Is The Stock Market Now The Most Overvalued It's Ever Been? | New Harbor
Summary
Precious Metals: Extended run-ups in gold and silver led to an overheated condition, followed by a sharp pullback; managers remain medium-term bullish and are actively hedging and trimming into strength.
Gold Miners: Miners saw a ~20% correction but remain core positions with options overlays; relative strength has recently favored bullion over miners, which is being monitored for rotation.
US Treasuries: With the Fed likely cutting 25 bps and eyeing an end to QT, yields are trending lower; TLT was highlighted as a beneficiary of declining long rates while T-bills still provide attractive optionality.
AI/Tech Concentration: The market is increasingly driven by mega-cap tech; NVDA ($5T) and MSFT near ATHs underscore liquidity-fueled momentum, but a reversal in tech would likely hit the broader market hard.
Key Tickers: NVDA and MSFT were discussed as major drivers of index performance amid earnings and valuation extremes; TLT was cited as a vehicle for long-duration Treasury exposure.
Oil Services: Recently added to portfolios as the group broke higher after a long lag; Energy trends are improving with oil service leadership.
Emerging Markets: EM has perked up, aided by China-related developments; prior covered-call hedges on EM were used as partial downside protection amid mixed signals.
Risk Management: Financials are lagging and hedged with covered calls, while overall equity exposure is capped near 45%; the team plans to sell into potential melt-ups and reduce risk on breakdowns amid record-high valuations and budding credit stress.
Transcript
Not only are valuations stretched, they are categorically at all-time highs on the on the metrics that are most reliable with future predictive returns. That is a black and white categorical statement we can make without anybody's opinion affecting that statement. It's it's reality. Okay. So, uh being okay with, you know, selling down from 80 to 40 or 30% and it not being the the absolute high, that's okay. The worst sin and the worst regret that one may have to deal with is not doing that and having a massive massive re reset in their financial security. One that literally may be forcing decisions like hey I thought I was going to retire two years from now I got to work another seven. [music] Welcome to thoughtful money. I'm Thoughtful Money founder and your host, Adam Tagert. Welcoming you here for another monthly review with the team at New Harbor, one of the endorsed financial advisory firms by Thoughtful Money. I'm joined as usual by lead partners John Lodra and Mike Preston. Hey guys, how you doing today? >> Hi, Adam. Great to be with you. Thanks for having us. >> Hello, Adam. Good to see you again. >> Thanks, Mike. And hey, you know, thanks again particularly to you, Mike, and Justin there at New Harbor for hanging with us all day long at the Alpha Money Fall online Conference a week ago. Uh it was a great event, but but great in part as well, you guys making yourselves available there and answering folks's questions and the live chat and all that. Um look, lots even happened since that conference. Um now, the day we're recording here, um and again, we usually have you guys on every week. Usually you're reacting to somebody's video and we talk a little bit about what the markets have done over the past week. Um, but we have started this new uh routine with you guys. I think we've been doing it three or four months now where we have you on and you give your own hour in terms of um you know your full outlook and any changes you're making your portfolio and uh what you think might lie in the road ahead. So, lots to uh react to here. Um one thing we're not going to be able to react to too much um is the Fed meeting, this [clears throat] week's Fed meeting. um because the uh news uh the actual official release from the FOMC is going to come out about an hour after we finish recording here. So, we'll find that out. But I really don't think it's going to be too much of a surprise uh this week. Um it seems very clear that the Fed is going to cut by 25 basis points. They will likely announce the end of QT. Um if they do anything terribly different than either of those two things, then yeah, that probably will surprise the market. And if so, we'll talk about it with you guys next week. Um, that being said, John, why don't we start with you? Love to hear your any other thoughts you might have about uh, you know, this week's Fed announcement, but more importantly, I know you had pulled some charts together and um, you charts of the Fed balance sheet and a few other things going on, but but but it looks like because the Fed is has pivoted and is now going back to cutting and maybe ending QT. Um, it's not because it's mission accomplished, per se. It's because, hey, there's some real concerns going on. Now, the Fed has talked about weakness in the jobs market, but I think you're beginning to see some initial signs of stress in the credit markets, which of course we know that's that's where really all the chips uh are that that that's where the big money lies. So, what are you seeing right now? >> Yeah, thank you, Adam. And we will indeed by the time this video airs, we will indeed have the Fed announcement and post announcement press conference. So we'll learn more about their current thinking. But it's uh all but certain at least the market thinks so that the Fed will drop uh 25 basis points, a quarter% on the short-term Federal Federal funds reserve rate. Um and again, this this affects very short-term rates. It doesn't affect uh in and of itself things like mortgage rates and things like that. uh that's more as relates to QT and we'll talk about that in a second. Um but the market is all but certain that the the Fed will drop a quarter percent today. Um there has been some talk about the Fed starting to uh uh reach a point to to end the quantitative tightening program that they started well restarted I guess back in 2023 I guess it was. And just to put that, you know, you you talked about, you know, the whole idea of mission accomplice. Let's look at a picture here to kind of put that in perspective because um I think it's really just eye popping uh where we've come from and where we are. This is a chart. It shows the total assets on the Federal Reserve uh balance sheet. And basically, just a reminder, when the Fed in the wake of uh 0809 financial crisis, they entered several rounds of quantitative easing QE1 23. And basically what quantitative easing involves is the Fed printing money literally out of thin air paper dollars uh base money supply to go out and buy bonds treasury bonds mortgage securities uh and those bonds end up on the Fed balance sheet. So in 100 years nearly 100 years of the Fed's existence uh prior to the GFC they amassed a balance sheet u of about 8 8 900 billion and then you can see what's happened since then right we've had QE1 QE 2 QE 3 and then QE4 you might call it in the wake of COVID here we are today in October 2025 the Fed's balance sheet is still just a tad bit below $7 trillion again I'll remind folks before the great financial crisis, it wasn't even a trillion dollars. Not even close. Um, so and and back around here, I forget the actual date, but it was around in 2010. I can remember it like yesterday, um, Ben Bernani made a rare appearance on 60 Minutes. At the time, Fed chairs didn't do these kinds of things. They didn't go on 60 Minutes and, you know, give up the ghost in terms of what their thoughts were. He basically, paraphrase, said, "Hey, these are temporary measures. We're going to be able to reverse these measures." you know, um, not too far down the road once the economy stabilizes. And here we are today and look, we haven't reversed those measures. We've had, you know, some normalization in the balance sheet. And and what this quantitative tightening is is basically the Fed hasn't sold these bonds. They've just as these bonds have matured, they simply haven't reinvested the proceeds. So they've, you know, taken liquidity out of the system in that in that way. But we still are um way way higher than we ever were prior to the GFC and we're at all-time highs in the stock market. We have, you know, still relatively healthy economy. Um I know there's you emerging cracks in in employment and things like that, but to think, you know, if that if if anybody was asked back back here, would we still be at nearly 7 trillion dollars and talking about an end of QT? um I think people would have lied through their teeth saying that yeah that that's going to happen. So just a dramatic thing. And why is this happening? Uh let's take a look at some some other uh data points. We're starting to see some stress in the system. This is a chart um that shows some some key spreads on some key interest rates. And I don't want to get into the weeds here. These are kind of technical things. But the the one I want to highlight here is what's called this secured overnight financing rate. This is the rate that uh banks can borrow uh collateralized by their treasury holdings. And typically when that starts to blow out relative to this this thing we call interest on overnight reserves, that's a sign of some liquidity crunches, some balance sheet concerns, some credit concerns, and we've seen in recent weeks um some some, you know, defaults and and stresses with some of the subprime auto lenders and other kind of non-bank financial institutions. Um, I think the word cockroaches has been used. Uh, Jamie Diamond talked about, you know, where there are some cockroaches, there probably are more. We're starting to see that in in some of the data. And all these interest rate spreads are starting to spike up here pretty notably at a time when the red line is the um the total amount of reserves on uh, you know, in the system. Those have pulled back. These are overnight reserves to three million $3 trillion. That's on the on the the x-axis. So it's evident that whatever liquidity has been drained from the system that's starting to exacerbate some fragilityities in the system and um you know so I think there's a bit of a a credit panicking here and I'll just sh finalize with this chart. This is this is the um what's called the overnight repurchase activity. This is basically uh when the Fed when the Fed right here uh stopped temporarily their their first round of quantitative tightening. It was in respon I'm sorry right here. It was in in response to this the repo market blowing out and that's ultimately what led to just before the co no linkage there but you know so much for their attempts to tighten the the balance sheet at that point. The the the repo market freaked out in 2019 quietly Fed had to come and save it and we're starting to see some murmurss there. I don't want to over exaggerate what we're seeing here because oftentimes there is some activity near month's end. Uh but it connects some dots as to why the Fed is suddenly becoming u uh much more dovish in terms of not just rate drops but but also ending QT. We'll learn more when the Fed comes out later today, but uh some some very >> emerging kind of concerning things that that we want to be watching very closely. >> Okay. Um, Mike, I want to connect this with um uh a few things that that we were talking about before we turn on the camera here. Um, so u I think you've got a stat that says that um that we've hit a point now where the top 10 companies in the S&P 500 uh now make up 40% of the indices value. Right? So, um, the the day we're talking, the stock market is at a new all-time high. Um, we are less than a 100 points away from the big S&P 7000 milestone. So, [clears throat] you know, John is is pointing rightly to, you know, some signs of stress, some signs of concern. Um, but the market just does not seem to care, right? Um so uh I think uh I think just yesterday what Nvidia became the world's first $5 trillion company. I think Microsoft just just um passed 4 trillion. Um as I like to say yeah now uh if you take Nvidia, Microsoft and Thoughtful Money combined those three companies are worth $9 trillion. [laughter] >> Thoughtful money being the biggest one out of them. Right. So um uh but but yeah, so just react to the contrast there between what John is noting at is hey you know that the Fed is kind of being forced to pivot here by weakness in the job market and maybe some other things. We're seeing some signs of stress looking at uh you know even a lot of the Fed's own metrics there that John showed. Um we've got some cockroaches that people are starting to notice. Square that with stocks at all-time highs and nobody really having any worries on Wall Street, it seems. >> I Adam, I think I think it's going to sound like a simple answer, but it's all about liquidity. It's just been liquidity and nothing but liquidity for many years. And some of your guests talk about liquidity in particular. I can't remember the name of the guest that that does that so so often on your on your channel, but >> Michael How. >> Exactly. Yeah. He talks about it and it's been that way for many years. So, it's no surprise that things that are really exaggerated get even more exaggerated. And you're right, the top 10 companies are 40% of the S&P. And so, and and out of those top 10, five of them are reporting in the next two days. You know, we got um Meta, Microsoft, Google, Amazon, and Apple. Couple of them tonight. Uh I think it might be Meta and Microsoft tonight. Tomorrow, Google, Amazon, Apple, but doesn't matter exactly which day. It's in the next two days. these these five behemoths, you know, and it it is just the the the the huge gorilla, you know, as we as we often say. Another one of your guests calls um I can't remember the name of that guest either, but it's like the the huge 800 lb gorilla is the liquidity and these big companies that are in this market. And so it doesn't make sense because we are seeing some signs of stress you know the u the unemployment numbers the which are by the way good for small and midcap companies and so maybe that's why they've been doing a little bit better but the Fed is probably behind the curve. A number of people a number of your guests have said that they're probably behind the curve. We'll see. They'll probably panic when we get a big drop in the market. Now what's going to cause a drop in the market? Who knows? But this market is dangerous because it's so thin. If you take a look at Nvidia, which you just said is the first $5 trillion company. It's just been straight up the last couple days, including today, right? And so the biggest companies are moving the most. Microsoft almost hit a new all-time high and they're reporting, I think, tonight. And they that might happen on the earnings report. So let's see what happens with the earnings reports. But other things like financials are are lagging a little bit the last few weeks here. equal weighted uh S&P is lagging a little bit. Russell 2000's lagging a little bit in the very short term. All of that can change very quickly, but if you just look at the charts over the last few weeks, you'll see that on these big updates, the NASDAQ's up big, the S&P's up big, equal weighted S&P is not participating, Russell 2000 is not participating as much. Now, does that have us really worried? Not too worried yet. Take a look. Let me just mention one one or two things about our our own system, our own indicators. Our own indicators are mixed and whippy is probably the best way to put it with a slight lean to the bullish side. A number of our indicators look at relative strength readings, short-term moving averages, um even chart patterns, things like that. Lean's a little bit bullish. That's why we don't have index puts on or index hedges on our model right now. That could change, but that's how it looks right now. But the real short-term stuff is whippy and mixed. You know, like I said, financials, etc. are are are lagging a little bit in the in the last couple weeks. And so, we have to see what happens here. We're knocking on the door of 7,000 S&P, as you say. And if we get there, we could catapult higher and everything could start participating. And that would be the kind of everything all-in parabolic meltup type moment. I think we're already in that type of blowoff top moment, but it could get even more exaggerated. And if that happens, if we're lucky enough to see that, we will take action probably selling into that rally a little bit of the time versus getting more committed. So, we're at risk here now of this vertical blowoff. I wouldn't bet on it and I wouldn't trade from this perspective. But with a mixed bag of indicators, if we get if we break through some of these resistance levels and it's an everyone in the pool type moment, it could give us the the the signals we're looking for. Like I think I've mentioned before, if you see something like 500 S&P points up in a couple weeks, you know, then you know you're getting close. >> Okay. I was going to ask you to repeat that for folks. So, I'm glad you did. Um, [clears throat] all right. So, in the interim, and I hate to use this analogy, but the music is still playing and to a certain extent, you guys are still on the dance floor. Um, you know, you've got what 40 45% equity exposure in your portfolio. >> Yeah, 45% if you don't count gold mining stocks, which we don't really that's that's separate, but 45% equity. Yes. >> Okay. All right. Um, I'll get in a moment to um any potential portfolio changes you've made recently, but just to kind of give the punchline up front, are you making any big changes right now or you still sort of executing on the allocations you've largely had of late? >> Uh, we're not making any big changes. Over the last couple weeks, our indicators were leaning more bearish. There's not nothing's been really definitive, but in the last couple weeks before this week, indicators were leaning more bearish. So, we wrote some calls, sold some short calls on some of our positions, you know, like emerging markets and and a few others. And selling calls brings in some cash and it's a and it's a slight or partial hedge. If we saw further deterioration, we would either start taking stops in our underlying positions or add index put protection. But that didn't happen. We've now shift, as I said, more towards the bullish side without conviction and confirmation. So, we covered one of those uh we we well actually was on the gold miners. We covered one of the uh short options. We did not add any more here because we're leaning bullish. We're not adding index puts because we're leaning bullish. So, the only thing we really did is we added a few short options. Uh a few weeks ago, I think we already mentioned this. We we we added oil service stocks and those have started to take off in the last couple weeks which is which has been nice to see but that's not new. So really we're we're sitting here at 45%. I think they answer another part of your question. I don't really see us going up from there even if we get this melt up. It's more like um we're happy with the participation we have in other areas including long-term bonds which are looking better uh and go gold and gold mining stocks and silver which have obviously been a really great performer this year. It's more like we would sell a little bit into some kind of melt up or if we get the opposite a meltdown we'd probably be taking stops and reducing from there. So we're probably roughly at our maximum equity exposure here almost no matter what happens. Okay, John, I'm going to come back to you just a minute, but Mike, let's stick with you for a bit. Um, because I know one of the most frequent questions you guys must be getting right now because I'm getting it a lot is all right, gold, is the top in, you know, was is the party over? Um, and probably paired with that is is this going to be a repeat of like what we saw back in when was it 2012? um when stocks uh gold and silver prices peaked and then you know basically kind of gave up most of their gains and then were dead money for a decade and that was a long base wasn't it? We've often shared the long cup and handle chart on the monthly chart of gold. It did peak in 2011. It took almost 10 years to come back and once it did come back and break out from that level uh at almost $2,000 an ounce, it had a quick doubling over what the less than the next year. So gold has been on a big tear. And while nobody knows the future, I think this time is different than 2011. Back then they had gold buying parties in in people's homes and there was all kinds of advertisements for cash for gold and that type of thing. And I just think we're further along in this debasement trade story. We're further along in history in the cycle of things and we're entering the last 3 to 5 years of a fourth turning. You know, all of which tell me that this time is different. And again, nobody can know for sure, but I believe it's different this time. Famous last words, right? Write those down. >> But having said all of that, the trade got extremely overheated. And we can just tell from the psychology of it. A number of clients and and uh and and and non-clients that we talked to wanted to be allin in that market in silver and gold and miners. And there was just a lot of overconfidence. And we were seeing just day after day after day straight up. And so we were warning people to think about selling a little bit on the way up because psychologically it becomes a trap. These days we're talking to people over the last few weeks about this psychological trap of being all in something. Not everyone is all in in our model. We're only about 12 and a half% between miners and silver monetary metals. But some people are 50 80 100% in and they just once you're all in, it's hard to get out at all. So we've been coaching people to sell a little bit. I had a call today with somebody like that that was nearly, you know, well over 50% in metals and we were talking about how it makes sense to sell 10%. Right here, sell 10% right here and use that money in your life. A lot of times people have trouble selling anything with gold and silver because of that all-in viewpoint and because they don't know what to do with the money. I would say nearly 100% of the time when I talk to people about selling into a rally, which is how you want to do it, they always say, "Well, what am I going to do with the money?" Because they don't believe in dollars. And they just they can't get unstuck with that. So, I found it's a lot easier to talk to people about doing real things with the money, like take a trip, do a home improvement construction project, help the kids, whatever. But I find that it helps people take the money, get permission to do it, and then do something interesting or fun with it in their real life. And so that's kind of the whole psychology of it. The math of it is this. And if I could just share a chart or two, we can talk about the math or what what what happened in the charts. [snorts] All right, so here's silver. This is going to be the silver ETF coming up. We walked along the outside of the Ballinger band. We had a big breakout back here at around 32 to 33 on uh this ETF which was 35 silver. We talked about that triple top numerous times on this program and since then we've walked up the next four months and we w this is a big big move and so this got really overheated. Now look at this pullback. This pullback is nearly 20%. It's like 18% in silver. >> Silver. >> Yeah, that that's painful if you bought right there at 49.25. >> It's painful. But let me back out to the weekly chart. Now, here's the weekly chart and here's the triple top breakout that I just mentioned. All we did is came back to the outside of the weekly bowlinger bands. >> I've talked a little bit about the fiveweek uh EMA or exponential moving average. This happens to be the 21, but um Span Henrik talks a lot about the five, which is why we were bringing up here. He was on your program a few weeks ago talking about it. And we basically came down to the fiveweek moving average and shot through it. But if you take a look here, we're right back to it. So this pullback of about 18% was mirrored roughly in gold as well. Take a look at gold on the ETF. Went from 403 to 360 something. Pretty darn close to 20%. And if you look at GDX, it had a 20% pullback. This is painful for people. You know, as as nice as this felt, this pullback is fast, right? And we've already had a pretty good bounce. So, let me go to the daily. Change this daily back to the 21 period moving average. We can take a look. >> Before you get to the bounce, I I just want to I just want to take a moment to note that while it wasn't super popular at the time, um because everybody was loving the the daily great gains um and saying, "No, you guys don't get it. This is the great repricing of gold and silver. It's underway. It's not going to stop." Um, we were counseling that people consider hedging in some way, shape, or form, whether it was selling a little bit, as you said earlier, Mike, whether it was just putting on some downward hedges. Um, and and this is exactly why. Now, some people might say, well, look, I'm not going to sell my gold and silver, and I think it's going to continue to go higher from here in the mid to long run. And I agree with them. Um, and yeah, if you want to, you could just ride that down and then hopefully ride it back up. But of course, we don't we don't know how long it's going to take to recover. Hopefully, it won't be that long, but it it it still could go lower and it could could stay down longer than we'd all like. We just don't know yet. But also too, if you put some some hedges in up there in the stratosphere before this thing corrected, well, you know, now you're sitting on some gains on those hedges and you've got some dry capital to to start dollar cost averaging back in if you want to increase your exposure. So, I just want to now that this has happened, I just want to really explain to people why we were being so persistent in saying, "Hey, you really should think about hedging." >> Yeah. Well, that is the big question, Adam, is is was this the top? I don't think so. But it was it was very overheated. And we were hedging on the way up. And I'll be honest, we were early. We were early. We had some short calls down here at 63. I'll put a line there. And then those got buried. Then we had this crazy blowoff all the way up here. We had a second layer of calls at 85. So, we had these two about half of this hedge down at 63, the other half up here. Well, we got this pullback and guess what? The first thing we did is we moved this hedge up and we got some premium for doing this. So, these are not the called returns, but we moved the 63 up to 67, I believe. So, that first one is gone. We were able to move that hedge up. That one is in the money, but you have to add in accumulated credits to understand what that sale price would be. Bottom line is we got a really good, really robust hedge on that half down here. And when this pullback happened, we covered this 85 hedge for nearly a full profit, which adds cash to the account and hedges the position. So now we have half hedge down at here, and we've got full participation if we get a bounce right back up towards the top. This is a pretty steep downtrend. My guess is that we'll probably chop around here for a while, ultimately break base out, and break higher again. far from guaranteed. Why? Which is why we always talk about be careful being all in in anything. But I do believe gold and silver are signaling that this is the real deal in terms of getting closer to the end of this whole debasement story. Central banks haven't stopped buying gold um and and probably won't. And I really do believe gold and silver will go higher. We don't have to have it be that way. If we're wrong and that was the top, well, we've got to pretty well hedge and we'll start taking stops on the position at some point. So, but right now, that's how we're managing it. And I can't stress enough, sell a little bit into an up market. Um, and you can really just tell by your your level of discomfort. If you're having a lot of discomfort over this, you're probably a little heavy. Talk to us. We can help you get a little bit unstuck. You know, when John when when you go to John a little bit later, he he may want to share some of the charts about how extreme things were from on a math sense. In a math sense, I just show shared some thoughts from a psychological and a chart perspective. The trade was way overheated. Is it done? Probably not, but we never know for sure, which is why we have our hedges. >> Okay. And Mike, um, so you guys have been doing some pretty proactive hedging here as you just walked us through. Your core positions, are they different at all today than where they were a couple weeks ago, or are they largely unchanged in in your actions been around the hedges? >> The core positions and our other sectors you're talking about, I think, right? >> No, I'm talking I'm talking about precious metals and precious metals miners. >> Yeah. Our core position isn't different. And our core position has been roughly 10% model weight miners and 2.5% silver. I didn't talk about our silver hedging there, but we did something similar in silver. As it went vertical, we sold calls. It went even further and went into the money and then had the big pullback. On the big pullback, we moved our hedges up so that our floor is higher. So, that part hasn't changed. We did notice and we don't know if it's whippiness yet. As I mentioned, our indicators are whippy, but relative strength has now favored gold bullion versus gold miners. It has been gold miners for the longest time. And it's simple. If you just look at the monthly or daily or the monthly uh uh daily, weekly or monthly performance of miners versus bullion or vice versa, you can just chart these things out and it's now flipped back in favor of bullion. It's impossible to tell whether that's a whippy indicator that will reverse quickly or if that's durable. So, that's something we're keeping our eye on. If that sticks, we'll probably start to increase our bull our bullion position relative to the mining position. But, uh, no, our core we're dancing around the core here really is our core position hasn't changed. >> Okay. And that's what I wanted folks to take away from it wasn't like because of the the recent action and the recent correction. It's not like you materially sold out your position or anything like that. >> No. No. That would happen on a breakdown hopefully from much higher levels. hopefully uh a long time down the road. It's it's tempting to say, "Well, shoot, this was a moonshot. It's all done for gold and silver." But real big bull markets in metals and in frankly any sector will try to shake you out at least once. And I've said before that in real big bull markets, you'll see a double off the bottom or double off the base and then a double again. Silver miners, gold miners, they have a little more than doubled in general off their base. And now we have this big pullback. Is this really the first pullback to throw people off the bull? I think so. Though we're not betting on it, but I think that's likely. And I think we might likely see another doubling from these levels in some of these things. I don't know if we'll see that in the majors, but in some of the smaller companies and the silver miners, I think they could easily double again from here. So again, this is not a recommendation to go in. It's just talk to us about your individual situation if you'd like. Um, I I just don't think it's done yet. But if it is done, that's the thing. This is what a professional does. They have a plan in place for what to do. Our signals will continue to give us negative signals. If that's the case, we would probably start to to ease out of the position. You know, maybe with that half that we have hedged, but right now the jury's out. Let's see if we get a further bounce from here. And I'm thinking that we might. >> All right. Um, well, now John, let's come over to you. Thanks for being patient. Um, John mentioned some of the charts you have which, you know, I think build on this conversation he and I were just having in terms of the kind of extremes that we were at and then what tends to happen after these extremes. >> Yeah, I think it would be important to to share some of these only because um these are inherently emotional decisions and we always bring things back to the data to help us kind of ground ourselves. So, let me share a couple charts. They actually were pulled together by other folks, but they resemble some of the internal dashboards we look at that are just frankly more friendly to share for your audience here than than our dashboard. Uh our dashboard is a little bit uh wonky for our internal purposes. But this is a uh a chart that looks at both gold and silver. And this is uh as of two weeks ago, essentially roughly about two weeks ago, right when both gold and silver were reaching their recent peaks. And you know, for example, uh we looked at gold had had only been up nine weeks in a row a handful of times in history, uh five times essentially, including this most recent instance. Never before in this long history going back to the 70s had gold been up 10 weeks in a row. And you know, you can see the the follow-through performance in these instances. you know, almost every very low probability of follow-through positive performance going out a day to two months later. In fact, not only not positive, but there's some pretty big historical uh precedent for some big pullbacks. Uh not like what we've not unlike what we've seen. So, we we were very much as bullish as we have been and still remain longer term precious metals. We we thought there was a very high probability of a pullback. In fact, that's happened and that's that's why we had the hedges we had in place. Same thing with silver. You can see this is a different look but it's basically the relative strength that got so extreme uh exceeding 86 and just a number of extreme relative strength that again almost every time in the very small handful of instances in history this has happened the follow through for you know weeks to a year later were almost categorically negative. Contrast that with this is just from yesterday. Uh and it shows you know in similar historical instances where gold or silver has pulled back as as massively and quickly as it has this time almost without fail the follow through anywhere from a day to a couple months later in case of gold and a day to a year later. More often than not the followrough has been positive. This is not a guarantee. Every time is different and we're not huge fans of averages, but these charts just show in in a I think a picture the extremity that we had reached and the very high probability that that translates into a pullback. And now that we've had that pullback, the coast is clearer. It's not a perfectly convincing case that we go higher here. Mike mentioned and this is probably a pretty good base case that we may uh gyate sideways here a bit. uh you know might be a little bit uh volatile and and um we're happy to have some hedges still in place even though we used this pullback to modestly increase our position after effectively having sold some in that rally by by virtue of the hedges we had. So um just wanted to add that that context to the whole dilemma of how much to sell, when to sell, when to be patient and and step to the sidelines. And that's uh every bit of conversation that's still relevant for a lot of people here today, not just with precious metals, but we talked about Nvidia and some of these high-flying stocks. These are all the same kinds of discussion. What is your position size? What are the probabilities that you know uh we see continued um trajectory that we've seen? I mean, Nvidia probably is going higher at some point, but is going to keep the same pace of of ascension that we've seen recently. >> All right, M. John, thanks so much and um appreciate you guys both going so deep into um the precious metals there because that's been such an acute topic right now that folks have been looking for some insight on. So I think you guys did a great job. John John to um another asset class that um is sort of on the move right now and and again one that folks kind of are asking questions about is bonds. Um, so we are now seeing the Fed, you know, going into a a cutting regime. And so if you've been sitting there in the T-Bill and chill trade, you're starting to see your TBO yields start to go down. And now we have just recently begun to see the the 10-year uh fall below 4%. Um, and looking like it's potentially going to keep going down for at least some period of time. Um what are your thoughts there on bonds right now? >> Yeah, so let's share a chart of the 10-year yield. This is a chart of the 10-year Treasury yield. Uh these numbers are off a decimal place. So for example, right now we're at 3.99 uh9 on the 10-year yield. Um I'm sure a lot of this it's been a pretty boring day today in the bond markets because all eyes are and ears are waiting for the Fed. But there is an unmistakable downtrend in yields uh since about uh you know May um in in these bond yields. We had this huge panic in the bond market back on liberation day it seems like uh years ago but it was just a handful of months ago. That was a huge scare in the bond market and it caused a lot of policy changes and and uh change in tone from the administration as to what their policies would be. But we've seen a pretty consistent uh and and um trending decline in yields and and right now the path of least resistance is prior for yields to continue to to drip lower especially if for example the Fed comes out more forcefully and talks about the end of quantitative tightening. Essentially what that does is it basically creates um less supply in in in the bond market and and you know all else being equal less supply relative to the fixed demand you're going to see those those those those yields come down and prices go up. That's the likely scenario. Um if if we look out a little further to longer term yields um just pull up the 30-year. This is the 30-year yield. We we got as high as 5.15 back in in May. The 30-year yields are now down at 40 4.566. Um so pretty dramatic, but again the path of least resistance is probably lower on yields. My I could we could easily see, you know, 30-year yields coming down to this prior recent low right around here testing around the 4.3 4.4 level. Um that would be supportive of things like, you know, we've talked about TLT. It's a ETF that holds longerterm treasuries. Um, this is a chart of that. This is a daily chart. You know, we had and just to zoom out a bit here. This is what that it's been a horrible place to be for much of the past bunch of years. I mean, when 10-year yields were below half a percent in 2020, that's as close as you get to a bubble in the bond market as a rampant bubble you might call in the stock market. That was a horrible time to be an owner of bonds because there was only one way for yields to go go and that was up and bond values down. What we've seen here is a painful consolidation, but one that probably is is is is either going to be rangebound or dripping higher. We think um probably near near-term target on things like TLT, and this is not a recommendation. Happy to have an individual conversation with any any folks that would like to call us. Um we think it you know probably a path of least resistance is to see TLT come back and and test out this 100 level here. And you know if you look at a shorter term chart you know a lot of the technicals we just had a uh so-called golden cross 50-day moving average came above the 200 day moving average. You know it's been a quite a nice orderly rise in these bond values as interest rates have have come down. So, we're not we're not hugely into long-term bond. It's still even with the Fed's um cutting campaign, there's we're still at a target rate today uh at four to four and a quarter on short-term treasuries. That's almost certainly going to get lowered to 3.75 to 4%. That's the target range. Uh but even still, uh if you look at um the belly of the curve, 2 3 five, you know, month uh treasuries, those are I'm I'm sorry, year treasuries, those are down about 3.6, I think. So even though the Fed has started cutting, it's not like the tea bill and chill trade is over because we do think uh there is good sound reasons to still have a a a bucket of very liquid, very safe um things like treasury bills. We have about 22% in our tactical model right now. And that just simply represents for us optionality in the form of being able to convert that into other things be it stocks or commodities or whatever when uh conditions are more permissive and and inviting. So, >> so John, if somebody was was doing T- billill and shield and really just rolling over really short-term T- billills, say like, you know, 30 60-day T bills, um, or I guess four week or 8w week T bills, um, [clears throat] you know, not personal financial advice, but would you would you encourage them to consider maybe perhaps now maybe buying some one-year, two-year uh, treasuries ju just to, you know, if if you're really liking that kind of 4% range, sure, why not lock it in for the next two years as it looks like the the shorter end of the curve um is going to go downwards as the Fed continues to cut. >> Really depends on uh you know, and you you've prefaced this, this is not financial advice because that's actually a real personal conversation based upon the objective of a client. You know, we we don't own we're not heavily b invested in bonds. We own about 5% in 3 to sevenyear treasuries and that belly of the curve has actually rallied a bit because those yields have come off. We we own about 7 and a half% long-term. But um if if one is looking to uh use a bond portfolio to lock in like um you know known income and and maturities to to for example pay for uh a kid's college education, you know, tuition bills coming due. That's absolutely a valid thing to be thinking of. But I I can't I don't want to generalize. I don't think I can say in general because I I do think um you know that uh you know T- bills still are a fine place to be and I I'd rather have the short-term liquidity to be able to deploy into a stock market selloff for example or a further pullback into precious metals or commodities that I think is uh I I would not encourage a wholesale um kind of feeling like you got to go go out in the curve. you know, some degree of that is certainly, you know, uh, acceptable, but, um, the the the belly of the curve, you know, the two, three, five years, those aren't I wouldn't call them cheap right now. They're not, you know, dangerous, but it's not like this compelling slam the table, you know, go out and do that because you're fearful of short-term rates um, coming down. In fact, you know, uh, we could see the Fed's, you know, cutting campaign, you know, rather shortlived depending on how things play out. we get a reignition of inflation here, um I think they're going to have to go on pause, right? And we we just can't forecast that. We'll have to see how that how that plays out. >> Okay. Well, my my my short-term um or shorthand uh guidance to folks would be if you're one of the many folks that have been asking, hey, um I'm really heavily into Bill and Chill and I've been loving it, but I I'm now concerned because it's going away. You know, shorthand answer I think from John is is then talk to your adviser. Um, you know, there may be multiple different strategies that that uh are worth considering here. There's no one-izefits-all solution to that question. Um, all right. Well, look, um, as we as we start to wrap up here, u, Mike, I'll come back to you briefly. Um, you know, I think you mentioned a couple of other sector. I mean, obviously tech is doing amazing. Um, I think you mentioned financials had been looking a little bit weak of late. um as you as you look out at the different sectors that you guys are just watching, you know, monitoring on a on a daily basis there at New Harbor, um what ones are looking, you know, particularly interesting to you and what ones are maybe looking particularly worrisome? >> So, Adam, we're still in the strongest, we're in the strongest sectors. That's what we have to do with the relative strength analysis that we use. You know, the first thing we're looking at is what are the signals of the market? The market signals are tilting bullish here, but not decidedly so. So, we're still, you know, we're still 45% in in equities, as I mentioned. We want to populate that with the strongest sectors. We got 15% of that as an international a mix of broad international and emerging markets. Emerging markets have started to perk up quite a bit by the way, particularly with u with China kicking in. So, if you look at the eyeshares emerging market, ticker symbol EM is 30% China. So, it's certainly gotten it certainly has received some help on some of the latest developments and trade deal news there. But in terms of the in general the domestic sectors that we are in that are the strongest, it's utilities, technology, industrials, financials. Now, we're in financials and I just admitted that it's weakening a little bit. So, we have to use our discretion to decide when to cut something. just because it starts to falter a little bit. We don't really know if that's a signal that says do something or give it a little more time, a little more rope. That's the hardest thing about being a personal investor or a professional. Financials is definitely the weakest out of our group and we're going to wait and see what happens here. Um the the ETF yesterday was a little bit below the 50-day moving average. Haven't looked at it today, but there's hedges in place on these things on some of them, and they're they're only partial hedges. Covered calls are only partial hedges. puts are more robust hedges, but they cost a lot of money. We prefer covered calls because they bring in money versus cost money, >> right? >> So, those are what we're in. Well, actually, we and I forgot to mention that we just added the oil service stocks as a sector a couple weeks ago and that has broken higher in the last week. So, that's nice because that that's been a lagard for a long time. Oil oil and energy has been a lagard. Healthc care has been a lagard. A few weeks ago, we started to see energy start to tick up and biotech start to tick up. So, we added oil service, but I but I have to also admit that healthcare and biotech is on our watch list and we have not added it to our model yet. So, if we keep staying bullish on our signals, then we'll we'll keep being in the strongest sectors. If the market rolls over, we'll cut the weakest sectors one by one. It's how it works with us. We're always looking for a shift. But technology out of that whole group that I just mentioned is the strongest almost worryingly so. It's been so relentless. But you know, we're in we're in an ETF in technology. So yeah, tech, industrials, utilities, oil service, and uh financials right now with financials being the weakest. >> Okay. And and let me just ask you what if um not saying that this is going to happen, but just let's say there is a reversal in tech. I know it seems so hard to consider right now because it's been the lead dog that has pulled the sled for so long now. Um but so much market value is now concentrated in it. Right. We you you mentioned earlier that the top 10 companies in the S&P 500 now make up 40% of the interest. The vast majority of that market cap from those top 10 companies are in tech and a lot of that's in the AI trade. Um so if something were to compromise that what do you think the knock-on effect would be on the overall markets? >> I don't very bad. [laughter] I don't really see any way that that would not be very bad for the market. There's no way for the market to do well if those were to come down. You know, again, I I I I'm speculating here. I think we're going to get a squeeze higher and it's probably going to continue to be concentrated in these names. It's it's it's eye popping to see, you know, Nvidia chart uh Nvidia market cap 5 trillion. If these things come down hard, the whole market's going to come down. So, it's more likely we get a squeeze higher and maybe some of the lagards actually start to participate as well. Watch for the S&P Equalweight. Like take a look at the ETF RSP for instance, or the Russell 2000, ticker symbol IWM. Keep your eyes on if they start to to break out of their ranges and decidedly move higher. Then frankly, everything's going higher, including those names you just mentioned. But it's kind of a worrying thing because I'm even listening to myself talk here. It's just like a bubble, right? I'm talking about a bubble. So, you don't want to see the tech falter here because because that would be bad. >> Yeah. Well, that's interesting. So, you know, um I mean that's the huge debate. Is it in a bubble? Is it not? Um many big names including Sam Alman himself there at OpenAI have have said of late, yeah, it's in a bubble. And I've even heard it said by by folks in the space, it's in a bubble, but it's in it's in a rational bubble. Um and I don't really know what a rational bubble is to me. That sounds like mental gymnastics just trying to justify it all. But but I think I think what the spirit of that is just hey these are the way that these these new technologies get put out there in the world is you have this massive capex race to be you know the winners in the infrastructure of it and then you realize you've overbuilt um and there's some cleansing and then then things recover from there. But you kind of kind you kind of have to do it this way is sort of how they're saying it, right? true or not, these guys are pursuing it, you know, at at uh all hands on deck. And if it does prove to be a bubble, and Mike, you're right that there is some sort of, you know, blowoff top that sucks up everything into it. I mean, you you just you just have to to in my opinion to be an investor in this market, you have to have a plan for if and when the rose comes off to AI trade. A and the potential collateral damage that could do to your point, Mike, just given how big of a percent of the market it is. Who knows if it's going to happen? Who knows when? Could happen tomorrow. Could happen three years from now. But um I feel like if you're going to be long this market in any material way, you at least have to have a plan in place for what you're going to do if that thing starts reversing. >> Absolutely. And I find that people have a very hard time psychologically selling on the way down. But that gets that goes to having a plan. You might say if we get a further melt up here, I'm going to start selling into that rally. That's a good plan. If we are wrong and and we fall right from here and and break technical levels, start to sell and take some stops. That's a plan and we happen to be relatively semi-permanently underweighted equities versus the industry norm here at 45%. Well, that's because we know we're not perfect. And for the passive investors out there, because I know you probably have a lot of viewers that are passive investors, whether you're 60 or 80 or 100% in index funds passively, I just know that most people are not a they're not going to get out on the way down and b stock market valuations at these levels are not conducive with positive returns over the next decade, meaning you're likely going to see negative returns. And so because of that fact and because of the fact that people won't react on the way down, if you're passive, just dial down your exposure right here, get down to 30 or 40% stocks and and stay with that the rest of your life. Well, or at least through this next market cycle, not necessarily the rest of your life, but index investing is really super long-term based and it does work over a very long period of time. But not every time in history is equal. near the crisis point of a fourth turning at the highest objective valuations we've ever seen in the history of the United States. This is where you need to dial it down if you're passive just so you can sit through it. >> Yeah. And I just want to note for folks there's a difference, use the word value. There's a difference between the word value and price. >> I'm not that worried objectively that we're stock market's trading at the highest price that it's ever traded at. That's going to happen over the span of time. Prices will go up. You know what what I think we're all concerned about is valuations [clears throat] is is the multiple of that price versus the expected earnings, right? I mean, those are very stretched to the upside here. And you guys have shown many times the the John Husman charts that show that that when the market pulls that much of tomorrow's valuation into today by increasing multiples is it creates a return drought going forward. It just makes sense, right? If you're going to pull tomorrow's prosperity into today, well, you're going to have less prosperity tomorrow, right? So, you know, on average, you could have a a very uh flat stretch of the market ahead of you, perhaps even a lost decade as as Husman's charts are are currently uh forecasting. Now, again, highly unlikely if that manifests that it's just going to be a flat market for the next decade. It means it's probably going to be, you know, up and down, a lot of volatility. And so to your point, Mike, if you're a passive investor, you know, A, you're not going to make that much over that that lost decade. Um, and B, if your emotions get the worst of you, you may end up getting, you know, booted out of the market during some of those downdrafts and actually losing, right, money, having negative returns. Now, a good active investor can actually make a lot of money in that type of market, right? And and you and many other people on this channel have recently, you know, who've appeared recently have talked about that. Hey, this may really be becoming the era where the pendulum swings back to active investing and we'll see if that's the case. But I think your warning is an important one, Mike, kind of concurrent with what I was saying with T- Bill and chill. You know, if if you've been enjoying the past couple years of getting paid to sit in safety and T bills and then whatever else year long has done pretty well over the past three years, right? Looks like we're going to have our third backtoback year of of 20% uh or close to 20% returns on the S&P. I I know what you're saying, Mike, is hey, don't expect that to be the norm going forward. Highly unlikely to be that, right? You're shaking your head now as I'm saying this. All right. Um John, I'll hand it back to you and let you wrap up here. Um you know, anything else you you want to say that maybe I haven't thought to ask you about. And also too, if you could just do, you know, the general like you you guys are in the business of talking to real people uh to help them grow, but most importantly protect their wealth because they have lives to live. >> And so, you know, in your interactions that you're having right now, you know, what are you hearing from folks? What are they most nervous about? What counsel do you find yourself offering most to people right now given the current market environment? >> Yeah, thank you, Adam. And just to to put a lay person's spin on what Mike talked about, have a plan to sell. One thing that I I really want to encourage folks to just embrace is the idea of it. There is going to be regret. You're going to have regret no matter what you do. Perfection is not a possible thing in this thing we call investing. And the the name of the game here is being okay with regret. And hopefully the form of regret that is the the gentle kind, not the big kind, like selling out too early in a in a in a very toppy. And to put put a point on it, Adam, not only are valuations stretched, they are categorically at all-time highs on the on the metrics that are most reliable with future predictive returns. That is a black and white categorical statement we can make without anybody's opinion affecting that statement. It's it's reality. Okay. So, uh, being okay with, you know, selling down from 80 to 40 or 30% and it not being the the absolute high, that's okay. The worst sin and the worst regret that one may have to deal with is not doing that and having a massive massive re reset in their financial security. One that literally may be forcing decisions like, hey, I thought I was going to retire two years from now. Now I got to work another seven or whatever. Um these are the things that are a consequence when you overlay a real life with um you know a financial portfolio and and real life goals. Um so so absolutely bring this back to your own situation. This time of year let me just in this environment we are having more conversations with people that uh their job situation is less certain. Um we're not seeing massive layoffs, but we're we're seeing enough that uh it's becoming more of a concern if not >> right now. I'll note this week we've seen we've seen many multi,000 layoffs from some of America's largest larger employers. >> Yep. Layoffs or or just the concern about layoffs. So, if you're if you're worried about your job security, even if even though you haven't been notified, you know, this is a great time to take a step back and look at your plan, look at your investment plan, because if you have a situation where there is a layoff, you know, there there is a totally different game plan for how do you how do you provide the paycheck that you will no longer be getting for whatever transitional or permanent period that might might entail. Um, we are entering the last two months of the year. It's always a good time to think about uh tax related moves. Um you know, many folks may have very large gains in some stocks or positions, precious metals for example, and they're worried about um realizing gains, but they may also be forgetting the fact that they have other positions in their portfolio that are losses. Uh and they can harvest those losses to offset those gains. you know, we, you know, for better, not worse. We don't have a lot of losses we can har har har har har har har har har har har har har har har har har har har har har har har har har har har har har har har har har har har har har har har har harvest this year in our client portfolios. We're very grateful for that. But still, if it if it comes time to to sell and and derisk, the worst sin is letting gains evaporate than paying some some gain capital gains taxes. So, you want to be very um you know, I think objective about where we are and bringing it back to your own situation and and this is the time of year to really start to focus in on some of that stuff. >> All right. Well, very well said, John. Thank you, gentlemen. So, just in wrapping up real quick, um first off folks, if you enjoy these monthly uh check-ins with the guys from New Harbor and want us to continue doing them, um please let us know by mentioning so in the comments below, but also by hitting that like button and clicking on the subscribe button below, as well as that little bell icon right next to it. A reminder, too, if you did not attend the Thoughtful Money Fall Conference uh and really wish you had, you can still buy the replay over at thoughtfulmoney.com/conference. And if you'd like to buy your ticket for the spring online conference at a 0% inflation rate, meaning the same price that we've offered it for this year, uh you know, the most recent conference we just did, um then you can do get that over at thoughtfulmoney.com/206. Uh to John's point there, um I think a lot of what you guys, you know, the takeaway from a lot of what you guys have have said today is um hey, you know, there there's nuance out there. Um, you know, this is a time where a lot of people are sitting on some gains, maybe they're sitting on some losses if things didn't go as well for them. The future looks, you know, kind of uncertain here. Um, for all the reasons that you mentioned about the floating risks out there, whether they're in the credit market, whether they're in the valuations, um, this is a really good time to check in with your personal financial advisor and, you know, really make sure that you're entering 2026, having done all the key end ofear things that you should do given your personal situation here in 2025, but also setting yourself up well for 2026 in a very hopefully intelligently riskmanaged way. So, if you've got a good financial adviser who can who's doing all those things for you, well, great. Don't mess with success. But if you don't have one or you'd like a second opinion uh from one that is skilled in those uh topics, um then consider talking to one of the financial adviserss that Thoughtful Money endorses. These are the firms you see with me on this channel week in week out. Perhaps you'd like to talk to John and Mike themselves directly there at New Harbor Financial. So to set up one of those discussions, just fill out the very short form at thoughtfulmoney.com. Only takes you a couple seconds to fill out the form. These consultations are totally free. There's no commitments involved. Uh it's just a service these firms offer to be as helpful to as many people as possible. John and Mike, great job as as always, my friends. I'm looking forward to seeing you next week to do our regular, you know, weekly market recaps, but um very much appreciate these uh much more in-depth monthly deep dives and looking forward to doing a lot more with you in the future. >> Thank you, Adam. Always fun. We'll see you next week. >> Thanks for having us. So happy to have this opportunity. And thanks to all your viewers for watching. See you soon. >> All right, boys. And everybody else, thanks so much for watching.
Is The Stock Market Now The Most Overvalued It's Ever Been? | New Harbor
Summary
Transcript
Not only are valuations stretched, they are categorically at all-time highs on the on the metrics that are most reliable with future predictive returns. That is a black and white categorical statement we can make without anybody's opinion affecting that statement. It's it's reality. Okay. So, uh being okay with, you know, selling down from 80 to 40 or 30% and it not being the the absolute high, that's okay. The worst sin and the worst regret that one may have to deal with is not doing that and having a massive massive re reset in their financial security. One that literally may be forcing decisions like hey I thought I was going to retire two years from now I got to work another seven. [music] Welcome to thoughtful money. I'm Thoughtful Money founder and your host, Adam Tagert. Welcoming you here for another monthly review with the team at New Harbor, one of the endorsed financial advisory firms by Thoughtful Money. I'm joined as usual by lead partners John Lodra and Mike Preston. Hey guys, how you doing today? >> Hi, Adam. Great to be with you. Thanks for having us. >> Hello, Adam. Good to see you again. >> Thanks, Mike. And hey, you know, thanks again particularly to you, Mike, and Justin there at New Harbor for hanging with us all day long at the Alpha Money Fall online Conference a week ago. Uh it was a great event, but but great in part as well, you guys making yourselves available there and answering folks's questions and the live chat and all that. Um look, lots even happened since that conference. Um now, the day we're recording here, um and again, we usually have you guys on every week. Usually you're reacting to somebody's video and we talk a little bit about what the markets have done over the past week. Um, but we have started this new uh routine with you guys. I think we've been doing it three or four months now where we have you on and you give your own hour in terms of um you know your full outlook and any changes you're making your portfolio and uh what you think might lie in the road ahead. So, lots to uh react to here. Um one thing we're not going to be able to react to too much um is the Fed meeting, this [clears throat] week's Fed meeting. um because the uh news uh the actual official release from the FOMC is going to come out about an hour after we finish recording here. So, we'll find that out. But I really don't think it's going to be too much of a surprise uh this week. Um it seems very clear that the Fed is going to cut by 25 basis points. They will likely announce the end of QT. Um if they do anything terribly different than either of those two things, then yeah, that probably will surprise the market. And if so, we'll talk about it with you guys next week. Um, that being said, John, why don't we start with you? Love to hear your any other thoughts you might have about uh, you know, this week's Fed announcement, but more importantly, I know you had pulled some charts together and um, you charts of the Fed balance sheet and a few other things going on, but but but it looks like because the Fed is has pivoted and is now going back to cutting and maybe ending QT. Um, it's not because it's mission accomplished, per se. It's because, hey, there's some real concerns going on. Now, the Fed has talked about weakness in the jobs market, but I think you're beginning to see some initial signs of stress in the credit markets, which of course we know that's that's where really all the chips uh are that that that's where the big money lies. So, what are you seeing right now? >> Yeah, thank you, Adam. And we will indeed by the time this video airs, we will indeed have the Fed announcement and post announcement press conference. So we'll learn more about their current thinking. But it's uh all but certain at least the market thinks so that the Fed will drop uh 25 basis points, a quarter% on the short-term Federal Federal funds reserve rate. Um and again, this this affects very short-term rates. It doesn't affect uh in and of itself things like mortgage rates and things like that. uh that's more as relates to QT and we'll talk about that in a second. Um but the market is all but certain that the the Fed will drop a quarter percent today. Um there has been some talk about the Fed starting to uh uh reach a point to to end the quantitative tightening program that they started well restarted I guess back in 2023 I guess it was. And just to put that, you know, you you talked about, you know, the whole idea of mission accomplice. Let's look at a picture here to kind of put that in perspective because um I think it's really just eye popping uh where we've come from and where we are. This is a chart. It shows the total assets on the Federal Reserve uh balance sheet. And basically, just a reminder, when the Fed in the wake of uh 0809 financial crisis, they entered several rounds of quantitative easing QE1 23. And basically what quantitative easing involves is the Fed printing money literally out of thin air paper dollars uh base money supply to go out and buy bonds treasury bonds mortgage securities uh and those bonds end up on the Fed balance sheet. So in 100 years nearly 100 years of the Fed's existence uh prior to the GFC they amassed a balance sheet u of about 8 8 900 billion and then you can see what's happened since then right we've had QE1 QE 2 QE 3 and then QE4 you might call it in the wake of COVID here we are today in October 2025 the Fed's balance sheet is still just a tad bit below $7 trillion again I'll remind folks before the great financial crisis, it wasn't even a trillion dollars. Not even close. Um, so and and back around here, I forget the actual date, but it was around in 2010. I can remember it like yesterday, um, Ben Bernani made a rare appearance on 60 Minutes. At the time, Fed chairs didn't do these kinds of things. They didn't go on 60 Minutes and, you know, give up the ghost in terms of what their thoughts were. He basically, paraphrase, said, "Hey, these are temporary measures. We're going to be able to reverse these measures." you know, um, not too far down the road once the economy stabilizes. And here we are today and look, we haven't reversed those measures. We've had, you know, some normalization in the balance sheet. And and what this quantitative tightening is is basically the Fed hasn't sold these bonds. They've just as these bonds have matured, they simply haven't reinvested the proceeds. So they've, you know, taken liquidity out of the system in that in that way. But we still are um way way higher than we ever were prior to the GFC and we're at all-time highs in the stock market. We have, you know, still relatively healthy economy. Um I know there's you emerging cracks in in employment and things like that, but to think, you know, if that if if anybody was asked back back here, would we still be at nearly 7 trillion dollars and talking about an end of QT? um I think people would have lied through their teeth saying that yeah that that's going to happen. So just a dramatic thing. And why is this happening? Uh let's take a look at some some other uh data points. We're starting to see some stress in the system. This is a chart um that shows some some key spreads on some key interest rates. And I don't want to get into the weeds here. These are kind of technical things. But the the one I want to highlight here is what's called this secured overnight financing rate. This is the rate that uh banks can borrow uh collateralized by their treasury holdings. And typically when that starts to blow out relative to this this thing we call interest on overnight reserves, that's a sign of some liquidity crunches, some balance sheet concerns, some credit concerns, and we've seen in recent weeks um some some, you know, defaults and and stresses with some of the subprime auto lenders and other kind of non-bank financial institutions. Um, I think the word cockroaches has been used. Uh, Jamie Diamond talked about, you know, where there are some cockroaches, there probably are more. We're starting to see that in in some of the data. And all these interest rate spreads are starting to spike up here pretty notably at a time when the red line is the um the total amount of reserves on uh, you know, in the system. Those have pulled back. These are overnight reserves to three million $3 trillion. That's on the on the the x-axis. So it's evident that whatever liquidity has been drained from the system that's starting to exacerbate some fragilityities in the system and um you know so I think there's a bit of a a credit panicking here and I'll just sh finalize with this chart. This is this is the um what's called the overnight repurchase activity. This is basically uh when the Fed when the Fed right here uh stopped temporarily their their first round of quantitative tightening. It was in respon I'm sorry right here. It was in in response to this the repo market blowing out and that's ultimately what led to just before the co no linkage there but you know so much for their attempts to tighten the the balance sheet at that point. The the the repo market freaked out in 2019 quietly Fed had to come and save it and we're starting to see some murmurss there. I don't want to over exaggerate what we're seeing here because oftentimes there is some activity near month's end. Uh but it connects some dots as to why the Fed is suddenly becoming u uh much more dovish in terms of not just rate drops but but also ending QT. We'll learn more when the Fed comes out later today, but uh some some very >> emerging kind of concerning things that that we want to be watching very closely. >> Okay. Um, Mike, I want to connect this with um uh a few things that that we were talking about before we turn on the camera here. Um, so u I think you've got a stat that says that um that we've hit a point now where the top 10 companies in the S&P 500 uh now make up 40% of the indices value. Right? So, um, the the day we're talking, the stock market is at a new all-time high. Um, we are less than a 100 points away from the big S&P 7000 milestone. So, [clears throat] you know, John is is pointing rightly to, you know, some signs of stress, some signs of concern. Um, but the market just does not seem to care, right? Um so uh I think uh I think just yesterday what Nvidia became the world's first $5 trillion company. I think Microsoft just just um passed 4 trillion. Um as I like to say yeah now uh if you take Nvidia, Microsoft and Thoughtful Money combined those three companies are worth $9 trillion. [laughter] >> Thoughtful money being the biggest one out of them. Right. So um uh but but yeah, so just react to the contrast there between what John is noting at is hey you know that the Fed is kind of being forced to pivot here by weakness in the job market and maybe some other things. We're seeing some signs of stress looking at uh you know even a lot of the Fed's own metrics there that John showed. Um we've got some cockroaches that people are starting to notice. Square that with stocks at all-time highs and nobody really having any worries on Wall Street, it seems. >> I Adam, I think I think it's going to sound like a simple answer, but it's all about liquidity. It's just been liquidity and nothing but liquidity for many years. And some of your guests talk about liquidity in particular. I can't remember the name of the guest that that does that so so often on your on your channel, but >> Michael How. >> Exactly. Yeah. He talks about it and it's been that way for many years. So, it's no surprise that things that are really exaggerated get even more exaggerated. And you're right, the top 10 companies are 40% of the S&P. And so, and and out of those top 10, five of them are reporting in the next two days. You know, we got um Meta, Microsoft, Google, Amazon, and Apple. Couple of them tonight. Uh I think it might be Meta and Microsoft tonight. Tomorrow, Google, Amazon, Apple, but doesn't matter exactly which day. It's in the next two days. these these five behemoths, you know, and it it is just the the the the huge gorilla, you know, as we as we often say. Another one of your guests calls um I can't remember the name of that guest either, but it's like the the huge 800 lb gorilla is the liquidity and these big companies that are in this market. And so it doesn't make sense because we are seeing some signs of stress you know the u the unemployment numbers the which are by the way good for small and midcap companies and so maybe that's why they've been doing a little bit better but the Fed is probably behind the curve. A number of people a number of your guests have said that they're probably behind the curve. We'll see. They'll probably panic when we get a big drop in the market. Now what's going to cause a drop in the market? Who knows? But this market is dangerous because it's so thin. If you take a look at Nvidia, which you just said is the first $5 trillion company. It's just been straight up the last couple days, including today, right? And so the biggest companies are moving the most. Microsoft almost hit a new all-time high and they're reporting, I think, tonight. And they that might happen on the earnings report. So let's see what happens with the earnings reports. But other things like financials are are lagging a little bit the last few weeks here. equal weighted uh S&P is lagging a little bit. Russell 2000's lagging a little bit in the very short term. All of that can change very quickly, but if you just look at the charts over the last few weeks, you'll see that on these big updates, the NASDAQ's up big, the S&P's up big, equal weighted S&P is not participating, Russell 2000 is not participating as much. Now, does that have us really worried? Not too worried yet. Take a look. Let me just mention one one or two things about our our own system, our own indicators. Our own indicators are mixed and whippy is probably the best way to put it with a slight lean to the bullish side. A number of our indicators look at relative strength readings, short-term moving averages, um even chart patterns, things like that. Lean's a little bit bullish. That's why we don't have index puts on or index hedges on our model right now. That could change, but that's how it looks right now. But the real short-term stuff is whippy and mixed. You know, like I said, financials, etc. are are are lagging a little bit in the in the last couple weeks. And so, we have to see what happens here. We're knocking on the door of 7,000 S&P, as you say. And if we get there, we could catapult higher and everything could start participating. And that would be the kind of everything all-in parabolic meltup type moment. I think we're already in that type of blowoff top moment, but it could get even more exaggerated. And if that happens, if we're lucky enough to see that, we will take action probably selling into that rally a little bit of the time versus getting more committed. So, we're at risk here now of this vertical blowoff. I wouldn't bet on it and I wouldn't trade from this perspective. But with a mixed bag of indicators, if we get if we break through some of these resistance levels and it's an everyone in the pool type moment, it could give us the the the signals we're looking for. Like I think I've mentioned before, if you see something like 500 S&P points up in a couple weeks, you know, then you know you're getting close. >> Okay. I was going to ask you to repeat that for folks. So, I'm glad you did. Um, [clears throat] all right. So, in the interim, and I hate to use this analogy, but the music is still playing and to a certain extent, you guys are still on the dance floor. Um, you know, you've got what 40 45% equity exposure in your portfolio. >> Yeah, 45% if you don't count gold mining stocks, which we don't really that's that's separate, but 45% equity. Yes. >> Okay. All right. Um, I'll get in a moment to um any potential portfolio changes you've made recently, but just to kind of give the punchline up front, are you making any big changes right now or you still sort of executing on the allocations you've largely had of late? >> Uh, we're not making any big changes. Over the last couple weeks, our indicators were leaning more bearish. There's not nothing's been really definitive, but in the last couple weeks before this week, indicators were leaning more bearish. So, we wrote some calls, sold some short calls on some of our positions, you know, like emerging markets and and a few others. And selling calls brings in some cash and it's a and it's a slight or partial hedge. If we saw further deterioration, we would either start taking stops in our underlying positions or add index put protection. But that didn't happen. We've now shift, as I said, more towards the bullish side without conviction and confirmation. So, we covered one of those uh we we well actually was on the gold miners. We covered one of the uh short options. We did not add any more here because we're leaning bullish. We're not adding index puts because we're leaning bullish. So, the only thing we really did is we added a few short options. Uh a few weeks ago, I think we already mentioned this. We we we added oil service stocks and those have started to take off in the last couple weeks which is which has been nice to see but that's not new. So really we're we're sitting here at 45%. I think they answer another part of your question. I don't really see us going up from there even if we get this melt up. It's more like um we're happy with the participation we have in other areas including long-term bonds which are looking better uh and go gold and gold mining stocks and silver which have obviously been a really great performer this year. It's more like we would sell a little bit into some kind of melt up or if we get the opposite a meltdown we'd probably be taking stops and reducing from there. So we're probably roughly at our maximum equity exposure here almost no matter what happens. Okay, John, I'm going to come back to you just a minute, but Mike, let's stick with you for a bit. Um, because I know one of the most frequent questions you guys must be getting right now because I'm getting it a lot is all right, gold, is the top in, you know, was is the party over? Um, and probably paired with that is is this going to be a repeat of like what we saw back in when was it 2012? um when stocks uh gold and silver prices peaked and then you know basically kind of gave up most of their gains and then were dead money for a decade and that was a long base wasn't it? We've often shared the long cup and handle chart on the monthly chart of gold. It did peak in 2011. It took almost 10 years to come back and once it did come back and break out from that level uh at almost $2,000 an ounce, it had a quick doubling over what the less than the next year. So gold has been on a big tear. And while nobody knows the future, I think this time is different than 2011. Back then they had gold buying parties in in people's homes and there was all kinds of advertisements for cash for gold and that type of thing. And I just think we're further along in this debasement trade story. We're further along in history in the cycle of things and we're entering the last 3 to 5 years of a fourth turning. You know, all of which tell me that this time is different. And again, nobody can know for sure, but I believe it's different this time. Famous last words, right? Write those down. >> But having said all of that, the trade got extremely overheated. And we can just tell from the psychology of it. A number of clients and and uh and and and non-clients that we talked to wanted to be allin in that market in silver and gold and miners. And there was just a lot of overconfidence. And we were seeing just day after day after day straight up. And so we were warning people to think about selling a little bit on the way up because psychologically it becomes a trap. These days we're talking to people over the last few weeks about this psychological trap of being all in something. Not everyone is all in in our model. We're only about 12 and a half% between miners and silver monetary metals. But some people are 50 80 100% in and they just once you're all in, it's hard to get out at all. So we've been coaching people to sell a little bit. I had a call today with somebody like that that was nearly, you know, well over 50% in metals and we were talking about how it makes sense to sell 10%. Right here, sell 10% right here and use that money in your life. A lot of times people have trouble selling anything with gold and silver because of that all-in viewpoint and because they don't know what to do with the money. I would say nearly 100% of the time when I talk to people about selling into a rally, which is how you want to do it, they always say, "Well, what am I going to do with the money?" Because they don't believe in dollars. And they just they can't get unstuck with that. So, I found it's a lot easier to talk to people about doing real things with the money, like take a trip, do a home improvement construction project, help the kids, whatever. But I find that it helps people take the money, get permission to do it, and then do something interesting or fun with it in their real life. And so that's kind of the whole psychology of it. The math of it is this. And if I could just share a chart or two, we can talk about the math or what what what happened in the charts. [snorts] All right, so here's silver. This is going to be the silver ETF coming up. We walked along the outside of the Ballinger band. We had a big breakout back here at around 32 to 33 on uh this ETF which was 35 silver. We talked about that triple top numerous times on this program and since then we've walked up the next four months and we w this is a big big move and so this got really overheated. Now look at this pullback. This pullback is nearly 20%. It's like 18% in silver. >> Silver. >> Yeah, that that's painful if you bought right there at 49.25. >> It's painful. But let me back out to the weekly chart. Now, here's the weekly chart and here's the triple top breakout that I just mentioned. All we did is came back to the outside of the weekly bowlinger bands. >> I've talked a little bit about the fiveweek uh EMA or exponential moving average. This happens to be the 21, but um Span Henrik talks a lot about the five, which is why we were bringing up here. He was on your program a few weeks ago talking about it. And we basically came down to the fiveweek moving average and shot through it. But if you take a look here, we're right back to it. So this pullback of about 18% was mirrored roughly in gold as well. Take a look at gold on the ETF. Went from 403 to 360 something. Pretty darn close to 20%. And if you look at GDX, it had a 20% pullback. This is painful for people. You know, as as nice as this felt, this pullback is fast, right? And we've already had a pretty good bounce. So, let me go to the daily. Change this daily back to the 21 period moving average. We can take a look. >> Before you get to the bounce, I I just want to I just want to take a moment to note that while it wasn't super popular at the time, um because everybody was loving the the daily great gains um and saying, "No, you guys don't get it. This is the great repricing of gold and silver. It's underway. It's not going to stop." Um, we were counseling that people consider hedging in some way, shape, or form, whether it was selling a little bit, as you said earlier, Mike, whether it was just putting on some downward hedges. Um, and and this is exactly why. Now, some people might say, well, look, I'm not going to sell my gold and silver, and I think it's going to continue to go higher from here in the mid to long run. And I agree with them. Um, and yeah, if you want to, you could just ride that down and then hopefully ride it back up. But of course, we don't we don't know how long it's going to take to recover. Hopefully, it won't be that long, but it it it still could go lower and it could could stay down longer than we'd all like. We just don't know yet. But also too, if you put some some hedges in up there in the stratosphere before this thing corrected, well, you know, now you're sitting on some gains on those hedges and you've got some dry capital to to start dollar cost averaging back in if you want to increase your exposure. So, I just want to now that this has happened, I just want to really explain to people why we were being so persistent in saying, "Hey, you really should think about hedging." >> Yeah. Well, that is the big question, Adam, is is was this the top? I don't think so. But it was it was very overheated. And we were hedging on the way up. And I'll be honest, we were early. We were early. We had some short calls down here at 63. I'll put a line there. And then those got buried. Then we had this crazy blowoff all the way up here. We had a second layer of calls at 85. So, we had these two about half of this hedge down at 63, the other half up here. Well, we got this pullback and guess what? The first thing we did is we moved this hedge up and we got some premium for doing this. So, these are not the called returns, but we moved the 63 up to 67, I believe. So, that first one is gone. We were able to move that hedge up. That one is in the money, but you have to add in accumulated credits to understand what that sale price would be. Bottom line is we got a really good, really robust hedge on that half down here. And when this pullback happened, we covered this 85 hedge for nearly a full profit, which adds cash to the account and hedges the position. So now we have half hedge down at here, and we've got full participation if we get a bounce right back up towards the top. This is a pretty steep downtrend. My guess is that we'll probably chop around here for a while, ultimately break base out, and break higher again. far from guaranteed. Why? Which is why we always talk about be careful being all in in anything. But I do believe gold and silver are signaling that this is the real deal in terms of getting closer to the end of this whole debasement story. Central banks haven't stopped buying gold um and and probably won't. And I really do believe gold and silver will go higher. We don't have to have it be that way. If we're wrong and that was the top, well, we've got to pretty well hedge and we'll start taking stops on the position at some point. So, but right now, that's how we're managing it. And I can't stress enough, sell a little bit into an up market. Um, and you can really just tell by your your level of discomfort. If you're having a lot of discomfort over this, you're probably a little heavy. Talk to us. We can help you get a little bit unstuck. You know, when John when when you go to John a little bit later, he he may want to share some of the charts about how extreme things were from on a math sense. In a math sense, I just show shared some thoughts from a psychological and a chart perspective. The trade was way overheated. Is it done? Probably not, but we never know for sure, which is why we have our hedges. >> Okay. And Mike, um, so you guys have been doing some pretty proactive hedging here as you just walked us through. Your core positions, are they different at all today than where they were a couple weeks ago, or are they largely unchanged in in your actions been around the hedges? >> The core positions and our other sectors you're talking about, I think, right? >> No, I'm talking I'm talking about precious metals and precious metals miners. >> Yeah. Our core position isn't different. And our core position has been roughly 10% model weight miners and 2.5% silver. I didn't talk about our silver hedging there, but we did something similar in silver. As it went vertical, we sold calls. It went even further and went into the money and then had the big pullback. On the big pullback, we moved our hedges up so that our floor is higher. So, that part hasn't changed. We did notice and we don't know if it's whippiness yet. As I mentioned, our indicators are whippy, but relative strength has now favored gold bullion versus gold miners. It has been gold miners for the longest time. And it's simple. If you just look at the monthly or daily or the monthly uh uh daily, weekly or monthly performance of miners versus bullion or vice versa, you can just chart these things out and it's now flipped back in favor of bullion. It's impossible to tell whether that's a whippy indicator that will reverse quickly or if that's durable. So, that's something we're keeping our eye on. If that sticks, we'll probably start to increase our bull our bullion position relative to the mining position. But, uh, no, our core we're dancing around the core here really is our core position hasn't changed. >> Okay. And that's what I wanted folks to take away from it wasn't like because of the the recent action and the recent correction. It's not like you materially sold out your position or anything like that. >> No. No. That would happen on a breakdown hopefully from much higher levels. hopefully uh a long time down the road. It's it's tempting to say, "Well, shoot, this was a moonshot. It's all done for gold and silver." But real big bull markets in metals and in frankly any sector will try to shake you out at least once. And I've said before that in real big bull markets, you'll see a double off the bottom or double off the base and then a double again. Silver miners, gold miners, they have a little more than doubled in general off their base. And now we have this big pullback. Is this really the first pullback to throw people off the bull? I think so. Though we're not betting on it, but I think that's likely. And I think we might likely see another doubling from these levels in some of these things. I don't know if we'll see that in the majors, but in some of the smaller companies and the silver miners, I think they could easily double again from here. So again, this is not a recommendation to go in. It's just talk to us about your individual situation if you'd like. Um, I I just don't think it's done yet. But if it is done, that's the thing. This is what a professional does. They have a plan in place for what to do. Our signals will continue to give us negative signals. If that's the case, we would probably start to to ease out of the position. You know, maybe with that half that we have hedged, but right now the jury's out. Let's see if we get a further bounce from here. And I'm thinking that we might. >> All right. Um, well, now John, let's come over to you. Thanks for being patient. Um, John mentioned some of the charts you have which, you know, I think build on this conversation he and I were just having in terms of the kind of extremes that we were at and then what tends to happen after these extremes. >> Yeah, I think it would be important to to share some of these only because um these are inherently emotional decisions and we always bring things back to the data to help us kind of ground ourselves. So, let me share a couple charts. They actually were pulled together by other folks, but they resemble some of the internal dashboards we look at that are just frankly more friendly to share for your audience here than than our dashboard. Uh our dashboard is a little bit uh wonky for our internal purposes. But this is a uh a chart that looks at both gold and silver. And this is uh as of two weeks ago, essentially roughly about two weeks ago, right when both gold and silver were reaching their recent peaks. And you know, for example, uh we looked at gold had had only been up nine weeks in a row a handful of times in history, uh five times essentially, including this most recent instance. Never before in this long history going back to the 70s had gold been up 10 weeks in a row. And you know, you can see the the follow-through performance in these instances. you know, almost every very low probability of follow-through positive performance going out a day to two months later. In fact, not only not positive, but there's some pretty big historical uh precedent for some big pullbacks. Uh not like what we've not unlike what we've seen. So, we we were very much as bullish as we have been and still remain longer term precious metals. We we thought there was a very high probability of a pullback. In fact, that's happened and that's that's why we had the hedges we had in place. Same thing with silver. You can see this is a different look but it's basically the relative strength that got so extreme uh exceeding 86 and just a number of extreme relative strength that again almost every time in the very small handful of instances in history this has happened the follow through for you know weeks to a year later were almost categorically negative. Contrast that with this is just from yesterday. Uh and it shows you know in similar historical instances where gold or silver has pulled back as as massively and quickly as it has this time almost without fail the follow through anywhere from a day to a couple months later in case of gold and a day to a year later. More often than not the followrough has been positive. This is not a guarantee. Every time is different and we're not huge fans of averages, but these charts just show in in a I think a picture the extremity that we had reached and the very high probability that that translates into a pullback. And now that we've had that pullback, the coast is clearer. It's not a perfectly convincing case that we go higher here. Mike mentioned and this is probably a pretty good base case that we may uh gyate sideways here a bit. uh you know might be a little bit uh volatile and and um we're happy to have some hedges still in place even though we used this pullback to modestly increase our position after effectively having sold some in that rally by by virtue of the hedges we had. So um just wanted to add that that context to the whole dilemma of how much to sell, when to sell, when to be patient and and step to the sidelines. And that's uh every bit of conversation that's still relevant for a lot of people here today, not just with precious metals, but we talked about Nvidia and some of these high-flying stocks. These are all the same kinds of discussion. What is your position size? What are the probabilities that you know uh we see continued um trajectory that we've seen? I mean, Nvidia probably is going higher at some point, but is going to keep the same pace of of ascension that we've seen recently. >> All right, M. John, thanks so much and um appreciate you guys both going so deep into um the precious metals there because that's been such an acute topic right now that folks have been looking for some insight on. So I think you guys did a great job. John John to um another asset class that um is sort of on the move right now and and again one that folks kind of are asking questions about is bonds. Um, so we are now seeing the Fed, you know, going into a a cutting regime. And so if you've been sitting there in the T-Bill and chill trade, you're starting to see your TBO yields start to go down. And now we have just recently begun to see the the 10-year uh fall below 4%. Um, and looking like it's potentially going to keep going down for at least some period of time. Um what are your thoughts there on bonds right now? >> Yeah, so let's share a chart of the 10-year yield. This is a chart of the 10-year Treasury yield. Uh these numbers are off a decimal place. So for example, right now we're at 3.99 uh9 on the 10-year yield. Um I'm sure a lot of this it's been a pretty boring day today in the bond markets because all eyes are and ears are waiting for the Fed. But there is an unmistakable downtrend in yields uh since about uh you know May um in in these bond yields. We had this huge panic in the bond market back on liberation day it seems like uh years ago but it was just a handful of months ago. That was a huge scare in the bond market and it caused a lot of policy changes and and uh change in tone from the administration as to what their policies would be. But we've seen a pretty consistent uh and and um trending decline in yields and and right now the path of least resistance is prior for yields to continue to to drip lower especially if for example the Fed comes out more forcefully and talks about the end of quantitative tightening. Essentially what that does is it basically creates um less supply in in in the bond market and and you know all else being equal less supply relative to the fixed demand you're going to see those those those those yields come down and prices go up. That's the likely scenario. Um if if we look out a little further to longer term yields um just pull up the 30-year. This is the 30-year yield. We we got as high as 5.15 back in in May. The 30-year yields are now down at 40 4.566. Um so pretty dramatic, but again the path of least resistance is probably lower on yields. My I could we could easily see, you know, 30-year yields coming down to this prior recent low right around here testing around the 4.3 4.4 level. Um that would be supportive of things like, you know, we've talked about TLT. It's a ETF that holds longerterm treasuries. Um, this is a chart of that. This is a daily chart. You know, we had and just to zoom out a bit here. This is what that it's been a horrible place to be for much of the past bunch of years. I mean, when 10-year yields were below half a percent in 2020, that's as close as you get to a bubble in the bond market as a rampant bubble you might call in the stock market. That was a horrible time to be an owner of bonds because there was only one way for yields to go go and that was up and bond values down. What we've seen here is a painful consolidation, but one that probably is is is is either going to be rangebound or dripping higher. We think um probably near near-term target on things like TLT, and this is not a recommendation. Happy to have an individual conversation with any any folks that would like to call us. Um we think it you know probably a path of least resistance is to see TLT come back and and test out this 100 level here. And you know if you look at a shorter term chart you know a lot of the technicals we just had a uh so-called golden cross 50-day moving average came above the 200 day moving average. You know it's been a quite a nice orderly rise in these bond values as interest rates have have come down. So, we're not we're not hugely into long-term bond. It's still even with the Fed's um cutting campaign, there's we're still at a target rate today uh at four to four and a quarter on short-term treasuries. That's almost certainly going to get lowered to 3.75 to 4%. That's the target range. Uh but even still, uh if you look at um the belly of the curve, 2 3 five, you know, month uh treasuries, those are I'm I'm sorry, year treasuries, those are down about 3.6, I think. So even though the Fed has started cutting, it's not like the tea bill and chill trade is over because we do think uh there is good sound reasons to still have a a a bucket of very liquid, very safe um things like treasury bills. We have about 22% in our tactical model right now. And that just simply represents for us optionality in the form of being able to convert that into other things be it stocks or commodities or whatever when uh conditions are more permissive and and inviting. So, >> so John, if somebody was was doing T- billill and shield and really just rolling over really short-term T- billills, say like, you know, 30 60-day T bills, um, or I guess four week or 8w week T bills, um, [clears throat] you know, not personal financial advice, but would you would you encourage them to consider maybe perhaps now maybe buying some one-year, two-year uh, treasuries ju just to, you know, if if you're really liking that kind of 4% range, sure, why not lock it in for the next two years as it looks like the the shorter end of the curve um is going to go downwards as the Fed continues to cut. >> Really depends on uh you know, and you you've prefaced this, this is not financial advice because that's actually a real personal conversation based upon the objective of a client. You know, we we don't own we're not heavily b invested in bonds. We own about 5% in 3 to sevenyear treasuries and that belly of the curve has actually rallied a bit because those yields have come off. We we own about 7 and a half% long-term. But um if if one is looking to uh use a bond portfolio to lock in like um you know known income and and maturities to to for example pay for uh a kid's college education, you know, tuition bills coming due. That's absolutely a valid thing to be thinking of. But I I can't I don't want to generalize. I don't think I can say in general because I I do think um you know that uh you know T- bills still are a fine place to be and I I'd rather have the short-term liquidity to be able to deploy into a stock market selloff for example or a further pullback into precious metals or commodities that I think is uh I I would not encourage a wholesale um kind of feeling like you got to go go out in the curve. you know, some degree of that is certainly, you know, uh, acceptable, but, um, the the the belly of the curve, you know, the two, three, five years, those aren't I wouldn't call them cheap right now. They're not, you know, dangerous, but it's not like this compelling slam the table, you know, go out and do that because you're fearful of short-term rates um, coming down. In fact, you know, uh, we could see the Fed's, you know, cutting campaign, you know, rather shortlived depending on how things play out. we get a reignition of inflation here, um I think they're going to have to go on pause, right? And we we just can't forecast that. We'll have to see how that how that plays out. >> Okay. Well, my my my short-term um or shorthand uh guidance to folks would be if you're one of the many folks that have been asking, hey, um I'm really heavily into Bill and Chill and I've been loving it, but I I'm now concerned because it's going away. You know, shorthand answer I think from John is is then talk to your adviser. Um, you know, there may be multiple different strategies that that uh are worth considering here. There's no one-izefits-all solution to that question. Um, all right. Well, look, um, as we as we start to wrap up here, u, Mike, I'll come back to you briefly. Um, you know, I think you mentioned a couple of other sector. I mean, obviously tech is doing amazing. Um, I think you mentioned financials had been looking a little bit weak of late. um as you as you look out at the different sectors that you guys are just watching, you know, monitoring on a on a daily basis there at New Harbor, um what ones are looking, you know, particularly interesting to you and what ones are maybe looking particularly worrisome? >> So, Adam, we're still in the strongest, we're in the strongest sectors. That's what we have to do with the relative strength analysis that we use. You know, the first thing we're looking at is what are the signals of the market? The market signals are tilting bullish here, but not decidedly so. So, we're still, you know, we're still 45% in in equities, as I mentioned. We want to populate that with the strongest sectors. We got 15% of that as an international a mix of broad international and emerging markets. Emerging markets have started to perk up quite a bit by the way, particularly with u with China kicking in. So, if you look at the eyeshares emerging market, ticker symbol EM is 30% China. So, it's certainly gotten it certainly has received some help on some of the latest developments and trade deal news there. But in terms of the in general the domestic sectors that we are in that are the strongest, it's utilities, technology, industrials, financials. Now, we're in financials and I just admitted that it's weakening a little bit. So, we have to use our discretion to decide when to cut something. just because it starts to falter a little bit. We don't really know if that's a signal that says do something or give it a little more time, a little more rope. That's the hardest thing about being a personal investor or a professional. Financials is definitely the weakest out of our group and we're going to wait and see what happens here. Um the the ETF yesterday was a little bit below the 50-day moving average. Haven't looked at it today, but there's hedges in place on these things on some of them, and they're they're only partial hedges. Covered calls are only partial hedges. puts are more robust hedges, but they cost a lot of money. We prefer covered calls because they bring in money versus cost money, >> right? >> So, those are what we're in. Well, actually, we and I forgot to mention that we just added the oil service stocks as a sector a couple weeks ago and that has broken higher in the last week. So, that's nice because that that's been a lagard for a long time. Oil oil and energy has been a lagard. Healthc care has been a lagard. A few weeks ago, we started to see energy start to tick up and biotech start to tick up. So, we added oil service, but I but I have to also admit that healthcare and biotech is on our watch list and we have not added it to our model yet. So, if we keep staying bullish on our signals, then we'll we'll keep being in the strongest sectors. If the market rolls over, we'll cut the weakest sectors one by one. It's how it works with us. We're always looking for a shift. But technology out of that whole group that I just mentioned is the strongest almost worryingly so. It's been so relentless. But you know, we're in we're in an ETF in technology. So yeah, tech, industrials, utilities, oil service, and uh financials right now with financials being the weakest. >> Okay. And and let me just ask you what if um not saying that this is going to happen, but just let's say there is a reversal in tech. I know it seems so hard to consider right now because it's been the lead dog that has pulled the sled for so long now. Um but so much market value is now concentrated in it. Right. We you you mentioned earlier that the top 10 companies in the S&P 500 now make up 40% of the interest. The vast majority of that market cap from those top 10 companies are in tech and a lot of that's in the AI trade. Um so if something were to compromise that what do you think the knock-on effect would be on the overall markets? >> I don't very bad. [laughter] I don't really see any way that that would not be very bad for the market. There's no way for the market to do well if those were to come down. You know, again, I I I I'm speculating here. I think we're going to get a squeeze higher and it's probably going to continue to be concentrated in these names. It's it's it's eye popping to see, you know, Nvidia chart uh Nvidia market cap 5 trillion. If these things come down hard, the whole market's going to come down. So, it's more likely we get a squeeze higher and maybe some of the lagards actually start to participate as well. Watch for the S&P Equalweight. Like take a look at the ETF RSP for instance, or the Russell 2000, ticker symbol IWM. Keep your eyes on if they start to to break out of their ranges and decidedly move higher. Then frankly, everything's going higher, including those names you just mentioned. But it's kind of a worrying thing because I'm even listening to myself talk here. It's just like a bubble, right? I'm talking about a bubble. So, you don't want to see the tech falter here because because that would be bad. >> Yeah. Well, that's interesting. So, you know, um I mean that's the huge debate. Is it in a bubble? Is it not? Um many big names including Sam Alman himself there at OpenAI have have said of late, yeah, it's in a bubble. And I've even heard it said by by folks in the space, it's in a bubble, but it's in it's in a rational bubble. Um and I don't really know what a rational bubble is to me. That sounds like mental gymnastics just trying to justify it all. But but I think I think what the spirit of that is just hey these are the way that these these new technologies get put out there in the world is you have this massive capex race to be you know the winners in the infrastructure of it and then you realize you've overbuilt um and there's some cleansing and then then things recover from there. But you kind of kind you kind of have to do it this way is sort of how they're saying it, right? true or not, these guys are pursuing it, you know, at at uh all hands on deck. And if it does prove to be a bubble, and Mike, you're right that there is some sort of, you know, blowoff top that sucks up everything into it. I mean, you you just you just have to to in my opinion to be an investor in this market, you have to have a plan for if and when the rose comes off to AI trade. A and the potential collateral damage that could do to your point, Mike, just given how big of a percent of the market it is. Who knows if it's going to happen? Who knows when? Could happen tomorrow. Could happen three years from now. But um I feel like if you're going to be long this market in any material way, you at least have to have a plan in place for what you're going to do if that thing starts reversing. >> Absolutely. And I find that people have a very hard time psychologically selling on the way down. But that gets that goes to having a plan. You might say if we get a further melt up here, I'm going to start selling into that rally. That's a good plan. If we are wrong and and we fall right from here and and break technical levels, start to sell and take some stops. That's a plan and we happen to be relatively semi-permanently underweighted equities versus the industry norm here at 45%. Well, that's because we know we're not perfect. And for the passive investors out there, because I know you probably have a lot of viewers that are passive investors, whether you're 60 or 80 or 100% in index funds passively, I just know that most people are not a they're not going to get out on the way down and b stock market valuations at these levels are not conducive with positive returns over the next decade, meaning you're likely going to see negative returns. And so because of that fact and because of the fact that people won't react on the way down, if you're passive, just dial down your exposure right here, get down to 30 or 40% stocks and and stay with that the rest of your life. Well, or at least through this next market cycle, not necessarily the rest of your life, but index investing is really super long-term based and it does work over a very long period of time. But not every time in history is equal. near the crisis point of a fourth turning at the highest objective valuations we've ever seen in the history of the United States. This is where you need to dial it down if you're passive just so you can sit through it. >> Yeah. And I just want to note for folks there's a difference, use the word value. There's a difference between the word value and price. >> I'm not that worried objectively that we're stock market's trading at the highest price that it's ever traded at. That's going to happen over the span of time. Prices will go up. You know what what I think we're all concerned about is valuations [clears throat] is is the multiple of that price versus the expected earnings, right? I mean, those are very stretched to the upside here. And you guys have shown many times the the John Husman charts that show that that when the market pulls that much of tomorrow's valuation into today by increasing multiples is it creates a return drought going forward. It just makes sense, right? If you're going to pull tomorrow's prosperity into today, well, you're going to have less prosperity tomorrow, right? So, you know, on average, you could have a a very uh flat stretch of the market ahead of you, perhaps even a lost decade as as Husman's charts are are currently uh forecasting. Now, again, highly unlikely if that manifests that it's just going to be a flat market for the next decade. It means it's probably going to be, you know, up and down, a lot of volatility. And so to your point, Mike, if you're a passive investor, you know, A, you're not going to make that much over that that lost decade. Um, and B, if your emotions get the worst of you, you may end up getting, you know, booted out of the market during some of those downdrafts and actually losing, right, money, having negative returns. Now, a good active investor can actually make a lot of money in that type of market, right? And and you and many other people on this channel have recently, you know, who've appeared recently have talked about that. Hey, this may really be becoming the era where the pendulum swings back to active investing and we'll see if that's the case. But I think your warning is an important one, Mike, kind of concurrent with what I was saying with T- Bill and chill. You know, if if you've been enjoying the past couple years of getting paid to sit in safety and T bills and then whatever else year long has done pretty well over the past three years, right? Looks like we're going to have our third backtoback year of of 20% uh or close to 20% returns on the S&P. I I know what you're saying, Mike, is hey, don't expect that to be the norm going forward. Highly unlikely to be that, right? You're shaking your head now as I'm saying this. All right. Um John, I'll hand it back to you and let you wrap up here. Um you know, anything else you you want to say that maybe I haven't thought to ask you about. And also too, if you could just do, you know, the general like you you guys are in the business of talking to real people uh to help them grow, but most importantly protect their wealth because they have lives to live. >> And so, you know, in your interactions that you're having right now, you know, what are you hearing from folks? What are they most nervous about? What counsel do you find yourself offering most to people right now given the current market environment? >> Yeah, thank you, Adam. And just to to put a lay person's spin on what Mike talked about, have a plan to sell. One thing that I I really want to encourage folks to just embrace is the idea of it. There is going to be regret. You're going to have regret no matter what you do. Perfection is not a possible thing in this thing we call investing. And the the name of the game here is being okay with regret. And hopefully the form of regret that is the the gentle kind, not the big kind, like selling out too early in a in a in a very toppy. And to put put a point on it, Adam, not only are valuations stretched, they are categorically at all-time highs on the on the metrics that are most reliable with future predictive returns. That is a black and white categorical statement we can make without anybody's opinion affecting that statement. It's it's reality. Okay. So, uh, being okay with, you know, selling down from 80 to 40 or 30% and it not being the the absolute high, that's okay. The worst sin and the worst regret that one may have to deal with is not doing that and having a massive massive re reset in their financial security. One that literally may be forcing decisions like, hey, I thought I was going to retire two years from now. Now I got to work another seven or whatever. Um these are the things that are a consequence when you overlay a real life with um you know a financial portfolio and and real life goals. Um so so absolutely bring this back to your own situation. This time of year let me just in this environment we are having more conversations with people that uh their job situation is less certain. Um we're not seeing massive layoffs, but we're we're seeing enough that uh it's becoming more of a concern if not >> right now. I'll note this week we've seen we've seen many multi,000 layoffs from some of America's largest larger employers. >> Yep. Layoffs or or just the concern about layoffs. So, if you're if you're worried about your job security, even if even though you haven't been notified, you know, this is a great time to take a step back and look at your plan, look at your investment plan, because if you have a situation where there is a layoff, you know, there there is a totally different game plan for how do you how do you provide the paycheck that you will no longer be getting for whatever transitional or permanent period that might might entail. Um, we are entering the last two months of the year. It's always a good time to think about uh tax related moves. Um you know, many folks may have very large gains in some stocks or positions, precious metals for example, and they're worried about um realizing gains, but they may also be forgetting the fact that they have other positions in their portfolio that are losses. Uh and they can harvest those losses to offset those gains. you know, we, you know, for better, not worse. We don't have a lot of losses we can har har har har har har har har har har har har har har har har har har har har har har har har har har har har har har har har har har har har har har har har harvest this year in our client portfolios. We're very grateful for that. But still, if it if it comes time to to sell and and derisk, the worst sin is letting gains evaporate than paying some some gain capital gains taxes. So, you want to be very um you know, I think objective about where we are and bringing it back to your own situation and and this is the time of year to really start to focus in on some of that stuff. >> All right. Well, very well said, John. Thank you, gentlemen. So, just in wrapping up real quick, um first off folks, if you enjoy these monthly uh check-ins with the guys from New Harbor and want us to continue doing them, um please let us know by mentioning so in the comments below, but also by hitting that like button and clicking on the subscribe button below, as well as that little bell icon right next to it. A reminder, too, if you did not attend the Thoughtful Money Fall Conference uh and really wish you had, you can still buy the replay over at thoughtfulmoney.com/conference. And if you'd like to buy your ticket for the spring online conference at a 0% inflation rate, meaning the same price that we've offered it for this year, uh you know, the most recent conference we just did, um then you can do get that over at thoughtfulmoney.com/206. Uh to John's point there, um I think a lot of what you guys, you know, the takeaway from a lot of what you guys have have said today is um hey, you know, there there's nuance out there. Um, you know, this is a time where a lot of people are sitting on some gains, maybe they're sitting on some losses if things didn't go as well for them. The future looks, you know, kind of uncertain here. Um, for all the reasons that you mentioned about the floating risks out there, whether they're in the credit market, whether they're in the valuations, um, this is a really good time to check in with your personal financial advisor and, you know, really make sure that you're entering 2026, having done all the key end ofear things that you should do given your personal situation here in 2025, but also setting yourself up well for 2026 in a very hopefully intelligently riskmanaged way. So, if you've got a good financial adviser who can who's doing all those things for you, well, great. Don't mess with success. But if you don't have one or you'd like a second opinion uh from one that is skilled in those uh topics, um then consider talking to one of the financial adviserss that Thoughtful Money endorses. These are the firms you see with me on this channel week in week out. Perhaps you'd like to talk to John and Mike themselves directly there at New Harbor Financial. So to set up one of those discussions, just fill out the very short form at thoughtfulmoney.com. Only takes you a couple seconds to fill out the form. These consultations are totally free. There's no commitments involved. Uh it's just a service these firms offer to be as helpful to as many people as possible. John and Mike, great job as as always, my friends. I'm looking forward to seeing you next week to do our regular, you know, weekly market recaps, but um very much appreciate these uh much more in-depth monthly deep dives and looking forward to doing a lot more with you in the future. >> Thank you, Adam. Always fun. We'll see you next week. >> Thanks for having us. So happy to have this opportunity. And thanks to all your viewers for watching. See you soon. >> All right, boys. And everybody else, thanks so much for watching.