Are Markets Giving A Real Signal Or Just Noise Right Now
Summary
Geopolitics & Oil: Ceasefire headlines contrasted with ongoing strikes left oil futures disconnected from tight physical markets, highlighting delivery risks and potential force majeure scenarios.
Energy Allocation: Guest added to energy exposure after a sharp selloff, framing oil as investable (not tradable) amid what may be the largest modern oil supply shock.
Precious Metals: Constructive on silver with a technical base and breakouts, keeping commodities as a favored long-term allocation.
Dollar & Flows: Erosion of the petrodollar and rising yuan usage point to a weaker USD backdrop, benefiting emerging markets, commodities, and energy over time.
Credit Stress: Rising redemption requests and gating in private credit and knock-on risks in CLOs urge caution, while commercial real estate distress deepens.
Fixed Income Stance: Prefers short-term Treasuries for safety and flexibility; selectively likes EM local-currency bonds, but is wary of long-duration bonds due to inflation and fiscal risks.
Market Posture: Defensive on broad equities (S&P/Nasdaq), advocating patience, active risk management, and opportunistic adds in resilient real assets.
Transcript
Nothing in this program should be considered investment advice. It is for educational purposes only. Please hit pause and read this disclaimer in full. Our long-term indicators have put us on defense. And the best thing that you can do sometimes is just sit back and watch and wait for the dust to settle because a lot can change in the next two weeks. A lot can change. Hello everyone. Welcome to this episode of Finance Hugh. I'm your host Chris Martinson back with Paul Ker of Ker Wealth Management. Hi Paul. >> Hi Chris. Good to see you today. >> Well, we have a lot to talk about today because um we're recording this on Wednesday looks like uh April 8th, but we just had this big ceasefire announcement last night and it had a huge impact on markets. So that's what I want to talk about markets in in the Iran war and it began with this that came out last night. uh Donald Trump tweeting out based on conversations with Prime Minister Shabbaz Sharif and Field Marshall Assim Munir of Pakistan and wherein they requested that I hold off the destructive force being sent tonight to Iran. Um he agreed they agreed to the complete immediate and safe opening of the straight of Hermuzz and in return he said I agree to suspend the bombing and attack of Iran for a period of two weeks. This will be a double-sided ceasefire. So a lot of market happiness around that and uh most importantly he said we received a 10-point proposal from Rand and believe it's a workable basis on which to negotiate. So markets hugely relieved instantly. Here's a snapshot of futures this morning. I think they're up even higher than this in the cash market right now. But what do you see on the top? Just a wall of green in the indices across energy a wall of red. Giant giant declines. um crude oil getting smashed back to 9558 in the US even lower 9454 in Brent and then of course gold silver not of course I'm not I'm a little confused why gold silver they've been trading like like they're riskon investments not risk off investments it's been a little bizarre this whole war um they've been trading a little odd so so that that's that's where we're at and um what what do you think is are are these justified responses by the markets >> well I Yeah, that's a really good way to phrase that question. At least in the short run, the short covering is absolutely justified because the market got a little lopsided in positioning and kind of prepared for downside positioning. What does the market do? It punishes the largest amount amount of individuals at at U across the board really. I butchered that phrase. So I I do believe that at least this initial rally is higher than I would expect it to be based on the potential knock-on effects down the down the road, but market was lopsided. So this short covering's got to take place across the board. And I think that magnified the downside on on oil at least at this point. So the question is, are we going to be have some people that are, you know, bought high and sold low that looks like on a lot of your shorts right now? >> Well, Paul, there's something very weird that's happening here because I'm looking at a live feed right now of the S&P. It's at 6772. That's up 155. So, it's basically where it opened immediately this morning. You know, it's wiggled a little, but it hasn't gone anywhere. And the reason I find that a little odd is because the whole basis of this was that there was a workable plan. Trump said there's this 10-point plan they've proposed and we think we can work with it. So, this just came out about an hour ago and it didn't budge the markets at all. And the White House official just said, "Hey, wait a minute. The 10-point peace plan that Iran publicly released on Wednesday differs from the plan that Trump said was a workable basis on which to negotiate. And here's why that's weird, Paul. We've all been reading the same plan for about 3 weeks. It's the same one. They released the same one that I've seen that I haven't seen them wiggle on this. So, unless they had some different 10-point plan that they showed the negotiators, but this is what Iran has released probably 20 separate times, right? These 10 points here guarantee that Iran will not be attacked again. permanent end to the war, not just a ceasefire. End to Israeli strikes in Lebanon, which has already been violated badly by Israel. No surprise. Lifting of all US sanctions on Iran. End to all regional fighting against Iranian allies. Iran would then reopen the straight of Hormuz. Impose a $2 million fee per ship transiting the Hormuz. Iran would split these fees with Oman. So million each, I guess. Iran would establish rules for the safe passage through the Hormuz. and Iran would use Hermu's fees for reconstruction instead of reparations. So that's I think they had reparations on there, but this is what they said was the 10-point plan. Now the White House is saying, "Oh, that's not what we saw." But they're not releasing what they thought they saw. So turns out trust is a difficult commodity to come by of late with this particular administration for me. Um, >> yeah, >> putting it mildly. One thing, yeah, I was going to say, I'll say it a little bit more brutally. One thing that seems to be consistent is whatever is coming out is not the complete and whole truth. And the question is, is there any basis for the, >> you know, sometimes lies are based on a little bit of truth? The question is, is there any truth in there? Is it just all propaganda? I I don't know at this point. Yeah. >> It's just I I wish we could trust what was being said. I wish that a handshake was a handshake and that our our our country's word was our word, but it we at least it appears consistently that has not been the case. >> Well, this is going to be hugely market moving. So, if the markets have it wrong that there isn't really a ceasefire that we're about to continue with the hostilities for whatever reason. So, can we be clear? It's actually not a ceasefire right now because a ceasefire technically is when both parties have an agreed upon list of things, right? I won't do this, you won't do that, we will do these things, whatever. Move these pieces back from the chessboard. A ceasefire always includes both parties having a complete and mutually agreed upon list of things that have enforcable actions attached to them. United States has one set of things it thinks it wants. Iran has a different set of things. So, we're not we a ceasefire here is not what we would classically call a ceasefire. a ceasefire here means we we've stopped the the bullets and and missiles from flying for now, which is a more fragile condition than saying, "Oh, we've achieved a ceasefire. We're about to get back to normalized relations. The straight of Mus is going to open. Everybody's going to be happy." Um, so I like my words to mean things. This happened a lot during co words got changed on us midstream. And I I don't like that. I We need another word for this. It's not a ceasefire. sort of like a temporary suspension of hostilities or something. Um >> so now just an hour ago uh as of this recording at about noon here on Wednesday the 8th uh Kobes letter reporting breaking the passage of oil tankers through the straight of has been stopped per Iran's farest news agency. Iran says it will withdraw from the ceasefire if Israel continues attacks on Lebanon which it just did and is preparing potential responses. and Nick Sorder reporting the same thing. So, do we do we have a ceasefire where things are going to move through the straight of Hermuz again? Like Trump said, hey, we've just we've come to an agreement. We're going to have complete resumption of traffic through the straight appears not, >> you know. And what's interesting is the markets seem to get, you know, especially on these tweets on Monday mornings, whether it's the ALOS, they get started and then it seems that they get caught up in the euphoria. You wouldn't think that algorithms could do that, but they seem to start this mission of covering and then all other news that comes out is just ignored in the interim period. I mean, look, you know, I get it if you're an algorithm and you have to cover your shorts and reposition at this point. I just don't think we have I think it's a very risky thing to assume this is over and go long. I mean, our long-term indicators have put us on defense, and the best thing that you can do sometimes is just sit back and watch and wait for the dust to settle because a lot can change in the next two weeks. A lot can change >> and especially if we're not fully open today. And and the wild card's real, right? I mean, are they not a part of this? And if they're continuing to strike Lebanon and that's that's limiting ships coming through today. I did think one thing that was interesting as a part of that at least a report I read this morning that IN wants to be paid in cryptocurrency and from what I understand on the report it was on zero hedge um once they have an agreement you know that they've cleared a ship to go through they only have a few seconds to pay in cryptocurrency because they don't want it traceable and they don't want that money available for sanctions so you know just the lack of trust that they have and the negotiating and the US have in their word seems to be that they want to try to stay out of future sanctions if they come back and have money that's a little more mobile and outside the swift banking system. And I think that's a big deal for the dollar long term. >> And I read that too, but I'm not sure if that's only thing they're going to do. It's made it sound like that's it. They only want to be paid in crypto. But they'd already been paid in yuan, Chinese yuan. >> So is it both? I'm not sure. I'm going to have to wait to see where the dust settles because trading in Chinese yuan keeps them out of the swift system because I think they just they take Dwan, they recycle them back through the Chinese banking system and buy what they need from China. >> And the one seems to be the big winner out of uh the aftermath of this which is just another major erosion of the dollar's position as the medium of exchange around the world. you know, aka the global reserve currency that's continuing to weaken, which is probably going to reduce demand for dollars, which means a weaker dollar, even if this is over and everything's in great shape, which makes it a little easier because some of the most undervalued assets would be, you know, the assets that you want to own in a weaker dollar. emerging markets, commodities, energy related investments, agriculture, all those things that we need uh and would highly likely add to the knock-on inflationary effects that are going to be coming. Now, I don't have this report with me in a slide, but I read just last week even in Bloomberg, they're talking about the end of the petro dollar, right? So, this is now on everybody's lips. this idea that the regime that stood for 50 plus years where countries would buy in oil in dollars and then most importantly there's two sides to the petrod dollar trade one you use the dollars to buy the oil but then two you agree to put those dollars back into the US system what a win-win for the US system right we just manufacture dollars and people use them to buy oil which is a real thing and then they take those oil profits and put them back in the US so that it pumps up our financial markets that was that was the Um >> Mhm. >> the deal seems to be over. >> It sure appears to be. And you know the best way for the listener to think about it, and this is a a brutal oversimplification, but think of it like an unlimited line of credit. I mean, basically, you've got this unlimited line of credit in that positioning. And this is going to start capping that line of credit for our country, which is going to limit our our ability to uh foolishly fiscally spend. I mean, it's going to take some time, but this is a big change from a long-term perspective that's going to change asset allocation over the years ahead. >> Indeed. Hey, when we get back, Paul, from this little break, I want to talk about what's going on in the oil market right now. I think there's some really big clues there that we have to talk about. It's very bizarre and it's worth mentioning. So, as soon as we get back, we're going to talk about that. Markets are facing heightened uncertainty and thoughtful portfolio management has never been more important. If your current strategy relies solely on passive investing or diversification without active oversight, it may be time to consider a different approach. At Peak Financial Investing, we connect you with experienced wealth managers who actively manage portfolios using disciplined, research-driven strategies designed to adapt to evolving market conditions. Our focus is on helping clients navigate volatility with clarity and confidence. While no investment strategy can guarantee results or eliminate risk, we believe that preparation and active management can make a meaningful difference over time. Visit peakfinaniallinvesting.com to schedule a complimentary consultation and explore whether our approach aligns with your goals. I'm Dr. Chris Martinson and I am proud to support Peak Financial Investing. This is not a guarantee of future performance, but a call to take your financial planning seriously. Again, that's peak financial.com. Investing, of course, involves risk, including the potential loss of principle. Past performance is not indicative of future results. Please consult with a qualified adviser before making investment decisions. Welcome back, everybody. Oil markets. Paul, there's here's my position. I think these markets right now are untradable, but they're investable. Difference to be a good trader today, you probably have to be an insider. Like we've seen some people making some really welltimed bets, you know, on poly market and in the futures market, front running these big decisions out of the Trump White House. I believe truly that if the SEC looked into it, they'd find something there. But lot lot of people have been commentating on that. We've even seen major news articles saying this is weird. um these trades. So to trade that is almost impossible. You have to be in front of the you have to know what the news is that's come about to come out. And so but that's different from investing. So I want to talk about investing because you know I'm a big believer in investing in oil and gas. I have been for a long time. This is now a reinforced thesis of mine. But look at if you wanted to trade this oil last night on announcement of that ceasefire which has already been undone by the way. It's already like oh we were looking at the same 10-point plan. Huh. You know, so technically everything Trump wrote is kind of off the table, but doesn't matter. There was this huge massive dumping. But what I want you to notice here, everybody watching this, you see this? Somebody was prepositioning. Really large. These are crazy amounts of oil to be traded. Big short positions were layered on right before this big announcement came out. Boom. Oil's down 20%. But then it goes nowhere. This is a band between 94 and 96. It's just stuck in this $2 band all day long. And Just Dario on Twitter, I follow him very closely, said, quote, I asked an oil trader why the price isn't moving back up after the news of the ceasefire isn't holding. His reply, it depends on who opened that wave of short positions that crashed the price in the first place. And that's not what an oil trading house would do so close to delivery. Well said. >> So, somebody, whoever put those oil shorts out, they may have to deliver that. What do you think happens if they're not in a position to deliver oil? >> Well, I would say that's a major wrench in the in in the system or somebody's going to have substantial losses that are going to have to be covered. And I would assume that that's going to spike the price back up if they're having to cover that somehow. And the physical market like you you've been tracking this. I'm watching the paper market and glancing at the physical markets, physical markets are completely detached from the paper markets and oil still. Is that correct, Chris? >> Yeah, it's it's trading at a huge premium to that. So, so what we're looking at when we're when we're putting up this price of oil, everybody, this is a futures market. So, this is for oil delivery. I think the front month on this is May. And in a week or two, I forget that it's about a week or two from now, they're going to have to roll that to the next month. The problem is is that the futures the the forward price which is if I want to buy oil today right now I don't want to wait like this says if I wait till next month I can get it for 95 a barrel. It's currently closer to 140 a barrel right now on on the open spot market. So that's why these big oil trading houses would be like I'm not going to short that so close to delivery meaning that the person on the other end has an option to either roll their contract forward a month or say no I'll take it. Right. And of course you would take it because if you could take it at 95 a barrel and sell it for 140, you do that all day long. That's what you would do. >> Yes, absolutely. Absolutely. >> Here's a prediction. Um if they don't have these oil barrels to deliver what it'll be, another cooling system failure, technical issue, maybe a squirrel in the pipeline. >> Yeah. Oh no, we're we shut down trading and we don't exactly know why. >> Yeah. So >> or Paul, what if they declare force majour and say, "Yeah, yeah, yeah, we were shorting oil, but you know, we had good reasons for wanting to do that, but we can't deliver it." So what if they break the market? Say we can't deliver. That's a possibility. And that would have massive ripple effects across the industry. I mean, that would have massive ripple effects across everything in the options chains, which is which is the large majority of the market moving trading right now. I mean, even retail is all into options. They, you know, they're sexy. I get it. But but this this is not just for institutions anymore. That has all kinds of ripple effects across the board. >> So note this again. So this is this is a snapshot I took just before we started recording. Note here, particularly this little area here from about 7 to 9. You see there was a tiny pop, but it got sold hard instantly. Um that little pop right there was because this news came out. And this is huge news. Uh so you see here, this came out at 8:49, but it was actually announced in Financial Times just about about an hour earlier. And so what Bloomberg is reporting here that is a key Saudi oil pipeline to the Red Sea was hit in a drone attack hours after a ceasefire in the war in the Middle East. H it's kind of weird to have things blowing up after the ceasefire. According to a person familiar with the matter, which is a little wiggly, uh apparently a pumping station along the route on this pipeline was targeted and that's of course how you hit a pipeline. Um you hit the pumping stations, not the pipeline. And the damage is still being assessed. But apparently it's not operating at this point in time. And by the way, this allowed close to 5 million barrels a day to be exported about 70% of Saudi Arabia's total prewar levels. And it was this this east west pipeline that came from Saudi Arabia here at the Raz Tanura facilities and also the Albkike refinery coming across here and getting it out through the Red Sea. But while we're on it, notice all of the other damage that's happened here. These are these are all things that have been hit and damaged. So even if the pipeline wasn't hit, even if the straight of Hormuz opened up, these things are going to take weeks to months to repair. So again, oil didn't even budge on that news. So that's not how markets are supposed to work. >> They should be moving relatively dramatically on that because it puts in question the the ceasefire. And look, if they can't ship out the other side, that gives more control over that straight of moves to Iran. So, I mean, if they did it to increase their negotiating power for the next two weeks and had an excuse to do it and were ignoring it, that's a pretty that's a pretty strategic move at that point. And from what I understand, Chris, you can verify this. I read a report this morning. Right now, there'sund there's more than 187 tankers, but there's 175 million barrels of oil on 187 tankers stuck that can't get through the straight of Hormuz right now, >> which is a pretty good number. um until you realize that, you know, the world consumes about a 100 million barrels a day, >> okay, >> of oil. Um obviously we're still producing all over the rest of the world. So it's not like that's the only oil we'd be be consuming, but that was roughly about 25% of the daily consumption of oil was coming out of of that straight, right? So that 180 million barrels, don't get me wrong, it'll be nice once that moves, but so that moves out. Then the next thing that has to happen is we have to have empty tankers come back in and then they have to start drawing down the storage tanks that all got full to the brim. And once those filled to the brim, they unfortunately had to shut down production in the oil fields cuz you can't keep pumping it if doesn't have anywhere to go. So they'll come back in, they'll start draining these tanks down, and then they can start opening up the oil fields. But not until these are drained down sufficiently. And even after they start that process, it'll be anywhere from two to four weeks to get reasonable production back out of those fields. It's a delicate process. Probably looking at a minimum two to three more months of even if the straight is open this second, two to three months of highly irregular and suppressed oil flows. Nothing we can do about that. >> No. No. And I'm glad that you pointed out the difference between investing and trading, you know. So one of the things we've been talking about for a while at least in our strategies has been continuing to see money flow increase to commodities for the first time really since >> you know 2012 to 14 is when that major change and commodities and emerging markets were the lead for the most of 2000 all the way up to about 2014. But we had increased exposure to commodities a little over a year ago maybe a year and a half ago. But one thing that's interesting is money flow in and our tools have been increasing. So a lot of times you'll have exposure some there are times where it's a light switch but mostly a dimmer switch where you turn risk up you turn risk down. There are exceptions to that but energy is exposure in just general energy had already been increasing in the portfolios but in one of our main strategies had become a target about the time that all this broke out. Of course, prices spike and and move. And this is where investing and you have to be a patient from a long-term standpoint and invest your strategy, not your emotions. Does it make sense to chase it? Yeah, you might miss some in the short period, but today gave us a phenomenal opportunity to allocate that increased exposure to energy from an investable standpoint. You've got this big smash down in price. We were very patient to wait on it. And look, if we have demand destruction and and we have a major recession later in the year because of the knock-on effects of this, then that that may not be a great position in the short run. But in the midst of all the emotion around these prices, the information for investing in that sector has continued to increase as time goes along. So that's one major opportunity we were able to take advantage of in a lot of our strategies um today with this with this you know temporary major smacking on oil price and by the time this comes out it'll already be allocated. So not a recommendation that's specifically what our strategy is telling us to do right now from a longer term perspective. When you look at something like this, like this long-term damage that's happened, at best at best, this is going to result in, and I I mean this is best case scenario, a loss of about 3 million barrels per day o going forward, right? For a lot of reasons. One, uh the oil fields aren't going to come quite back online. Two, there's all it's going to take forever to get all of these damaged plants fixed again. uh three there's going to be a well for sure you know you got an extra dollar a barrel going on to everything because of the toll that's going to be put on the uh hormuz straight there but but overall the world has never seen an oil shock this large before ever so biggest ever right and that's not even me but faty bro of of the international energy agency said this is like the 73 the 81 and the 2002 oil crisis all wrapped wrapped into one like it's bigger than all of those combined. So that's going to have a lot of effects. We're just going to have to be very nimble. We're going to have to watch what they are. It's going to be really hard to figure out what's happening and why because this isn't this isn't just oil. It's not just oil and natural gas. It's all the derivative products that happened downstream from that. So I don't I don't think anybody's really Paul in in a position to know at all just how big this is going to be because it it hits too many sectors at once. You need an aluminum expert, a sulfuric acid expert, a ura expert, a petrochemical expert like and these are all sort of interacting with each other as well. So what a dynamic situation. >> Well, and it's something that the markets haven't had a chance to model. I mean the thing about the the algorithms is they have to be modeled to react in a certain way and yeah AI may be great and it may be you know they're using AI trading and they can adapt and move maybe quicker than what they have in the past but if you don't have anything that's this severe to model off of everything even those strategies are going to have to be tweaked and adapted as time goes along and there's going to be some wrong moves that are inside of there. That's why you have to have a strategy. You have to have some, you know, parameters and try to keep your motions in check as much as possible. >> Well, just just to complete the story, um this just came in also just this morning. Let me see if we can um play this. So, these are um in the United Arab Emirates, the oil terminal in Fujiro, which is one of the biggest oil terminals. You can see all the people running. there's uh there's planes flying overhead, drones are coming in, and that was in direct retaliation because apparently the UAE had attacked the Leavon refinery in Iran uh on its part. So there's still this tit fortat going back and forth here and that's still happening. So that doesn't look very ceasefire to me, you know, at all. But this is what it looks like on the ground if you were there currently. So in the past, Paul, even just that that would have moved oil in in times past, >> that one incident. We're having several of these incidents per day now for weeks on end. And it's it's quite bizarre to to see that how just how quiet um the whole thing is. And so Sebastian Cruz here, I think he did a good job just he said just Wednesday. Do you understand what happened today? A single Wednesday. So the UAE air force bombed Iran's oil refineries on both the Siri and Levant islands after the ceasefire started. And then Iran fired 17 ballistic missiles, 35 drones at the UAE after the ceasefire started. And Abu Dhabi's Habshan gas complex was struck again after the ceasefire started. Air raid alerts are going off in Dubai after the ceasefire started. And we have explosions in Bonrain's capital, Manama, after the ceasefire started, Kuwait attacks reported, and Netanyahu said the ceasefire does not include Lebanon. Um, and so yeah, JD Vance called it a fragile truth. Understatement of the century. Yeah. Um, so I don't understand h how you can have these giant market moving things just based on Trump tweeting something and then you get all of this stuff coming out and it's completely ignored >> and and maybe it's just a lot of emotion out there right now and people are just reacting because they're so scared of missing out, right? They're so scared of maybe that's the case. I don't know. Doesn't make a lot of sense to me. market doesn't seem to be seems to be operating mechanically and feeding on those initial reactions instead of adapting to the to the news as it's coming out. >> Yeah. >> Or maybe it's looking through it. It's hard to tell. I just presented stuff that just came out on Wednesday, but but it was just Monday when I woke up and I and that's when I got thrown into another sort of level of um concern about everything and continued, you know, buying things for the farm and and uh really making sure I was ready because this came out where where this was the first time that Saudi Arabia had really been struck and uh their Jubel petrochemical complex was set on fire. Seven major fires in there. Some of those red dots are probably just flares, but in that yellow circle, there's some really big fires. And and this one plant is responsible for 7% of the world's petrochemical output >> is a wow huge number. So if you're concerned about things like lubricating oils and petrochemical, you know, there it's it's a big word. >> So many things coming out of the petrochemical. A lot of chemicals out of there. everything from ethylene gas to propane to butilated this and that. There's all this precursor stuff that goes into making all these other components that feed the rest of the world. So again, I don't even know how to begin analyzing what that really means. We don't know yet. We just don't know. And I'm ashamed to say out of all the things that I've purchased and wrapped up, I think I was telling you before we started, that's the one thing that had slipped my mind because I didn't write it down in the midst of of hey, check this list, check this list, check this list. >> Yeah. So, not over. We're just going to have to keep a close eye on it. I would say the way I look at it, the chance of there being more oil, I don't think the world is really digested. I don't think the price of oil really actually reflects a its utility in in life, right? So oil's pretty important stuff, right? So one way I've talked to people about it say to understand people I was talking with somebody the other day. They said we would we would never pay $400 a barrel for oil. Because I suggested that number. I said yeah we would. They well they already pay the equivalent of that in Europe. They buy it. But I said, the way I explained it to this person, I said, 'Im imagine I put a gallon of gas in your car and let's imagine your car goes, it's a truck goes 20 miles on that gallon. Now get out of your truck and push it back 20 miles and tell me how much you would pay for that gallon. >> It' take you six weeks probably, you know, like >> it's No, we we'll pay it. You know, I don't think we'll like it and it'll have other knock-on effects to our economy that we can't predict, but oil's been cheap for a long time. And I think it's about to get more expensive. >> Yeah. >> Because of the shock. >> Yeah. All of the information says that. That person may choose to sit at home and be in a position where they're not going to pay it personally directly out of their pocket, but they will because everything that goes into the production of our food, the transportation of our food to get it over, you know, they're going to end up paying it in other ways if they can avoid it by sitting at home and, you know, for a period of time. We we just have to I mean, we have to have it to function in society today. And it ripples through everything kind of across the board. new construction, transport of any material, large majority of that's diesel fuel. Now, we may make some adaptations, but again, I don't think that uh the electrical uh grid and electric vehicles technology is up to the point that we can completely replace it at this point. So, we don't have much of an alternative. It's built into our society. Can I put in a small pitch for for the poor belleaguered US farmers uh and the global farmers too, but this has been bothering me too, Paul. So, at the same time, we saw the big crushing of price in oil. We see it in soybean, corn, oats, like all the grains just got crushed down as well. Let me pull this out to a daily. So what you can see here, Paul, is a corn as of today costs exactly the farmer could yet get even less than he could on March 1st before the war. It's down a tiny bit here, right? How is this possible? These poor corn farmers, their diesel costs have doubled and their fertilizer costs have gone up about the same. You know, closing in on 100%. Almost a full doubling right now. So those are their two prime input costs. And so they're just going to get squeezed and squeezed hard here. How does this happen? How how does it happen that we're looking at what's clearly going to be a very challenging year for food production and all of the grains are basically exactly where they were when the war started. >> I don't see any forward-looking uh market movement in that whatsoever. The the only question that comes to mind is it for political purposes, right? We've got the midterms coming up and there's there's entities or or those that are connected to the White House. Hey, maybe we'll give you a trade for this if you'll help us out on this other side to try to push those prices down the interim period to make inflation less in the future at the expense of the farmer. And if you look at it from a longer term standpoint, what's that going to do? Your small farmer is going to continue to be squeezed and pushed out of business where your industrial Wall Street backed farms are going to have access to capital that that small farmer won't. I mean, what is that? that's just war against the small business um for control from the Wall Street um extension is really what it ends up being. And I don't want I want small farmers across the country individually as our farmers. I don't want it controlled by major corporations and and extended arms of government because that gives them far more control over us as individuals. And look, if you can gain control of the entire food supply, you've got an unbelievable amount of power over individuals. But I mean, small farmers are just struggling across the board. They are if that's their sole source of revenue. I I I don't understand that. That's not resilient across the board and doesn't make sense to me, at least with what I can see right now. >> No, it doesn't make sense unless the thing you described isn't a bug. It's a feature, right? >> Yeah. So the it's not a bug that these small farmers get driven out of business because there's a well-connected big firm in there who's ready to buy up that that acreage on the cheap. And >> uh I I guess and if that's the same firm that's able to drive down the price of of the commodity through the futures, I mean then it's just that that's not a good system, right? So >> I'm here's I guess my frustration, Paul, is that I'm old enough markets used to make sense. you would see some piece of market moving news and the market would move on that news >> and there was a connection there. Wasn't always perfect, but it was close enough that if you understood that you you paid attention to the news now. It's almost like you you'd be punished like you said you you're punished for being prudent. If you read the news, you would say, "Oh, I should be long corn." You're going to get punished for holding that view. >> No. And to kind of follow on on that, I had spent some time on the tractor over the weekend and a little bit on Monday. And I was just thinking about the fact that, you know, in every aspect of our lives, we should be prudent. Okay. But but all of this short-term market manipulation, if that's exactly what it is, and insider trading, basically, it's driving us to the individual. And I get it because it is a stressful environment. If you don't have a strategy and you're completely ruled by your emotions, then it is demoralizing for these swings all over the place. Well, if somebody doesn't have access to somebody that they know or trust or an adviser that can articulate a a a rules-based riskmanage strategy, then what other alternative is there? It's like herd us into the passive. Come on into the passive. We're going to punish you for being prudent. we're going to make you feel like a fool when you lower risk at a certain period of time because we're going to paper over these markets. And what it ultimately ends up doing is hurting a whole bunch of people into a position to where I am the king. I am the one that you have to rely upon. And there's a lot less resiliency in that. And that's the thing that concerns me about it. You know, kind of our whole uh mission is say look, we got to play the rule by play the game by the rules that are forced upon us. We can't control that. And you have to understand the strengths of the approach and you have to understand the weaknesses of the approach. But you also have to understand the freedom that can give you. This isn't about, you know, being the single best performing path over the next two to three years. If they can't hold it together, it may be, but that's not the purpose. The purpose is resiliency to protect your assets. Because what they've told us in history, was it Jefferson if I remember correctly said if you give control of your currency over to a central bank first by inflation, then by deflation they will rob you of all your wealth. Well, that's a risk, right? We've had we get all this inflation and then you get some deflation or if they stop doing that, that is a risk. You've got all of these risks associated with just being herded in this manner. And unfortunately, it takes courage. It takes strength. And it takes keeping your emotions in check to walk that path less traveled. But that path less traveled is what will stand the test of time. We're on a path when you have this centralized control that that um um that is unsustainable. At some point it breaks or there's one ring to rule them all, right? and and nobody wants to be in the situation to where one individual can rule every outcome for the entire popul populace around the country. >> Yep. Well said. We'll leave it there, Paul. We're going to take a quick break. When we come back, we got to talk about what's going on over in private credit. Uh there's there's a huge story there, too. Uh this is a good one. We'll be right back. Today's markets are more volatile than ever with ongoing economic and geopolitical uncertainty. Navigating such environments requires thoughtful, adaptive strategies, not a one-sizefits-all approach. At Peak Financial Investing, our registered investment advisory firm connects clients with experienced wealth managers who focus on active portfolio management. These professionals use evidence-based strategies designed to respond to changing conditions, not outdated formulas, but customized approaches grounded in research, discipline, and risk awareness. We believe in open, informed conversations, including discussing tools like precious metals and diversification as part of a broader financial strategy. Every investor's situation is unique, and our adviserss tailor their guidance accordingly. Visit peakfinaniinvesting.com today to schedule your free consultation and explore how proactive management can support your financial goals. I'm Dr. Chris Martinson, proud to work with Peak Financial Investing and my support reflects my professional views. I encourage you to take control of your financial future by making informed decisions. All right, welcome back everybody. Paul. Um, so let's turn away from Yes. All that stuff is sim going on over there in the Middle East. Can we talk about private credit? What's simmering here? So global markets investor here putting out that the private credit crisis unfolding at record speed. Investors requested 14 billion in redemptions from private credit funds in one Q 26 most ever, more than double 4Q25. And only 50% of those requests were met. So 7 billion unmet just parked and stuck and that there's a whole bunch of private credit funds listed down there. But th this is a pretty big deal right now. That's a really big deal. And it's it's obiscated, right? It's kind of in the shadows. It's it's it's, you know, lurking out there. But this is like a horror movie, you know, where you hear the music and you watch everybody making the wrong decisions with that creature lurking in the background. That's what private credit is right now. what's taking place underneath the surface. >> Yeah. So, the red bars in this are are the first quarter of 2026 redemptions. It's just up. Everybody's like, "Get my money. I want my money out of here." And you and I talked about the fact that um just before this private credit went kind of sour, Wall Street had been making a huge push and Trump even signed an executive order allowing retail 401ks to begin participating in this wonderful world of private credit. >> Yeah. >> What a coincidence. What a coincidence, you know. And my question is, I'm hoping that they were just a little too greedy and a little too late so that they don't damage a tremendous amount of individuals. I haven't seen a lot of private equity offerings come into major company 401ks at this point. So, thank goodness that that's a slowmoving uh machine. But we've talked about this several times over the past year, year and a half is just what I had seen in a major change to where hey private credit private equities out here but you've got these huge minimums before you can get in and then they started dropping some. And I guess it was about a year year and a half ago maybe a year ago it really kind of came up on my radar. Time flies by fast. Maybe it was a year and a half ago that there was this massive effort to push it to the average individual. They had the returns in hindsight to look at. They had the allocations with Harvard and some of these other major institutions where basically what they did was they go to the average individual and say hey these really smart people that have accumulated a lot of wealth like they've been doing this and this is what you need to do. You had endowments and pensions that were coming out going had you just done this in the past then this is the returns you would have had implying that that's going to be what takes place in the future. That's one of the reasons why I tell people, look, past performance can give you an indication of the strengths and weaknesses of a strategy, but it has no indication whatsoever of what's going to occur in the future. You know, the only thing you can can look at in past performance is how it reacted in certain environments. But there's been a massive push to get this off on the average individual. And there's a lot of people that I tried to talk out of exposure to the private equity over the years and just refused to take clients on that wanted to have that much exposure because I was serious enough about the risks associated in that category and were seeing those come to fruition a lot quicker than what I anticipated they would. And Chris, there's knock-on effects. I mean, it's not only that there, you know, a lot of people get into the bond space and they get these CLLOs or collateralized loan obligations which are another knock-on effect of that. I mean, there's a tremendous amount of risk in that that bond and, you know, CL CLLLO space and private equity and they've gated these and I don't see anything that's going to change it dramatically over the next, you know, 3 6 n months. It's like everything in Wall Street. you know, there was a gap, they get here, and then they've gone way over to the other side, and there's just going to have to be destruction and a lot of damage to get us back to a basis of of where that should be. Th those are really hard deals. I wouldn't I'd hate to be in your shoes if somebody said, "Should I get into this private credit, private equity deal?" Because you have to read each perspectus front to cover to back, you know, >> to know what's in there or what's not in there. And often it's even a little vague like how it's actually going to perform, you know, because you have to sort of squint at this highly technical legal ease, you know, to figure out what the risks are. It used to used to when I would read a perspectus, you could go straight to certain sectors, you know, like there's a lot of it that's just stamp and then you have two or three pages out of 150 pages that are that are the meat of what you're looking for. It's not the case anymore. I mean, I had somebody recently that was fully convinced. I say recently, it was probably four months ago, fully convinced that they had access to an offering that looked great. And I'm like, look, you're going to have to give me a couple of days because it's going to take a while to read through this. You know, you go to those spaces and it looks good. And then I start reading, you know, all of the um uh other space. And I'm like, "Oh, this has been moved to another area." So, you go look. And I respond back. I'm like, "Nope, don't touch it. Stay away from it. Here's the reason why you don't want to have access to this at this moment in time." And and that's the frustrating thing, right? How many people actually read these? They get a they get an advisor that shows past performance that looks awesome. They hand them a prospectus. And I think that's the diff why it's so important to have a fiduciary instead of a transactional individual because that fiduciary has a responsibility. The question is, did they actually go through those perspectuses to look at them? We did in that case. And you know, look, I I was already worried about the space. I was looking for, you know, items to say, "Hey, this is as good as they made it sound." But when you get into those fine details, it's like, look, this is the reason why you want to stay away from it. You don't want to get into something illquid in this environment with what's taking place. Wait till the damage is over and then start looking for opportunity when there's blood in the streets because there will be opportunity in that space after the damage is done. I just don't believe it's right now. >> Some of that stuff is going to be wrapped up in commercial real estate. We're starting to see a lot more bubble up in that sector right now. I've got a quick thing here u from Night Andale Associates. I follow them. They're talking Chicago seems to be doing particularly poorly. Um but uh they have this foreclosure that just went down. Somebody paid $350 million for the property in 2017. $240 million debt package. It just goes into foreclosure. I've been reading a lot of them where they're going off at basically 10 cents on the dollar is uh kind of going rate for these things. Could be a little higher, could be a little lower, but these are some very serious wipeouts. Who's holding these debt packages? How come we never read about somebody's got to be eating these losses, Paul? I just I don't know who yet, you know, but I know the damage is there. And I've seen a couple of of deals here recently that have blown up within the past year of people that are working for companies that you know got overleveraged and come to find out it was pension funds that had allocated the large majority of the debt. So the question is do you have pensions out there? Do you have insurance companies? Do you have you know that's a space where some of the big banks are involved but not all of them. So, if it's if it's overinvested into by pensions, that has a lot of knock-on effects and risks for those individuals that are relying on that pension in their retirement. And quite frankly, if you've got if you've got that pension coming in, there's nothing you can do about it except for hope that the managers that are there are making quicker decisions than the average person so that they can cut their losses quickly. Well, it's because something changed, right? you know, we had COVID and then it it sort of broke the narrative that you have to get in your car, fight traffic, go sit in an office all day, fight traffic home, all that kind of broke that and and a lot of that never came back postco people figured out. I didn't like that whole commuting thing anyway um very much. So that's problem one. Problem two is a lot of these buildings just can't be converted easily into anything else. when when they're built, they're built for purpose and that purpose is office space for for example and and that's what it's configured for. So turning it into say an apartment really hard because the plumbing chases aren't there. You have to cut holes in the floors which is complicated process where the wiring is like retrofitting a building is is hard um compared to purpose building it. Well, and in addition to that, I read a report yesterday. I wish I had bookmarked this one, but said that that there are more AI data centers being built than office buildings now, which makes sense with what's taking place in the space. But, you know, when you stand back from that, that means where's the money going? The money is going to build these data centers. It's not going to support or bonds or fund these office buildings. that ball of money redirected somewhere else means there's less capital to kick this can down the road on these overleveraged properties and you're right I mean to convert them is ridiculously expensive I think we had talked about it I think Grant Williams had put out one of his reports maybe about a year ago some Chicago buildings that had sold for 10 cents on the dollar and my initial thought was well oh that's great they can convert it into apartments at this point that'd be a great investment for them but then you go down the rabbit hell trail of looking at it it's nearly I don't know if It is, but nearly cheaper based on the analysis of that one building to tear it down and rebuild than it is to remodel. >> Crazy but true. And and then of course um commercial real estate in some places have been really getting hammered because uh it turns out that they have really defective governments there. Chicago is one of those places. Portland is another. Seattle like people have decided they they make it very very business unfriendly. um they they have these very progressive programs they're interested in pursuing cost money so they have to tax people. So of course you tax the business people hard and so a lot of people have been fleeing uh that as well at least from a business standpoint. I I read case after case all the time now of businesses just saying it's not worth it uh to try and continue to be unloved and and even um treated hostily by your local government rather than as an asset. you're treated as if you're a criminal of some kind. >> And that's not good for capital flowing into those uh and investment flowing into those cities. And that that's a slow train wreck that will continue to evolve. And unfortunately, those those citizenry will change when the pain of changing is easier than the pain of staying the same. And and right now for the for the people who are voting for those policies and those governments in place with their hands out, the pain hasn't gotten that severe yet, but it's coming. >> Wonder if anybody has a a portfolio that specifically excludes progressive MUN bonds. Um if you're in the MUN space. No, there must be you must have to you must have to take local governance into account when buying a MUN bond, I would think. Right. >> Right. Well, what I have seen, I mean, we take that into consideration from the risk from a long-term standpoint, but what I have seen this taking place in the industry. Many investors are are looking for yield because of their belief that that's a guaranteed, you know, investment. Nothing's going to happen to it. So, they really don't care in what um jurisdiction is is it's in as long as the yields are higher. My argument is you're getting a higher yield there because the risk is higher from a longer term standpoint. So, just avoid that and go somewhere else. and and and uh stay out of that space until the dust settles. I'm not a big fan of munis in any of those jurisdictions that are heading down that path. That's just a huge risk from a long-term standpoint. >> Interesting. Where do where do where do you see this all heading from here? Anything changed in your in your uh model approach lately? >> No. Yeah, our long-term uh signals against the S&P and the NASDAQ are on full defense right now. that that may change if the information changes, but that has us just standing back and and observing, right? We we did allocate some to the energy space because of the fact that that long-term signals are there. It's on a long-term buy. Commodities are still there. I really like the price action in silver right now. Not a recommendation to buy, but I really like what's taking place there. It looks like we've flushed out all of those individuals that we're chasing there at the end, but we built a good space and it doesn't, you know, a good base and we're starting to get some technical breakouts. So, I still like the commodities and energy space. We took advantage of this selloff. By the time this comes out, we will have already been allocated. That's a good decision from a long-term standpoint. I'm very worried about the credit space. I'm very worried about longerterm bonds from a uh you know anything that's longer than seven years at this point maybe for a trade if it's real liquid but with the weight of the information we have our stance right now is just stand back you know lock in your profits on the S&P and the NASDAQ just sit back and and and be patient to see how things unfold here going forward and the only reason we went ahead and allocated energy is it was on a long-term buy signal the weight of the information continue to build. It is an investable space and we have a major reaction to the downside that gives us the opportunity to allocate at much better prices instead of chasing the euphoria over the past week or so. So, I'm real pleased about that. How it'll work out from a long-term standpoint, I don't know. We don't know how this future is going to unfold, but the weight of the information says it's an investable space, so we took advantage of it. The S&P and the NASDAQ right now, based on our tools, says it's not really an investable space. So just stand back and wait. Maybe we buy a little bit higher if the if this is all clear, but the downside risk is larger right now than the upside potential with the with the information we have at this time. >> Mhm. And um what about bonds? What are you what are you seeing in bonds right now? >> So what I'm seeing on the bonds from a longer term standpoint, just I want to look at it at TLT today just to kind of see to update me on where we are. We've been basing here for a while now to to in full disclosure, we own a position in TLT right now after exiting several years ago. It is a trade that if we have some demand destruction and and you know potential recession, maybe I don't know. Then there is some upside potential there, but I don't like it from a a longer term investable space. I don't like owning these individual bonds that are going to be 20 years or 15 years because of the lack of liquidity. I want to be in something that I can move quicker, but I'm very concerned about bonds from a long-term standpoint because of the inflationary pressures and the tendency of this administration, the governments around the world to try to print. The money supply is still growing, right? And then at the same time, lack of demand with the yuan is an alternative to the US dollars, less money circulating back into our treasuries. I'd read, you know, for those that have to have exposure and is appropriate to have exposure to the fixed income space. I really like emerging market local uh currency bonds. Not a recommendation. That's just a space that we like. And I don't like anything that's long-term as an investable standpoint. And I want to stay shorter and flexible in that curve until we have some more uh some more information because look, if if we continue to spend, let's say we get best case scenario, but the kind there are some knock-on effects and demand destruction, what's this administration probably going to do? Spend more fiscally uh uh foolishness in the short run, expand the money supply around the governments around the world. That's not good for bonds from a long-term standpoint. So, I don't like anything long except for a trade. We own it right now for a trade, but I've got a good riskreward because we've been basing for a long enough period of time that if we break down, we're out. Minimal loss to the downside with a decent return to the upside. If we do have that pop to the upside for whatever reason, then that's then at least with the information I have at this time, we hit our price targets, we harvest those profits, and we reallocate into other areas that may look much more attractive uh in the negative response to that. So, if somebody's particularly nervous and and you know you you've defined some pretty decent current upside downside risk asymmetries in stocks, you don't like bonds long term. Where does somebody hide out if they say, "I I just want to go safe right now and step aside for a minute." >> Well, short-term treasuries, that seems to be the best alternative right now. Um, treasuries, you don't have to worry about FDIC insurance from that standpoint because they carry the full faith and credit of the US government. You can argue that all day long, but in the mechanism of where we are right now, that's really the safest place to be. Or Treasury money market. Like I tell clients, if you don't know what to do, then just park it in a Treasury money market right now. Yes, you might lose to inflation in the short run, but you've got flexibility. You've got protection of that capital in the short run because the longer you go out on that curve, right, if you're in the short-term Treasury money market, that hasn't broken the buck yet. It just about did in 2008 when Lehman Brothers uh collapsed. You know, there was there was a they argued for the capital injection that they had to protect money market accounts. But if you're I wouldn't be in corporate money market right now. I'd be in treasuries and I'd be shorter term because interest rate moves have minimal effect on three month, minimal effect on six month. They do on 20-year. The longer you go out, think seesaw on the playground. That's just a longer swing. So if I didn't know what to do, I didn't want to do anything, I'd be sitting in Treasury money market right now for the safest capital, a fair return here in the short run. Is it fair from inflationary standpoint? But you can react to that. That's where I would go just to park capital and we've got a lot sitting in that. The money that we have dialed that risk down is sitting in those government obligation money market accounts so that we have flexibility and protection of that capital against downside. uh until we have enough information to deploy one way or another. >> Well, sounds very prudent to me. And so, if anybody would like to talk to Paul and his team, please go to peak financialvesting.com, fill out a very simple form, and within 48 business hours after you submit that form, somebody from Paul's office will get a hold of you, and you will get scheduled for the first of what should be three calls. an initial introductory call, get to know each other, a planning call, and then a recommendations call. And if all that squares up, well, maybe it makes sense for you and Paul and his team to work together. So again, peak financial.com. And uh I'm sure Paul would love to hear from you. Paul, any last words? >> No, I was going to say you you may meet with me, you may meet with John Alexander, you might meet with Dylan Smith, you might meet with Alex Snellgrove. We're all on the same page. Everybody goes through the same process. I'm chair of the investment committee, but we just had a a a a meeting of the minds last week just kind of talking about and everybody is full agreement. When you go through that plan, it gives you information that you've probably never seen somewhere and you're probably more educated than even some of the new adviserss in the industry. So, you know, that's one thing that I mandated on everybody several years ago. You don't shortcut that. You take clients through that planning process. And everybody across the board was like, "Hey," one of them was like, "I pushed back on that for a long time, but I understand the value that that gives the clients and the information it gives us to be able to give the appropriate recommendation to do everything that we can prudently do to help you navigate the days ahead and have a su successful retirement." Excellent. Well, thank you everybody for listening. Thank you Paul for your time. We'll be back next week with another edition of Finance You
Are Markets Giving A Real Signal Or Just Noise Right Now
Summary
Transcript
Nothing in this program should be considered investment advice. It is for educational purposes only. Please hit pause and read this disclaimer in full. Our long-term indicators have put us on defense. And the best thing that you can do sometimes is just sit back and watch and wait for the dust to settle because a lot can change in the next two weeks. A lot can change. Hello everyone. Welcome to this episode of Finance Hugh. I'm your host Chris Martinson back with Paul Ker of Ker Wealth Management. Hi Paul. >> Hi Chris. Good to see you today. >> Well, we have a lot to talk about today because um we're recording this on Wednesday looks like uh April 8th, but we just had this big ceasefire announcement last night and it had a huge impact on markets. So that's what I want to talk about markets in in the Iran war and it began with this that came out last night. uh Donald Trump tweeting out based on conversations with Prime Minister Shabbaz Sharif and Field Marshall Assim Munir of Pakistan and wherein they requested that I hold off the destructive force being sent tonight to Iran. Um he agreed they agreed to the complete immediate and safe opening of the straight of Hermuzz and in return he said I agree to suspend the bombing and attack of Iran for a period of two weeks. This will be a double-sided ceasefire. So a lot of market happiness around that and uh most importantly he said we received a 10-point proposal from Rand and believe it's a workable basis on which to negotiate. So markets hugely relieved instantly. Here's a snapshot of futures this morning. I think they're up even higher than this in the cash market right now. But what do you see on the top? Just a wall of green in the indices across energy a wall of red. Giant giant declines. um crude oil getting smashed back to 9558 in the US even lower 9454 in Brent and then of course gold silver not of course I'm not I'm a little confused why gold silver they've been trading like like they're riskon investments not risk off investments it's been a little bizarre this whole war um they've been trading a little odd so so that that's that's where we're at and um what what do you think is are are these justified responses by the markets >> well I Yeah, that's a really good way to phrase that question. At least in the short run, the short covering is absolutely justified because the market got a little lopsided in positioning and kind of prepared for downside positioning. What does the market do? It punishes the largest amount amount of individuals at at U across the board really. I butchered that phrase. So I I do believe that at least this initial rally is higher than I would expect it to be based on the potential knock-on effects down the down the road, but market was lopsided. So this short covering's got to take place across the board. And I think that magnified the downside on on oil at least at this point. So the question is, are we going to be have some people that are, you know, bought high and sold low that looks like on a lot of your shorts right now? >> Well, Paul, there's something very weird that's happening here because I'm looking at a live feed right now of the S&P. It's at 6772. That's up 155. So, it's basically where it opened immediately this morning. You know, it's wiggled a little, but it hasn't gone anywhere. And the reason I find that a little odd is because the whole basis of this was that there was a workable plan. Trump said there's this 10-point plan they've proposed and we think we can work with it. So, this just came out about an hour ago and it didn't budge the markets at all. And the White House official just said, "Hey, wait a minute. The 10-point peace plan that Iran publicly released on Wednesday differs from the plan that Trump said was a workable basis on which to negotiate. And here's why that's weird, Paul. We've all been reading the same plan for about 3 weeks. It's the same one. They released the same one that I've seen that I haven't seen them wiggle on this. So, unless they had some different 10-point plan that they showed the negotiators, but this is what Iran has released probably 20 separate times, right? These 10 points here guarantee that Iran will not be attacked again. permanent end to the war, not just a ceasefire. End to Israeli strikes in Lebanon, which has already been violated badly by Israel. No surprise. Lifting of all US sanctions on Iran. End to all regional fighting against Iranian allies. Iran would then reopen the straight of Hormuz. Impose a $2 million fee per ship transiting the Hormuz. Iran would split these fees with Oman. So million each, I guess. Iran would establish rules for the safe passage through the Hormuz. and Iran would use Hermu's fees for reconstruction instead of reparations. So that's I think they had reparations on there, but this is what they said was the 10-point plan. Now the White House is saying, "Oh, that's not what we saw." But they're not releasing what they thought they saw. So turns out trust is a difficult commodity to come by of late with this particular administration for me. Um, >> yeah, >> putting it mildly. One thing, yeah, I was going to say, I'll say it a little bit more brutally. One thing that seems to be consistent is whatever is coming out is not the complete and whole truth. And the question is, is there any basis for the, >> you know, sometimes lies are based on a little bit of truth? The question is, is there any truth in there? Is it just all propaganda? I I don't know at this point. Yeah. >> It's just I I wish we could trust what was being said. I wish that a handshake was a handshake and that our our our country's word was our word, but it we at least it appears consistently that has not been the case. >> Well, this is going to be hugely market moving. So, if the markets have it wrong that there isn't really a ceasefire that we're about to continue with the hostilities for whatever reason. So, can we be clear? It's actually not a ceasefire right now because a ceasefire technically is when both parties have an agreed upon list of things, right? I won't do this, you won't do that, we will do these things, whatever. Move these pieces back from the chessboard. A ceasefire always includes both parties having a complete and mutually agreed upon list of things that have enforcable actions attached to them. United States has one set of things it thinks it wants. Iran has a different set of things. So, we're not we a ceasefire here is not what we would classically call a ceasefire. a ceasefire here means we we've stopped the the bullets and and missiles from flying for now, which is a more fragile condition than saying, "Oh, we've achieved a ceasefire. We're about to get back to normalized relations. The straight of Mus is going to open. Everybody's going to be happy." Um, so I like my words to mean things. This happened a lot during co words got changed on us midstream. And I I don't like that. I We need another word for this. It's not a ceasefire. sort of like a temporary suspension of hostilities or something. Um >> so now just an hour ago uh as of this recording at about noon here on Wednesday the 8th uh Kobes letter reporting breaking the passage of oil tankers through the straight of has been stopped per Iran's farest news agency. Iran says it will withdraw from the ceasefire if Israel continues attacks on Lebanon which it just did and is preparing potential responses. and Nick Sorder reporting the same thing. So, do we do we have a ceasefire where things are going to move through the straight of Hermuz again? Like Trump said, hey, we've just we've come to an agreement. We're going to have complete resumption of traffic through the straight appears not, >> you know. And what's interesting is the markets seem to get, you know, especially on these tweets on Monday mornings, whether it's the ALOS, they get started and then it seems that they get caught up in the euphoria. You wouldn't think that algorithms could do that, but they seem to start this mission of covering and then all other news that comes out is just ignored in the interim period. I mean, look, you know, I get it if you're an algorithm and you have to cover your shorts and reposition at this point. I just don't think we have I think it's a very risky thing to assume this is over and go long. I mean, our long-term indicators have put us on defense, and the best thing that you can do sometimes is just sit back and watch and wait for the dust to settle because a lot can change in the next two weeks. A lot can change >> and especially if we're not fully open today. And and the wild card's real, right? I mean, are they not a part of this? And if they're continuing to strike Lebanon and that's that's limiting ships coming through today. I did think one thing that was interesting as a part of that at least a report I read this morning that IN wants to be paid in cryptocurrency and from what I understand on the report it was on zero hedge um once they have an agreement you know that they've cleared a ship to go through they only have a few seconds to pay in cryptocurrency because they don't want it traceable and they don't want that money available for sanctions so you know just the lack of trust that they have and the negotiating and the US have in their word seems to be that they want to try to stay out of future sanctions if they come back and have money that's a little more mobile and outside the swift banking system. And I think that's a big deal for the dollar long term. >> And I read that too, but I'm not sure if that's only thing they're going to do. It's made it sound like that's it. They only want to be paid in crypto. But they'd already been paid in yuan, Chinese yuan. >> So is it both? I'm not sure. I'm going to have to wait to see where the dust settles because trading in Chinese yuan keeps them out of the swift system because I think they just they take Dwan, they recycle them back through the Chinese banking system and buy what they need from China. >> And the one seems to be the big winner out of uh the aftermath of this which is just another major erosion of the dollar's position as the medium of exchange around the world. you know, aka the global reserve currency that's continuing to weaken, which is probably going to reduce demand for dollars, which means a weaker dollar, even if this is over and everything's in great shape, which makes it a little easier because some of the most undervalued assets would be, you know, the assets that you want to own in a weaker dollar. emerging markets, commodities, energy related investments, agriculture, all those things that we need uh and would highly likely add to the knock-on inflationary effects that are going to be coming. Now, I don't have this report with me in a slide, but I read just last week even in Bloomberg, they're talking about the end of the petro dollar, right? So, this is now on everybody's lips. this idea that the regime that stood for 50 plus years where countries would buy in oil in dollars and then most importantly there's two sides to the petrod dollar trade one you use the dollars to buy the oil but then two you agree to put those dollars back into the US system what a win-win for the US system right we just manufacture dollars and people use them to buy oil which is a real thing and then they take those oil profits and put them back in the US so that it pumps up our financial markets that was that was the Um >> Mhm. >> the deal seems to be over. >> It sure appears to be. And you know the best way for the listener to think about it, and this is a a brutal oversimplification, but think of it like an unlimited line of credit. I mean, basically, you've got this unlimited line of credit in that positioning. And this is going to start capping that line of credit for our country, which is going to limit our our ability to uh foolishly fiscally spend. I mean, it's going to take some time, but this is a big change from a long-term perspective that's going to change asset allocation over the years ahead. >> Indeed. Hey, when we get back, Paul, from this little break, I want to talk about what's going on in the oil market right now. I think there's some really big clues there that we have to talk about. It's very bizarre and it's worth mentioning. So, as soon as we get back, we're going to talk about that. Markets are facing heightened uncertainty and thoughtful portfolio management has never been more important. If your current strategy relies solely on passive investing or diversification without active oversight, it may be time to consider a different approach. 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Welcome back, everybody. Oil markets. Paul, there's here's my position. I think these markets right now are untradable, but they're investable. Difference to be a good trader today, you probably have to be an insider. Like we've seen some people making some really welltimed bets, you know, on poly market and in the futures market, front running these big decisions out of the Trump White House. I believe truly that if the SEC looked into it, they'd find something there. But lot lot of people have been commentating on that. We've even seen major news articles saying this is weird. um these trades. So to trade that is almost impossible. You have to be in front of the you have to know what the news is that's come about to come out. And so but that's different from investing. So I want to talk about investing because you know I'm a big believer in investing in oil and gas. I have been for a long time. This is now a reinforced thesis of mine. But look at if you wanted to trade this oil last night on announcement of that ceasefire which has already been undone by the way. It's already like oh we were looking at the same 10-point plan. Huh. You know, so technically everything Trump wrote is kind of off the table, but doesn't matter. There was this huge massive dumping. But what I want you to notice here, everybody watching this, you see this? Somebody was prepositioning. Really large. These are crazy amounts of oil to be traded. Big short positions were layered on right before this big announcement came out. Boom. Oil's down 20%. But then it goes nowhere. This is a band between 94 and 96. It's just stuck in this $2 band all day long. And Just Dario on Twitter, I follow him very closely, said, quote, I asked an oil trader why the price isn't moving back up after the news of the ceasefire isn't holding. His reply, it depends on who opened that wave of short positions that crashed the price in the first place. And that's not what an oil trading house would do so close to delivery. Well said. >> So, somebody, whoever put those oil shorts out, they may have to deliver that. What do you think happens if they're not in a position to deliver oil? >> Well, I would say that's a major wrench in the in in the system or somebody's going to have substantial losses that are going to have to be covered. And I would assume that that's going to spike the price back up if they're having to cover that somehow. And the physical market like you you've been tracking this. I'm watching the paper market and glancing at the physical markets, physical markets are completely detached from the paper markets and oil still. Is that correct, Chris? >> Yeah, it's it's trading at a huge premium to that. So, so what we're looking at when we're when we're putting up this price of oil, everybody, this is a futures market. So, this is for oil delivery. I think the front month on this is May. And in a week or two, I forget that it's about a week or two from now, they're going to have to roll that to the next month. The problem is is that the futures the the forward price which is if I want to buy oil today right now I don't want to wait like this says if I wait till next month I can get it for 95 a barrel. It's currently closer to 140 a barrel right now on on the open spot market. So that's why these big oil trading houses would be like I'm not going to short that so close to delivery meaning that the person on the other end has an option to either roll their contract forward a month or say no I'll take it. Right. And of course you would take it because if you could take it at 95 a barrel and sell it for 140, you do that all day long. That's what you would do. >> Yes, absolutely. Absolutely. >> Here's a prediction. Um if they don't have these oil barrels to deliver what it'll be, another cooling system failure, technical issue, maybe a squirrel in the pipeline. >> Yeah. Oh no, we're we shut down trading and we don't exactly know why. >> Yeah. So >> or Paul, what if they declare force majour and say, "Yeah, yeah, yeah, we were shorting oil, but you know, we had good reasons for wanting to do that, but we can't deliver it." So what if they break the market? Say we can't deliver. That's a possibility. And that would have massive ripple effects across the industry. I mean, that would have massive ripple effects across everything in the options chains, which is which is the large majority of the market moving trading right now. I mean, even retail is all into options. They, you know, they're sexy. I get it. But but this this is not just for institutions anymore. That has all kinds of ripple effects across the board. >> So note this again. So this is this is a snapshot I took just before we started recording. Note here, particularly this little area here from about 7 to 9. You see there was a tiny pop, but it got sold hard instantly. Um that little pop right there was because this news came out. And this is huge news. Uh so you see here, this came out at 8:49, but it was actually announced in Financial Times just about about an hour earlier. And so what Bloomberg is reporting here that is a key Saudi oil pipeline to the Red Sea was hit in a drone attack hours after a ceasefire in the war in the Middle East. H it's kind of weird to have things blowing up after the ceasefire. According to a person familiar with the matter, which is a little wiggly, uh apparently a pumping station along the route on this pipeline was targeted and that's of course how you hit a pipeline. Um you hit the pumping stations, not the pipeline. And the damage is still being assessed. But apparently it's not operating at this point in time. And by the way, this allowed close to 5 million barrels a day to be exported about 70% of Saudi Arabia's total prewar levels. And it was this this east west pipeline that came from Saudi Arabia here at the Raz Tanura facilities and also the Albkike refinery coming across here and getting it out through the Red Sea. But while we're on it, notice all of the other damage that's happened here. These are these are all things that have been hit and damaged. So even if the pipeline wasn't hit, even if the straight of Hormuz opened up, these things are going to take weeks to months to repair. So again, oil didn't even budge on that news. So that's not how markets are supposed to work. >> They should be moving relatively dramatically on that because it puts in question the the ceasefire. And look, if they can't ship out the other side, that gives more control over that straight of moves to Iran. So, I mean, if they did it to increase their negotiating power for the next two weeks and had an excuse to do it and were ignoring it, that's a pretty that's a pretty strategic move at that point. And from what I understand, Chris, you can verify this. I read a report this morning. Right now, there'sund there's more than 187 tankers, but there's 175 million barrels of oil on 187 tankers stuck that can't get through the straight of Hormuz right now, >> which is a pretty good number. um until you realize that, you know, the world consumes about a 100 million barrels a day, >> okay, >> of oil. Um obviously we're still producing all over the rest of the world. So it's not like that's the only oil we'd be be consuming, but that was roughly about 25% of the daily consumption of oil was coming out of of that straight, right? So that 180 million barrels, don't get me wrong, it'll be nice once that moves, but so that moves out. Then the next thing that has to happen is we have to have empty tankers come back in and then they have to start drawing down the storage tanks that all got full to the brim. And once those filled to the brim, they unfortunately had to shut down production in the oil fields cuz you can't keep pumping it if doesn't have anywhere to go. So they'll come back in, they'll start draining these tanks down, and then they can start opening up the oil fields. But not until these are drained down sufficiently. And even after they start that process, it'll be anywhere from two to four weeks to get reasonable production back out of those fields. It's a delicate process. Probably looking at a minimum two to three more months of even if the straight is open this second, two to three months of highly irregular and suppressed oil flows. Nothing we can do about that. >> No. No. And I'm glad that you pointed out the difference between investing and trading, you know. So one of the things we've been talking about for a while at least in our strategies has been continuing to see money flow increase to commodities for the first time really since >> you know 2012 to 14 is when that major change and commodities and emerging markets were the lead for the most of 2000 all the way up to about 2014. But we had increased exposure to commodities a little over a year ago maybe a year and a half ago. But one thing that's interesting is money flow in and our tools have been increasing. So a lot of times you'll have exposure some there are times where it's a light switch but mostly a dimmer switch where you turn risk up you turn risk down. There are exceptions to that but energy is exposure in just general energy had already been increasing in the portfolios but in one of our main strategies had become a target about the time that all this broke out. Of course, prices spike and and move. And this is where investing and you have to be a patient from a long-term standpoint and invest your strategy, not your emotions. Does it make sense to chase it? Yeah, you might miss some in the short period, but today gave us a phenomenal opportunity to allocate that increased exposure to energy from an investable standpoint. You've got this big smash down in price. We were very patient to wait on it. And look, if we have demand destruction and and we have a major recession later in the year because of the knock-on effects of this, then that that may not be a great position in the short run. But in the midst of all the emotion around these prices, the information for investing in that sector has continued to increase as time goes along. So that's one major opportunity we were able to take advantage of in a lot of our strategies um today with this with this you know temporary major smacking on oil price and by the time this comes out it'll already be allocated. So not a recommendation that's specifically what our strategy is telling us to do right now from a longer term perspective. When you look at something like this, like this long-term damage that's happened, at best at best, this is going to result in, and I I mean this is best case scenario, a loss of about 3 million barrels per day o going forward, right? For a lot of reasons. One, uh the oil fields aren't going to come quite back online. Two, there's all it's going to take forever to get all of these damaged plants fixed again. uh three there's going to be a well for sure you know you got an extra dollar a barrel going on to everything because of the toll that's going to be put on the uh hormuz straight there but but overall the world has never seen an oil shock this large before ever so biggest ever right and that's not even me but faty bro of of the international energy agency said this is like the 73 the 81 and the 2002 oil crisis all wrapped wrapped into one like it's bigger than all of those combined. So that's going to have a lot of effects. We're just going to have to be very nimble. We're going to have to watch what they are. It's going to be really hard to figure out what's happening and why because this isn't this isn't just oil. It's not just oil and natural gas. It's all the derivative products that happened downstream from that. So I don't I don't think anybody's really Paul in in a position to know at all just how big this is going to be because it it hits too many sectors at once. You need an aluminum expert, a sulfuric acid expert, a ura expert, a petrochemical expert like and these are all sort of interacting with each other as well. So what a dynamic situation. >> Well, and it's something that the markets haven't had a chance to model. I mean the thing about the the algorithms is they have to be modeled to react in a certain way and yeah AI may be great and it may be you know they're using AI trading and they can adapt and move maybe quicker than what they have in the past but if you don't have anything that's this severe to model off of everything even those strategies are going to have to be tweaked and adapted as time goes along and there's going to be some wrong moves that are inside of there. That's why you have to have a strategy. You have to have some, you know, parameters and try to keep your motions in check as much as possible. >> Well, just just to complete the story, um this just came in also just this morning. Let me see if we can um play this. So, these are um in the United Arab Emirates, the oil terminal in Fujiro, which is one of the biggest oil terminals. You can see all the people running. there's uh there's planes flying overhead, drones are coming in, and that was in direct retaliation because apparently the UAE had attacked the Leavon refinery in Iran uh on its part. So there's still this tit fortat going back and forth here and that's still happening. So that doesn't look very ceasefire to me, you know, at all. But this is what it looks like on the ground if you were there currently. So in the past, Paul, even just that that would have moved oil in in times past, >> that one incident. We're having several of these incidents per day now for weeks on end. And it's it's quite bizarre to to see that how just how quiet um the whole thing is. And so Sebastian Cruz here, I think he did a good job just he said just Wednesday. Do you understand what happened today? A single Wednesday. So the UAE air force bombed Iran's oil refineries on both the Siri and Levant islands after the ceasefire started. And then Iran fired 17 ballistic missiles, 35 drones at the UAE after the ceasefire started. And Abu Dhabi's Habshan gas complex was struck again after the ceasefire started. Air raid alerts are going off in Dubai after the ceasefire started. And we have explosions in Bonrain's capital, Manama, after the ceasefire started, Kuwait attacks reported, and Netanyahu said the ceasefire does not include Lebanon. Um, and so yeah, JD Vance called it a fragile truth. Understatement of the century. Yeah. Um, so I don't understand h how you can have these giant market moving things just based on Trump tweeting something and then you get all of this stuff coming out and it's completely ignored >> and and maybe it's just a lot of emotion out there right now and people are just reacting because they're so scared of missing out, right? They're so scared of maybe that's the case. I don't know. Doesn't make a lot of sense to me. market doesn't seem to be seems to be operating mechanically and feeding on those initial reactions instead of adapting to the to the news as it's coming out. >> Yeah. >> Or maybe it's looking through it. It's hard to tell. I just presented stuff that just came out on Wednesday, but but it was just Monday when I woke up and I and that's when I got thrown into another sort of level of um concern about everything and continued, you know, buying things for the farm and and uh really making sure I was ready because this came out where where this was the first time that Saudi Arabia had really been struck and uh their Jubel petrochemical complex was set on fire. Seven major fires in there. Some of those red dots are probably just flares, but in that yellow circle, there's some really big fires. And and this one plant is responsible for 7% of the world's petrochemical output >> is a wow huge number. So if you're concerned about things like lubricating oils and petrochemical, you know, there it's it's a big word. >> So many things coming out of the petrochemical. A lot of chemicals out of there. everything from ethylene gas to propane to butilated this and that. There's all this precursor stuff that goes into making all these other components that feed the rest of the world. So again, I don't even know how to begin analyzing what that really means. We don't know yet. We just don't know. And I'm ashamed to say out of all the things that I've purchased and wrapped up, I think I was telling you before we started, that's the one thing that had slipped my mind because I didn't write it down in the midst of of hey, check this list, check this list, check this list. >> Yeah. So, not over. We're just going to have to keep a close eye on it. I would say the way I look at it, the chance of there being more oil, I don't think the world is really digested. I don't think the price of oil really actually reflects a its utility in in life, right? So oil's pretty important stuff, right? So one way I've talked to people about it say to understand people I was talking with somebody the other day. They said we would we would never pay $400 a barrel for oil. Because I suggested that number. I said yeah we would. They well they already pay the equivalent of that in Europe. They buy it. But I said, the way I explained it to this person, I said, 'Im imagine I put a gallon of gas in your car and let's imagine your car goes, it's a truck goes 20 miles on that gallon. Now get out of your truck and push it back 20 miles and tell me how much you would pay for that gallon. >> It' take you six weeks probably, you know, like >> it's No, we we'll pay it. You know, I don't think we'll like it and it'll have other knock-on effects to our economy that we can't predict, but oil's been cheap for a long time. And I think it's about to get more expensive. >> Yeah. >> Because of the shock. >> Yeah. All of the information says that. That person may choose to sit at home and be in a position where they're not going to pay it personally directly out of their pocket, but they will because everything that goes into the production of our food, the transportation of our food to get it over, you know, they're going to end up paying it in other ways if they can avoid it by sitting at home and, you know, for a period of time. We we just have to I mean, we have to have it to function in society today. And it ripples through everything kind of across the board. new construction, transport of any material, large majority of that's diesel fuel. Now, we may make some adaptations, but again, I don't think that uh the electrical uh grid and electric vehicles technology is up to the point that we can completely replace it at this point. So, we don't have much of an alternative. It's built into our society. Can I put in a small pitch for for the poor belleaguered US farmers uh and the global farmers too, but this has been bothering me too, Paul. So, at the same time, we saw the big crushing of price in oil. We see it in soybean, corn, oats, like all the grains just got crushed down as well. Let me pull this out to a daily. So what you can see here, Paul, is a corn as of today costs exactly the farmer could yet get even less than he could on March 1st before the war. It's down a tiny bit here, right? How is this possible? These poor corn farmers, their diesel costs have doubled and their fertilizer costs have gone up about the same. You know, closing in on 100%. Almost a full doubling right now. So those are their two prime input costs. And so they're just going to get squeezed and squeezed hard here. How does this happen? How how does it happen that we're looking at what's clearly going to be a very challenging year for food production and all of the grains are basically exactly where they were when the war started. >> I don't see any forward-looking uh market movement in that whatsoever. The the only question that comes to mind is it for political purposes, right? We've got the midterms coming up and there's there's entities or or those that are connected to the White House. Hey, maybe we'll give you a trade for this if you'll help us out on this other side to try to push those prices down the interim period to make inflation less in the future at the expense of the farmer. And if you look at it from a longer term standpoint, what's that going to do? Your small farmer is going to continue to be squeezed and pushed out of business where your industrial Wall Street backed farms are going to have access to capital that that small farmer won't. I mean, what is that? that's just war against the small business um for control from the Wall Street um extension is really what it ends up being. And I don't want I want small farmers across the country individually as our farmers. I don't want it controlled by major corporations and and extended arms of government because that gives them far more control over us as individuals. And look, if you can gain control of the entire food supply, you've got an unbelievable amount of power over individuals. But I mean, small farmers are just struggling across the board. They are if that's their sole source of revenue. I I I don't understand that. That's not resilient across the board and doesn't make sense to me, at least with what I can see right now. >> No, it doesn't make sense unless the thing you described isn't a bug. It's a feature, right? >> Yeah. So the it's not a bug that these small farmers get driven out of business because there's a well-connected big firm in there who's ready to buy up that that acreage on the cheap. And >> uh I I guess and if that's the same firm that's able to drive down the price of of the commodity through the futures, I mean then it's just that that's not a good system, right? So >> I'm here's I guess my frustration, Paul, is that I'm old enough markets used to make sense. you would see some piece of market moving news and the market would move on that news >> and there was a connection there. Wasn't always perfect, but it was close enough that if you understood that you you paid attention to the news now. It's almost like you you'd be punished like you said you you're punished for being prudent. If you read the news, you would say, "Oh, I should be long corn." You're going to get punished for holding that view. >> No. And to kind of follow on on that, I had spent some time on the tractor over the weekend and a little bit on Monday. And I was just thinking about the fact that, you know, in every aspect of our lives, we should be prudent. Okay. But but all of this short-term market manipulation, if that's exactly what it is, and insider trading, basically, it's driving us to the individual. And I get it because it is a stressful environment. If you don't have a strategy and you're completely ruled by your emotions, then it is demoralizing for these swings all over the place. Well, if somebody doesn't have access to somebody that they know or trust or an adviser that can articulate a a a rules-based riskmanage strategy, then what other alternative is there? It's like herd us into the passive. Come on into the passive. We're going to punish you for being prudent. we're going to make you feel like a fool when you lower risk at a certain period of time because we're going to paper over these markets. And what it ultimately ends up doing is hurting a whole bunch of people into a position to where I am the king. I am the one that you have to rely upon. And there's a lot less resiliency in that. And that's the thing that concerns me about it. You know, kind of our whole uh mission is say look, we got to play the rule by play the game by the rules that are forced upon us. We can't control that. And you have to understand the strengths of the approach and you have to understand the weaknesses of the approach. But you also have to understand the freedom that can give you. This isn't about, you know, being the single best performing path over the next two to three years. If they can't hold it together, it may be, but that's not the purpose. The purpose is resiliency to protect your assets. Because what they've told us in history, was it Jefferson if I remember correctly said if you give control of your currency over to a central bank first by inflation, then by deflation they will rob you of all your wealth. Well, that's a risk, right? We've had we get all this inflation and then you get some deflation or if they stop doing that, that is a risk. You've got all of these risks associated with just being herded in this manner. And unfortunately, it takes courage. It takes strength. And it takes keeping your emotions in check to walk that path less traveled. But that path less traveled is what will stand the test of time. We're on a path when you have this centralized control that that um um that is unsustainable. At some point it breaks or there's one ring to rule them all, right? and and nobody wants to be in the situation to where one individual can rule every outcome for the entire popul populace around the country. >> Yep. Well said. We'll leave it there, Paul. We're going to take a quick break. When we come back, we got to talk about what's going on over in private credit. Uh there's there's a huge story there, too. Uh this is a good one. We'll be right back. Today's markets are more volatile than ever with ongoing economic and geopolitical uncertainty. Navigating such environments requires thoughtful, adaptive strategies, not a one-sizefits-all approach. At Peak Financial Investing, our registered investment advisory firm connects clients with experienced wealth managers who focus on active portfolio management. These professionals use evidence-based strategies designed to respond to changing conditions, not outdated formulas, but customized approaches grounded in research, discipline, and risk awareness. We believe in open, informed conversations, including discussing tools like precious metals and diversification as part of a broader financial strategy. Every investor's situation is unique, and our adviserss tailor their guidance accordingly. Visit peakfinaniinvesting.com today to schedule your free consultation and explore how proactive management can support your financial goals. I'm Dr. Chris Martinson, proud to work with Peak Financial Investing and my support reflects my professional views. I encourage you to take control of your financial future by making informed decisions. All right, welcome back everybody. Paul. Um, so let's turn away from Yes. All that stuff is sim going on over there in the Middle East. Can we talk about private credit? What's simmering here? So global markets investor here putting out that the private credit crisis unfolding at record speed. Investors requested 14 billion in redemptions from private credit funds in one Q 26 most ever, more than double 4Q25. And only 50% of those requests were met. So 7 billion unmet just parked and stuck and that there's a whole bunch of private credit funds listed down there. But th this is a pretty big deal right now. That's a really big deal. And it's it's obiscated, right? It's kind of in the shadows. It's it's it's, you know, lurking out there. But this is like a horror movie, you know, where you hear the music and you watch everybody making the wrong decisions with that creature lurking in the background. That's what private credit is right now. what's taking place underneath the surface. >> Yeah. So, the red bars in this are are the first quarter of 2026 redemptions. It's just up. Everybody's like, "Get my money. I want my money out of here." And you and I talked about the fact that um just before this private credit went kind of sour, Wall Street had been making a huge push and Trump even signed an executive order allowing retail 401ks to begin participating in this wonderful world of private credit. >> Yeah. >> What a coincidence. What a coincidence, you know. And my question is, I'm hoping that they were just a little too greedy and a little too late so that they don't damage a tremendous amount of individuals. I haven't seen a lot of private equity offerings come into major company 401ks at this point. So, thank goodness that that's a slowmoving uh machine. But we've talked about this several times over the past year, year and a half is just what I had seen in a major change to where hey private credit private equities out here but you've got these huge minimums before you can get in and then they started dropping some. And I guess it was about a year year and a half ago maybe a year ago it really kind of came up on my radar. Time flies by fast. Maybe it was a year and a half ago that there was this massive effort to push it to the average individual. They had the returns in hindsight to look at. They had the allocations with Harvard and some of these other major institutions where basically what they did was they go to the average individual and say hey these really smart people that have accumulated a lot of wealth like they've been doing this and this is what you need to do. You had endowments and pensions that were coming out going had you just done this in the past then this is the returns you would have had implying that that's going to be what takes place in the future. That's one of the reasons why I tell people, look, past performance can give you an indication of the strengths and weaknesses of a strategy, but it has no indication whatsoever of what's going to occur in the future. You know, the only thing you can can look at in past performance is how it reacted in certain environments. But there's been a massive push to get this off on the average individual. And there's a lot of people that I tried to talk out of exposure to the private equity over the years and just refused to take clients on that wanted to have that much exposure because I was serious enough about the risks associated in that category and were seeing those come to fruition a lot quicker than what I anticipated they would. And Chris, there's knock-on effects. I mean, it's not only that there, you know, a lot of people get into the bond space and they get these CLLOs or collateralized loan obligations which are another knock-on effect of that. I mean, there's a tremendous amount of risk in that that bond and, you know, CL CLLLO space and private equity and they've gated these and I don't see anything that's going to change it dramatically over the next, you know, 3 6 n months. It's like everything in Wall Street. you know, there was a gap, they get here, and then they've gone way over to the other side, and there's just going to have to be destruction and a lot of damage to get us back to a basis of of where that should be. Th those are really hard deals. I wouldn't I'd hate to be in your shoes if somebody said, "Should I get into this private credit, private equity deal?" Because you have to read each perspectus front to cover to back, you know, >> to know what's in there or what's not in there. And often it's even a little vague like how it's actually going to perform, you know, because you have to sort of squint at this highly technical legal ease, you know, to figure out what the risks are. It used to used to when I would read a perspectus, you could go straight to certain sectors, you know, like there's a lot of it that's just stamp and then you have two or three pages out of 150 pages that are that are the meat of what you're looking for. It's not the case anymore. I mean, I had somebody recently that was fully convinced. I say recently, it was probably four months ago, fully convinced that they had access to an offering that looked great. And I'm like, look, you're going to have to give me a couple of days because it's going to take a while to read through this. You know, you go to those spaces and it looks good. And then I start reading, you know, all of the um uh other space. And I'm like, "Oh, this has been moved to another area." So, you go look. And I respond back. I'm like, "Nope, don't touch it. Stay away from it. Here's the reason why you don't want to have access to this at this moment in time." And and that's the frustrating thing, right? How many people actually read these? They get a they get an advisor that shows past performance that looks awesome. They hand them a prospectus. And I think that's the diff why it's so important to have a fiduciary instead of a transactional individual because that fiduciary has a responsibility. The question is, did they actually go through those perspectuses to look at them? We did in that case. And you know, look, I I was already worried about the space. I was looking for, you know, items to say, "Hey, this is as good as they made it sound." But when you get into those fine details, it's like, look, this is the reason why you want to stay away from it. You don't want to get into something illquid in this environment with what's taking place. Wait till the damage is over and then start looking for opportunity when there's blood in the streets because there will be opportunity in that space after the damage is done. I just don't believe it's right now. >> Some of that stuff is going to be wrapped up in commercial real estate. We're starting to see a lot more bubble up in that sector right now. I've got a quick thing here u from Night Andale Associates. I follow them. They're talking Chicago seems to be doing particularly poorly. Um but uh they have this foreclosure that just went down. Somebody paid $350 million for the property in 2017. $240 million debt package. It just goes into foreclosure. I've been reading a lot of them where they're going off at basically 10 cents on the dollar is uh kind of going rate for these things. Could be a little higher, could be a little lower, but these are some very serious wipeouts. Who's holding these debt packages? How come we never read about somebody's got to be eating these losses, Paul? I just I don't know who yet, you know, but I know the damage is there. And I've seen a couple of of deals here recently that have blown up within the past year of people that are working for companies that you know got overleveraged and come to find out it was pension funds that had allocated the large majority of the debt. So the question is do you have pensions out there? Do you have insurance companies? Do you have you know that's a space where some of the big banks are involved but not all of them. So, if it's if it's overinvested into by pensions, that has a lot of knock-on effects and risks for those individuals that are relying on that pension in their retirement. And quite frankly, if you've got if you've got that pension coming in, there's nothing you can do about it except for hope that the managers that are there are making quicker decisions than the average person so that they can cut their losses quickly. Well, it's because something changed, right? you know, we had COVID and then it it sort of broke the narrative that you have to get in your car, fight traffic, go sit in an office all day, fight traffic home, all that kind of broke that and and a lot of that never came back postco people figured out. I didn't like that whole commuting thing anyway um very much. So that's problem one. Problem two is a lot of these buildings just can't be converted easily into anything else. when when they're built, they're built for purpose and that purpose is office space for for example and and that's what it's configured for. So turning it into say an apartment really hard because the plumbing chases aren't there. You have to cut holes in the floors which is complicated process where the wiring is like retrofitting a building is is hard um compared to purpose building it. Well, and in addition to that, I read a report yesterday. I wish I had bookmarked this one, but said that that there are more AI data centers being built than office buildings now, which makes sense with what's taking place in the space. But, you know, when you stand back from that, that means where's the money going? The money is going to build these data centers. It's not going to support or bonds or fund these office buildings. that ball of money redirected somewhere else means there's less capital to kick this can down the road on these overleveraged properties and you're right I mean to convert them is ridiculously expensive I think we had talked about it I think Grant Williams had put out one of his reports maybe about a year ago some Chicago buildings that had sold for 10 cents on the dollar and my initial thought was well oh that's great they can convert it into apartments at this point that'd be a great investment for them but then you go down the rabbit hell trail of looking at it it's nearly I don't know if It is, but nearly cheaper based on the analysis of that one building to tear it down and rebuild than it is to remodel. >> Crazy but true. And and then of course um commercial real estate in some places have been really getting hammered because uh it turns out that they have really defective governments there. Chicago is one of those places. Portland is another. Seattle like people have decided they they make it very very business unfriendly. um they they have these very progressive programs they're interested in pursuing cost money so they have to tax people. So of course you tax the business people hard and so a lot of people have been fleeing uh that as well at least from a business standpoint. I I read case after case all the time now of businesses just saying it's not worth it uh to try and continue to be unloved and and even um treated hostily by your local government rather than as an asset. you're treated as if you're a criminal of some kind. >> And that's not good for capital flowing into those uh and investment flowing into those cities. And that that's a slow train wreck that will continue to evolve. And unfortunately, those those citizenry will change when the pain of changing is easier than the pain of staying the same. And and right now for the for the people who are voting for those policies and those governments in place with their hands out, the pain hasn't gotten that severe yet, but it's coming. >> Wonder if anybody has a a portfolio that specifically excludes progressive MUN bonds. Um if you're in the MUN space. No, there must be you must have to you must have to take local governance into account when buying a MUN bond, I would think. Right. >> Right. Well, what I have seen, I mean, we take that into consideration from the risk from a long-term standpoint, but what I have seen this taking place in the industry. Many investors are are looking for yield because of their belief that that's a guaranteed, you know, investment. Nothing's going to happen to it. So, they really don't care in what um jurisdiction is is it's in as long as the yields are higher. My argument is you're getting a higher yield there because the risk is higher from a longer term standpoint. So, just avoid that and go somewhere else. and and and uh stay out of that space until the dust settles. I'm not a big fan of munis in any of those jurisdictions that are heading down that path. That's just a huge risk from a long-term standpoint. >> Interesting. Where do where do where do you see this all heading from here? Anything changed in your in your uh model approach lately? >> No. Yeah, our long-term uh signals against the S&P and the NASDAQ are on full defense right now. that that may change if the information changes, but that has us just standing back and and observing, right? We we did allocate some to the energy space because of the fact that that long-term signals are there. It's on a long-term buy. Commodities are still there. I really like the price action in silver right now. Not a recommendation to buy, but I really like what's taking place there. It looks like we've flushed out all of those individuals that we're chasing there at the end, but we built a good space and it doesn't, you know, a good base and we're starting to get some technical breakouts. So, I still like the commodities and energy space. We took advantage of this selloff. By the time this comes out, we will have already been allocated. That's a good decision from a long-term standpoint. I'm very worried about the credit space. I'm very worried about longerterm bonds from a uh you know anything that's longer than seven years at this point maybe for a trade if it's real liquid but with the weight of the information we have our stance right now is just stand back you know lock in your profits on the S&P and the NASDAQ just sit back and and and be patient to see how things unfold here going forward and the only reason we went ahead and allocated energy is it was on a long-term buy signal the weight of the information continue to build. It is an investable space and we have a major reaction to the downside that gives us the opportunity to allocate at much better prices instead of chasing the euphoria over the past week or so. So, I'm real pleased about that. How it'll work out from a long-term standpoint, I don't know. We don't know how this future is going to unfold, but the weight of the information says it's an investable space, so we took advantage of it. The S&P and the NASDAQ right now, based on our tools, says it's not really an investable space. So just stand back and wait. Maybe we buy a little bit higher if the if this is all clear, but the downside risk is larger right now than the upside potential with the with the information we have at this time. >> Mhm. And um what about bonds? What are you what are you seeing in bonds right now? >> So what I'm seeing on the bonds from a longer term standpoint, just I want to look at it at TLT today just to kind of see to update me on where we are. We've been basing here for a while now to to in full disclosure, we own a position in TLT right now after exiting several years ago. It is a trade that if we have some demand destruction and and you know potential recession, maybe I don't know. Then there is some upside potential there, but I don't like it from a a longer term investable space. I don't like owning these individual bonds that are going to be 20 years or 15 years because of the lack of liquidity. I want to be in something that I can move quicker, but I'm very concerned about bonds from a long-term standpoint because of the inflationary pressures and the tendency of this administration, the governments around the world to try to print. The money supply is still growing, right? And then at the same time, lack of demand with the yuan is an alternative to the US dollars, less money circulating back into our treasuries. I'd read, you know, for those that have to have exposure and is appropriate to have exposure to the fixed income space. I really like emerging market local uh currency bonds. Not a recommendation. That's just a space that we like. And I don't like anything that's long-term as an investable standpoint. And I want to stay shorter and flexible in that curve until we have some more uh some more information because look, if if we continue to spend, let's say we get best case scenario, but the kind there are some knock-on effects and demand destruction, what's this administration probably going to do? Spend more fiscally uh uh foolishness in the short run, expand the money supply around the governments around the world. That's not good for bonds from a long-term standpoint. So, I don't like anything long except for a trade. We own it right now for a trade, but I've got a good riskreward because we've been basing for a long enough period of time that if we break down, we're out. Minimal loss to the downside with a decent return to the upside. If we do have that pop to the upside for whatever reason, then that's then at least with the information I have at this time, we hit our price targets, we harvest those profits, and we reallocate into other areas that may look much more attractive uh in the negative response to that. So, if somebody's particularly nervous and and you know you you've defined some pretty decent current upside downside risk asymmetries in stocks, you don't like bonds long term. Where does somebody hide out if they say, "I I just want to go safe right now and step aside for a minute." >> Well, short-term treasuries, that seems to be the best alternative right now. Um, treasuries, you don't have to worry about FDIC insurance from that standpoint because they carry the full faith and credit of the US government. You can argue that all day long, but in the mechanism of where we are right now, that's really the safest place to be. Or Treasury money market. Like I tell clients, if you don't know what to do, then just park it in a Treasury money market right now. Yes, you might lose to inflation in the short run, but you've got flexibility. You've got protection of that capital in the short run because the longer you go out on that curve, right, if you're in the short-term Treasury money market, that hasn't broken the buck yet. It just about did in 2008 when Lehman Brothers uh collapsed. You know, there was there was a they argued for the capital injection that they had to protect money market accounts. But if you're I wouldn't be in corporate money market right now. I'd be in treasuries and I'd be shorter term because interest rate moves have minimal effect on three month, minimal effect on six month. They do on 20-year. The longer you go out, think seesaw on the playground. That's just a longer swing. So if I didn't know what to do, I didn't want to do anything, I'd be sitting in Treasury money market right now for the safest capital, a fair return here in the short run. Is it fair from inflationary standpoint? But you can react to that. That's where I would go just to park capital and we've got a lot sitting in that. The money that we have dialed that risk down is sitting in those government obligation money market accounts so that we have flexibility and protection of that capital against downside. uh until we have enough information to deploy one way or another. >> Well, sounds very prudent to me. And so, if anybody would like to talk to Paul and his team, please go to peak financialvesting.com, fill out a very simple form, and within 48 business hours after you submit that form, somebody from Paul's office will get a hold of you, and you will get scheduled for the first of what should be three calls. an initial introductory call, get to know each other, a planning call, and then a recommendations call. And if all that squares up, well, maybe it makes sense for you and Paul and his team to work together. So again, peak financial.com. And uh I'm sure Paul would love to hear from you. Paul, any last words? >> No, I was going to say you you may meet with me, you may meet with John Alexander, you might meet with Dylan Smith, you might meet with Alex Snellgrove. We're all on the same page. Everybody goes through the same process. I'm chair of the investment committee, but we just had a a a a meeting of the minds last week just kind of talking about and everybody is full agreement. When you go through that plan, it gives you information that you've probably never seen somewhere and you're probably more educated than even some of the new adviserss in the industry. So, you know, that's one thing that I mandated on everybody several years ago. You don't shortcut that. You take clients through that planning process. And everybody across the board was like, "Hey," one of them was like, "I pushed back on that for a long time, but I understand the value that that gives the clients and the information it gives us to be able to give the appropriate recommendation to do everything that we can prudently do to help you navigate the days ahead and have a su successful retirement." Excellent. Well, thank you everybody for listening. Thank you Paul for your time. We'll be back next week with another edition of Finance You