Can The Rally In Stocks Continue Into Year End? | Lance Roberts

📋 Investment Thesis

Description:
TIME'S NEARLY UP! LOCK IN THE EARLY BIRD PRICE DISCOUNT FOR THE THOUGHTFUL MONEY FALL CONFERENCE AT ...

Transcript:
As long as this bullish trend remains intact, I would just keep buying these dips through the end of the year. Now, at some point, you're going to get a bigger correction. Um, you know, a test of of the 50-day moving average is not out of the question. You know, even and a test of the 20-day 200 day moving average is certainly not out of the question either, but you know, I just don't really kind of see that happening over the next couple of months. >> Welcome to Thoughtful Money. I'm thoughtful money founder and your host Adam Tagert. Welcoming you back here at the end of the week for another weekly market recap featuring my good friend the mothball portfolio manager Lance Roberts. Lance, how you doing? >> Fine. Yes. Uh I've I've got moths in my closet. >> You know, I was trying to think of a good word for shutdown because we we news this week is the government shutdown. So mothball was the best I could do on short notice. >> I like it. I like it. Um, >> yeah, we have nothing to talk about because we have no data to work with. >> Yeah, I know. There the the jobs data was supposed to come out today and everybody was sort of worried about what if we don't get it. It's kind of like, yeah, what if we don't get that data that nobody really believes anyways and is going to get revised after they tell it to us? >> Well, that's kind of the comment we made on our show. I was uh on our show on Thursday. I was talking with Michael Leewoods and you know then that was the conversation is talking about oh my gosh you know this government shutdown now now we won't get CPI data and employment data and I'm like who cares nobody nobody really believes that data anyway you get the data and then you revise it all but that's that's the logical side of us but in reality the market clings to that data only from the standpoint of what does that mean for the Fed will they cut rates or not right and this whole last couple of years really since October nomber of 2022 when we hit that bottom. This whole market rally has been based on will the Fed cut rates when how much are they going to cut rates? And we just go from we just drift from one employment report to the next CPI report to the next employment report to determine if we should pay more for stocks. It it's just ridiculous. But here's where we are. >> Here here's where we are. Um well look um I have this question to ask you later. I may as well ask it now. Yeah. >> Um what impact, if any, do you expect it to have market-wise? >> None. Um we actually did a study um this week in our daily market commentary looking back at at past, you know, government shutdowns and the markets up 85% of the time. Yields typically fall during shutdowns. Um you know, it's it has very negligible impact on markets at all. I mean, you know, it may give them a little bit of wiggle, but it doesn't have any real real impact because at the end of the day, and again, when you look at the markets where we are right now, you know, people are just chasing momentum at the moment, it really has nothing to do with the economic data or even the fundamental data. I mean, we've got stocks trading at 40 times valuations. Nobody cares about that. That's just a function of sentiment. So, you know, again, it's it's it's interesting to watch the media get all breathless over. I'm like, "Oh my gosh, it's a government shutdown. What does that mean? But let me clear up a few things here real quick. Okay, let let's do talk about what a government shutdown does mean and what it doesn't mean. Because every time we have a government shutdown, there's always the media headlines. We're going to default on our debt. Senior citizens aren't going to get their paychecks. Military won't get paid. That's all hogwash. In a shutdown, discret anything mandatory in the budget is paid. that is that is paid regardless of whether the the government is in shutdown or not. If you were involved in any type of protection of property, personal safety, national security, your job is secure. You keep working. The only people that are furoughed are what's called non-essential workers. And these are people that fall outside those categories primarily in things like parks and recreation, uh government employees related to the BLS, you know, uh the the Bureau of Economic Analysis. Those employees get to go home on a paid vacation, mind you. They are furoughed. They don't get paid while they're while they're laid off, but as soon as they come back, they get fully reimbursed for all of their time. So the interest on the debt gets paid. We will not default on our debt. Social Security checks will go out on time. Social Security recipients will get their checks. Military veterans and military benefits uh will all be paid on time because why? That is in the mandatory spending category of the budget. Only 25% of the budget is discretionary and that's the only amount of money that's affected by a shutdown. So that's that's just the the basics of it. >> You know what might be somewhat different this time? Um, I haven't followed the news enough to really know this, but uh, just reading some of the headlines, >> uh, as I understand from the headlines, which may be an imperfect understanding, is that, um, during a shutdown, the president has more authority uh, to fire people, at least in the executive branch. And so this may actually end up being an opportunity for the administration to make deeper cuts than they were able to make before. Um >> that is correct. >> That is correct. >> But only but right but only if those people are not involved in personal security, pro protection of property or national security. >> Okay. But a phrase I've heard getting kicked around is sort of like, yeah, the non-essential workers have to go home. Why do we have non-essential workers in the government? Shouldn't you if you're in the government, shouldn't it be an essential role? Maybe we should get rid of a lot of these non-essential roles. >> I've been saying that for years. If you're if I have employee if I had employees in my business, right, that I looked at and said, "Yeah, I can live with them. I can live without them. I'm going to live without them." You know, if you're classified as Look, it's a little different in government. I get it. Right. Well, but I think that's what's different this time is is you finally have a government administration saying, "Yeah, we don't want him around." You know, people can argue in the comments whether that's good or that's bad, but that that what might be different this time. >> Yeah. Yeah. No, there's there is potentially the case that Oh, so so going back to what I said earlier, right? And and and we're talking about normal government shutdowns. So, we've had a a plethora of government shutdowns throughout history. The last government shutdown we had lasted a total of 34 days. It was in 2018. That was the longest one we've had on record. Most government shutdowns don't last very long. But these but shutdowns have been going on since the 70s. So this isn't a new thing that just cropped up. It's like the whole debt ceiling limit thing that we raise every year that's been going on forever, right? So >> it's just another tool of brinksmanship that's in the arsenal, the political arsenal. >> So So nobody should get, you know, nobody should be, you know, shocked by, you know, oh, it's a government shutdown. It's a terrible thing. It happens all the time. But you know yeah nor in a normal government shutdown you you furlow off the non-essential workers that's about 900,000 workers and then like I said they come back. Now the the question will be and again this is kind of the debate in the headlines is will this administration use this opportunity to fire a bunch of government workers and then not bring them back. You know we'll see if he's successful in that. Let's just say look I don't know that answer right. I don't know if that's true or not. Um that's again like you that's what they're talking about in the media headlines. But we've seen this government try to fire other departments before and immediately they file lawsuits and then a federal one of the circuit federal judges then you know bans them from firing that employee for the time being. You know so you know firing a government employee is extremely difficult. They have all kinds of protections built into place and and it's very very difficult. And I'm not saying that's a good thing by the way. You know, the government should be able to fire employees just like any business, but we've entrenched them into the system over the decades and now it's very very hard to fire, you know, government workers from their jobs. >> I think there's a similar analogy in there's a similar analogy in the education system with tenure teachers. Yeah. >> Exactly. And it's it doesn't matter whether they're doing a good job or not. It's just very hard to get rid of them. And again, we've seen this just recently. I mean, we've tried to shut down Doge, right? Doge tried to shut down departments, fire and immediately they file law file lawsuits and then you know a judge says you know >> nope send them back to work and then you're stuck with this. So you know again we'll see what happens. Um you know the one thing I would pay attention to is that it is going to cause an uptick in the unemployment rate but that's going to be a temporary issue because as soon as these people come back to work the unemployment rate will reverse. Um, but the the conversation that Mike and I had was is this is also a really good opportunity to start looking at alternative data in terms of employment. Paychecks just came out. They they are a company that surveys mostly small businesses. They showed a negative job creation in small businesses in the last month. ADP just showed a loss of don't quote me. I think it was negative 32,000. >> But it was negative. Yep. I saw that. >> Yeah. Negative 32,000. So now again, ADP as an example has not had a very high correlation to the Bureau of Labor Statistics report over the last few years. They used to be much more highly correlated. I used to have a mathematical calculation that I could almost tell you to the the the hundreds of what the BLS report would be off of the ADP report. But that correlation broke about four years ago. Mhm. >> However, once you factor in the revisions from BLS, you know, all these job revisions we get every month, it actually correlates a lot better with ADP at that point. So, what ADP is telling us is very likely what we would have seen in the employment report anyway on Friday is a fairly weak number. >> Yeah. And you and I you and I have sort of ranted about this before which is >> sure maybe 40 years ago you had to impute a lot of this stuff >> but now in the digital era we can we can know all the data right I mean we can have these real time highly comprehensive reports yet we still kind of rely on these older imputations birth death models stuff like that why don't we just look at the millions of paychecks that are going out >> I've I've been arguing with that for a while and the other thing too is is that you A lot of the government surveys still work on surveys. Like I send Adam a survey or I call him on the phone and say, "Adam, you know, what are you doing?" And and if you take a look at the survey responses, they're just falling off a cliff. Nobody's responding to these anymore >> because they there's so much other data out there and there's like whatever. Um but that that lack of survey responses requires more amputation in terms of trying to gauge what the global economy is. And so that's why we're getting all these really weird deviations, >> higher error rates, right? Yeah. You've got lower sample sizes, imperfect data collection. Yeah. Your error rates going to go up. Also, too, look, I don't want to um I want to be a little sensitive to the BLS. They had a massive um you know, nuclear shock to their data set during COVID, right, where just millions of people got fired and then they scrambled to rehire them. So there is sort of a bullhip effect that that made it really hard for a couple years but man by now we should have more exact. >> Well again my my whole point has been like for instance the death the birth death adjustment is terribly flawed. It's just an estimate that they say oh we you know this this you know businesses were created and every time they create a business they hire somebody and that's terri that's a terribly flawed assumption. Um, a, you know, first of all, we know that business formation has not been as strong as what the BLS has claimed. And I've argued for years that if you would just use a a 12-month average of your monthly numbers, it gives you a much better reality of what's happening seasonally, right? The the 12-month average of your employment set smooths out the seasonality. So, all these seasonal, you don't need these seasonal adjustments. You don't need the birth death model. If you just look at the the the actual, you know, household survey of employment and then use a 12-month moving average, you get a much better measure of employment over time. But see, that's too simple. You could do that with one person and a pencil. You wouldn't need a whole department. So >> too too much of a threat to the government bureaucracy. Exactly. >> Um All right. Well, look, um but but key thing investing wise, you don't think it's going to really matter much. Historically, it hasn't. And I've seen similar data. Um but but just looking at the market market don't care right >> it really it really doesn't yeah and again you have to remember you know if if this government shutdown happened and we were in a nonfavorable market the market this would probably you know kind of say the market was already weakening for some other reason you know bad earnings whatever it was and then the shutdown happens then that kind of accelerates the the you know potentially the selling pressure that comes in the markets but when you're in a bullish trend it it really doesn't have much of an impact. In fact, I've actually just posted a chart on this this morning. If you give me one second, maybe I can find it real fast here. Um, but yeah, I was just there was a really good chart out this morning. Yeah, here it is. Um, so this is just a history of government shutdowns and kind of like recessions. We used to have recessions a lot more often than we have today. We used to have a lot more shutdowns uh back in the 70s and 80s, but you you can see that most of the time when you have a shutdown, the market just kind of keeps on going. And and again, like you had a shutdown as an example in 2018. And that lasted 34 days, but during that shutdown, during that 34 days, the market declined, but it really wasn't because of the shutdown. It was because of other stuff that was happening in the markets as well. So, and again, it was just a minor pullback. It wasn't anything major. So, you know, it kind of depends on where you are in the cycle when that shutdown occurs, but for the most part, um particularly particularly since 1990s forward, um they really haven't meant a whole lot. >> Okay. So, I want to um in a second I want to get to um >> kind of the the real confusing crosscurrens that are going on right now for investors where um you'll see things like if you look at GDP now, the Atlanta Fed's GDP now, uh I think they're projecting a 3.9% uh GDP growth rate for Q3, right? Really strong, right? But then you look at the ADP data and you're like, "Oh my gosh, like jobs are contracting. The jobs market is getting a lot weaker, right?" So, and but but markets are at all-time highs, right? So, there there's just a lot of um you know, kind of anybody can find the data they want to make any argument they want because there's lots of data on both sides of the ledger right now. >> Sure. >> Um so, I want to ask you about that in a minute, but a couple quick things. Um one here, we're I just want to note that we're at the beginning of a quarter here and there are things that come along with that like companies have, you know, start reporting earnings. Um so, the buyback window will shut for a while. That'll be of interest. Um, but uh I do this in my family, Lance, and it's a legacy from growing up. Um, do you ever do you guys have the custom of like the first thing you're supposed to say when you wake up on the first day of the the month is rabbit rabbit? Have you ever heard that? >> I've never heard that. I'm from Texas. We say squirrel. Squirrel. >> Yeah. Or armadillo. Armadillo or whatever. Right. Um, yeah. It's probably a New England thing where which where I grew up. And I think it's probably from England or Europe. I've heard some people say white rabbit, white rabbit. Um >> but it's just one of these things like don't step on a crack. It it'll bring you bad luck or whatever, right? But anyways, so first of the month, first of the quarter, make sure sometime today you say rabbit rabbit just to just to get that good luck mojo going for you. Um secondly, folks, um given all the uncertainty that's out there right now, I just want to remind everybody that the thoughtful money fall online conference is coming up. Um, I'll give more details about it at the end of this, but I just want to remind you if you haven't bought your ticket yet, you only have a couple days left to get it at the early bird price discount that we've been offering. I've really extended the offer this time because I want as many people as possible to pay the lowest price for this conference as possible. So, to go pick up your ticket now, go to thoughtfulmoney.com/conference. And a reminder, if you're a subscriber to our a premium subscriber to our Substack, look for the code I've sent you. That'll let you get an additional 50 bucks off of that price. Um, all right. So, Lance, um, let's let's uh well, I I want to get to what I just mentioned there about all the different data, but but real quick before we do, um, let's just talk about the market. Um, maybe you can pull out the TA and whatnot, but we we are back at all-time highs. And my question for you is, is it time to raise your end of the year target? I I know you resisted doing it. And I know you don't like to, but the market seems to have so much momentum behind it at this point in time. We're already getting a lot of discussion in the financial media about the big round 7,000 S&P number. Um, is the tractor beam now engaged on the S&P to pull it up 7,000 >> for for sure. Yeah. I mean, markets love that big that big round number. Uh, but no, I I never raise my target. This is one of my big beefs with Wall Street is that if you take a look at earnings estimates as an example, um they come out, you know, like for instance, we got in March of this year, we got the 2026 estimates all the way through the end of 2026. And so they go, we're going to have, you know, 274 $294 a share in earnings. And then already already now it's already down to 274. So what's the value of a target if you're constantly revising your target? And then yeah because at the end of the day if I keep revising my targets like say I was right you know earnings were at 255 well yeah but you started at 294 that's not helpful right so yeah no I never raise you know we we set our targets out the beginning of the year we live and die by them and that's it now we we don't we don't we don't manage for targets that's just it's kind of a fun exercise based on valuation metrics and those type of things but it means nothing at the end of the day to have a price target. of you know great the market's at 6700 or 6,800 we're managing the markets we're you know we're our portfolios are very long equities right now we're participating with the markets and that's going to continue so I'm hoping yes I'm absolutely hoping that the markets can gravitate up towards 7,000 there's certainly some reasons for that uh corporate buybacks will start at the end of October um you've got professional managers way behind on performance this year and you've got a lot of retail momentum and then also just as we get into the end of year, you're going to have portfolio rebalancing for the end of the year where a lot of these stocks that have have been rallying are going to have to get added to a lot of portfolios. So, there's a lot of drag now for the markets between now and the end of the year. Now, it doesn't mean it has to happen for sure and it doesn't mean it's not going to have some wiggles along the way. Generally, the first two weeks of December, you get a correction in the markets because mutual funds have to make their annual distributions. You typically get some weakness in early November. Um, so and and October tends to be a little bit sloppy. You have higher volatility in October. So, you know, but if you have a weak October now and and I'm about to tell you something else. If we do have some weakness in October, that sets up November to be a very strong month. Um, we've had five straight months in a row of the market rising. That's a fairly long stretch without having a corrective month. Now, a corrective month only means that if the month is down 0.01% 01% that was a corrective month. It doesn't mean a five or 10 percent correction. >> Yeah. >> But historically when you have five, six months in a row of advances, you're going to have a down month. >> Um so again, you know, we've got some things. We've had a very strong market here. The trend is very positive. Lots of momentum. There's certainly some risk here. I would certainly can can, you know, suggest managing risk. Um you know, we've talked about the the new thematic models that we launched recently. I've got a stock in there that I bought on August the 1st. It's up 350% now. So, you know, it's just a lot of this momentum is just I mean in these portfolios I've got a couple portfolios up like almost 20% in a month. So, you know, it's just this whole momentum chase in the market is running and there's really nothing to stop that at the moment unless something comes along to dramatically change that and I don't know what that would be at the moment. >> Okay. And as we talked about last week, um, you know, some on this program recently like Mark Newton have made the argument mostly from a technical perspective that a five to 10% correction in October, November wouldn't be out of the question. Certainly could be justified. Um, in Mark's case, and I think in yours, Lance, too, I think you're saying this right now, >> that would probably be a buying opportunity to then try to catch the end of the year rally. >> Absolutely. Yeah. No, you you buy any dip between now and the the the end of the year. So, yeah, I mean, I would not expect anything substantial here. This market has consistently been buying the 20-day moving average. Um if if you kind of look back just over the last you know really kind of since the April lows and again it's so funny you had this 20% correction in April and nobody this every you'll remember this we were on this on this you know we were talking about this then you know everybody was panicking during this 20% decline and it was like oh my gosh the the you know AI is dead you know nobody wants to own AI stocks anymore all the thesis is wrong um you know the whole nine yards and it was like oh this is this is the big one Elizabeth and then of show that was the bottom on April. And by the way, that was a >> Stanford and Sun reference. I got it. >> I was going to say you would you would get it. Most of your listeners probably are like, "Who's Elizabeth?" Anyway, >> oh, I think we got a bunch of red fox. >> Yeah, you could you could not have red fox on TV anymore, that's for sure. Um, but anyway, you know, so after that April low, this market has just been consistently challenging the 20-day moving average. And every time we get to the 20-day moving average, you know, that's been your kind of buying opportunity. And they've been very swift. Um, every time that we've had these little dips back down here, you know, the mark the investors have have stepped in, bought these dips repeatedly. They just bought this one, you know, five days ago. So again, I just I would just as long as this bullish trend remains intact, I would just keep buying these dips through the end of the year. Now, at some point, you're going to get a bigger correction. Um, you know, a test of of the 50-day moving average is not out of the question. You know, even and a test of the 20-day 200 day moving average is certainly not out of the question either. But, you know, I just don't really kind of see that happening over the next couple of months unless somebody comes out over earnings and and so what you need to have a a correction day moving average is say Nvidia comes out and that'll be in November and they come out and say, "Yeah, all of our targets were wrong. um you know, we're cutting our revenue estimate. We're we're cutting our you know, our investment, you know, capex projections. That would cause this market to sell off sharply. I don't see that. I'm not saying that's going to happen. I don't see it happening, but it would take something like that to reverse the momentum of the market. >> Okay. Um All right. So, here's where I'm going with all this. Um so, I talked about these, you know, data points on either side of the ledger here. Um, I just released a really interesting video with Michael Canowitz of Piper Sandler. He is the hope framework uh guy. >> Um, and you know what I like about the home frame hope framework is it's it's a very empirical way of looking at the world. And so it's sort of one of those like he may have all sorts of personal opinions, but if the framework isn't telling him isn't validating the opinions, he relies on the framework, >> right? And um one of the things that he is looking at is uh you know I asked him you know what in a nutshell how would you describe the current environment and he said um I I think we're entering a Goldilocks backdrop for the economy and what's interesting about that is you know Lance you and I have talked a lot about how there's lots of data that the you know we're seeing economic uh slowing economy um but you know there are things like GD GDP. Now, like I told you, I mean, 3 3.9 is is higher than what the economy has grown so far this year. And here here's what he said. He said, you know, we're we're seeing some some good growth in in parts of the economy, and it seems to be broadening out, right? So, it was kind of the big tech uh all the infrastructure investment in big tech driving the action, but now we're starting to see some of these unloved sectors start to uh see some return of capital and know the profits are beginning to recover a bit. Um lower inflation, right? So, you know, again, inflation hasn't gone away. Um but it is definitely a heck of a lot lower than it was two years ago, right? And there are signs that it's continuing to moderate. And I know you're on that team, Lance, that it's going to we're going to disinflate from here. Um he expects lower interest rates going forward. Uh one because the Fed is going to be cutting the policy rate. They've already started, right? Um but what gives him confidence that we're going to continue to see lower rates there. And this is the interesting part is he says yes the jobs market is weakening but it is weakening at the at sort of the Goldilocks level. In other words, it's weakening enough that the Fed is changing policy to bring rates down but it's not you know spiking in a sense that like oh my god the you know the economy is melting down and tons of people are out of work. So it's it's it's weak enough to get the the goose uh the gooseing of of economic stimul of monetary stimulus uh from the Fed. Right. Right. >> So uh and he's got a bunch of charts that show kind of whenever you've had that that set of conditions you get recovery. You you get it you get stronger uh economic growth going forward. And then the other factor he mentioned too was low oil prices. He says you know absolutely low oil prices have been helping the situation. the tariffs, you know, or inflation would be biting much more if oil had been a problem here, if we had oil at 80 or $90 a barrel, but we don't. Doesn't look like we're going to have that anytime soon. So, kind of where he's going with this is like I think 2026 is actually probably going to be a better year economically speaking, economic growth speaking, than now. And I don't see why the markets won't benefit from that. He's not necessarily saying that the markets are going to grow at the same rate they've grown this year or the previous years, but he thinks that there's going to be a lot of recovery in in the rest of the market. You know, the the smaller cap stocks and really just the S&P 493 who've largely kind of been left behind by the Mag 7. So, you know, I was kind of asking him like, wow. So, are you basically saying that like despite everything that's gone on, despite all the concerns that that the valid concerns that many uh people, myself included, have raised, the market's likely going to have a third double-digit growth year this year? We're going to have avoided recession and we're looking at a year ahead of us where the economy looks like it could be doing pretty well and the markets, you know, look set to have another positive return. and he said, you know, right now that that doesn't seem that improbable to me. >> Yep. No, he's he's right. Um, you know, the the interesting thing is is that is the kind of the mainstream consensus right now by Wall Street in general is that we're going to have this economic recovery. >> I mean, it must be because stocks are bulletproof at this point. >> Well, yeah, but there's there's more behind that that you have just momentum and sentiment driving markets at the moment. Um, but the the interesting case is is for Wall Street is based on earnings. And what they're expecting is is that there's going to be a sharp pickup in earnings for the 493 and the seven are going to have slowing earnings growth. Um, and that'll kind of equate itself out and that's going to give you another 10 15% return year next year. Well, the problem I have with that analysis is only this is that we've had booming economic growth for the last three four years. uh ever since 2022, we've had very strong economic growth because of the inflation reduction act and chips act, all that. And the 493 didn't generate any earnings growth to speak of. They they grew a little bit, but nothing nothing important. Sledigit growth rates in earnings and revenues. So, what what makes it different going into next year that all of a sudden this economic activity is going to shift into these 493? Well, there's, you know, that's that's the question we've got I got to answer. Now the hope is is that all this AI capex spending this kind of 3 trillionish that's sitting on the books for 2030 um that's going to get sp building data centers well that requires you know Caterpillar and deer to go you know build roads and bridges and those type of things you know uh construction companies to go build the facilities power grid utility companies to to build the power infrastructure all that. So that's where all this growth is going to come from because that 3 trillion will translate into basically 12 to 15 trillion of economic activity between now and 2030. That's the hope. That's a lot of hope, right? I'm not saying that can't happen at all. And I think you should have at least part of your book allocated towards that. And if you take a look at our portfolio, we have allocations in those areas to participate that. So, so we're, you know, we're looking at that very closely, but the expectations are very elevated for that to occur and you know, as always the case, it's going to be the disappointment of those expectations that cause the big problem for the markets regardless of what the economy is doing. >> Yeah. And I I I sort of prompted Michael on that. And he did say, "Hey, look, yeah, if it turns out that um everybody wakes up and and all of a sudden thinks that, you know, we're going to have a lot fewer profits in AI or at least fewer profits early on, you know, nearer term." Um or that there's just less there there in any way, shape, or form, then then yeah, then then it it's so big. the negative wealth effect of of the evaporation of that phantom capital, you know, would send shock waves through everything. So, he he he agrees that that that could definitely um be what spoils the soup here. Um, but it was just interesting because, you know, I I think that's a hard thing I'm going to guess for a number of viewers of this channel to wrap their brains around here, which is like we went through uh we went through CO, we did all the distortions of the economy, we, you know, created this massive inflation. Um uh you know we've seen that the economy the the the employment market has has weakened the way many of us have suspected it would and whatnot and yet we might make it through all this without really having to pay the piper. >> Yeah. >> Right now now now to be clear you know and Michael is one of the you know guys who talks about the bifurcated economy and the bifurcated markets more than anybody else. So he gets the whole K-shaped thing. Um, we're talking not having to pay the piper on average, right? Meaning, you know, the top the top part of the K is doing great. Bottom part's doing increasingly worse. So, I don't want to suggest that there aren't people out there who said, "Hey, I'm who say, you know, I'm paying the price here right now." And and certainly >> from the persing power of our of our currency, you know, it's taken it continues to to be in in my opinion the valve the release valve that uh that that does pay the price for all this stuff. It just buys >> well that's just that's just inflation though and if inflation drops that improves that condition and more importantly if you get stronger economic growth that's going to be the one byproduct of that will be a much stronger dollar and you know so once you start getting improvement of the dollar remember the dollar is just relative to every other currency. So whether the dollar is going up or down is just relative to other currencies and that's one of the big pro one of the big headwinds potentially uh for earnings which is that multinational comp companies have benefited greatly from the weaker dollar because of their profit margins because again it makes products for international people you know if I live in Europe I can buy US products much cheaper because of the of the currency exchange rate but the dollar's been basing now for several months and is starting to build a much stronger appetite. And in fact, I we just did some research this week, you're starting to see momentum coming back into the dollar. So if we see if we see an upturn in economic growth, which is also what the dollar is potentially laying out, you see an upturn in economic growth, the dollar rallies sharply, that's going to start impairing earnings for multinational companies. So companies like Apple, Nvidia, Google, those type of things, they'll take an impairment on earnings from that stronger dollar. So again, we start talking about earnings reports, those type of things. um any asset that trades in dollars potentially, you know, gets impacted as well. So again, you really the one of the big trades for next year you want to pay attention to is going to be the the strengthening of the US dollar. >> Okay. And is I'm curious, do you think that's more likely than not that the dollar? >> Oh, that's a probably about a 90% trade next year. >> In the next next 12 to 18 months, you'll see a stronger dollar. >> Okay. Um, and I I I I'm glad you mentioned that and I asked you specifically just because I've had some folks on recently who think that the dollar is going to continue to be in a bare market. So, I'm beginning to note this is one of the the topics kind of like how inflation has been for the past year and a half >> where I'm seeing more difference than than consensus. >> Well, yeah. Yeah. You've got that is you what you've got is you've got a big consensus trade on short dollar. And that's the one thing I love about consensus trades is that when everybody gets on one side of the trade, no matter what it is, whether it's stocks, commodities, you know, the dollar, interest rates, inflation, you know, everybody was super, you know, high inflation's going to the moon and that's why we were saying it's like, no, it's not going to happen because of all these other reasons. And then inflation's been coming down. Consensus trades are great for contrarian bets and you've got a massive short position against the US dollar right now. And again, that makes complete sense because if I'm a hedge fund and I can short the dollar and make money with it, I'm going to keep shorting it as long as I'm making money with it. The problem comes if I get a reversal in the dollar, I have to start chasing the dollar higher to cover my shorts and that fuels the dollar run. So that's why, you know, when you have a big consensus and a big short position against a a particular asset class, it's a really really good technical setup for a bull rally in that particular asset. >> Okay. And I just want to note to our viewers who have really been enjoying the returns in their precious metals that there is a general inverse correlation between the dollar and gold and that's likely been one of the tailwinds behind gold. >> Um that the dollar has been weakening, you know, over the past year. >> Um that that that correlation doesn't always hold. You know, it's not like a law of nature, but it's a more often than not. So if Lance is correct and the dollar strengthens from here, just be prepared of the possibility that that may actually be negative for gold. >> Yeah. I mean, and that's just a function of again, if I own gold and a foreign currency, right, and the dollar rallies, then I'm not only getting impaired on the the dollar rally, the differential in the currency, I'm also getting impaired on the asset. So people will sell their gold to move it into US treasuries as an example, which would benefit from a stronger dollar, >> right? So, >> and and you another thing I didn't talk about it with Michael as much as I wish I had, but um uh a question I've raised to you and others of late is if the administration is successful, if it's if it's the the economic policies that it's been aggressively pursuing are successful. You know, they take a while to to take effect and to start being reflected in in the real economy. Um but we're now what, you know, nine months into the new administration. um at some point, Q2, next year, Q3, whatever. Um if those policies bear the fruit that the administration hopes they will, that's going to start adding tailwinds to the economy as well, right? So, in addition to the factors that that Michael laid out for us there, >> there may be the additional boost of okay, we're finally starting to see what the administration was hoping we were going to see from all the things that it's been doing, the deregulation, the tax relief, you know, the the the new trade deals, stuff like that. >> Yeah. You know, and one thing too is is just, you know, we're talking about stronger economic growth. We're not talking about 6% economic growth, right? I mean, we're talking maybe two two and a half% economic growth next year. >> Well, okay. I mean, that's a good question. And Okay. So, is that is that what you think? You don't think that? >> Yeah. No, I mean, I just don't I don't want >> You don't think Trump's gunning for four plus? >> Yeah. No, look, we haven't been able to run a four plus economic growth rate for any length of time at all in this economy outside of juicing the economy through, you know, stimulus checks. Um, but you know, we'll we'll probably run it, you know, again this year once we kind of all tally this up. Uh, I know I know right now the Atlanta Fed's at like 3.9. That number is going to come down a good >> It's going to jar, right? And Q1 was negative. So, >> yeah. Yeah. So, and so Goldman Sachs right now has uh Q3 pegged at like 2.2%. So, you have negative half percent in the first quarter. Then you've got the 3.8 and 2.2. And when you start adding that all that all that up, by the end of the year, we're going to be right around 2% growth. Two 2.1. And so maybe if we get a little stronger economic growth next year, maybe we're running at two and a half. But you know, again, you know, we're not talking about gang buster economic growth like we're going to return back to the 60s and 70s, at least not at this juncture because the the debts and the deficits are still going to erode and economic growth because it diverts capital into non-productive purposes. So that that that formula hasn't changed and you're still in a deflationary environment. So that formula hasn't changed either, which is going to weigh on economic growth. And again, the top 10 20% of the population can't drive the entire economy to astronomical extremes when you got 50% dragging. And so, so those dynamics in the economy, demographics, debt, and deficits, those haven't changed. And that's going to that's going to continue to impede economic growth. Doesn't mean we'll have a recession. Again, we'll avoid recession, but we're not going to have this gang buster, you know, we're not going to have this return to Goldilocks economies that, you know, kind of is the idea, right? >> Okay. So what I hear you saying here is just hey yeah maybe but manage your expectations. All right, this brings me back to my earlier question then. Beginning of this year, you wrote a piece called Curb Your Enthusiasm, >> right, which basically told people to expect a more volatile year ahead, right? It's not going to be the the escalator ride that 2023 through 2024 was. >> And you were right for the first third of the year. >> Um, >> it's been an escalator, pretty steep escalators. >> So, is I'm just curious, is is what you are the conditions you wrote that piece for now moot? Are we are we beyond that? >> Um they they've c that 20% correction certainly removed a lot of the risk out of the market. It re So the great thing about corrections are is they reset the table and so uh if you go back and look at sentiment as an example um investor sentiment dropped to levels that we haven't seen since the financial crisis. I mean, you had such negative sentiment in the markets. All that bullish kind of extreme sentiment was completely rung out of of asset classes across the board. Um, and so that reset that table and allowed for this run. I I don't think we're done with volatility yet. Again, a 3 to 5% correction between now and the end of the year is not out of the cards at all. So again, by the time we get to year end, we may still see, hey, this good year, but you know, again, you know, it was it was a bumpy ride along the way, which was kind of the idea to start with. Now, next year, we'll see what it looks like, but you know, valuations are problematic where they are. And again, you know, we're now trading at the highest valuation based on Ford PES that we've had since the turn of the century. So again, valuations do matter um longer term. In the short term, it's just a reflection of sentiment. They don't mean anything. And over a 12-month period, valuations mean zero. All it tells you is everybody's very exuberant about stocks. That's all it tells you. Um, but over the long term, high valuations do matter. And at some point, the expectations are going to have to come to fruition. We can't keep just pushing that bar saying, well, you know, I thought they were going to make, you know, $5 a share, so maybe if they make six, I can pay more for a stock, right? At some point, those companies going have to step up and really make those earnings. And I think that's the bigger risk we get into over the next couple years. >> Yeah. Well, I'm just like, so how let's assume we end the year around 7,000. Sure. >> Just for a second. Okay. Um I don't know exa I know here at 67,000 on the S&P. And by the way, I should have mentioned this earlier, folks. Lance and I are recording this on Thursday. We told you we were going to do that last week. We're also going to record on Thursday next week as well. Um although it'll be Mike Liowitz next week in Lance instead. Uh we're doing that just because of schedule issues on on both uh the RA teams and my side. Um so we don't have Friday's data here yet. So forgive us if the market does something amazing tomorrow and we haven't been commenting on it here. But um so you know right now at 6,700 it's up about 14% year to date. So I'm going to guess 7,000 would be somewhere around 20 thou 20% for the year which would be basically three backtoback >> Mhm. years of 20%. Um, does that make you nervous? I mean, at some point is it so good you're like, look, this just can't continue like this going forward. This is >> Well, so so 20% plus gains happen more often than you than you can imagine in the markets historically. >> I get it. But back to back to back. >> Yeah, that it it happens. Uh, and that's momentum, right? That's just momentum in the market. So again once you start having that kind of momentum it's going to continue to drive it until something breaks it and again it's all about psychology. So what what is what will happen at some point and again I don't know whether it's this year next year after next 5 years from now whenever it occurs but at some point again and it was interesting you know just this past you know few days ago we had Jerome Pal come out and talk about the stocks are fairly highly valued >> which was very reminiscent of Allen Greenspan's irrational exuberance moment back in 1996 well the market ran for four more years and the biggest returns of the market came in the last two years of that run then eventually reality you know, kind of came to fruition. So, at some point, you know, these 20% gains are are fine. And and and the way this this math is working is, and again, as I mentioned a second ago, is I look at the I look at the S&P and I say, "Okay, I think the S&P next year is going to earn $274 a share in earnings." And so, we get to 274 and the markets are doing okay. And it's fine. And so, I go, "Well, I think they could actually make 294." And then I push it to, you know, 315 and then I push it to 380, you know, and so the more the market rises, the more emboldened I get to keep pushing those forward projections. And this is from Wall Street's side. And I can do that so that I can justify well, if I could if I if I could generate $300 a share in earnings and all of a sudden my Ford PE isn't 22 anymore, it's 20. So now I can run stocks back up some more, back up to 22 times forward earnings. Well, when I get there, I've got to I've got to bump that. I got to bump the E again. So, at some point though, that E becomes so unattainable. That's where your problem comes. And right now, that E on forward projections is the highest deviation from the long-term growth trend ever on record going back to 1900. >> So, let's let's combine that with the uh backto backtoback nature of this. So, you you you mentioned the late 90s, right? >> Mhm. >> That ended in a big correction, right? So, is it sort of the I mean, it sounds kind of obvious, but is it the bigger the runup, the the bigger the correction when it arrives? >> Well, you know, it's interesting. And so, this weekend's newsletter is talking about the 1996 comparison, and we're just looking at the markets today versus the, you know, kind of the market back in the dot era because there's a lot of similarities going on. Um, >> it's funny, I'm thinking back like there was exuberance in 96. Like, if it was, it was so tiny compared to where it got back. >> Well, yeah. And and so, you know, this isn't 96ish. This is we're probably more 97ish, maybe 98ish, somewhere around there. But, you know, back back then you had companies like Global Crossing and Pets.com and others. And, you know, there was a lot of revenue, you know, kind of you buy from me and you know, I'll promise to buy from you and if you'll promise to if I buy from you, you'll buy from me and if you'll give me some internet >> like Nvidia appears to be doing right now. >> Yeah. Yeah. No, that's what I'm saying though. There's a lot of similarities of that, right? There is there's a huge difference though. Um and and and you know so this is the one thing to think about is that in 1999 when Enron came to fruition and everybody realized the fraud and it wasn't just Enron. Enron was just he was the burn Enron was the Bernie maid off of what was going on in the dotcom era but it was WorldCom it was Lucent Gross you know Global Crossing all these companies um they had no revenue right and so all this valuation assumption everything that was going on with those companies completely fell apart because >> there's nothing there and these companies went bankrupt because they had no other revenue now let's fast forward to today let's just assume for a moment that tomorrow, Adam, we wake up and this whole AI thing is complete pipe dream and, you know, the the models are proven to be absolutely, you know, crappy and we're never going to use it. It was a complete waste of time. >> Yeah. Artificial stupidity. Yeah. >> Flips. >> Exactly. So, we just just go with that assumption. So, companies like Apple, Meta, Microsoft, Google, Apple, they're going to take big hits, right? But they're not going out of business because >> these companies already had massive businesses without AI. You know, Amazon's going to keep selling product every day without AI. You know, Walmart's going to keep selling product every day without AI. You know, Google's going to keep selling ads and YouTube channels and, you know, Meta's going to keep selling, you know, Facebook ads and all that stuff. >> These companies will go down 30, 40, 50%, but they're not going bankrupt. Um, but that what to your point though and and what the point you're trying to make here is that that's the risk, right? is that we build up so much expectation in the markets which is what's happening right now and that's that's a reflection of valuations. Valuations are just a reflection of expectations. The expectations are becoming so elevated that even the smallest miss at some point even the smallest disappointment is going to lead to a more severe repricing in a lot of these stocks that that either have very little earnings. Think a company like Ollo, right? There's a big bet that we're gonna have this massive push for nuclear energy and that's why Ollo is running. But Ollo has no revenue. They have no income because they haven't built a plant yet. So this is going there's going to be companies that could eventually and again I'm not I'm not don't I'm not using Aqua as an example. I'm just you know saying this as the case. There are companies that are tied to this AI chase that have no business model yet. They are hoping and they're getting priced on expectations this AI thing is going to matter. There's a lot of other companies that have massive businesses with or without AI. So in your portfolio, you need to be very selective about the companies that you own because if these expectations falter, there's going to be some companies that will go out of business. There's going to be other companies that are deeply impacted but will survive. And there's going to be other companies that will go relatively unscathed because it has such a small minor impact to their portfolio. Think about Costco or Walmart, right? So, make sure your your portfolio is diversified and allocated in a manner that you can weather such a downturn. >> True. Let me ask you about Costco just because you brought it up there though. Costco is trading at really high multiples, right? >> Have you been to Costco? >> No, I know. I know. But, but let me ask you this. So >> in in your you know a meteor hits the AI sector, right? >> Um and and half the market value of that gets vaporized, right? Yeah. >> Like the whole world is going to turn risk off, >> right? >> And so these crazy multiples that, you know, relatively crazy for historically that Costco is trading at will probably get cut pretty darn hard. So, I agree. Costco won't go down as much as an Nvidia would in that that world, >> but it would not be unscathed. >> I said relatively. >> Yeah. >> Yeah. Yeah. What I mean by that though, Yeah. No, I I agree with your your comment. And again, I'm just pulling stuff off the top of my head. >> Yeah. Yeah. And and I'm not saying that Costco won't get Sure, it'll get hit less, but it it's still still benefiting from this halo effect of everything's awesome and AI is going to change the world and so let's pay higher multiples for everything. Yeah. >> Yeah. Well, no. And again, you know, take a look at Costco example tra of sales of one and a half. You know, it's not grossly overvalued. There are, you know, and again, it's Ford multiple is 41 times earnings and and that's pricey for a consumer staple stock. But, you know, when you think about when you think about Costco, right? And then the the thing I love about them is that membership. >> Yep. >> That is just free cash flow every single year that comes into that that company. So, you know, that's going to be more of a defensive off like a a defensive rotation stock more likely in a Walmart will likely be a defensive rotation stock more than say, you know, financials. >> Yep. I I just want to set the expectation that yes, you want to get defensive like that, but like in in this kind of nuclear event we're talking about, almost everything's going to get you might be glad you're down 20% versus 60, right? >> Oh, yeah. Yeah. No. And and look, and if this market, you know, if we get into one of if we when when I'm just going to go out there, I'll say, look, when we get to that point, we'll have 15% equity in our portfolio. I mean, you know, we won't have a lot of exposure to stocks in that riskoff event. We'll be mostly in in treasuries at that point because that's what's going to benefit the most. >> Um, but, you know, that's going to be something down the road for now. Yeah. >> Can can we just do a quick check in on AI? I know we talked about this last week because there was some news. Um I haven't had a chance to look at it much this week, but I'm just curious if you've seen anything. It seems like almost every week there's another person, you know, at the top of the AI pyramid or at the top of Wall Street who just says, you know, this thing's a bubble. >> Oh, yeah. >> Yeah. And you know, we're now beginning to see, you know, front page news that's analyzing the the the roundtpping of capital uh amongst the companies in this ecosystem. You know, uh Apple investing in Open AI that invest in Microsoft that invests back in Nvidia stuff. Um, so you know, I mean, right now the stocks are doing fine, but uh, what's your what's your level of sense of of us getting to that? Because what is it? Ben Hunt sort of talks about um, what happens when private knowledge becomes public knowledge. And the classic parable of it is is the emperor has no clothes. You know, everybody sort of just accepts the emperor is walking around naked until the little kid says, "Hey, that guy's got no clothes on." And then all of a sudden everybody says, "Oh, I guess we can all admit this." So are do you have a sense that we are we are heading towards that moment where it's just like, "Hey, look, this this could all be great, but like the end of the day, where are the incremental re, you know, profits coming from this thing? Where the incremental revenues?" Because again, >> they're selling a bunch of pickaxes and shovels. No doubt, right? But if all we end up with out of this is a whole bunch of pickaxes or a bunch of data centers that that honestly just make electricity expensive for the rest of us >> and we're not getting gobs of new profitability uh in return, at least not anytime in the foreseeable future, then then that is not sustainable, >> right? No. No. You know, the the problem with bubbles is they're only recognizable in hindsight, right? Unfortunately. So the the problem is when you're in the midst of a bubble, you know, we can all say that, oh, look, it's a bubble. It's a bubble. It's it's clearly a bubble. Nobody really knows if it's a bubble or not until we pass the point that it eventually pops. Now, you know, is it fairly safe to say that AI there's a lot of AI stocks that are pro that are in a bubble? Yeah, you can go there. You look at some of the valuations are getting paid for companies. Those are very bubble-like, you know, kind of categories. But as we saw in 1996, 1987, '98, 999, that inflation of the bubble can last a whole lot longer. And this is this is the the point of this weekend's newsletter that we're going to write is because Michael Symbbleist had a great article about AI. And so I've I've I've taken some stuff out of that for the newsletter, but talking about some of the stuff that's going on, and then I've got some tactics about how to navigate the inflation of a bubble. But the the important thing to understand is is that the inflation of the bubble can last a very very long time and it doesn't necessarily have to pop either. It can slowly deflate over time. It typically doesn't but it can. >> So you know betting and this is so and again this goes back to you know our very basic premise that you and I have harped on for the last you know five years because you know there's all these people coming out you know the market's going to crash this is going to happen. The market's going to go down 50%. you better get out of stocks now. And that hasn't happened. Market just keeps going up. And that's because of of sentiment. And this is why we focus so much, you know, when you and I talk, we focus a lot on technicals. We focus on the sentiment of the markets. We focus on conditions because we focus on money flows because that's what drives asset prices. And and as Peter Lynch once said, you know, more money's been lost trying to avoid the crash than actually what you would have lost in the crash. And that's happening to a lot of A lot of people right now they're they they're missing out on the markets. They've missed out on the markets. Now they're trying to get in because of FOMO. Um that can drive markets higher, but that's also what happens towards the end of a cycle. So you know the problem for me and that look I don't know the answer. But I I'll tell you this is that you know as is always the case you have to have a definitive time frame for these things to occur. Yes. Is the market gonna have a big correction? Absolutely. Problem is is I can't tell you when. So until I can give you an estimate of when that's going to happen, don't don't worry about it right now because again, things are things are working in the markets that are very supportive for the markets, we will eventually have a 30 40 50% correction at some point. Again, like we talked about last week, just a correction back to April lows at this point would be almost 30%. >> Yeah. >> Right. And you'd still be >> wrenching and we'd still be in the bull trend. Yeah. >> Yeah. Yeah. It would just be a correction. Everybody be going, "It's a bare market." No, it's just a correction in a bull market. That's all it is. because you went back to you went back to trend lines. So again, don't worry about, you know, these things. You need to be aware of these things. And this is the point of the article, the newsletter this weekend. Be aware of these things. Be aware of the risk. Pay attention to earnings growth. Pay attention to what's happening with announcements. Manage your risk in your portfolio. And at some point, these things are going to start to evolve. And we'll be able to identify, hey, the market just put in a major market top. We need to start reducing equity. Um, I'll tell you when we get there, but we're not there now. >> Okay. Okay. Great. So, you you went right where I was going to ask you to go, which is, you know, this is a big reason why I um recommend so many people consider working with a professional financial adviser. >> Um, because this is I mean, it's tough in general, right? Nobody knows what the market's going to do. And as I like to remind people, everybody has their own zone of excellence and what you spend your time on, whether it's your job or your family. Not everybody is a great super experienced investor who has the sense of market history that that you do. Um but uh this I think is a particularly confusing market I think especially for the type of person who's watching this channel because these are critically thinking people um who have worked hard to to make you know to to to generate and save capital and they they want to provide and protect their families right >> and right now I I think a lot of them feel squeezed between two competing emotions right one is this market is stupidly overvalued and um uh you know it's ripe for a correction like you said, right? And I see the FOMO around me and I don't want to be the greatest fool who finally capitulates and gets in and then this whole pig rolls over and I've done the exact wrong thing, right? I miss the runup uh or I've missed a lot of the runup and uh I get into the exact wrong time, right? I totally get that feeling. But then, you know, we were talking about uh, you know, Canitz's thesis here, which is like, you know what, this this doomsday didn't arrive and now there's, you know, there's there's a a pool of evidence, maybe even a growing one that says we might get out of this thing. Okay? Right? We might be entering into a better economy next year. Uh, the markets might be broadening, you know, in a way. And by the way, Michael says that you know, active investing is probably going to be where you get the better returns going forward than just riding the big names. Um, but you know, but but that that side of the argument says, well, look, if you just keep sitting out, you may miss another great, you know, another great year, a couple years in the market, right? I mean, after 2023 put in a 20 plus% year, there were a ton of people who said that was crazy and it was coming off the lows of 2022, so okay, I guess I get it. But that's a one-off event. And then they were surprised by a 20% return in 2024. And now they might be surprised by a 15 to 20% year again here in 2025, right? So, you know, they're just missing great gains in the market. So, um, you kind of answered this already, but but what would be your direct advice to that viewer right now watching this who's feeling like, yeah, I'm squeezed by those two emotions. I I really don't want to miss out on better gains if green shoots are coming, but I don't want to be that stupid last fool. >> Yeah. Well, you know, two things. One, you know, this this is always one of the biggest challenges of the markets, which is getting into them. And you know, there there is no good way. And look, we we have tried every method in the world to onboard clients in a portfolio. So, so if you come over as a client and or a prospect and you say, "Hey, Lance, I want you to invest my money for me." I've tried everything over over 35 years investing. I've tried to dollar cost average into markets. I've tried to to pick bottoms in markets to get money invested and all those type of things. Onboarding, getting getting invested in the markets is the most difficult thing because it's never the right time and nothing ever works the way you expect it to work. Um, so, you know, we have a very simplistic method. Um, we we get you we on board half of our positions right now. Then we look for opportunities to add to the rest of the positions over time. It takes about 12 months, but we get you into the portfolio. It it works over time. Um, but it's it's again, it's never per it's never perfect timing. It's it just never works well. So getting into the market's the most difficult thing. Now, let's just assume today you're sitting 100% in the cash. Well, I tell you what, let's let's let's do one better, Adam. Let's go back to March of this year because you and I actually had a conversation about a gentleman in that exact in this exact situation. So in March of this year, you bring me you bring me assets and I'm going to buy half of our positions and all of our bond positions because bonds are going to act as a hedge if the market declines. >> Y >> and so absolutely you know you're you're invested market declines by nearly 20% in April. March, late March and April, 20% down in the markets. Big impact, right? >> Right. >> So that sucks, right? Bonds did well. Bonds helped support the the portfolio. You got half equity position. So you're the market's down 20. You're down roughly about four and a half maybe percentish because of the balance in the portfolio. >> So you're definitely down. >> And then we added near the bottom of the market. We bought those other halves of all those positions and onboarded the portfolio. Now, of course, four months later, you're far ahead of the game. Now, if you sold that bottom, you missed out on all those gains. But the the purpose of only buying half the positions right now, the things I want to own, is that I can wait for those big corrections to buy that other position and then dollar cost average into the portfolio and drive that advance going forward. And so, there's never a right time. So there's so let's just assume today that you've got 100% cash in your portfolio and you're just saying okay I you know I don't want to miss out anymore I need to participate it's no problem. October, November, December tend to be fairly we are beginning the seasonally strong six months of the year. Um October, November, December, January, February, March, April are the strongest months of the year uh overall. Now we just had a boomer summer which happens from time to time but typically we're moving to the seasonally strong period. got big drivers as I said earlier going into the year we've got earnings sentiment professional investors are off sides they've got to play catch-up for end of the year rebalancing and you got corporate buybacks coming in the last quarter of the year 20 almost a quarter of all corporate buybacks for the year occur in the last month of the year so in the last two months of the year so it's a big corporate buyback push to get it on the books by the end of the year so you've got some good tailwinds take your portfolio to make your make your watch list of stocks you want to buy and say okay I want to buy these stocks buy and you and how you how you kind of do this is up to you but divide your cash into six parts and buy one sixth of your positions this month by one sixth your position November the 1st one6th on December the 1st and keep doing that process every month you could do it in quarters you could do it in thirds depending on how fast you want to get into the markets but you let the markets as the markets advance just keep buying and if you get a dip in the market if we get a three or 5% correction buy some more and just work your way into the markets. Now, that sounds difficult, right? Because again, it's like, well, yeah, but if I get all invested and the market has a huge correction, then what? That's okay. The hardest part of managing a portfolio is actually getting invested. That's the hard part. Once you're invested, it becomes relatively easy because I have to do is now is just manage risk. I take profits in big winners. Like for instance, we just rebalanced all of our portfolios this past week. So, we took profits in our big winners. We added to positions that we wanted to own. We added meta to the portfolio on this pullback. So, you know, we did some things like that. That's what opportunity corrective opportunities give you to do. And if you manage the risk, you can manage the draw down risk. You can manage the the the the risk to the downside. As as I said with Adam a few minutes ago, if this market tops and we begin to see all the signs of a classic top, we'll be at 15% equities. We never go to zero. We're never 100% out of stocks for a whole variety of reasons like we can explain that some other day >> because it's hard to get back in when you get to zero as you're saying now. >> That's the biggest thing. Um as a lot of people are finding out being in cash is difficult. Um but so we'll get down to 15% equity. So if you think about that if the market goes down 10% I only have 15% equities. I'm down one and a half. Who cares, right? That's easy. So again, you can managing the portfolio risk is so much easier than trying to get in the markets. But just getting into the markets, you just have to start. And it doesn't matter where the markets are trading. Waiting for that big correction, you're going to wind up giving up so much gain time you get there, the correction is not going to matter. You're so far behind the curve at that point, you can't catch up. >> Okay. All right. Well, well said. And hopefully folks watching, if you were one of those folks feeling squeezed by those emotions that I mentioned, hopefully that gives you some, you know, guidance to aspire to. And obviously the easiest thing to do if you are wrestling with this is just talk to a good financial adviser and get their counsel. and whether it's one you have or Lance or anyone else, but you know, don't just sit there and stew. Um, all right, Lance. Um, we'll start wrapping it up in a minute. We'll get to your trades in just a second. Um, bonds, anything you want to say about bonds? Um, >> they're doing great. I mean, um, you know, a couple of weeks ago, we got down to 4%ish almost, and I I wrote a piece then saying, "Hey, we could see, you know, interest rates tick back up to around 4.2." They did that. Now they're starting to trail off again here a bit, but you know, um, bond yields are putting in a much more bullish formation. And if we get a strong rally, if we get a dollar rally at some point, um, in particular, um, and bonds are performing better, that's going to help help that dollar rally as well. So again, you know, I'm still, you know, yields are going to track inflation and economic growth. And so if we get 2% economic growth and 2%ish inflation over the next year, we should have yields around two and a half. So, you know, bonds still look pretty good here. >> Okay. So you're I don't want to say you're calling for this, but you you are kind of hoping that bonds will be down to two and a half at some point next year. >> No, no, not not in the next year. It'll take time to get there, you know. So if it takes, you know, 2, three years to get to 2% inflation, just assuming kind of a, you know, a gradual disinflation, you know, it takes some time to get there, but yeah, I mean, you'll eventually see, you know, yields should trade somewhere between, you know, economic growth and inflation somewhere around that level with a small premium. So again, two and a half percentish in a 2% environment wouldn't be surprising. >> So let me ask you this. Let's let's assume for a second that that tariffs don't have any inflationary um effect from here on out. And I know you that's your default anyways. Not everybody thinks that way, but you do. >> But I'm just curious just from the shelter component of CPI. I mean, where are we right now with with CPI? 2.8 2.9 >> 2.8 2.9. Yep. um you know I if if if and as um the lagging shelter data in the official CPI calculation starts to catch up with the real-time data that we're seeing. I mean wouldn't you expect CPI to start coming down pretty materially next year? >> It's going to come down dramatically. And this is uh we just actually posted an article um on Wednesday. Michael Leewitz did a great piece on this exact exact thing. Excuse me. Um discussing Steven Moran. >> Uh Steven Moran was the outlier on the Fed >> the FOMC. Yeah. >> Yeah. The FOMC on and the recent meeting and and if you look at the dot plot as an example, this is a dot plot of of the last uh meeting. This dot down here is Stephen Moran. >> And I want to say we laughed about that and predicted it when we saw it before they actually admitted it was Moran. We were like, we know who that dot is. >> We know who that dot is. But, you know, everybody was like, "Oh, he's just being political." He's not really being political. He's a very, very smart guy. And he's done a whole paper on why rates should be lower. And part of that comes into the new tenant rent index and CPI shelter. So, CPI, 40% of CPI is homeowners equivalent rent and and the rent index. That makes up 40%. So, it doesn't really matter. You know, this is the whole funny thing about tariffs is that tariffs are a onetime impact. So once I put a tariff on something that's the inflation it does I don't I don't keep adding a tariff every month right? So once the tariff is there it's imputed. So if the price of that good or service doesn't change over the next 12 months there's no inflation even with the tariff. So and tariffs only impact really the good side of the economy. So goods make up about 30% of our economy. Services are 70% which have no impact from tariffs. So, and the bigger part of that is is that even with tariffs, they're so outweighed by the 40% of the CPI index is driven by rent that you can't have an impact. So, what's important is is that this orange line is CPI and this blue line is the new tenant rent index and the new tenant rent index leads CPI by a very a decent margin here. You can see this back in 2007208 it led CPI pretty well. um let it uh new tenant rent index let it in 2021 we sent stimulus checks to households. Everybody that rented an apartment said, "Yeah, we're raising rents because everybody's got a $1,500 check to rent an apartment." Um that's all now reversed and reversing sharply. So there's a lot of that 40% is going to drive inflation over the next, you know, year to two until you start to see these rents start to stabilize and you know, so that's going to be the important driver here. >> Okay. So just to your question then um you know you said earlier you thought we might have um you know 2% economic growth next year or two two and a half um >> we just made a an argument there that CPI could be in the low twos to 2.0 by the end of next year if shelter keeps coming down like this. >> Right. >> So given your math of hey they should all be in the same ballpark. Why why wouldn't bond yields get down to 2% at some point by the end of next year? >> They they could. I'm not I'm just I'm just not willing to stick a time frame on it because there's so many kind of moving parts in the economy right now um that it kind of makes timing when you know I can say look the target's pretty much there. It's just like the dollar trade, right? Everything's set up for a really strong dollar trade. I just can't time it. So, you know, this is one of those trades that we start building very slowly over time and we'll start building in a dollar trade at some point here in into the portfolio through whatever holdings we have and we'll set that up because because the odds of that happening are very very strong. The odds of yields going lower are very very strong. I just the timing becomes difficult. So, I wouldn't make a big bet today because you could be stuck with some dead money here for six months or nine months by the time we see the economic variables all come into play. >> Okay. All right. Well, then how about trades? When we talked last week, you had started a lot of rebalancing. Sounds like you continued it. And if I heard you right, sounds like you finally actually found your entry point for Meta. >> Yep, we did. Um, so yeah, so the the you know, so last week before we we talked, I had just rebalanced all the thematic models and I had actually rebalanced the crypto model again this week because there was because one position in particular, but a couple of them ran so hard this week that that portfolio since August the 1st is now up over 20%. and I had to rebalance it twice within the the last week or so because positions were actually doubling in size relative to their weight in the portfolio. So I had to keep rebalancing it back to target. So we did that this week and then in the um in the in the core models which are dividend equity models, our uh ETF model and our primary equity model. We rebalanced those this week. We did a few sales. Nothing nothing major. We did add Meta finally. We had sold Apple earlier this year just because they're really not growing revenue that much and we were waiting for a better kind of an oversold opportunity to add Meta and so we we start we built a starter position in Meta this past week and I'm hoping that I can get Meta to pull back some more so I can add the other half of that position. >> Okay. All right. Well, we'll keep tracking it live here every week with you. So, if and when that happens, you'll let us know. >> Yep. >> Um Okay. Well, look, um, uh, I want to get a quick, uh, rant in here and then we'll wrap things up. Um, so I was, uh, back in California briefly recently, um, uh, for the gentleman's Olympics, and I think we've talked about this in past years, Lance, >> but it's it's the funnest day of the year for me. Yeah, it's funnest day of the year for me. It's um a a group of guys here and most of them I I don't see for much of the year until this day and we get together uh at the house of the the the fellow who's sort of this was his brainchild and he organizes the whole thing and it's probably about I don't know two dozen of us and um we kind of dress up and you know Gatsby- like uh costumes and uh and we play a whole bunch of uh whole bunch of games together. Um, so it's everything from axe throwing to billiards and darts and pingpong and botchi and shuffleboard and foosball and horseshoes and something crazy called okie horseshoes and it's it's just a a great day with with guys and it's it's really well produced. like puts a lot of work in advance to build brackets and you know you start the day early in the morning and you you play your first waves and then as the day goes on you advance further and further until you get to the quarterfinals and the semi-finals and then at the end of the day everybody goes and watches the finals of every sport. Super cool, super fun. Um every station, every game station is sponsored with a drink. So about halfway through the guys are getting pretty sloshed. I don't drink. Uh, and and I tell you, this this past year was was um it was a tough year for me because I didn't do nearly as well as I would have liked standing. My games were all good, but I just I didn't win nearly as many as I'd hoped. And um it's really irritating when the guys are getting drunker and drunker and yet they're beating you by bigger and bigger margins, says the sober guy. But anyways, it it was a great time and I I got to um you know, because I I've I've now moved to to Nevada. Um uh you know, sort of some farewell. I mean, I'm going to see the guys again next year, but but sort of like, hey, we know you're moving. We want to, you know, have some meaningful uh words, parting words with you. Um I and and while I was back too with them, I um I I went and saw a mentor of mine um business mentor of mine. He's a guy uh I've talked about a couple times over the past years. Maybe sometime I'll have him on this channel. He's a really successful entrepreneur. Um but he's also um uh just like a student of personal development. In anyways, long story short, I have um relied on his counsel many times when I've been making a big business decision or big big life decision and we went and we had lunch and um it it ended we we had a great lunch and we we we really kind of said goodbye to each other and then he turned around and he came back and he said, "Hey, I just want to tell you like I'm I I I'm really proud of you. I feel really good about where you are right now." now and he said, "I remember where you were when you were struggling with the decision to leave your prior company and the risk that you were taking on and what you were going through and it's so great to see where you are now and what what's become of thoughtful money and and all the momentum it has behind it." And it was nice to hear all that stuff, but it was it was particularly meaningful because besides him and you, Lance, I mean, there are very few people, I think, who really know kind of the full story of my journey there. There's a lot I haven't been able to say publicly. And I got to say, it's just it's really nice to be understood. And that was sort of the gift that he gave me is he said, "Hey, look, um, you know, I I I've been following you. I' i've kept close to your your journey and your story and I want to reflect back to you the progress you've made." And that happens so rarely in life. And, you know, with this gentleman's Olympics thing, I had one or two conversations with these guys where, you know, we're we're all men. Men aren't really great in expressing their emotions and whatnot. like you and I, we spend most of our time tearing each other down. But a few of them really took the time. >> That's what guys do. >> Yeah. But a few of them took the time to kind of drop the the the the wall and just say, "Hey, I've really valued your friendship for reasons x, y, or z. I wish you really well for these reasons, but you've meant, you know, you've been it's been a meaningful friendship to me for for this reason." And um it it it feels great. And and I guess why I'm where I'm going on this rant is um often times in our relationships um there's a lot of stuff that's unspoken because we we we take it for granted. And I don't mean like we dismiss it, but we just assume, okay, yeah, this is what's understood, right? But every so often it's just really nice to say the unspoken to somebody else and just put it on the table and kind of reaffirm. It's just it's like watering the plant, right? It's just like, hey, you know, uh maybe you don't even need it today, but I think this is going to feel good for you, right? And um uh my wife's a therapist, as you all know, so this is kind of the world she lives in. And one of the things that she uh she has her clients do a lot is something that's called active listening, which is, you know, two people come to her, usually they're they're in conflict, right? And she says, "Look, I don't want one of you is going to talk, the other is going to listen. And the one who's listening, your job is to not say anything, right? Just let the person kind of get out what is what's in their mind and what they feel. Your job is to after they're done, repeat back to them as best as possible a summary of what you heard them say, right? You don't have to agree with it, but your job is to try to get it as right as possible from their point of view. Right? And it's it's an incredibly useful exercise because the p the other person usually will say, "Wow, yeah, you got it." Like for the first time in a long time, like I feel heard by you. Not even necessarily agreeing you to change asking you to change your mind yet. I just want you to know how I feel and be able to reflect that back to me. Right? And I think that's part of the the value I was getting out of these conversations is these guys were just taking the time to say the unspoken and um make sure that I heard it, you know, in in a way that was authentic for them. So, where I'm going with this is, you know, Lance, I'm guessing, uh, maybe you haven't, but I'm guessing you probably had some of these experiences of late with your wife and people in your life just saying, "Hey, you know, I don't say it enough, but hey, you know, I really value this part of you or have, you know, love this part of, hey, this just makes me feel great when we're together doing X, Y, or Z, right?" Uh, and my ask of folks watching today is just, you know, pick somebody in your life today to to do this with, you know, um, just just think about, hey, why do I enjoy this person? And when's the last time I really told them I did and why I did, and I I guarantee you, uh, it'll it'll yield nothing but great dividends for zero cost on your rent. >> Yeah. Yeah. They say it, you know, it costs nothing to be nice to somebody. You know, it also costs nothing to be an to somebody, too. So, you know, >> Well, I think it cost you in the long run. >> But no, but no, to your point, it's it's, you know, it's, you know, and particularly with guys, right? Like when you were talking, I just wanted to interrupt and go, I'm sorry, I wasn't listening. >> But >> you say something that I'm sorry. >> Yeah. Yeah. I don't know what you're talking about. Um, but yeah, but no, it's it's very true. It doesn't cost anything but and again you know we talk about this a lot with relationships and you know with with your spouse and you will be surprised the what results you can get from your spouse just by saying hey I appreciate you appreciate what you're doing I I value you being here you look very pretty today and and again you know we get into a lot of these relationship struggles where again it's just lack of communication generally more than anything else and it took a long time for me to learn this. My wife and I used to butt heads a lot when we first got married >> because we were still learning how to to deal with each other. Right. >> Well, and it was your second rodeo, too, right? I mean, >> yeah. Well, hers, too. It was both of ours and and we both had previous marriages where our spouses were not good fits um for a variety of reasons and they were very anti- our personalities. And my wife and I's personalities are very similar, which is also problematic because we have a lot of the very kind of our personality traits are very similar. So, it works good in some some instances, but it can also kind of work against you. But it took it took a few years to where I I just learned that all she wanted was validation. she all she wanted. She, you know, she works hard, she takes care of the house, she takes care of the kids, and she will bend over backwards for for you to do anything you want as long as she feels like you validate her or and that you at least appreciate it. And it took me a while because I'm a guy, right? We just don't, you know, we just don't go around saying, "Hey, good job, Adam. You look great today, Adam." You know, we're just guys, we don't do that. And it took me a long time to realize that that was the lang that was her love language. She just needed me to say, "Hey, I appreciate you doing that. here's some flowers, you know, just for no reason here, you know, and it it was just those type of things and it made a world of difference in our relationship. And you know, again, this is, you know, but this happens with every relationship and particularly with with, you know, guy on relationships. Again, you know, it's I saw I saw, you know, the other day there was this video, this girl saying, "Guys are so complicated." And this guy pops up on the video and says, "No, we're not." He says, "We can see a guy we haven't seen in 15 years and go, "Sup." and we're good. You know, that that's all it takes for us. We're very basic creatures. And you know, for women, that's hard for them to understand in a lot of cases that we are very basic and we don't have a lot of needs. We don't have a need to express emotions and those type of things in a lot of cases, but that's where we've got to go that little extra distance. It means a lot, but even between guy and guy relationships like you and me, you know, we're we're good friends, but I don't come on here every day go, "Adam, you look great today, bud. I seeing you. Appreciate what you're doing. We We just don't do that. But when you do express that on a sincere manner, >> it means a lot. >> It does. And I think we're pretty good about it in the sense that Yeah. It's not it's not every time we talk by any stretch, but I think when it matters, we're pretty good about saying, "Hey." Um but yeah and so I mean I think in in all parts of your life your spouse your kids your friends male female you know just this is the kind of thing that I think kind of the more you do you probably can't overdo this but um but I think particularly guy on guy and of course Lance and I are guys so there's probably a female on female version of this that we don't fully appreciate but um I would encourage the you know the guys watching this to to look for another man in their and say, "Hey, let me let me try this out." Might feel a little weird initially, but um >> I would I would suggest doing it with somebody you know. >> Yeah, there you go. That's a good caveat. Do it with Don't do it with a total stranger. Um but uh but yeah, it's just one of those things like uh um yeah, I don't know. like you know uh you know once once in a blue moon my wife will come up and like I talking like two years or so you know give give my shoulders an unprompted massage or whatever and I'm like you know what I did not in the moment have a thought at all that a would need a massage but you know what like that feels great you know like totally unexpected right um you know getting just some some authenticity and and hopefully authenticity in a way that matters and uh and is bond developing Um there's only good stuff that can come from that. And and last thing I'll just say on this is um you know I talk about how wealth being really three things and again this is all researchbased. It's quality relationships. It's purpose in your life and then it's health. And for quality relationships you know quality quality relationships are are based on trust and goodwill. And that is not something you can create out of thin air. The only way you can create that is out of repeated interactions that build that, right? And so, um, you know, because of that, invest. It's like investing in a bank account, right? It's just an emotional bank account. Every so often, just make sure, hey, have I deposited enough in there? And if I haven't, let me put a little extra in today. >> Yeah. >> That's right. >> All right, folks. Well, hopefully that's a good uh inspiring thing to take away from this. Um, if you think that um, one of the best ways to deposit into your own emotional bank account is to continue to watch Lance Roberts on his channel week in and week out, please let them know that by hitting the like button, then clicking on the subscribe button below as well as that little bell icon right next to it. I want to thank everybody. We did end up crossing 150,000 subscribers on this channel. So, that's a fantastic milestone. Again, uh, that is all attributable to you who watch. Thank you so much for doing that and for all your support for this program. Um, as I always say, uh, and have already said in this conversation, if you'd like to get some help in, um, you know, positioning your finances for what may lie ahead, particularly if it takes one of the paths that Lance and I have talked about here on this program, um, highly recommend that most people get the help of a good professional financial adviser um, in doing so and, uh, ideally one that takes into account all the macro issues that we talk about here on Thoughtful Money. If you've got a good one who's doing that for you, great. don't mess with success. But if not, talk to one of the consider talking to one of the financial adviserss that Thoughtful Money endorses. Maybe even want to talk to Lance and his team there at Raa. To do that, just fill out the very short form at thoughtfulmoney.com. The adviserss will be in touch with you immediately after that. Uh and lastly, don't forget we've got the conference coming up really soon. Uh again, um you only have a couple days left to lock in the early bird price. So go do that now over at thoughtfulmoney.com/conference. And if you're a premium subscriber to the Substack, go use the code I've sent you to get an additional $50 off. Lance, as usual, my friend, I'll give you the last word here. >> No, it's great. Um, you know, um, you know, we again, this is Thursday, so we'll see what happens, uh, tomorrow, but uh, again, we'll have the newsletter out this weekend on this whole AI thing. So, it'll be posted over on Substack, I think, uh, Lance Roberts, and then Adam will post it, and then I'll also post on our website, realveadvice.com. I think it's a good read because we talk about how to actually navigate the bubble. >> All right. Well, who doesn't want to know about that? Okay. Well, folks, go check that out when it's out and available. Lance, you have yourself a great week. And everybody else, thanks so much for watching.