Stocks Likely To Trend Higher Into Year End? | Michael Lebowitz
Summary
Market Outlook: The expectation is for an upward trend in the stock market towards year-end, assuming no major disruptive news events occur.
Technical Analysis: The S&P 500 is currently supported by key moving averages, with the 20-day and 50-day moving averages acting as critical support levels.
Liquidity and Earnings: Liquidity issues are emerging, but the end of earnings season may bring back stock buybacks, providing market support.
Inflation Data: Recent CPI data came in cooler than expected, suggesting potential room for further Fed rate cuts, although skepticism remains about the data's accuracy.
Housing Market: The housing market faces challenges with declining rents and potential oversupply, impacting home prices and affordability.
Energy Sector: The energy sector, particularly oil, is influenced by geopolitical tensions and economic conditions, with potential for price fluctuations based on global events.
Speculation Concerns: The market is experiencing speculative behavior, particularly in meme stocks and sectors like AI, raising concerns about sustainability.
Gold and Debasement Narrative: The recent surge in gold prices is attributed to speculative narratives rather than fundamental debasement of the currency, suggesting potential for a correction.
Transcript
Look, assuming there's no news, which is a horrendous assumption, the trend should be for the market to drift higher. But as we know, as we saw the last time we talked, there is news and it does affect the markets. So pay attention. But uh the you know, all things considered, we expect an upward trend into year end. >> Welcome to thoughtful money. I'm Thoughtful Money founder and your host, Adam Tagert. Welcoming you back at the end of the week for another weekly market recap. This time featuring my good friend Michael Liowitz, portfolio manager at RAIA. Michael, how you doing? >> I'm doing great. It's Friday. >> It's Friday. Um, well, it's funny you mentioned that. So, the last time you were on, Michael, which I think it was two weeks ago, we had to record on a Thursday because of my schedule. I travel and I made sort of an off-hand comment of, "Hey folks, you know, we're recording this on Thursday, so we're going to be missing one day of the week. Hopefully nothing happens that last day." And then, of course, the markets had like their worst down day of the year. So glad we're doing it on Friday again. >> Well, so what's going to happen on Saturday now? >> Yeah, I know. Well, it's not temp fate there. Um but but what was interesting is the markets did have a big um draw down for a brief moment there. There was a lot of panic um and kind of a lot of volatility over the next couple of trading days because it was a on again offagain tweet trade war between uh President Trump uh and the Chinese. Um, we'll get more to that in a moment. But, but since that uncertainty in the markets, they've picked themselves back up as they've been doing pretty much all year and pretty much trading back at record highs on the day. We're talking here. So, I think maybe Michael, maybe we just go, you know, straight to the TA here. Um, market seems to be feeling pretty good right now despite all the potential negativity we've seen in the headlines recently. Um, what's your take here? Yeah, and if you remind me, let's get back to that Friday from two Fridays ago because there was a little liquidity issue and liquidity issues are starting to pop up a little. So, I would like to expand a little bit on that, but we can do that a little bit later. Um, let me share my screen and we're going to start with a u with a graph of the S&P 500. uh not much has changed. You know, we've talked about this divergence between the MACD, which is just slowly leaking lower, and the market, which is, for lack of a better word, slowly leaking higher. Um, and same with the RSI, which is down here in the red. It's, you know, lower highs, lower lows. Kind of same with the MACD. The MACD is going on a little bit of a buy signal, but it's been doing that back and forth buy sell signals uh as it declines. So, it is working towards fair fair value, which is positive. The RSI is close to 50, which is fair value. And you can see the S&P has kind of gone nowhere for a month, a month and a half. Um the moving averages have proven to be helpful right now. The last couple days, we've been supported by the 20-day moving average in red. The blue uh is the 50-day, and that did provide initial support. Um, but right now, that's kind of if we break the 20, that's the next line in the sand. And then I just drew these this red line. It's been a line of support pretty close to the uh to the uh 50-day moving average. So, that's a level to watch. We don't want to break that. uh because then you you you set a precedent of a lower low. Doesn't mean it's the end of the world, but something to pay attention to. Conversely, if you get above the green line, you you hit record high, higher highs. So, so let's see how it breaks out of this range. The market's trading decently this morning. Uh bringing it to the very upper end of that range, but not quite at a record high. Um we'll see. And then at the very bottom, I added on bal balance volume. That may be a new one. And it's basically measuring on, you know, if it's an up day or down day and what the volume was like. And generally in a bullish market, you want to see it trending upward. What we don't want to see is it start to flatline or even decline while the market's going higher. That's telling you that the selling pressure is increasing, even if it doesn't show up in the S&P itself. So it's another technical indicator that uh we could pay attention to. In 1999 that was one of the hints that there was something changing in the structure of the market that had flattened out despite the market going on to record high after record high. So something to watch. There's zero warning. It's doing exactly what you want it to do. And you know as we kind of look ahead we have a big week in earnings. A lot of the big tech companies are next week along with a lot of other large companies and we're slowly once we get past that, you know, we're getting on the other side of earnings season. Um meaning that a a lot of the earnings news is now in the market, but b a lot of these companies in sty stock uh blackout stock buyback blackout periods can start buying back their stock. And that starts as early as this week. some of the the banks have reported already are probably out of the blackouts. Companies have reported this week could probably start buying back next week. So you you have that support for the market that starts kind of coming back into the market that was left out for the last few weeks. Um, and then we just run into the holiday cheer, the the rebalancing, the typical year-end activities that can that traditionally are helpful to the market. So, >> the Santa Claus rally, >> the Santa Claus rally, look, assuming there's no news, which is a horrendous assumption, the trend should be for the market to drift higher. But as we know, as we saw the last time we talked, there is news and it does affect the markets. So pay attention. But uh the you know, all things considered, we expect an upward trend into year end. >> Okay. So um you know, I I had um some folks on the channel not that long ago like um Mark Newton who is uh Tom Lee's research partner at Funstrat, you know. unstrat famous for being very bullish most of the time. And you know, Mark is a is a a technician's technician. I mean, he he's like, "Look, I I I don't really care what I don't really listen to what Tom Lee is saying. I just look at what the the tape is telling me." And >> even he was saying, "All right, I've got I've got some near-term concerns that uh the market could um pull back a bit in in October, November." I think he was saying this around the beginning of October and uh and then said, "But I expect that to be a buying opportunity and then the year to end strong, you know, typical end of the year rally." Um I've mentioned this to Lance. I think Lance has said, "Yeah, that that sounds pretty right to me as well." Um, so looking at where we are right now, um, with the best data you have available to you, which is always imperfect, do you think we're beyond, um, whatever pullback risk there was in the market and now we're just going to kind of, you know, drift higher until we get to that that gooing of the the Santa Claus rally? Um, or do you see signs that no, we might not be out of this yet. November might actually still see a downdraft. I I struggle with some of that a little bit because I think some of that that sentiment I know from Lance and maybe Mark is based on history and October have been among the worst months. Um but there have been plenty of good I mean October have been among the worst month but there have been plenty of good October. Um so so I think it goes back to the question is what could upset the apple cart? And you know, I could rattle off 40 things that could upset the market any month, any day. Um, you know, and President Trump is very vocal, and he's always willing to say something that can stir the pot, both positively and negatively. So, obviously, something can happen. Something can happen late November, early December, January. Uh, obviously I'm not ruling anything out, but I don't there's nothing I really see that that is, you know, predictable that is really going to cause the market to change direction rapidly. Not to say we don't get back down to to the even the 50-day moving average as support, certainly, but um there's there's really not much right now. doesn't mean my long-term outlook is this bull market's going to run forever, but I do think the market is pretty supportive from here to year end. >> Okay. All right. Um well, look, um some of the data that is lifting stocks today, Friday, we're talking is the um the latest CPI data came out and I was a little I'm not fully versed in exactly which research functions are shut down during this government shutdown and which aren't. Um, but we did get a new CPI update. Um, it it it came in as quote unquote cool. Um, meaning it was a little bit less than expectations both month over month or year-over-year. It is noting notable though that um the year-over-year CPI number was 3% which I think is the highest since January. So inflation is is still kind of remaining sticky at the the 3%ish level but um it wasn't as much as what expectations were. So people are are interpreting that it seems as okay well this gives the Fed you know more more room to cut. Um this is this inflation is not so hot that it might slow down the rate cuts. So the market's saying okay good you know rate cuts still on. Maybe we get a little bit more. We'll see. Um anything else to say about the this new inflation data? >> I I I know the stocks are up decently this morning. Bond market has really done not much. It's up a hair or down a little bit in yield. I just don't think the market read too much into it. Uh the data is stale. It's uh who knows how accurate it is. You know, my guess is this number could be revised decently. Uh we just don't know how they're reporting it. Are they doing the same calculations they were doing using the same amount of data? We don't there's a lot we don't know. So, I think as long as it came in a tenth above or below, it came in below, but you know, a tenth within expectations, the market wasn't really going to care about the number. Why the stock market's going up today, I don't know. It goes up almost every day. Uh, but I think the bond market is kind of the tell that the market just doesn't care. Um, you know, the other the the one aspect of it, and we've talked about this for a while, is that CPI shelter prices are coming down and that's one reason why the number came in slightly better than expectations. That's going to continue to happen for a a while, not just months, many, many months. So, it's just playing catch-up. So, you know, I think in the media you're going to see some argue, well, the inflation is not as good as they say because some of that was shelter. I would argue the opposite. Inflation is too high already. In the real inflation rate is lower, but shelter is keeping it higher and we're in the process of normalization. Now, again, Adam, we can debate all day what the right inflation rate is. I'm just talking about the CPI inflation rate. >> Yeah. >> Right. We, you know, you can argue it's 5%. And look, when I go shopping, I'm not going to argue with that. It certainly seems like it's pretty high, but CPI is what drives the market and what drives both the bond and stock market, gold market, every market. So, um, you know, that's where we have to talk. >> Yeah. And you know, as you have said many times and the math makes total sense is that of that official CPI number, 40 plus percent of it is shelter. it's the it's the big dog in the calculation and that seems to be disinflating and uh that is just going to be dragging the CPI down or at least a large part of the CPI down with it as you said over many many months from now. So >> yeah, and in fact there so rent is a part of that. Um and the Cleveland Fed. So the one of the big reasons why it lags is because what they're doing is they're doing surveys and they're asking people what their rent is this month versus last month. So if you signed a lease a year ago or six months ago, your rent this month is the same as it was last month as the same as it was the month before. It's only till you resign your lease that you have a new rent and it gets captured. So, they are capturing some new leases, but they're capturing a lot of old leases. The Cleveland Fed has an index where it's just new leases, whether it's renewals or new people, you know, someone moving into a new apartment or house or whatever it is. >> And that index actually has been plummeting, right? Going well below zero. So, you know, and that jibes to some degree with what we're seeing from like Apartment.com and some other private uh enterprises that that do this for a living. They're not plummeting as much as the index, but they are in negative or flat flat to negative territory. So that tells me that what we're seeing with CPI shelter today is probably going to go on for another year, year and a half, regardless of rents could start spiking tomorrow, but for that same reason, it's going to take a while, a long while to get into CPI, >> right? It's a very lagging indicator in CPI, >> a very flawed way of doing of calculating it as well. We don't we don't do that with anything else. We don't say, "What did you pay for gas 6 months ago?" Right. >> Right. We asked you what's the price of gas today. >> Yeah. Yeah. Um so I had a housing expert Nick Jurley on the program recently and he walked through the the rent data and and you know his data sources show the same thing, Michael, that >> rents are are are um deflating at this point in time. Um right >> and uh and a factor of that, it's not the only factor. um you know, we're we're we're seeing all sorts of, you know, potential weakness in just the general consumer household, but a but a decent factor in it has been um the clamp down in illegal immigration and the deportations. Um so that the uh you know, millions of illegal aliens that were that were coming in here, they weren't really pushing up the prices of housing very much. It's not like they were crossing the border and then out bidding, you know, a regular American for a house. But these guys got to live somewhere, right? And um yes, some of them were being put up in hotels, but a bunch of them were, you know, living together and renting someplace, right? And so, especially in the areas that had high populations of illegal immigrants, they've seen really strong rent deflation. And you know, obviously rents go down in one part of the market. Well, that makes it attractive for people who might rent in the other part of the market to say, "Well, I think I'll start renting there." So, it starts pulling rents down everywhere, right? And because >> in theory a house is worth what you could rent it out for, that actually does indirectly begin to impact housing prices as well. So we have a a bunch of factors that are impacting the housing market right now, including a lot of inventory coming onto the market finally. But this is one of those elements which is declining rents are starting to actually really weigh on home prices. And and look, I know you have a couple housing experts that know a lot more than me about housing, but my take on housing is that there is a lot of pent up supply. A lot of people that want to move, but can't because mortgage rates are too high and they don't want to turn in their 3% mortgage for a 6, 7% mortgage. It just doesn't make sense. So, there's a lot of pent up supply, you know, and couple that with the demographics. There's a lot of baby boomers that are retiring, close to retiring, want to retire that would like to downsize or move to a warmer climate or whatever it may be. So, there's a lot of pent-up supply, but I also think there's some pent up demand because of mortgage rates, because of high prices. Buyers haven't been willing to buy. They've been renting. So, I think the big question for the housing market is how big is that pent up supply and demand? And will they just are they the same size and will everything just kind of be steady or is one bigger than the other? My gut tells me that the supply side could be bigger than the demand side. Uh especially with the labor market weakening as of late that that a lot of people may not want to commit to a house at this point. Even if rates come down, they're going to need for prices to come down, too. But you know, your experts know more than me about the housing market, but that is a concern I have. >> Well, you're they agree with your gut. Um they're actually getting quite worried that demand is really what is um falling here. Um so it's it's almost irregardless of what happens on the supply side, which is increasing. They're saying the big problem is just there's just not nearly uh enough demand there right now, at least for what the sellers want. Um, I also want to put up this um this data that Lance Lambert, another uh housing expert, um he runs ResiPro. Um >> uh the Mortgage Bankers Association's updated forecast for the average 30-year fixed mortgage rate. So, he's got it by quarter for the next two years. Well, it's 6.4% in Q1 of 2026. uh actually for all of 2026 and then 6.3 for all of 2027. So I look at that and think all right that helps a little bit but like that's not the calvary that everybody's hoping for on the mortgage market here right if you're one of those people that's stuck because you've got a sub 3% mortgage you know a 6.3% mortgage two years from now is not really going to make housing that much more attractive to you. No, I think what you know, backing into his forecast, what he's telling you is the economy is going to be mediocre and yields are going to stay exactly the same for two years, Treasury yields, which will basically keep mortgage yields about the same. He's not forecasting an economic boom. He's not forecasting a recession. So, >> and by the way, those aren't that that's not his forecast. That's the mortgage banker. >> No, I know. No, I know. It's the safe forecast, right? If that was my job, that that's what I would forecast, too, because you're not going to hurt anyone's feelings. But if you think we're going to have a recession, odds are that mortgage rates fall quicker than that, more much more so than that. >> And and if you think we're just in the first inning of this massive AI boom and the economy is just going to go gang busters, they could be decently higher. >> All right. All right. Well, again, >> you know, they're not going out on a limb is what I'm telling you. >> They're not going out and I totally get that and that's like as you said, it's probably their job, but they're also not going out there and saying, "Hey, you know, we see mortgage rates coming down to the 4% and that's going to really, you know, unlock this market and make it affordable for those people to to to finally move, you know, downsize, whatever. If you're a senior sitting on a 3% mortgage, >> well, here's the the tough part with that. If we get down at a 3 4% mortgages, we're probably in a recession. So then the question is who can move, right? >> Can people afford to to move or feel comfortable buying or selling? And that that's that adds a whole different factor to the equation. >> Well, and so this is this is why so many of the housing experts I talked to and and again my own personal opinion for what it's worth is mortgage rates stay the same. What's going to make housing more affordable, which it needs to be to move all this inventory that's coming online, is yeah, it's not the rate, it's price. Price is going to have to come down. >> To your point, okay, let's say the mortgage rate does drop into the fours, you know, in the next year or two. Well, that's probably because we're falling into a recession. And what else is going to have to come down to make housing affordable? Price. So, it's kind of like, you know, under under most scenarios, it's like the the the the thing that's going to have to clear this market is price. And we're already seeing that right now >> in the in the new housing market, right? Which we're in this weird aarent moment right now where it's actually cheaper to buy a new home than it is to buy an existing home. Um, and you know, the main reason for that is to move the inventory. Uh, the the home builders are having to provide all sorts of cash and non-cash discounts, >> right? I mean, I see it in in in my neighborhood. Houses are just sitting there and and they're they're good houses. These houses half the time would be sold the day of the open h the first open house if not before. They're sitting there for months. Like a couple of them have been on for almost a year there. And there's only a few houses in my, you know, my neighborhood has maybe 2,000 houses. There's, you know, there's never more than five or six at a time and they're just sitting there. whether it's the small the lower price or the higher price, it doesn't really seem to matter. So, you know, I think I I don't think I think the market's just in a stalemate. It it's just not moving. It's just sitting there and you have these marginal transactions which affect these statistics, but I don't think they really tr tell the true story that house prices are either rising or falling. I think you need more volume to to tell you a better story. Well, so I think you're in one of those markets that's kind of in the wy coyote moment stage where gravity hasn't kicked in yet, but there are a lot of markets in an increasing number now where um enough inventory has come online that gravity is taking over. I mean, god, do you live in Austin or you live in St. Petersburg and you're, you know, you're familiar with what freef fall looks like. But >> talking to Nick Julie, one of the things that really caught my attention was um as of July, I think it's the most recent data he had, um prices had fallen month over month in half of US states. And we're we're even starting to see weakness in places like Boston, um some places in the Midwest, which were, you know, up until now, people have been saying, "Well, these are bulletproof markets because there's just not enough inventory here, right?" Um even those markets are starting to see some real price softness now. So, we'll see. But, you mean you live, if I understand correctly, you live close enough to DC that, >> you know, historically there's a lot of demand there. Um and maybe this movie has just taken a little bit longer to play out where you live. But that's you know but keep in mind the government layoffs are probably the most in my area >> and the the impact you know people working in the private sector for companies that work consult to the government or work for the government in some way are being impacted as well. So not nearly as bulletproof as it used to be. But, you know, again, you know, I wouldn't character I would just characterize house pricing as kind of flat, probably leaking a little, but again, there's just not enough transactions to tell you what's going on because the price of every house is, you know, every house is unique there. It's not like new homes where they're identical. My neighborhood, every house is unique. They're all 80 years old. They've had they've been knocked down. They've have additions. they've, you know, done all kinds of remodels. So, so because one sells at a lower price doesn't, you know, it's hard to, you know, with old with used homes, it's harder to tell what's going on with price than new homes. But to your point, K Schiller is telling us that home prices are flat to falling in decent parts of the country. >> Yeah. Yeah. Well, anyways, you're going to be an interesting bellweather here. So, uh, let's have this discussion again in Q1 and you can tell us what's what's going on there. >> And and just for the record, about 2 hours ago, I got, um, you know, a call I seem to get every few weeks. Are you interested in selling your house >> really? >> And I give them a number that's twice the value of my house. And they hang up on me. But someday I may be moving next door to you if they accept it. >> Well, we'd love to have you here in Reno. Um, all right. Well, look, um, lots of of stuff to get through still, so let's keep going. Um, so, you know, I mentioned early on what what caused the the market volatility two weeks ago was the um the trade war back and forth um between President Trump and China and uh that's continued. So, um you know, we're still in the midst of that. That's so that's a a bit of uncertainty here. Again, market doesn't really seem to care about at this point in time. Um, we also saw the president just um smack Canada um because uh an ad was run in the province of Ontario that was sort of critical of of tariffs, the US's tariff policy. And I mean, I'm sure this is just a negotiating tactic, but Trump, you know, kind of threw his hands up and walked away from the table and said, "Okay, these talks are over." Right? Um so, we've got all that going on. Curious to hear if you have any thoughts one way or the other on that. Maybe it's just a whole bunch of Kabuki theater at this point in time, but um uh before you answer just one question related to this, which is as part of the the trade war hard ball, um President Trump has really been tightening the screws on a lot of countries, China included, um to really cut down their purchasing of Russia oil. Um you know, Trump is, you know, touting himself as the peace president to his credit. He has a lot of wars have ended under his his nine-month old administration so far. And uh you know coming off of of the um Israeli Palestinian peace uh agreement uh he's now really trying to zero in on on the war in Ukraine. And Russia apparently has not been has been dragging its heels more than Trump would like. And so he's really now trying to tighten the screws on them economically and pushing big countries to buy a lot less. And so China and India have basically agreed, we'll see if they follow through with it, but to um really really curtail their purchases of Russia, Russian oil and gas. Um so two questions on this one, any thoughts on the whole trade war thing, and then on the uh pressure on Russia oil, you know, we're seeing the the the US oil prices uh bread prices, world prices start to tick up here. Is the bottom in oil in? >> No. Uh maybe. Uh, let me go to the first one. I'm surprised the market even cares anymore about the tariff negotiations. We have seen this so many different times where Trump puts a tariff on a company on a country, they retaliate, it gets worse, they they play ball, it gets better, then something happens, it gets worse. It it's a game. It's a negotiating game that's being done in the public and it's, you know, again, how many taco every day is a taco Tuesday. Every day is also a day where we get a new tariff or, you know, something else going on. So, I I think it's important to pay attention to what's going on with the tariffs, where they ultimately end up. But watching a negotiation is is it's like watching an NBA basketball game and thinking because of one or two plays in a row, you know how the game's going to end. It you know they're ultimately going to score 200 plus points. Those four points had very little to do with anything. >> Yeah. >> Um >> it's a good analogy. >> Yeah. Uh the uh what was the second part of that again? the >> is the bottom and oil in >> uh you know what if Russia comes to the table Trump will ease the sanctions oil goes back down the five six% it picked up over the last day or two I I think some of that more of that equation has to do with the economy if we go into a recession oil could slip lower uh but oil prices are decently cheap here um and we know that production is being cut back on the margin. Uh so and OPEC is increasing production. So let's see what the economy does. But oil will probably stick around where it is, go up and down with some of this Russia news. Uh but I think it'll be more dependent on the US and global economy where it ultimately goes. >> Okay. on on that last point then um where do you see the economy going let's say over the next 12 months um we had seen a lot of signs leading up until the shutdown that the economy was was you know slowing um not crashing but but slowing um you know I think some of those headwinds still exist um though I've had a number of people on the program of late Barry Stales name that immediately comes to um that says, "Hey, not only, you know, is liquidity still going pretty well, but like um we're going to start seeing tailwinds from a lot of the new administration's economic policies as we head into 2026, and that's going to keep things growing. Um so, as best you can tell right now with with the uh the shutdown and the data, we're not getting right now, where do you see the trajectory of the economy going?" I I think parts of the economy are doing well. It's that K-shaped economy. Parts are doing well, parts aren't. I think it ultimately comes down to employment. Employment affects sentiment. Sentiment affects personal consumption, which is 70% of the economy. So if you know how consumers feel, are they scared and pulling back on spending or are they optimistic and willing to spend more, go, you know, want to go out to dinner an extra night a week or buy that couch they've been waiting for, a car, whatever it is. So I I think the employment market will help answer that question as we go through. Um, >> what's your default at RA right now as you look to 2026? I think we slow down, but I don't see a recession necessarily, but I think we not slow down, but we kind of stay at this slow rate of growth, 2% give or take. Uh, which by the way, that's the natural growth rate of this country. So, I know it seems low and it's, you know, over time I think it just probably goes slightly lower over time. The Fed thinks, I think, I believe their long-term estimate is 178. Um, so we're basically at trend growth. We've erased all that, you know, we finally all that extra liquidity and momentum in the economy from from the pandemic is finally out of the system and we're back to trend growth. So again, if you tell me where employment will be for the next six months, I'll give you a much better indication of where the economy will be. >> Okay. Um well uh we're not getting fresh employment data right now and even when we were a lot of people weren't really believing it right. Um do you have any indicators hard or soft right now that are telling you where employment's headed? >> Yeah. So ADP has been pretty clear that the labor market is barely adding jobs. We can look at payroll taxes or tax withholding. uh although I guess that data is not being released but prior to the government shutdown that was telling us that we were basically not really adding jobs either. So, you know, to the best of my ability with the limited data available, my guess is we're probably growing between 25 and 50,000 jobs a month, which is 100 plus,000 100,000 plus below where we should be growing for the given the growth rate in the economy. So, that is a problem. But again, we don't have a lot of meaningful data, which maybe is good. Maybe it's good that we step back from this constant flow of data and really assess the the economy on some of the more private sources. Um, it's actually been refreshing from my seat because the markets jump up and down because a number is a tenth of a percent high or low. In the grand scheme of things, that number will be revised six different times and be something outlandish one way or another and no one cares. But, you know, at the heat of the moment, it's that, you know, some fraction of a percent that >> that's that moves markets and creates narratives that are half the time not true. >> Okay. So, that's interesting. So, it's just taking some of the noise out of the system. >> Yeah. >> Yeah. >> Yeah. And, you know, that that being said, it would be nice to have some of the data. It it would just be nice if the market didn't have a spasm every time the data wasn't perfect. >> Yeah. >> Kind of like corporate earnings. It's the same same thing. A company, you know, comes in a penny short or a penny over or they guide slightly higher and the market, you know, for the stock, that stock goes berserk one way or another. And in the grand scheme of things, it has no impact on that company. All right. Two, >> in many cases, >> you just you just gave me two things to to chime in on here with. Um, uh, hold on one second. Uh, okay. So, first off, you you mentioned that you live near the DC area. Um, and there have been, you know, job reductions, Doge, etc. Um I I I don't really have an update on this, but I remember hearing as we went into the government shutdown um trying to remember the fellow's name and what position he had, but um uh I'm not going to remember, but but it it seemed that the shutdown actually gave the administration more authority to cut jobs rather than just furlow people, at least in the executive branch. Um, and uh, I think there were actually some layoffs that were announced, but but at the time, this was two weeks ago or so. Um, at the time, you know, the administration was sort of beating its chest. Was like, okay, hey, kind of a misstep here on the Democrats if you don't want us to get rid of people. You just gave us an opportunity to really start trimming some of this fat here that we've been trying to get done. Is that happening? Are you hearing anything from your your either DC contacts or your people who just live in your area about this? >> I I I mean I personally don't see anything. Uh I know they did fire. It wasn't a big number. I you know a few thousand I heard like 4,000 something like that. Yeah. >> But that's not I mean the DC metro area is you know I don't know what it is. Three million three and a half million. It's nothing you know. And how many of those people can get a job relatively easy? Um, so I, you know, it it's sure a few people have lost their jobs and it kind of sucks. I I think the bigger impact to the DC area is that they're not getting paid these government workers and that is, you know, if this continues, they're starting to miss paychecks. that that will have an impact on on their debt, on how often they go out to dinner, you know, spending money. So, that'll be interesting. But we're probably still a couple weeks out for that to have a big impact as well. >> Okay. And by the way, the guy I was trying to remember his name is um uh he's the budget chief, Russell Vote. Russell Vont. >> Yes. Yes. >> Um Yeah. and they're they're calling these reductions in forces, you know, not not furlows, but we're actually getting rid of these folks. So, this article here from uh October 11th quotes the 4,000. Um, you know, it's been two weeks since then. So, you know, I'm curious to hear if anything more of that has happened. If anybody knows, please let us know in the uh the comments below. Um, okay. So, um uh the other thing you mentioned was, you know, kind of the noise and things that wing the markets around. Um, you know, both you and Lance have been commenting on how there's a lot of speculation in the market today. Um, and we've seen uh some meme stock activity now uh happen in brands like Beyond Meat and Crispy Cream Donuts. So, I'm just curious. I mean, what are you taking from that uh that we just still have too much froth going on in this market here? Yeah. I would also like to know where the SEC is when you need them. U I mean these are just scams. Literally >> shut down. Yeah. It's it's government shutdown. >> Yeah. They weren't there before either. But uh you know it's just people investors are will it's the line between gambling and investing has kind of joined. So when you think about sports betting it's kind of all or none. You either can make double your money or you lose your money. If you parlay, you can multiply it three, four, five, six times or lose it. And investing is is kind of working its way towards that all or none, that binary outcome where it seems like more and more investors are willing to buy Beyond Meat. The stock was a 50 cent company. It dropped from 75 cents to 50 cents like a week ago because they're restructuring their debt because they're on the verge of bankruptcy. They heavily diluted the equity shareholders which is that's why it dropped even though 7 cents isn't a lot percentage-wise. It's massive for a company that I think was a $200 something dollar stock three four years ago. Companies basically on the verge of bankruptcy. They're not their sales are declining. their product is not, you know, as wanted or needed as was originally thought. They've never turned a profit as a public company. Then all of a sudden, the stock's trading at eight because of some guy on social media that I've never heard of saying he's buying. He bought he bought at 50 cents at 60 cents. Then he goes, he tells you what he's doing. Everyone jumps on board. And guess who's selling to those people at six, seven, eight dollars a share? The guy that bought it 506 due to started the whole thing. Yeah. >> Right. He's out. He's been out and then it works its way right back down. There's I There's a stock 1800 Flowers. You've heard of him. I think it's FLWs. >> On that day where Beyond Meat took off, it took off. It went from five to eight and back to five in a day. Why? Nothing happened with their earnings. there's just a heavy short base. So, so the these these meme uh actors kind of uh go after stocks with heavy short bases because they want to get the shorts to have to cover, cause the pop, cause people to jump in, make their profits, and get out. And it's it's, you know, third 20 years ago, this was unthinkable. You know, if we think about why Martha Stewart went to jail now, it's beyond ridiculous com compared to what these people are doing. Um, >> yeah, it's it's not unlike shorting a bank and then convincing all the depositors at the bank to run in and ask for their money and then you create a run in the bank and the bank, you know, gets in trouble and your shorts make a lot of money and then you're out, right? But you've destroyed a bank in the process, >> right? >> It's just not. But I think right to your initial point, I think what it really does is it talks to the speculation in the market. Uh you know in our commentary uh either today or coming out Monday, we posted a graph of Russell comp small cap companies with negative earnings have beating small cap companies with positive earnings by like 30% since April. So, you know, people are so so a lot of negative companies are based on hope. Hope that their earnings are going to grow. Hope that they're going to either fix their problems to get earnings to grow. Or in a lot of like technology cases, they have a great product. They're investing the money now, they'll grow later. Earnings, right? Versus is a company with earnings that that's already producing that, you know, that you can predict. And you know, you're seeing that across the board that the hope is trading much better than the predictable. The bird in the hand is not worth as much as two in a bush, as they say. >> Uh whereas I think a lot of philosophers would argue they'd rather have the bird in a hand. Uh or, you know, fundamental stock traders. Um >> it's much easier to predict. Uh so you know it's just we see it in in just crypto. If you're a company that that's involved that that makes you know we talked about this I think two weeks ago the kimono company that's going to be buying Bitcoin that's now up 300%. So what they're going to be buying Bitcoin. Well why should that affect their valuation? >> Right? because it does because if you're involved in crypto or AI or data centers, that's good. That must be good. You're going to make a fortune. >> Yeah. It's interesting. So, you know, when you're in times of of broth, I mean, these are sort of late stage, right? Everybody wants the sizzle, right? When times are tough, everybody wants the steak, right? And and right now it seems that sizzle's trading at a high premium and stake is probably undervalued. >> Exactly. And it's you could see it in all parts of the market. Even you know even safe parts of the market the riskier part of the safer part like in utilities some of the you know like utilities more on the nuclear side are going through the roof. >> Right. But that's right. They don't have any incremental revenues yet. It's all story, >> right? So, this is the interesting. So, here's a great example. We like the natural gas MLPS. They are providing gas to the data centers today. They will be providing it for the next 5 years because there is no alternative. The long run alternative may be nuclear. Those plants can take 10 years to build and who knows what companies doing it today will even be around 10 years from now. The market would rather have that hope that nuclear is the answer 10 years from now and the profits from that 10 years from now than the answer that than what is feeding these data centers and you know these stocks like you know nuclear related stocks going through the roof and the MLPS are going nowhere. >> Yeah. And that's that's why I keep asking you about oil is is oil is about as uh and natural gas. I mean fossil fuels are about as stake as it gets, right? I mean these are the things that power the world. Um, and these are companies with real profits and real dividends, but in a lot of ways, you know, they're just being completely overlooked right now. Um, >> it's not even steak, it's hamburger. >> Yeah. Or it's the cow itself, right? It's just as basic get. Um, and look, I own some of these uh these nuclear stocks and uh I hope they continue to do great. But you know uh if and when we get to a point where the froth gets bled out of the market because of whatever reason right the economy slows enough or you know we start taking losses or people realize the AI was truly in a bubble and some of that immaterial amount of that market valuation starts going away um you know when people start getting uh when when the party starts ending where you can't get away with uh getting by on sizzle alone you know markets attention's going to turn back to the And >> you know, right now there's some of these some of these areas like like fossil fuels that just seem like >> they're really good values. Now the question is is is you know when are they going to turn, right? They just because they're cheap doesn't mean they can't get cheaper, right? >> Yeah. Yeah. And but it's it's creating opportunity. The question is who has the patience to wait it out to to both wait for those you know sit on companies that are not keeping up with the market or even declining and waiting for their day in the sun and whether that happens when all other stocks go down and because the froth has left the market or just all of a sudden you know like if Amazon or or Google signs a deal with a with a pipeline and then oh wait pipeline lines are also part of the AI trade >> all aboard and they join the sizzle right regardless of what the market does. So you you know as an investor you have to be diversified and you can't just put all your eggs into the natural gas part. You can't put them all into the nuclear part and you have to spread those bets around a little bit. But you know but you have to be willing to have patience for some of those bets and understand your risk tolerances for other parts of the bet. Take profits even though they are going up. So, you know, portfolio management helps you kind of steer through periods where you have this big divergence of what's in and out of vogue. >> Yeah. And on that part yet, are you guys increasing your exposure to the energy space yet or are you maintaining what you have and looking for certain technical signs to then start adding in the future? >> So, we did add uh last week 1% more to our natural gas uh pipeline position. Uh we are contemplating adding a little bit to more traditional energy uh company but we haven't done anything yet but they have been energy has been on a relative basis one of the cheaper sectors in due for a rotation but that rotation may not come until the market weakens too when right you know when >> investors start flocking to staples and energy and you know Well, and it doesn't mean it can't get even cheaper, right? I mean, as you mentioned, OPEC's increasing production. Hey, maybe there actually eventually is a ceasefire in Ukraine and Russia oil comes back on the the world market again and you know that that would >> you'd expect that to lower prices, right? Because it's no longer under embargo. So, it doesn't mean that um you know things can't get cheaper before that sector really fully turns. Um, but you know, I will I will tell folks that I am um the little position in energy I'm adding to it right now in the f fossil fuel side of things. Don't do it because I'm doing it. Um, but I am just letting folks know that I'm starting to do that. Um, and uh and we'll see. But Michael, do do you uh if if and when oil the sector does start turning up, um do you anticipate increasing the percentage of your portfolio that's exposed to that sector or do you feel like you're pretty much at the weight you're going to be and you're just going to ride it? So, so part of the problem with that is if you just look at XLE as a guide, the the spider energy ETF sector sector ETF, >> it has done much better than the price of oil. So, there's a a decent gap there where you would expect XLE to have fallen more than it has uh or under, you know, underperformed the market more than it has. So, that's one thing that's keeping us a little weary. Will it catch down to the oil market? Might the oil market zoom up, but the energy stocks have kind of priced it in, so to speak, or might they both go up together? So, that's that's one of the considerations we've been talking about. >> Okay. Um, and you know, I think one of the one of the nice attributes of this sector, um, yeah, I'm looking at it with the scars of being a longtime um, precious metals mining stockholder. where there were many many years um where those stocks just really did terribly. Um and and then finally, you know, the thesis has has uh proven out much longer than I thought it would, but it's been a great year so far for this these companies, right? Um but with oil, um a lot of those companies pay nice dividends, right? I mean, there's a few of these mining stocks will pay dividends, but these oil companies are are really good. um and you know have been very consistent dividend payers. So to the extent you have to wait, you get paid to wait. >> They also tend to be less risky. They're in safer >> Exactly. >> countries. They're much more adept at hedging. I feel like they've gotten better about not just drilling because the price of oil is high. They understand that the price of oil goes up and because the price of oil oscillates. Gold tends to trend higher. it it oscillates within the trend whereas energy tends to stay flat. So they've gotten much better about not just going gang busters at the top of the range but you know better economics behind their drilling processes processes. So they're they're better you know they're they're much better managed companies. They do pay good dividends. They have decent valuations. Um but nonetheless, their prices are largely their their revenues and their earnings are largely tied to the price of crude oil and to a lesser degree, you know, natural gas and some of the other uh other energy forms that come off of oil. >> All right. Well, we'll we'll keep checking in in future um future market recaps here going forward uh just to track what's going on here. Um all right. So, uh couple things I want to get to, but um first let's go through uh the bond market. So, in the day we're talking here, uh the US 10-year is trading with a three handle. You know, it's it's just a little bit below 4%. We've had a couple of days this week that have been below four. Um you have been you know very consistent Michael in saying that you thought that bond yields were going to uh drift down from from where they've been. Um so this gives validation you know to what you've been saying. I assume you still forecast that they're going to go even lower throughout 2026 than where they are right now. >> Yeah. I mean it's been a slow drift. Um you know the bond market technically looks decent. It's forming on a price basis higher highs higher lows. we kind of had a double bottom. Uh so, you know, it's it's it's not a sizzle trade. It's just a slow grind, lower in yield, higher in price. Uh you can see a lot of the volatility has been taken out of the bond market. You have a bad auction or a good auction and bonds move a little barely. CPI today, you know, the move was almost imperceptible. So, so you've really reduced the the volatility and I think you've stripped out some of the the narratives that were going around about inflation, tariff inflation, about the deficits, those you don't hear people talking about those anymore, right? Which is interesting because the debasement narrative is going full steam, but bonds are doing fine. So you know what was plaguing bonds was that term premium that we have talked about before and that term premium has come down as those worries ease. Uh it doesn't mean they can't come back and then you couple that with generally the economic growth rate has been slowing. U inflation has kind of been stuck but I think we can blame it on tariffs for the most part and that over time it's expected they'll come back down. And if you look at inflation expectations, they've been drifting lower alongside with yields. So, the outlook is good. You know, if we get into a recession, you could see them drop quicker. If we just have this slow grind economy, >> they'll probably slowly grind a little bit lower. Um, got the Fed meeting next week. They're going to cut rates. They're probably gonna talk about either remove QT or talk about a plan to get rid of QT by year end. Uh so that on the margin is somewhat positive. Uh more of the QT part. Uh the the you have to be a little careful with the Fed. If the market starts thinking the Fed's easing too fast or too much, they may think it's inflationary, which could hurt the longer maturities. But the pace seems pretty measured right now. They'll they'll most likely cut rates next week, but maybe they'll take a month off or they'll reassess the situation. So, you know, I think the Fed is somewhat constructive for bond yields as well along with the economy. >> Okay. Um, well, I'll tell you, uh, in terms of yields continuing to drift downwards, you're in good company. you know, the Lacy just I just did this conference, right? So, the Lacy Hunts, the Stephanie Pomboys, the Grant Williams, uh the Danielle D. Martino Booths, I just interviewed Ed Dow. They all they all agree with you on this. Not everybody is on this train, just being really clear, but you've got some big names there. >> Let me ask you this. um uh you know at the conference were were folks like David Haye and Jim Grant who have spent much of their careers really following interest rates and um you know had the the the 40-year bull market in bonds. Um both of them feel like okay that's over the bull market's over and going forward um we're probably going to have secularly higher rates. Now it doesn't mean that rates can't go down for a year or two right but they think that they will be drifting higher not lower say over the coming decade. Um where where are your guys' minds at RAIA? I mean clear you think they're going to come down into 2026. Um do you have a point of view of of the the longer term secular direction of interest rates over the next decade? >> Yeah. So you know if the if the government continues to pull the games it played in in the you know 20 during the pandemic and afterwards rates could easily drift higher if inflation gets stuck at 3%. It you know they they may reset higher. Uh we'll see. Look, our job as investors is to worry about the next few months, the next year. Yep. >> Where things are going to be in 10 years, I don't know. They don't know. A lot will change between now and then. >> Uh I like Jim Grant a lot, but he has been on the bare side of bonds. He'll eventually be right, but he's been on the bear side forever. I'm actually My coffee mug is I don't know if you can see it. It's a Grant's mug. Um I I think he does some great work. Doesn't mean I agree with him on certain things but um you know I'm focused on the next 3 6 months year. Uh look stock market is telling us that returns are going to be 0% for the next 10 years plus or minus a few percent. Why are we why do we hold stocks then? Because no one is telling us how we get to 0%. We could go up for five years in a row and have a great depression in 2029 and then rally for four more years after that or we could the bottom could fall out tomorrow and we could have nine years of a glorious bull market. We don't know how we're going to get there just like we don't know what's going to happen to bonds over the next five or 10 years. A lot will change and it could change for the better. could change for the worse. >> Okay. All right. Well, >> but but you know, but Jim Grant has been on that horse for 20 years. So, the fear is he will be right at some point. It's just when >> Okay. All right. And and you know that you're you and your cohort there, we've talked about the analogy of the the car with the headlamps. You know, you're you're your job is reacting to what you can confidently see in the lights that your headlamps show. you you worry less about what's out in the future darkness and because you deal with that when it comes into the light of your headlines. >> We think about it though, you know, we talk about this stuff, we research it, we think about it. I don't, you know, I don't just say, "Oh, he who cares what happens in two years." We write about this stuff all the time. So, you know, it's not we're drivers and certainly what matters most is what's in front of us, but we also want to know where that road is going to bend and where there's, you know, potential for bad weather or whatever's coming down the pike. We want to be ready for it. Um, and mentally prepared so that if something changes drastically, we're not shocked. We know what to do. We have a plan B, a plan C. And that's, you know, to some degrees as important as just what's out my front window. What can I see right here? >> All right. Um, and thank you, Michael. I mean, again, one of the big reasons why we do these weekly recaps is that people can see how a good, experienced, professional money manager thinks, right? Because it's a it's a always it's a real-time developing process, right? You've got you've got some major thesis, you've got some things you've got high confidence on, but then you're just having to react in real time to lots of different changes, >> right? I mean, if I tell you with certainty Nvidia is going to be a $5 stock five years from now, you you know, a lot of people would say, "Oh, I'm going to go short it." Well, on its way to five, what is it now? Like 180 or something. You short it today, it goes to 500. You get margin called, you lose a ton of money, you get pulled out of stock and it then proceeds to go from 500 to five. The point is you don't no one knows the path on how markets will travel even if you have a good idea of what the expected return is. Mhm. So >> yeah, and this again is it's another reason why, you know, there are a lot of DIY investors that watch these videos and I say, look, if you can take um inspiration from what Michael and Lance and all the other experts uh that I interview, um if you can take inspiration and and um insight from, you know, all their their outlooks that make you make better decisions, fantastic. But there's a lot of regular people, Michael, who, you know, they've got other things to worry about, but they don't have the expertise that you do. And so, you know, they they they they want they ideally would like to have a set it and forget it. Oh, okay. Nvidia is going to fire. Well, let me make that decision now, and then it'll pay off at some point in the future. >> It's a very dangerous game to play like that for the reasons you just mentioned. You can get killed multiple times all along the way. And this is why I think for those people, >> finding a good financial quarterback is the right decision for them. not not what's the next best asset to put in my portfolio, but who actually is the best professional to manage all this for me so that I can focus on the things I'm good at and let them take over the active management of this important stuff. Um, >> do me a favor, Adam. Please don't make the title of this Mike thinks Nvidia is going a five. >> Really? Because I thought that was I mean, we were going to get a ton of eyeballs with that one. >> You will. >> Yeah. On me, but it will. >> Confidence. I was thinking Michael's guarantees with confidence that Nvidia is going to hit five. Um all right. So, uh let's let's now move to um the quote unquote debasement trade, which was all in the headlines, you know, a week ago as gold and silver were continuing to zoom to new all-time highs. Now, we've seen them sell off a bit. Um, and uh, you've just wr written a piece about the debasement trade and really asking, hey, is it a real thing or is this maybe more narrative than reality, >> right? And the reason it's important to me is because this narrative, and the narrative can be true or false, is really what's driving the price of gold. If you look, how many times does the word debasement show up in the media? That number has skyrocketed over the last few weeks. Everyone all of a sudden knows what the basement is. No one had ever heard of the word three, four weeks ago. Now everyone knows what the basement is. >> Yeah. Well, sorry to say interject, but the irony there is that of course the people that have been invested in gold and silver, many of whom watch this channel, have known about it for ever, you know, decades in in many cases. But I guess it took $4,000 gold to wake up the financial media to this, >> right? And like the basement is the wrong word for what's going on, you know, quabble about definition. But I felt like I needed to to put out an article about what's going on. And as I was kind of thinking about this, I was like, well, what's rebasement? If we wanted to rebase the economy, what the uh currency, >> what would that look like? Because if you can agree on what rebasement works, debasement is just the polar opposite. So when I think about rebasement, I go back to the gold standard. If you want to rebase the currency, you're going to the base, the foundation. You're going to do something with the structure of that currency. So let's go back to the gold standard. But the point is we haven't had a gold standard since 71. So how are you debasing something? You know, this foundation is not being debased. Now, now the popular narrative for debasement or the popular definition is excessive money, money printing, money supply, uh declining purchasing power and a loss of confidence. So, I went through my last article which showed up on Wednesday. I'm going to share my screen here. I I I want to walk through those three definitions to see if something has materially changed over the last six months or even longer. And is this the basement story real, you know, according to those three definitions or is there is it more of a narrative used to support the price of something going up? So, first of all, money printing. The Fed doesn't print money. The government doesn't print money. Banks print money and they do it through loans. When someone m when a bank makes bank makes a loan to a person, money is created. That's it. It's final. Right now, the Fed can incentivize money creation. They can lower rates. They can lower reserve requirements, capital requirements. They can do a lot of things to to try to incentivize the banks. The government can print money, but they can borrow money. again alone it's alone even though it's a security same concept but but with that with that and look believe it or not believe it it doesn't really matter is the Fed in a mode where they're incentivizing money creation and what I'm showing you here is that Fed funds minus you know CPI and GDP is very elevated we've talked about this fed funds are over 4% % CPI is 3% you know GDP is closer to 2%. Historically that's that's a very restrictive level. So basically they're not incentivizing money creation. Then you throw on top of that that they're pulling 40 billion of liquidity out of the market every year from or every month because of QT. That's further restrictive. So there's nothing there that the Fed is fueling money creation. This Adam, this graph is the most important. Well, the money, you know, there money is being printed. We can debate all day who's printing it. Money is being printed. Well, money should always grow with the size of the economy or or you have some big problems. If it can't keep up with that, you're going to have deflation. And you can't run an economy in deflation. So what I have here is the growth rate of GDP or you know the the GDP and the uh money supply in green and blue and that darker blue shading in the back is M2 as a percentage of GDP. It popped during a pandemic. That was concerning. And then it came back down. Right now, it's at the same percentage more or less that it was in 2017. That was eight years ago. I'm not saying that the trend higher is not bad, but there's nothing in this graph that tells me that the basement is occurring because of M2. M2 as a percentage of the economy, obviously, you know, ignore that blip, but where we are today is about the same as a percentage of the economy. What everyone seems to forget is the economy has grown almost 50% in the last 5 years. We're a much bigger country economically than we were. So excessive money supply that's not going on. You know, we can say it went on in 2020 21 very shortlived and in in many ways it was erased. It it's happened very you know it happened during World War II. There was excessive money printing. we won the war and it reverted back closer to normal. Um, so the second one is purchasing power. And you know, the argument goes, well, I used to be able to go to the movies for my dad would go to the movies for 50 cents and get a thing of popcorn for a nickel and blah blah blah, right? But but that fails to consider how much money he was making, how much money he was, how his wealth was accumulating. So, here's a long-term graph of real disposable income. It's rising. That means our incomes are growing faster than inflation. Real is just after the rate of inflation. So, the trend is upward. It doesn't mean there aren't periods where it goes down slightly, but it's upwards. Meaning that we're making more. So, yes, the movies cost 15 bucks, 20. I don't I haven't been in movies in a while. 15 20 bucks. But we're not making $3,000 a year either. Our standard of living is higher today than it was in the 50s. And that's for both the rich and the poor. The standard of living has risen across the board. It doesn't mean that there's a grow there's still a growing inequality. You know, I'll be the first to tell you that. But the standard of living has increased for everyone. Um wealth the the ability to generate wealth. So you have money, you know. Most of the arguments like, "Well, I know, but a dollar doesn't buy what it used to." Well, if you have your dollar in a tin can or in your mattress, you're right. You lost, right? You know, that dollar buys you a lot less than it used to. And that's the graph we see all the time. But here, if you just invested your money in three-month treasury bills and rolled them over every three months for, would I go back to 1950, you were better off than if you were just invested in inflation. So, if your money just went up with inflation, you were better off in treasury bills. Treasury bills are about as safe as it gets. That's the least riskiest investment there is. A lot of people are invested in stocks or longerterm bonds or a whole host of things in real estate that went up much more than tea bills. So our wealth has grown more than inflation. Our incomes have grown more than inflation. So it's the people with money in tin cans that that can really argue that their purchasing power has been wiped out. Um loss of I'm sorry. Did you want to say something? >> Yeah, I did. But I I'll wait. Keep going. >> Okay. I'm on a roll here, Adam. Let me go. Uh, so loss of confidence in the currency. Here's your dollar index. Is there something in that index that tells you that there is a complete loss of of uh confidence? It's it's down 10 15% this year. Look at how many times over the last 50 years it's been up or down 10, 15, 20%. It's had much larger moves. It's, you know, the orange line shows you it's basically at the average of the last 50 years. It's it's it's oscillating like it always does. Countries have to buy and sell dollars to trade. And when the economy slows or picks up or when exchange rates change, that all plays into the dollar. You know, the loss of confidence. I if if if if if foreign so foreign investors are much more affected by the value of the dollar than us domestically and if I'm a foreign investor and I have no confidence in the do the if I'm a foreign investor and I want to buy Nvidia my first move is to take my currency let's just say the yen and then I buy I convert my yen to dollars so I've already made one bet the yento dollar ratio >> now I take my dollars and I buy Nvidia Right? And if Nvidia is up 10% over the next year, that's great. But if the dollar loses 10% to the yen, I'm break even. So for a foreign investor, currency is important. What's that currency going to do? They want to buy US investments when they think the dollar is going to rise against their home currency and sell when it's not. So the graph on the left is just foreign debt held by foreign and international investors. Is there something in that graph that tells you that there's a confidence problem in the dollar? And and look, if you kind of look at it, the trend has actually picked up in the last few years, >> the growth rate. Um equity investors too, they're largely buying our equities, not selling our equities. >> Um so, so you know, you kind of walk through those three arguments. They don't make sense or or they don't pan out according to what the statistics are telling you. There's another argument that that says, "Well, that's fine. Gold is priced in ounces per dollar." And it's not gold that's going up. It's the dollar that's going down. The the real dollar, not indexed against other currencies, the value of the dollar, right? And people are buying gold because they want hard assets. Well, then why isn't oil going up? That's a very, that's one of the hard It's liquid, but it's a hard asset. Why is real estate, we talked about this earlier, why is real estate stagnant, right? The graph on the left shows you the gold to oil ratio that should be a flat line. Oil should be rising with gold. If people want out of dollars, they want nothing to do with dollars. There's your K Schiller. We were talking about that early. That's heading towards 0% right now. There's nothing in that trend that tells you people are clamoring to turn their dollars in and put it into real estate. Same with many other commodities. Um, and why are bond yields dropping? If if no one has any faith in in the government and the currency, why are they willing to lend the government money? Why are they not taking those dollars and buying assets? So, you know, in my opinion, the whole debasement story makes sense. I doesn't make sense. I get that there's some questions about the the faith in the US government and deficits and all that stuff, but when you really look through the data, has it really been that different over the last couple years? Really? I mean, gold has what has it done? Doubled in the last um uh year, year and a half. Yeah, >> there's I I think gold is getting ahead of itself and the narrative is used to support that. I'm not saying the fiscal situation in this country is great. I'm just saying that its rate of deterioration is not really that different from the trends that we've been on and to all of a sudden assume that we're just all of a sudden going off the edge of a cliff. I I think you're going to end up getting caught. And I think this graph kind of tells you a lot. Call volume of GLD, the gold ETF. It's speculative. It It's not that gold isn't an okay long-term holding, but I think it's gotten way ahead of itself on where it is. And I actually had this graph I was going to do after that market, but we kind of skipped it. The one on the left is the last few years, and you can just see the moving averages. It's been in a great bullish trend for the last two three two you know two years from 1600 up to 40 4400 recently right but if it just falls back to the 200 day moving average there's nothing bearish about that that's what that's what bullish trends do they they do bounce off these key moving averages you're talking 3300 >> yeah and it would still be in the bull trend there >> yeah it's still bullish right and the longer term graph graph goes back to uh the late '7s. That's on a logarithmic graph, so all the percentage changes are equal. And I drew that green line and you can move it around a little, but it's a good approximation of the trend line. We're on that bullish trend and you can drop on that graph to 2500 and be right on trend. You can drop below it like it's done plenty of times in the past, too. So, the point is really understand what the narrative is truly saying and is it true doesn't mean we don't we do have problems in this country but is go gold is telling you that this country is that the currency is going away that we have completely debased it the rate at which gold is rising and that's where I find fault with this whole thing and I think you can just see it in the speculation and you know I I wanted to draw this cartoon of I think there's a lot gold holders that are looking all around. They see all these bubbles, but they don't see the bubble that they're in. And you know, I I think it could be unfortunate because I think gold will correct. It's gone too far too fast and it's not reflecting fundamentals at this point. And and Adam, just for the record, I own gold. I've owned it for over two decades now, and I will continue to hold it. But you know, you have to separate price from reality just like you do with stocks, just like you do with bonds. Gold is not any different. It's an asset. That's very that's where does all the volume in gold? It comes from the futures exchange. That's that's really the price setter in gold and that's what's driving gold prices. I know I know a lot of your viewers are not going to want to hear that message, but that's my take and you know, Lance is largely on board with that. >> Yeah. And I very much appreciate that and I've been having these discussions with you and Lance over the past bunch of weeks and um like you I have been adding my voice to the chorus of saying look any asset that goes this far this fast um generally is getting caught up in some speculation and I have been encouraging people to consider hedging um in the event of a material pullback. Um, so I I I'm I'm right there with you and I appreciate this and and really the the MACD on the chart there on the left, you know, really >> Yeah, I meant to show that. >> Yeah. Really shows you how overstretched the gold price uh has has likely gotten in the short term here. Um folks, >> the time for the the time for the debasement article was 2020 21 22 >> gold trillions. That's when we were really really hurting the credit and faith in our currency. >> Yeah. Well, so I mean what some people would say, Michael, and you don't have to agree, is some people would say, well, look, this is a repricing, right? You know, go gold didn't move in in response to that the way that it should have. And now this is the world kind of waking up to the fact of the debasement that that has happened. And I will say on some of these things, you know, dollar versus other currencies, US Treasury yields, whatever, um there you can make the argument uh you can do the push back of yeah, but we're the cleanest shirt in the dirty hamper, right? That like every other country is doing the same thing and often oftenimes even worse. So on a relative basis, you would expect the US to continue to outperform, right? The other question I have for you here, and I'm not I'm I'm not trying to undermine your argument in any way. I think it's totally sound. I think every gold holder who especially is sitting on big gains right now should be taking this with a uh he should be listening very closely to all this. But if you can go back go back to the chart of um was it real personal income? >> That one >> real disposable personal income. So in many ways you're absolutely right. We have the average person enjoys a much higher quality of life than we did in the 60s. And you can measure that in terms of you know prevalence of of uh antibiotics and the health care that we get. You can measure that in you know we have these magical devices that give us all the world's knowledge for very little cost. Um we have dependable hot water and electricity grids that are much more dependable than they were back then. We've got a you know uh much more national infrastructure. I mean there's there's all sorts of things that again you know we we can all go take an on demand hot shower which is something that like the pharaohs couldn't do right. So there are elements >> the pharaohs could everyone else couldn't. >> Well they didn't I don't think they even had you know on demand hot shower. They had to get some slaves to go boil you know a bunch of water and they could take it in five hours. Right. Yeah. >> Um so >> better than nothing. >> Better than nothing. Yeah. But my point is is I'm I'm conceding to your point that there are a lot of ways where our quality of life is is is better on those dimensions. Now, you know, you know, I I was young, but I lived through the 70s. Um, you know, back then, you know, you could have a a one income household that could, you know, uh support the whole family and you could still take at least a vacation a year. you know, it wasn't necessarily a fancy European vacation, but you could throw everybody in the back of the uh the station wagon and take them somewhere fun and all that stuff, right? And your kids got educated and you all that type of stuff. And so I look at this particular chart and think this tells a story that doesn't feel true to a lot of people. And I'm just curious if you you know one of the things that could be distorting this because you're using CPI as the as the discount factor here right is and I know I know you think CPI you know probably doesn't match your reality when you go to the grocery store you mentioned that earlier right where it it has been the calculations of CPI have been changed over the decades right adding h hadonics and all sorts of other substitutions and you know well if a TV adds x YZ bells and whistles than than we're actually including it as even cheaper in the the calculation here. So I you know I know John Williams at Shadow Stats tries to calculate the inflation rate kind of using 70 styles equations and I'm not sure if that's the best one to use or not but it'd be interesting to see this chart with kind of a pre completely hydonicized uh version of inflation to see if it's not flatter. Oh, it I'm sure it's flatter, you know, and it depends on who you are, where you live, what you spend money on, on where it is, you know, where how, you know, how that's changed. It it's definitely flatter. The point is it's rising. It's increasing. And look, John Williams is he's been telling you inflation's been 8 10% for the last pre- pandemic, right? >> Yeah. Well, if we're getting 3% pay raises and inflation is 8%, we're losing 5% of purchasing power a year, how is it that for the large majority of people over time they get ahead in life? They don't they don't work their way into squalor despite having jobs. So, you know, I don't know what the inflation rate is. And Adam, we can have debates all day about the quality of life and the the the wealth inequality, the gaps. You know, there's a lot of social issues and problems. I'm not saying it's perfect, but I am saying that from the poor to the wealthy, they are financially better off today than 1950. You know, we can argue all day about family life, family structure. you know, a lot of different things. But from a purely financial view, and look, I get it that both spouses are working in some cases, it's that changes the equation. But but the facts bear out that after inflation, people are making more money today than they were. >> Okay. And really where I'm going with this is is even if somebody doesn't fully swallow all the the data that you've had here for some of the reasons I've just mentioned, I I I I what I take from the data here, Michael, uh the most important thing I take from the data here is we don't seem to see anything in the past couple years that suggests that the uh purchasing power of the currency is going to zero that the world is giving up on the US all these things that these debasement trade headlines are kind of causing people to to feel panic about. >> Mhm. >> So you know the data does not suggest panic. So if you are buying gold in a panic because you feel like oh this debasement trade is basically taking my dollars to zero next year that would probably be a very unwise conclusion. >> Right. Right. I mean you look at all these graphs and there's nothing in any of these trends that look like the change in the gold trend in the gold price which has gone almost hyperb you know it's almost like turned a 90 degree corner. None of these are pointing in that direction. Um which leads me to believe that it's not the narrative is nice. It's handy but it it's not necessarily true. This is speculative juices flowing through the market. >> Okay? And again, when things get speculative, they get very frothy. At some point, the froth goes away, and that's when you can get in real trouble, especially if you're buying in at the late stage of the speculation. >> And by the way, futures, which largely drive the price of gold, are a margin. You know, you're you're trading that stuff, futures trade on margin by definition. So I don't know what the margin requirements are but it's probably at least 10 to one. So so it's the speculation is multiplied within a futures market. We know that there's all these levered ETFs that hold gold or silver that are also doing that. Gold miners in a way are levered positions on gold. >> They are definitely >> uh for better or worse. It works both ways obviously. Um, so you know, just I hope this just shows another side to the argument. Obviously, your viewers can take whatever side they want or find some middle point point and agree or disagree, but this is how we see it. >> No, I very much appreciate that. And again, you know, any asset you buy, gold, stocks, Nvidia, whatever, right, you should be basing on data, not not just on narrative. Right. >> Right. Right. >> Yeah. Okay. Um All right. Well, look, in starting to wrap up here, um trades, uh you you mentioned briefly that you guys added 1% to your natural gas pipeline position. Any other trades in the past week? >> We added a we did all these trades Monday or Tuesday. We added a 2 3% to both our equity and sector models. We brought some positions up to where we wanted to. Um we added to Meta. We've been wanting to do that for a while and it sold off. It came on a nice buy signal so we added to it. Uh we added to Kinder Morgan which we, you know, that's our pipeline. JP Morgan got beat up on earnings. We took advantage of that. Um and I believe we added a little bit to Amazon as well. Um >> All right. So, kind of a busy week. >> Yeah. I mean, look at the end of the day it was a couple two three%. It's not really moving the needle. It just It's kind of a a a bullish rebalancing. It It's not >> I didn't hear any trimming in there. I mean, you were mostly buying. >> We sold service. I'm sorry. We sold service now. Uh we like the company. It just hasn't been working. It's kind of resting on a lot of our risk limits. So, we said, "Let's get back to it another day." >> Mhm. Uh so net net uh this isn't a let's put the pedal to the metal and just you know buy whatever we can here because the market's going to zoom into year end. It's a we're already pretty much fully exposed. Let's just you know add a little bit in in companies or sectors that we think are have gone beat up a little bit more in the market and have you know are giving us some good technical indications. >> Okay. All right. Good. Well, again, thanks for being so transparent. Hey, just getting back to the gold thing for a second. I do want to express my appreciation. Um, I know you prepared those slides probably feeling like you're going to tell uh deliver a message that maybe a lot of people watching this aren't going to be super happy about hearing about. And in my mind, Michael, that is exactly the kind of quality you want to have in a financial adviser is somebody who's going to tell it to you straight, no matter if they think it's what you want to hear, what you don't want to hear. You want somebody who's going to tell you what they believe to be the truth and not just pander to what you you think they want you to hear. >> And Adam, look, you know, I have been bullish bonds for a while. You know who I value most? Jim Biano. He's one of the biggest bears out there, bond bears, right? I don't necessarily agree with what he says, but I try to read as much as I can because a I know he's smart. He knows what he's talking about and I want to hear the contrarian view. >> Andy makes it with data, too. He's not just slinging an opinion, >> right? Like I I love it that Lacy Hunt and I think alike that that that makes me feel good about myself, but that doesn't do anything for me. He's he's kind of preaching from the same pulpit as me, but just using bigger words, right? >> Well, and a ton of data, too. But yes. >> Yeah. Yeah. No, I mean he he he is like the professor. I'm the TA or I'm not even a TA. Whereas uh Biano and again I don't necessarily agree with a lot of what he says, but I want to hear that other view. I want to hear where could I be wrong? Where where what should I be aware of? Is he on to something? So, you know, it's nice. It's a pat on the back when you read people that have the same opinion of you and it's very easy to get caught up in your own views that you're right. Oh, I must be right because Lacy Hunt says I'm right. That's nice. But I I get much more conviction from my ideas, my thoughts, my forecast when I when I focus on the other side. What are they saying? Why are they saying that? And then maybe my conviction weakens. You know what? Bianca's on to something. maybe maybe I shouldn't be as bullish or you know so you know like or not what I just said at least think about it and consider it. >> All right and again thank you for just caring and having the courage enough to just come out and present all that. So >> I don't care. No one. Well, now they do know where I live because of you, Adam. Thanks. >> Yeah. folks. In the show notes below this, I'll put Michael's actual street address in case you want to show up at his doorstep and make a point. Just kidding, my friend. Um, all right. Um, uh, because I know you're a sports guy and because you kind of mentioned today, you you you mentioned briefly some sports, you said some sports issues and you cited some gambling issues. Just curious if you have any thoughts on the unfolding NBA mafia gambling scandal that's all of a sudden broken. >> It's crazy. It's It doesn't surprise me. I mean, there's so much This is part of the You know, sports gambling has always been a thing before it was legal, but I think legalizing it has really made it more mainstream. Um, and it's added to the profits. So, I think being able to fix bets is just like what we talked about the meme stocks. It it's it's fixing the result and uh it's not surprising to me. Uh it's a very easy sport to fix uh you know because of you can bet on players how many points will they score? How many rebounds? Well, if a player gets hurt five minutes into the game, he's not going to meet those goals. And if you know he's going to get hurt and he tells you he's going to get hurt, those that's an easy way for the player to make money and for the better to make money. So, you know, I mean, I think it just talks to human beings that we will exploit whatever situation we have for our greater good. Yeah. And I think, you know, we've ranted a lot in the past about how we have really trained recent generations of of people to be speculators, not investors. >> Right? Fundamentals haven't mattered for so long to a certain extent that everybody is said, "Oh, yeah, you got to trade based on narrative." Right? and uh and and younger generations have said, "Look, you know, I'm regardless what your charts say, you know, I feel like I'm not going to make the American dream unless I catch some rocket ride, some meme stock, some crazy crypto, whatever, right?" Um, and so we've injected a lot more speculation into the markets, which of course you put a lot of liquidity in the system, too, and that that also engenders speculation. Um, there's a there's a long-term corrosive effect of that speculation, right? It it it creates malinvestment. that sends capital to places it shouldn't be versus the places where it's creating too value. And I think it's true anywhere and we're seeing it in sports too, right? You put enough speculation in there. Yeah. The temptation becomes too great for the players or the coaches start taking falls, taking dives, um, and kind of making a mockery of of what sport is, which is supposed to be the best person, the best team perseveres, not the team that stands to make the most off the spread on the bet. >> Right. Right. You know, Beyond Meat's a good example. the market, not the stock market, the food market, the consumers are basically telling you the product just doesn't make sense. >> That sales are down 20 sales of the the plant-based meat industry are down 18% in the past two years. Like the market is >> it can't be from a profitable perspective, it's not sustainable, right? The the capital markets where we buy and sell food and you know all that are telling you it just doesn't work. But now the stock has a new infusion of liquidity. That liquidity is being put into a stock that probably has no value. Could be going to cancer research. It could be going to a whole different bunch of other things that could be very good for society. It's not. It's chasing a company that will, you know, possibly end up bankrupt and go the money will go to money heaven or hell or wherever it goes. >> Yeah. Um, well, I mean, again, this is this is why I think you can kind of make the intellectual argument that like, you know, we sort of need a system cleansing to get rid of a lot of that stuff. Um, injure a lot of the speculators enough that it takes them a long time before they they rembrace that that type of behavior. Um, but of course, nobody, I mean, even those rooting for that is going to have fun during that corrective process should one actually happen. Um, all right. Uh well, let's let's if we can get to a rant quickly and then we'll we'll wrap things up here, Michael. Um uh today's rant is about private equity ruining the world. Um and I've ranted with this in the past with Lance, but but had a recent experience that uh I thought really drives this home. First off, um I think I mentioned this last time that I'd heard it, but I couldn't remember the exact stat, but there are more private equity funds in the US than there are McDonald's's now. So, apparently there are 19,000 private equity funds and only 14,000 McDonald's's. Um it's kind of crazy. >> I'm only I'm actually surprised there's only 14,000 McDonald's, >> I guess. I mean, 50 states, 14,000. I guess that's a lot of McDonald's's per state. But yeah, but the fact that that there's so many more private equity funds really tells you folks that that you know this is um this is a game that's being played. Um uh now what do private equity firms do? They they buy companies with other people's money and a crap ton of debt. And then what they do is they take those companies, they jack up the prices, they dramatically cut costs all in trying to service that extra debt. and what whatever's left over, they pay themselves really generous management bonuses, right? So, they're just basically just harvesting whatever cash flow they can take out of these companies. So, what happens in the end? The company's hollowed out. The workers are all overworked and underpaid uh and uh the consumer is paying more for worse quality. Right? And I'm painting with a broad brush here. Not every private equity firm is a bad actor and this doesn't happen in all cases, but it's certainly happening a lot. And it's we're seeing it in a ton of sectors here. Um, uh, Gretchen Morgansson, who I've interviewed on this channel about it, you know, she's written at length about this, um, particularly citing, uh, the injurious impact that private equity's had in the healthcare industry, particularly in like nursing homes where it's not just a P&L issue. I mean, this is really measured in like patient emiseration or early death, right? Um so the stakes are actually you can be quite high. Um, you know what's interesting, um, you know, is after these these firms, um, do all this stuff, right? They've enriched themselves by basically harvesting all the value out of these companies they buy again with other people's money. Um, they then try to sell it to some bigger sucker, right? And uh I just saw uh a report that Kalpers, the big pension system here in in uh California or in where I used to live until recently in California, um uh they just re released a report called um why private equity is important for your pension, right? So they're actually trying to convince their pensioners, hey, this is all good for you, all the private equity that we're buying. And pension firms are kind of famous for being like the dumb money where Wall Street shows up and says, "Hey, you know, this is how you're really going to meet your actuarial returns. Forget that boring bond stuff or even the stock stuff. Let's sell you this cool private equity stuff." Um, of course, this is the stuff that we know is going to just blow up in their faces. Um, where uh it's going to underperform very likely and you know, at the at the moment where the pension's going to want those funds the most, they're going to be too liquid to extract, right? So, um, you know, we're we're we're seeing this, um, you know, you could almost say sort of broad daylight robbery, right, of of of the corporate system by these these pirates who are coming in hollowing at these companies and then dumping the trash on on on the dumb money. Um, I I I I'm I'm kind of worked up about this right now because um, we took our dog. So, I've got a dog. Uh you guys have probably seen me put them on X, but our older dog, best dog I've ever had. Um she's a silver lab. Her name's Boston. She's just she's absolutely uh my my daily companion, best buddy. So anyways, she was um looking like she had some sort of intestinal distress. And uh my uh we had a family member not that long ago had a had a dog who kind of woke him up in the middle of the night with intestinal distress and it turned out their their intestine had been twisted and and the dog had to be put down like that night. It was just out of the blue terrible, you know, one of those terrible things that happened. So I didn't know what was wrong with her. Maybe she just wasn't feeling well, right? Maybe this is something that was probably going to pass like 98% of things that dogs have. So, I called up the vet when the vet opened in the morning and said, 'Hey, can you just check my dog out? So, we bring the dog in there and the the vet says, ' Okay, yep. Um, but you know, you didn't have a reservation today, so you're going to have to pay a emergency visit fee or whatever. Okay, fine. You know, whatever. I care about the dog. And they kept the dog there for a couple hours. And they called me up and said, "Well, we'd like to take an X-ray." I said, "That's fine." You know, and I'm assuming that that's going to be a bit, but okay. You know, it's important to me to see if there's a blockage or anything. And, you know, we we think your dog should have these anti-nausea things. No. and we think your dog should have this and they call me a couple times just asking if they could do you know what seemed like a little x y or z thing and at no point and I should have asked but at no point did they say well this is what this cost right so I go and pick up the dog after the dog being there for like 3 hours $1,400 vet bill and eventually really all they did was take an x-ray and give the j dog some palative stuff but there was no surgery there was nothing in there that you would think you know would be worth any of that and at no point did They warn me like, "Hey, you know, we're we're getting over 500 bucks worth of care. Do you want to continue doing this? We're getting over $1,000 worth of care. Are you sure you want to do this right?" They just look at you with a smile and say, "Yep, that's 1,400 bucks." And look, for this dog, I would pay anything. But, you know, we ended up really not doing anything with the dog except giving it time. And sure enough, you know, she got better thankfully. Um, but I'm just thinking of the average person, like the average person walking, especially the town I live in, right? the average person walking in there and being slapped with a $1,400 bill and you know all this stuff is just there to they're maximized to just generate whatever large expense they can as possible for the customer because I don't know if you've been to the vet recently folks but this has been a rollup that private equity has done. The vast majority of veterary practices now are not solo practices anymore. They might look like it, but most of them have been bought by private equity firms. And they're doing this across all veterinarian uh veterinarians. So, it's not like you can go to the cheap one in town anymore. They're all pretty much owned by one. So, it's a big racket. I'm kind of angry about it. So, anyways, that's my rant. What do you have to add, Michael? I would just say it's going on because there's too much liquidity in the system and that liquidity is creating these speculative juices. however that shows up, you know, and it's just there's too much money and it's it's not going into good things. It's going into trying to squeeze out pennies at at the cost to society. So, that's a much much broader issue that's been facing this economy for the last, you know, 40, 50 years. Uh, you know, and and we're going to see the Fed come in and help liquidity out. They're going to cut QT. Well, they're gonna, you know, indirectly allow for that pet shop or the veterinarian to keep, you know, for that private equity firm to keep doing what they're doing. So, until we have a change in the way that we focus our capital and manage our liquidity, I I unfortunately a lot of this stuff will continue or even worsen whether it's private equity or just speculative gambling. not even investing, gambling, which is just squandering capital away >> instead of putting it to good use. >> It's so frustrating and particularly maybe so in the veterinary industry just because they know they've kind of got you by your emotional shorthairs here, right? Where they know that for most people that animal is a part of their family and it's it's like well do you want to put grandma down or do you want to you know pay up? And in most cases, people are going to pay up because nobody wants grandma or their their best dog, you know, to to to not make it for money alone, right? But it's it's super frustrating. And it, you know, it's it's, >> you know, especially with that type of provider, that's where especially in a small town, like those are the relationships that people really care about. And now it's turning what what used to be a really respected and beloved profession into one that you just start resenting now because you just feel like they're just trying to reach their arms as deep into your pockets every time you go there, right? Um sort of a similar issue here too. So um when I moved to Reno, I um uh folks can see I I I got a haircut recently. Um, so, uh, uh, you know, I went to go look for I I I invest the least in my hair out of almost anybody short of somebody who cuts their own hair. And, um, so I was just looking for like, okay, where's a cheap haircut? And there really aren't that many like independent barber shops around here anymore. And it's because there are these um you know hair cutting shops now that I don't know for certain if it's private equity owned, but they're franchises now. And you go in there and um it's it's not a bad experience, but it's um it's basically haircut as a subscription now. So you walk in and they say, "Okay, we could give you a haircut, but but really, you know, we try to have a relationship with our customers and and our pricing, you know, this huge pricing thing on the wall and they really heavily guide you into well, you know, buy our haircut subscription club and there all these different levels." And when you kind of do the math, at least when I do the math for me, I'm like, "Okay, you know, like this haircut subscription things make sense because I'm on camera. I've got to get my haircut every so often." And uh your cheapest level to me is pretty reasonable price rw wise. Um and at least they promise that if you don't use it, it rolls over. So, you know, it it's it's not like if I'm late and going and getting my haircut, I've I've I've lost the money I paid. I can roll it over into the future. Um and it's interesting because they've they've totally changed the experience. So, you go in there. This is a guy's haircut cutting place where while you're waiting, you sit down in a leather chair by the big sports TV. There's a bar um and depending upon what level of service you you pay, you get a free drink or and they've got a bottom shelf and a top shelf. So, the premium guys get the top shelf stuff, right? You go sit in your chair and every chair has a TV turn tuned to a sports game in front of it. So, they've really kind of like engineered it for the the bro the guy, you know, experience, which is which honestly is not, you know, I'm like, hey, it's nice, right? I mean, I I don't need it. It's totally wasted on me for the most part, but like I get it. I get why guys would want to come here and just, you know, uh kind of get this type of experience. Um, and of course though, like anything like this, I mean, everything is an upsell, right? So, it is kind of annoying. the first time you go there, they kind of give you the Rolls-Royce treatment for the the the bottom price so that you know what's possible. And then, of course, they're they're trying to sell you on all these other things. Um, it was fine for me. It's it's economicalish at at the current price, so I'm just going to do it because it's it's the most convenient for me here. But at the same time, I look around and I'm like, you know, this but this is driving out again sort of like the veterinarian thing. The corner store barber shop where it was just the solo practitioner or two guys with two chairs and it's where you know it's kind of a hub of the community and you know you you can go get a well in the old days, you know, $12 haircut. Uh nowadays I probably can't get your haircut anywhere for under 30 I imagine. But you know it was just sort of the cheap but personal and part of the town fabric part. Now it's the sort of corporate like I said haircut as a subscription service. Um super impersonal. I don't know. There's there's not only with the malinvestment, you know, economic part of it. Michael, I feel like we're just kind of losing part of what enriched our social fabric through all this stuff. >> And but those are choices we make too. And I'm going to give some free advertising here. There's a hardware store called Stro Sniders right around the corner and they are 10, 20, 30% more than Home Depot, but when I go in there, it's very personal. They help you. Everyone there can help you or they know someone that can, you know, it's not just, oh, it's an aisle six, but it's, oh, you're going to need this and if you get that, make sure you screw it on this way and that way and here's what you need to do. And I go there on purpose. A, it's a little closer, but B, I know I'm paying more, but I like supporting them. I like them being in business because when I get to Home Depot, I'm always pissed off because no one knows where anything is. >> Yeah, >> definitely no one can help me. Like, hey, how am I going to get this onto that? What do I need? No one has a clue. >> And it's it's annoying. So, we we as consumers can elect where and how to spend our money. So, I think it's it's easy to blame other people, but we're, you know, you can go to that place or the hair cuttery or you can go to, you know, Spyros and and get your haircut there and it may be a little more and you don't get the TV, but you get some nice conversation and you you feel like your money, you know, who your money's going to. So, look, and that's not to say I just go to local places. I don't. I go to the chain, the big box stores, too. win. I'm I'm as guilty as anyone else, but those are all decisions we make. >> So, I I I totally agree. We we every time we open our wallets, we vote with our dollars for the type of solutions that we want to see in the world. So, I totally agree and I've been a big supporter of sustainable uh produced foods which cost more but are way better for us nutritionally, but also way better for um uh you know, our soils and and our communities and all that type of stuff. So I' I've made this pitch a lot. Um but what I am seeing though through this is yes, we can do that. But the problem is is the more of of these kind of both big box and private equity backed franchises and stuff like that that that come into play, it does steal enough people in who are driven just by the bottom line or whatever that the the small independents can't they don't have enough economic demand to to be sustainable anymore and they go out of business. And that's that's the thing that I I'm really mourning here, which is yes, we should as as we see new models like that or the models we like, we should feed them. But this stuff is is causing a die- off in a lot of main street America that is going to be hard, I think, to recover from, >> right? And that's, you know, we were talking about the 50s. Everything was mainstreet America in the 50s. Now we've gone so far away from that. So when you're talking about standard of living, maybe financially we're better off, but we don't have the mom and pop shops lining the street that the service would be better or >> and are we better off the cheap Chinese product that breaks in three months versus the more expensive American one made locally that might be around in 50 years. Right. >> Right. Right. So you know and and you can blame the politicians but we have made that decision with our wallets like you said. >> Yeah. And you know, so totally agree there's a big onus on us for that. And um Treasury Secretary Scott Bessant when it's like his first or second month in office, but he said something that really I was super shocked in a really positive way. And this was back when when they were sort of telling us like, hey, things might get rocky for a while. You know, I think they've reversed from that a little bit. Um, but uh he said, "Hey, you know, buying cheap crap from China is not an American birthright." And uh I I thought it was it was really good kind of like just straight talk, tough love, harsh medicine from a government official. It felt so rare to hear. But you know he's right in the sense that like we we have we have come to believe that you know the the the supreme arbiter is is simply price and that we should be able to get you know um cheapest stuff from wherever it needs to come from uh to to be happy and to to run our economy. And you know a that's that that's it that isn't a birthright of ours. B there's a lot of cost that comes along with it. Part of which is we've learned through the past several years that hey we're maybe too dependent on companies countries that that aren't our best don't have our best interest at heart right uh and sometimes you know resiliency is what's more important and sometimes to be resilient you know you pay a little bit more upfront but it it pays off in the long run right so >> I to your point I think we just need to as a culture say hey look you know what you know we should value things other than simply the absolute most rock bottom cheap price. Um, all right. Well, look, great discussion as always, Michael. Thank you so much. Um, I really appreciate you again pinch hitting for Lance while he has to take his wife to one of her chemotherapy treatments. Um, last uh update from him was things were going as best as could be hoped there. So, we'll all collectively keep our fingers crossed and keep making our prayers for her. Um, in just wrapping up here, folks, please, first off, thank Michael for both investing the uh the prep and the time to come on here and uh fill in Lanch's shoes and show him that appreciation by hitting the like button, then clicking on the subscribe button below as well as that little bell icon right next to it. If you didn't watch uh the conference, the Thoughtful Money Fall online conference this past weekend, uh don't worry if you if you would like to actually watch it still, you can by purchasing the conference replay. To do that, just go to thoughtfulmoney.com/conference. And if you um are a premium subscriber to our Substack, look for the code I've been sending you. You can use that to get an additional 50 bucks off of that replay video. Um and uh if you are looking to lock in our spring conference price at a 0% inflation rate, meaning the same price we just did the fall conference at, uh cuz we don't know yet whether we're going to be able to keep the price the same or if we're going to have to raise it next year. Uh, you can buy it at today's price over at thoughtfulmoney.com2026. Um, and again, you can also use your um code that I've sent you to get uh 50 bucks off of that price for the the spring conference, too. Um, and then lastly, if you would like to get some help in figuring out how to navigate your portfolio for the road ahead, especially if it uh plays out the way that Michael thinks it may, um, then highly recommend most people watching this video get that help from a good professional financial adviser. Importantly, one that takes into account the macro issues that we talk about here. You've got a good one is doing that for you. Well, stick with them. Don't mess with success. But if uh you don't or you'd like a second opinion from when it doesn't meet meet that criteria, maybe even Michael and Lance and their team there at Real Investment Advice, uh then consider scheduling a discussion with these firms. To do that, just fill out the short form at thoughtfulmoney.com. These uh consultations are free. There's no expectation to work with these firms. It's just a service they offer to be as helpful to many people, as many people as possible. Michael, again, my friend, thanks so much. Really appreciate it. Um, I'm sure you'll be pinching a bit more in the future. Um, can't wait to uh see what the world has cooked up for us by the next time you're on. >> Sounds great. Looking forward to it, Adam. >> All right. And everybody else, thanks so much for watching.
Stocks Likely To Trend Higher Into Year End? | Michael Lebowitz
Summary
Transcript
Look, assuming there's no news, which is a horrendous assumption, the trend should be for the market to drift higher. But as we know, as we saw the last time we talked, there is news and it does affect the markets. So pay attention. But uh the you know, all things considered, we expect an upward trend into year end. >> Welcome to thoughtful money. I'm Thoughtful Money founder and your host, Adam Tagert. Welcoming you back at the end of the week for another weekly market recap. This time featuring my good friend Michael Liowitz, portfolio manager at RAIA. Michael, how you doing? >> I'm doing great. It's Friday. >> It's Friday. Um, well, it's funny you mentioned that. So, the last time you were on, Michael, which I think it was two weeks ago, we had to record on a Thursday because of my schedule. I travel and I made sort of an off-hand comment of, "Hey folks, you know, we're recording this on Thursday, so we're going to be missing one day of the week. Hopefully nothing happens that last day." And then, of course, the markets had like their worst down day of the year. So glad we're doing it on Friday again. >> Well, so what's going to happen on Saturday now? >> Yeah, I know. Well, it's not temp fate there. Um but but what was interesting is the markets did have a big um draw down for a brief moment there. There was a lot of panic um and kind of a lot of volatility over the next couple of trading days because it was a on again offagain tweet trade war between uh President Trump uh and the Chinese. Um, we'll get more to that in a moment. But, but since that uncertainty in the markets, they've picked themselves back up as they've been doing pretty much all year and pretty much trading back at record highs on the day. We're talking here. So, I think maybe Michael, maybe we just go, you know, straight to the TA here. Um, market seems to be feeling pretty good right now despite all the potential negativity we've seen in the headlines recently. Um, what's your take here? Yeah, and if you remind me, let's get back to that Friday from two Fridays ago because there was a little liquidity issue and liquidity issues are starting to pop up a little. So, I would like to expand a little bit on that, but we can do that a little bit later. Um, let me share my screen and we're going to start with a u with a graph of the S&P 500. uh not much has changed. You know, we've talked about this divergence between the MACD, which is just slowly leaking lower, and the market, which is, for lack of a better word, slowly leaking higher. Um, and same with the RSI, which is down here in the red. It's, you know, lower highs, lower lows. Kind of same with the MACD. The MACD is going on a little bit of a buy signal, but it's been doing that back and forth buy sell signals uh as it declines. So, it is working towards fair fair value, which is positive. The RSI is close to 50, which is fair value. And you can see the S&P has kind of gone nowhere for a month, a month and a half. Um the moving averages have proven to be helpful right now. The last couple days, we've been supported by the 20-day moving average in red. The blue uh is the 50-day, and that did provide initial support. Um, but right now, that's kind of if we break the 20, that's the next line in the sand. And then I just drew these this red line. It's been a line of support pretty close to the uh to the uh 50-day moving average. So, that's a level to watch. We don't want to break that. uh because then you you you set a precedent of a lower low. Doesn't mean it's the end of the world, but something to pay attention to. Conversely, if you get above the green line, you you hit record high, higher highs. So, so let's see how it breaks out of this range. The market's trading decently this morning. Uh bringing it to the very upper end of that range, but not quite at a record high. Um we'll see. And then at the very bottom, I added on bal balance volume. That may be a new one. And it's basically measuring on, you know, if it's an up day or down day and what the volume was like. And generally in a bullish market, you want to see it trending upward. What we don't want to see is it start to flatline or even decline while the market's going higher. That's telling you that the selling pressure is increasing, even if it doesn't show up in the S&P itself. So it's another technical indicator that uh we could pay attention to. In 1999 that was one of the hints that there was something changing in the structure of the market that had flattened out despite the market going on to record high after record high. So something to watch. There's zero warning. It's doing exactly what you want it to do. And you know as we kind of look ahead we have a big week in earnings. A lot of the big tech companies are next week along with a lot of other large companies and we're slowly once we get past that, you know, we're getting on the other side of earnings season. Um meaning that a a lot of the earnings news is now in the market, but b a lot of these companies in sty stock uh blackout stock buyback blackout periods can start buying back their stock. And that starts as early as this week. some of the the banks have reported already are probably out of the blackouts. Companies have reported this week could probably start buying back next week. So you you have that support for the market that starts kind of coming back into the market that was left out for the last few weeks. Um, and then we just run into the holiday cheer, the the rebalancing, the typical year-end activities that can that traditionally are helpful to the market. So, >> the Santa Claus rally, >> the Santa Claus rally, look, assuming there's no news, which is a horrendous assumption, the trend should be for the market to drift higher. But as we know, as we saw the last time we talked, there is news and it does affect the markets. So pay attention. But uh the you know, all things considered, we expect an upward trend into year end. >> Okay. So um you know, I I had um some folks on the channel not that long ago like um Mark Newton who is uh Tom Lee's research partner at Funstrat, you know. unstrat famous for being very bullish most of the time. And you know, Mark is a is a a technician's technician. I mean, he he's like, "Look, I I I don't really care what I don't really listen to what Tom Lee is saying. I just look at what the the tape is telling me." And >> even he was saying, "All right, I've got I've got some near-term concerns that uh the market could um pull back a bit in in October, November." I think he was saying this around the beginning of October and uh and then said, "But I expect that to be a buying opportunity and then the year to end strong, you know, typical end of the year rally." Um I've mentioned this to Lance. I think Lance has said, "Yeah, that that sounds pretty right to me as well." Um, so looking at where we are right now, um, with the best data you have available to you, which is always imperfect, do you think we're beyond, um, whatever pullback risk there was in the market and now we're just going to kind of, you know, drift higher until we get to that that gooing of the the Santa Claus rally? Um, or do you see signs that no, we might not be out of this yet. November might actually still see a downdraft. I I struggle with some of that a little bit because I think some of that that sentiment I know from Lance and maybe Mark is based on history and October have been among the worst months. Um but there have been plenty of good I mean October have been among the worst month but there have been plenty of good October. Um so so I think it goes back to the question is what could upset the apple cart? And you know, I could rattle off 40 things that could upset the market any month, any day. Um, you know, and President Trump is very vocal, and he's always willing to say something that can stir the pot, both positively and negatively. So, obviously, something can happen. Something can happen late November, early December, January. Uh, obviously I'm not ruling anything out, but I don't there's nothing I really see that that is, you know, predictable that is really going to cause the market to change direction rapidly. Not to say we don't get back down to to the even the 50-day moving average as support, certainly, but um there's there's really not much right now. doesn't mean my long-term outlook is this bull market's going to run forever, but I do think the market is pretty supportive from here to year end. >> Okay. All right. Um well, look, um some of the data that is lifting stocks today, Friday, we're talking is the um the latest CPI data came out and I was a little I'm not fully versed in exactly which research functions are shut down during this government shutdown and which aren't. Um, but we did get a new CPI update. Um, it it it came in as quote unquote cool. Um, meaning it was a little bit less than expectations both month over month or year-over-year. It is noting notable though that um the year-over-year CPI number was 3% which I think is the highest since January. So inflation is is still kind of remaining sticky at the the 3%ish level but um it wasn't as much as what expectations were. So people are are interpreting that it seems as okay well this gives the Fed you know more more room to cut. Um this is this inflation is not so hot that it might slow down the rate cuts. So the market's saying okay good you know rate cuts still on. Maybe we get a little bit more. We'll see. Um anything else to say about the this new inflation data? >> I I I know the stocks are up decently this morning. Bond market has really done not much. It's up a hair or down a little bit in yield. I just don't think the market read too much into it. Uh the data is stale. It's uh who knows how accurate it is. You know, my guess is this number could be revised decently. Uh we just don't know how they're reporting it. Are they doing the same calculations they were doing using the same amount of data? We don't there's a lot we don't know. So, I think as long as it came in a tenth above or below, it came in below, but you know, a tenth within expectations, the market wasn't really going to care about the number. Why the stock market's going up today, I don't know. It goes up almost every day. Uh, but I think the bond market is kind of the tell that the market just doesn't care. Um, you know, the other the the one aspect of it, and we've talked about this for a while, is that CPI shelter prices are coming down and that's one reason why the number came in slightly better than expectations. That's going to continue to happen for a a while, not just months, many, many months. So, it's just playing catch-up. So, you know, I think in the media you're going to see some argue, well, the inflation is not as good as they say because some of that was shelter. I would argue the opposite. Inflation is too high already. In the real inflation rate is lower, but shelter is keeping it higher and we're in the process of normalization. Now, again, Adam, we can debate all day what the right inflation rate is. I'm just talking about the CPI inflation rate. >> Yeah. >> Right. We, you know, you can argue it's 5%. And look, when I go shopping, I'm not going to argue with that. It certainly seems like it's pretty high, but CPI is what drives the market and what drives both the bond and stock market, gold market, every market. So, um, you know, that's where we have to talk. >> Yeah. And you know, as you have said many times and the math makes total sense is that of that official CPI number, 40 plus percent of it is shelter. it's the it's the big dog in the calculation and that seems to be disinflating and uh that is just going to be dragging the CPI down or at least a large part of the CPI down with it as you said over many many months from now. So >> yeah, and in fact there so rent is a part of that. Um and the Cleveland Fed. So the one of the big reasons why it lags is because what they're doing is they're doing surveys and they're asking people what their rent is this month versus last month. So if you signed a lease a year ago or six months ago, your rent this month is the same as it was last month as the same as it was the month before. It's only till you resign your lease that you have a new rent and it gets captured. So, they are capturing some new leases, but they're capturing a lot of old leases. The Cleveland Fed has an index where it's just new leases, whether it's renewals or new people, you know, someone moving into a new apartment or house or whatever it is. >> And that index actually has been plummeting, right? Going well below zero. So, you know, and that jibes to some degree with what we're seeing from like Apartment.com and some other private uh enterprises that that do this for a living. They're not plummeting as much as the index, but they are in negative or flat flat to negative territory. So that tells me that what we're seeing with CPI shelter today is probably going to go on for another year, year and a half, regardless of rents could start spiking tomorrow, but for that same reason, it's going to take a while, a long while to get into CPI, >> right? It's a very lagging indicator in CPI, >> a very flawed way of doing of calculating it as well. We don't we don't do that with anything else. We don't say, "What did you pay for gas 6 months ago?" Right. >> Right. We asked you what's the price of gas today. >> Yeah. Yeah. Um so I had a housing expert Nick Jurley on the program recently and he walked through the the rent data and and you know his data sources show the same thing, Michael, that >> rents are are are um deflating at this point in time. Um right >> and uh and a factor of that, it's not the only factor. um you know, we're we're we're seeing all sorts of, you know, potential weakness in just the general consumer household, but a but a decent factor in it has been um the clamp down in illegal immigration and the deportations. Um so that the uh you know, millions of illegal aliens that were that were coming in here, they weren't really pushing up the prices of housing very much. It's not like they were crossing the border and then out bidding, you know, a regular American for a house. But these guys got to live somewhere, right? And um yes, some of them were being put up in hotels, but a bunch of them were, you know, living together and renting someplace, right? And so, especially in the areas that had high populations of illegal immigrants, they've seen really strong rent deflation. And you know, obviously rents go down in one part of the market. Well, that makes it attractive for people who might rent in the other part of the market to say, "Well, I think I'll start renting there." So, it starts pulling rents down everywhere, right? And because >> in theory a house is worth what you could rent it out for, that actually does indirectly begin to impact housing prices as well. So we have a a bunch of factors that are impacting the housing market right now, including a lot of inventory coming onto the market finally. But this is one of those elements which is declining rents are starting to actually really weigh on home prices. And and look, I know you have a couple housing experts that know a lot more than me about housing, but my take on housing is that there is a lot of pent up supply. A lot of people that want to move, but can't because mortgage rates are too high and they don't want to turn in their 3% mortgage for a 6, 7% mortgage. It just doesn't make sense. So, there's a lot of pent up supply, you know, and couple that with the demographics. There's a lot of baby boomers that are retiring, close to retiring, want to retire that would like to downsize or move to a warmer climate or whatever it may be. So, there's a lot of pent-up supply, but I also think there's some pent up demand because of mortgage rates, because of high prices. Buyers haven't been willing to buy. They've been renting. So, I think the big question for the housing market is how big is that pent up supply and demand? And will they just are they the same size and will everything just kind of be steady or is one bigger than the other? My gut tells me that the supply side could be bigger than the demand side. Uh especially with the labor market weakening as of late that that a lot of people may not want to commit to a house at this point. Even if rates come down, they're going to need for prices to come down, too. But you know, your experts know more than me about the housing market, but that is a concern I have. >> Well, you're they agree with your gut. Um they're actually getting quite worried that demand is really what is um falling here. Um so it's it's almost irregardless of what happens on the supply side, which is increasing. They're saying the big problem is just there's just not nearly uh enough demand there right now, at least for what the sellers want. Um, I also want to put up this um this data that Lance Lambert, another uh housing expert, um he runs ResiPro. Um >> uh the Mortgage Bankers Association's updated forecast for the average 30-year fixed mortgage rate. So, he's got it by quarter for the next two years. Well, it's 6.4% in Q1 of 2026. uh actually for all of 2026 and then 6.3 for all of 2027. So I look at that and think all right that helps a little bit but like that's not the calvary that everybody's hoping for on the mortgage market here right if you're one of those people that's stuck because you've got a sub 3% mortgage you know a 6.3% mortgage two years from now is not really going to make housing that much more attractive to you. No, I think what you know, backing into his forecast, what he's telling you is the economy is going to be mediocre and yields are going to stay exactly the same for two years, Treasury yields, which will basically keep mortgage yields about the same. He's not forecasting an economic boom. He's not forecasting a recession. So, >> and by the way, those aren't that that's not his forecast. That's the mortgage banker. >> No, I know. No, I know. It's the safe forecast, right? If that was my job, that that's what I would forecast, too, because you're not going to hurt anyone's feelings. But if you think we're going to have a recession, odds are that mortgage rates fall quicker than that, more much more so than that. >> And and if you think we're just in the first inning of this massive AI boom and the economy is just going to go gang busters, they could be decently higher. >> All right. All right. Well, again, >> you know, they're not going out on a limb is what I'm telling you. >> They're not going out and I totally get that and that's like as you said, it's probably their job, but they're also not going out there and saying, "Hey, you know, we see mortgage rates coming down to the 4% and that's going to really, you know, unlock this market and make it affordable for those people to to to finally move, you know, downsize, whatever. If you're a senior sitting on a 3% mortgage, >> well, here's the the tough part with that. If we get down at a 3 4% mortgages, we're probably in a recession. So then the question is who can move, right? >> Can people afford to to move or feel comfortable buying or selling? And that that's that adds a whole different factor to the equation. >> Well, and so this is this is why so many of the housing experts I talked to and and again my own personal opinion for what it's worth is mortgage rates stay the same. What's going to make housing more affordable, which it needs to be to move all this inventory that's coming online, is yeah, it's not the rate, it's price. Price is going to have to come down. >> To your point, okay, let's say the mortgage rate does drop into the fours, you know, in the next year or two. Well, that's probably because we're falling into a recession. And what else is going to have to come down to make housing affordable? Price. So, it's kind of like, you know, under under most scenarios, it's like the the the the thing that's going to have to clear this market is price. And we're already seeing that right now >> in the in the new housing market, right? Which we're in this weird aarent moment right now where it's actually cheaper to buy a new home than it is to buy an existing home. Um, and you know, the main reason for that is to move the inventory. Uh, the the home builders are having to provide all sorts of cash and non-cash discounts, >> right? I mean, I see it in in in my neighborhood. Houses are just sitting there and and they're they're good houses. These houses half the time would be sold the day of the open h the first open house if not before. They're sitting there for months. Like a couple of them have been on for almost a year there. And there's only a few houses in my, you know, my neighborhood has maybe 2,000 houses. There's, you know, there's never more than five or six at a time and they're just sitting there. whether it's the small the lower price or the higher price, it doesn't really seem to matter. So, you know, I think I I don't think I think the market's just in a stalemate. It it's just not moving. It's just sitting there and you have these marginal transactions which affect these statistics, but I don't think they really tr tell the true story that house prices are either rising or falling. I think you need more volume to to tell you a better story. Well, so I think you're in one of those markets that's kind of in the wy coyote moment stage where gravity hasn't kicked in yet, but there are a lot of markets in an increasing number now where um enough inventory has come online that gravity is taking over. I mean, god, do you live in Austin or you live in St. Petersburg and you're, you know, you're familiar with what freef fall looks like. But >> talking to Nick Julie, one of the things that really caught my attention was um as of July, I think it's the most recent data he had, um prices had fallen month over month in half of US states. And we're we're even starting to see weakness in places like Boston, um some places in the Midwest, which were, you know, up until now, people have been saying, "Well, these are bulletproof markets because there's just not enough inventory here, right?" Um even those markets are starting to see some real price softness now. So, we'll see. But, you mean you live, if I understand correctly, you live close enough to DC that, >> you know, historically there's a lot of demand there. Um and maybe this movie has just taken a little bit longer to play out where you live. But that's you know but keep in mind the government layoffs are probably the most in my area >> and the the impact you know people working in the private sector for companies that work consult to the government or work for the government in some way are being impacted as well. So not nearly as bulletproof as it used to be. But, you know, again, you know, I wouldn't character I would just characterize house pricing as kind of flat, probably leaking a little, but again, there's just not enough transactions to tell you what's going on because the price of every house is, you know, every house is unique there. It's not like new homes where they're identical. My neighborhood, every house is unique. They're all 80 years old. They've had they've been knocked down. They've have additions. they've, you know, done all kinds of remodels. So, so because one sells at a lower price doesn't, you know, it's hard to, you know, with old with used homes, it's harder to tell what's going on with price than new homes. But to your point, K Schiller is telling us that home prices are flat to falling in decent parts of the country. >> Yeah. Yeah. Well, anyways, you're going to be an interesting bellweather here. So, uh, let's have this discussion again in Q1 and you can tell us what's what's going on there. >> And and just for the record, about 2 hours ago, I got, um, you know, a call I seem to get every few weeks. Are you interested in selling your house >> really? >> And I give them a number that's twice the value of my house. And they hang up on me. But someday I may be moving next door to you if they accept it. >> Well, we'd love to have you here in Reno. Um, all right. Well, look, um, lots of of stuff to get through still, so let's keep going. Um, so, you know, I mentioned early on what what caused the the market volatility two weeks ago was the um the trade war back and forth um between President Trump and China and uh that's continued. So, um you know, we're still in the midst of that. That's so that's a a bit of uncertainty here. Again, market doesn't really seem to care about at this point in time. Um, we also saw the president just um smack Canada um because uh an ad was run in the province of Ontario that was sort of critical of of tariffs, the US's tariff policy. And I mean, I'm sure this is just a negotiating tactic, but Trump, you know, kind of threw his hands up and walked away from the table and said, "Okay, these talks are over." Right? Um so, we've got all that going on. Curious to hear if you have any thoughts one way or the other on that. Maybe it's just a whole bunch of Kabuki theater at this point in time, but um uh before you answer just one question related to this, which is as part of the the trade war hard ball, um President Trump has really been tightening the screws on a lot of countries, China included, um to really cut down their purchasing of Russia oil. Um you know, Trump is, you know, touting himself as the peace president to his credit. He has a lot of wars have ended under his his nine-month old administration so far. And uh you know coming off of of the um Israeli Palestinian peace uh agreement uh he's now really trying to zero in on on the war in Ukraine. And Russia apparently has not been has been dragging its heels more than Trump would like. And so he's really now trying to tighten the screws on them economically and pushing big countries to buy a lot less. And so China and India have basically agreed, we'll see if they follow through with it, but to um really really curtail their purchases of Russia, Russian oil and gas. Um so two questions on this one, any thoughts on the whole trade war thing, and then on the uh pressure on Russia oil, you know, we're seeing the the the US oil prices uh bread prices, world prices start to tick up here. Is the bottom in oil in? >> No. Uh maybe. Uh, let me go to the first one. I'm surprised the market even cares anymore about the tariff negotiations. We have seen this so many different times where Trump puts a tariff on a company on a country, they retaliate, it gets worse, they they play ball, it gets better, then something happens, it gets worse. It it's a game. It's a negotiating game that's being done in the public and it's, you know, again, how many taco every day is a taco Tuesday. Every day is also a day where we get a new tariff or, you know, something else going on. So, I I think it's important to pay attention to what's going on with the tariffs, where they ultimately end up. But watching a negotiation is is it's like watching an NBA basketball game and thinking because of one or two plays in a row, you know how the game's going to end. It you know they're ultimately going to score 200 plus points. Those four points had very little to do with anything. >> Yeah. >> Um >> it's a good analogy. >> Yeah. Uh the uh what was the second part of that again? the >> is the bottom and oil in >> uh you know what if Russia comes to the table Trump will ease the sanctions oil goes back down the five six% it picked up over the last day or two I I think some of that more of that equation has to do with the economy if we go into a recession oil could slip lower uh but oil prices are decently cheap here um and we know that production is being cut back on the margin. Uh so and OPEC is increasing production. So let's see what the economy does. But oil will probably stick around where it is, go up and down with some of this Russia news. Uh but I think it'll be more dependent on the US and global economy where it ultimately goes. >> Okay. on on that last point then um where do you see the economy going let's say over the next 12 months um we had seen a lot of signs leading up until the shutdown that the economy was was you know slowing um not crashing but but slowing um you know I think some of those headwinds still exist um though I've had a number of people on the program of late Barry Stales name that immediately comes to um that says, "Hey, not only, you know, is liquidity still going pretty well, but like um we're going to start seeing tailwinds from a lot of the new administration's economic policies as we head into 2026, and that's going to keep things growing. Um so, as best you can tell right now with with the uh the shutdown and the data, we're not getting right now, where do you see the trajectory of the economy going?" I I think parts of the economy are doing well. It's that K-shaped economy. Parts are doing well, parts aren't. I think it ultimately comes down to employment. Employment affects sentiment. Sentiment affects personal consumption, which is 70% of the economy. So if you know how consumers feel, are they scared and pulling back on spending or are they optimistic and willing to spend more, go, you know, want to go out to dinner an extra night a week or buy that couch they've been waiting for, a car, whatever it is. So I I think the employment market will help answer that question as we go through. Um, >> what's your default at RA right now as you look to 2026? I think we slow down, but I don't see a recession necessarily, but I think we not slow down, but we kind of stay at this slow rate of growth, 2% give or take. Uh, which by the way, that's the natural growth rate of this country. So, I know it seems low and it's, you know, over time I think it just probably goes slightly lower over time. The Fed thinks, I think, I believe their long-term estimate is 178. Um, so we're basically at trend growth. We've erased all that, you know, we finally all that extra liquidity and momentum in the economy from from the pandemic is finally out of the system and we're back to trend growth. So again, if you tell me where employment will be for the next six months, I'll give you a much better indication of where the economy will be. >> Okay. Um well uh we're not getting fresh employment data right now and even when we were a lot of people weren't really believing it right. Um do you have any indicators hard or soft right now that are telling you where employment's headed? >> Yeah. So ADP has been pretty clear that the labor market is barely adding jobs. We can look at payroll taxes or tax withholding. uh although I guess that data is not being released but prior to the government shutdown that was telling us that we were basically not really adding jobs either. So, you know, to the best of my ability with the limited data available, my guess is we're probably growing between 25 and 50,000 jobs a month, which is 100 plus,000 100,000 plus below where we should be growing for the given the growth rate in the economy. So, that is a problem. But again, we don't have a lot of meaningful data, which maybe is good. Maybe it's good that we step back from this constant flow of data and really assess the the economy on some of the more private sources. Um, it's actually been refreshing from my seat because the markets jump up and down because a number is a tenth of a percent high or low. In the grand scheme of things, that number will be revised six different times and be something outlandish one way or another and no one cares. But, you know, at the heat of the moment, it's that, you know, some fraction of a percent that >> that's that moves markets and creates narratives that are half the time not true. >> Okay. So, that's interesting. So, it's just taking some of the noise out of the system. >> Yeah. >> Yeah. >> Yeah. And, you know, that that being said, it would be nice to have some of the data. It it would just be nice if the market didn't have a spasm every time the data wasn't perfect. >> Yeah. >> Kind of like corporate earnings. It's the same same thing. A company, you know, comes in a penny short or a penny over or they guide slightly higher and the market, you know, for the stock, that stock goes berserk one way or another. And in the grand scheme of things, it has no impact on that company. All right. Two, >> in many cases, >> you just you just gave me two things to to chime in on here with. Um, uh, hold on one second. Uh, okay. So, first off, you you mentioned that you live near the DC area. Um, and there have been, you know, job reductions, Doge, etc. Um I I I don't really have an update on this, but I remember hearing as we went into the government shutdown um trying to remember the fellow's name and what position he had, but um uh I'm not going to remember, but but it it seemed that the shutdown actually gave the administration more authority to cut jobs rather than just furlow people, at least in the executive branch. Um, and uh, I think there were actually some layoffs that were announced, but but at the time, this was two weeks ago or so. Um, at the time, you know, the administration was sort of beating its chest. Was like, okay, hey, kind of a misstep here on the Democrats if you don't want us to get rid of people. You just gave us an opportunity to really start trimming some of this fat here that we've been trying to get done. Is that happening? Are you hearing anything from your your either DC contacts or your people who just live in your area about this? >> I I I mean I personally don't see anything. Uh I know they did fire. It wasn't a big number. I you know a few thousand I heard like 4,000 something like that. Yeah. >> But that's not I mean the DC metro area is you know I don't know what it is. Three million three and a half million. It's nothing you know. And how many of those people can get a job relatively easy? Um, so I, you know, it it's sure a few people have lost their jobs and it kind of sucks. I I think the bigger impact to the DC area is that they're not getting paid these government workers and that is, you know, if this continues, they're starting to miss paychecks. that that will have an impact on on their debt, on how often they go out to dinner, you know, spending money. So, that'll be interesting. But we're probably still a couple weeks out for that to have a big impact as well. >> Okay. And by the way, the guy I was trying to remember his name is um uh he's the budget chief, Russell Vote. Russell Vont. >> Yes. Yes. >> Um Yeah. and they're they're calling these reductions in forces, you know, not not furlows, but we're actually getting rid of these folks. So, this article here from uh October 11th quotes the 4,000. Um, you know, it's been two weeks since then. So, you know, I'm curious to hear if anything more of that has happened. If anybody knows, please let us know in the uh the comments below. Um, okay. So, um uh the other thing you mentioned was, you know, kind of the noise and things that wing the markets around. Um, you know, both you and Lance have been commenting on how there's a lot of speculation in the market today. Um, and we've seen uh some meme stock activity now uh happen in brands like Beyond Meat and Crispy Cream Donuts. So, I'm just curious. I mean, what are you taking from that uh that we just still have too much froth going on in this market here? Yeah. I would also like to know where the SEC is when you need them. U I mean these are just scams. Literally >> shut down. Yeah. It's it's government shutdown. >> Yeah. They weren't there before either. But uh you know it's just people investors are will it's the line between gambling and investing has kind of joined. So when you think about sports betting it's kind of all or none. You either can make double your money or you lose your money. If you parlay, you can multiply it three, four, five, six times or lose it. And investing is is kind of working its way towards that all or none, that binary outcome where it seems like more and more investors are willing to buy Beyond Meat. The stock was a 50 cent company. It dropped from 75 cents to 50 cents like a week ago because they're restructuring their debt because they're on the verge of bankruptcy. They heavily diluted the equity shareholders which is that's why it dropped even though 7 cents isn't a lot percentage-wise. It's massive for a company that I think was a $200 something dollar stock three four years ago. Companies basically on the verge of bankruptcy. They're not their sales are declining. their product is not, you know, as wanted or needed as was originally thought. They've never turned a profit as a public company. Then all of a sudden, the stock's trading at eight because of some guy on social media that I've never heard of saying he's buying. He bought he bought at 50 cents at 60 cents. Then he goes, he tells you what he's doing. Everyone jumps on board. And guess who's selling to those people at six, seven, eight dollars a share? The guy that bought it 506 due to started the whole thing. Yeah. >> Right. He's out. He's been out and then it works its way right back down. There's I There's a stock 1800 Flowers. You've heard of him. I think it's FLWs. >> On that day where Beyond Meat took off, it took off. It went from five to eight and back to five in a day. Why? Nothing happened with their earnings. there's just a heavy short base. So, so the these these meme uh actors kind of uh go after stocks with heavy short bases because they want to get the shorts to have to cover, cause the pop, cause people to jump in, make their profits, and get out. And it's it's, you know, third 20 years ago, this was unthinkable. You know, if we think about why Martha Stewart went to jail now, it's beyond ridiculous com compared to what these people are doing. Um, >> yeah, it's it's not unlike shorting a bank and then convincing all the depositors at the bank to run in and ask for their money and then you create a run in the bank and the bank, you know, gets in trouble and your shorts make a lot of money and then you're out, right? But you've destroyed a bank in the process, >> right? >> It's just not. But I think right to your initial point, I think what it really does is it talks to the speculation in the market. Uh you know in our commentary uh either today or coming out Monday, we posted a graph of Russell comp small cap companies with negative earnings have beating small cap companies with positive earnings by like 30% since April. So, you know, people are so so a lot of negative companies are based on hope. Hope that their earnings are going to grow. Hope that they're going to either fix their problems to get earnings to grow. Or in a lot of like technology cases, they have a great product. They're investing the money now, they'll grow later. Earnings, right? Versus is a company with earnings that that's already producing that, you know, that you can predict. And you know, you're seeing that across the board that the hope is trading much better than the predictable. The bird in the hand is not worth as much as two in a bush, as they say. >> Uh whereas I think a lot of philosophers would argue they'd rather have the bird in a hand. Uh or, you know, fundamental stock traders. Um >> it's much easier to predict. Uh so you know it's just we see it in in just crypto. If you're a company that that's involved that that makes you know we talked about this I think two weeks ago the kimono company that's going to be buying Bitcoin that's now up 300%. So what they're going to be buying Bitcoin. Well why should that affect their valuation? >> Right? because it does because if you're involved in crypto or AI or data centers, that's good. That must be good. You're going to make a fortune. >> Yeah. It's interesting. So, you know, when you're in times of of broth, I mean, these are sort of late stage, right? Everybody wants the sizzle, right? When times are tough, everybody wants the steak, right? And and right now it seems that sizzle's trading at a high premium and stake is probably undervalued. >> Exactly. And it's you could see it in all parts of the market. Even you know even safe parts of the market the riskier part of the safer part like in utilities some of the you know like utilities more on the nuclear side are going through the roof. >> Right. But that's right. They don't have any incremental revenues yet. It's all story, >> right? So, this is the interesting. So, here's a great example. We like the natural gas MLPS. They are providing gas to the data centers today. They will be providing it for the next 5 years because there is no alternative. The long run alternative may be nuclear. Those plants can take 10 years to build and who knows what companies doing it today will even be around 10 years from now. The market would rather have that hope that nuclear is the answer 10 years from now and the profits from that 10 years from now than the answer that than what is feeding these data centers and you know these stocks like you know nuclear related stocks going through the roof and the MLPS are going nowhere. >> Yeah. And that's that's why I keep asking you about oil is is oil is about as uh and natural gas. I mean fossil fuels are about as stake as it gets, right? I mean these are the things that power the world. Um, and these are companies with real profits and real dividends, but in a lot of ways, you know, they're just being completely overlooked right now. Um, >> it's not even steak, it's hamburger. >> Yeah. Or it's the cow itself, right? It's just as basic get. Um, and look, I own some of these uh these nuclear stocks and uh I hope they continue to do great. But you know uh if and when we get to a point where the froth gets bled out of the market because of whatever reason right the economy slows enough or you know we start taking losses or people realize the AI was truly in a bubble and some of that immaterial amount of that market valuation starts going away um you know when people start getting uh when when the party starts ending where you can't get away with uh getting by on sizzle alone you know markets attention's going to turn back to the And >> you know, right now there's some of these some of these areas like like fossil fuels that just seem like >> they're really good values. Now the question is is is you know when are they going to turn, right? They just because they're cheap doesn't mean they can't get cheaper, right? >> Yeah. Yeah. And but it's it's creating opportunity. The question is who has the patience to wait it out to to both wait for those you know sit on companies that are not keeping up with the market or even declining and waiting for their day in the sun and whether that happens when all other stocks go down and because the froth has left the market or just all of a sudden you know like if Amazon or or Google signs a deal with a with a pipeline and then oh wait pipeline lines are also part of the AI trade >> all aboard and they join the sizzle right regardless of what the market does. So you you know as an investor you have to be diversified and you can't just put all your eggs into the natural gas part. You can't put them all into the nuclear part and you have to spread those bets around a little bit. But you know but you have to be willing to have patience for some of those bets and understand your risk tolerances for other parts of the bet. Take profits even though they are going up. So, you know, portfolio management helps you kind of steer through periods where you have this big divergence of what's in and out of vogue. >> Yeah. And on that part yet, are you guys increasing your exposure to the energy space yet or are you maintaining what you have and looking for certain technical signs to then start adding in the future? >> So, we did add uh last week 1% more to our natural gas uh pipeline position. Uh we are contemplating adding a little bit to more traditional energy uh company but we haven't done anything yet but they have been energy has been on a relative basis one of the cheaper sectors in due for a rotation but that rotation may not come until the market weakens too when right you know when >> investors start flocking to staples and energy and you know Well, and it doesn't mean it can't get even cheaper, right? I mean, as you mentioned, OPEC's increasing production. Hey, maybe there actually eventually is a ceasefire in Ukraine and Russia oil comes back on the the world market again and you know that that would >> you'd expect that to lower prices, right? Because it's no longer under embargo. So, it doesn't mean that um you know things can't get cheaper before that sector really fully turns. Um, but you know, I will I will tell folks that I am um the little position in energy I'm adding to it right now in the f fossil fuel side of things. Don't do it because I'm doing it. Um, but I am just letting folks know that I'm starting to do that. Um, and uh and we'll see. But Michael, do do you uh if if and when oil the sector does start turning up, um do you anticipate increasing the percentage of your portfolio that's exposed to that sector or do you feel like you're pretty much at the weight you're going to be and you're just going to ride it? So, so part of the problem with that is if you just look at XLE as a guide, the the spider energy ETF sector sector ETF, >> it has done much better than the price of oil. So, there's a a decent gap there where you would expect XLE to have fallen more than it has uh or under, you know, underperformed the market more than it has. So, that's one thing that's keeping us a little weary. Will it catch down to the oil market? Might the oil market zoom up, but the energy stocks have kind of priced it in, so to speak, or might they both go up together? So, that's that's one of the considerations we've been talking about. >> Okay. Um, and you know, I think one of the one of the nice attributes of this sector, um, yeah, I'm looking at it with the scars of being a longtime um, precious metals mining stockholder. where there were many many years um where those stocks just really did terribly. Um and and then finally, you know, the thesis has has uh proven out much longer than I thought it would, but it's been a great year so far for this these companies, right? Um but with oil, um a lot of those companies pay nice dividends, right? I mean, there's a few of these mining stocks will pay dividends, but these oil companies are are really good. um and you know have been very consistent dividend payers. So to the extent you have to wait, you get paid to wait. >> They also tend to be less risky. They're in safer >> Exactly. >> countries. They're much more adept at hedging. I feel like they've gotten better about not just drilling because the price of oil is high. They understand that the price of oil goes up and because the price of oil oscillates. Gold tends to trend higher. it it oscillates within the trend whereas energy tends to stay flat. So they've gotten much better about not just going gang busters at the top of the range but you know better economics behind their drilling processes processes. So they're they're better you know they're they're much better managed companies. They do pay good dividends. They have decent valuations. Um but nonetheless, their prices are largely their their revenues and their earnings are largely tied to the price of crude oil and to a lesser degree, you know, natural gas and some of the other uh other energy forms that come off of oil. >> All right. Well, we'll we'll keep checking in in future um future market recaps here going forward uh just to track what's going on here. Um all right. So, uh couple things I want to get to, but um first let's go through uh the bond market. So, in the day we're talking here, uh the US 10-year is trading with a three handle. You know, it's it's just a little bit below 4%. We've had a couple of days this week that have been below four. Um you have been you know very consistent Michael in saying that you thought that bond yields were going to uh drift down from from where they've been. Um so this gives validation you know to what you've been saying. I assume you still forecast that they're going to go even lower throughout 2026 than where they are right now. >> Yeah. I mean it's been a slow drift. Um you know the bond market technically looks decent. It's forming on a price basis higher highs higher lows. we kind of had a double bottom. Uh so, you know, it's it's it's not a sizzle trade. It's just a slow grind, lower in yield, higher in price. Uh you can see a lot of the volatility has been taken out of the bond market. You have a bad auction or a good auction and bonds move a little barely. CPI today, you know, the move was almost imperceptible. So, so you've really reduced the the volatility and I think you've stripped out some of the the narratives that were going around about inflation, tariff inflation, about the deficits, those you don't hear people talking about those anymore, right? Which is interesting because the debasement narrative is going full steam, but bonds are doing fine. So you know what was plaguing bonds was that term premium that we have talked about before and that term premium has come down as those worries ease. Uh it doesn't mean they can't come back and then you couple that with generally the economic growth rate has been slowing. U inflation has kind of been stuck but I think we can blame it on tariffs for the most part and that over time it's expected they'll come back down. And if you look at inflation expectations, they've been drifting lower alongside with yields. So, the outlook is good. You know, if we get into a recession, you could see them drop quicker. If we just have this slow grind economy, >> they'll probably slowly grind a little bit lower. Um, got the Fed meeting next week. They're going to cut rates. They're probably gonna talk about either remove QT or talk about a plan to get rid of QT by year end. Uh so that on the margin is somewhat positive. Uh more of the QT part. Uh the the you have to be a little careful with the Fed. If the market starts thinking the Fed's easing too fast or too much, they may think it's inflationary, which could hurt the longer maturities. But the pace seems pretty measured right now. They'll they'll most likely cut rates next week, but maybe they'll take a month off or they'll reassess the situation. So, you know, I think the Fed is somewhat constructive for bond yields as well along with the economy. >> Okay. Um, well, I'll tell you, uh, in terms of yields continuing to drift downwards, you're in good company. you know, the Lacy just I just did this conference, right? So, the Lacy Hunts, the Stephanie Pomboys, the Grant Williams, uh the Danielle D. Martino Booths, I just interviewed Ed Dow. They all they all agree with you on this. Not everybody is on this train, just being really clear, but you've got some big names there. >> Let me ask you this. um uh you know at the conference were were folks like David Haye and Jim Grant who have spent much of their careers really following interest rates and um you know had the the the 40-year bull market in bonds. Um both of them feel like okay that's over the bull market's over and going forward um we're probably going to have secularly higher rates. Now it doesn't mean that rates can't go down for a year or two right but they think that they will be drifting higher not lower say over the coming decade. Um where where are your guys' minds at RAIA? I mean clear you think they're going to come down into 2026. Um do you have a point of view of of the the longer term secular direction of interest rates over the next decade? >> Yeah. So you know if the if the government continues to pull the games it played in in the you know 20 during the pandemic and afterwards rates could easily drift higher if inflation gets stuck at 3%. It you know they they may reset higher. Uh we'll see. Look, our job as investors is to worry about the next few months, the next year. Yep. >> Where things are going to be in 10 years, I don't know. They don't know. A lot will change between now and then. >> Uh I like Jim Grant a lot, but he has been on the bare side of bonds. He'll eventually be right, but he's been on the bear side forever. I'm actually My coffee mug is I don't know if you can see it. It's a Grant's mug. Um I I think he does some great work. Doesn't mean I agree with him on certain things but um you know I'm focused on the next 3 6 months year. Uh look stock market is telling us that returns are going to be 0% for the next 10 years plus or minus a few percent. Why are we why do we hold stocks then? Because no one is telling us how we get to 0%. We could go up for five years in a row and have a great depression in 2029 and then rally for four more years after that or we could the bottom could fall out tomorrow and we could have nine years of a glorious bull market. We don't know how we're going to get there just like we don't know what's going to happen to bonds over the next five or 10 years. A lot will change and it could change for the better. could change for the worse. >> Okay. All right. Well, >> but but you know, but Jim Grant has been on that horse for 20 years. So, the fear is he will be right at some point. It's just when >> Okay. All right. And and you know that you're you and your cohort there, we've talked about the analogy of the the car with the headlamps. You know, you're you're your job is reacting to what you can confidently see in the lights that your headlamps show. you you worry less about what's out in the future darkness and because you deal with that when it comes into the light of your headlines. >> We think about it though, you know, we talk about this stuff, we research it, we think about it. I don't, you know, I don't just say, "Oh, he who cares what happens in two years." We write about this stuff all the time. So, you know, it's not we're drivers and certainly what matters most is what's in front of us, but we also want to know where that road is going to bend and where there's, you know, potential for bad weather or whatever's coming down the pike. We want to be ready for it. Um, and mentally prepared so that if something changes drastically, we're not shocked. We know what to do. We have a plan B, a plan C. And that's, you know, to some degrees as important as just what's out my front window. What can I see right here? >> All right. Um, and thank you, Michael. I mean, again, one of the big reasons why we do these weekly recaps is that people can see how a good, experienced, professional money manager thinks, right? Because it's a it's a always it's a real-time developing process, right? You've got you've got some major thesis, you've got some things you've got high confidence on, but then you're just having to react in real time to lots of different changes, >> right? I mean, if I tell you with certainty Nvidia is going to be a $5 stock five years from now, you you know, a lot of people would say, "Oh, I'm going to go short it." Well, on its way to five, what is it now? Like 180 or something. You short it today, it goes to 500. You get margin called, you lose a ton of money, you get pulled out of stock and it then proceeds to go from 500 to five. The point is you don't no one knows the path on how markets will travel even if you have a good idea of what the expected return is. Mhm. So >> yeah, and this again is it's another reason why, you know, there are a lot of DIY investors that watch these videos and I say, look, if you can take um inspiration from what Michael and Lance and all the other experts uh that I interview, um if you can take inspiration and and um insight from, you know, all their their outlooks that make you make better decisions, fantastic. But there's a lot of regular people, Michael, who, you know, they've got other things to worry about, but they don't have the expertise that you do. And so, you know, they they they they want they ideally would like to have a set it and forget it. Oh, okay. Nvidia is going to fire. Well, let me make that decision now, and then it'll pay off at some point in the future. >> It's a very dangerous game to play like that for the reasons you just mentioned. You can get killed multiple times all along the way. And this is why I think for those people, >> finding a good financial quarterback is the right decision for them. not not what's the next best asset to put in my portfolio, but who actually is the best professional to manage all this for me so that I can focus on the things I'm good at and let them take over the active management of this important stuff. Um, >> do me a favor, Adam. Please don't make the title of this Mike thinks Nvidia is going a five. >> Really? Because I thought that was I mean, we were going to get a ton of eyeballs with that one. >> You will. >> Yeah. On me, but it will. >> Confidence. I was thinking Michael's guarantees with confidence that Nvidia is going to hit five. Um all right. So, uh let's let's now move to um the quote unquote debasement trade, which was all in the headlines, you know, a week ago as gold and silver were continuing to zoom to new all-time highs. Now, we've seen them sell off a bit. Um, and uh, you've just wr written a piece about the debasement trade and really asking, hey, is it a real thing or is this maybe more narrative than reality, >> right? And the reason it's important to me is because this narrative, and the narrative can be true or false, is really what's driving the price of gold. If you look, how many times does the word debasement show up in the media? That number has skyrocketed over the last few weeks. Everyone all of a sudden knows what the basement is. No one had ever heard of the word three, four weeks ago. Now everyone knows what the basement is. >> Yeah. Well, sorry to say interject, but the irony there is that of course the people that have been invested in gold and silver, many of whom watch this channel, have known about it for ever, you know, decades in in many cases. But I guess it took $4,000 gold to wake up the financial media to this, >> right? And like the basement is the wrong word for what's going on, you know, quabble about definition. But I felt like I needed to to put out an article about what's going on. And as I was kind of thinking about this, I was like, well, what's rebasement? If we wanted to rebase the economy, what the uh currency, >> what would that look like? Because if you can agree on what rebasement works, debasement is just the polar opposite. So when I think about rebasement, I go back to the gold standard. If you want to rebase the currency, you're going to the base, the foundation. You're going to do something with the structure of that currency. So let's go back to the gold standard. But the point is we haven't had a gold standard since 71. So how are you debasing something? You know, this foundation is not being debased. Now, now the popular narrative for debasement or the popular definition is excessive money, money printing, money supply, uh declining purchasing power and a loss of confidence. So, I went through my last article which showed up on Wednesday. I'm going to share my screen here. I I I want to walk through those three definitions to see if something has materially changed over the last six months or even longer. And is this the basement story real, you know, according to those three definitions or is there is it more of a narrative used to support the price of something going up? So, first of all, money printing. The Fed doesn't print money. The government doesn't print money. Banks print money and they do it through loans. When someone m when a bank makes bank makes a loan to a person, money is created. That's it. It's final. Right now, the Fed can incentivize money creation. They can lower rates. They can lower reserve requirements, capital requirements. They can do a lot of things to to try to incentivize the banks. The government can print money, but they can borrow money. again alone it's alone even though it's a security same concept but but with that with that and look believe it or not believe it it doesn't really matter is the Fed in a mode where they're incentivizing money creation and what I'm showing you here is that Fed funds minus you know CPI and GDP is very elevated we've talked about this fed funds are over 4% % CPI is 3% you know GDP is closer to 2%. Historically that's that's a very restrictive level. So basically they're not incentivizing money creation. Then you throw on top of that that they're pulling 40 billion of liquidity out of the market every year from or every month because of QT. That's further restrictive. So there's nothing there that the Fed is fueling money creation. This Adam, this graph is the most important. Well, the money, you know, there money is being printed. We can debate all day who's printing it. Money is being printed. Well, money should always grow with the size of the economy or or you have some big problems. If it can't keep up with that, you're going to have deflation. And you can't run an economy in deflation. So what I have here is the growth rate of GDP or you know the the GDP and the uh money supply in green and blue and that darker blue shading in the back is M2 as a percentage of GDP. It popped during a pandemic. That was concerning. And then it came back down. Right now, it's at the same percentage more or less that it was in 2017. That was eight years ago. I'm not saying that the trend higher is not bad, but there's nothing in this graph that tells me that the basement is occurring because of M2. M2 as a percentage of the economy, obviously, you know, ignore that blip, but where we are today is about the same as a percentage of the economy. What everyone seems to forget is the economy has grown almost 50% in the last 5 years. We're a much bigger country economically than we were. So excessive money supply that's not going on. You know, we can say it went on in 2020 21 very shortlived and in in many ways it was erased. It it's happened very you know it happened during World War II. There was excessive money printing. we won the war and it reverted back closer to normal. Um, so the second one is purchasing power. And you know, the argument goes, well, I used to be able to go to the movies for my dad would go to the movies for 50 cents and get a thing of popcorn for a nickel and blah blah blah, right? But but that fails to consider how much money he was making, how much money he was, how his wealth was accumulating. So, here's a long-term graph of real disposable income. It's rising. That means our incomes are growing faster than inflation. Real is just after the rate of inflation. So, the trend is upward. It doesn't mean there aren't periods where it goes down slightly, but it's upwards. Meaning that we're making more. So, yes, the movies cost 15 bucks, 20. I don't I haven't been in movies in a while. 15 20 bucks. But we're not making $3,000 a year either. Our standard of living is higher today than it was in the 50s. And that's for both the rich and the poor. The standard of living has risen across the board. It doesn't mean that there's a grow there's still a growing inequality. You know, I'll be the first to tell you that. But the standard of living has increased for everyone. Um wealth the the ability to generate wealth. So you have money, you know. Most of the arguments like, "Well, I know, but a dollar doesn't buy what it used to." Well, if you have your dollar in a tin can or in your mattress, you're right. You lost, right? You know, that dollar buys you a lot less than it used to. And that's the graph we see all the time. But here, if you just invested your money in three-month treasury bills and rolled them over every three months for, would I go back to 1950, you were better off than if you were just invested in inflation. So, if your money just went up with inflation, you were better off in treasury bills. Treasury bills are about as safe as it gets. That's the least riskiest investment there is. A lot of people are invested in stocks or longerterm bonds or a whole host of things in real estate that went up much more than tea bills. So our wealth has grown more than inflation. Our incomes have grown more than inflation. So it's the people with money in tin cans that that can really argue that their purchasing power has been wiped out. Um loss of I'm sorry. Did you want to say something? >> Yeah, I did. But I I'll wait. Keep going. >> Okay. I'm on a roll here, Adam. Let me go. Uh, so loss of confidence in the currency. Here's your dollar index. Is there something in that index that tells you that there is a complete loss of of uh confidence? It's it's down 10 15% this year. Look at how many times over the last 50 years it's been up or down 10, 15, 20%. It's had much larger moves. It's, you know, the orange line shows you it's basically at the average of the last 50 years. It's it's it's oscillating like it always does. Countries have to buy and sell dollars to trade. And when the economy slows or picks up or when exchange rates change, that all plays into the dollar. You know, the loss of confidence. I if if if if if foreign so foreign investors are much more affected by the value of the dollar than us domestically and if I'm a foreign investor and I have no confidence in the do the if I'm a foreign investor and I want to buy Nvidia my first move is to take my currency let's just say the yen and then I buy I convert my yen to dollars so I've already made one bet the yento dollar ratio >> now I take my dollars and I buy Nvidia Right? And if Nvidia is up 10% over the next year, that's great. But if the dollar loses 10% to the yen, I'm break even. So for a foreign investor, currency is important. What's that currency going to do? They want to buy US investments when they think the dollar is going to rise against their home currency and sell when it's not. So the graph on the left is just foreign debt held by foreign and international investors. Is there something in that graph that tells you that there's a confidence problem in the dollar? And and look, if you kind of look at it, the trend has actually picked up in the last few years, >> the growth rate. Um equity investors too, they're largely buying our equities, not selling our equities. >> Um so, so you know, you kind of walk through those three arguments. They don't make sense or or they don't pan out according to what the statistics are telling you. There's another argument that that says, "Well, that's fine. Gold is priced in ounces per dollar." And it's not gold that's going up. It's the dollar that's going down. The the real dollar, not indexed against other currencies, the value of the dollar, right? And people are buying gold because they want hard assets. Well, then why isn't oil going up? That's a very, that's one of the hard It's liquid, but it's a hard asset. Why is real estate, we talked about this earlier, why is real estate stagnant, right? The graph on the left shows you the gold to oil ratio that should be a flat line. Oil should be rising with gold. If people want out of dollars, they want nothing to do with dollars. There's your K Schiller. We were talking about that early. That's heading towards 0% right now. There's nothing in that trend that tells you people are clamoring to turn their dollars in and put it into real estate. Same with many other commodities. Um, and why are bond yields dropping? If if no one has any faith in in the government and the currency, why are they willing to lend the government money? Why are they not taking those dollars and buying assets? So, you know, in my opinion, the whole debasement story makes sense. I doesn't make sense. I get that there's some questions about the the faith in the US government and deficits and all that stuff, but when you really look through the data, has it really been that different over the last couple years? Really? I mean, gold has what has it done? Doubled in the last um uh year, year and a half. Yeah, >> there's I I think gold is getting ahead of itself and the narrative is used to support that. I'm not saying the fiscal situation in this country is great. I'm just saying that its rate of deterioration is not really that different from the trends that we've been on and to all of a sudden assume that we're just all of a sudden going off the edge of a cliff. I I think you're going to end up getting caught. And I think this graph kind of tells you a lot. Call volume of GLD, the gold ETF. It's speculative. It It's not that gold isn't an okay long-term holding, but I think it's gotten way ahead of itself on where it is. And I actually had this graph I was going to do after that market, but we kind of skipped it. The one on the left is the last few years, and you can just see the moving averages. It's been in a great bullish trend for the last two three two you know two years from 1600 up to 40 4400 recently right but if it just falls back to the 200 day moving average there's nothing bearish about that that's what that's what bullish trends do they they do bounce off these key moving averages you're talking 3300 >> yeah and it would still be in the bull trend there >> yeah it's still bullish right and the longer term graph graph goes back to uh the late '7s. That's on a logarithmic graph, so all the percentage changes are equal. And I drew that green line and you can move it around a little, but it's a good approximation of the trend line. We're on that bullish trend and you can drop on that graph to 2500 and be right on trend. You can drop below it like it's done plenty of times in the past, too. So, the point is really understand what the narrative is truly saying and is it true doesn't mean we don't we do have problems in this country but is go gold is telling you that this country is that the currency is going away that we have completely debased it the rate at which gold is rising and that's where I find fault with this whole thing and I think you can just see it in the speculation and you know I I wanted to draw this cartoon of I think there's a lot gold holders that are looking all around. They see all these bubbles, but they don't see the bubble that they're in. And you know, I I think it could be unfortunate because I think gold will correct. It's gone too far too fast and it's not reflecting fundamentals at this point. And and Adam, just for the record, I own gold. I've owned it for over two decades now, and I will continue to hold it. But you know, you have to separate price from reality just like you do with stocks, just like you do with bonds. Gold is not any different. It's an asset. That's very that's where does all the volume in gold? It comes from the futures exchange. That's that's really the price setter in gold and that's what's driving gold prices. I know I know a lot of your viewers are not going to want to hear that message, but that's my take and you know, Lance is largely on board with that. >> Yeah. And I very much appreciate that and I've been having these discussions with you and Lance over the past bunch of weeks and um like you I have been adding my voice to the chorus of saying look any asset that goes this far this fast um generally is getting caught up in some speculation and I have been encouraging people to consider hedging um in the event of a material pullback. Um, so I I I'm I'm right there with you and I appreciate this and and really the the MACD on the chart there on the left, you know, really >> Yeah, I meant to show that. >> Yeah. Really shows you how overstretched the gold price uh has has likely gotten in the short term here. Um folks, >> the time for the the time for the debasement article was 2020 21 22 >> gold trillions. That's when we were really really hurting the credit and faith in our currency. >> Yeah. Well, so I mean what some people would say, Michael, and you don't have to agree, is some people would say, well, look, this is a repricing, right? You know, go gold didn't move in in response to that the way that it should have. And now this is the world kind of waking up to the fact of the debasement that that has happened. And I will say on some of these things, you know, dollar versus other currencies, US Treasury yields, whatever, um there you can make the argument uh you can do the push back of yeah, but we're the cleanest shirt in the dirty hamper, right? That like every other country is doing the same thing and often oftenimes even worse. So on a relative basis, you would expect the US to continue to outperform, right? The other question I have for you here, and I'm not I'm I'm not trying to undermine your argument in any way. I think it's totally sound. I think every gold holder who especially is sitting on big gains right now should be taking this with a uh he should be listening very closely to all this. But if you can go back go back to the chart of um was it real personal income? >> That one >> real disposable personal income. So in many ways you're absolutely right. We have the average person enjoys a much higher quality of life than we did in the 60s. And you can measure that in terms of you know prevalence of of uh antibiotics and the health care that we get. You can measure that in you know we have these magical devices that give us all the world's knowledge for very little cost. Um we have dependable hot water and electricity grids that are much more dependable than they were back then. We've got a you know uh much more national infrastructure. I mean there's there's all sorts of things that again you know we we can all go take an on demand hot shower which is something that like the pharaohs couldn't do right. So there are elements >> the pharaohs could everyone else couldn't. >> Well they didn't I don't think they even had you know on demand hot shower. They had to get some slaves to go boil you know a bunch of water and they could take it in five hours. Right. Yeah. >> Um so >> better than nothing. >> Better than nothing. Yeah. But my point is is I'm I'm conceding to your point that there are a lot of ways where our quality of life is is is better on those dimensions. Now, you know, you know, I I was young, but I lived through the 70s. Um, you know, back then, you know, you could have a a one income household that could, you know, uh support the whole family and you could still take at least a vacation a year. you know, it wasn't necessarily a fancy European vacation, but you could throw everybody in the back of the uh the station wagon and take them somewhere fun and all that stuff, right? And your kids got educated and you all that type of stuff. And so I look at this particular chart and think this tells a story that doesn't feel true to a lot of people. And I'm just curious if you you know one of the things that could be distorting this because you're using CPI as the as the discount factor here right is and I know I know you think CPI you know probably doesn't match your reality when you go to the grocery store you mentioned that earlier right where it it has been the calculations of CPI have been changed over the decades right adding h hadonics and all sorts of other substitutions and you know well if a TV adds x YZ bells and whistles than than we're actually including it as even cheaper in the the calculation here. So I you know I know John Williams at Shadow Stats tries to calculate the inflation rate kind of using 70 styles equations and I'm not sure if that's the best one to use or not but it'd be interesting to see this chart with kind of a pre completely hydonicized uh version of inflation to see if it's not flatter. Oh, it I'm sure it's flatter, you know, and it depends on who you are, where you live, what you spend money on, on where it is, you know, where how, you know, how that's changed. It it's definitely flatter. The point is it's rising. It's increasing. And look, John Williams is he's been telling you inflation's been 8 10% for the last pre- pandemic, right? >> Yeah. Well, if we're getting 3% pay raises and inflation is 8%, we're losing 5% of purchasing power a year, how is it that for the large majority of people over time they get ahead in life? They don't they don't work their way into squalor despite having jobs. So, you know, I don't know what the inflation rate is. And Adam, we can have debates all day about the quality of life and the the the wealth inequality, the gaps. You know, there's a lot of social issues and problems. I'm not saying it's perfect, but I am saying that from the poor to the wealthy, they are financially better off today than 1950. You know, we can argue all day about family life, family structure. you know, a lot of different things. But from a purely financial view, and look, I get it that both spouses are working in some cases, it's that changes the equation. But but the facts bear out that after inflation, people are making more money today than they were. >> Okay. And really where I'm going with this is is even if somebody doesn't fully swallow all the the data that you've had here for some of the reasons I've just mentioned, I I I I what I take from the data here, Michael, uh the most important thing I take from the data here is we don't seem to see anything in the past couple years that suggests that the uh purchasing power of the currency is going to zero that the world is giving up on the US all these things that these debasement trade headlines are kind of causing people to to feel panic about. >> Mhm. >> So you know the data does not suggest panic. So if you are buying gold in a panic because you feel like oh this debasement trade is basically taking my dollars to zero next year that would probably be a very unwise conclusion. >> Right. Right. I mean you look at all these graphs and there's nothing in any of these trends that look like the change in the gold trend in the gold price which has gone almost hyperb you know it's almost like turned a 90 degree corner. None of these are pointing in that direction. Um which leads me to believe that it's not the narrative is nice. It's handy but it it's not necessarily true. This is speculative juices flowing through the market. >> Okay? And again, when things get speculative, they get very frothy. At some point, the froth goes away, and that's when you can get in real trouble, especially if you're buying in at the late stage of the speculation. >> And by the way, futures, which largely drive the price of gold, are a margin. You know, you're you're trading that stuff, futures trade on margin by definition. So I don't know what the margin requirements are but it's probably at least 10 to one. So so it's the speculation is multiplied within a futures market. We know that there's all these levered ETFs that hold gold or silver that are also doing that. Gold miners in a way are levered positions on gold. >> They are definitely >> uh for better or worse. It works both ways obviously. Um, so you know, just I hope this just shows another side to the argument. Obviously, your viewers can take whatever side they want or find some middle point point and agree or disagree, but this is how we see it. >> No, I very much appreciate that. And again, you know, any asset you buy, gold, stocks, Nvidia, whatever, right, you should be basing on data, not not just on narrative. Right. >> Right. Right. >> Yeah. Okay. Um All right. Well, look, in starting to wrap up here, um trades, uh you you mentioned briefly that you guys added 1% to your natural gas pipeline position. Any other trades in the past week? >> We added a we did all these trades Monday or Tuesday. We added a 2 3% to both our equity and sector models. We brought some positions up to where we wanted to. Um we added to Meta. We've been wanting to do that for a while and it sold off. It came on a nice buy signal so we added to it. Uh we added to Kinder Morgan which we, you know, that's our pipeline. JP Morgan got beat up on earnings. We took advantage of that. Um and I believe we added a little bit to Amazon as well. Um >> All right. So, kind of a busy week. >> Yeah. I mean, look at the end of the day it was a couple two three%. It's not really moving the needle. It just It's kind of a a a bullish rebalancing. It It's not >> I didn't hear any trimming in there. I mean, you were mostly buying. >> We sold service. I'm sorry. We sold service now. Uh we like the company. It just hasn't been working. It's kind of resting on a lot of our risk limits. So, we said, "Let's get back to it another day." >> Mhm. Uh so net net uh this isn't a let's put the pedal to the metal and just you know buy whatever we can here because the market's going to zoom into year end. It's a we're already pretty much fully exposed. Let's just you know add a little bit in in companies or sectors that we think are have gone beat up a little bit more in the market and have you know are giving us some good technical indications. >> Okay. All right. Good. Well, again, thanks for being so transparent. Hey, just getting back to the gold thing for a second. I do want to express my appreciation. Um, I know you prepared those slides probably feeling like you're going to tell uh deliver a message that maybe a lot of people watching this aren't going to be super happy about hearing about. And in my mind, Michael, that is exactly the kind of quality you want to have in a financial adviser is somebody who's going to tell it to you straight, no matter if they think it's what you want to hear, what you don't want to hear. You want somebody who's going to tell you what they believe to be the truth and not just pander to what you you think they want you to hear. >> And Adam, look, you know, I have been bullish bonds for a while. You know who I value most? Jim Biano. He's one of the biggest bears out there, bond bears, right? I don't necessarily agree with what he says, but I try to read as much as I can because a I know he's smart. He knows what he's talking about and I want to hear the contrarian view. >> Andy makes it with data, too. He's not just slinging an opinion, >> right? Like I I love it that Lacy Hunt and I think alike that that that makes me feel good about myself, but that doesn't do anything for me. He's he's kind of preaching from the same pulpit as me, but just using bigger words, right? >> Well, and a ton of data, too. But yes. >> Yeah. Yeah. No, I mean he he he is like the professor. I'm the TA or I'm not even a TA. Whereas uh Biano and again I don't necessarily agree with a lot of what he says, but I want to hear that other view. I want to hear where could I be wrong? Where where what should I be aware of? Is he on to something? So, you know, it's nice. It's a pat on the back when you read people that have the same opinion of you and it's very easy to get caught up in your own views that you're right. Oh, I must be right because Lacy Hunt says I'm right. That's nice. But I I get much more conviction from my ideas, my thoughts, my forecast when I when I focus on the other side. What are they saying? Why are they saying that? And then maybe my conviction weakens. You know what? Bianca's on to something. maybe maybe I shouldn't be as bullish or you know so you know like or not what I just said at least think about it and consider it. >> All right and again thank you for just caring and having the courage enough to just come out and present all that. So >> I don't care. No one. Well, now they do know where I live because of you, Adam. Thanks. >> Yeah. folks. In the show notes below this, I'll put Michael's actual street address in case you want to show up at his doorstep and make a point. Just kidding, my friend. Um, all right. Um, uh, because I know you're a sports guy and because you kind of mentioned today, you you you mentioned briefly some sports, you said some sports issues and you cited some gambling issues. Just curious if you have any thoughts on the unfolding NBA mafia gambling scandal that's all of a sudden broken. >> It's crazy. It's It doesn't surprise me. I mean, there's so much This is part of the You know, sports gambling has always been a thing before it was legal, but I think legalizing it has really made it more mainstream. Um, and it's added to the profits. So, I think being able to fix bets is just like what we talked about the meme stocks. It it's it's fixing the result and uh it's not surprising to me. Uh it's a very easy sport to fix uh you know because of you can bet on players how many points will they score? How many rebounds? Well, if a player gets hurt five minutes into the game, he's not going to meet those goals. And if you know he's going to get hurt and he tells you he's going to get hurt, those that's an easy way for the player to make money and for the better to make money. So, you know, I mean, I think it just talks to human beings that we will exploit whatever situation we have for our greater good. Yeah. And I think, you know, we've ranted a lot in the past about how we have really trained recent generations of of people to be speculators, not investors. >> Right? Fundamentals haven't mattered for so long to a certain extent that everybody is said, "Oh, yeah, you got to trade based on narrative." Right? and uh and and younger generations have said, "Look, you know, I'm regardless what your charts say, you know, I feel like I'm not going to make the American dream unless I catch some rocket ride, some meme stock, some crazy crypto, whatever, right?" Um, and so we've injected a lot more speculation into the markets, which of course you put a lot of liquidity in the system, too, and that that also engenders speculation. Um, there's a there's a long-term corrosive effect of that speculation, right? It it it creates malinvestment. that sends capital to places it shouldn't be versus the places where it's creating too value. And I think it's true anywhere and we're seeing it in sports too, right? You put enough speculation in there. Yeah. The temptation becomes too great for the players or the coaches start taking falls, taking dives, um, and kind of making a mockery of of what sport is, which is supposed to be the best person, the best team perseveres, not the team that stands to make the most off the spread on the bet. >> Right. Right. You know, Beyond Meat's a good example. the market, not the stock market, the food market, the consumers are basically telling you the product just doesn't make sense. >> That sales are down 20 sales of the the plant-based meat industry are down 18% in the past two years. Like the market is >> it can't be from a profitable perspective, it's not sustainable, right? The the capital markets where we buy and sell food and you know all that are telling you it just doesn't work. But now the stock has a new infusion of liquidity. That liquidity is being put into a stock that probably has no value. Could be going to cancer research. It could be going to a whole different bunch of other things that could be very good for society. It's not. It's chasing a company that will, you know, possibly end up bankrupt and go the money will go to money heaven or hell or wherever it goes. >> Yeah. Um, well, I mean, again, this is this is why I think you can kind of make the intellectual argument that like, you know, we sort of need a system cleansing to get rid of a lot of that stuff. Um, injure a lot of the speculators enough that it takes them a long time before they they rembrace that that type of behavior. Um, but of course, nobody, I mean, even those rooting for that is going to have fun during that corrective process should one actually happen. Um, all right. Uh well, let's let's if we can get to a rant quickly and then we'll we'll wrap things up here, Michael. Um uh today's rant is about private equity ruining the world. Um and I've ranted with this in the past with Lance, but but had a recent experience that uh I thought really drives this home. First off, um I think I mentioned this last time that I'd heard it, but I couldn't remember the exact stat, but there are more private equity funds in the US than there are McDonald's's now. So, apparently there are 19,000 private equity funds and only 14,000 McDonald's's. Um it's kind of crazy. >> I'm only I'm actually surprised there's only 14,000 McDonald's, >> I guess. I mean, 50 states, 14,000. I guess that's a lot of McDonald's's per state. But yeah, but the fact that that there's so many more private equity funds really tells you folks that that you know this is um this is a game that's being played. Um uh now what do private equity firms do? They they buy companies with other people's money and a crap ton of debt. And then what they do is they take those companies, they jack up the prices, they dramatically cut costs all in trying to service that extra debt. and what whatever's left over, they pay themselves really generous management bonuses, right? So, they're just basically just harvesting whatever cash flow they can take out of these companies. So, what happens in the end? The company's hollowed out. The workers are all overworked and underpaid uh and uh the consumer is paying more for worse quality. Right? And I'm painting with a broad brush here. Not every private equity firm is a bad actor and this doesn't happen in all cases, but it's certainly happening a lot. And it's we're seeing it in a ton of sectors here. Um, uh, Gretchen Morgansson, who I've interviewed on this channel about it, you know, she's written at length about this, um, particularly citing, uh, the injurious impact that private equity's had in the healthcare industry, particularly in like nursing homes where it's not just a P&L issue. I mean, this is really measured in like patient emiseration or early death, right? Um so the stakes are actually you can be quite high. Um, you know what's interesting, um, you know, is after these these firms, um, do all this stuff, right? They've enriched themselves by basically harvesting all the value out of these companies they buy again with other people's money. Um, they then try to sell it to some bigger sucker, right? And uh I just saw uh a report that Kalpers, the big pension system here in in uh California or in where I used to live until recently in California, um uh they just re released a report called um why private equity is important for your pension, right? So they're actually trying to convince their pensioners, hey, this is all good for you, all the private equity that we're buying. And pension firms are kind of famous for being like the dumb money where Wall Street shows up and says, "Hey, you know, this is how you're really going to meet your actuarial returns. Forget that boring bond stuff or even the stock stuff. Let's sell you this cool private equity stuff." Um, of course, this is the stuff that we know is going to just blow up in their faces. Um, where uh it's going to underperform very likely and you know, at the at the moment where the pension's going to want those funds the most, they're going to be too liquid to extract, right? So, um, you know, we're we're we're seeing this, um, you know, you could almost say sort of broad daylight robbery, right, of of of the corporate system by these these pirates who are coming in hollowing at these companies and then dumping the trash on on on the dumb money. Um, I I I I'm I'm kind of worked up about this right now because um, we took our dog. So, I've got a dog. Uh you guys have probably seen me put them on X, but our older dog, best dog I've ever had. Um she's a silver lab. Her name's Boston. She's just she's absolutely uh my my daily companion, best buddy. So anyways, she was um looking like she had some sort of intestinal distress. And uh my uh we had a family member not that long ago had a had a dog who kind of woke him up in the middle of the night with intestinal distress and it turned out their their intestine had been twisted and and the dog had to be put down like that night. It was just out of the blue terrible, you know, one of those terrible things that happened. So I didn't know what was wrong with her. Maybe she just wasn't feeling well, right? Maybe this is something that was probably going to pass like 98% of things that dogs have. So, I called up the vet when the vet opened in the morning and said, 'Hey, can you just check my dog out? So, we bring the dog in there and the the vet says, ' Okay, yep. Um, but you know, you didn't have a reservation today, so you're going to have to pay a emergency visit fee or whatever. Okay, fine. You know, whatever. I care about the dog. And they kept the dog there for a couple hours. And they called me up and said, "Well, we'd like to take an X-ray." I said, "That's fine." You know, and I'm assuming that that's going to be a bit, but okay. You know, it's important to me to see if there's a blockage or anything. And, you know, we we think your dog should have these anti-nausea things. No. and we think your dog should have this and they call me a couple times just asking if they could do you know what seemed like a little x y or z thing and at no point and I should have asked but at no point did they say well this is what this cost right so I go and pick up the dog after the dog being there for like 3 hours $1,400 vet bill and eventually really all they did was take an x-ray and give the j dog some palative stuff but there was no surgery there was nothing in there that you would think you know would be worth any of that and at no point did They warn me like, "Hey, you know, we're we're getting over 500 bucks worth of care. Do you want to continue doing this? We're getting over $1,000 worth of care. Are you sure you want to do this right?" They just look at you with a smile and say, "Yep, that's 1,400 bucks." And look, for this dog, I would pay anything. But, you know, we ended up really not doing anything with the dog except giving it time. And sure enough, you know, she got better thankfully. Um, but I'm just thinking of the average person, like the average person walking, especially the town I live in, right? the average person walking in there and being slapped with a $1,400 bill and you know all this stuff is just there to they're maximized to just generate whatever large expense they can as possible for the customer because I don't know if you've been to the vet recently folks but this has been a rollup that private equity has done. The vast majority of veterary practices now are not solo practices anymore. They might look like it, but most of them have been bought by private equity firms. And they're doing this across all veterinarian uh veterinarians. So, it's not like you can go to the cheap one in town anymore. They're all pretty much owned by one. So, it's a big racket. I'm kind of angry about it. So, anyways, that's my rant. What do you have to add, Michael? I would just say it's going on because there's too much liquidity in the system and that liquidity is creating these speculative juices. however that shows up, you know, and it's just there's too much money and it's it's not going into good things. It's going into trying to squeeze out pennies at at the cost to society. So, that's a much much broader issue that's been facing this economy for the last, you know, 40, 50 years. Uh, you know, and and we're going to see the Fed come in and help liquidity out. They're going to cut QT. Well, they're gonna, you know, indirectly allow for that pet shop or the veterinarian to keep, you know, for that private equity firm to keep doing what they're doing. So, until we have a change in the way that we focus our capital and manage our liquidity, I I unfortunately a lot of this stuff will continue or even worsen whether it's private equity or just speculative gambling. not even investing, gambling, which is just squandering capital away >> instead of putting it to good use. >> It's so frustrating and particularly maybe so in the veterinary industry just because they know they've kind of got you by your emotional shorthairs here, right? Where they know that for most people that animal is a part of their family and it's it's like well do you want to put grandma down or do you want to you know pay up? And in most cases, people are going to pay up because nobody wants grandma or their their best dog, you know, to to to not make it for money alone, right? But it's it's super frustrating. And it, you know, it's it's, >> you know, especially with that type of provider, that's where especially in a small town, like those are the relationships that people really care about. And now it's turning what what used to be a really respected and beloved profession into one that you just start resenting now because you just feel like they're just trying to reach their arms as deep into your pockets every time you go there, right? Um sort of a similar issue here too. So um when I moved to Reno, I um uh folks can see I I I got a haircut recently. Um, so, uh, uh, you know, I went to go look for I I I invest the least in my hair out of almost anybody short of somebody who cuts their own hair. And, um, so I was just looking for like, okay, where's a cheap haircut? And there really aren't that many like independent barber shops around here anymore. And it's because there are these um you know hair cutting shops now that I don't know for certain if it's private equity owned, but they're franchises now. And you go in there and um it's it's not a bad experience, but it's um it's basically haircut as a subscription now. So you walk in and they say, "Okay, we could give you a haircut, but but really, you know, we try to have a relationship with our customers and and our pricing, you know, this huge pricing thing on the wall and they really heavily guide you into well, you know, buy our haircut subscription club and there all these different levels." And when you kind of do the math, at least when I do the math for me, I'm like, "Okay, you know, like this haircut subscription things make sense because I'm on camera. I've got to get my haircut every so often." And uh your cheapest level to me is pretty reasonable price rw wise. Um and at least they promise that if you don't use it, it rolls over. So, you know, it it's it's not like if I'm late and going and getting my haircut, I've I've I've lost the money I paid. I can roll it over into the future. Um and it's interesting because they've they've totally changed the experience. So, you go in there. This is a guy's haircut cutting place where while you're waiting, you sit down in a leather chair by the big sports TV. There's a bar um and depending upon what level of service you you pay, you get a free drink or and they've got a bottom shelf and a top shelf. So, the premium guys get the top shelf stuff, right? You go sit in your chair and every chair has a TV turn tuned to a sports game in front of it. So, they've really kind of like engineered it for the the bro the guy, you know, experience, which is which honestly is not, you know, I'm like, hey, it's nice, right? I mean, I I don't need it. It's totally wasted on me for the most part, but like I get it. I get why guys would want to come here and just, you know, uh kind of get this type of experience. Um, and of course though, like anything like this, I mean, everything is an upsell, right? So, it is kind of annoying. the first time you go there, they kind of give you the Rolls-Royce treatment for the the the bottom price so that you know what's possible. And then, of course, they're they're trying to sell you on all these other things. Um, it was fine for me. It's it's economicalish at at the current price, so I'm just going to do it because it's it's the most convenient for me here. But at the same time, I look around and I'm like, you know, this but this is driving out again sort of like the veterinarian thing. The corner store barber shop where it was just the solo practitioner or two guys with two chairs and it's where you know it's kind of a hub of the community and you know you you can go get a well in the old days, you know, $12 haircut. Uh nowadays I probably can't get your haircut anywhere for under 30 I imagine. But you know it was just sort of the cheap but personal and part of the town fabric part. Now it's the sort of corporate like I said haircut as a subscription service. Um super impersonal. I don't know. There's there's not only with the malinvestment, you know, economic part of it. Michael, I feel like we're just kind of losing part of what enriched our social fabric through all this stuff. >> And but those are choices we make too. And I'm going to give some free advertising here. There's a hardware store called Stro Sniders right around the corner and they are 10, 20, 30% more than Home Depot, but when I go in there, it's very personal. They help you. Everyone there can help you or they know someone that can, you know, it's not just, oh, it's an aisle six, but it's, oh, you're going to need this and if you get that, make sure you screw it on this way and that way and here's what you need to do. And I go there on purpose. A, it's a little closer, but B, I know I'm paying more, but I like supporting them. I like them being in business because when I get to Home Depot, I'm always pissed off because no one knows where anything is. >> Yeah, >> definitely no one can help me. Like, hey, how am I going to get this onto that? What do I need? No one has a clue. >> And it's it's annoying. So, we we as consumers can elect where and how to spend our money. So, I think it's it's easy to blame other people, but we're, you know, you can go to that place or the hair cuttery or you can go to, you know, Spyros and and get your haircut there and it may be a little more and you don't get the TV, but you get some nice conversation and you you feel like your money, you know, who your money's going to. So, look, and that's not to say I just go to local places. I don't. I go to the chain, the big box stores, too. win. I'm I'm as guilty as anyone else, but those are all decisions we make. >> So, I I I totally agree. We we every time we open our wallets, we vote with our dollars for the type of solutions that we want to see in the world. So, I totally agree and I've been a big supporter of sustainable uh produced foods which cost more but are way better for us nutritionally, but also way better for um uh you know, our soils and and our communities and all that type of stuff. So I' I've made this pitch a lot. Um but what I am seeing though through this is yes, we can do that. But the problem is is the more of of these kind of both big box and private equity backed franchises and stuff like that that that come into play, it does steal enough people in who are driven just by the bottom line or whatever that the the small independents can't they don't have enough economic demand to to be sustainable anymore and they go out of business. And that's that's the thing that I I'm really mourning here, which is yes, we should as as we see new models like that or the models we like, we should feed them. But this stuff is is causing a die- off in a lot of main street America that is going to be hard, I think, to recover from, >> right? And that's, you know, we were talking about the 50s. Everything was mainstreet America in the 50s. Now we've gone so far away from that. So when you're talking about standard of living, maybe financially we're better off, but we don't have the mom and pop shops lining the street that the service would be better or >> and are we better off the cheap Chinese product that breaks in three months versus the more expensive American one made locally that might be around in 50 years. Right. >> Right. Right. So you know and and you can blame the politicians but we have made that decision with our wallets like you said. >> Yeah. And you know, so totally agree there's a big onus on us for that. And um Treasury Secretary Scott Bessant when it's like his first or second month in office, but he said something that really I was super shocked in a really positive way. And this was back when when they were sort of telling us like, hey, things might get rocky for a while. You know, I think they've reversed from that a little bit. Um, but uh he said, "Hey, you know, buying cheap crap from China is not an American birthright." And uh I I thought it was it was really good kind of like just straight talk, tough love, harsh medicine from a government official. It felt so rare to hear. But you know he's right in the sense that like we we have we have come to believe that you know the the the supreme arbiter is is simply price and that we should be able to get you know um cheapest stuff from wherever it needs to come from uh to to be happy and to to run our economy. And you know a that's that that's it that isn't a birthright of ours. B there's a lot of cost that comes along with it. Part of which is we've learned through the past several years that hey we're maybe too dependent on companies countries that that aren't our best don't have our best interest at heart right uh and sometimes you know resiliency is what's more important and sometimes to be resilient you know you pay a little bit more upfront but it it pays off in the long run right so >> I to your point I think we just need to as a culture say hey look you know what you know we should value things other than simply the absolute most rock bottom cheap price. Um, all right. Well, look, great discussion as always, Michael. Thank you so much. Um, I really appreciate you again pinch hitting for Lance while he has to take his wife to one of her chemotherapy treatments. Um, last uh update from him was things were going as best as could be hoped there. So, we'll all collectively keep our fingers crossed and keep making our prayers for her. Um, in just wrapping up here, folks, please, first off, thank Michael for both investing the uh the prep and the time to come on here and uh fill in Lanch's shoes and show him that appreciation by hitting the like button, then clicking on the subscribe button below as well as that little bell icon right next to it. If you didn't watch uh the conference, the Thoughtful Money Fall online conference this past weekend, uh don't worry if you if you would like to actually watch it still, you can by purchasing the conference replay. To do that, just go to thoughtfulmoney.com/conference. And if you um are a premium subscriber to our Substack, look for the code I've been sending you. You can use that to get an additional 50 bucks off of that replay video. Um and uh if you are looking to lock in our spring conference price at a 0% inflation rate, meaning the same price we just did the fall conference at, uh cuz we don't know yet whether we're going to be able to keep the price the same or if we're going to have to raise it next year. Uh, you can buy it at today's price over at thoughtfulmoney.com2026. Um, and again, you can also use your um code that I've sent you to get uh 50 bucks off of that price for the the spring conference, too. Um, and then lastly, if you would like to get some help in figuring out how to navigate your portfolio for the road ahead, especially if it uh plays out the way that Michael thinks it may, um, then highly recommend most people watching this video get that help from a good professional financial adviser. Importantly, one that takes into account the macro issues that we talk about here. You've got a good one is doing that for you. Well, stick with them. Don't mess with success. But if uh you don't or you'd like a second opinion from when it doesn't meet meet that criteria, maybe even Michael and Lance and their team there at Real Investment Advice, uh then consider scheduling a discussion with these firms. To do that, just fill out the short form at thoughtfulmoney.com. These uh consultations are free. There's no expectation to work with these firms. It's just a service they offer to be as helpful to many people, as many people as possible. Michael, again, my friend, thanks so much. Really appreciate it. Um, I'm sure you'll be pinching a bit more in the future. Um, can't wait to uh see what the world has cooked up for us by the next time you're on. >> Sounds great. Looking forward to it, Adam. >> All right. And everybody else, thanks so much for watching.