend line resistance on a negative divergence which in the past have shown to matter right I mean you can you can look at this back in time. Does it matter now? I don't know. But I will know that one of the liquidity legs, not only is RP all of a sudden not there, but buybacks are also coming out towards the end of the month as we approach the next earning season. So yes, I at least want to be mentally prepared for some sort of hiccup if all of a sudden some of the uh liquidity pulls out. And I'm curious to see how relevant this trend line of resistance can still maintain. If it is relevant, you know, things could get obviously ugly. Notice how they cleanly saved here that dip below from the co uptrend here in April. Now this is this is this is pretty I think reflective of how much you have to close your eyes with regards to history of of where we are and speaking of other asset classes you know here's gold and it's one of your favorites um monthly chart 88 RSI history for that very little you know I mean got close to it here and then we have to go back all the way to 1979 1980. Wow. Okay. And if I it's it's like with any charts, you know, it's not bearish until something happens. It just it shows you how incredibly powerful the price action has been. And you know, one could argue, well, gold is acting like we're about ready to hit a major crisis and they need to print through kingdom come. Uh so it is it is a bit conflating in that in that sense because obviously the market itself is not taking that message but obviously we do have cons you know geopolitical issues with tariffs and so we see a lot of central bank buying we see government buying and and all that but I'm just saying historically there really is not any history of sustainability in fact when you get to high levels like that on a monthly RSI, you typically do see, you know, at least a pullback or something sizable, right? Um, so do I want to chase gold here? No, I I don't. Does it mean it's not going to go higher? No. But I do also note a long-term trend line here. We'll have to see if that has any relevance or or not. But that's that's kind of the challenge, I think, in in general to say where do I find anything that's attractive to buy, right? especially if everything's melting up. And you know, I mentioned obviously the incredible valuation concentration in in just the top six stocks. I don't even mention the top 10, but 20 trillion in six stocks. I I posted a chart yesterday on Google on a daily chart. I'm just using that chart that that stock as an example, not for any other particular reason, but you know, the daily RSR is 8.87. 87. Um, you know, I don't know how much more optimism you can get, but this is a monthly version of this and the it's not anywhere near its monthly Ballinger bands. Do we have a lot of history of the stock pushing against the upper monthly Ballinger band? Yeah. Doing big bull rallies, yes. Uh, is that a good time to push or you buy long? No. Uh, in fact, you know, you see often these reversal candles out of a big monthly Ballinger band extension, but you know, this is this is a $3 trillion market cap stock now. Um, and you know, there's no precedence for this other than maybe to point it out towards 2007, you know, when when we had also a lot of speculation in in the market. Um, and and that that's kind of, you know, another one of those warning signs that hasn't really mattered so far, but you know, we saw what would happen with Oracle the other day. You know, $350 billion in new market cap based on a PowerPoint deck on one slide. You know, we're going to make so much money in five years. Okay, here's $350 billion. You know, so stock goes from 650 billion to nearly a trillion in 30 minutes. you know that that just smells bad I have to say from you know a sentiment type of perspective and so you you know I look at this and go no not interested I mean if it works out for you great I'm just not interested in in chasing I'm just it's just part of the the whole landscape of is liquidity just total overwhelming everything and of course you know I'm talking about passive investing You know, we do have the retail mania back in in a major way, right? We got what over a trillion dollars in margin debt now. We got people going leverage in in double, triple, quadruple. Heck, in in crypto, you can get 50 times leverage now on on pressing your luck. And then, of course, we have the systemic issue of ODTE, right? I mean, I'm I'm I'm I'm actually feel kind of bad for Las Vegas because who wants to go to a casino where you can lose money, you know? It's I mean, wow. I mean, I, you know, this as the technician in me and then now I look at this just hate to bring this in because everybody's eyes glazes over, but I want to highlight this. I mean obviously market cap to GDP now at 215%. Yeah, let's cut rates. That seems like a good idea because we don't have enough speculative fraud in the market. And you know, I know people will say, well, you know, with these big cap tech stocks, a higher valuation is deserved. But, you know, we have just absolutely no history for it. at a time when the earnings yield in the S&P has dropped to levels that we've not seen during the tech bubble you know it as as we are also playing this massive massive channel here uh to to the upside that that's just screaming kind of caution alto together now as we saw in 99200 that can doodle around for a while but this is not normal market functioning I mean this this is kind your normal range if you will and notice how as coming out of COVID how this was already fairly low and it got punished right now we're even lower right and here's a basic fundamental I know why even bother talk about fundamentals but gap PE is now 30.5 it's now higher than it was here in the tail end of 24 before we had the correction just so everybody body understands 30.5. If you look at the bull market markets over the last 30 years, your typical range in bull markets between on the low end about 15 to a high end of about 25. Okay, that's that's your range in terms of normal bull market behavior. The only at the other time the gap PE really spikes is obviously when earnings come down and in the denominator changes. But in bull markets, 30 is massively high, 30.5. So you you could drop 20% on the market and you still be at the top range of what a normal bull market would be like. I mean, it's it's expensive. Very expensive. And but it hasn't mattered at this point. It it hasn't matter. And now I want to bring you to if you don't mind to a aspect of all this that makes this all seem rather dystopian uh in terms of what we're seeing given that what we've just discussed about all these asset prices flying to record highs in many cases with unprecedented or rarely seen extensions. You would think you would have just really bullish sentiment on the side of consumers. We we don't. We have absolutely dreadful consumer sentiment. Uh in fact, it's basically con commensurate with recessions. Um and so this is where the dystopian part comes in. How do you explain this? And Adam, you get ready for this. You know, you you and I have talked about wealth inequality for a few years. Every time you see this type of stuff happening, uh these big rallies, it obviously benefits the top 10% because they own 90% of the stocks. Exactly. And there's some data coming out that frankly I find highly disturbing, but it it makes sense. And that is if you look at the breakdown in consumer sentiment, those in the top 10% are very confident. They're very happy. Yeah. Yeah. Because they see their wealth go up a lot and so they're confident. Makes sense. But if you look at the lower consumer spectrum in terms of income, which I hate to tell you this is most people, uh, confidence is much much lower. And so when you look at economic reports like retail sales, they look okay, right? Today came in plus 0.6%. Seems okay. When you then realize that we've now reached a point where basically half of all spending, consumer spending is driven by the very same top 10% that own 90% of the stocks that are benefiting from the asset class meltup. Uh you you are overtly approaching new territory here. Now, on the one hand, I can say, "All right, as long as asset prices go up, consumer spending is going to go up." But notice how almost irrelevant the lower end of the spectrum becomes. That's the bottom 60% less than 20% of of spending. And now we're going into this new AI world. You know, I have no idea how this is going to play out, but the worry is that but if it means less jobs, yeah, for that bottom 60%, it just gets worse. They're going to get hammered. And you know in past cycles when you have the unemployment rate rising and that then impacts filters into consumer spending that then in filters into earnings and then you have these big big corrections bare markets that type of thing. You know, I hate to even ask the question, but what if it is different this time in a really wicked, wicked way, and that is they are able to lay off people and replace them with AI and efficiency and that actually keeps margins up. That keeps the top 10% happy because the stocks are not really hurting. And then when the recession, so to speak, is over, they're not hiring these jobs back, right? Those jobs don't come back. Yeah. And as bad as wealth inequality has expanded since the age of permanent intervention, what if we're heading into this just new era of permanent underclass that doesn't have a chance? And notice now with all this, you know, not only record gold prices, metals prices, stock prices, we also have a record housing prices with an entire generation priced out, right? And now we're going to ease financial conditions even further and as President Trump promised, boom in the housing market from record levels. I mean, it's it's obscene what's actually happening on that front. And and so this is this is worrisome. You really have a system that is by the rich and for the rich and everybody else left behind. I I you know been concerned about this for years, but I just see see it keep getting worse from cycle to cycle to cycle. It's I I so appreciate you bringing up those charts and talking about this um Sven because you you you and I do talk about this every time we're on. I talk about it a fair amount with a number of other people. Just to, you know, throw another name out there. Someone else who's very concerned about this is Darius Dale who um basically says if if the momentum the trajectory doesn't change, he thinks exactly what you just said would would unfold. you know, not just increased dispossession of the the majority, but also the fact that yeah, it probably will end in better asset prices for the the elite few that that own all the assets at that point. And I don't know if you've heard me talk about this, Fen, but um Peter Atwater, behavioral economist, coined the term the K-shaped economy. And I've said totally get it, but as the trajectory we're going on, you know what what I don't like about the K-shaped um uh analogy given the fact that so many people are now uh not mattering as you said the the case shape kind of makes you think all right well half the country is doing good half the country is doing less good right and it's like no no no it's much more lopsided than that getting worse so I've put out this concept of a lowercase eyes-shaped economy where you have, you know, a very small number of people with all the advantage totally removed from everybody else doing just great and then everybody else is the on that down part of the lowercase I just being increasingly left behind. So I I I I hope we don't end up, you know, in this sort of dystopian uh future you think we may get to. But like you Sven, if we if we don't have some pretty major fundamental changes, I don't see how we kind of avoid it at this point. Yeah. I mean, it's it's it's depressing. I mean, it is dystopia because and and you know, the worry obviously is, you know, and and this is what we're already seeing on on social media, the the ever aggressive anger and and hate and people tearing on each other and and division. It's it's awful. Uh and and as long as it stays on social media, I guess fine, but you know, we see some and and last week has really proved that. Yeah. And and to your point, you know, desperate people act desperately. And so what you everybody wants someone to blame. Everybody wants someone to blame and then they they get fed, you know, it's this new business model actually that I don't know if you saw this. Uh there was this chart out there about you know this may sound quaint but you know apparently fewer and fewer adults are having sex on a weekly basis. I mean it's dropped off dramatically and uh you know I I do worry about how much time everyone is spending on devices every day and social media and their reality gets warped and they get sucked into you know certain things. they click on something and all of a sudden the algorithm keeps feeding them that. So you your your perception of reality is is getting warped and before you know it you got you know millions on the street rioting, right? Um certainly not a place we any of us want to be at because you know let's face it post World War II social stabilities is an important critical element of um you know a functioning of a functioning society. No, absolutely. Functioning society. Abs. Absol. Absolutely. And so I think, you know, I I see some people stirring stuff up. Uh and you know, I'm thinking, dude, you're playing with fire. Tone it down a little bit. You know, let me ask you this, and we could we could tangent on this for another three hours, but um I'm going to ask you an unfairly hard question, which is I don't think anybody watching this disagrees with anything you just said, Sven. Like I I think we are at the point culturally where we can all look at each other in the eye and agree agree that social media, digital media is having a toxic impact on society net, right? Um but you know in the west we have this sort of you know libertarian mindset of but everybody should be allowed to do what they want to do, right? Are do you think part of the solution coming out of here is at some point we are going to have to intentionally place restrictions on social media uh to to reduce its corrosive effect on society and I don't know the answer to this question but if we just keep just letting you know admitting we have a problem but doing nothing about it the problem is not going to get resolved. Yeah I mean it is a fairly loaded question. I I would agree with that. Um, I can only speak for myself in this regard. I mean, obviously I come from a time where there was no phones and no social media. So, I remember that time. We remember the world. Yeah. Exactly. Yeah. I I feel really worried about this younger generation that grew up on all this stuff. This is why I'm talking about, you know, warped perception, warped reality. You mentioned the event last week. you know, everybody is eager to find the cause on this side of the political spectrum or this side of the political spectrum. Maybe the more relevant question is what in society is causing young males to not only throw away their future but basically burn it up for for some for some act of anger um that they think they've you know been triggered by by something. Um, and you know, it's not only this event. I see it even here in the UK. I mean, we there's been horrific incidences of teenagers stabbing adults or other teenagers. And it's like this did not happen when I grew up. Um, but it happens more frequently that I'd like to see for for sure. And so this is a big societal problem. And then obviously the tech companies take zero responsibility for that. In fact, I hate to say it going back to the earlier discussion about you know hate and division it is the model. I mean if I you know maybe this is the lowest appeal to human nature but you know if there's a train wreck people will click on it and stare at outrage is their business model. Yeah. Yes. pink fluffy unicorns don't get as many views and so they have actually a vested business interest in in keeping everybody at each other's throats and we're all being manipulated on on that front. Now the ideal situation is at least for myself is to say uh I want to take personal responsibility on this front and say I'm going to very much limit my exposure to this. I actually happen to believe in my heart that 99% plus of people are perfectly peaceful. They want to live their lives and take care of their families. But there is obviously in every society there is this element that's not peaceful. Uh and they're causing trouble in in various degrees. And social media in particular keeps pointing that out to you and before you know it, you actually have the perception that everything is horrible. I give you a specific example. Okay? I've seen a lot of tweets this year about hor horrible London is and the riots and stabbings and this and that and the other. I've been actually to London a bunch of times. I live I don't live very far from London. So I'm I'm there on a regular basis. And London is a very diverse city. No question about it. But everywhere I go and I've been in all kinds of sections of London this year. I I've never ever felt threatened, nor have I seen any trouble, nor have I seen any crime or anything like it's it's actually peaceful. Now, I'm not naive enough to to say, well, there's no crime in London. It's a major metropolitan city. Of course, there's crime. There's always crime. But I think what social media tends to do in particular and and the old news media used to do that as well, but I think it's more aggressive now in social media is like, "Oh, look at this guy. Look at this guy. Look at this guy." And all of a sudden, even Elon goes on this and and he keeps pointing out these narratives of reality that I just don't see. And I'm actually there as opposed to Elon, you know, I'm just saying, "What are you guys doing? you know, you you you're warping the minds of everyone and thinking things are a certain way when they're not. Um, and so I can't even look at this stuff anymore because frankly in so many cases it's just absolutely mind-numbing and I want to don't want to spend my life looking at mind-numbing stuff. So I I've pulled back quite a bit on social media. Uh, and you know the the young one we have in the house, he's he's trying to actually wean himself off as well. So I think we do have um a choice to make. Now a lot of people are completely addicted to this stuff and they probably can't make that choice uh for for themselves. Uh I hate the notion of the government dictating what I can look at and what I can't look at. So I'm don't don't get me started on that in terms I don't like that. Okay. But I I think it's up to us to take control in in in in in how we approach all this. And and you know what? We have a choice to say, "No, I'm I'm not partaking in this nonsense. I'm not partaking in this, you know, circle jerk of hate and division, but I know it's hard and it's it's it's very hard. Maybe I can start a movement. Join me, Adam. We start together. I I'm I'm ready to sign up as as I think probably 98% of the folks watching this. You know, there there is I think sort of a a a bit of a cultural, you know, I think the pendulum is starting to swing. And I've definitely heard um this mantra of, hey, go touch grass, right? Like just put the device down, get outside, be in the real world, right? Um and I hope um culturally we embrace that more. And look, this is a huge topic. So, you know, we I'll get off it in just a second. But, um, I I I I do worry in the sense that look, you and I are going to be okay, Sven, because we've got, um, we're inoculated from the worst of this because we lived in an era before digital devices, and we can we can we can we know how to deal without them and find joy in the world. A lot harder for our kids, right? But but they can even find their way with good modeling and good support, right? But not every home has a a Sven Henrik as a father, right? And so there there going to be a lot of kids that have just grown up in this toxic soup and they don't have the resources uh to help guide them out of it. And that's generally where the worst of this happens anyways, right? It's the it's the people that feel disaffected and they go down some rabbit hole that ends up in rage and then they end up doing something, you know, with that rage that's very regrettable. I don't know what the answer is. I agree with you. I'm very anti-censorship. Um but uh I I do feel like if we if we just let it fester, I'm not sure it the patient gets better on their own here. But anyways, more for a different time. Yeah, it's unfortunately beyond our scope, but you just I can just share what I'm thinking and I I just I know I want to keep taking a step back from from all that. Take Well, I appreciate that. And again, the end of at the bottom of all this is what we were talking about earlier through your charts here, which is that we are on a trajectory where a greater and greater percentage of society is going to increasingly feel left behind, increasingly feel, understandably angry about that, especially as the top 10% continues just to say, why doesn't everybody just eat cake? Right? Cake's delicious. Yeah. and and very little good comes from that in the long run as history has you know is replete with examples for us but as long as nothing matters nothing matters and this is the challenge now obviously from from a market perspective now I want to point out a few things I've seen where I say okay they haven't mattered uh but they nevertheless point to something ruminating possibly uh that has me cautious uh despite the 2017 example in the color coming down. Uh I want just highlight those and you know those things don't matter until maybe in hindsight and you look at them going well that was obvious you know we we'll see but I'll point a couple out. First of all, you know, I I highlight obviously this this massive liquidity correlation on assets prices and one of the classic I've been tracking for years is Bitcoin and and the S&P and I've called it the same trade and that is in terms of directional moves. You know, when when liquidity in the green is is is positive, they all rise and when liquidity gets pulled out, they all drop. Uh, and that's kind of been the run here too in the last uh 2 years or so since the uh October 22 bottom, more than two years now. Time flies. Um, but you know, if you dig in a little closer, um, I do note once in a while something happens. Uh, and that's to me of interest as you may have noticed by at the moment, at least for now, Bitcoin has not made a new high here recently despite the S&P making a new high. We've seen that in the last few years a couple of times. One was here uh in the end of 24, beginning of 25. S&P made a new high. Bitcoin did not quite a new high correction. We had that here the tail end of 21. S&P made a new high famously January 22. Bitcoin did not. Um it's a potential sign out there. Let's say maybe something is a foot. As I mentioned there there may be one or two legs of the liquidity equation that may be missing for a few weeks. I don't know uh if that has an impact but for now I just note that as a potential divergence probably worth watching. Then this neverending rally um this is the S&P components above the 50 MA. You know kept screaming back from the April lows and then I made a new high here in the in the June time frame. But every new every new high since then on the S&P has seen fewer and fewer components above the 50 MA. In fact, you know, we got close to 666 this week and maybe we'll still hit it. I don't know. Um I'm just using that as a historical reference because of the infamous March 2009 666 low. Uh but you know as we make these new highs we see ever fewer components above the 50 MA. I mean to be here at this level after this continued rally and only be barely see 50% 56% of components above the 50 MA. That's that points to some sort of weakening. And and incidentally we've seen this before, right? If you look go back here to 24 uh we kept making new highs but the components the participation weakened. It points to a weakening internally uh in in the market. New highs and nicely new highs, new lows. Uh got pushed pretty aggressively here in September. Um and typically when it gets that high, you know, it sets up for some sort of dip at least. seen that plenty of time. You know how extensive that dip is obviously depending on the circumstances. What's interesting is we just kept ripping up, but this indicator already turned uh not confirming these highs here. So, you know, doesn't mean anything. It doesn't mean anything yet. Um but it's certainly another divergence to to worth pointing to. I mean, you know, we we had this even here. Um and you know, again, this can be minor. can mean mean nothing. But I find it interesting that this is a fairly aggressive spike and it goes in the face of a rollover in new highs, new lows. I pointed that out on Twitter yesterday as well. I mean the you know I've seen many stupid rallies before, but this one really takes the cake on on one level and that is open gaps. Um 12 open gaps since the April lows. Now, I I prefaced the tweet by saying, you know, used an art cashing quote. You know, all gaps fill if ever. Um, meaning that, you know, some gaps never fill and and some take forever. But to me, this is just a basic expression of market imbalance because that's not usual market functioning. Yes, been plenty of rallies where we've seen a bunch of open gaps. Uh, and usually most of them get filled or at least some of them to have an extended run like that with no gap filling is unusual market functioning uh in in my book. And you know ultimately I think markets like balance and so to me that's that's an obvious risk that at some point we may see some sort of gap filling. uh how many gaps I can't tell you, but it's just kind of another part of this new silly phase if if you will. And notice we actually have a very clean trend here that actually got saved again here in August. Um you know, as long as the trend stays intact, bulls stay in control. If the trend breaks, then obviously things can change quickly. This is one of the wildest charts out there. I think it's cumulative new highs, new lows. Uh absolutely baffling. This this was the uh 2018 high. This was the 2019 high going into the COVID crash. 2020 high was a slight divergence and then of course we had the dump and then the printing that lifted everything up and then this tightening cycle. We haven't even approached the lows of COVID on that indicator. And as we're making new highs again here in September, we're actually having a lower reading again visav February of 25. You know, that surprises me, especially considering how well small caps have done in the summer. You would think we would see a broadening on this. This is one of those charts that just has me going, hm. You know, I know we're concentrated. I know we're dependent on on on these high cap tech stocks, but that's just another one of those charts that speaks to divergent market behavior. And I got another one on that. you know, equal weight on some measures is making new highs. But I look at the XVG, which is the value line geometric index. And ever since that blowoff top here in 2022, notice that divergence. We made a slight new high on the S&P, lower high on XVG. It was a signal then and you know, we've never even approached it. Um, I mean, we got close, I suppose, in in late 24. Then another divergence, right? We made the February highs, lower high on XVG and down. Y and this was this was a kind of a fake throwover, but it created a new trend line. We're not at the trend line yet. Maybe we'll still squeeze higher, but I notice again very tightening wedging and divergence vis the new S&P high. So to me in terms of you know broad market signaling it again tells me this is this is not very impressive. You know we're just so dependent on the Googles of the world going through the moon. Um you know when we haven't really made much progress here visav 2018 actually it's it's stunning. Uh so the bull market not may not be as broad as we think. So what I'm saying and I have no idea if any of this is even feasible but based on all these divergences if something matters in the dollar rallies one could make maybe the most obvious case the most obvious technical case would be a retest of the February highs right I mean I can draw all kinds of scenarios so it's completely speculative but in this environment you know I mean I anyone calling for 3% % pullback is viewed as a raving lunatic and this would be kind of a 7 8% pullback. Um that would get us quickly oversold would fill some gaps. It's it's one of those scenarios if the year end rally um history continues. I would love to see something like this just to get a cleansing uh of the excess and obviously that would involve some sort of trend break. But I'm I'm pointing this also out in context of the VIX which has been nothing but crushed uh since the April lows and it's also kind of been tightening. And and by the way, I'm not saying we can't make even further highs. I'm not saying this at all. I'm just saying that in in context of everything that we've seen, something like this wouldn't surprise me, right? Um, and you know, you can argue the VIX could break out of its wedge and maybe even tag this trend line, fill a gap. There's a gap at 26 and maybe that's it. And then you have your classic year-end rally. Um, I'm reduced to being just highlighting a spec speculative case um because at this point we have zero evidence of anything changing in the program and the program is higher every week, new highs every week, right? Um, but if something like this were to happen, it also wouldn't surprise me and and would make technical sense. Um, but you know, 78% pullback, is that the end of the world? No. Uh, not at all. In fact, you know, going back to my quarterly chart, here's the quarterly 5 EMA at 622. If we were to drop lower than the MA would drop and guess guess all what we would have all we would have is a 200 MA tag, you know, perfect support. I mean, you know, it wouldn't even fill any of these gaps. But basically, my view in general is this is if we do see the dollar rallying, if there is some corrective activity, and I know this is a pathetically wide risk range, but I want to stay open-minded. I mean, if it's a 2017 case, maybe a 50 MA is all you get and and and that's it, right? But, you know, notice the confluence here on the 100 MA and the February highs. That may be it, right? If you do get a pullback or you have the 150 MA, 200 MA, and a quarterly 5 EMA, uh, and that may be support. And guess what? Any of these would not mean the end of the bull market at all. Okay? you would need to drop below the quarterly 5 EMA and stay below uh for something to show that actually the program has changed in a major way. Uh at this point we can't even get a you know 1% pull back. So be interesting to see what happens tomorrow with the Fed. Um obviously you know the there's been a lot of political gesturing or just you know positioning on on this as well. The Fed actually is in a very difficult position and partially they're to blame that for themselves. Um because they while they seem to run tight for conditions with high rates, they actually have let incredibly loose financial conditions run. And so now they're in this position where they face these stackflationary risks. Now terrorists are not their fault but terrorists are filtering in through still. Uh and the full effect is still to be felt. I don't know what the effect ultimately will be. The quickest solution to inflation is by the way the way it's always been which is a recession. Mhm. Um and you know there are some like UBS that actually point out to to recession risk even though the market is completely ignoring that but we've seen that before too, right? Uh, and in fact, I would argue, you know, as a counterpoint to this 2017 case I pointed out, there actually have been plenty of examples where midepptember presents some sort of peak in markets. We've seen that, you know, mid to third week of September markets have major tops. back 2007 on the heels of the uh Fed rate cut, the markets peaked in in October of of 2007. Just because you got a smooth run like that doesn't mean it stays like that forever, you know. So, um for us right now, riskreward is not there for new longs. Uh but we're waiting for a technical setup basically to to argue, okay, we want to test this level. We're going to test this zone and and see if that makes sense for us. uh just keeping in mind that the liquidity drivers will remain with us although you know buybacks are coming out and that may provide a short-term hiccup and that may set up for something here to be determined. I I would argue you know and I'm going to stop sharing now. There we go. That was kind of all right. It was fantastic as always and and I think really sets things up well for the conference. Um folks, this was just uh the appetizer to what federal finally delivering at the conference. So let me let me um try to put a bow on this, which is um if I took good notes, um you're basically saying, hey, look, you know, uh market's going to remain bulletproof until it isn't. Um there are plenty of um potential weak weak signs of weakness uh in this market or or signs of vulnerability in this in this market right now. So even though it's grinding higher uh right now, if I heard you correctly just a few sentences ago, it sounds like you're you're not putting any real active trades on this. So sort of your your advice to the general investor is is not a great market to be deploying fresh capital into. you probably want to wait and see for a better entry point. And obviously, if we get that sort of correction that you think could happen between now and the end of the year, especially if it happens quickly, gets rid of the worst of the the overvaluations. Um, that might set that might be a good entry point for an end ofear rally. Um, I guess I'll pause for a second. Am I capturing your outlook correctly? Yeah, I mean, look, I not interested in new longs right now at all. Uh, and you know, if it goes higher, it goes higher. I I'm fine with that. You know, I zero FOMO. And if if people want to go wild and reckless, go right ahead. Have have at it. You know, it's been a great year for us. You know, the the the rally from the April lows has been fabulous. and uh you know to to want to chase something in in in the current backdrop um basically tells me from my perspective I have to abandon all discipline and process I'm not a fund manager so I don't have these obligations that these guys have uh so I have more flexibility you know a lot of them can't sell they they they need to be long they need to chase that's why you have a year- end chase in in in many cases. Um and and so you know this is just a personal decision we have to make for ourselves. Um in in fact you know I I can look at all this and say well the US is maybe from my perspective don't want to touch that right now but there are their opportunities. You know there's some chart setups we're looking at in Europe right now. Europe had a fantastic year so far as well. Um but that's trading perhaps a bit more cleanly on some levels and Europe is still cheaper so maybe we'll find some nicer setups there uh visa v the US uh so you know we we all have that flexibility and ability to make decisions where we think the best next opportunity is but yeah I mean you know there are precedences there there's no precedence for the valuations we've seen right I mean this market could drop 50% % and we would still be richly valued visav all of history, right? Um and and you know maybe surprisingly we do get a recession and all these things actually do matter uh into next year. But you know I'm not shorting this. I'm not interested in shorting any of this. You know we haven't put any shorts on in years. you know, I mean that that not interested in fighting this this liquidity machine that continues to distort everything, you know, but picking our spots, being tactical and execution and know when we like riskreward and when we don't. Right now, we just don't. Okay, very fair. So, um, quick question. Let's say the data continues to um show a slowing economy that maybe you know folks start getting legitimately worried about recession. Would you expect that stocks would eventually have to get that memo and repric by something more than just the garden variety pullback that you're currently thinking could happen in between now and the end of the year? You know, looking back at all these cycles, the the one thing that really matters is earnings. Yeah. Uh you need to see earnings actually drop. The market is still pricing and earnings growth for next year. Sorry about in your answer is do you need to see earnings drop like actual earnings reports? We missed our estimates or do you need to see earnings expectations come down? need to see gap earnings peak and start showing a slowing that gap. So, so it's the P&L. Yeah. Okay. Yeah. As long as earnings keep going higher, you will find some bull that wants to, you know, justify multiple expansion, right? you you you need that's why I said this is maybe this the dystopian part where you may see a slowing in the economy or you may see a slowing in the jobs market but because they're able to create surprising efficiencies via AI and that keeps the earnings picture somewhat stable decent so it can offset reduced consumer consumer spending because they're getting cost savings of the same amount or more. Yeah. And to the extent at the lower end, the people that are getting impacted by jobs do not matter to the consumer spending because it's now dominated by the top 10%. you may end up with an an even more confounding cycle that protects and kind of further could could be if if the government wakes up to the fact that we're creating this permanent underclass and it starts implementing some sort of UBI, well then maybe consumer spending doesn't actually suffer because that money is getting recycled. I mean, it it's kind of sick if you if you think about it. Um, but I wouldn't put anything past anyone. I mean the reality is the and people can't forget this the amount of this this is the this this year is the third largest deficit in history only out outsurpassed by the co excess 2020 and 2021 u it's massive stimulative so that and sorry that that's after an administration that was just elected that during the campaign was one of their key selling points was doge we're going to shrink the size of government spending It's that but this this is the thing you know it doesn't I've been saying this for years doesn't matter who's in charge of doing the same thing and the rest is marketing and and and narratives sorry you know to burst anyone's bubble I mean was it April Bessant came out and says after 40 years of Wall Street's time it's now Main Street's time four months later he's victoring new market record highs victory lapping them come on. Let's let's get real here. It was Main Street's time for about 4 days and that was the end of it. No, it's it's still very much um the same program. And I you know th this is why I also can't at this point take these tariffs too seriously you know because what 30 billion tariffs income visav 345 billion budget deficit it's it's a it's a it's a drop in the bucket okay you know it's it it I mean yeah it is going to impact some companies and it's going to impact some consumer and guess who's it going to impact again the lower end of the spectrum the consumer customers, you know, they always get hurt the worst. Uh, and and so, you know, I I would love for the natural business cycle to to come to fruition. In fact, you know, the fact that we haven't had any decline in housing prices has been sick because it got pushed up because of all the mortgage backed securities and zero rates after COVID again. Yeah. I I you probably saw the same headlines, but about a week ago, the headlines were sort of floating that the administration might declare a national housing emergency and take some actions. And I'm like, I don't know how to read that other than problem created by too much central planning intervention to be addressed by more central planning intervention. Well, I mean that that what what is I mean the official demand apparently is for power to drop rates to what 1% 1%. Yeah. Yeah. And how how has that worked in housing markets in the past? It's boosted them up even higher. You know, now you can argue, well, there's a lot of supply that's not on the market because people are not selling because they don't want to move and pay higher mortgages. I get I get that argument, but um you know fact is the housing market is at the highest ever. It's as unaffordable as ever and you know the accountability with that again lies with the Fed who never takes accountability for anything. So I as as by the way and as much as I you know philosophically agree with beating up on the Fed um I also don't like what I see in terms of taking control of it and making their decision a a by political degree. I think that's right and essentially making it a proxy of the White House. Right. If you if you stack it with a bunch of, you know, yesmen, then what does the Fed even what what does the Fed cherry? How does it even matter? Because if it's just if everyone's just going to implement what the administration wants, you know, I hate to bring this up, but this is, you know, I mentioned all the liquidity and all these other factors, but there's unfortunately also a political component. you know, when there used to be a time when you had divevestigure and no conflicts of interest or at least the minimization of them and blah blah blah. I mean, now we're in anything goes phase, you know, the the Trump family is completely all in on crypto ventures. I guess they made four and a half billion dollars so far in crypto gains this year. And what is the one thing you want if you're running crypto ventures? You want liquidity, right? And you want lower rates, a lot of lower rates. And guess what? That's what's being pushed. It's it just, you know, it all fits together. There's there's that, right? You know, argument. It's all selfserving, right? And and and then if if you and that's why all of a sudden you you What else do you want? You want to control the Fed in in in such a scenario, right? Yeah. And in addition to that, you know, you you you want lower yields, right? And so controlling the Fed helps with that, but also how do you get the longer rates down? Well, if we have more stable coins, they can buy more treasuries and they can pull yields down, right? So, I mean, there's there you're right. There's there's a whole um either self- serving at least in in terms of the political goals. So anyways, Fen, look, I could talk with you about this forever. Um, thank you so much for coming on and doing such a wonderful job here. Next time you come on, um, I'll make sure we go long enough that we've just solved all the world's problems and then people can just know what to do. Um, but seriously, um, I can't wait to see uh, your contribution to the conference. Thanks again so much for doing that. A reminder to folks, um, if you haven't got your ticket yet, go get it now. Go to thoughtfulmoney.com/conference, register there. Again, there'll be replay videos if you can't watch live. Um, and uh, get your your ticket now while we're still offering it at our lowest early bird price discount. And if you are a premium subscriber to our Substack, make sure you look for the code that I've emailed you that you can use to get an additional $50 off of that lowest early bird price. Um, Sven, uh, last question, but most important one. For folks that would like to follow you and your work in between now and the conference, where should they go? Northmantrader.com is the is the website. Uh we we have a service there if you want to sign up to, you know, daily thoughts on on the latest markets development. We we got the daily market brief. Otherwise, you can follow me on the Twitter feed at Northwind Trader where once in a while pine on things here and there. Okay, great. And as usual, when I edit this, I'll put those URLs and handle to your X account up on the screen so folks know where to go. Folks, the links will be in the description below this video as well. Sven, my friend. Can't thank you enough. It's always so great to see you. Great job today and look forward to seeing you uh we're in September, so next month at the conference. Thanks for letting me ramble on there, Adam. But uh certainly there's a lot of things to consider and uh keep a breast off. It's there is. But you have a very excellent uh perspective and expertise and the fact that you're willing to share it so liberally is is a real gift to these viewers. So, thanks so much. All right. Well, now is the time in the program we bring in the lead partners from New Harbor Financial, one of the endorsed financial advisory firms by Thoughtful Money. I'm joined as usual by lead partners John Lodra and Mike Preston. Guys, thanks for joining me. Um, so everybody, we're recording this uh a day after uh I recorded with Sven. You can tell that by the different shirt that I'm wearing. um reason why we wanted to wait to record was so that u we would have the results of the FOMC release which we just got minutes ago. So um boys we we'll get into the you know the results we saw from that in just a second but first why don't we get your guys's initial reaction to the conversation with Sven? Any key takeaways you think are notable to to continue to talk about? Mike, why don't we start with you? Thank you Adam. We've been following Sven at Northman Trader for years. um probably more than a decade and uh we appreciate his work. Sven put a lot of very useful charts up and he talked about these very important trend lines across a number of different markets. The first one he talked about was the quarterly chart of the S&P 500 on a quarterly basis. The S&P 500 has been nothing but up since 2009. That's a that's just a huge amount of time, 16 years. and down candles or red candles on that quarterly chart were very very rare and the five period exponential moving average has been support and it's going to be that way for as long as it's going to be that way. None of us really know when the turn is going to come. I'm sure the turn is coming particularly in light of where we are in you know in terms of cycle theory like fourth turning theory. And if we look at things like valuations that Sven talked about later in the talk, he talked about the fact that valuations were still at 250 215% market capitalization divided by GDP. The old Buffett indicator, anything over 100 120% in the old days was overvalued and here we are stuck at 215%. And nobody cares. Nobody's going to care until it matters. and the central banks have changed the rules so profoundly that we've become used to this new normal. The problem with all of this wealth effect focusing is it's caused the greatest wealth divide we've ever seen. Like Spence said, the top 10% own 80 or 90% of the assets and it's just not a fair system. But it continues. And so as we continue into the crisis and climax of this fourth earning, it's probably going to be a really important thing. The difficulty about all of that is it's hard to make day-to-day instantaneous investing decisions because this time has been so different for so long, so much longer than ever before. It feels permanent, but it isn't. A couple other things that I thought were very interesting. When Sven talked about the weekly chart, he he just zoomed in a little bit. The S&P 500 since April had no real red candles, no real down weeks. the ones that that happened were very very brief and snapped right back and yet again the five period exponential moving average was support again. So he talked a lot about these things and the fact that the support has been there particularly for the stock market the S&P 500 and the trend lines that he showed were very widely respected and so it's been a trend followers market for a long long time. He also showed that the S&P 500 and the junk bonds, ticker symbol JNK, I think he used, have literally been, you know, extremely correlated. The mirror images, one follows the other. It's been an everything moves together type market. And then he also talked about the dollar. The dollar's been really interesting just watching here um after the the Fed meeting. The dollar just made a new low relatively speaking and you touched 90 9642 on the S on the DXY as we speak. And Sven showed a chart another trend line chart that was um a little bit extended down to the the the five period um EMA the five period uh exponential moving average on his chart which I think was a quarterly chart. I can't remember if it was quarterly. Maybe it was a monthly chart, but he was showing that it was getting a bit overdone here and maybe we'll get a bounce. And if we do get a bounce, that could be a negative thing for stocks because lower dollar has been supportive of asset prices. So, we'll see. The real question is, do we break this recent low or are we entering a support zone? We've thought here at New Harbor for a while that somewhere around 95ish is likely a support zone. So, we'll have to see. And I think I'll just wrap up with a quick talk about gold. He talked about the overboughtness of gold. Gold up an epid at an uh 88 um I think I think he said it was a um either I think it was an 88 DSI which is like a daily sentiment indicator but the bottom of the line the bottom line is it's at the top of its trend line. It's been nothing but up. It's had a big big move. And if we've learned one thing in our in our careers, if I've learned one thing, it's that calling a top is really hard. So definitely don't want to call a top in gold. In fact, if I had to guess, I think it's likely going higher, but it's getting the room's getting a little bit warmer. I'll tell you that in terms of sentiment. So, uh, we've done some small things with our positions like our silver position we just sold a covered call on yesterday to take in a little bit of premium and to put a small hedge on that position. But we expect uh even though they're overbought, we expect those markets to continue to be supportive of higher prices. But don't be surprised if you see a quick shakeout in any of these markets, maybe even most importantly gold and silver, which are getting a little bit stretched as he talked about. So with that, I think I'll pause and uh give you a chance to talk, Adam, but uh thank you. All right. So, um, the the chart you first mentioned there, Mike, of of how, um, you know, it's been a trend followers market and the the S&P for, I mean, just years now has been running right along the top end of the Ballinger bands. Um, you know, there hasn't been that much cycling between the top and the bottom of the Ballinger bands. It's just kind of been riding the top. Um, and the fact that there are very little red candles in that what I believe was a quarterly chart like you said. And a key takeaway from that is especially in a dist I think in a general market it's harder for bears to make money um consistently because you have to get your timing right but in a heavily um intervened with market like we have now. I think it's that on steroids. So you know it's it's not to say don't be skeptical. Don't don't position yourself in ways for a market correction especially when valuations get as distorted as they are now. But you just have to be cognizant of the nature of this deformed market. Meaning it can stay deformed for much longer than you expect. And I think most people you I think you guys at New Harbor and me chief among them, you know, can look back at at many periods of the last 10 years and say, "Oh my gosh, this thing the market stayed elevated for much longer than we thought." And a lot of these periods where we were really worried. So I just wanted to make folks, you know, it's really easy to see a lot of that stuff and say, "Oh my gosh, this pig's rolling over. or I got a position, you know, short. Now, uh I've just seen a lot of people who have had that same response along the way, positioned short and then just got steamrolled over as this market just kept going the way that it was. So, just just a word to the wise there. Again, not not not to not have hedges, and we'll talk a little bit more about that in a second, but just be careful about how aggressively short you might want to get this market. Um, speaking of the Ballinger bands, uh, it just blew my mind when he showed how the top tech stocks um, were not just trading at the top of their Ballinger bands. They had blown through it. I mean, to extents that we had never seen before in the data series. Uh, and remembering the Google chart that he put up there. Um, you know, that's something where you just have to say, well, look, you know, either either the old rules of investing um still apply or will still apply at some point in time, or we're just in a totally new game with totally new rules. Um, I see you smirking here, Mike. I I I presume you probably think, hey, at some point the old rules will reapply, but it kind of makes you feel like you're taking crazy pills uh when you see stochastic movements like that. Do would you agree? for sure. And this has been going on for for years, Adam. Um it's been driving a number of people crazy for years. Active managers at the top of that list. You kind of have to just pick your battle really. You know, here at New Harbor, we have a an equity allocation that's relatively low compared to industry norms. We're at around 45%. And we have some hedges around that as well. And so that means if we get a huge meltup, we'll probably underperform the S&P. We've got other parts that are doing pretty well like gold, silver, and mining stocks, but you you you can't really have it your way. You can't have it every which way. You got to you're going to have to pick your battles. And so, uh there's a lot of people out there that are in treasury bills and the T- bill and chill trade. That's not so bad either. Guaranteed 4% with no downside risk. So, you can't have it all, particularly in a distorted market and particularly when you're not going to likely be able to get out. So, our advice should be to lighten up. Um, don't have to don't have to be in in in the mood for every bit of it. And this applies too to people that are in gold and silver. We're having conversations with them all the time about, well, shoot, my my gold and silver has gone up threefold. You know, my mining stocks are way up. What should I do? It's really, really hard to sell on the way up. And we're telling people, you have to mentally do it. Just just do it. and we're helping people do it that are overexposed at this point because of this big run. Sell a little bit and be happy when it goes higher because you're just never going to get the top. And just to clarify, you're not saying get out of the position. You're just saying sort of trim back to initial weight. Um, you know, if if if the portfolio if if the the asset has appreciated so aggressively that it's now a much greater percentage of portfolio than it was when you initially bought the position on, capture some of those gains. Rebalance. This is this is just standard wealth management. And I'm glad you're mentioning this, Mike, because I' I brought this up a couple of times over the past couple weeks, both here and on X. And understandably, there are a lot of people who are saying, "No, you're crazy. Why would you sell any of this right now? This is it. This is the moment we've been waiting for. This is when true price discovery is coming into the metals and the miners are going to go to the stratosphere." And that very well may all be true. Um, but one, it it might not be. And therefore you want to have some diversification just in case your primary thesis turns out to be incorrect. But also nothing goes straight up in a straight line. And so by deploying some of these hedges that you're mentioning, Mike, not only are you sort of decreasing your risk, but you're increasing your potential that if if there is a pullback, you'll be protecting, you know, more of your core position from that. but you'll also have some some dry powder to then reinvest at lower prices and then ride the next part of the upcycle here. So, I don't get a sense that you're saying at all the bull market in gold is over. I think you're just saying, "Hey, look, it's moved really far really fast. Chances of a snapback are probably not to be dismissed." And rather than just ride 100% of the snapback down and then hopefully continue to ride the the resumption of the bull market, have some protection in there just for prudence sake. And then you can use that to your advantage if indeed the snapback does happen. Yeah, absolutely. People that have been in this trade, the gold and silver and miners trade for 10 or 15 or 20 years have three times or four times or five times or maybe even 10x in some cases if they bought gold back in 2000 in the 300s. They've got huge gains. And we're I'm talking to people all the time about this. What's the point of doing it if you never use it? You know, so if you put some, let's just say you put a h 100,000 into gold and silver back 20 years ago, that might be worth 300,000 now. It might be worth more if you were in minors. And so that might be a much bigger portion of your net worth. It might not be depending upon other variables. But the point is that a number of our clients are well into their retirement years and they're like, well, what do I do with this? It's worked. You know, unless you're holding it just for that Armageddon event, which is actually kind of a small percentage probability, sell a little bit along the way and use it in your real life. Remodel the bathroom, put the roof on, buy another car, buy a new car, you know, do something do something to make it feel real, you know? That's that's what I think makes sense. And you'll still have a really good position and be happy when it goes higher. Okay. Um, look, you know, so not telling people go out and sell your your precious metals positions. Um, and you know, personal preference here, folks. So, you know, this not personal finance advice. I think if you're sitting on ounces, you probably don't want to sell those right now. And so, you, you know, as a protection, you might want to take a hedge maybe in in the form of an option versus selling, you know, your actual physical metal. Uh, miners might be a little bit of a different story. Um but um uh again the the the right thing to do is obviously highly dependent upon your own personal situation. And so all I'm going to say advise people is is you know if you are sitting on some pretty big gains in the minor although honestly this really applies to any stock. I mean let's say you bought Nvidia 5 years ago and you've got a massive appreciation of that too. Um I if you don't have a clear sense of what you want to do, let it ride, protect it, sell some of it, whatever. Just have a conversation with your financial adviser and say, "Hey, look, I I've got the good fortune now of having some of these gains given the rest of my financial situation and my goals and my risk tolerance and all that. What might what might make sense for me here?" And then, you know, consider the feedback and then make a decision. Um, do don't don't make doing nothing your default decision just because you didn't investigate the options. Um, all right. Um, well, John, look, let's come over to you. Um, anything to add to to Mike's comments on the SPEN interview before we get to today's Fed news? No, the only thing I'll just reinforce is we see much of what Sven has called out there, some of the divergencies. We're seeing some stalling in some of some of our breath indicators, for example. Nothing in kind of alarm mode quite yet. Uh but uh for example, he pulled up uh the same chart that I pulled up in our video last week together, Adam, showing the kind of rollover, the steady decline in the number of the S&P 500 con constituences um you know, trading above their 50-day moving average. So, we're seeing this kind of narrowing of the market, which generally, if we see that follow through, starts to to put at risk some of this uh this rally. But we'll we'll wait as that uh data evolves. But that's just something uh we've been observing and I'd reinforce. You know, of course, the u the news of the day is the the Fed meeting, the the the most important Fed meeting of of the history of mankind. They they always are the day of the um so we we got that those results out as you you mentioned and you know, perhaps we can look together, Adam, at um at the the wording changes because it does speak to I think u you know, a balance of concerns and risk, but please Yeah, le let's do that. Just last question for you on the spend thing before we hop off it. Um, so Sven, who is much more of a trader, right? So I just want to call out his investing approach, very different from your guys' because he is much more short-term nimble in and out. You guys are investing for the long term for your clients. But he basically said, yeah, I mean, after giving us his his view of the market conditions, he said, I don't see this as a market that I'm excited to put new capital to work in. Uh, I'm much more willing to wait to see what happens. and uh and if I'm right that some of these uh you know risks that we're seeing play out, I might have the opportunity to buy in at at better valuations. Um what do you guys think of that at New Harbor? Uh yes, we do have a different time frame approach, different philosophical philosophical approach, but we feel feel very much the same way. We've had a a very satisfactory year for our clients. uh barely saw any downside in the in the April sell-off and we've been able to um capture a a very dramatic upswing uh since then for our clients. Uh we always look forward, not backwards, no victory lapping in our business. Uh but uh you know, certain things like precious metals certainly have helped. Uh but we're, as Mike said, we're we're preaching that it's time to kind of you know, not get greedy here. It's it's really important to remember what this money is for for for our clients anyways. They're not trying to post up uh you know top top desile mutual fund returns. They're trying to live their life comfortably and and not without a lot of without a lot of fear and stress. So that's that's necessary ingredient in that kind of objective is to to basically harvest those those those gains and protect them uh when it makes sense to we're very much in that kind of uh easing towards that kind of uh mindset right now for our clients. Okay, great. All right. Yeah. So, let's get on to the FOMC release. Uh, at the time we're talking, Jerome Powell um has not come out uh to speak yet or or maybe he's about to, but we're not going to have the benefit of of hearing his guidance uh in this discussion here. Um so, we can talk about that second part next week. Uh but basically, Feds seem to have done what the markets were expecting. Uh cut by 25 basis points. So, a single rate cut. Um sounds like there was one descent on the board. Not a huge surprise. um Steven Moran um who is the recent Trump appointee who is replacing another Fed governor um blanking on her name but who who uh who left recently is not Lisa Cook. She still voted this time around and Moran wanted a 50 basis point cut. Um but beyond that I think it was unanimous for 25 basis point rate cut this time around and as best I understand and correct me if you know any differently John I don't think they touched the pace of QT. Yeah, I don't think they spoke to that. that may come up in the presser. If I was a reporter in the room, I'd want to ask about that, especially because there's been some interesting dynamics, shall we say, going on in the Treasury market. Uh, for example, uh, there's been some charts making the rounds, and I actually shot a video on our channel that'll probably come out later this week on the pretty dramatic increase by the Treasury in performing what are called Treasury buyback operations. A lot of misconceptions out there, and I get into this in that video. It's not QE. This is not the Federal Reserve printing money out of thin air to go buy out buy long-term Treasury bonds. It's the Treasury itself buying back longerterm bonds um in what they call liquidity enhancement operations. Uh and it's a pretty dramatic increase over even last year. And the whole period like 2003 to 2013, they didn't do any of this. So, the fact that they're increasing it speaks a lot of what their concerns probably are. Um, but you know, it would be great if they were just buying back long-term debt, essentially paying off debt, but no, they're they're increasing issuance of short-term debt to do that. So, it's just playing games with the maturity of of the outstanding debt. And, you know, it it it checks a lot of box. It makes a lot of makes a lot of things come make sense when you think about the bullying and and the taunting to lower short-term interest rates. Well, yeah, if the Treasury is going out and issuing a lot of short-term debt, you bet they want the the interest rate lower on the short end if they're going to kind of buy back long-term and and and borrow short term. So, that all kind of makes sense. But, let's go to the the um the Fed statement uh because there a couple of wording changes and you know, we parse every single word that comes out of the Fed, so we might as well look at it in a red line comparison. So, this is comparing the today's statement with the last Fed meeting statement. And you'll notice right off the bat, they kind of remove any kind of reference to export, you know, uh, noise related to tariffs and things like that. And they really focus on the weakening in the job market. Job gains have slowed. Um, you know, inflation has moved up and remained somewhat elevated. But here's the key. It says, uh, the committee is attentive to their to their two two main objectives, inflation and job job market. And they clearly say here that the they they they view the balance of risk has has soundly shifted towards the job market and protecting the job market. So that the the key, you know, I think the translation to that is, you know, we'll probably let inflation run a little hotter uh if if that's the consequence of of trying to, you know, stem the the slowdown in the jobs market. I find it curious that they still reiterate the 2% inflation target. a lot of people that think that's, you know, um a pipe dream that in fact that they'll ultimately in trying to defend this the slowdown the economy that seems emergent that uh they'll end up having to throw in the towel and arbitrarily um you know capitulate to a higher inflation target. That's that's to be seen. My opinion they're just FY editorialized. Pal will never give that up in my opinion. Uh he'll keep the 2% target until he's out and he'll make somebody else reduce or increase it. I think that's a fair read, Adam. Absolutely. But let's look at the the projection. This is a dot plot. I hope you can see this. This is basically I think if there was a little bit of a surprise here is that it the the it came out a little bit more dovous than even the market was was anticipating because you know so six six uh these each dot here represents a a voting member. So um you know basically six so as you as you mentioned um it was unanimous except for one descent that a 25 basis point drop but if you look here uh six members uh basically feel that we should stand pat for the rest of the year like in other words no more rate cuts for the rest of the year but a full nine are calling for a two you know quarter point drops uh so two more quarter point drops before the end of the year. one member is calling, you know, calling for another five five drops uh five quarter point drops. So, it's pretty pretty uh outlier there, but the the I'm laughing because I'm going to bet that's Moran. Yeah, I saw some speculation that it might be Waller, but who knows? Uh but the median expectations for two more and we can kind of actually see that in in the data here. This is a a comparison of the market implied probability. So if we look at the October meeting uh just yesterday uh there was only about a 74% chance or probability deemed by the market for uh you know another drop uh at the October meeting. Now that's a near certainty 93%. So odds have shifted dramatically in the market size that they're going to cut. Then if you go to the December meeting again there was only 70% chance that there will have been two additional cuts by December uh as of yesterday. Now it's uh uh 92%. So there's been a pretty dramatic uh increase or or interpretation by the market that uh you know we're going to get two more cuts. And not to say the market is right here. They get this wrong all the time. But that's at least initially uh what what's being read into it. Market reaction pretty typical for a Fed day. So far it's been a whipssaw. You know, this is noisy page here, but this is spy S&P 500. Here's the release. Shot up. So stocks rallied a bit on the release, then they kind of pulled back sharply. They rallied again, pulled back. So a lot of noise there. We look at bonds. This is long-term treasuries. We got a spike higher there, meaning yields dropped and now we're seeing that pullback. So yields are are backing up again. Um you know, the probably the big uh move of the day here uh was the dollar. Uh this is a chart of the US dollar. It sold off pretty hard here. Took out the recent low I think back in April and but it's regaining some ground. So that's and and Sven called out the US dollar weakness is a key pillar in this kind of rally of risk assets. You know we agree. I mean that's that's been certainly a fuel and um so far the path of least resistance seems for a weaker dollar though we are getting a bit oversold and it would not be surprising to see the dollar try to find some footing in in this area. Okay. Um all right. Uh so you know let me get to the so what of all this. So for quarters, years now, to be honest, um we and and and many of the other people have come on this channel and I have have looked with skep increasing skepticism at the employment data coming out of the BLS. Um that's kind of come to a head in in recent months um where it's been very publicly called out as being highly unreliable and interestingly some saying they think it should be worse, some saying they think it should be better. Um but um it seems to be the jobs data that really shifted here. You know, Pal for all this year. This is the first rate cut of 2025. All this year, Pal kept saying, "Yes, the jobs market is cooling, but it's cooling from an overheated place and we're calling this normalizing and we don't see anything that worries us." And increasingly during his pressers, the the journalists would say, you know, that's kind of different than what I'm hearing from real people out in the real world. and they kept saying, "No, we don't really see anything here that worries us." And then all of a sudden at Jackson Hole, oops, um, this jobs market is now cooling faster than we wanted to. Seems to be weaker than we thought. Now they've just said here the balance of risks are now on the the the downside for employment and and they expect more rate cuts to come from here as you just walked us through. So, you know, this is so important because as we've, you know, underscored for so long, so goes the unemployment uh rate, so goes the economy. Um, and uh, you know, we're we're we're now at this point where, you know, the economy the economic data is slowing, right? Um, so we are seeing a slowing economy. We are now seeing a more concerning environment for uh for employment and yet stocks are still partying, right? They're at all-time highs. So, John, just talk for a moment about um how how long in your opinion, and I know nobody knows for sure, but how long in your opinion can the markets ignore those fundamentals slowing economic growth and potentially worsening uh jobs market from here? Yeah, in a word I I don't think that long. The problem is we and everybody else are focused on the dayto-day. So it might feel excruciatingly long, but in the context of the kinds of time time frames that our clients need to be worried about, not long, whether it's, you know, a couple months, few months, six months, that's rather irrelevant in the context of uh a broad financial plan. Uh you know, a couple things. Let me just share. You know, you you comment about the job markets. Yeah. and and uh here here is a look at the unemployment rate and overlaid with the recessions what what you'll see here and the recess the recessions start and they're usually post-dated after the fact but they start in early phase at the end of recessions is usually when things get the worst in the jobs market. So it's a classic lagging indicator. So when the jobs market gets really really bad, uh probably the stock market has already sold off pretty healthily and the the economy's been in, you know, a technical and real recession. So So point being is you look at these turnups here, uh they don't take very long to to go parab parabolically higher. So I do think that that the the stock market is is a bit at odds with what seems to be emerging here. And I I think that can turn on a dime, right? Um you look at history, that's that's been the case. Yeah, John, I'm going to I'm going to um I'm I'm going to steal a chart uh in a second here to overlay over yours. Um just bear with me one second here. Um all right, let's do it here. Uh all right, so it's the same chart more or less. You can see this. Mhm. Yep. Um so same chart, uh unemployment rate and recessions grayed out there, but it also has the federal funds, the Fed's federal fund right there in red. And just as you've said, John, when the unemployment rate bottoms out and starts increasing again, it tends to then spike up into the next recession. Right. Y similarly with the federal funds rate, when the Fed has been on a hiking regime, plateaus and then starts cutting rates, that also is when usually the next recession starts and then the Fed is sort of panic cutting into that next recession. Right? So here we are 2025. We're kind of seeing both potentially in process here. An unemployment rate that has bottom that is now picking up steam. Uh and although not in a crisis level yet uh and a federal funds rate that plateaued was reduced for a little bit but then kept at a high plateau after that that now the Fed is starting to cut again signaling more rate cuts to come in the near future. I guess we have to ask ourselves here, what is going to be different this time to avoid repeating the pattern of almost every other similar cycle here in the past 75 years? Yeah. Well, so that's a great point, Adam. If you look at the 2000 and uh tech bubble collapse and the 08 to09 collapse there um you know one thing that people have forgotten is that the Fed as you can see in this red these red lines here in both those cases dramatically in and almost in a panic fashion lowered interest rates. Yet it did nothing. If you and I have a chart that I won't be able to find in time to to bring it up here, but if you overlay the S&P 500, that's exactly when these things when the S&P cratered. Those are when the market corrections happen. Exactly. So, so in other words, cutting interest rates, you know, stimulating, if you will, uh didn't didn't stop the market from collapsing. Right. So, this this simple mantra that we've all been conditioned that, oh, liquidity, easing conditions means stock market goes up. Well, we have a pretty short memory if if we've forgotten that that wasn't the case at all in the tech bubble collapse and and the uh the housing collapse and and we are as Sven pointed we've pointed out we're in rare valuation territories. I can't help Adam but to share another chart here because this is another take at how extremely overvalued we are. And this is a chart that was put together by GQG Partners. And it basically shows the weight of S&P 500 names that are trading at greater than 10% uh 10 times price to sales ratio. Here's where we were in the tech bubble. We are way above that. So, you know, yeah, we can we can debate about whether the, you know, three or five or seven hyperscalers that are going to control AI uh are fairly valued or not, but uh I think it's a whole different debate to say that 35% of this S&P 500 should be trading at, you know, greater than 10 times price of sales. That's crazy. That is mind-blowing. That'll come to earth. It maybe and and you know, just to put it into proper context, I think David Rosenberg put out a great table. He he he basically put it like this. You know, if if you look at any time that Schiller Cape, you know, Siller Schiller cyclally adjusted PE ratio exceeded 35, every single time I think on a 1 3 7 10 year followon basis, uh the market was was was down in history. I may be messing that up a little bit, but the point being is that yeah, valuations aren't very useful in the very short term, but when you start to extend the time frame without fail in all of history, uh when you get above that level, and we're well beyond that level right now, um you know, you see negative buy and hold return. So, at the very least, if there's one thing Mike and I would love to get across, if if folks have have adopted a passive buy and hold approach, now's the time to really question that or at least, you know, not be all in on that approach. Scale back. You don't have to be 100% invested in anything and and lock in some of those gains. You've been lucky. Absolutely. Absolutely. Um, so, all right, we we got to wind things down here. Mike, I'll come to you in just a second. Um, but that's a great chart, John, just to a show how bananas uh this this period is right now. Um, but also, you know, what's driving a lot of the stock price uh appreciation is multiple expansion, right? Is the times to sales, is the times to earnings. And when you hear the word multiple expansion, just think, I'm pulling tomorrow's value into today. And just like if you I don't know, you know, um uh trying to think of a good analogy here, but you you um you ask your your boss for a loan, you know, to to to pay you early for next week's wages. Sure, he pays you today, but at the end of next week, you don't get a paycheck because you already got it last week, right? So, when you pull tomorrow's value into today, when you get to tomorrow, there's a value drought. there's a valuation drought because you already pulled it in, right? So, um you know, history shows us when you pull too much value into today, uh just mathematically stocks have to really underperform uh in in in in the um following uh sequence uh just to balance things out, right? And we have had I just got to remind people, we've had uh now we're on track, I think, for three back-to-back double-digit years in the stock market. and we had, you know, barn burner years in 2023 and 2024. Who knows how the this year will end, but if it continues appreciating from here over the next couple months, um then we're going to have a third barb burner year. Um which we still don't need to to have some sort of reversion to the mean valuation wise. So again, valuations are are really bad timing indicators. Um but they do give you a sense of the confidence you can have that that you know at some point uh what's going to happen and at some point we're going to have to go through that valuation drought which is going to pull down today's prices. So Mike you know there's a lot of people watching this who you know I think are understandably really confused just because things are so uncertain. Hey there's still a party going on. I don't want to be the idiot that sits out the party, especially when, you know, my brother-in-law, who's a is seems to be making money handoverfist here. Um, but at the same time, I also don't want to be the greatest fool who jumps in, you know, uh, on the bandwagon right as the wheels come off. So, um, you know, what kind of conversations are you having right now with your clients and the people that are are contacting you from this thoughtful money audience? Yeah, I guess there's a little bit of FOMO going on, a fear of missing out, and it's likely to get worse if we have a a meltup further from here. It's going to get worse. And my advice to those people that are feeling like they have to get in is don't bother. Honestly, don't bother. If that's how you feel, it's not a good reason to make that decision. Um the the tea bill and chill trade, like I mentioned, still pays 4% annually. Um if you talk to a professional, talk to us. We can help you get into a model that is hedged. We can help you dollar cost average into a model that's hedged if you want to. But don't make decisions based on emotions, particularly fear of missing out. It takes years to learn yourself, to learn your personality from a trading perspective. And the market is rigged against you, against your emotions, because it's nothing but a sea of emotions. And so you'll likely do the wrong thing at the wrong time if that's going to be your guidepost. So talk with us. So, we're happy to to to chat with you, review your portfolio, give you some pointers. We're almost certainly going to tell you to reduce risk, get a little bit of gold and silver if you don't already have some, and uh be patient because things have been longer forever, but longer than they've ever been this different before, but they're not they're not going to be different forever. And we think we're getting close to a point where that's going to change. You talked about unemployment. The SAM rule triggered I think over a year ago. the first time that I can see on a chart that that that hasn't predicted a recession. So everything is different now everything but not permanently. So just if you can't if you don't want to deal with your emotions and all those ups and downs just go to T billills and wait it out or talk to us or somebody like us. That's about all I can say. Okay. Um so uh you know I would encourage people who um you know a lot of your clients are are older right um approaching retirement in retirement and honestly those people have had a great gift right they've had this massive you know multiple bonanza years in the market over the past couple years right um and even though they had to go through 2022 it it didn't take very long for valuations to get back there and and and tell new all-time highs now, right? So, you've had a real gift here heading into your later stage of investing. And what you don't want to do is put your capital at undue risk of the type of of correction that that you guys are talking about and are saying, "Hey, it's it's it's highly likely and to a certain extent mathematically inevitable." Again, timing is a little bit TBD, but you've been given this great gift. So revisit how your portfolio is positioned. Make sure that you find ways to derisk it given this correction risk that we're talking about going forward and you know basically lock in the good fortune that you've had, right? And if the market continues to go up from here, great. That's additional gravy for you. But if it doesn't materialize, if we do go through a a correction, you know, at some point in the relatively near future, well then thank goodness you you put the d-risking in place, right? So, as as I think you guys like to say a lot, you know, a lot of your clients don't have time for a doover, you know, if there's a 20 plus% market correction, a lot of them don't necessarily have the decade or two decades, you know, remaining to to get back to even and then have additional growth on that. So, you know, I think I would say look, be cognizant of the fact that you're hopefully in a better position today than you were three years ago because of the great run the markets had. Be smart about it. Be prudent about it. lock in the things you're going to need for your retirement. Um, and then yeah, if the market keeps going up from here, have some exposure to that so you get that gravy, but don't put yourself at undue risk of your luck running out and having these things that seem to be more mathematically likely by the month derail you from a a a peaceful retirement. Any closing words on that before we wrap up? Mike? Yeah, just don't mess it up. You know, don't make the big mistake. We are at levels that we would not be surprised to see this market peak when it actually peaks. stand for more than 10 years. A lot of people don't have that type of patience to sit through that. It will be okay eventually, but it could take decades. And so, again, the sky's is not falling. Don't have to sell everything, but make a big move towards conservative conservatism. The market literally has to correct. Really, history says this. Our debt situation and the world's debt situation says that we can't allow it to correct. So, this is the battle that's going on. Central bankers are trying to keep this thing up and going more and more and more. Young people are praying for a crash or they should be because they need it to have a chance. And so the cycle goes on. You here we are again in the fourth turning cycle. It's going to happen. History says it's going to happen. Protect yourself. Um there's going to be opportunity for everybody. It's not going to be an overnight thing where you have to jump in. Although it's going to feel like people need to jump in because they're so used to the V-shaped recoveries. that's not going to happen this time. So, you're going to have to be emotionally even keeled and um if you're not really used to that, particularly when it comes to investing, you're going to need somebody to lean on, a good adviser, as we said earlier. So, all right. Well, well said, Mike. And one of the reasons, folks, why I'm underscoring this so much is the data is sadly clear that um investors have the highest exposure to stocks in their portfolio than they've ever had percentage-wise. And the cohort that has the greatest exposure to stocks is the cohort that is right at retirement age right when they should be de-risking. So hopefully folks um take these words of caution uh to heart. All right, Mike. Well, look, thanks so much. Um folks, if you want to get in touch with John and Mike um or one of the other financial adviserss that thoughtful money endorses, uh just fill out the very short form at thoughtfulmoney.com and you can have a free consultation with them. doesn't cost you anything. No commitments involved. Just a free service they offer to be as helpful as possible to you. Um, also don't forget that we have the thoughtful money online fall conference coming up in just a month now, Saturday, October 18th. If you can't watch live, don't worry. Everybody's going to get the replay videos for that. You can go buy those tickets right now over at thoughtfulmoney.com/conference. And do go buy them now if you haven't bought already because we still have the early bird price discount, our lowest that we're offering for just a little bit longer. And remember, if you're a premium subscriber to our Substack, check it check your email for the code I've I've sent you where you can use to get an additional $50 off of the price of the conference. Uh John and Mike, it's always so wonderful. Folks, please uh please let them know your thanks for that as well as letting Sven know your thanks by hitting the like button and then clicking on the subscribe button below as well as that little bell icon right next to it. boys. Look forward to um continuing talking with you next week, especially once we we know the outcome of of whatever guidance pal is giving probably right now at his presser. But thanks so much, boys. Thanks. Thanks again, Adam. We'll see you next week. Thank you, Adam. And we look forward to seeing you next week. Appreciate it. All right. And everybody else, thanks so much for watching.