Odds Of Stock Market Correction Grow As Economy Slows | Lance Roberts

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a correction back to the 200 day moving sorry the 200 day moving average would be roughly about 10%ish 10 11%. So that's not going to be, you know, that's, you know, a lot of people are going to be calling us like, "Mike, you know, Adam, is this the big one, right? Are we talking about?" But can you imagine just if we go back to the April lows, just where we were in in lows of April, that's 26% lower just to retest the lows of April, right? Talk about that for a second because a test of the April lows isn't isn't something um completely out of the question here, right? No, technically, not at all. [Music] Welcome to Thoughtful Money. I'm Thulful Money founder and your host, Adam Tagert, welcoming you here at the end of the week for another weekly market recap featuring my good friend, the Languid portfolio manager, Lance Roberts. Lance, how you doing? I'm doing good. Yes, I'm languishing this week. So, well, I picked Languid because it means a slow or slowing down. Um, this relates to a piece that you just wrote about um, some of the leading indicators suggesting that things are slowing down. We'll get to that in just a minute. I got to admit, Lance, uh, I was a little nervous to, uh, to poke fun at you today with that word. Um, because as you were setting up your camera today before we turned on the recording, I got to see your man cave a little bit and there were some katana swords there. And for those of you who don't know what a katana is, it's one of those Japanese sort of samurai swords. And I asked Lance about it and he's like, "Yeah, that's back from when I used to fight with swords during your MMA days." Back in the day. Yes. Yes. Back in the day. So I think I said to you then I was like, "Lance, I always knew you were a guy. I didn't want to get angry at me, but I I keep learning how bad of a guy you would be to get angry at me." Yeah. Know that those were those were all the fun days, you know, when I when I when you think back to your younger days of stuff you did, I'm like, I'm surprised I'm still alive today. So, I I'm surprised you've got all your fingers and appendages if you're Oh, no. I have I trust me. I I have battle scars all over my body, so trust me, I I have scars galore. So, yeah. Oh my god. All right. Well, look. Yeah. I had no idea how much I was taking my life into my my hands, poking fun at you all these uh No, see, I'm old now, so it doesn't matter. I just, you know, these days I just go, "Yeah, whatever." Okay, we'll see. Something tells me the bear still had a little bit of fight left in him, but hopefully I never find it. Um, all right. Well, look, um, fair amount to talk about this week. Um, real quick, let me just remind folks that the thoughtful money Paul online conference is coming up real fast. Uh, it's it's going to be Saturday, October 18th. Uh, we're now here at the end of September, so we're getting real close. It's going to be a fantastic event again this year, folks. Um, extremely timely, especially as things are looking so uncertain for 2026. Um, also too, I'll break the news here. We've got a few more people added to the roster. Um, just added Danielle D. Martino Booth. And what's funny about that is, uh, I've asked Danielle to speak, I think, at like every conference that we've had. And I thought I was doing her a kindness by giving her a uh, a conference off, and I got this angry text from her saying, "You're having a conference and I'm not involved." So, she very much still wanted to come in front of the thoughtful money audience, folks. And I said, "Of course. Yeah. you want if you want to come present here, we would absolutely love to have it. So, we're going to have Danielle uh David Haye is going to come. He's going to talk about um income investing and uh investing in opportunities outside of the US. Uh we're going to have Craig Wisher on. Um he's I think participated in one or two conferences in the past. He's going to talk about farmland investing. Uh and then of course we've got the the roster I've mentioned. Um, Lacy Hunt, uh, Judy Shelton, uh, Stephanie Pomboy, Grant Williams, Michael How, Darius Dale, Sven Henrik, uh, Andy Sheckchman talking about precious metals, Lynn Alden talking about Bitcoin, uh, Melody Wright talking about the housing market. Um, it's going to be just fantastic. So, if you haven't bought your ticket yet, really go do it like right now so that you lock in our early bird price discount while it's still there in its last few days. To do that, just go to thoughtfulmoney.com/conference and recall that if you are a premium subscriber to our Substack, check your email. I've been sending you um emails with a discount code that you can use to get an additional $50 off of the ticket price. That includes $50 less than that early bird discount. All right. Um Lance, so um slow down. So, uh you wrote a piece this week, uh titled Slowown Signals. Are the leading indicators flashing red? So why don't you answer that question for folks here? Well, you know, this is, you know, kind of just the ongoing debate that goes on, right? Recession, no recession, recession, no recession. And, you know, right now there's certainly no sign of recession. Um, to speak in terms of, you know, if you take a look at economic growth in the second quarter, just printed 3.8% for the final revision. Um, again, you have to take that with a big grain of salt because a lot of that 3.8% 8% was a simply a function of the um uh trade balances going back and forth. You know, in the first quarter, we had that negative GDP print because of inventory stocking prior to uh the onset of tariffs. Then as soon as tariffs weren't what everybody thought they were going to be, then we had the big reversal of that. So, a vast majority of that 3.8% growth is a one-time effect. Um but again it doesn't really change the fact that we're seeing a lot of economic weakness across various sectors of the economy whether it's manufacturing services are showing a slowdown uh labor costs are declining towards 1%. There's um we just saw today personal income and spending coming in um in terms of the latest reports personal income came in at 4% which was just slightly above expectations of.3. So that's good news, but personal spending was 06. So in other words, people are diving more into savings, uh, more into debt, etc. because their incomes aren't keeping up with their spending rate. So um, that's going to lead to an, you know, again, we talk about these things that are kind of forward projecting these forward kind of looks. And when you start having a decline of savings rates, then that's kind of a good precursor for a slowing economic environment. And so it's really kind of the JX of the article day. posted on our on our Substack page as well as um on Twitter this morning on X whatever. Um but you know, but the the big driver for this is really this expectation for forward earnings growth and that's that continues to be my my biggest concern here. Let me share this chart with you. Yeah. And as you're pulling it up, the reason why you care so much about it is because, as you always tell us, um it's really future earnings are going to want to are going to dictate where asset prices go. Exactly. Uh it's a very very high correlation between the two. And again, and it's also just how investors operate. They're looking forward. They're saying, "Well, I can afford to pay um you know, 24 times earnings today on a forward operating basis because earnings will catch up with me." But look at this chart for a second. So this is the gap between the mag 7 stocks and the bottom 493 in earnings growth. Okay. Hey, can you magnify that a little bit? Uh, sure. Absolutely. Try trying to be as sensitive of our folks who wear readers. Yeah. Yeah. Like me. Thank you. Is that better? Yeah. Okay. So the the blue lines are the mag seven earnings growth and you'll see first quarter of 2024 you had 50% earnings growth. that's been declining obviously just as these companies are getting larger and and we're kind of going through the cycle. But you'll notice that earnings growth for the bottom 493 has really been non-existent in 2024 and 2025. Even in third quarter, fourth quarter this year, they're only expecting 4% growth in earnings for these two stocks. Now, if you take a look at the economic data, that's where earnings come from. If you have strong earnings growth, then you that's coming from strong economic activity. And so Wall Street's expecting this big surge of 11 to 15% in earnings growth for the bottom 493 stocks. Now this is far worse once you get to smaller midcap stocks because 40% unprofitable. They've got debt problems. All other kinds of things are highly sensitive to economic data. Their growth rates expected to be flat to negative. But the point is is that Wall Street's expecting this really strong economic growth going into next year. The question that that we have to ask ourselves as investors is okay fine where is that going to come from and particularly given the case if earnings growth is is slowing for the mag 7 which are your big revenue drivers then how is it that this other 493 companies are going to magically manufacture earnings growth when the mag seven the biggest drivers of revenue and earnings over the last you know five years in particular is losing ground and so there there's and so the point is for investors it's something to pay Not saying that it can't happen. So don't say that I'm I'm, you know, I'm, you know, this is this is absolutely what's going to happen because it could. Who knows? But it's just something to to certainly be cautious on. And particularly and let's what's what's the narrative there? Is it that AI is finally going to start delivering results to the smaller companies outside of the Mag 7 or is it something else? Well, that that could be part of that narrative. But again, if if AI is going to generate stronger economic growth, where does economic growth come from? It comes from demand within the economy, right? So, I've got to have more full-time jobs, people collecting paychecks, I got to have rising wages, all those type of things. And AI does the opposite of that. It reduces jobs. It lowers wage growth because it increases productivity rates. So that certainly doesn't arg well for stronger economic growth to support estimated earnings for for companies that have not actually posted earnings growth of any sort really over the last couple of years. Um and this is leading economic index which continues to be negative and has recently turned lower. So again despite what we saw in quarter 1 and quarter two in terms of GDP even in quarter three of GDP right now quarter 3 GDP is expected to be about 2.2% 2% growth. Leading economic indicators have turned lower again. So that certainly doesn't suggest that we're about to have this really robust economic growth within the overall economy. And yeah, hey, sorry, real quick on that on that chart. Um, first off, leading econom index, that's a composite of a whole bunch of different indicators, right? Leading economic, credit, markets, all kinds of stuff. Yeah. Okay. Yep. So, it's a it's a hodgepodge of many different things. Um, I just want to note here, um, kind of every time it has dipped negative, um, uh, we've had a recession with the kind of notable rec exception of 2022, although I will say that wasn't a fun year. Yes. Um, so, um, you know, I guess you kind of got to ask yourself if it is indeed declining again here in negative territory. Um, something different has to happen this time for it not to be at least a unhappy year. Well, I wouldn't I wouldn't say that something different needs to happen because if you look So, so first of all, leading economic indicators. So, so two things real quick. First, this is a six-month rate of change. Um, so if you just take a look at the leading economic index, it just kind of goes in a 45deree angle and kind of bobs up and down. So looking at it in a six-month rate of change gives you a much better indicator of economic impact. And historically going back through history, excuse me, uh, a negative downturn of consequence in leading economic indicators has always been in conjunction with a recession. So to to your point though, 2022 we did not have a recession even though it wasn't a fun year. And the difference was between 2022 and every other recession period was that we had this massive influx of capital in the markets, you know, zero interest rates, quantitative easing, um you know, just all these stimulus checks to households and we built up that huge big wad of economic activity that is still kind of working it itself through. And so we've now gotten to the end of that. And so the the the issue now is is is the leading economic indicator going to start register and again I don't know the I don't know the answer to this but given the historical function of how the leading economic indicators work relative to the economy with no more stimulus and all this other stuff supporting economic activity and we're starting to see investors you know capital run out of the economy lower employment growth those type of things is are the leading economic indicators about to start going back to functioning properly. In other words, you know, in 2022, they didn't function properly because of these one-time anomalous impacts on the economy. Now, the economy is returning back to normal, which means that the indicator should start to return back to normal. We'll see. And again, I'm not making a prediction that, you know, we're about to have a recession, but what this does suggest is that the economy is slowing down. It's not accelerating, which does put forward expectations at risk. when you look at cape at 40 times earnings right now, you know, you've got to pay attention to what's happening with the economic growth rate. So, totally agree and and I think you're making my argument for me, which is we actually had an explanation in 2022 that there was something different this time that that this might not be commensurate with a full recession. And your answer there was we had all this stuff still slloshing around from the co rescuers. Right. Now that we don't, you got to have another explanation uh to say, "All right, well, if this continues to drop further into negative territory, we're not going to have a recession because of special case X." That's really all I'm saying. Yeah. And and and you're right. And and that that is correct. In other words, you need something that's different this time versus, you know, previously when these economic indicators worked. And that's the same thing with the the the yield curve. And, you know, a lot of people are like, "Oh, the yield curve inverted. We're going to have a recession." No, the the inversion of the yield curve is not the recession signal. It's the uninversion. And so we've had an uninversion of the yield curve that typically precedes slower economic environments. There's a lot of reasons for this economically, but uninversions of yield curves are typically where you start seeing slower economic growth. And and remember, we might be in a recession early next year, but won't know it for a year, right? Until it shows up in the gray bar after it gets dated, right? So, you know, the the the kind of the key to all of this is paying attention to these indicators and what it suggests. And as I was just saying a second ago, this is the percentage of of total employees. So, you take a look at all employees that are employed, right? This is not the working age population. So, are you employed? Yes or no? Okay. How many of you are working full-time? And that rate is dropping. And you only see that in slower economic environments. And there's a a decently high correlation to economic growth versus, you know, the employment levels. It makes sense again, you know, if I have a full-time job, I have benefits, I have health care insurance, I can take care of my family, I've got some discretionary income. If I'm working three or four part-time jobs, I'm probably don't have a lot of excess discretionary income to support it support the economy, right? So, I think that's the thing that is, and this is one of the things that I pay the most attention to is continuing to watch what's happening. Employment because of its impact. Consumer sentiment is also very important and that's clearly not going in the right direction. So, you know, we had this big surge in in consumer sentiment, you know, during uh all that kind of COVID stimulus and things like that, but that's all starting to work itself out. Consumers are becoming a lot less confident both on current conditions and forward expectations as well. C can I ask you a really high level question here? Sure. So, um it's a little easier to see in some of the other charts, but I think we can see it here. Um, I can go back to a different chart if you want. No, it's fine. Um, so the last like pronounced recession that we were in was the Great Recession, right? Which is 2008 through I think spring of 2009 officially. Yeah. Um, yes, we did have a recession in um during COVID, but it was literally a blink and you miss it recession. You can almost not see the gray line here. Right. Right. So best recession in history. Yeah. So kind of for all intents and purposes, we haven't had a recession now for what, 16 years. Well, effectively, yes. Well, again, if you don't count the pandemic, which is kind of oddball thing because it wasn't a natural recession. It was a man-made one. Yeah. Well, let me Exactly. Because we shut we shut the global economy down, right? So, let's put an asterisk on that and just remove it from the data set for a second. Um, I mean that's kind of I'm going to say anomalous, but obviously we only go back this chart only goes back to the 50s. Um, only pardon me, only the 50s. Only the 50. But I think if we went back, you know, another hundred years or so, we would have had recessions a lot more frequently than than 60. Like 16 years is a really anomalous time, right? Um, and my thesis here, you tell me if you disagree. Um, I don't think it's because the economy just magically, you know, became more resilient. Um, I think it's more from a policy standpoint. Oh, we we got a lot more allergic to the concept of having a recession, right? Um, and I and I suspect that that's the playbook that's in place. Um, so which is one of one of the points I want to make here is just kind of crazy, right? And I've used this analogy before. It's just like saying you don't like winter and you don't ever want there to be winter. And so when it gets cold, the government's going to spend a ton of money and bring a bunch of heaters outside and we're going to, you know, try to just heat away winter, right? Um, and you know, as we've talked a lot about, look, winter plays an important role in the seasons of life and recessions play an important role in capitalism. They're there to get out the malinvestment, right? Creative destruction. Mhm. Um so, uh I guess so the next question here is is um what what does your gut tell you? And I know I'm just asking you to totally guess here, but if we start entering recession again, you know, is it going to be all guns blazing? Like, okay, we got to do everything possible to to make this recession last even shorter than the COVID one, right? Um or do you think it would be more pronounced this time? Well, it depends on the it depends on the cause, right? So, again, you know, we talk about this a lot and written about it a lot. If you're having just a normal economic slowdown that slips into a recession, right? Nothing nothing earthshattering going on. It's just consumers are running out of capital. Um, you know, companies are starting to lay off employees to to, you know, kind of work against, you know, slowing demand, those type of things. So, you just kind of get a a more organic recession kind of like we saw back in the, you know, 50s and 60s. is just kind of these organic recessions that occur. Then, you know, it's not going to be dramatic. You know, maybe you have negative 1, one and a half% growth. Um, the market goes down 20 30 35% something like that. Um, you know, you go through a period of of kind of adjustment. The Fed will cut rates to zero, probably restart QE at some point. And, you know, that that it won't be it won't be this devastating event, right? Um the the problem that we have right now is for most investors is there's only been three recessions that most people remember now because of just we're getting older. Most people don't remember the 91 recession which was mild. It was organic recession. Um you have to go back to really the the late 70s 80s to get you know bigger recessions um that were normal right just kind of a normal recession. So the only recessions that people know today and the only ones they remember is the.com crash, the financial crisis, the pandemic shutdown. Yeah. And and sadly in terms of like professionals, a lot of them remember a lot of them don't even remember the dot crash anymore. Exactly. Well, exactly right. Talk to a 40-year-old, they don't remember it. Yeah. No, that's absolutely right. But that's also the dangerous problem here. here. And again, this is why, you know, I push back on narratives a lot of times with people is like, oh, you know, we're about to have a 50% plunge in the market. Yes, it's possible. It is entirely possible we could have a 50% decline in the market, but you need an event to make that occur. And that's that event is going to have to be credit related at some point. And there's certainly some things that are popping up. You know, we we we're starting to see, you know, some issues in the credit market. Um, not even ask I'm going to ask you about in a second. So, yeah. Right. Right. I was just about to mention that. So you gotricolor going on, but while that's an important deal, it's not the size of like the subprime prices. So it's not a lemon. Yeah. Correct. So, you know, so the point is is that we've got to be careful extrapolating the word recession to meaning a financial crisis of some sort because a normal economic recession which should occur should be allowed to occur should happen on a more frequent basis in my opinion to keep the economy healthy and going because it resets debt levels. It does a lot of things. You allow bankruptcies to happen. You allow companies to go out of business. It's not the end of the world. It's actually healthy. Um but you need for that you know again we just have this psychological link to every recession. Rword is the next financial crisis and that's not necessarily the case. So I think we've got to be careful as investors is not to make our investment decisions based on every recession being a financial crisis even could you know again there could be an event I mean may be you know just the the needle in the hay stack and and like we saw in the dotcom crisis you know it was in sorry yeah during the dotcom crisis it was Enron and Enron was a fraud and it was and and you know completely kind of blew up but then we started figuring out it wasn't just Enron it was worldcom it was loose Houston, it was Global Crossing. It was, you know, all these other companies uh that were involved and that's what fueled that return to rationalization of what was going on during the crisis. So, you know, again, could be that. Maybe there's a whole lot more out there. We don't know that yet. So, so, okay, good, good answer. I agree that you said let me flip it though from investors to the folks that are running the economy, right? Our politicians essentially, right? I think they have gotten to the point where in their mind recession is it's an intolerable thing. I guess this is kind of my question where I don't think if they would be like, "Oh, this looks like a garden variety recession. We're just going to let it play out over the next next couple of quarters cuz that's healthy for the economy." I think they're going to react as all hands on deck. We can't let this happen. This is terrible. People are starting to lose their jobs. Y I think we have a president in the in the Oval Office who loves to use the stock market uh you know as a personal scorecard. Um and so I I guess my question to you is is is you know do you suspect that they what do you suspect their reaction function would be even to the beginning of a garden variety recession? I think it'll be exactly what you just said. I think I think that and again it's not just the current president that uses the stock market as a scorecard. Biden did it. Obama did it, you know. Oh, sure. I mean, honestly, Trump, you know, he beats that drum. I mean, more than Yeah, of course. They all every president does it. And of course, you would, right? It's like, hey, our stock market's at record highs, you know, that's that's great, right? That just shows the economyy's healthy. We're booming. It's it's a good marker. Um, but no, absolutely. You know, after the financial crisis, our policy makers have gotten addicted to what they can manually factor into the economy. You know, the Fed's going to immediately return to QE. Uh they'll immediately, you know, the Jerome Pal, I always kind of laugh. Jerome Pal says, "We're not ever going back to zero interest rates." BS. As soon as you get a recession, you'll be at zero interest rates. First sign of a ifricolor shows up as a as a bigger issue with a credit crisis and starts to impact one of your member banks like Goldman Sachs or JP Morgan, your rates are going to zero. Let's be honest, you know, and and and state the card. But, you know, we've gotten used to this. Don't be surprised if we get into another downturn in the economy that regardless of who's president, whether it's, you know, President Trump or whoever's the next president, don't be surprised if there aren't immediate calls for checks to households again because they saw I think I think there will be. I think that's a guarantee. Will we do it? Who knows? But I I I I feel comfortable sticking my neck out and guaranteeing that will happen. There will be calls for it from Congress and from the people themselves. Absolutely. And it'll be from the right. It'll be from the left. it'll be from everybody in between because what they saw was is that they could stimulate economic growth and all of a sudden they could quell that recession. They could make people happy. They could buy the votes that they needed to stay in office. So you've now established that MMT playbook, modern monetary theory playbook in to the policym decisions coming out of the government. And no, to your point, I do not think that changes and I think that'll be the first thing we see if this economy does actually start turning and If we turn into a mild recession, maybe they they don't go extreme, but if there's any sign of a credit problem, particularly with the major banks that that immediately they're going to go to that playbook. My that's my opinion only. Of course, you may I I I personally two guys opinions, but I personally think the moment that we start seeing job losses on a monthly basis, more than one month in a row, you're going to start getting a freak out in Congress about this. Yeah. Um Okay. So, here's why I'm asking all this, right? So there's a price to that, right? Because it begs the question, well, why didn't we just do this all along, right? If it's easy just to intervene and make a recession not arrive, why don't we do that, right? Nobody likes winter. And from my perspective, the cost is I mean, at the end of the day, it's it's wealth equality is the cost. Um it is you're you're the current the purchasing power of the currency is paying the price and you are at the same time um making money by less. So everybody gets hit with an increase in cost of living but generally you're gooseing asset prices and those are owned very uh you know in a very concentrated basis in in a relatively few households right so so that's been the price that we've been paying now you know inflation what's the Gilra comment you know was the tax that not one man in a million you know could see now I think we are a little more attuned to it given the the big jump we've had in cost of living recently so maybe It's becoming a little bit more of a limiter. But it is interesting. I I look back on that those charts you just had and there were a whole bunch of other recessions there. Yeah. And they could have decided to do something like this, but they didn't. What do you think kept them from doing it back then? Was it a respect for the purchasing power of the currency? Was it because the the currency was was tied to something physical and they just couldn't do it because it wasn't a fiat currency? Like why didn't they take that presumably lowhanging fruit? Well, so a couple reasons. ones. So, first of all, the the the person power of the currency is just simply a function of inflation, right? So, the question you have to ask yourself is do these policies create inflation. So, the only the only policy that we saw actually create inflation versus deflation was stimulus checks to households and because we had no infl so we did we've done QE had no inflation, right? Inflation ran actually below levels. The Fed was begging for inflation, you know, all during 2010, 2020. I'm resisting the argument that CPI doesn't really reflect people's true cost of living. But go ahead. Well, no, no. Hey, no. I I'll absolutely agree with you that, you know, the the CPI, which is the measure of inflation we have to work with, right? It certainly does not reflect everybody's cost of living. For example, people in New York, they pay four times the rent. The the rent in New York is four times the rent it is in Texas. So, it depends on where you live, right? Same in California, right? So, everybody's inflation rate that they personally pay. There was a really great article out on uh I think it was on Zero Hedge earlier this week talking about Gen Z's and millennials are tapping their 401k plans to pay for living expenses because their cost of living is above what they're bringing income and we just saw that in the personal income reports today. Personal incomes are growing at point4% personal spending is going up 6. So right yeah because you can you can only use buy now pay later on so many burritos. Correct. Right. So, no, absolutely agree with you. But when we're talking about global economic dynamics, we have to focus on CPI, which is our our global inflation gauge. That's that's what everything's tied to. Um, so, you know, the issue is is that the only policy that we saw create inflation was stimulus checks, sending checks directly to households, actually physically printing money and sending checks to households. Um, that that was your inflation push. So do I'm not so sure that we will immediately jump back to that but previously we never did that. That was never a consideration previously. Uh the Federal Reserve did not become active in managing the economy until after 2000 during the dotcom crisis and that was where Alan Greenspan started promoting you know adjustable rate mortgages. We never had a housing problem prior to 2000 because that was when we started doing adjustable rate mortgages. We split up down payments at the 8020 so you could bypass PMI and get out of the 20% down payment. We started doing all these things to manufacture activity in the economy and and then the politicians go, "Hey, we've never done this before, but this is working. We like this." And so you've ingrained this, but it was never a consideration where the Fed was, you know, previous to really two the turn of the century, the Fed was this very quiet organization. Nobody knew who the Fed chairman was. Nobody knew who Fed members was. If if you ask anybody in the 90s like who are the Fed members, they can even tell you the chairman was much more people can tell you numbers now than ever in history. Yeah. Exactly. Yeah. So, so you know the Fed was very quiet. they just basically managed reserves for banks and and there was not this intervention into the economy and so that just never really occurred and and even deficit spending was not a deal until Ronald Reagan came along and Ronald Reagan said look we've got to break the back of inflation so we're going to hike interest rates we're going to do this thing to break inflation from the oil embargo in the 70s and we need to do deficit spending right now uh to get employment going again and so they create they did deficit spending created 9 million jobs and and got it going and then The problem was is every other president after that goes, "Hey, if a little deficit spending is good, how about a little bit more?" Right? So, we get to the the heart of my question, which is, so was there a culture or set of values around fiscal restraint that that really our leadership held for 200 years and then decided, ah, you know what? Let's loosen it a little. like like you almost kind of a letting a genie out of the bottle moment and then as they got a taste of it they they both realized hey this is great in the immediate term and also I'm beginning to see it create some issues down the road but I can paper over those for the rest of my tenure and then get out of here and let someone else deal with it. Absolutely. you know, you go back 200 years how the country was founded and you kind of look at, you know, the the, you know, each, you know, kind of Congress over time and and policies, you know, again, we used to vote on spending bills one at a time. So, if you wanted to to do a spending bill for agriculture relief, whatever, you voted on that bill and then you voted on another bill. And so, over it's it's kind of like mission creep that happens. And and so you do one thing and then so during World War I, we started voting on bulk bills and that was supposed to be a temporary thing and then once once the war was over supposed to go back to just managing, you know, the purse as it was meant to be, you know, done by Congress, voting on one bill at a time. Of course, you know, once you do that, it's like, oh, this is so easy. We'll just do this going forward. And those things kind of lead to each other. And so over time, yes, that very conservative kind of monetary nature of the economy has slowly been whittleled away for ease, uh, for expediency, for better outcomes, you know, and and these type of things. And that just has just continued to kind of just layer upon things over time. And it's worked for so long now that this is just the way we do things now. It's like, you know, look, well, it's it's also like you you can't do things differently without a massive cost, right? Right. But when was the last time we actually passed a budget in Congress? Yeah. Forever ago. Yeah. We just use continuing resolutions now, right? Yeah. Right. The last time we had a budget was when Bush was in office, right? Which one? And then the second one. So, sorry, Bush Jr. Um but yeah, when Obama took office, that was the last budget we ever had. And every and during his entire tenure, during Trump's tenure, Biden's tenure, and now now we don't every time we come up to a debt ceiling, there isn't even a discussion of passing a budget. We just pass a continuing resolution, which then the problem with that is that every continuing resolution takes last year's spending, adds 8% to it, and that's the new budget. So we're just incre This is why spending continues to to double every 8 to n years rule of 72 is because of these continuing resolutions. We're not actually doing anything to cut spending. Yeah. All right. Well, look, sorry to go on this this aside, folks, but I think it's really important in a very high level. Yeah. And here hearing, you know, us talking about this. To me, it really does feel like um the journey of the addict, right? you know, you you take something you know you probably shouldn't take and it makes you feel great in the immediate term. Um but the more you take it, the the more the withdrawal period afterwards, the more pain it has. And then if you want to feel good again, you need more of it to get back up to where you were. And then you eventually end in a point where you're like, I I can't not be taking massive doses of this all the time, or else the withdrawal I go through is like, you know, terrible, almost near fatal. But but to your point earlier about the wealth gap, I mean this is household net worth by percentile group. So this is different than equity ownership. This is this actually includes houses, but you get the same idea that you know the big bulk of wealth gains has been for the top 10% of the economy. The 50, you know, the the the kind of the 50 to 90th percentile has done okay since 2020. We've definitely seen some wealth improvement there. uh the bottom 50% has had some improvement but not a lot because they don't participate in the stock market. They've seen their wealth has increased really as a function of of real estate uh increases. They're in other words their home values have increased um in the bottom 50% that's mostly their house. They don't have a lot of investments. You know the the 50 to 90% they have some investments mostly their house but the real wealth creation has been in the top 10% which is the ones that own about 90% of the stock market. Yeah. And let let me just interrupt to note because I don't think people can easily see it. There's actually four groups represented in this chart. The bottom 50% down there. Yeah. The bottom 50% you can hardly see. Um both because the color is an unfortunate choice, but also it's just barely there. Yeah. Yeah. This is this is I I actually have multiple I have versions of this chart. I just haven't updated them yet. This was one that was put out last week by the marketer, but it's the same thing. um you know but but again this is just you know kind of that problem sorry pull pull that back up again because I just want to make a really important point um because the chart does sort of distort it a bit um so if you take the two top tiers there right the top 1% and then the the the next 9% so you add them together it's the top 10% yep do the quick math there they own it's net worth right they own what 75% almost 80% of total net worth. Yep. Yeah. So when we talk about assets being unfair or unevenly distributed, I mean it is extremely lopsided and only getting more so. Yeah. And and again this is because of the choices we've made. Um, you know, again, monetary easing, zero interest rates. If you have assets, right, if you had wealth to start with and you were investing in the markets, this has been since the turn of the century, this has been some of the best financial history ever for the markets because you've had you to to kind of the core of my point here, I mean, you have had the folks running the system doing everything they can to help you. Yeah. and and sadly not that many people are in that vote on a relative basis. Right. That's right. So so the whole power structure has been supporting essentially the top 10% or top 30% or whatever you want to say there. Right. And you know and that's why you know that's why I'm so adamant about you know getting people to save and invest money. You know it's it's easy to sit around and complain about well you know they have all the money you know go kill. It's very interesting. I just saw a a survey that was out two days ago and they went and they went and interviewed a bunch of kids. 46% of the kids said that socialism is a better system than capitalism. I I have that here to talk about with you. Yeah. Okay. So, you know, I can't remember the exact numbers. So, you have Thanks for having the exact numbers, but it's it's an overwhelming amount of of these young kids say, "Oh, socialism would be a much better system." I have lived in socialist countries. It's not. But you know, even if it even if you look at just socialism as the way it operates structurally, it doesn't create wealth. And the whole reason that young people are rebelling against capitalism is because they're feel they're being ostracized by the system. Oh, the wealthy have all the capital. I don't have anything. So, we need a different system to take the capital from the wealthy and give it to me. Socialism doesn't work that way in reality, but it sounds nice in a thesis. But capitalism is where if you want to have the opportunity to build wealth, capitalism is is what you want. You just have to learn to participate with it. And and unfortunately, this is why, you know, when we have our conversations and our rants and those type of things. I always get a lot of, you know, hate emails and comments. It's like, oh, you don't understand. It's like, yeah, I do understand. I've been where you are. I was young once and you know I to I took the steps necessary to participate in a capitalist system. You can too. You just have to want to do it. And it's easy to point fingers and and want these other things to be given to you. But anything that's given to you always has a bigger cost than what you go out and earn unearned for. And it's unfortunate when you look at these statistics. So yeah, 90% of the people, you know, have all these assets. Look, I there's a lot of young people right now that are making a ton of money in the markets. Now, they're probably going to lose it all in the next downturn because they're speculating on wild crazy assets. I wrote a piece this week for a daily commentary talking about per which are these perpetually uh these perpetual options. So, you can buy a perpetual option on Bitcoin and as long as Bitcoin goes up, you can keep you can leverage yourself up to 10 times. So, that's great, right? So, if you if you have a perpetual option on Bitcoin for $500 and it goes up 10%, you make $5,000. The problem is is at some point it goes down 10% and you're completely wiped out. And that's going to happen to a lot of these young kids that are speculating in the market. So, you know, it's important. This is why we talk so much about risk management. It's boring. I get it. You you know, you know, selling stuff when it's overvalued doesn't make any sense because it's just still going up. And why why not just be invest these assets that are just going up? I get it. The problem is is these always end. And if you're not paying attention to your risk and managing your portfolio and managing your investments the right way, you wind up losing it all. And this happened. We saw this in 2022 just recently. Everybody's forgotten about 2022, but all these young people that were had the tiger by the tail lost 90% of their values, you know. Yeah. Well, I mean to a certain extent, you know, they still came out ahead because everything's back up to all-time highs and that's because of all the intervention that's going on. So, a big question is is when, if ever, will that break? Um, which we can we can continue to opine on. But hey, let me let me get back to something you said here. So, um, uh, so first off, I just want to acknowledge that look, there's always going to be wealth disparity. Um, there just our humans are different, right? We all start from different places. Some work harder than others, some are luckier than others, all that type of stuff. But if you just look at the paro principle, which which is ubiquitous in the universe in general, you're going to have 20% um of the people that have the, you know, the majority of the wealth and you're going to have, you know, 80% of the people that that aren't and and you'll get you'll find sort of fractal versions of that the further you go down uh across the population. Um, so there will always be a natural wealth disparity, but um, I believe for all the reasons that we were talking about, Lance, um, it's not natural right now. It is getting increasingly distorted by these factors we're talking about. And I actually, I know we disagree about this. I don't want to get into a big discussion about it today. I do think it is harder today because I think you agree with me. We don't have sort of true capitalism uh, these days. We have sort of corporatism and we have, you know, other things that are putting their thumb on the capitalist scale. Are we a socialist country? No, thankfully. Um, but we don't have the capitalism that I think we all aspire to. And yes, we can spend a lot of time, you know, discussing, ranting about this, being angry about it. But to your point, I'm like, look, yeah, the system isn't quite as fair as it was, but that's all the more reason for you to get going and making sure that you end up on the right side of this line, right? So yeah, there there are some, in my opinion, there are some headwinds against you that maybe previous generations recently didn't have to deal with, but that's just more reason for you to, you know, grab your destiny and work hard so that you don't get pushed back by those. You're one of the ones that crosses the right side of that line. Um, and I totally believe with everything you're saying, Lance, which is we, our system is still capitalist enough that anybody who works hard enough for long enough can change their station here. Um, and yeah, you might have to get real creative like sleeping in your car like you did or, you know, making a lot of the sacrifices that I had to make that I did. Um, so the opportunity is definitely still there. And yeah, you but but I will say this is something that I have been sort of warning about over the the past decade or so, which is the more wealth inequality that you create as a society, the more people that you start to really cause to start giving up on the social contract, the more people are going to turn to alternatives like socialism because they're going to say, "Look, I mean, you tell me socialism's bad, I'm going to get screwed with that, but I feel like I'm getting screwed by the current system, so at least I may as well get gets gets something by who's ever screwing me and that guy's promising me more free stuff than you are. Right. Absolutely. And I think that's exactly kind of where we are right now in this this this college uh poll that you just mentioned. But there's a much bigger cost to the free stuff than there is for having a capitalist. Absolutely. But but a lot of these kids don't know that. I understand that. And again, you know, you you say you you make these statements where it's like, well, it's tougher today than it was. It's No, it's always been tough. It's not. I know. I know. And look, let's just go pre-war pre-W World War II, it was terrible growing up. Yeah, exactly. I mean, you you were that's what I'm saying is that every generation has their challenges, right? It's ne it's ne capitalism has never been easy and the headwinds are different today than they were previously, but there but they are the same in terms of the challenges. In other words, things are always, you know, World War II, you know, Vietnam, these type of things that occurred. You know, there's always these challenges. The difference is whether or not you go, I'm going to take advantage of the system and you start that process, whatever that process is. And you look at you look at Tik Tok as a good example. How many people have started a business on Tik Tok? I'm not talking about just being an influencer, right? You know, they're getting paid to do ads and those type of things. It's a job, right? And they're definitely participating in the capitalist system by, you know, being an influencer and having an Only Fans page or whatever. That's capitalistic. You know, that's capitalism at work. I don't promote that. But how many people have started a business on Tik Tok just by, you know, making a cutting board or whatever and they start selling their their their products online, hats, t-shirts, you know, whatever it is. I don't know. Trump says a lot because there was a big reason of saving Tik Tok was all the small businesses. But honestly, just being transparent, Tik Tok's a black box to me. I've never used it. Trust me, this me too. But the me too, but Well, you use it a little bit. I know you do. I I do use a little bit. I haven't figured it out yet. But but there are millions of people that have actually started their businesses on TikTok and they they and they and it's just and that's my whole point is look if you want to start a business there is absolutely nothing stopping you from starting a business. If you have a good idea and a good concept there are people willing to give you money. So so in other words you know yeah you've got this wealth gap of people at the top but you know what you also have you've got 10% of the people with 90% of the wealth that are willing to invest in your business if you have a good idea. Yeah. So, so, um, I promise you, let's have a conversation about on the good side of the ways in which, you know, scrappy, uh, proactive folks can change their station here because I don't want to get mired in it here. Um, I will say on that last part, you're right. Um, I'm I'm a little um depressed by that because again something I've been saying for a good while is is I think the economy is sort of morphing uh to the state where you kind of only have two main options as an entrepreneur if you're going to start a business where you got to go real big at scale, like massive scale, right? Sell widgets for, you know, a very competitive price, small margin, but but you you've got the Beanie Baby that everybody wants or whatever, right? and and you just sell a gazillion of these things, right? Um and that's hard because you need a ton of capital and you need to get the fed, right? Right. Or you got to basically service that top 10%. That's where all the money is. So that's it's kind of like why Willie Sutton rob the banks, right? Well, because that's where the money is, right? And so you got to kind of I'm not I'm not sure that's the case. You don't have to service the top 10%. You can service the global economy, right? I mean, look, if I want to start a t-shirt business, right? I can do that. And I could go talk to somebody say, "I've got this idea for a t-shirt business, whatever it is." And there's there's people out there with money go, "Yeah, I'll invest in you. I'm I'm investing it. Look, I invest in people all the time. So, if you have a really great business idea, you've got a business plan, you've got a background in it, you understand what the hell you're doing, I'm interested. Let me know. Send me the business plan, right? We'll take a look at it." Um, but there's a lot of people out there like that. And whether it's real estate investing, you know, whether it's building multif family homes, whether it's building houses, there are people that will invest in a good solid business. So you take advantage of that capital. Banks will loan you the money and then but you can then sell that product to everybody in the country, right? So you've got a huge consumer base and that's the beautiful thing about the US is that we're a consumption-driven society and that's a huge consumer base to sell into. Okay. So here here's here's my point on that and maybe this is a a discussion to have in more depth at a later time is I agree to a certain extent that is catering to the wealthy because increasingly they're the ones that have the capital so you got to go you know knock on their doors. Sure. Nothing totally wrong about that, but I think that capital is getting increasingly concentrated, right? Um, and then secondly, you know, you know, think of the local hardware store versus, you know, Walmart, right? where it's just getting harder to create a small business and compete with these massive conglomerates and these, you know, global supply chains and umeneral these hedge fund rollups and stuff like that. In general, yes, I will agree with you. In general, yes. But there are people that have found niches I'm totally there. Yeah, we can talk about a broad stroke that Right. Right. And that's my that's my art. That's my push back on you is that your arguments are very broadbrush in general. Oh, wealth disparity is causing all these problems. It's not. There are tons of opportunities. You just have to be willing to go find those opportunities and take advantage of them rather than sitting on your douff saying, "Oh, life is so unfair. You know, Adam showed me this chart of wealth disparity and I'm never going to be able to participate in that." It's untrue. Adam, you're a good example. You built this whole business. You're selling you're you're making a lot of money on this channel by selling a product to some to people that they want. And people are I just want to be clear you and I let me finish. I'll let you finish. People are sending you $8, $10 subscribe to your YouTube channel, whatever. They may not have that money, but they're willing to give it to you for the information they're getting. So, you've created a product. You've participated in capitalism. You are the best example I know right now for young people to aspire to and say if Adam can do it, I can do it. Forget all this other narrative nonsense. It's keeping you in your seat. It's not getting you to grow. And we need to start getting more of our young people to reach out there. Start reaching for that ring. Start taking those risks because if you don't take the risk, you can't achieve success. It's a very it's a very kind thing. I just want to underscore you and I I think are saying essentially the same thing which is there is opportunity out there and I think we both want to encourage people to to get there and and remind me after I say this there's something really nice about some feedback that we've gotten about us in this this um weekly market recap. Um, I do think so what I do is is is I I I do think things are challenging and I want to make sure people are eyes wide open about the challenges and then use that to fuel their okay well I better not wait for this to get handed to me cuz the system maybe doesn't work the way I initially thought it was going to and I got to get off my douff and I got to work you know more creatively like this because there is opportunity and honestly I think kind of in a world of AI um you know those that that embrace this hungry proactive uh entrepreneurship. Um that may actually be a really key successful competitive differentiation going forward in terms of how where you end up. So anyways, I I I think in many ways we we we think the same way here, Lance. Um and again, that's why I said like maybe we'll do a maybe not a rant, but we'll do a show at some point in the future that's about like, hey, okay, you're 25 years old. here's all the things that we think you should do right to to advance your station if you're if you're still but but one thing I do want to note is I think it's important to talk about all this stuff because I don't think this is what kids are being told growing up in our education system they're stepping out into a world yeah well it's not it's not what they're getting from the the mainstream media which is all about you know everything is bad um you know they definitely don't get it in terms of you know mentorship from other people and again you know how many times I've failed trying to start my business I mean nothing is easy and and like we've talked about before. The difference between success and failure is those that are willing to try again after they fail because you're going to fail. You're going to start businesses and you're going to fall flat on your ass. You're not you're going to go talk I I cannot tell you how many doors I knocked on trying to raise capital to start my first business and all the hoops I so quick story. I went I was 22 years old. I wanted to start a financial f sorry a fitness business. I wanted to create like the next Gold's Gym 24-hour fitness type thing, right? Yeah. Except with swords. Except with swords. Yes. So, we, you know, I had this idea for a corporate health and fitness facility, 15,000 square feet, all the equipment, nutrition. I was, you know, we were kind of doing stuff way ahead of the time. Nutrition, counseling, all kinds of stuff. And I went to the bank and I said, I need to borrow a million dollars. I'm 22 years old. I don't have a job. I just graduated from college. And the bank goes, "Yeah, no, we're not you a million dollars." And I'm like, "Okay, but I tell you what. I tell you what. What would it take to get you to loan me the million dollar?" See, and and this is the difference where most people quit. The bank says, "No." She go, "Okay, well, that's not going to work." So, I quit. Right? So, I kept going back to the banker saying, "Okay, well, tell me what you what would I need to have in hand for you to loan me the million dollar?" and they go, "Well, I need you to have some signed contracts for at least $50,000 worth of revenue." I said, "No problem." So, I went and talked to the leasing company of the building I wanted to lease. It was a big strip center in this town. And I said, "I need access to this space. I I can't rent it from you right now. I'm working on the financing and you're not using this facility. It's" And this this is like an empty strip center, right? The ceiling tiles are hanging down. There's concrete floors. Half the windows aren't even installed yet. I said, 'I just need to use the space here to to pre-sell some memberships to this fitness facility that's going to be here. And they surprisingly they said,"Okay, yeah, you're not going to hurt us." I set up a table. I put out signs out front. I said, "Fitness facility coming soon." Listed all the aspects and I sold $50,000 worth of memberships, pre-sale, money in the bank at the bank. So then I went back to the bank and I said, "Okay, there's your $50,000." And the bankers, well, you know, not I can't quite do the million-dollar loan yet. I really need to see you have a corporate sponsor. And I was like, fine. So, I went out and started talking to the big corporation. I got Dow Chemical to sponsor me. And so, Dow Chemical says, "Yeah, if you if you ever get this thing up, we'll offer it to all of our employees and they can come work out at your facility." I'm like, "Awesome. Great." Sign a contract. They took it back to the bank. Bank says, "Well, yeah, that's getting pretty close. We're not there yet. you need to have some investors that have some capital. So, I'd go out and find me three investors and you know, so I went and talked to everybody. Everybody's like, "No, that's never going to work. That's not going to happen." I got turned down over and over and over again. Finally, I found three guys that would said, "Yeah, I'll I'll invest money into the business." So, I sold 40% of the business to them for capital, took it to the bank, and the bank finally just said, "Fine, here's a million dollars. You can go build your business. I'll give you a million dollars just to get out of my face." Yeah, it was pretty much the case. I just kept beating them down until they couldn't say no anymore. And that took a year and a half to do all that. And and and you know, could you do that again today? I don't know. Banks are different. But my point is is that we built the facility. It operated. It functioned. It made money. It was fantastic. It was wonderful. Um but it it there were so many challenges to get there. Now, how many people do you know would stop at every little failure that every time I got turned down for something, how many people would normally stop versus keeping going? And that's the difference. And that's what I'm saying about capitalism. Capitalism is not easy. If it was easy, everybody would do it. And you know, that's why people are voting for socialism because that's the easy way. Just give me free stuff. But there's a huge cost to that. And if you think wealth disparity is bad now, wait till you have socialism. it gets really bad. Um, but you Well, it's crazy because none of the people that are saying, "I prefer to, you know, I prefer socialism to capitalism." Yeah. Actually go live in a socialist country, right? You know, there there is no little Miami in Cuba, right? You know, we got a little Havana in Miami in in in Florida, but we don't have, which is hysterical because part of that article is is like, you know, we want to be like Cuba. Have you ever been to C? I've been to Cuba. You don't want to live in Cuba. If you think you think povertyy's bad here, wait till you go to Cuba. Yeah. I have some friends who just went about two months ago and they came back kind of shell shocked. Yeah. They were like it was a cool experience, but they were just like, "Oh my god." Yeah. Yeah. Yeah. The way you know the the So, the point of this is is that, you know, just you and and to your point, Adam, is that I think the message that we have to get across to our our younger viewers is that no matter what you want to do, you can do it. just ha, you know, put together a business plan, have an idea, go for it, and look, you may fail. And every great success in the world has probably been bankrupt at least once or twice. Oh, yeah. Nobody ever gets it right the first time. First time. Exactly. But you just got to keep trying at it. And if it's just wanting to build wealth, start building wealth. Just, you know, open up an account, start investing. Um, we just rebalanced our accumulator model yesterday. We we swapped out some positions in our accumulator model to lower the threshold. So now you can actually build that model for about 1,500 bucks. Start with save up 1,500 bucks. Go invest in that model and just start contributing to it every month, right? Stick 500 bucks a month in or $100 a month in whatever you got. But just start doing that and make that part of your system. And that's how you build wealth. just start instead of complaining about the system, start participating in the system and start doing what it takes to be to to get to where you want to be. Yeah. So, like I said, you you and I are in agreement about all this. One thing I will say to your your inspiring story is I actually think I don't like the reasons why this is the case, but I actually think it's it's probably substantially easier today to get at capital as a scrappy new entrepreneur. and and and you know one of the reasons for that is one capital is concentrated right so you got a lot of rich guys who just have a ton of money they're trying to figure out what to do with it they're trying to they're looking for business opportunity you're actually helping them by bringing them an idea and sort of similarly with the banks um uh and you know especially as we're going back into an easing cycle on rate cuts you know that's going to banks their job is to lend you know so they're they're so anyways easier for you to follow that type of path that Lance just laid No, it is. And and you know, today it's interesting right now because you know, you've got so many hedge funds that are out there, so many private equity firms. And this is one of the things we talked about previously, Adam, is about this push to put private equity into like 401k plans and stuff. That's a huge negative. We should not do that. But for younger people, it could actually be a good benefit because these companies, these private equity companies are going to be sourcing out every form of capital that they can find to fund deals and they're going to be needing deals to to put into these funds to to do that. So, if you've got any type of reasonable idea, I mean, I just read a story about a guy who bought an industrial manufacturing company. He had no ties to this company. He just went to a PE company and said, "Hey, if you'll give me the money, I'll go buy this industrial manufacturing plant and start running it." And they gave him the money, you know, and so, you know, it's just we're in that cycle right now where actually getting access to capital is really much easier than it's been in a long time. Yeah. Yeah. And there's, you know, pro pros and cons about that. Um, a lot of malinvestment probably gets funded, but, you know, again, if you're the scrappy entrepreneur, Yep. you can change your station through it, right? Okay. Um, so let's move on. But real quick, I did just want to note um I have been getting more often than not recently, Lance. Um uh just really nice comments from people both via email and sometimes in the comments these YouTube channels uh and sometimes in DMs on on X um about people who have just said, "Hey, I've really appreciated what I've learned about um investing from this channel and especially from these weekly market recaps with you, Lance." and uh and that really is the best feedback that I can get. I mean, that is this is a missiondriven business. That is the mission. Um but I'll tell you, Lance, I mean, some of these people have like taken snapshots of their portfolios and said, um you know, I I I I didn't really know much about investing, but I've learned a lot from you, and man, I've had such a great year. And they'll they'll show me their portfolio returns for the year, which are amazing, and I'm so happy for them. But part of me too is like, "Oh my god, like you're crushing me." Yeah. Yeah. So, I mean, it's wonderful. It really It really is such a hopefully, you know, a flywheel of um of education and insight. And again, as I always say to people, information in and of itself doesn't have any value. The value is in the application of it. And so if anybody is actually applying what they learn on this channel or other channels like this, there are plenty others out there uh to improve their their financial um you know, destiny, uh I think I I couldn't be prouder to be part of that movement. Yeah, absolutely. And I just hope those people are emailing you, showing you their portfolios. Also remember to take profits because this will end eventually and you don't want to give them all back up again. So again, just, you know, risk management. Don't forget the risk management part. Don't forget that. So that's a good segue to start to talk aboutricolor but also and the potential sort of systemic risks that we might be seeing out there. But before we get there, let's get to the TA because we still have a market that um while has stock markets had a couple down days, uh still trading near all-time highs and valuations are still quite rich. Yeah. So a couple things. One is as um I wanted to show you just take a quick look at our factor analysis. So um this is factors the factors in the I'm sorry go ahead. No I'm just chuckling because everything's starting to migrate up to that upper right quadrant again. Yeah. Well so so again what factor analysis is is what we look at is is factors of the market. So what what is a factor? So a factor is like uh momentum or u high dividend or mega cap growth. So you know kind of these kind of investing themes. That's what a factor is. And so we just looked at these we we kind of keep track of these factors and we look at them on both an absolute basis. So what what is absolute? Absolute is how is you know how are equal weight S&P 500 index trading to itself? Is it overbought or oversold relative to itself and then we look on a relative basis which is how is it relative to the S&P. So what we're focusing on and what this chart is to the right is this quadrant is both the absolute uh versus a relative. So is it overbought on both an absolute and a relative basis. So for instance gold miners which is at the is the most overbought it's 76% overbought relative on an absolute basis and 75 overbought on a score on a relative score. So it's way up here in the upper right hand corner. Um but again it's not just them. It's it's ARC disruptive technology. You you're going to get a theme here, right? High beta momentum, emerging markets, mega cap growth, momentum, S&P growth. So, you'll notice that the things that are most aggressively overbought is all the high beta growth related type structures. And when you get these more massive extremes to one side, you eventually get that reversion. And where's that reversion going to go? is going to go back to the stuff that's underperforming like equal weighted um you know stocks you know midcap growth has been underperforming is like may see a little bit of pick up there but you're going to get stuff back to low beta and that's going to be that defensive rotation in the markets when it occurs and and we're not seeing that just yet but over the last couple of days as for example in the small and midcap space we saw a lot of these high-f flyers like bloom energy ahr systems others um take very big wax I mean they they were down you know 10 12 15% in a day or two and they just gotten but but these are the stocks that over the last month and a half have had they're up 70% 80% a month and a half and so they're just giving back some of those gains. Um so again just make sure that you know again this kind of goes back to the premise of just managing portfolios. Um to to your your point on the on the TA we came down we tested the 20-day moving average yesterday bounced off that a little bit this morning. We're going to see if that holds. We're still within this very defined trend channel holding right at the 20-day moving average. The concern here is we do have money flows declining. So even though we've got this bounce in the market, we have money flows declining. You still have this negative divergence in relative strength, negative divergence in momentum, all suggesting that the markets are getting weaker, not stronger. Um so you're getting a more narrow concentration of kind of what's driving the markets. And again, nothing wrong with that, but it does suggest that, you know, there's a little bit of risk here. Uh, also this week, uh, sorry, sorry, next week is end of the quarter rebalancing. So, a lot of this action that's going on this week is kind of ahead of that quarter end rebalancing. Um, and then of course we're going to start October. So, we'll get start we're going to start to fire up quarter quarter three earnings here pretty quick. So, we'll start getting those reports coming in. But seeing some a bit of jockeying of positions, you know, kind of going into next week isn't really surprising. You know, the thing we want to watch is if we take out the 20-day moving average, which has been really key support here, this this kind of running trend, then the 50-day moving average is sitting right around 6450ish somewhere around there. And then you've got a pretty big gap before you get to any real support. You know, around 6,200, then somewhere around 6,000. So, you know, there's certainly some downside risk if we get a correction going. It's funny that 6,000 now feels um like a painful correction given that uh at the start of the year, you know, it felt like a real stretch goal. Yeah. Yeah. I know. I mean, look, a correction back to the 200 day moving, sorry, the 200 day moving average would be roughly about 10%ish, 10 11%. So, that's not going to be, you know, that's, you know, a lot of people are going to be calling like, Mike, you know, Adam, is this the big one, right? Are we talking about? But can you imagine just if we go back to the April lows just where we were in in lows of April, that's 26% lower just to retest the lows of April, right? Talk about that for a second because a test of the April lows isn't isn't something um completely out of the question here, right? No. Technically, not at all. Isn't it's not out of the question at all. And and look, if you just look at this on a longer term scale, right? You know, this is the kind of the interesting part is that if we kind of back this up, put this on a bit of a scale so so we can kind of look at this here. Let me take the money flows off here real quick. Okay. By the way, as you're getting rid of money flows, are you expecting money flows to go down as we enter October just because buybacks uh start getting turned off? Yeah, it would it wouldn't surprise me to see them tailor off a bit more. I mean, they're they got very elevated during this recent run, so a reversion won't be surprising at all. I mean that's just a kind of a function of it. Yep. So, but you know, like I said, I want to keep things, you know, if you start to keep things in perspective. You know, this is this is the market going back to basically 2019. So, here's the peak of the market in 2020. Here's that 35% plunge. That looks like a little minor correction now, right? It so does. Yeah. This is 35%. This is 19, right? And this is just because of the law of large numbers that's going on here. Go ahead. Yeah. And I'm agreeing with you. Yeah. But so yeah, so you take about a correction back to the April lows. That's just the that's basically nothing more than just this trend line that we've been running now for the last 5 years. So a correction back to trend would be nearly 30%. Now if you don't think people will be freaking out about it now, that will not be a bare market. Okay? A 26% correction. Everybody's going, "Oh, you've broke. You violated 20%. That's a bare market." No, that's not a bare market. you're still within a bullish trend going back to the 20 2020 lows and more importantly all the way back to 2009 actually. Um you'll still be in a bullish trend. You'll have a 26% correction from here and you'll still be in a bull market. That's going to be hard for people to wrap their brains around. Yeah. Which is um crazy just because almost kind of going back to my conversation about recessions like Yeah. Nobody likes to take a 20 6% hit, right? Yep. But in the course of market history, I mean, it's happened zillions of times. Correct. And this is but this is my point about risk management. And I'm actually just writing an article for next week talking about RSI. And I went back and I looked at RS, a relative strength index going back to 1970. And I just marked out what RSI was doing at every before every kind of previous significant you know kind of market downturn whether it was into QE or you know Euro crisis whatever and there's about a 26 week lag on a weekly basis um between registering this but if you just look at this so this is when RSI hit a peak uh back in 20 early 2020 and then of course your correction came in February March of 2020 you know so again whenever you look at these peaks um you know kind of in RSI high, you typically get corrective actions uh more often than not. And it's at least worth and again it's at least worth paying attention to because we're seeing a lot of the same, you know, kind of evidence, you know, in the markets right now where you've got very elevated, you know, peaks in RSI. The market's not really paying attention to it just yet. But when you get kind of these negative divergences, you know, that's again, just because you don't get the correction today, this is kind of my point. Everybody goes, "Oh, well, you know, we're overbought, but the market didn't go down." It eventually will. It may not go all the way down to where you are today. But this is why risk management is really important because again, you don't want to wind up in one of these periods. This is one of those lag periods where the market had volatility and eventually you had the big decline uh that came in in April of this year. But again, RSI was warning you had a big negative divergence um in RSI. It was warning you that there were issues coming. And then of course a lot of investors got sucked into that during the April decline. H um you know I think there's nothing to this but uh there was some chatter the other day as the S&P hit 666 for the first time that um boy wouldn't it be ironic if uh you know the the bottom of the market post GFC was 666 and then the the top uh turned out to be 6666 right yep no I mean and there is a little coincidence that that that's happening at a time where I think you're saying, look, there's there's a number of indicators here that suggest that uh you know, a rollover wouldn't be crazy here. Yep. No, absolutely not. Um, hey Lance, earlier this week, I don't know if you've seen it, but I interviewed Mark Newton, who is Tom Lee's research partner at Funstrat. And you know, Tom Lee, big bull. Um, Mark, you know, I would, well, Mark, I think, is a technician's technician is how he would describe himself. He's a total momentum investor and studies the macro and everything else, but says that's just like seasoning on the steak. I just really look at what the price action is telling me. And um you know, kind of like you, you know, his confidence is better, you know, the narrow the f the the less far out you go. Mhm. But he says, "Look, um, at least as of early this week, hey, I think the market could could still go a bit higher from here in the immediate term." But he said, "I'm my indicators are suggesting that a 5 to 10% correction in October, November, probably quite likely here, more likely than not." um he would then see that as a buying opportunity to then buy into an end of the year rally that would probably bring the market to new highs by the end of the year that that yeah and I was as he was saying it I was like I bet Lance would probably think that that sounds pretty fair. Um now he is he said um I get more nervous especially if we end the year strong uh about half one of 2026 um that uh you know we we could have some real high valuations to work off and then the market may either correct or just grind sideways for a large part of the first half of the year. I don't think that would surprise you and Mark definitely was saying look don't don't hold me to that. you know, I'll come on in December and give you my 2026 update then given what the data is telling me. But I thought all of that sounded like I I I could see Lance, you know, more or less agreeing with that. Yeah. No, I I look, the markets are overbought here. A little short-term correction would not be surprising. Um, you know, there's certainly some things that could lead to a bigger correction in October. I'm not saying that's going to happen, but there's certainly some things sitting out there. Disappointing employment report, a variety of things. Um, but yeah, going into the end of the year, look, you've got a lot of hedge funds that are underweight and they're underperformance equities. So, they're going to be playing catch-up uh in terms of performance before year-end reporting because again, it's uh called career risk. If they don't, you know, match their index or beat it, they're going to potentially lose assets or their job. Um, corporate buybacks will be exceptionally strong. Almost 30% of all corporate buybacks are done in the last three months of the year. So it's a very big corporate buy because they want to get those on on they want to get those done before end of the year. Yeah. Tax purposes, variety of other reasons. Uh so there's going to be a big push for buybacks into the end of the year. And then of course just you've also got your seasonally strong period. A lot of you know retail momentum in the market is still there. You've got a lot of of that and and and more importantly earnings should be good. There's no reason to expect that earnings collapsed in the last month. So earnings report should be good. we've we've lowered estimates going into the Q3 reporting period where we we'll have a decent beat rate 75 76% beat rate of earnings something like that um and that's going to help give support to you know the AI story and a lot of these other stories and and again there's no reason to expect earnings fell off a cliff in the last you know three months now fourth quarter and next year maybe some and early next year may be a different story but going into the end of the year there's some decent supports for this market to kind of keep it together okay all All right. Um, well, beginning to get tight on time, so I'm going to I'm going to cram a few things in here before we wrap up. Um, so we mentioned earlier. Um, I honestly haven't had a lot of time to deconstruct theirricolor story, so you may know more about it than I, but my understanding is is that it was sort of a a subprime lender in the auto space. Um, a decentsized company. I don't think the biggest in the world, but it but large enough to to to matter. And this was sort of appears to be one of those kind of collapse overnight stories where the the company just sort of surprised all of its its uh lenders that like, hey, you know what? We uh we got overextended and uh we're kind of imploding here. Um may not be big enough to um you know uh damage the system uh you know in in in the type of way that we saw the credit cascade starting in 20 two in 2008. But it definitely sort of has the smell of like, wo, okay, this was this was not expected. This this this this, you know, people weren't thinking, okay, that company looks sick and maybe it's it's going to have some rougher days ahead of it. Um, it it kind of seemed to catch the credit industry's eyes of like, okay, whoa, whoa, we were not expecting that, right? And I don't know why that's the case, right? They they loaned because they were a subprime lender or they were loan well they were loaning money to low-income households and to basically illegal immigrants that didn't have a social security number. So you know that was that was a big chunk of their business. And you know when you're in that type of market it's just like buy now pay later. Everybody's like oh it's fine. Are you paying attention to who you're loaning money to and what they're using it for? And everybody's just assuming that buy now pay later like oh there's no risk. These are all good. They're all going to pay off. you know, this isn't surprising and and and it wasn't just uh I mean uh this week also uh what was this other one? First Brands that was involved in the manufacturing of parts and highly dependent on debts also facing bankruptcy. So, you know, we'll we'll see if this spreads. But over the last, you know, 5 years, 6 years, seven years, you know, there's been this move, you know, we had this whole kind of narrative in the US is like, oh, you know, don't worry about if people don't have a social security number, they're in, you know, they need to have debt, they need to have these type of things. Don't worry about, you know, people with low incomes, you know, they need to have access to all this stuff. And, you know, this is very much how we get ourselves in trouble. We've had a credit card crisis on the same thing. We've had the financial crisis based on the same thing, you know, subprime auto mortgage debt, you know, but we get into these very and this is just a symptom of too much money in the market chasing too few assets. Right. Exactly. And and and this isn't new. Um this isn't something, you know, like, oh my gosh. No. And the fact that when you say things like nobody saw it coming, they never see it coming. Right. I know. Well, we've talked about when when the buy now pay later headlines come of the they'll be like, "Who could have ever seen this company?" Exactly. Nobody ever thought that would happen. But it's just it's too much money chasing too too few assets and and when you have that people just start throwing and this is what I was saying earlier, Adam, about if you want money, this is really a good time to go get it because people are throwing money at everything. But that's why I tell you like and that's why I I hated that that's the it creates that opportunity because it is the too much money is coming from too much intervention. Correct. Right. Correct. Yeah, absolutely. And it's kind and what's amazing is is that higher interest rates haven't impeded that. You know, we all thought and look and me included. I all thought that when the Fed hiked rates that we would have a much bigger economic, you know, kind of crush on our hands. Mr. Mr. Lag effect over here. I mean, I did too. Yeah. Yeah. And it's been it's actually been quite amazing that I did not re you know, I knew there was a lot of money in the system. You and I talked about in 2022 why we weren't having a recession because of, you know, the Chips Act and the the IRA act and all these other type of stuff. Picking the Python. Yep. Yeah. Yeah. Yeah. And, you know, but I had, you know, it's just been it's actually been amazing. I you know, how how stable the environment has been because of all that and even higher interest rates didn't impact that structure yet. I I still have a worry. Yeah. You hear yet? I still have a worry that it's all going to happen. It's just Yeah. And probably right as everybody has given up, you know, the thought that it could happen, right? Oh, right. When it arrives. Yeah, exactly. We need people to be absolutely bullish on the economy and the markets, and that's when you'll be in the in the prime set, right? Well, so anyways, I I just I don't know if we need to talk more about specifically, but it's it's notable um to you know, Stephanie Pomboy always talks about um you know, it's not going to matter until the bodies start floating to the surface. Um, and that's how credit contagions tend to happen is it's a party that folks weren't expecting to to collapse and then people begin to realize, oh, you know what, this party was a was a lender to that party and all of a sudden that that debt got defaulted and now that party, that second party is now in trouble, right? And you you you can start to have a cascade. Isolor uh systemically important enough probably not. I don't know enough about it. Um but it's just a sign that oh okay you know there's a body or two that's starting to float to the surface and that obviously raises the question how many more right maybe none maybe some big ones we don't know yet. Yeah. Well, and again, you know, when you take a look at the tririccolor bankruptcy, they listed their liabilities at about a billion dollars. That's that's not chump change, right? And this is the old story is like if you owe if you owe the the bank a million dollars, it's your problem. If you owe them a billion, it's their problem. So, this is the bank problem, not aricolor problem. Um, go ahead. I was just going to say I another headline that caught my attention on this and I I don't know if it's not directly related, but it kind of rhymes is um so back to buy now pay pay later. PayPal has created their own version of buy now pay later. I think it's called like pay in six or something like that. You know, six easy installments, right? And the headline was just very recently they sold they're still they're still running it, but they sold the book of debt from it to another company. And you almost wonder if it's them, you know, kind of getting out while the getting's good, like knowing that, you know, this is going to blow up at some point. How do we not have it affect us when it does? Let's find some sucker who's willing to buy all that debt, right? Yeah, exactly. No, I mean that's, you know, I was just looking real quick just to comparative. So, you have color at a billion and the subprime market was 8 trillion. So, you know, small. Yeah, it it's it's small and it doesn't mean that there's not, you know, this isn't just kind of the first cascade to fall. I would be careful about extrapolating this into a much bigger issue right now like this is the beginning of the next, you know, major crash. Uh it's certainly it's certainly indicative of we but it is certainly indicative of a much weaker economy because again they were making loans these loans were getting paid. Everybody had stimulus checks blah blah blah and now you're running out of that and so now all this loose lending is going to start catching up as people run out of money. They go into deficit they can't meet their payment obligations etc. Right. and and we so two things one we've talked a lot about this around the um you know centered around the student loan repayment situation where now because you are forced to pay those loans back you have no choice you have to skimp elsewhere and we've seen delinquencies and auto loans credit card payments even mortgages start to jump as a result of that right so this could definitely be part of that probably is to a certain extent to your point Lance if they were really giving loans to a lot of illegal immigrants I mean part of it could just be their customer base just skip the border on them, right? And I don't know. And that that's kind of exotic. I mean, that that's that's not necessarily economic related. Um it has an economic impact on companies that depend on that that population, but um that could be a little bit of a special case. No, I'm not even No, I'm not even saying that they're skipping the border, right? I'm not saying that at It's just that when you loan money to people that you know are low they're they're low I mean their business was low-income families and basically you know people without a social security number that was kind of their business and they did a billion dollars worth of it. They all need cars but if you don't have a way to go track these people down it's really hard to collect. That's yeah and so so you know and and look it doesn't mean they skip the border. It just means they, you know, if you're loaning money to low-income households and to people, if you don't have a social security number, it's probably going to be hard to get, you know, a very high paying job. I'm I'm just assuming um you know, you're going to be working in a lower income strata. That just increases that risk of default on payments as as cost of living, etc. Yeah. Yeah. It's it's a risk. I was I was just saying that we've we know that two million by according to the government Tom Hman, two million folks have already either been deported or self- deepported. So I'm assuming that some of their populations literally skip the border. And if you're if you know you're leaving the country, you're not going to square your debts. You're just going to be like, "All right, I'm not paying that because I'm going home, right?" Yeah. Well, and again, based in Texas, so you know, again, that's where a lot of these deportations are happening as well. So it very well could be a, you know, part of the issue. Sure. Yeah. Yeah. Okay. Um, let's see here. Um, want to get your quick thoughts on this. Um, so because you know, Lance, you like me were around during the com bubble and you saw a lot of the fishy stuff that was going on back then with vendor financing, right? Yeah. Yeah. So there's starting to be some questions raised in the AI space that I think are I mean they're valid questions. Um I I don't know if if it's, you know, if if things are as fraudulent as they were back then, but it definitely seems a little suspicious when you have um you know, some of these lead horses in the AI race um who are, you know, doing phenomenally well, uh then take uh you know, basically inject capital into their customers for their their customers to then roundtrip back to buy their their product and and a great recent example of that was Nvidia uh just I think put like a hundred million or something into here we go is Invidia recycling profits it I know it just recently put it into Open AI and then Open AI announced it was going to buy a bunch more it no it's even better than that um so open AI invested $und00 million into Oracle which invested $und00 million into Nvidia which invested $und00 million into a open AI oh my goodness so it is the Oraoros it's just the snake eating it own tail here. So, but if you're interested in more commentary on this, we actually wrote on this today in our daily market commentary on our website. Uh it's also on X, also on Substack at Lance Roberts. You can find it there. But it was interesting because again, it was a CN CNBC headline as well uh talking about Nvidia's investment overnight will be in cash and most of that cash is going to be used to lease Nvidia chips. So, it's very much a circular trade. Um now, there's nothing illegal about it. There's nothing there's nothing wrong with it, right? So let's you know you don't want to immediately equate this to you know some type of you know like this isn't Enron right you know this is all open and above board but it is worth considering that in order to buy the chips that open AAI wants to buy they need $100 million so I need to get $100 million to buy the chip to lease the chips from Nvidia so Nvidia says okay here's $und00 million and I get a $100 million contract you know it it's is are you really making money or are you just moving chips around the chessboard right now? Right. And it's kind of to me this sort of like with earnings per share where they just doctor it up by doing share buybacks and yet the stock rises because EPS is going up, right? Even though profits haven't changed at all. Um these things the market seems to react to these. Oh, you know, uh Nvidia is putting money into OpenAI. Well, OpenAI should be worth more. Well, Open AI is buying more chips from well Nvidia should be worth more, right? where it's just the same money circulating around, right? Yeah. No, it it is. And you know, again, we're just and we're posting astronomical valuations on things like right and so XAI U, which is Tesla's, uh, you know, artificial intelligence kind of platform, they just raised it. They they just did a funding round at a 10 billion valuation. I mean, we're slapping, you know, multibillion dollar valuations on stocks. Again, this is what I was saying earlier is that there's just so much money chasing assets. If you have a reasonably good idea, there is somebody going to throw money at you because they've got to get that money deployed otherwise they have to give the money back to their investor groups, right? Which which again encourages at the end of the day malinvestment, right? Which is the risk here, right? And somebody brought up to me the other day, um Mark Zuckerberg said something like, um, you know, given the size of the pie we're going after, you know, it's worth it to to throw a few hundred billion, you know, at some of these things we're not sure are going to work out, right? Kind of talking like hundreds of billions of dollars are kind of like loose cash change. Yeah. Yeah. Exactly. And here here was my reaction to that, which is I get it. the the potential spoils of AI are so tremendous that yeah, they make hundreds of billions of dollars seem like small change now for you know if you win the race. The problem is is as I see it and I could definitely be wrong. I'm no technologist. Um the AI race to me feels much more like a winner take all race, right? So you got a bunch of companies that are trying to build the best AI, smartest AI. one of them is going to succeed and at some point everybody's going to gravitate to that because it's the best, right? We we see that network effect with with and all sorts of other things. And so a a lot of the big companies now that are trying to win the race are going to not win it. They're going to lose it. And a lot of the phantom capital that phantom market value they have right now because folks are betting on them to win, that's going to have to go away as they capitulate and say, you know what, I I I didn't win this race. So, a just, you know, I I I I don't think people are really cognizant of the fact that, yeah, a lot of this market value de facto is going to have to go away. Now, maybe it won't go away. Maybe it'll get transferred to the winner and the winner becomes massive, but if you're invested in one of the losers right now, you got to date with Destiny at some point in the future on that. There's also the question too of like, and how big is the pie at the end of the day? Like, I believe it's probably pretty damn big. Is it? But, uh, is it? Maybe not. And I'll talk about that in just a second. But it might be like the internet as we talked about where it might take a lot longer for the winner to realize the value of winning anyways, right? It might be not for 20 years until it's really, you know, proven out. And so some of the even the winner's market valuation may have to take us a haircut for a good period of time over time. So we we have those uncertainties. And right now, to your point, Lance, everyone's just throwing money at this willy-nilly. Valuations are just as as uh Chris Irons nicely said or pornographically overbe right now. Yeah. Um so there's that and then let me just connect one thing and I'll let you react. Um Bane just uh released an analysis this week where they they said look we're we're doing our best to size kind of the the opportunity set of AI here I guess in sort of present value terms I guess. and they were sizing it around a $2 trillion market and they're like from our analysis and we're being as generous as we can be. We can kind of see how 1.2 trillion of that is going to manifest over coming years. Mhm. But there's this 800 billion gap that we just can't we can't come up with a credible reason for that to get realized right now. Yeah. And so, you know, if it doesn't, I mean, that's like a 40% freaking haircut in terms of the expected value of AI. But, but again, that's, you know, that's exactly what happened in the dot crisis. You know, expectations get too far ahead of reality and then you have to adjust back to reality. You know, the internet was a thing. Everybody thought, you know, just because you had the dot crash doesn't mean the internet wasn't real. the internet was real and companies, you know, companies like Amazon and and a lot of others, you know, thrived on the internet and did great, but you had to flush out all that excess, all those over overhyped expectations. And that's where we are right now. The the expectations are too far above reality. At some point, that'll correct. Now, that doesn't mean tomorrow. That doesn't mean next week. It doesn't even mean next year. Um, you know, this could very well this could be the we could be in the 1996. You know, we just had Jerome Pal this week go, "Hey, stocks are fairly highly valued." 1996, Alan Greenspan goes, "Hey, we're having a rational exuberance in the market. It was four more years before the market blew up." So, don't think that just because expectations are ahead of reality that the crash comes tomorrow. But at some point there'll be a reversion of of reality to these expectations. It was interesting. David Einhorn um just wrote a piece talking about this. He said that there's an unprecedented amount of spending on artificial intelligence infrastructure and may destroy vast amounts of capital. He said the numbers being thrown around are so extreme that it's hard to understand them. And there's a reasonable chance that a tremendous amount of capital destruction is going to come through the cycle. And again, know that's that is probably a true statement, but it doesn't mean tomorrow, right? It doesn't mean tomorrow. And that's that's kind of the danger here. And I'll get off this in a second. I used this analogy, I don't know, a year or two ago. when you distort the system, um it's like, uh, you know, having people go walk out on the ice. And the longer the ice doesn't crack, like, you know, in a pond, the ice gets thinner and thinner the out you get to the middle. But the more people go out towards the center that the ice doesn't crack, the more confident they get in the ice, right? And they start treating it like it's concrete, like it's just never going to break. And then of course if you get to the point where reality intervenes and you know the ice breaks it catches everybody by surprise and they are way too overextended because they were trusting the ice way too much and that's that's a big worry I have here for investors and look that's just the way markets work and nobody market doesn't care about my feelings or beliefs here but that is a big worry I have which is if if that manifests if if Einhorn's you know concerns there manifest in a in a sharp repricing of the markets Yeah, it's going to be disastrous right now. Maybe the market just trades sideways for a decade like John Husman's, you know, valuations say it should on average. Um, and then we just grind it out that way and we just have a lost decade in the market. I mean, that wouldn't be good, but it would probably be better than, you know, people getting zorched if it was good. But, you know, typically historically, right, you don't have lost decades where they don't they bounce back and forth. Yeah. They're they're all over the place, right? You end you end up at a lost decade, but you have a lot of volatility into Yeah. So, you know, I don't want people walk away, like, oh, they're saying that you're going to make no money over 10 years. That's not true. There'll be a couple of big crashes in there, right? Couple big declines, 20%, 30%. Again, like we just talked about a little earlier, just a correction back to the bullish trend is a 26% decline, right? That is completely that should be that should be in your deck expecting to happen at some point because that's just what markets do over time, right? And and again to underscore your point and that's just to stay in the bullish trend. Yeah. Bullish trend. We got a whole another conversation to have at that point. Yeah. But which is crazy because like we we kind of treat bare markets now kind of the way that we did recessions. Yeah. Right. Where it's like you know we we need them, you know. In fact, you kind of should cheer to a certain extent because it means that you're going to get really good buying opportunities. Yeah. Yeah. All right. Well, look, we're running out of time and I know I got to get you out of here soon, Lance. So, I just want to say thanks to your partner in crime there, Mike Lieitz, for coming on and pinch hitting for Stephanie Pomboy this week. He talked about um uh he presented uh his latest bullish case for bonds. Um he thinks that bonds um have a pretty good uh outlook ahead of them for say next 6 12 months. Um, anything you want to say above and beyond, you know, what he talked about? Yeah. No, no, he's right. Actually, this past Monday, um, I posted on our website a bullish and bearish case for the markets and I laid out the bullish case for the markets from here and I laid out the bearish case for the markets from here. Um, in the bearish case of course is where bonds really have their best benefit. um of course and you know for a whole variety of reasons but you know when you talk about high valuations and this is kind of where we are right now you talk about valuations so we're at 22 times uh forward earnings and and 25 times trailing earnings this is on a one-year basis um and when you talk about cape valuations which are not good for short-term in the short term valuations are all a function of just sentiment so right now valuations are high because we got a lot of investor sentiment that's why valuations are high long-term 10 years or more valuations are all about returns and at 40 times cape your return structure doesn't look good for stocks but in the short term it's very bullish but when you talk about high valuations you know those ultimately are going to revert to some type of reality and one of the big things we're watching on right now is the difference between the annual percentage change in earnings versus economic growth now why this is important important is because economic growth is where earnings come from as we talked about before and you'll notice that there's a fairly decent gap right now between earnings and earnings expectations which are pretty elevated. There's this big gap historically when there's a gap between GDP growth and earnings earnings catch down to GDP not vice versa. So in that environment and we actually wrote a piece about that in that environment the prospect when you talk and and of course this also ties into equity risk premiums which are running at historically very low levels. So you take a com combination of all these events and the perspective equity risk premium and this is the kind of the key sentence here. The perspective equity risk premium based on expected returns is negative and the ERP indicator from Schiller data continues to track around 20-year lows. All the warning signs are there and we need to have a be paying closer attention to the opportunities in bonds and risk in stocks with the next logical step for asset allocation being a switch to being underweight stocks and overweight bonds because in that environment yields are going to drop fairly sharply elevating your your bond prices and there's a lot of other support for that including your economic data which is all turning lower as well which all suppresses yields and if you take a look for instance at the non non-financial corporate data that that price input from non-financial corporates is running at about 1% and there's a very very high correlation between CPI and the and the non-financial corporate business which suggests that inflation is going to drop closer to 1% over the next year than not. Um all right and one bit of data the mics and that's why Mike is right and why yes we are getting a lot more bullish on on our bond holdings. Okay. And um one of the topics you you mentioned it briefly earlier, we won't have time to get into it this week, but is that um the more that we the deeper we're getting into this year, we are beginning to see that tariffs have not had the inflationary effect that many people feared they would. And you you briefly mentioned the PCE today's PC um prices earlier uh but they came in exactly as expected. um both sub 3%. Um and uh yeah, folks, it's it's not that inflation isn't still going on to a certain extent, but it's not this kind of runaway spike in inflation or dramatic spike in inflation that that many folks feared yet. Now, there might still be some some issues from that. I mean, last night, Trump just put big tariffs on heavy trucks and cabinetry and all sorts of things. So, we'll see. But but to you know and this was something that you had said Lance that hey you don't think tariffs are inflationary in general and I won't make have you make that case again right now but right that is that so far that has been playing out right right and again it's just and again when you take a look at the other big drivers of what's going on in the economy those are all slowing down and inflation is a function of economy and the big point about that is is that inflation is also where corporate profit margins come from and so as inflation You know, so right now this 3% sticky inflation we've got right now is good for corporate profit margins. But if that inflation rate starts to edge off and start to align with what's actually happening in the economy over the next year, that's margin compression is going to become a much bigger issue for the stock market. Yeah. Okay. And obviously margin compression then you know that that affects earnings outlooks and that should bring prices down. Exactly. Okay. Um two things just to mention maybe we'll get into them more deeply next time. Um, precious metals are um, back uh, on a tear. Silver is a an official meltup here at this point, Lance. So, in since we've been speaking today, basically, silver, which was um, close to its all-time price high, is now up 3% on the day. Um, I just want to remind folks, you know, it's wonderful if you're a long-suffering precious metals investor. Um, these things don't continue forever. And so to Lance's ongoing thing about you know take gains position size or my my advice to even just hedge you know think about it right you know and and again you know we in our thematic models we just did a re a full rebalance yesterday so we went through every one of our thematic models on simplevisor and we rebalanced those we did a couple of of you know position changes and some of the growth models and those type of things but in the all weather model which owns uh a whole variety of precious metals owns uranium, gold, gold miners, etc. We just went in and rebalanced those back to target, took those gains. Um, kind of rebalanced some of the other holdings in the portfolio as well. But again, just part of that risk management process, just, you know, we actually did that yesterday. Okay. So, you're sticking to your knitting, eating your own dog food. Um, question for you, Lance, about Bitcoin. I've been seeing an increasing number of articles of late talk about how kind of technically Bitcoin is starting to look a little concerning to them. Um, do you have any thoughts that we can get into in into more depth next week um about Bitcoin? No, no. I mean, look, you know, the what's going on with Bitcoin? Um, and actually, it's just interesting. I two things to say about Bitcoin and we could definitely get into these more next week. Keep keep it tight only because I got a few more things to get through and I know we got Yeah. No, I'll be really I'll really really really fast here just a second here. I want to uh show you this. Um I posted this chart this morning. So this is Bitcoin in the blue line and below that is Micro Strategy and then the two times levered Micro Strategy. And what's important is is that the MSTU the two times leveraged Micro Strategy is back to its April lows. So it's down 45% since April. Um so you know two things from from this are is that this is the understanding of lessons about leverage in markets particularly with ETFs and how the option role occurs and why you should not invest in leverage ETFs. You know Bitcoin is not down nearly as much as these two but people chasing those types of leveraged returns. It can become problematic in a stable environment. So you know Bitcoin is not really going up or down. Um it's you know it's been basically about a 25% gain for the last several months. everything else is getting crushed because of that that time decay of premium. So again, be careful if you're long Bitcoin particularly leverage Bitcoin. Now just from this the the the function of Bitcoin itself, Bitcoin is highly is is a highly correlated risk asset. And one of the things that has been kind of happening as of late is that that downturn in Bitcoin that I just kind of showed you over the last couple weeks is kind of been preceding this downturn in stocks. So, you know, again, if that continues to melt down, if we I shouldn't say meltdown, that's not a correct term. If Bitcoin continues to decline, if we begin to see that kind of riskoff move out of Bitcoin, that's going to feed over into other risk assets as well, particularly in in the stock market. Okay. All right. Well, look, um, to the extent you've got more you want to say about that, let's hear market for next week. Yep. Y um let me also flag for folks too the next two weeks Lance and I are going to be recording on Thursdays um just for schedule requirements on both of our ends. So um you know we'll do our best to give you as much of the market's action even though we'll be missing a day of it but hopefully we'll and and actually my wife's next chemotherapy treatment is next Friday. So Mike is going to be with you on Thursday. Okay, great. All right, so we'll have Leoitz back uh even sooner. Yep. Um all right. And uh trades, Lance, any notable trades this week? Um no, just rebalancing right now. We rebalanced. So in all of our thematic here, I'll just kind of show you what this looks like real quick. So in all of our thematic portfolios on Simplevisor, we have gone through and done a full rebalance as of yesterday. So we went into the AI model. Couple of significant changes that we made. Um in the crypto model, as an example, we owned two Bitcoin ETFs. Um, we swapped one of those yesterday for an Ethereum ETF. So, we now have the EyesShares Bitcoin ETF Trust and we have the Eyesshares Ethereum Trust. So, again, we did make that swap yesterday. In the uh growth focused equity portfolio, we did add a couple we did a couple of swaps, but mostly just a rebalance in that portfolio. And then in the small and midcap stocks, uh we took profits in Bloom Energy, Kratos Defense, um uh AHR Systems, which were up 60 70%. We did take profits in those um and just kind of rebalance those all back to target. So So no, nothing major going on, just a simple process. It's quarter end doing a little bit of rebalancing. We did do, like I said, we did a couple equity swaps here and there just to kind of balance the portfolio a little bit better. Uh this coming week we're going to do the core models. Uh so in the core models we'll do a rebalance probably either you know first probably in the first two or three days of next week we'll do a rebalance in our core models of the equity the ETF portfolio and the dividend equity focus portfolio. Okay. And I remember a couple weeks ago you were saying that you had a list of stocks that you were looking that you were you were waiting for them to get into a territory where you felt like you know you'd get better entry points. I don't get the sense that that you you've hit those entry points yet on those. Um, we did add we did do a couple yesterday just kind of small position sizes like I bought a little bit of uh Applied Digital Corporation yesterday in the smaller midcap stock portfolio. Um, it's about half a position of what it's going to be. So, I'm hoping it declines more. I'm hoping it gives me another another leg down here so I can buy the other half of it. Um, again, it's hard with some of these stocks to to to try to wait for the exact opportunity. So, just trying to step in and and do a little bit dollar cost averaging into these Okay. All right. Well, look, um, in wrapping up here, Lance, we don't have a ton of time for a rant, and I want to do something positive. So, I've got a little quick feel-good message, and I'm sure given your background, you'll have something to add on to it. So, we talk about the importance of compounding in investing, right? The earlier you start, you get that magic of compounding, helping you build um, wealth over time. Your money starts making money for you. Um, but uh, that also applies to life. So, you know, kind of back to Lance's um advice there about, you know, how you get started, right? And you just start grinding things out and yeah, you're going to fail a bunch of times, but you're going to learn and your learning is going to compound. Uh some bad things will happen to you, but also some good things will happen to you and the benefits of those will start to compound over time. So, the message here is just that compounding works in real life as well. And as a small example of that, um I'm sure I'm going to get some grief for this uh as being uh you know, playing in my ego here, but I I'm putting it up here just to to prove to folks the point I'm making. So um I don't know if you saw Lance, but I put on on X the other day. Uh I've been working with this strength trainer for about nine months now. I was doing the work myself before. So um here is a video of me lifting what is a heavy weight for me on a deadlift. And I I note that serious deadlifters will not be impressed by this weight at all, but I think a regular person should uh just being honest. But 335 335 lbs. Here is my my deadlift at 335 lbs. And I was doing it on my own. And you can see had to really psych psych myself up for it. Um definitely a shaky start. I had to wear a weight belt to get it off. And you know when I when I stood up, I then dropped the weight. I didn't bring it back down to the ground. So, lots there that you could uh you know, criticize about my my form. Um, here is the video of me lifting the same weight uh just the other day uh having been trained now by a good professional trainer. Um, and you'll see here, not only am I lifting the weight a lot more cleanly, um, a lot more confidently, um, but the form is much better. You see, I'm doing it for five reps here. So, I'm I'm lifting the weight a lot more. Uh, and I'm also returning the weight to the floor every time, including the last rep here. And why why I put that up there is just to show you, you know, the difference there. Yeah, it's it's I guess it's a fair amount of time. It's about 9 months, 9 months or so. Um, but, you know, I was 53 in the first one. I'm 54 in the second one. It's really not that much different. And my point is is, you know, you apply yourself at something, you keep at it, um you'll get better over time. The benefits will compound. And I'll tell you, there are plenty of days, you know, over the past nine months, Lance, where I totally failed on the workouts. I just couldn't get the weight where I wanted to. There are plenty of days where I just didn't want to get up and go into the gym and and work on it, but I did. Um, and just that dedication, having a goal. But really importantly, and this is the second part of the the lesson I'm trying to impart here is the older I get, the more I appreciate paying for the wisdom of experts, right? Um, and I was only able to get myself to a certain state on my own. And you saw from that first clip, you know, it was very imperfect. Um, now that I've been shown how to do it better by a coach, um, a, you know, I'm much better at it. It's safer. I'm stronger. You know, all all the benefits that come along with it. But I'll tell you, like I'm going to go in there in a couple hours. Like, when I go in there, I've done a ton of deadlifts for this guy. I've done a ton of squats for him. Still today, every single squat I do, okay, Adam, you're you're sitting a little bit too forward on that one or your back needs to be a little bit straighter. like there are all these microcorrections that the expert is able to pick up on that I would never know on my own. In fact, if I was just on my own, I'd probably be continuing to cement my bad habits. Um, as I like to say, by definition, we're blind to our blind spots. Working with a a coach, you know, they've got the expertise to not only see your blind spots, but to know where you need to go, where you might not yourself know how to do that. So, I' I've really found whether it's in money, whether it's in education, whether it's in fitness, whatever. Um, recruiting a good coach is a a total force accelerator um on your progress, but also on your timing. You can get way further way faster leveraging a good expert than just trying to kind of struggle around and grope in the dark on your own. So, I I'll hand it to you, but I I'm sure as both a finance guy and a fitness guy, you you've seen the same thing. Oh, yeah. No, absolutely. You know, there it's just interesting you were talking about that is like, you know, the you know, same for me. So, I go to the gym, you know, pretty much every day of some sort. I'm working out almost every day doing something and, you know, the hardest days are just, you know, when you're tired, you don't want to go. It's easy to go, "Oh, I'll just, you know, I'll just go tomorrow." But you just got to go and do something. And typically if you just go do something it's it's always better than doing nothing but some of my best workouts have been on days I really didn't want to go to the gym. Absolutely. I was going to say the same thing. Yeah. Absolutely. There there number of times where I've gone to he's like how you doing today? I'm like honestly like I I hardly got here. I'm not sure I'm going to make it through the workout. And your body just it's not psyched for it. But halfway through sort of something happens and then all of a sudden you're you're posting some of your And to be honest, I've had days where I go to the gym not in the mood and I wasn't in the mood the whole workout. But, you know, I just got something done and that that was good enough. But, yeah. No, I mean, it's just but it's the same thing like we were talking about earlier about, you know, participating in the capitalist system. You just got to you got to get up and just get started. Just do something. And if you do something, then you do something else tomorrow. Then these little small actions turn into something big later, right? And you know, I mean, it's anything, right? I mean, gardeners know exactly what I'm talking about, right? Um, and I think what's really important about it too is not only do you get the direct benefits of that compounding in whatever it is, your deadlift or your tomatoes you're growing or whatever, right? But it it builds a mental muscle for this, right? So to your point, Lance, when you're talking about like, hey, you got to pick yourself up from failure and you got to go back to the bank and you got to ask like like forcing yourself to build that willpower or or or pushing yourself to build that willpower in all aspects of your life bleeds into what's going to drive your career success or even your relationship success. Right. It it it's it it you know, in many ways that mental muscle you're building may be more powerful or more important than all the rest. That's right. That's right. Yeah. All right. Well, look, we'll leave it on there. Um, we've had some pretty heavy rants of late, so hopefully that one was a pickme up for folks. Um, a couple quick reminders. Um, first off, if um, you think that the best way to start your compounding journey to a better future for yourself is to continue to watch Lance Roberts on this channel every week, 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. Uh, again, don't forget that the uh, Thoughtful Money online conference is coming up real fast. So, if you haven't yet, go get your ticket at thoughtfulmoney.com/conference. And uh you know, given the growing uncertainty in the market that Lance and I have talked about here, um if you'd like to get some help from a professional adviser in managing your portfolio uh prudently, taking all that into consideration, if you don't already have a great financial adviser, highly recommend you talk to one of the ones that Thoughtful Money endorses, perhaps even Lance and his team there at RAA to do that. uh just fill out the short form at thoughtfulmoney.com and the firms will be in touch with you right away. Lance, my friend, another great week. Hope all is going well in your life uh with your family and um uh I look forward to seeing you when you're back in what, two weeks. Uh well, yeah. No, I'll I will see. Yeah, I'll be back here. So, we're going to record on Thursday for the next two weeks. So, Mike will be here next week and then the following Thursday, I'll be back with you. Okay. All right. Well, look, buddy. Have a good time in the inter room. And everybody else, thanks so much for watching.