Big Jobs Miss Suggests Economy Is Sicker Than Believed | Lance Roberts

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If we look at trends of the data, for instance, like employment data, it's clearly been weakening for months and months and months. Yes, it wasn't negative. Yes, it wasn't recessionary yet. Um, but it's clearly weakening and it's telling you that the economy is coming under a lot more trouble. [Music] Welcome to Thoughtful Money. I am Thulful Money founder and your host, Adam Tagert, welcoming you back here at the end of the week for another weekly market recap featuring my very good friend, the Oric portfolio manager, Lance Roberts. Lance, how you doing? I'm doing great, Adam. Good to be here as always. And I don't know about Oric, but uh tired. That's a good one. Well, I'm trying to stay on the positive side. Um Oric, AU R I C, right? Meaning of gold like gold. Um it's uh been a bunk just bananas fantastic week for the precious metals. Gold has broken out uh to new all-time highs, hitting them every day, hitting them again the day we're talking here, Lance. Uh silver even stronger. Um I know you just put out a piece like an hour ago uh that said, "Hey, probably time to trim your gold, folks." So we'll talk about that in a little bit, but um but right now uh yeah, Lance says gold finger. Yeah. Well, no, like you know, you and I talked, I guess it was probably a month or so ago that I was talking about how gold had formed a really nice base and if we could get a breakout here that would be good and you could definitely get a move higher. So, that's occurred. Um, you know, right now so the question, but you know, of course, what happens next is always the case, but you know, as as always with investment management, when something like this happens, everybody gets all excited, so they start buying it now, you know, instead of buying it when it was oversold and and you had a good entry point. And and so again, this is always the issue with, you know, risk management general is trying to buy things that aren't necessarily working time. You know, gold just kind of went sideways for several months, wasn't really performing well. Stocks were doing a lot better. And so we talked about that kind of that flow of liquidity. So today is, you know, stocks aren't performing well and gold is performing well. So, you know, you're just getting this money rotation back and forth between, you know, investment assets. And once the market kind of resets itself, then very likely we'll see money come out of gold again to go back into stocks. So it'll just depend on where the flows are going. So it's just important to to always pay attention to those flows and then don't forget to take profits, you know, when you have good gains. Yeah. Okay. And again, we'll we'll we'll talk about this hopefully in a bit. Um but I do a want to, you know, you've got a bit of a reputation here. I not completely unfairly deserved, but I think largely unfairly deserved that Lance hates gold. I don't hate gold at all. I I know you don't I know you're impartial and I know you have your all-weather portfolio that has gold in it all the time, but I do want to call out the fact that you did say as you said a month plus ago saying, "Hey, you know, for those who think I hate gold, gold's got a really attractive looking technical pattern going on right now." That's paid off. So, anyways, kudos to you for that. Um and and and to your question about um uh you know, what you want to do is you want to buy the things that are out of favor that have a lot of potential. Um, one of the things I want to talk to you about if we've got time today, um, is is this the time to be buying into oil and and the energy complex, um, given how how much those stocks have underperformed and some of the the real macro fundamentals that seem to be improving there. Yeah. Yeah. So, we'll we'll get to that, but a couple of things. Um, first off, I just want to thank I I'll let you say whatever you want to in your behalf. I just want to thank the audience. Uh we got a little personal in last week's uh uh market recap uh for very valid reasons. Um reasons were sad to have had to get into it. But um this community really has a lot of support for you, Lance. A lot of love for you. Um I I'm just going to tell you I'm not going to ask you on air every week, Lance, how things are going. Um I know you got a lot on your shoulders and a lot you're dealing with. Um so, you know, we're not going to we're not going to do a repeat of of last uh last week's unless you want to get in there, Lance. But um I want to give you a chance to say anything else on this before we we get back to our regular programming. Yeah. No, no. I it is it was absolutely amazing. I just I you know I know there were a ton of comments. I know you got a ton of of comments and but I just had a lot of people that emailed me directly just wishing you know well thoughts and and prayers and you know for my wife and um next week we start chemo. So we we had our doctor's visit yesterday and so next week we start the first chemo treatment. But um you know the the the prayers and the outreach mean more than probably you know and and they are very helpful and we do appreciate them very much. I tried to answer every single one that came in. There were so many of them. If I if I happen to miss yours for any reason um I apologize. I tried to answer every single one that came in. So So I hope you got a response and again if you email me I try to answer every single email that comes in. All right. All right. Well, um, again, thank you folks for for all the support you're showing here. Um, and I'm just going to say, hey, look, um, my opinion, but I think one of the best things for Lance is just to keep him focused on, you know, the stuff he needs to do. Uh, and part of that's his day job, um, when he's not with his wife. So, um, we're going to get back to the regular programming here. And we're probably going to get back to the regular, you know, kind of ribbing each other. And don't think I'm trying to kick him in while he's down. I think it's just trying to distract him and bring out, you know, help him focus on the the thing the the operating in the way he's used to operating. So, don't think that would that would be appreciated. Yes. Okay. All right. Well, look, um I think the big news uh the day we're talking here, Lance, is um the jobs market, right? We talked we talked about this last week, how that really did seem to be the thing that sort of forced Pal to change his tune at Jackson Hole. Um and the data has only gotten worse since then. So, we we got the ADP numbers um which weren't great. Uh we then got the Jolts numbers uh recently and passed an important milestone which was that uh there are now more job applicants than there are job openings. And that is a very different narrative uh than what we've been hearing for the past 3 years. You know, you probably remember Lance when when Pal started hiking, that was the thing he was really pointing to. Oh my gosh, look how many more job openings we have than applicants. This this job market's way too hot. It's way too tight. Uh, you know, we got to bring this thing down. We got to normalize it. Right now all of a sudden it's wait a minute. Now we got more people who want to work than there actually openings out there. Um, so then today we got the payrolls numbers right? And this is, mind you, after the president publicly fired the head of BLS saying, "Hey, I think your numbers are are are too negative." Um well the whoever's in the interim seat has got to be sweating bullets today because um if you haven't seen it folks the the jobs uh came out the payrolls came out at 22,000 only 22,000 a very low number but um it was quite low versus expectations which were 75,000 uh jobs which is not a great number to begin with anyways but uh 20 22,000 so a big disappointment then the June numbers were revised uh the July numbers were revised up a smidge, but the June numbers, Lance, were revised down to a negative print for the month. And I think that's the first month since like May 2020, if I'm doing this from memory, um where we actually had a a contraction uh in the jobs uh numbers. So that's a you know, it's a big development here. Now, also the unemployment rate rose to 4.3%. That's expected. But all right, Lance, you and I have talked, you know, many, many times about how if you look at the pattern of the unemployment rate, um, basically once you're coming off a recession, that unemployment rate, you know, comes down, down, down, down, down, it then starts basing and then once it's actually bottomed and, uh, it starts going back up. Historically, it is then raced back up and that's into the start of the next recession. So we are seeing the script seem to be playing out here now. Now now it's still early but you know it seems that more and more of this data is playing against the historical script. And so the the question that I like to put out there is is what for us not to be repeating that pattern. Something's got to be materially different about this time. Is there something materially different about this time that argues against history repeating itself here? No, I I don't think so at all. I mean it it's funny because you were just talking about oil prices as well and I just published an article last week talking about oil prices as an economic indicator and there's a very very high correlation uh between what's happening with oil prices and what happens with economic growth. And while I'm doing this I'm actually running a couple of charts real quick because I was waiting for the unemployment data update on Fred. Um but you know when you know when you take a look at what's happening with the employment numbers and we've been talking about this for months now is that hey we said the Fed should have been cutting a lot earlier this year because the employment data was already slowing down and what's what's important and this is this is where most economists get things wrong is they focus on a number. They go oh well you know employment's not negative. Okay well it being negative or positive is irrelevant. What's the trend of the data? Is the trend of the data improving? Is the economy getting stronger? Is employment getting stronger? Or is employment getting weaker? And if we look at trends of the data, for instance, like employment data, it's clearly been weakening for months and months and months. Yes, it wasn't negative. Yes, it wasn't recessionary yet. Um, but it's clearly weakening and that's telling you that the economy is coming under a lot more trouble. We're starting to see, you know, college graduates having a tough time getting jobs. uh Kico Phillips just announced that they're going to have a large reduction in workforce to become more productive and more efficient. Um and this is going to be and and AI is only going to exacerbate all of this, right? Because it's just you're now able to replace more and more jobs with AI. It was funny yesterday my wife and I were at the grocery store. We were buying some groceries for the trip this weekend and we ran into our realtor that sold us our house uh that we're in right now. And even she's saying she says she says AI is scaring the the the living daylights out of me because it's starting to come into real estate very very quickly. And pretty soon you're not going to need a real estate agent to buy a house because that's just filling out paperwork and AI can do that very very efficiently. So, you know, there's a lot of jobs. There's a lot of businesses where, you know, the in the legal business or in the dental business or in, you know, the the real estate business. There's a lot of jobs in there. Now, you can't necessarily replace the dentist, right? You got to have the dentist has a job, but the receptionist, the, you know, the the people, you know, filing it, filling out the paperwork, all the assistants and support staff, those jobs are all under threat. And so when you take a look at what's happening with this employment data, it's really a two-fold story that's going on. First, it's telling you that the businesses are already shifting to become more productive by hiring less people, which is protecting profit margins in a slowing economy. So that's why companies are still producing good profit margins here because they're cutting the bottom line cost and that that's showing up and being reflected in the employment data. But the other side of this is that the employee the the economy is simply slowing down and we were running at 12 to 14% nominal GDP coming out of 2020 because of all that stimulus and pig and the python has now come out the other end. The pig has now exited the python and we're back to more normalized economic activity and now you're seeing surges in delinquency rates on student loan debts and credit cards and and mortgages, you know, delinquencies picking up. So you're seeing that the consumer is becoming a lot more stressed. that's impacting the economy. As the economy slows down, the first the first defensive line for corporations is to hire fewer people and to find efficiencies. And that's what's going on here. Yeah. So, how I'm just curious, how meaningful is today's news? Um, just as a a a step along the the prog the trend that you're noticing here. Well, it's it's it's real important. Um, here, let me try to share a chart with you real quick. I haven't I haven't had time to clean this up yet. So, just uh forgive the uh the dirtiness of the of the graphic, but so this is a chart of full-time employment relative to the working age population. So, what you're looking at here is, you know, how many people are of working age in the population and how many people are actually employed full-time. Now, why is that important? Full-time employment is what pays the bills, right? Um, it provides insurance, provides health benefits. It's very hard to, you know, raise a family on a part-time job. So, full-time employment is very important to overall economic growth. And what you'll notice is is that back in 1999 2000, full-time employment relative to the population was approaching 54%. Very, very high level. We had, you know, a very large percentage of the working age population was employed full-time. Now, just because you're working age doesn't mean you work, right? It just means that you could be a housewife, you could be a student. There's a lot of a lot of other factors. But if you're in the working age between basically 16 and 54, you should be working in some shape, form, or fashion. We had more than half the population. We're now down to 49% of that. Now, what's important to note though is that when full-time employment as a rel as as a percentage of the working age population, this is the only thing that really matters is when that turns down, that usually precedes economic recessions. That makes sense, right? We start hiring, you know, I'm going to start cutting back on my full-time employment. Maybe I'll hire a few more temps because I can just let them go really easy and they work cheaper. But you start seeing that reduction in full-time employment heading into recession. So 1999 recession in 2000, 2006, 2007 recession in 2008, 2019, 2020, of course we had the shutdown of the pandemic, and then we peaked out. And what was interesting is is despite, you know, this boomer economic growth that we had, we never actually evencliped the peak of what we had going in terms ter terms of full-time employment versus the population prior to the pandemic. we never got back to that previous peak and we've now turned lower. And so it's important to watch this because again that tells you again is that if I'm reducing the amount of full-time labor that's that's fewer people that have the ability to really sustain a full robust lifestyle within the economy that impedes demand and that's why this normally correlates to recessions historically. Yeah. So I know you're you're what actually throw that back up for a second. So you're you're showing us, you know, the sausage as it's made here. Um I know in that chart it looks like you're planning on on shading in uh the recessions, which actually have a here's here's a again this is this is my work this is my work spreadsheet. This is what I build stuff off of. Um but here's a little different look. So this is this is kind of the same same idea. This has recessions shaded on it. This is the percentage of total employees working full-time. So, how many employees? How many people are employed? Okay. And what percentage of those employees? Now, this is full-time and part-time. So, what's the percentage of those that are actually working full-time? And you'll see the same. It's it's exactly the same analysis, just a little different look, but you'll notice that every time that turns down, that precedes recessions. Yep. Yep. Exactly. Um, okay. And that was sort of one of the points I was going to make. Um, I'm curious when you talked about us not getting back to the precoid highs in terms of the total workforce. Um, a thought that immediately came to mind on that was, um, probably a material factor of that was you had a lot of boomers, boomer employees whose stock portfolios, you know, zoomed higher with the trillions in stimulus that got shoved into the system and they were able to retire early. And so we basically removed, you know, kind of a lot of cream from the top of the workforce there. Yeah. Um this is the same chart. I just wanted to show you this. This is the same chart uh overlaid against GDP. So you can see that whenever this turns lower, economic growth slows and it makes sense, right? I mean it's just those are kind of correlary in nature. Um but again, it's just it's very important to pay attention to this because we're clearly seeing that impact back into the economy. Economy. Yeah. Um so right. But your point's right. Um, you know, there there there were a lot of people that were just became day traders and a whole lot of other stuff in markets and did real estate investing and never actually went back into the workforce, right? So, here's a risk here, right? No, no guarantee this is going to happen, but here's a risk, which is if we end up having a material market correction potentially coincident with a recession, right? um is you could have a lot of people who were 60 65 years old um you know they still they still had potential years ahead of them to work. Let's say 55 and older, right? Who who retired because their their uh portfolios did much better than they thought. You could potentially all of a sudden have some material part of that cohort if there's a big enough market correction be like, "Oh geez, I got to unretire here and I got to unretire right at the worst time." Right. Which is when unemployment zooming and you know, nobody's hiring. Right. Right. No, it's true. Look, this is why I've been, you know, for years I've railed about people that want to retire early. you know, this like this whole financial independence, retire early, and now there's, you know, a lot of articles out about how kind of Gen Z wants to retire by the time they're 35. It sounds great in nature, but the problem is at some point, and actually the the guy that actually started the whole financial independence, retire early movement, he retired early and he had to go back to work and he went back. Yeah. Yeah. So it it just you know things happen economically and you know a lot of that stuff is based on this these kind of false narratives that oh the market compounds at 8% a year and you're going to make every if you make 8% a year on your money you're you just live on 4% of that you have an extra 4% that grows and compounds over time. It's all fine and dandy till the market corrects 20%. Right. And you have to eat that year. Yeah. Yeah. and and then all of a sudden you got to go back to work and then a multitude of things happen which is you now and and today more than ever you know the risk of you taking and you know I I was talking to my daughter she called me the other day and we were just talking on the phone and she says yeah my my roommate's thinking about taking a year off and just go travel around Europe and then come back to school and I go if you even think about that I will hang you by your ankles because that one year in this in this environment that we're in today, you take a year off, your skill gap is going to be so far behind your cohorts, you'll cohorts, you'll have a very very tough time getting a job because just because technology is moving so fast with AI and everything that's happening right now, take a year off, go have fun. Hey, I get it. You know, we need a break. It's all fine and dandy, but that skill gap that you lose is going to be very, very hard to get back. And the longer you're out of the workforce, the bigger that skill gap gets. Yeah. All right. Well, look, um, that might be a rant for an upcoming, uh, show here, Lance. Um, I just want to show this chart, another way of looking at what we've been talking about. Um, but this is, um, I was talking about earlier. Um, jobs added, you know, payroll jobs added over the past, what's this, two and a half years, uh, versus the unemployment rate. And just to your point about trends, Lance, right? Yeah. 4.3% it it's it's not a crisis uh rate by any stretch. Um but the trend here is concerning right which is that that's continuing to go up right at the time where job growth is really just you know petering out here. Well again and that's the and that's really kind of the important point. So uh I can't really see that chart. So that started in January January 23. Yeah. So you know and this is this is kind of my point. you know what the what you know the federal what Jerome Pal and all the markets the economists would focus on is like okay what was the jobs report this number it's like oh we had 300,000 jobs this month everything's fine but again you take a look at the trend of that data in in either data set right the trend is clearly been weakening not for months it's been weakening for the last couple of years and that's that pig that we talked about is exiting the python and as and as that all that monetary stimulus comes out of the system companies have begun to recalibrate. Well, you know, people aren't spending as much. You know, if you take a look at, uh, you know, look at what just happened with Cabba. Um, Chipotle Mexican Grill. Um, uh, there was a sal greens. Um, there was another one I just reported all the other day. Lululemon just got clobbered. Yeah. Lululemon. Yeah. Well, okay. Lululemon's got a whole other issue. Um, so my partner, uh, his wife is a news anchor for Fox 26 here in town. She's in a Lululemon store when a group of people break in and start just swiping everything out of the store and running out. And she's like interviewing the employees going, "Are y'all going to call the cops?" And they go, "No, we can't because we'll get fired if we intervene or call the police." So yeah, not surprising Lululemon's down 20%. But it's funny because in Lululemon's report, they go, "Oh, well, it's the tariffs." No, your stuff is expensive as crap. And there's a lot of stuff that you can buy on the internet that's just as good as Lululemon for a whole lot less. And if you take a look at at a chart of Lululemon, it is not a since tariff problem that Lululemon's been having. This is a 50% decline over the last year and a half in that stock because people are starting to cut back and they're finding better alternatives. But this goes back to what I was about to say about these restaurants. Every one of those restaurants that reported, they're all reporting that their primary cohort, like who who eat at Chipotle, right? It's really not you and me. You know, we're not primary bene, you know, primary consumers of Chipotle. It's a younger it's kind of the younger generation that go there, you know, it's kind of hip, it's cool, you get a burrito, way too expensive. But yeah, that it's not the Taco Bell crowd, but it is it is younger, you know, slightly healthier readers. Yeah, exactly. But even so, but what they're doing now is they're seeing that that group of people begin to cut back on their foot traffic into stores. So, they're all having to make make adjustments now. You know, trying to figure out ways to to attract that customer base back. Um, and uh, Sweet Green said they're going to add 25% more chicken and tofu to their salads that they produce to try to draw that crowd back in. But it's the cost, you know, the it's um my wife's aunt and and I had gone out to lunch yesterday with my wife to before we went to go to her doctor's appointment and she was talking about the cost of insula. She took her daughter to Ensilada, which is another, if you're not familiar with, it's a like a salad bar restaurant, but it's I'm not, but I figured as much with a name like Ensilada. Yeah. Yeah. You you go into Insilada and basically it's a a bar and you go down the aisle and you say, "I want this and my salad." And so at the end of the aisle you have your salad made and and you know it's in a bowl and they fill up the bowl with your salad. It's like $20 for a salad. Yeah. For a salad. It's $20. Yeah. you know, and you know, it's just it's just the cost of that is now reached the point to where consumers are going, you know what, I can either find places to eat cheaper or I'll just eat at home, pack my lunch, whatever it is. And we're starting to see that shift in the economy now showing up in these restaurants as well. Hey, let me ask you this. Um this is a this is a bigger topic to explore and I got some other points I want to make here so I don't want to get too distracted by this but um you know one of the uh I think valid discussions that's going on around illegal immigration right is um you know the whole like well who's who's going to pick your lettuce and you know who's going to clean your hotel room and stuff like that right and Um the the push back on that is is well wait a minute are you arguing for like a permanent underclass that kind of gets treated like you know sort of slave labor, right? And so let let's say for a moment we keep the border shut to illegal aliens and we say look we're going to fill those jobs domestically and you know to do so yeah the we're probably going to have to pay a more living wage for folks to do this work. You know, I I folks are going to say, "Hey, this is easy for a guy wearing a sport coat and a button-down shirt to say, but you know, I before COVID, I mean, I remember talking to people who would come to America from other countries and, you know, they would in some c depending where they came from, you know, some of them would weep when they would walk into a US grocery store just to see the selection of food, but also the price that oh my god, this is so affordable, right? You people live like kings. And we may have just underpriced food in this country. And look, I get it. Like the last thing the American household wants here is to see increased cost of living in their food. But I do wonder if we if we really focused on having like a more resilient, you know, sustainable um uh sustainable both workforce and sustainable um uh just pricing structure. if food should not be more expensive um because it is being grown and packaged by Americans um who you know well want healthare and stuff like that and and so the issues right okay so it's a noble thought right I guess my point is like is is maybe is $20 a fair price for a a salad in a store and we've just been so used to over the past 50 years of having cheap labor I I hear what you're saying or too food too cheap food prices labor for food. I hear what you're saying and I'm not sure that there's actually a lot of truth to that. There may be some of that. Part of what's happening with the food price inflation is is that when we started sending check and again this food price inflation really occurred over the last 5 years more so than we've seen in in quite a long time. And a lot of that was because we were sending checks households and companies were going man people are out just spending money and there's a lot of demand. Everybody's eating out. Nobody wants to cook at home. they just want to get out of their house for whatever reason. Then we've got Door Dash, we've got all these other things. Yeah. Sorry, just to say another trend at the same time though was the rise in minimum wage. Uh you the forced rises and big big increases in minimum wage that that too. And and so you had that and then you've also had all so as we talked about a couple weeks ago on the show I was surprised to learn um on the statistics that 75% of food sales from restaurants are delivery. Right. I would have thought it was the opposite. I thought I would have thought that at least 50/50, right? You know, dining in versus delivery, but 75% of their food is now delivery. And this is because we've made it so easy. People come home, they're like, "I don't want to cook. There's nothing in the fridge. You know, I'll just door dash something." Yeah. We can we can There's a lot of room for us to tighten our belts. I get it. Yeah. Yeah. Yeah. But but all that demand, right? All that that easy access to demand allowed businesses to raise their prices probably more so than they should have. Should the prices gone up? Sure. Absolutely. Um but but I don't get the sense that restaurant margins have gone up a lot. Sorry. I don't get the sense that restaurant margins have gone up a lot over that 5year period. Well, we've had a ton of restaurants, at least out here in California, go out of business. That's that's been more the norm. Well, I don't know. But you take a look at a company like Chipotle that's growing their sales and growing their EPS. You know, they're you know, they're doing very very well. um you know and but but a lot of this too this pricing is also a function of Wall Street going hey you've got especially with chains um you know we want you to meet these margins and these demands so they keep raising the prices until there's a breaking point and as long as you don't find that breaking point consumers look consumers become accustomed to prices if we keep charging $20 for a salad five years from now people will go ah it's cheap right it's been $20 forever right and we'll get used to that price That's why prices never reverse. Um, you know, if we go to $4 a gallon in gas, it never goes back to $2 a gallon of gas. Maybe go back to 350 or three, but we never go back to where we were because we get used to higher prices and and when it goes from four to 350, go, "Oh man, that's cheap again, right?" So, we'll start buying even though 350 was hugely expensive a year ago. Yeah. Yeah. There's a lot. Now, inflation is a big part of that, too. But yeah, the airline never gives you your blankets back after it takes them away. Yeah. Exactly. This is just consumer psychology, right? And so all this leads into these price increases. But you know, again, consumers ultimately at some point there's a breaking point of that and we're starting and because now consumers are running out of money. Now $20 for a salad is becoming a lot more of an issue than it was even just six months ago. Go look and I totally agree and that's I want to stay on the point of the weakening consumer so we can maybe revisit this later on. Just two points I want to make. One is I think there is an interesting discussion to say hey has our food been artificially cheap for basically our whole lives because of the the way and the the labor that we use to to to grow and pick it. Yeah. But AI is going to replace but look AI that's my point number two. That's my next point. Robotics is going to replace that. So it will. So what's interesting is we may have a who knows, you know, we may have a period of inflation as we start replacing those workers with domestic ones, but then deflation in those prices as the robots then take over. Maybe it'll just be a wash. Who knows? But yeah, uh to a certain extent, the robots can't come along fast enough, especially if you're concerned about uh the cost of food going forward. Yeah, but just real quick, while we're talking about this, Chipotle Mexican Group runs a 22% operating a gross margin. So they they're maintaining big margins, okay, of operations. So I I'll I'll be curious to hear what people who are work in the restaurant industry have to say in the comments section below. My my understanding is that in general margins have been getting real squeezed in that industry for the past five plus years, but folks, if I'm wrong, correct me. Um so you you um you mentioned, you know, some of the old things that we talked about like pigging the python and whatnot, right? And and now that that's through, we're starting to see this real weakness creep in. One thing you didn't mention that I just want to also say is contributing here to the margin pressure on corporate America is the maturity wall that we've been warning about forever, right? Um we are starting to go through that in earnest, right? So every month here um more and more companies debt is rerating which is just another pressure in the system here. And to a certain extent, same thing, you know, with with consumers as their debt has, you know, we we've seen APRs on credit cards and stuff like that go to record highs. So, um, this higher for longer effect, you know, the lag effect, which folks, you know, got real tired of me talking about for for too long. Um, I think we are starting to see that lag effect, the the the effects of the lag effect here in in in the material way that I thought was going to happen. I just full disclosure thought it was going to happen a lot sooner. Um, all right. Well, look, um, so unemployment, the employment situation is not looking great. As the employment market goes, so goes the economy. Folks will continue watching this on a on a, you know, week-by-week basis here, obviously. But Lance, um, I want to get to some of the, um, pieces that you published recently, Lance. Before I do, though, let's just get to the TA if we can. Sure. Um because uh I mean stocks haven't been performing great, but we're not that far from all-time highs. Um is is this a period where you're becoming a little bit more concerned about the direction of the market because of these macro issues, or do you think it's not time yet for the economy to drag markets down with it? Well, I don't know why you say the market's not been doing great. It just hit all-time highs yesterday. So, no, I Okay, but we we've had a lot of chop, right? And then, but my point is, yeah, we're still near all-time highs or we're at alltime highs. That red candle, what is that? Is that today? That's today. Um, we opened up this morning, set a new alltime high this morning um just after the jobs report. And it's funny because look, that jobs report sucked. And tells you that the economy is slowing down. That's not good news. But the market opened up pretty positive this morning on the hope it's like, oh great, this means the Fed's going to cut rates. And not only they cut rates by 25, maybe we even get a 50 now, you know, at the September meeting, but by October for sure, we're definitely going to have a rate cut. Maybe a 50 basis point cut by October. So markets are now going, "Hey, wait a second. Bad economic news may actually be bad data." So So th this would be a really big development, right? Because good economic news has been good for markets and bad economic news has been good for markets for the reason you mentioned is the interpretation now shifting. You can't you can't tell from one day's action right now. You know, this market could close up positive by the end of the day. It's already starting to turn up from the low. So, um again, it opened up positive, it went negative, it's turned back up from the low on an here. I'll just show you real quick. I mean, this is what's going on right now. So, I mean, you had you had your open, you sold off, and now you've kind of rallied back up here a bit. So, again, I mean, it's very possible. We and and and last two days in particular have been very important because um we've seen institutional buying at the end of the day. Uh a lot of it yesterday we had a tremendous jump right at the right at the close of the bell yesterday and the day before also right at the close of the bell a big jump uh and in the price of the market because institutions stepped in and were buying the end of the day close. So again there's been very bullish action on that on that front and markets are are continuing to do very well. There's absolutely nothing wrong with the markets right now. We're sitting right on the 20-day moving average. We actually broke that on Monday. We actually had a selloff, broke through it on Monday. Um, and then on Tuesday, right back above it again. So, you know, again, you know, these all the all the institutional buyers, these computerized trading algorithms, uh, systematic programs, algorithms, etc., they're all sitting right along that 20-day moving average. So, every time we hit that 20-day, they're stepping in and buying it. So that you know that's this buy the dip mentalities there and you can see this on the money flow as well. The market sold off. Um we had this real kind of negative divergence of money flows going into really kind of last week but then starting this week we had that dip back to the 20-day and they all stepped in and started buying. So we had this big surge in money flows over this last week. But you know what's important is is and now from a bearish perspective you do have a negative divergence in momentum and a negative divergence in relative strength. Those typically preede corrections in the markets when that occurs. Uh last time we had that was back here in kind of really in December, February and March and then we had that turn down in April. So, you know, those negative divergences, don't not pay attention to them because they matter. Um but right now the market hasn't picked up on it yet. Very likely it will. So, if we can get a break below the 20-day moving average, that kind of red line, um, which would also break that trend channel that we've been in now for the last few months, um, you know, that's going to lead to an immediate test of the 50-day moving average, which is right below it. So, there's not a lot of downside risk. It's maybe two, three% from the peak. Um, but if we crack out that 50-day, it's a good, it's a pretty decent drop to the 200 day moving average. So, there is risk of, you know, a 5 to 7 to 8% correction sitting there in the market. What you need is some type of catalyst or event to actually structure that. Okay. Um All right. So, super interesting. Do me a favor. Just just put your cursor over like February and March of this year. Yeah. Right here. So, you said we had negative divergences back there. And you can see we we we kind of had, you know, we rose, but then we had chop going sideways even though we went up to an all-time high. Yeah. And then it corrected really hard. Who knows? But I mean starting in August now um the past you know 40 days or so we see a somewhat similar pattern where it rose up to that level then it's kind of just been chopping around up there. Um so and we're in negative divergences. So to your point I mean would would not be crazy for this to be the sign of a market that's that's kind of running out of um uh propellant to go higher here. Oh, and by the way, just while we're here, you and I talk about credit spreads a lot, and we've had a lot of requests. I was like, "Hey, is there some place I can go to find credit spreads?" We've now posted all the credit spreads. So, you can look at AAA, double A, single A, triple B. This is all this is all the spreads related to US treasuries. So, if I want to look at double A spreads to US treasury to see where the spread is right now. Um, you know, here's C. You can look at C-rated treasuries. This is using the the the B of A data, but you can see where the credit spreads are relative to uh treasuries and and we're sitting here at historic lows. So, you know, you were talking about that maturity wall a second ago. Credit spreads are not showing any risk in the markets right now. Okay. Um I just interviewed David Haye and he had a great analogy for credit spreads. He said they're about as tight as spandex on a suma wrestler. That that would actually that's a very good analogy. Yes. That's because that's where we are at the moment. All right. Uh, and sorry, just go back to that chart again. Uh, which one? The the um chart of the S&P. Oh, yeah. Yeah. Yeah. So, if if we and not saying this is going to happen, but if we went down to the 200 day moving average, I just can't see what that number would correspond to on the S&P. About 6,000. About six. Okay. Which, you know, it's not that nuclear. No, no, it's it's it's uh Well, I can tell you what it would be. Um, it would be what about 8%. Maybe not even high to the 200 day moving average, right? It would be uh eight and a half percent. Yeah. Yeah. So, I mean, it's not the end of the world. That'd actually be a really healthy correction. It' be a great entry point to buy stocks. Yeah. All right. Well, look, um, you recently wrote a post. Anything else to say about the TA before we move on? No. I mean, nothing's nothing's really, you know, changed dramatically here. Okay. Yeah. It's kind of bor and we had we said this in our we had our investment meeting investment committee meeting yesterday with all our adviserss and we're like another week same story really boring it was a really short meeting it was like five minutes you know yeah just nothing is happening right now and and it's so incredibly boring just you know tech stocks work one day they don't work one day they work the next day they don't don't work the next day and it's just this rotation around the markets so it's just been incredibly boring. Let me let me just ask you this. Pulling from those meetings if you can. What would you say is I'm going to say the most and if you can't actually think of the most just one of the big ones. What do you think is the the the most compelling reason for the markets to continue up moving up from here making new highs? And then on the flip side, what is the most compelling concern you have that could pull the market lower? Well, the the most compelling reason right now is that you just have a ton of of sentiment, right? Investor sentiment is extremely high and professional investors are very underweighted equities and we're heading into the end of the quarter. So, they're going to have to get allocated back to equities by the end of the quarter. And so, if you look at hedge funds, you look at um you know, professional managers, etc., they're all very underweight equities. Retail isn't, but professionals are. So, they're going have to play catch-up. this market keeps running, they're going to get drugged back into this market, which is going to start pushing the markets higher. Um, the the more compelling reasons why you could have a correction is you're about to lose a major buyer on the 15th of the month, which is corporations. So, you you've been having about a $1.5 billion dollar a day pull by corporations buying stocks uh since the the buyback window opened up a few about a month ago. Uh, that's been helping lift the market, but that's that window closes on the 15th. So, you're about to lose a buyer going into second quarter earnings or sorry, second quarter earnings. No, sorry, third quarter earnings. I forget where I am. So, third quarter earnings in October. Uh, so we'll lose that buyer. And then if you have any if this economic weakness picks up more and we start to see it reflect back in other data, um, if we begin to see earnings estimates come down because of that, that's going to impact markets as well. So, this is all about earnings at the end of the day, right? So yeah, we've got to look at what potentially affects the forward outlook on earnings and a slowing economic growth should start to eat into estimates. Yeah. Yeah. So yeah, nothing nothing impacts forward earnings estimates like guidance from companies at their earnings call. All right. And I'm just curious, so you basically said um it's a tale of two buyers in your mind. One is the institutions coming in to window dress. Uh the other is is uh the corporations ceasing their buybacks in terms of just physical mass. If they were two fighters in the ring, you know, are they equally sized or is one notably bigger than the other? Well, well, the the professional managers are larger in size potentially. They've got more capital to move. It's just whether or not they will actually move the capital. Now, now one thing we know for sure is that one and a half billion dollars a day that's getting bought into the market that that is going to go away. That window will close and that buying will stop. So the question is whether or not the professional managers if the professional managers sit on the sidelines and go, "Hey, we'll just be underweight equities and at the end of the quarter, we're not going to worry about it because we just think the market's not in a good place to be." Valid reason. And you lose that buyer, then potentially you have a lot more weakness going into the end of the month. Got it. Okay. All right. Um, so you recently wrote a piece um about portfolio risk management, which is one of our favorite topics here. Um, you titled it accepting the hard truth. So, why don't you give us the the skinny on the hard truth here? Well, the hard truth is is that portfolio risk management isn't easy, right? And it's the thing that we don't want to do. Um, but really the focus of the article is talking about portfolio position sizing, something that most people don't do. They just they buy it they, you know, oh, I'm going to buy, you know, Broadcom today, right? So, Broadcom's up like 13% after earnings. Great. You buy it today and then they you just buy some percentage in your account, but you really don't have any idea what you're buying. And then the other side of that is is that what happens if you lose money? How does that impact your portfolio? We actually go through an example uh using Nvidia with a $100,000 portfolio about how to actually position size that into a portfolio based on what percentage of loss you're willing to take. And then that feeds into actually having stop losses in your portfolio, which is setting up a a either a percentage loss, which I don't I don't like percentage losses because they're too arbitrary. Um, and a stock like say Nvidia or Broadcom, they can move 10% in a day on a bad piece of news or some headline out in the world and so you get tripped out of your stock. I like to use moving averages. So if the stock breaks out below a moving average, then that gives me a better stop point and also that stop-loss trails because it's a moving average. So I just adjust my stop loss for the moving average as the market's going up. But again, that's it's just the article is just going through the, you know, just some of the basics of, you know, managing risk in a portfolio because that's the one thing that investors don't do well is they buy they're great. Investors are great at buying stuff. They're just really horrible at selling stuff and and it's just like, you know, you talk, we were talking about gold earlier, right? Um, you know, you take a look at gold right now on a relative strength basis, it's massively overbought. Now, just from a a purely logical perspective, you should take profits out of your gold position. Now, a lot of people's like, "Yeah, but it's going to keep going up." Yeah, maybe. But it's probably also going to correct here at some point because every time historically that gold is this overbought on a relative strength basis, it goes down in price. Now, it doesn't mean it collapses. Doesn't mean it goes down $1,000, but it's going to pull back to some level of support that was give a much better entry point to buy, you know, to add back to your position. But if you don't take profits, you've got no capital to buy with. So, you know, just this is the, you know, again, people are great at buying stuff. They just don't know when to sell it or how to manage the risk. Hey, so there's there's a couple things wrapped up in that. Um, a lot of it just human nature. Um, so, you know, behavioral economics. Yeah. Um, but human, you know, I I think the retail investor is is way more guilty of this than the institutional investor. Um, and as retail investors, we get excited about something. Oh, you know, I heard Lance talk about, you know, some stock that he thought was interesting and that sounds cool to me. I'm gonna buy that. Right. Right. Um so, it's really easy to um come up with your your trigger reason to buy into a stock, but if you don't know, if you don't come up with a sell plan when you come up with your buy plan, then that stock's just sitting there on your portfolio and you have no real trigger to know when to sell it. And this is why so many people will ride a stock up and then ride it all the way down when it's performing poorly, right? So, a big part of it is is either, you know, get real good about developing your sell rationale when you you create your buy rationale. Um or if you don't want to do that, you know, the easy answer to all everything we're talking about, Lance, is just outsource it, right? Which is to to hire a professional like you and your firm who can do this for you, right? Um, but uh the other trap that I think folks fall into, and gold is a really great example of it, is um, hey, I'm owning this for the long haul. So, Lance, I don't care what gold does this year, you know, any given month to month because I'm going to hold this for the next 10 years, right? Just compare and contrast that strategy with somebody who says, "Yeah, I want to own gold for the next 10 years, too, but I'm going to take advantage of, you know, actively manage it when it gets overbought versus oversold. How will their performance results differ?" It will perform vastly differently. Um, just take gold as a good example, you know, and basically in from 2020, the mid of 2024. Sorry, I gota I gotta let me get my dates right here. I'm just going to use GLD as an example. You know, this is this is a weekly chart. Um, probably do monthly better. Yeah, here's monthly chart. This is better. So, this is a monthly chart of gold. Um, and this is what we talk about a good bit is that when and let me kind of zoom in here. So from 200, you know, 6 7 8 through, you know, it it did great and then you lost a very big chunk of your value in 200 really kind of eight going into 2009 and then yes, if you just held it, it worked out fine and you came back and then you kind of peaked around 2012 and then you went nowhere for for basically 10 years and gold just traded lower, a lot lower actually. and then finally got back to where it was 10 years later. So from an investment standpoint, again, you take a look at this, it was three, now this is a monthly chart. So this is a very long-term chart, but it was three standard deviations above its monthly moving average. So whenever it's it's you get to those levels, you're going to have a correction at some point back to those moving averages. It's just it's a function of gravity. It happened back in 2007, 2008, happened here in 2012. Um, you know, again, happened here. here you got three standard deviations oversold in 2020 went nowhere until 2024 and now you're massively just this this extension um is beyond just about anything that we've seen previously. So this correction ultimately in gold at some point when it retests this long-term moving average and what causes that? Who knows, right? But something will come along. It's a commodity. It's not an asset. It's commodity. So when that commodity trades back to its long-term average, which it will, that's going to be a fairly substantial price decline. That doesn't mean it's going to go straight down there. It could be very much like we saw from 2012 to to 2020 where it's a very long grind lower and then finally rallies back higher. But again, these overbought conditions and and again you take a look at relative strength at every time that gold has been this overbought on a relative strength basis. Again, this is a monthly chart, so very very slow to move. But there was your peak. Here was your peak. Here was your peak. Here's your peak. Right? Every time that gold is this overbought, it ultimately corrects because it's a commodity. It's not money. It's not a currency. It's a commodity. And commodities trade. And what trades commodity f is what what translates to the price of gold is how commodity futures are traded. Your long trades and your short trades. And if at some point there's ever an imbalance of that trading, that's how you get these very big corrections in the price. So again, whatever drives that correction, it's just like stocks. You know, everybody talks about, oh, stocks are so overvalued, they're going to have to correct. Absolutely correct. But what you need is a catalyst. And at some point, stocks will have a very large correction in the price of their because of their valuations have a very large correction in price, but you need a catalyst for that. So at some point, you get a catalyst that causes this correction and this deviation in price, and that's just a function of time till it occurs. So, this is why if you can navigate this and use opportunities, this is where you and I were talking a while back. We said, "Hey, gold's very overbought here, it's going to correct here." And then this around over here was where you and I started saying, "Hey, gold's worked off through this consolidations, worked off a lot of this overbought condition." Here was the relative strength overbought. And we said, "This is where it's it's really overbought. Wait for a correction. This is where it got really oversold. This is where we said, hey, this is a pretty good setup to buy gold." You're now back to a relative strength overbought. And again, every time you get to these relative strength overbought conditions, here's your peak. Here's your peak. Here's your peak. Here's your peak. Take some profits. Doesn't mean sell everything, right? We don't sell everything. We own gold in our portfolio. We don't sell it all, but we trim it back. So, if we have a 5% position in gold, it's now seven. We trim it back to five. Use that cash for some other investment. Are we holding cash until we're ready to buy gold back? because again it will give you an opportunity to buy it back cheaper. And if you can do that over time and just manage that portfolio risk and not suffer those long periods of draw downs where you're either flat or losing money for, you know, five, six, seven years, which is a a consistent norm with gold, then you'll come out much better in the long term in terms of your total return basis. Okay? But this also but this is also why find me one just one portfolio manager in history that buys and holds. Right. I mean they you wouldn't need a portfolio manager if you were just buying and holding. Exactly. And you wouldn't have a market either because the market would just trade flat. If everybody just bought and held, it would just be flat. Yeah. Um okay. So uh so you know clearly the chart catches your attention with the the um breakout that gold has had of late. Uh very uh stretched in terms of valuations. And I want to be consistent here because we talk all the time when we think that regular equities have gotten stretched. And so I want to say hey same thing can happen with any other asset class including one like gold. Um well and that's that that that's an important point. I was just about to say that is that you could apply that same analysis to stock to Bitcoin to gold to silver to platinum to uranium to corn cotton wheat. The technicals apply across the board for every asset and every asset performs exactly the same relative to their technicals. Yeah. So gold is a little different. um you might disagree for with people's reasons why they think it is so, but you know there there's people that are holding it as um you know sort of sort of like inflation insurance or maybe even Armageddon insurance like you know I just I've got fears that you know we're going to have a currency reset or whatever. Right. So, um, you don't have to agree with those those those assessments, Lance, but but some people hold it, you know, like I'm going to hold this for the next 10 years and they'll hold it in physical form, right? Sure. So, it's it's easy. It's much easier to trim back your your precious metals exposure if you're sitting in GLD or, you know, some some paper traded thing. There are reasons for why somebody might say, you know what, I don't want to give up the ounces of gold that I have. What would your advice to them be? Would it be buying some put options or whatever, but just something that has gives a price offset? Yeah. Yeah. Just hedge it with So, if you've got, you know, let's say you've got $100,000 worth of physical gold sitting in a vault, right? Um Yeah. Go buy some put options on gold, right? Go buy $100,000 worth. You don't have to you wouldn't have to spend $100,000, but you can buy $100,000 worth of put options of coverage. Yeah. Of coverage to to hedge your position for. It wouldn't cost you much either. um in a lot of cases probably, you know, 10 20 grand. You can hedge your whole position. I'm I'm just I don't know what the number would be. I haven't actually looked at it. Right. And you don't even have to hedge your whole position. You could say, "Well, I'll hedge half of it." Right? I mean, yeah. Yeah. Pick a number or buy an asset that goes up when gold goes down in price. Just buy a non-correlary asset to hedge that. So, and they do have inverse gold funds, too. I mean, there you go. You could buy Yeah, you could actually they have issues over time, but Yes. Yeah. So, I mean, yeah, there's there's tons of ways to hedge your position. So you can lock in that value. Um and again, but this applies to every asset. It's just, you know, it's not just gold. It's, you know, if you own Nvidia or if you own Broadcom or you own um you know, Proctor Gamble, it's the same thing. If you have a very large concentrated position in something, then learn how to hedge and portfolio and manage that risk because if you do that, you can survive the down. That's the whole and the whole trick to this is survive the downturns. That's every asset goes up in price, every asset goes down in price. It doesn't matter what your thesis is, right? Long term doesn't matter what your thesis is. If we have economic armageddon, it ain't going to matter, right? Because the only thing you better have is guns and lead because, you know, you can have all gold you want, but you don't have guns to protect it. Somebody will come get it from you. So, um, you know, just keep in mind that everything goes up in price, everything goes down in price. And we just need to hedge that risk of those losses because we're spending a lot of time just getting back to even, whatever our thesis is. You know, a good example is as we just as we just showed you, right? Gold was flat for 10 years from peak to peak, right? So 2010 through 2020, it just was flat. So as an inflation hedge, it sucked, right? Stocks did a whole lot better in terms of that in terms of protecting your inflation adjustment uh during that period. So you know, forget all those it those thesises, right, that people put out. Most of those thesis that that put out there are from people selling you gold. And then just always ask the question is well if that's your thesis then why are you selling me your gold? Why aren't you keeping your gold if you're selling it to me? Um but you know just think about you know how you this is this is hard value money and just think about what I'm trying to what am I trying to achieve with my money and it doesn't matter how I achieve if I'm worried about the future purchasing power of my dollar which is all you should be worrying about. I can achieve that through a variety of different ways. So, just choose which one works. And if one's not working, find another one that is. And then you can always, and this is this is always the other thing that Adam, that gets me. Let's just say that you said, you know, I'm going to sell all my gold today. Gold's overbought. I'm selling all my gold today. For some reason, people think that if they sell all their gold today, they can never buy it back. It's like they're kicked out of the club of gold ownership, right? It's like, "Oh, no, no. You sold all your gold. You can never buy it back again." No, that's not the way it works. You can sell all your gold today if you want and you can buy it back cheaper at some point in the future and capitalize on those gains all over again. There's there's no exclusive club to any asset. That is a great reminder. Um and people again like I said it's human psychology. We we sort of tell ourselves these things, right? Um okay. Uh tell me which of you have been in the business of working with clients for decades and you've you've seen it all. What's worse, the guy that says, "H, you know what? I looked at that and gold was three standard deviations up and I sold a whole bunch of it and then it went up even higher and it didn't correct, right? And I missed out on those additional gains and man, I would have done so great if I stayed in, right? Versus the guy that that stayed in didn't hedge and then it had a material correction maybe years long. Yeah, it's they are they are they don't equal. that they I think we think they are, but I don't think they hard for going through it, right? They they are equal in this manner, right? The guy that gets out early, right, that took profits and and there's look, there's some great investors throughout history that their whole motto is is I'm glad I sold early, right? They always sell early and they're just not greedy. It's like, hey, I made money and I put that away. And remember any asset you have is only you know when you look at your portfolio uh of and you you pull up your portfolio on on your computer screen today that's not real. That's not real money, right? It's not real money till you convert it into cash, right? That's when it becomes real money. It's all ethereal play money. It's monopoly money until you convert it into something that that's spendable, hard cash. So, you know, the the guy that sells early, he makes the he makes the same mistake as the guy that sells late, which is I sold it and it went up without me. And then when it does correct, because it always does correct at some point, price is always correct. He doesn't buy it back because again, he thinks he's in this club that he sold it. He's never allowed to pay it again for some reason. Right. And and so he so he hurts himself by not just managing his sell, but also managing his buying. Look, that's that's part of portfolio risk management is also managing the buy and the sell. And and this is where people go wrong is again, they're good at buying, they're terrible at selling. And if they do sell, they're terrible at buying again. And I've never figured out the psychology behind that, why that occurs. But, you know, I've bought and sold Eli Liy. I can't tell you how many times over the past years or AB, you know, Abby, you know, we Nvidia, we've bought and sold I can't tell you how many times. We don't sell all of it, but we sell it and then when it pulls down, we buy it back and build our position back up and make more money with it. So, you know, again, that's the thing. I think you've got to leave a lot of this emotional baggage at the door and just focus on what are you trying to achieve and then focusing on the best way to do that. All right. So, I agree with all that. your answer was different than I what I was expecting. Um because uh I was expecting you were going to say, "Hey, look, you know, bird in the hand is better than two in the bush, right?" In other words, like look, if if you've taken your gains and then the thing continues to to run up, you got your gains. Congratulations. You lock yourself in, right? It's it's sort of like, you know, um somebody who can't afford a house finally has enough gains that they use to buy a house and they they they they they locked in that house, right? And then that investment that they sold went up even more and they're like, "Oh, gez, I could have bought a I could have bought a McMansion with that instead of a regular home, right?" Yeah. But you still have your own home and a roof over your head and you're in good shape, right? Versus the guy that had enough to buy the house and then held on too long and then now he's stuck renting forever, right? Like you're better off. Yeah. You're better off if you buy and miss out on some more gains, right? I mean, look, that's it's true. And that's why I said like great there's great traders in history that they always they're like, "Hey, we always sell early and you know, they don't wait till that last minute." And and that's the biggest mistake that investors make. They're always trying to get the last little clip out of out of some rise. It's like, "Oh, I'm going to get it right at the top, right?" That's impossible to do. And and I look, I can't tell you how many times throughout my investing career, I have watched people turn very large chunks of wealth into zero. Mhm. And and I'm I'm not talking about a few. I'm talking about a lot. And some of them are are obvious. I mean, I knew people that worked at Lehman saw their entire 401k plan go to zero. Enron saw their entire 401k. Those are those are those are the oneoffs. But during the financial crisis, I saw people with huge portfolios of Cityroup and Bank of America and and other stocks that that had been given to them, gifted to them through estates and those type of things. And they had, you know, three, four, five million dollars worth of the stock, hugely heavily heavily concentrated position their portfolio. And you know, it's grandpa's stock, so I can't sell it because grandpa would have never wanted me to sell this stock. And they watched it go to basically zero. And you know the guy and I'm like, "Dude, grandpa didn't leave you the stock. He left you the wealth. He wanted you to do something with the wealth, not just watch it just get destroyed." But these are the mistakes that we make. And and again, this is it goes to every asset class is that yeah, you're always better off selling early. And again, but you know, the point is is that you don't have to sell everything either. Um, you know, when something's going up, if you own $100,000 worth of gold where it is right now, I'd sell 20% of it and lock that gain in and then when it corrects, buy take that 20% and buy back your position back to 100 grand. So, you know, you can continue to accumulate over time. But if something goes wrong and that decline keeps going, well, at least you got some of your gains out of it and then you can sell some more, sell some more, you know, rework your position, however you want to do it. But that, you know, that's what I'm saying is like, you know, you you just have to manage the the exposure to your portfolio with some type of rules in place. And and you know, the the the biggest problem I think that most investors have is they have no real set of defined rules. They just start throwing money at the market. And it makes sense, right? I just throw money at the market, it just goes up every day. You know, I I buy gold. Why? Why buy gold? Because it's going up, right? So I buy more gold. I buy more Nvidia. Why? Because it's going up. There's there's no real strategy or structure to the portfolio. There's no investment rules, there's no kind of guidelines to follow. So, you know, you get lost really easy and we start getting trapped into these narratives that, you know, we start looking on the internet, right? We start looking for people that support our views like, "Oh, yeah, gold's going to the moon. You better just buy and hold." Or, you know, Bitcoin, you know, remember the whole buy and hold thing is total Bitcoin. and we get we so it feeds our confirmation bias which is fine except eventually something's going to happen and Bitcoin loses 50% of its value you know and and those things happen. Yeah. And what's interesting is um I've seen this a lot and I know you've seen it a lot more than me across your career Lance is you talk to people about this and you kind of get the Yeah. Yeah. Yeah. I I get it. I get it. I know. Right. and then the correction happens and then people are like, "Oh, why didn't I listen?" I mean, it it it it it's such a like you get it academically, but you don't really get it um truly understand it until it goes against you and then of of course it's too late. So, anyways, um good discussion. Um probably two key things I want to just note for folks which is thousand% agree with Lance is that you need to have a framework for why you're buying why you're selling and how to do this trimming that Lance is talking about. So either develop it if you don't have it and to be honest most people don't ever develop this. So if you don't then outsource it you know leverage somebody's expertise who does this well for a living. Um, secondly, and and let's I this has been a really good timely discussion for me because, you know, I' I've owned precious metals and so it's been a great year um for for my pre the precious metals part of my portfolio and I myself wrestle with these emotions, right? Yeah. So hard to consider selling this stuff because oh my god, it's done so well. It's finally done well. Like I've been holding on to this stuff for years, a decade, and it just hasn't gone anywhere. And man, now it's actually performing. Why am I your brain's screaming why are you selling this thing right when it's doing well and you everybody says let your winners ride and all that stuff right and I think the the only thing that I'll say about this is um Lance's logic is very sound and if if you're having trouble just getting starting here because it feels so unnatural to to to click the sell button just sell literally 20 bucks 50 like like just something just do some just prove to yourself, I can actually sell a little bit of this. And you know what? The world didn't end. Right. Yeah. And nobody showed up your door to beat you with a club. So, Right. Exactly. So, real quick, I was just going to uh we just published this uh about two weeks ago. If you go to our real investment uh advice website, um under resources, we have a link called financial survival guides. And the very first guide that we have on this is called real investment advice. And what this guide is is it's it's about 20 pages long. It's a very easy read. Um but what I've done is I've put together all of our investment rules. So we talk about rules that matter in investing, emotional investing traps, investor, speculator, buy and hold myth. A lot of the stuff that Adam and I talk about, we've put it all in writing in this guide. So it's free. It's it's free to download. Doesn't cost you anything. But we just go through all the emotional traps that we get ourselves into, all the rules to follow to help you just kind of navigate your portfolio a little bit better. But again, just go to realmeadvice.com, click on the resources and financial guides, and it's the first guide on on the list. That is super cool. Um, that's I love the fact that you guys have done that and I'm sure you're going to keep adding guides to that that channel, right? Well, we've got a bunch on there already. We've got, you know, retirement income guide, financial guard rails, um, ultimate chart guide for investment life. So, there's an annuity survival guide on there as well, severance packages. So, there's there's quite a few guides on there, but the latest one is called Real Investment Advice. Okay. Um All right. So, we were just talking about things that um were really overbought, you know, in some cases by by several standard deviations. Um talk for a moment about things when they're really underbought, which is also another hard time to buy them because you're like, "Everybody hates this. this thing's been performing miserably. Why should I take my hard-earned cash and plow it into this thing? But we just, you know, we gave an example earlier that energy may maybe really be kind of a a multi-year bargain right now. Yeah. So, you know, a good example of this is just happened uh not too long ago actually. There's a company kind of and I'm just I'm I just picked one off top of my head. Um but this is a wrist networks and back in you know this stock has been performing exceptionally well and then during kind of February March before you had the whole tariff blowout right this stock was just selling off they announced earnings earnings kind of missed the mark a smidge and the stock was really getting hit very hard so it was you know again you know you you look at you look at this chart and it looks a whole lot like everything else right so three standard deviations overbought extremely extended. Um, but people couldn't wait to buy the stock. Hey, this stock just goes up. You just buy the stock, it just it you look at the chart, it just goes up and up and up. It's just incredible. Uh, so you you buy the stock, three standard deviations overbought. They come out, they make one announcement and the stock loses a very big chunk of its value. Lost about 50% of its value. Um, got three standard deviations oversold. Now, the fundamentals of this company did not change. this company was still just growing earnings at a rapid pace. Sales were growing very rapidly. But again, when things get really extended in one direction, all it takes is one piece of news or one event to cause buyers to to stop buying and sellers to start selling. And and if sellers are trying to sell and the buyers are going, "Yeah, I'm not really interested in buying it." That price is going to fall until it finds buyers. This happens in every asset, gold, silver, platinum, stocks, bonds, you name it. But eventually there's going to be a point to where buyers go, "Okay, yeah, I think that's actually good value now because of it went from 120, went down to 60, 50% loss. Yeah, I'm going to start accumulating the stock." So, we started seeing three standard deviations oversold, started seeing volume, accumulation pick up, a lot of things like that. Stock started to stabilize, but nobody wanted it at this point. If I tried to get you to buy a risk Network, man, it just lost 50% of its value. I'm not buying that stock. Well, now the stock's trading back at all-time highs again and you missed all this gain. So again, this is why, you know, technicals mean so much is that when these things get extremely extended, extremely overbought, you're going to have these corrections. But then at the same time, you've got to look at the inverse of that and say, okay, well, now it's no longer overbought. It's actually potentially well well oversold. valuations have come uh back, you know, a lot better in line with where they are. I'm just going to correct you. You're reversing them. So over I did reverse that, but yeah, but valuations have now corrected. I'm very oversold and now is a better time to buy things and and so this works with every every stock, every investment over time. Um when things get really really overbought and extended, learn to take some profits. You're going to get an opportunity at some point to buy it back cheaper. You just have to be patient and wait for it. And again, you give me any stock. Pick a stock that you want, whatever it is. And I'll show you the same chart. Yeah. Let let me ask you this. So again, just to bring it back to energy for a moment. Um that's a sector, right? And and oil is a se Well, I guess energy is an industry. Oil is a sector of the energy industry. Um, so presumably the same thing works with um with sectors and industries as well, right? In other words, like you don't necessarily have to be out there trying to pinpoint exact uh companies. You could just say, "Hey, look, I think you know, again, oil as a sector really seems to be um uh on sale right now." And so you could buy an ETF, right? either of the producers or just of the the commodity itself and just say, "Hey, I'm gonna Yeah. Okay. The same approach." It it it No, literally it does the same thing. This is why I just I wrote here uh I just wrote this article uh week before last actually posted out last Friday um right before we did the show last Friday. Um, but this is this is based the the article is talking about uh energy price as an economic indicator. Um, this is the bullish oil bets down to 17-year lows. So, in other words, people betting bullishly on oil right now is almost non-existent. That is a great contrarian indicator for something to happen to lead to a reversal in oil prices. And this happens all the time, right? we we we'll have some geopolitical conflict or something and all of a sudden people go, "Oh my gosh, we're going to shut the straight of Hormuse and then oil shoot up 30 bucks right on this." But the reason that is it's not because we're really that worried about the straight of Hermuse. I mean, you know, yeah, that's important. But what happens is on the NYX all of a sudden everybody that's short oil betting it's going to go down has to cover those shorts which drives the price up. So now they're being forced to buy and the more that the price of oil buys, the more it causes them to have to cover those shorts. So again, you know, when you get to these very divergent periods and you just look at the the bullish oil bets tells you all you need to know is that every time you're at these levels, what happens? They didn't keep going down, they went up. And and this is because something will cause this ultimate reversal in the markets. And and basically, we just kind of went through this oil price and events and what occurs. And again, there's always a reason why, you know, things happen. You know, either it's a a backwardation issue or it's a taper tantrum or something there. There's some type of event that's going on that's moving the price of oil as it relates back to what's happening in the economy. Again, there's a very high correlation. This is the Let's increase the size of those charts if we can. Uh, yeah. Thanks. So the blue shaded background is a composite index of inflation, um, interest rates and GDP. So that's a composite economic index. Um, and it's got a very high correlation to crude oil prices. So crude oil prices declining, not surprising. You're also seeing that reflected since we use crude in every facet of our life. Um, whether it's building solar panels or windmills to the clothes you wear, that all involves energy. So if that's slowing down, the price is declining. that's a supply demand indicator then that also relates back to economic activity in all forms. So, so again, not surprising this is has got a very high correlation, but you know, these deviations from the four-year average, we've got a very big deviation from the current price of oil from its long-term growth, this four-year average growth trend. And normally when you get these kind of deviations below that four-year average trend, you get a reversal in oil prices and it's due to some event, whatever it is, there'll be something that happens that causes that very sharp re reversal in oil prices. So, personally, I'm getting very interested. We have we have a couple of energy stocks in our portfolio, but they're very small positions. I'm personally getting a lot more um optimistic on a energy trade coming up sooner than later. So, what would you want to see to tip you into, okay, let's start buying? Um well that's where we go back to it's interesting too a little bit different is that normally XLE as an ETF trades fairly closely to what's going on with oil prices and there's a bit of a divergence now between XLE and oil prices where they're currently trading but you know again when you take a look at actual crude oil as a as a function itself um yeah so this is oil um you're getting very very deviated from its long-term average and you'll notice though that's interesting thing is that even though that that the price of oil is declining, you're seeing money flow starting to pick up. And normally when you see that, you'll start to see a reversal in oil. So you could see a reversal in oil really kind of as soon as next week. But but I'd like to see a little bit more of a base form in here and then start to see this turn up and that give that make me a lot more optimistic that we've got a tradable rally in oil coming. All right. So you're you're you're not trying to catch the falling knife. You're you're waiting to see it bounce off a bottom. Yeah, exactly. Sorry, I choked myself up. No worries. I know talking about oil makes you his Houstononians uh emotional. Exactly. Um all right. Well, let's see here. Um I'm just looking at the time. Um we're starting to run out. We might have to boot the rant this week. Um but we we've extra ranted in recent weeks, so I think I think folks will forgive us. Um, so you you we gave super brief mention to this earlier, but but let me just ask you to talk about it directly, Lance. Sure. Um, so folks are looking at today's jobs report and saying, "Oh, yeah. Okay. Yeah, the Fed's definitely going to cut in September. Cut this month." Um, and looks like rate cut odds for 2025 are now um minimum three cuts going forward from here. I think the market is currently pricing in is it a September, November, and December. Those are the last three meetings. Um, so cut a 25 basis point cut at at all of them. Although there's still uh well there's probably heightened debate now after today's jobs data as to whether we'll get a 50 basis point cut this month or not. Um I I guess do you see those odds as as probably the the correct ones for now or do you see it differently? Well, I I never know what the Fed's going to do. The Fed kind of does their own thing and you know, like I said, they should have been cutting rates a while back. I I just pulled up the Fed watch me. So, the target probabilities for a September 17th rate cut is now 11.8% for a 50 basis point cut and 88.2 for a quarter basis point cut. So, you know, they're still betting on a quarter basis point cut even after today's report, but it's pretty much a fix at this point that they're going to cut, you know, 25 basis points. Yeah. Okay. Um, I will say, you know, I just interviewed Lacy Hunt um, about a week ago and, uh, Lacy uh, very concerned about the slowing economy and in his mind he thinks the Fed is way behind the curve here and he's like, I mean, they should be cutting like a 100 basis points at this point in time. Um, obviously that would totally freak out, it's not going to happen. It totally freak out the market if it happens, right? But yeah, I No, I absolutely agree with him. I you know the Fed should have been cutting several meetings ago. He's absolutely right. And now they're so far behind the curve. I think it's going to come up and bite him in the butt at some point. But again, if they came out and look, I even I think they come out September the 17th and they cut by 50 basis point. You know, you take a look at the the 10-year Treasury rate um as compared to the Fed funds rate. If the Fed cuts aggressively, that is because you're generally entering into an economic recession. Rates start to fall sharply, markets go lower, stocks don't perform well because you're having to start to repric earnings for much slower economic growth. So, you know, I think at this point the Feds is more sensitive to kind of the outlook that they put on the markets and I think they realize if they come out and cut 50 basis points in September, which it's possible. I'm not saying it's it's not possible. But I think they realize if they come out in September and cut by 50 basis points that they're going to freak out the markets because markets are kind of betting on 25. So maybe they do 25 and then say, "Hey, we're going to have to cut, you know, we're going to be cutting it every meeting through the end of the year now." And, you know, maybe they start to do that and then potentially even start talking about stopping QT. Okay. But I do think they're I think I think Lacy's right. I think they're behind the curve and at some point they may have to start cutting more aggressively, but if they do that that's not going to be good for the market. Okay. So, you and your colleague Mike Leowitz have been more confident than most that uh the slowing economy was going to win out in terms of, you know, where inflation heads versus uh tariffs, right? Um we've talked a lot that, you know, you don't even think tariffs are really that inflationary in the long run. Yeah. Um, so we're seeing bond yields, they've actually come down a fair amount in the past couple days, and I checked a few hours ago, they were down pretty hard again today. Yep. Um, so, uh, at your portfolio meetings, are you guys having any discussions about increasing your exposure to bonds or bond duration at this point? Well, right now, so right now, our bond portfolio is structured for a Fed rate cut. So, we have a lot of bonds allocated on the really short end of the curve, which are the most sensitive to rate cuts. Once we begin to see those rate cuts take effect and the economy begins to slow, we'll begin slipping out that duration to the longer end, which will pick up on slowing economic growth, falling inflation, um, and the drivers of long-term yield. So the first thing we're we're going to kind of cap work on capturing is the short duration part of the curve that's sensitive to Fed rate cuts and then we'll shift to capture the economic slowdown which is a much slower train to move. Okay. Um and does that basically mean that you think um rate cuts will happen faster than bond yields coming down? meaning, you know, because the Fed can change the policy rate overnight and looks like it will in a couple weeks. Um, be in the short end of the curve for that. Um, but it'll take a while for the slowing economy to start dragging down those mid to longer term bond yields. Yeah, it's just it's just it's a slow the economic slowdown is is a longer cycle than rate cuts. So, rate cuts are going to affect the short end of the curve. That's all they affect. Yeah. I just want folks to understand how how this propagates along the curve. The the short end moves real fast with the Fed policy change. Exactly. The rest takes time. And then as it moves out towards the end of the curve, it's much less sensitive to Fed policy and more sensitive to economics. So as the economic environment continues to slow and deteriorate, then that long end of the curve begins to pick up. And we're we're getting very close to that point. Um it's it probably you know this time next year you know we we're going to have a really good indication of where inflation and economic growth is headed and and so and also too I mean this past week you know there's this whole issue about tariffs now um you know he had this one federal judge came out and said tariffs are unconstitutional it's now going to go to the Supreme Court there I think there is a there is a you know the argument that the federal judge made in regards to tariff is not incorrect congress is the Congress Congress controls the power of the purse. So that includes spending money and taxes and all that. So technically the federal judge is right is that the congressional body should have passed a bill to introduce tariffs in this environment rather than using an executive. This is the problem with executive powers, right? They're very easy to overturn. Executive orders. Yeah. Yeah. Executive orders. Sorry. Um executive orders are very easy to overturn. You know, you follow the congressional path and and pass a bill. that's a much different story. So, this is going to Supreme Court and I think there's a reasonable risk that, you know, the Supreme Court sides with the federal judge and says, "Yeah, if you want to do tariffs, it's fine, but tariffs are attacks and that needs to go through Congress." And so, you know, it's interesting. Yeah. And and maybe I'm wrong. I mean, maybe I'm wrong. Maybe no, you're you're completely fine. Go for it. But, you know, we may not have tariffs to deal with as a tariff impact is my point. Well, it's interesting. So I've I've I I think there is prob probability there. I don't know, you know, whether it's majority or not, but enough that I I I think I've even seen the administration in the past 24 hours do a little like damage control of like, yeah, we may have to come up with a different solution for tariffs, right? But what's interesting is I've also seen uh reports in the past 24 hours of all of a sudden I guess on the hill uh tariffs have gone from oh my god they're attacks they're going to be super inflationary and and drive the economy off the rails to hey we've got hundreds of billions of dollars coming in every year now and and they don't seem to be as inflationary as they were and like hey if we if we get if we lose this tariff revenue oh my god we're not going to be able to you know we're not going to be able to fill that hole in the budget. Right. Yeah. No, it's funny how quick that that turned that tone changed in Congress. Well, it's funny how quickly Congress people get addicted to money, right? Yeah. Exactly. Well, but if I was and this is the I was telling I was talking about this on the radio the other day uh on our YouTube show the other day is that, you know, if I was President Trump, I'd say, "Okay, federal judge. Okay, fine." I would I would go to Congress today and say, "We're going to pass a singlepurpose bill. We're going to put a 10% tariff on everybody. we're just going to pass a bill puts 10% on everybody and you got the majority of the House, you have majority of the Senate, pass it. And then it completely kills this whole deal over tariff constitutionality in one fell swoop. And he should be able to do that fairly quickly because he has control of the House and Senate. Now, midterm's coming up next year, who knows? Um, but he could do it right now if he really put his mind to it. So, you know, he could solve his problem on terrorists pretty quick. All right. So there a couple interesting things that we don't have time to get into now, but I'll just flag them so that if we decide we do want to talk about them later, they're on the radar. One is this, you know, what does the world look like? I mean, look, Liberation Day threw the markets into a massive tizzy, right? Which everybody remembers. Um what happens if tariffs get pulled off the table, right? I mean, are we going to have a similar period of uncertainty, right? Um the other thing that just happened is h forgetting exactly what it's called. I think it's the SEO, the Shanghai coalition, whatever. But we basically just had a meeting of the big countries that aren't on team America, right? China, Russia, and India. I mean, India really seems to be saying, "Hey, America, I'm not going to I I'm not going to cowtow to your demands that I get on team America here. I'm going to at least try to straddle the fences here." Um but you know a lot of people are saying hey this is showing that the world is becoming perhaps a lot more bipolar than uh the US has bargained for. I don't want to open that right now because there's lots to potentially say about it. But it, you know, it could be quite meaningful if indeed uh there's there's a bigger resistance uh to what uh you know the current administration's trying to do with basically trying to get the rest of the world on its side so that it can more or less isolate China to get China to to uh agree to its trade demands. Yeah, that's true. And again, you know, this is and this is but see these are those issues that potentially have side effects that impact the financial market. So, you know, all these all these topics are great and we have no idea how they actually impact you know what what the outcomes of this going to be. But again, when you know, kind of regardless of of kind of what the views are, we've got to pay attention to these issues because at some point, if something occurs that all of a sudden changes how Wall Street is expecting forward earnings to grow, then that's where these valuation issues become a problem. And they become a problem quick. And which is why we need to be paying attention to all these different factors. even though they may seem irrelevant, one of these things could crop up and actually be the kind of be the catalyst that sparks that sell off in the market. Okay. Well, like I said, I'm just putting on the board so that if it actually starts becoming something, you know, we know it's out there. By the way, it's the Shanghai Cooperation Organization. That's what the SEO stands for. Okay. Um yeah, I'm going to I'm going to jettison the rant this week. Um so, right before we get to your trades, um last question for you, Lance. Um, I've had a lot of um either housing experts or analysts who look at housing really closely on the channel recently and it doesn't look good and this this is happening at a bad time, right? Um, I I I just interviewed Danielle Park from uh Canada. Uh, and and it's really instructive to to see her analysis of the the Canadian housing market because while there are some differences, it really does kind of give America a preview of coming attractions. Um, and she is, you know, basically saying, look, we we got a stock bubble and we got a housing bubble here. And, um, the housing bubble is already starting to correct. and the in her mind the stock bubble looks vulnerable. You don't have to necessarily agree with her. Yeah. But um you know lots to potentially be worried about. Again, a lot of bad data in housing. Um why is Warren Buffett buying the home builders now? Berkshire Hathaway buying. Yeah. Uh no, it's a good question. Um, you take a look at, you know, the it's it's a I think for for instance, like you take a look at Toll Brothers as a good example, you know, I think you have to start looking at supply and demand imbalances and these home builders are going to be forced to build a lot more homes in the future, right? Um, so existing home owner and this is the theory I think in a lot of cases is that existing homeowners aren't going to sell because they can't sell their house to go buy a 7% mortgage. So the only way to to provide supply is for new home builders to build new homes. And so now new home builders are starting to build build smaller square foot homes, those type of things, trying to fill that supply gap that's that's in there. Uh Scott Bessant just came out last week and said that they're kind of kicking around the idea of maybe declaring a national housing emergency. Terrible idea because that will definitely give us another housing bubble if they do that. But you know what what would that mean? I have no idea. But would they provide a lot of incentives for home builders to to build more inventory etc. What does that mean? So I you know you take a look at home builders though they trade fundamentally very cheap. So if you're Warren Buffett I'm looking for fundamentally cheap stocks that are growing revenue and earnings. Toll Brothers is a great example. Trades at a 10 times Ford PE price of sales of 1.3. It's growing earnings on a really steady growth path. um you know so and has you know runs a gross margin of 25% operating margin of 18%. I mean you know fundamentally these stocks are doing great. Now the one thing I don't like about Toll Brothers is that a lot of that you know kind of earnings per share growth is all driven by massive stock buybacks. So I I much prefer a company that's that's growing earnings and not buying back stock because that's really telling you that the company's really firing on all cylinders. But these stocks are but fundamentally you know stocks like Toll Brothers, Beer Homes, etc. they do trade fundamentally cheaply. And you know, look, I've got a lot of buddies in the real estate business. They are just chomping at the bit to get money invested back into real estate as soon as the Fed starts cutting rates because that will bring down uh start to improve cap rates. Okay. So, you think it might be a bet on lower interest rates, lower mortgage rates, and um perhaps additional forms of government intervention. Just FYI, just because you mentioned Toll as your example, that's not what Bergkshire bought into. I think they bought into Lenar and Dr. Horton. And it's not a big amount either. It's not like he's making a massive, you know, strategic bet for for Bergkshire on this. Um but okay, those are interesting. And you know, when when I when Bessant um made that comment, yeah. Um I I put out an X uh linking to it and I was like it's just really hard for me to hear this as anything other than problem created by too much central planning intervention to be addressed by more central planning. No, I look I I think it's a you know government should not get involved in housing you know if you want to if you want to make housing more unaffordable just like healthare right healthare was you know you know when once government got involved in health care to make it cheaper it became more unaffordable um same thing for housing you know if you want to make housing even more unaffordable get the government involved in it yeah no I I sadly fully agree with that all right so Lance trades sounds like you guys maybe haven't made that many trades over the past week we have it uh the portfolio is doing really really well. Um we just you know we run a 60/40 allocation right now that is uh holding uh 12% 13% cash and we're basically one point behind the S&P this year. So you know on a year-to- date basis. So the portfolio is performing very well. Our dividend equity growth model is actually performing right along with the S&P 500. So it's tracking it to to the tea this year. Um you know so so again there's not been a lot of need to adjust stuff. It's been very boring in the markets and it's like okay should we maybe do something here or there but you know we we took profits previously. We added back the stuff that was really oversold and and you know there's a few things that are going on that there's some opportunities kind of popping up that we're looking at but there just hadn't been you know sometimes you know we've talked about this before on the show is that sometimes you feel like you need to do something and when you feel like you need to do something generally it's best not to do anything and that's really been the case. is like, oh, we should really do something, but there's really not much to do. So, there's no sense in trying to force it right now until there's kind of a clear pathway to making changes in the portfolio. Yeah. I mean, I I equate this to um the science of hitting, you know, Ted Williams, which is he really understood exactly where in his strike zone, uh he could really knock the ball out of the park. and his job was really just to wait for the pitches that really got into that sweet spot. Right. Yeah. And that that that goes back to our conversation earlier about trading portfolios and managing money is that that article about portfolio risk management. It starts out with the the Hall of F the 10 Hall of Fame best hitters in throughout history. and you look at their batting averages, they're all like 365 on average, which means that every time they went to the plate, they struck out a whole lot more than they actually got a hit. And uh so we started off with that because it was a it was a quote by uh Steve Cohen, who runs 021 Capital Management, which one of the best hedge funds in the world. And he said his best trader is right about 55% of the time and his average trader is right about 45 to 50% of the time, which means they're losing trades more often than they make money, but they just limit the losses on their trades, right? So, you know, and that's and that's goes back to the whole risk management analogy about, you know, why it's so important to limit your losses and and manage your winners at the same time. You know, learn to take profits, rebalance risk, those type of things. But if you can just limit those losses, you know, you're going to have a lot more losers than you have winners, but the winners can really make the difference over the long term. So, absolutely. And you just add to that the the patience of a of a Ted Williams, I think we talked about this before, you know, Warren Buffett says, "Hey, look, in the difference between investing and batting is he's got to swing, right? If the ball's in the strike zone, he's got to swing or else um you know, he strikes out, right? So he's got pressure to swing the bat where he's like, "As an investor, I can take a million pitches and wait them all if they're not great." Right. So basically, why why make an investment that you don't feel great about? Right. That's right. So the patience that you're exerting by just saying, "Hey, there's just nothing right now that's really making us super excited." Yeah. And just because the stock's going up doesn't make it a good investment. Yes. Exactly. Um all right. Uh look, I I just want to end real quickly. This is not a rant. Um I just want to get your your top level reaction to it, Lance. Um, you know, I what I try to do with thoughtful money is to try to help, you know, regular people better understand what's going on uh in the mark markets and in the macro economic world. And I I try to distill it down to digestible, you know, things uh as often as I can. And you and I have talked about this that as a to to build wealth in the long term, there are three muscles you need to develop. There's your earning muscle, there's your savings muscle, and there's your investing muscle, right? And and in general, I think you you if you're just starting out in life, you want to develop them in that order as well. Um you know, you can't savings not going to help you too much if you've got nothing coming in, right? And uh you know, uh you can't invest if you haven't saved, right? So there's sort of a progression there. So, I just put out this um poll on X just to say, hey, you know, if if if you're evaluating your own development of those muscles, you know, which which one do you think you're best at? And what's interesting here is um people said they were pretty good at the best at saving uh investing kind of a close second. the earning muscle was the one that that people rated themselves lowest at except for those who just said, "Hey, I'm bad at all three. I need to hit the gym." Right? Um, and I this is interesting, but given our talk, Lance, about um, uh, what's going on in the employment market and where the economy looks like it's headed, I think this is a time more so than others, where really working on your earning muscle is really key because the thing that kills people during recessions is earnings compromised, right? getting your earnings compromised either by losing your job or getting your hours cut or whatever. So, um I'd love to just get your thoughts in general on this, but also like you know this this may be a time where trying to develop some multiple streams of income just in case you lose your primary one during a potential recession here, it's not going to be quite as devastating as otherwise. No, that's right. I mean the you know we talk a lot in you know our shop with with individuals about you know building up a a a cushion and you know a savings bucket that in case you lose your job you've got six months worth of salary set aside so that you can survive until you can find your next job you know but again you know it's hard to do right when you're just trying to make ends meet those type of things trying to save that extra cash is very difficult but you know again this is what I talked my daughter about, you know, all the time is like, look, you you you've got to do three things. One, you've got to separate out needs from wants. And you you think a lot of your wants are actually needs. Like, I need a new phone. You really don't. Right. Right. It's just a want, but you can't classify that as a need. So, so you got to start sorting those things out so that you can start saving money. And you know, and if you can learn to live on what you're bringing home from your primary job, then work a part-time job to create your savings bucket so that you can create money and save that and then eventually get that invested. But again, we can't invest until we have a savings bucket set up as well. We need that cushion. We need that emergency cushion put into place first before we even start investing. you know, le let's say you need $10,000 to cover six months worth of your savings or six months of living, whatever it is. So, save up that 10,000. Then you need to save up another 10,000 to go invest with. And that way, if something happens with your job, you're not forced to liquidate your your investments to pay bills with. You've got that cushion to help support you for six months until you can find a new job. But then that way, you can leave your investments alone to let them grow. But the problem is we get we we we tend to put those in reverse order. We start throwing money in the market because it's going up and oh, I can get rich quick this way and we start treating it like a casino and then when something blows up and I lose my job or whatever, now I've got to go liquidate all those assets and probably the reason I lost my job is because the economy is turning down which means the stock market's going down at the same time which just is a huge whole compounding effect on on the value of your wealth. And this is why so many investors wind up, you know, not having wealth by the time they reach retirement because of just, you know, these events that occur in life and they happen all the time, but being unable to navigate them safely. Yeah. Um, and to your point about wants and needs, this may be an unpopular comment, but um, it's always unpopular. Yeah, I know. I mean, it certainly works certainly works on a budget side of things, like the cost side, right? like um hey, you know what? You say you have to have that, but you really don't, right? Um you know, your whole thing about getting super creative and as a guy who lived out of his car, you know, you often remind us that, hey, you can you can get by with a lot less than you think. Um and I think the same thing on the earning side to be honest. I've known a lot of people in life and and and this is coming folks from a self-described workaholic. Um, so I understand I I I I'm wired this way and and I probably should have a little more life balance um work life balance in in my life. You and me both. Yeah. But um you know, I know a lot of people who were just like, "All right, you know, it's 5:00, you know, done. Um and I'll see you guys at 9ine tomorrow, right?" Um or, you know, "Hey, my weekends are sacrosanked, right?" And I'm all for preserving time in your life to appreciate your family, you know, to be able to indulge in the the things that bring you joy and peace of mind. Um, but there's sort of a time for everything. And you know, you the way you and I are wired, Lance, like you know, if you're if you're not at a point of of strength of of real stability, that's when you want to be just working over in in overdrive to try to get to that point, you know, as best as you can. And um there's I guess where I'm going with this is there probably is a lot more bandwidth in your life than you currently think to either lean into your current income and and and dial it up either through overtime or taking on additional projects at work that you can get compensated for, you know, or setting up a side gig or a side business or whatever. Um, and so just as you want to be, you know, uh, look at the hard truths of, hey, where can I cut costs, you know, look at the hard truths of, hey, where do I have additional bandwidth and opportunity here to to work on driving more income in here? So, yeah, it's no, it's fair. I think one of the worst things that we pushed onto the younger generation was this whole and this really kind of happened you know just going into the 2020 pandemic but also really coming out of it is that we started this whole narrative about work life balance is like well we need more work life balance we need to develop the European model of working in the states and have this work life balance that's a terrible narrative um because again you find somebody that's wealthy doing well they're doing successful they don't have work life balance. They're working and they may have work life balance later on. And it's like Dave Ramsey always says, "So you can live like nobody else today so you can live like nobody else tomorrow." And that's a fair statement. And so you just have to decide what's important to you. If you want work life balance, there's fine. There's nothing wrong with that, right? You go put in your eight hours at work and and you can go home and have your work life balance and and play video games, whatever it is that makes you happy. That's awesome. Nothing wrong with it. Unless you want to aspire to more. And if you want to aspire to more, you're going to have to put in the time to do it. You find any small business owner, they work 80 hours a week, they work 100 hours a week, they're working weekends, they're working holidays, they're working, you know, nights, they're working whatever it's required to run that business to make it successful. And those are the successful entrepreneurs and they and they do well. The guys that don't do that, they typically go out of business in fairly short order. That's why 80% of businesses fail um over a fairly short time frame, two two to three years, they fail. So again, it's just a it's it's all depends. And again, nobody's tell I'm not telling you, Adam's not telling you, we're not telling you you have to do this, right? And yes, there may be somebody out there that did work life balance and they worked it out and they they became very successful. And I'm sure that's happened, right? But it's a rarity. You know, for most people, you know, you look at the the really successful people in the world, they go, "Oh, he was an overnight success. It only took him 10 years to get there, grinding it out, but you know, he eventually made it." And that's what we see as the success side of it. You know, so you just have to decide what's important to you. If you want success, if you want wealth, if you want to build these things, it's going to require sacrifice. It's going to require discipline. It's going to require hard work. If you can just learn to live with those three things, you can be very successful and very wealthy. If you can't live by those three things, then you need to think about a different pathway maybe in life. And because again, it's very hard to achieve greatness without sacrifice, discipline, and effort. And and just it's any it's any event whether it's investing, saving, growing wealth, or or or participating in a sport, right? Find me a professional athlete that has work life balance. So, um it looks like we got a rant out of this anyways. I didn't didn't intend to. And I I'll I'll wrap it up for a bit. I agree with everything you said, Lance. And and to me, this is somewhat similar to our our conversation we were having 30 40 minutes ago of um you know, everybody's everybody's fine with their invest in investing strategy and they're fine with not harvesting and position sizing, you know, what you're talking about until the losses come, right? And then it's like this sucks. I really wish I'd done something differently. And for me it a big factor here is about control of your h how you live your life. Are you living your life on your terms or are you living your life on reality's terms and to a certain extent we all live life on reality's terms but the more successful you are the more you have the ability to kind of bend reality to your will. Right? where if you don't, and it's okay if you choose not to, but you're just going to be more affected by what happens in the economy, in the markets, etc., um, if you're not putting this this stuff in, and you'll be more vulnerable to having your hours cut or losing your job or whatever, you're going to be more vulnerable to continued increases in the cost of living. Um, and you know, if you're if you're doing okay right now, you might feel like, well, I'm fine, and that's cool, but you just have to make sure that, okay, well, look, if if if there's an economic down cycle here, and I'm I'm in a position where I can't really bend reality to my will, I got to realize that's the other side of that coin. Yeah, that's right. Yeah. All right. Um, well, look, folks, you're reminding me in this conversation, Lance, um, uh, who knows what's going to happen with the economy. Let's all hope that uh it doesn't fall apart from here. But um uh if you if you work for a living, meaning you you you you get a paycheck for a living, meaning your employment depends upon your employer continuing to employ you, uh if you haven't read Thoughtful Money's uh layoff guide, u layoff survival guide. Highly recommend uh you download it today. It's totally free. It's just at thoughtfulmoney.com/layoff. And um it it's got basically two sections to it. One is all the things you can do today in advance of a layoff to reduce your uh your vulnerability to getting laid off in the first place. Um and then the second part is all about okay if you walk in and you get surprised by a pink slip, what are all the things you should do right then and then in the weeks afterwards? And there there are some things you want to do right away. So, um, if if you have, you know, any potential vulnerability in in to your income of of getting, you know, summarily fired or laid off, go make sure you read that layoff guide, and it'll help you more if you read it in advance of getting laid off than not. Um, all right. Well, look, um, if, uh, if you think, uh, the the best first step in bending reality to your terms is to continue to watch Lance Roberts on this channel week in and week out, let them know that by hitting the like button and then by clicking on the subscribe button below, as well as that little bell icon right next to it. Um, if you would like some help from a professional financial adviser in figuring out how to maybe put that framework together for buying and selling in your life or you want to leverage their expertise to do that for you going forward, uh, especially if things unfold from here the way that Lance uh, thinks they might, uh, if you don't already have a good financial adviser doing that for you, consider scheduling a free consultation with one of the ones that Thoughtful Money endorses. These are the firms you see with me on this channel week in and week out. Perhaps you'd like to have that conversation with Lance and his team there at RAA. So to schedule one of those consultations, just fill out the very short form at thoughtfulmoney.com and the firms will be in touch with you right after you do that. Lastly, just a reminder that the thoughtful money fall conference is coming up. Uh it's going to be Saturday, October 18th. Don't worry if you can't watch it live. Everybody who registers will be sent replay videos of the entire event, all the presentations, all the live Q&A. Um we are getting uh you know I think I've mentioned most of the faculty that have signed up for it in this past week. We've had two additional big additions. We just had Sven Henrik uh agree to come on and uh you do a bespoke u presentation of his charts uh for the conference and then Linda Alden just signed on and we're going to have her talk specifically about Bitcoin this time round. Uh so it's continuing to be build up to be probably the best event uh we've yet done. And of course it's proving to be extremely timely given all the uncertainty that's building right now both macroeconomically and in the markets. So uh if you have not yet bought your ticket, run don't walk to get it now at thoughtfulmoney.com/conference. Um we are still making tickets available at the lowest early bird price discount. So I want to make sure as many people lock in their ticket at that lowest price as possible. And if you are a premium subscriber to our Substack, make sure you look for the code that I've sent you that will let you get an additional $50 off of that early bird price discount. All right, Lance, that's it. Um, end of the week here. Another great uh discussion with you. Hope everything goes well with you and your family. I know you're off to do a little bit of rest and relaxation this weekend. So, um, I hope you and your wife uh get everything you need from that. As usual, I'll let you have the last word. No, that's it. Um yeah, just I I don't know what's going to happen next week, but um yeah, just buckle up. It's going to get fun here over the next couple of weeks as we head the end of the quarter. Okay. And and yeah, we should say folks um right now it's looking uncertain that you'll be here next week just given some things that are going on. Um so don't be surprised if instead of Lance, we have Mike Lowitz. Um yeah, we'll probably have a little party uh for that. Anyways, Lance, exactly. Well, my plan's to be here, but yeah, we'll we'll see what happens. All right. Well, we hope you are. Okay. Um, Lance, buddy, have a great time. Um, everybody else, thanks so much for watching.