It Won't Take Much To Tip This Market Over | Lance Roberts

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prices are well above well deviated above long-term means. And typically when you have that kind of deviation, markets are going to find a reason to correct. And and all it needs is a reason, some reason. It may not even be a big it may not even be that big of a reason, but all of a sudden the market's off. Welcome to thoughtful money. I'm Thoughtful Money founder and your host, Adam Tagert. Welcoming you here at the end of the week for another weekly market recap featuring my good friend Lance Roberts, the portfolio manager with Dja Vu. Lance, how you doing? >> It's It's definitely just It's more like not deja vu, it's more groundhog day. >> Yeah, I was trying to find a Groundhog related adjective. There really isn't one out there. >> No, there's really not. >> No. Um, okay. So, folks, we're gonna a lot of good things to talk about today. Stocks are back at all-time highs. We're in this sort of groundhog day of the markets where stocks are high, but so are valuations. I'm sure we're probably still in overbought territory, Lance, but we'll talk about that in a minute. We're going to talk about whether um diminishing oil supplies are a uh and oil reserves are a ticking time bomb here for the global oil market. Um, we'll also talk about whether rising interest rates uh or rising bond yields is also a ticking time bomb for the market. And Lance, you just have a new piece out about that today. So, we'll get all of that in just a minute, folks. Um, real quick, I just want to start with um an exciting announcement here for for Thoughtful Money. Um, you know, in media it's all about putting in the work, putting out a good product day after day, kind of grinding away, and then hoping for, you know, a big opportunity, a really interesting door to open that gives you access to a much bigger audience. Um, as I say in Hollywood, it's sort of all about timing, right? So, there's a really exciting opportunity that has made itself available to Thoughtful Money. And I've got to be a little bit um circumspect about it um until it's actually made official. But um I've got the opportunity to bring the thoughtful money message uh potentially onto the platform um of another another podcast platform, but just one that is far bigger than mine with an aligned audience. So, I think it's it's where our message can really do a lot of good. Um, reach a lot of new people. Um, and it just could be very exciting. Um, so I will inform you folks as this goes along. Um, but I'm I'm really excited about the opportunity. Um, to be able to crack open that door. One of the things that uh that happened was basically this this platform uh took note of Fal Money and its success. and we've we've actually, if you've been following me on X, I've been posting how our audience growth has has done really well in the past couple months. And they approached me about potentially u you know bringing our content onto their platform um but also uh they want to sort of help Thoughtful Money as a business. And so kind of one of the key elements of this discussion was they've got a a marketing arm that said, "Hey, look, you know, we can take over a lot of the stuff that you're doing yourself, Adam, as you're running the whole business, and we think that we can, you know, basically turbocharge what you're you're doing, as well as free you up to create more great content." So, um, this is a long-winded way of saying, um, one of the things that I may have to do is sort of the price of of getting access to this much larger market, um, is doing, uh, sponsored table reads, which is something I've really avoided doing on this channel, um, for a bunch of reasons, but the biggest one is I'm very very aware that the biggest um, currency value that this this uh, platform, Thoughtful Money, has which has been really hard um uh invested in over time, hardil um is trust. Uh I want to make sure that when I tell you, hey, this is somebody that's important to listen to or this is a service that might make sense for for you know this type of person that you've got real faith in me and in this channel that I'm referring you to something that is worth your time that I'm not letting my editorial uh recommendations be influenced or guided by any sort of paid sponsor. So anyways, just to let you know, two things on this. Don't fear too much. Uh I told them first if we're going to do this, we're going to do it like toe in the water first to see what goes on. So probably just start with one uh every so often. Um if you listen to most podcasts, you you know exactly what I'm talking about. They take 30 45 seconds or so. The person reads, you know, a message from a company that that it's basically like a me reading sort of an advertisement about hopefully a product that's relevant to you. Um, and secondly, uh, it's, you know, when these videos run, YouTube runs, um, their own ads on the channel. I don't really have any control of that. U,, but what I can control is I can remove a YouTube ad in replacement. If I do a table read like this, I'll remove a YouTube ad. So, in other words, you're not going to get more ads. You'll just hopefully get, you know, the same amount. Um, and I will do my best to try to pick sponsors that are really relevant. So, for example, you know, I told these guys, look, I don't want to do financial products. I don't want people to think that I'm selling out in any way, you know, my my financial trustworthiness and believability here. But if I'm going to do a sponsor, a great sponsor might be a a company like Prolong, right, that makes those 5day fast mimicking diets because I do them myself. I've talked about them on this program before. I think they're it's a really good potential solution for people who want to work on their health should consider. So anyways, um that's one of their sponsors. So who knows? We'll see what happens here. But anyways, folks, I just wanted to give you kind of you be transparent with you about this. If uh if this works, fantastic. It should mean great things for Fal Money, for the ability to create additional great content here uh and to influence and help a lot more people around the world. And if it doesn't work out, it's no harm, no foul. I can shut this relationship down. We go back to doing things exactly the way that they were. But anyways, I just wanted to share with you folks what's going on here and um you know when is this going to start? I don't exactly know. It could start as soon as next week. It might take a few more weeks. It's very much in flux right now. But it's very exciting again that our little platform that we've been working hard over the years to build here is now beginning to get the attention of some pretty big fish. This this is not like a Joe Rogan folks, but it's probably just one notch down from that. So very excited. Lance, thanks for being patient through all that. >> No worries. It's all good. That's great news. >> Thanks. Yeah, it is pretty exciting and and I will tell you a little bit more about it off air um because I'm I'm sure you're interested and then folks as soon as I can talk about it publicly, I will. Um all right, so um deja vu groundhog day markets essentially back to all-time highs. Lance. Um, first off, uh, we don't need to pull up the TA quite yet, but are are do you still have the same feeling that these things are still pretty overbought and that the risk of some sort of pullback is still uncomfortably high here? >> Yeah. Yeah. No, I mean, just you're now eight weeks into consecutive weekly advances. That's getting really long. Like, when you look back historically, six, you know, we were originally kind of talking about six straight weeks of advances. That's decently long, but there's a lot of those throughout history. Seven weeks, quite a few of those, but significantly less. Eight weeks, you're getting down to a more rare occurrence. Nine weeks, 10 weeks, which is the longest, is pretty rare in its general. So, it doesn't mean that you know that the correction comes tomorrow or next week or whatever. But, you know, the markets can literally not go up forever. Um, they are going to have a correction. What you need is some type of catalyst to do that, right? You need something that causes the market to reassess where it's deploying capital. There's a lot of momentum by the market. Momentum is is like a freight train, right? I mean, once momentum is going down the track, it's extremely difficult to slow a train. And so, it's going to take a while to kind of eat away at that momentum, but you're going to need some type of catalyst that >> begins to reverse sentiment a bit. And we don't have anything right now, but again, you've got midterm elections coming up. You've got Kevin Worse being nominated today to the Fed. Um he's being sworn in. Typically first three months of a new Fed chair typically see some type of selloff. Then you can kind of match that with midterm election cycles. You got those problems. High oil prices another problem. Iran, you know, what's going on with Iran, another problem. So there's a lot of things that could that could creep up that one morning you wake up and the markets are down 2 3% and then sell off for a week or so and then re kind of kind of reset the table. But you know right now everything's fine. >> Okay. Yeah. Momentum is kind of self-reinforcing, right? Because as markets go up, you start getting people who were on the sidelines or late to the party starting to jump in, which then pushes prices up higher, increasing the momentum. And then you start it kind of becomes this chasing cycle. Now of course that can't last forever. Um but you never know when it's going to end. So right now you're basically saying look trains got a pretty big head of steam. You I think are probably still nervous that we're maybe getting closer to the end of the momentum than the beginning but we don't know for sure. So while it train still moving forward you're still riding it. >> Yeah. Well not not nervous isn't really the right word. I'm just aware of what's going on. And I tell you, it's really interesting when I start getting comments by, you know, email or on X or whatever. It's like, well, you said the market was going to correct two weeks ago. No, I said that we're due for correction sometime this summer. But what people assumed I said was is that, oh, Lance said the market's going to correct. That means tomorrow, so I'm going to get out of the market. And then they missed the runup. And now they're upset. As I've been saying all along for the last several weeks, I expect a correction sometime this summer. And like we said last week, I can't tell you when and and this this is a terrible way to predict stuff because I can't tell you when. I can't tell you what's going to cause it and I can't tell you where the bottom's going to be right now. But what I do know statistically and probability is that sometime between now and November, we're going to have a correction in the markets. But again, we could that correction could be from a 100 points higher in the S&P and we correct back to where we are right now, right? So, you know, that's the problem with trying to predict a correction and time the market and those type of things. Just pay attention to what's the market's doing. The market's fine right now. There's nothing wrong technically with the markets. We are overbought. We are extended. But again, we just came down, tested the 20-day moving average this past week. Bounced right off of that. That's a good technical, you know, kind of reflex off that first support level. And so, the markets are doing what markets do. They're they're grinding their way higher here. >> Okay. I I used the word nervous, which might have been too too strong of a word, but in the past two weeks or so, I'm just looking at my past notes. >> Sure. >> You know, you did say, look, you know, we've made a lot of money. We've we we've rebalanced a bit to to make sure we lock in some of these gains. We've we've um bought a little bit more defensive um stocks. And I think it was last week where I asked you >> given some comments you made, you know, are you thinking about potentially reducing your equity exposure? and you had said not yet, but you know, we're we're thinking about it. Um, and those are things that you would do if you were thinking, okay, this is starting to feel kind of played out. So, that's sort of what I meant. Um, and again, yes, I mean, with valuations, you never do know, it could be next week, it could be next quarter. Um, but there is a sense as as things get stretched where you begin to feel like, okay, the risks to the upside are starting to feel less than the risks to the downside. I'm just trying to get a sense for where you are. No, that's that's exactly right. You know, when I get nervous, that's when I come on here and say, "Hey, we just cut exposure by another 5%, added a short to the market, right?" Okay. >> To the portfolio. That's nervous, right? So, >> um we're not there yet. But, you know what is important is that the potential upside is outweighed by the potential downside. So, that's that riskreward ratio that we talk about a lot. So, if I look at if I look at the markets today and I go, if I invest a dollar today, what's my potential upside and you know that might be another 100 points or so on the S&P, what's my downside? It's 3400 S&P points just to get down to the 50 100 day moving average. So, that's a that's a that's a 4:1 ratio. That's not really a good riskreward that I want to, you know, really deploy a lot of capital into. So, I just want to be more cautious here and careful. I'm not grossly reducing exposure here. We're taking profits like we took some profits in Nvidia last earlier this week right before the earnings announcement just because we didn't know how it was going to come out. There was an eight options market predicted an 8% swing in one direction or the other. >> They came in absolutely killed it on earnings, killed it on revenue growth. The company's just a phenomenal monster. Um but the stock reaction was like me, you know. >> Well, that's the danger though, right? When you feel like a market is getting priced to perfection, there is no news that can make the market say, "Oh, fantastic. I'm going to give you a 15% premium here because it's already basically priced everything in." Right? >> And and that's and that's the problem with semis right now. I mean, semis are so overbought, so value overvalued, so extended, but there's a massive gamma squeeze going on inside of semis and and that can last for a while, but when that that gamma squeeze blows up, it'll be spectacular. You don't want to be on the other side of that trade. >> Okay. Second week in a row, you've used the term gamma squeeze. And I've seen in the comments, not everybody knows what you mean by that. So, can you give a quick description? >> Yeah. Basically, you've got two things that are just going on in the markets. When when you know when the markets are operating, you have to understand that there's two sides to every transaction. So, Wall Street is, you know, selling shares, hedging their books, those type of things. So when you want to create a call option as an example, so I want to buy calls on the S&P, right? Right now we have record call options on the markets. So when you want to buy a call option, somebody's got to have so you're betting on an option contract that you're betting on the price going up. Well, somebody in order to make that contract, somebody has to say, I'll take the other side of that trade. It's all bets, right? The market is nothing but bets one way or the other. And and so what happens is with with gamma squeezes in particular, it becomes very mechanical in nature, which is you have a big short position sitting out there. So when prices start to rise, those shorts have to cover, which pushes the prices higher, which causes shorts to cover, so forth and so on. It's a self-fulfilling feeding frenzy that cause so it's all mechanical in nature. Um that's causing these big price moves. And one of the things we wrote about this week is just saying could software be the next, you know, kind of gamma squeeze that goes on. Could we see a rotation from semis to software? Because software has a really huge short position sitting out there against it, which is fuel for a very accelerated rally at some point. So, you know, but but again, when these gamma squeezes end, they reverse just as quickly as they began. So, you just want to be real careful of that. If you're if you're long a lot of semis enjoying the ride, don't forget to take some profits. That doesn't mean sell everything, but take some profits and rebalance because a lot of these stocks are getting way way ahead of themselves. >> Uhhuh. And I would even say they tend to correct even faster, right? It is sort of the >> uh escalator up, elevator down type of dynamic, right? >> For sure. Absolutely. >> Yeah. Okay. Um, a question I've been meaning to ask you of late, Lance, is you know, it's almost daily now where there's some conflicting announcement, oftentimes several times a day, conflicting announcements on what's going on with with the Iran war in terms of the the peace negotiations, right? It's on, it's off. Things look really promising. Oh, we're going to carpet bomb Iran tomorrow. Uh, oh, wait, no. the Pakistani, you know, interlocutor says that, you know, we're resigning a document right now. And I'm just curious, um, I've seen some people propose this and and even I have begun to say it might be going on. Do you think there's some intentional market manipulation there? You know, I I have said given some of the um the timing of some of the um reputations that have come out on from the Irani side, it almost seems like they're letting a rumor get out there and then they come out and dispel it and you're like, are they taking the other side of that trade and are they is this a way for them to generate income, especially when we're cutting off their oil income? Um and then I've had a lot of people push back on me and say, well Adam, I mean the US could be doing the same thing and I can't disprove that. So I guess my question to you is is is is there like intentional pushing around of this market by sovereign states uh for some sort of gain here? >> No, I have no evidence whatever if these announcements that are moving the markets are being done for profit. There's just no way to prove that. However, what I will tell you, and this is pretty evident, is that the administration is certainly aware of what's going on with oil prices, how that's affecting affordability. Certainly, going into a midterm election cycle, there's certainly some, you know, some risk there for high oil prices and inflation and you know, voters vote with their pocketbook, >> not really for policy or politics. They vote on how they feel. >> And this is obviously going in midterm elections. oil, you know, oil prices at $100 a barrel, gasoline at $4 a gallon, at least in Texas, um is is not great, right? I mean, that's really impacting consumers. So, there is certainly an incentive for the administration to knowing that they that they can move markets to drop in an announcement that says, "Oh, yeah, we're very close to a deal. Everything's going great." And look, those negotiations are going on, right? We, you know, there's definitely negotiations. What we don't know for certain is, you know, all of the facts behind those negotiations and where we actually are on a peace deal. Now, of course, you know, Iran is never going to come out and say, "Yeah, yeah, yeah. We're we're getting pretty close to a peace deal and, you know, we're agreeing with a lot of what the administration, they're never going to do that. They have to maintain control over their political, you know, uh, context in their country. So, they're going to be coming out saying, "No, we're not giving up uranium. we're not doing. They may be negotiating that in the background, but they have to they have to put up this face right now that they're winning this fight. And so, a lot of people kind of fall into that trap. It's like, oh, what Iran says is true, but it's probably not the case. Same thing on on same thing on the US side. A lot of the stuff that we hear may or may not be the truth, but there is some truth to the fact that there are negotiations going on and we will eventually get to some type of resolution. Now whether it's a declared victory across the board for the US or for Iran or what who knows but this is part of that negotiation process negotiations especially at this level are not going to be we sit at the table and say okay this is what we want they go okay fine that's great we'll do that this is going to be a tugofwar for weeks months quarters however long it takes to get there um and that's going to have an impact on markets so absolutely though in the meantime the the administration is certainly going to do what they can verbally to try to keep the market somewhat stable and and that's what they've been doing more than you know job we call it job owning the markets the Fed's famous for doing this for for years for decades the the Fed's been job owning markets >> um talking about interest rate policy rate cuts those type of things that's just job owning the markets and and yeah for sure the administration is doing exactly the same thing >> yeah I I'm sure they are um although the sort of the spirit of my qu because to your point >> I think the administration has a very vested interest in getting gas prices down in advance of the the election. Absolutely. For sure. But that's >> five months away, right? And I don't think they're going to jawb on it daily down. I mean, maybe I'm wrong, but u I was I was more thinking about like these quick reversals that that happen. I mean, there's sort of a pattern emerging of like positive news overnight and then is or like right before the market opens and then like an hour or two later a reputation of that positive news, right? And I could potentially see I I don't again I folks I could be totally wrong here so you know take this with a boulder of salt but I'm not sure the US has an immediate need to try to pick up a couple of dollars on a day trade that lasts an hour or two. But I can see the regime, the Iranian regime, maybe really wanting that because like I said, they they're much more compromised on income here and that is influence they can have. They can control over what leaks and official comments get made. And so, you know, maybe this kind of rug pull of like will they, won't they? Oh, it looks like, you know, oil prices just dropped 5% because it looks like a deal, you know, is close to being done. and then an hour later, oh no, you know, we'll never do a deal under these terms and oil spikes. Somebody's making some money off of that, you know, probably some serious money off of that that quick reversal. So, it's just really interesting. I don't know the answer to this question. Um, but my my bigger question why I brought this up is is you but for you, what's it what's it like to have to manage a market that has this kind of crazy, you know, volatility that's being injected that is really non-market related, right? Is it just noise you tune out or does it make your job harder? >> No, it you just tune it's it's something we're aware of, but day-to-day price movements do not change our portfolio strategy, right? I mean, we're we're looking at long-term trends, fundamentals, earnings, those type of things. And so, I don't really care if the market's up 2% today or down 2% today. That doesn't really matter. What my goal is is to grow money over time, grow it safely, protect capital. So, you know, what happens from one day the next, that's all just noise within when the action. But unfortunately, this is why most investors wind up losing money over time is because they're reacting to all these headlines and they're taking these headlines in and they're trying to internalize those headlines and extrapolate out, oh my gosh, this is what this means because this happened today, but then it all changes tomorrow. And then so whatever thesis they had today is gone tomorrow and you just wind up making worse and worse investment decisions over time, eroding your capital and and and not creating the return that you want to get. So, you know, this is why I, you know, you know, one of the basic rules of investing, and I I've said this before on this on the air. I've written our 15 trading rules that I've given you copies of as well. But the number rule number 15 is turn off the media. >> If you turn off the media, get rid of the videos, get rid of the the mainstream media, get rid of the the the the articles and all that type of stuff and focus on your portfolio, you'll do a lot better. >> Okay. So, that makes total sense. We've talked about this a lot. But I'm just curious in addition to whatever noise you might be hearing um that's kind of trying to distract you or demand your attention, your practice there at RA is is made up of a bunch of clients who are real people. And I'm just wondering like do the phones ring more or people, you know, kind of getting distracted and saying, "Oh my gosh, Lance, I just heard this crazy rumor about, you know, the peace negotiations. Why are we not doing X, Y, or Z?" >> We we we have a very small percent. I mean, maybe two or three, you know, clients that are like that. They're very sensitive to the news and and initially they're that way and then once they're with us for a long time, they start to calm down because they figure out the methodology. >> They trust the process. Yeah. >> And they they trust the process. But also too, you have to remember we're very different than most adviserss. We communicate with our clients every single day. We provide videos, we have written articles, we've got blogs, we've got daily market commentary. Um, we're on the phone with our clients on a regular basis. And, you know, when something bad happens and most advisers are hiding under their desk, we're sending out video updates, you know, emergency bulletins. Hey, don't worry. This is what's happened. Uh, this is how what we're doing to counteract that right now. So, if you have any questions, call us. But, we are super hightouch and and and and very in front of our clients on a consistent basis. So, it smooths a lot of that out over time because they're already informed about what's going on. they're already informed about what we're paying attention to, what's important and what's not important. But it is, you know, but still, I mean, when you're getting this news kind of in your face all day long every day and and you hear other people saying this, that, the other thing, you know, there's we're certainly getting phone calls like, "Oh, I heard this guy say that, you know, this was going to happen." And that's generally that those type of questions is what generates the articles we write. >> And and so just like we wrote one today on interest rates because, you know, everybody on yields are breaking out. They're they're going to all-time highs and no, they're just normalizing. It's quite okay. Everything is fine. Calm down. It's it's and that's why markets aren't responding to them. >> All right. So, let let's lose this as use this as a segue into these two potential ticking time bombs that >> folks who are reading the headlines are now hearing about. Um we'll get to um interest rates in just a moment, but or bond yields in just a moment, but um oil supplies, right? So you know when when the straight of hormuz was closed um everybody kind of freaked out but you know there was a lot of uh slack in the system I guess you know just oil reserves either you know in storage on land or in tankers that were in transit and you know people basically analysts have been saying hey look that that that gives us a buffer of of of a while but the longer it takes for the strait to to reopen and and the Persian Gulf oil to start coming out. Um even if other exporters are increasing their production, they can't close that gap. And at some point in time, the system starts getting real tight on flows. And um I'm seeing an increasing number of articles out there about what could happen if and when those flows really start to to to you know begin to empty the the remaining storage that's out there. How what is your assessment right now of how close we are to kind of a a red line um on on basically the global buffer uh of oil supply? >> So let me ask let me ask you the question in reverse. >> Yeah. >> Given that markets are dynamic >> and the markets are pricing in all known information, what's the market telling you about this? >> Yeah, I haven't looked at long-term oil futures in a bit, but I don't get the sense that they're spiking yet. So, I'm guessing the market isn't too panicked about it yet, but we are seeing a lot of headlines come out and it it it is unknown what's going to happen there with these supplies. >> But yes, but remember markets are dynamic. So, if headlines are coming out, markets should be pricing that end. So, let's forget about let's forget about oil futures for the moment. Let's just talk about oil prices. >> So, headlines are coming out. We are 10 days away from running out of oil. Oil prices are at $97 a barrel right now on West Texas Intermediate Crude. >> Why are they not at 120, 130, 140, 150? Because if the markets were truly worried about that scenario, if there was this truly shortage of supply sitting there and tomorrow morning we're going to wake up and, you know, we're we're out of oil. markets would be pricing that in future Fords the you know you take a look at Ford uh oil prices through the end of this year and early next year those are all much lower than where we are now so you know so head this is this and this is kind of always the point right so when people are putting out these headlines generally is to get clicks views whatever it is and they probably truly believe what they're what they're publishing but when it comes down to your portfolio focus back on what markets are telling you because the markets are already pricing this is all known information. This This is not new information. You're not unveiling something that nobody's paid attention to so far. >> No. No. They've been worried about it since the very start of this. You're you're right. >> Absolutely. This is very well published, well doumented information. And if and I'm not saying that and and again, don't don't take me wrong here. I'm not saying that there's not a risk that that we this thing doesn't resolve with Iran and oil supplies really become problematic and oil prices do, you know, start to to rise from that. Absolutely. That's very much a possibility. But all I'm saying is is from an investment management standpoint, the markets know all this. And so what the markets are telling you right now is like this is what we're pricing stuff where we believe is a a decently fair value right now. this is that's where the market's pricing this on a forward basis as well. So that's I I would pay attention to that more than the headlines. Now again, things can change, right? You know, if we go back to January here, here's a really good example of this, Adam. >> Back in January, you and I were talking about the reflation trade. And the reflation trade was emerging markets and and um industrials and materials and this this booming economic growth that we're going to have. And that trade was working great. January and February, equal weighted indexes were outperforming the the market cap weighted index. Emerging markets was outperforming the S&P 500. The dollar was weaker because of that story. And then Iran comes up. Nobody was expecting Iran and all of a sudden now the dollar's much stronger. EM is underperforming because of that dollar relationship. Money flows. If you were taking a look at money flows early this year, there was a massive flow of dollars out of US equities into emerging markets over the last month and a half. There's been a massive reversal of that back into US equities. So all the emerging market funds are now coming back into the US, which is also why the dollar is strengthening because you're getting these flows into US assets. But that's my point is that what the markets didn't what the markets weren't aware of in January, February was US and Iran, right? That was the expected exogenous event that caused markets to repric everything. >> This is very known. So if something's going to happen, to your point >> and we're going to see another big spike in oil prices, which is possible, we're going to need some unexpected event to occur that nobody was pricing into the market. It's not just a function of running out of oil. All of a sudden there, you know, nobody can produce oil anywhere type thing, right? I mean, it's going to be something that, oh my gosh, I you know, I didn't real dude, that wasn't that wasn't in my deck of playing cards, you know, for for today's market. And that's the thing that gets you. >> Okay, that all makes sense. Um, and yes, um, you know, at the end of the day, folks, the key message that Lance, I think, rightly delivers here is doesn't matter necessarily what you or I think. What matters is what the market consensus thinks because that sort of sets reality in the here and now for markets. I guess the only thing I would add to what you said, Lance, is is yeah, all this is known except the market has basically an expected value for the I guess either the duration of the war um or at least the duration of how long um or how soon uh oil supplies will will will start flowing again through the Gulf. And if something changes that expectation, then yes, it could be a very different story. The analogy in my mind is sort of like you can be running on, you know, getting close to the E on the tank gas tank of your car, but if you know that there's a gas station every couple miles along the highway, you're not worried because you know you're going to pull over anytime you want to and you can refill up. But if you have entered a stretch where there's a sign that says no gas for, you know, 100 miles, you start worrying all of a sudden, right? And so I think I think that that that that might is the thing that I think you know maybe takes this from more of an academic discussion to a oh gez okay maybe oil prices do need to be a lot higher right now. >> Look look this could all change tomorrow if if Trump came out tomorrow morning and said you know what I'm just tired of negotiation with these idiots. We're just going to go bomb the crap out of them. >> You know >> which could easily happen >> which could but but that's that the markets aren't expecting that. The markets are expecting a negotiation and a settlement and a resumption of normal. But yes, a a a super radical outcome like that is not priced into the markets and that would be the scenario where stocks get crushed, oil prices spike and this whole trade unwinds. >> Okay. I guess last question on this then we'll move on. Do do you have any worry there that the market is underpricing the risk to to oil supply in the same way that right now you think it's maybe underpricing the risk to the semiconductor industry uh pulling back? >> Yeah. No, I look I I think the markets are are are underpricing the risk period. Right. I think I think I think investors are underpricing the risk that exists in the markets. >> Okay. And you're making this a general statement, not just oil, but just risk. >> Just oil, oil, semiconductors, economics, you know, there there's so many. I mean, you take a look at wage growth, you take a look at a lot of kind of the underlying economic fundamentals. Some of them appear to be okay on the headlines, but you really start digging down into those numbers, they're not so great. >> So, you know, I think there's a lot of mispricing of risk. And a lot of this is is based on the earnings estimates. And you know, I've showed you the charts before is just earnings estimates for this year and next year are just going parabolic. And you just just from a logical standpoint since that normally never happens outside of coming out of a recession. You know, when historically when you see earnings go straight up, uh earnings forward earnings estimates go vertical, it's because you're coming out of a recession and you're entering back into stronger economic growth. Well, we haven't been in a recession and yet we're acting like we're just coming out of a recession. Now, a lot of this has to do with capex spending showing up in the economic data, and that's all very that's all a very true story. We I've been articles about that. >> But it seems like earning, you know, what we're starting to price in is not in 26 26 earnings. We're not pricing in 2027 earnings. Those are priced in. We're now pricing in 2028 earnings. And that's a long time from here to expect nothing to go wrong. >> Yeah. Yeah. I I totally agree with that. Um, and maybe this comes back to my earlier question to you about sort of your level of nervousness. Um, I know you say valuations and rightly so, uh, are a terrible timing metric, >> but the higher they go from fundamentals, it is an indicator of risk, right? Of of of heightened risk. Um, >> so h how are you feeling right now given that you've got a multi-deade career having managed money through a whole bunch of different markets and stuff like that? like how are you feeling right now? >> Um I'm sleeping if that's a good >> Okay, >> but no look look the daily conversation that Mike and myself and and Nick Lane has um >> because Nick Lane runs our our factor rotation model. >> Mike helps me run uh our kind of our key flagship models. So the daily conversation that we have is what's what what do we need to be doing? What what what kind of risk management do we need to be doing? And that's why, you know, we took some profits this past week. Kind of added, you know, a little bit of of of rotation in the portfolio just a tad. Again, nothing drastic. And as as we've talked about before, the way you win this game, it's like a football game. You know, the the mistake that investors make is is that every down they're throwing the Hail Mary into the trying to get the touchdown. >> Football games are one in a matter of inches. If I can just keep moving the ball down the field an inch at a time or yard at a time or two yards at a time, I'm going to score a touchdown and I can eventually win games. Same same analogy for baseball. You know, more baseball games are won on singles and home runs, >> right? >> It's the same thing in your portfolio. Make small changes. You don't need to be dramatic. You don't need to buy into some narrative and go all in on some narrative. You know, be diversified, manage your risk, and you'll be fine. And just make small incremental changes because if the market starts to fall apart, like we've said before, you know, everybody's always concerned about, well, you know, so and so said the market's going to crash by 50%. Okay, maybe, but it's not going to happen tomorrow, right? You're have plenty of time to know that we're getting into a bigger e, you know, financial credit event or some other big >> credit spreads will start blowing out. But we'll see other signs of weakness. Yeah, >> tons. You have tons of time. You you may not you may not sell out at the high water mark. And and this is the investor's biggest mistake. They mark their portfolio to the high water mark which is the highest point in the portfolio. >> And so this year they started at $100,000. The portfolio is now $110,000 as an example. And then the market pulls back and it goes back to $100,000. And they're like, "Oh my gosh, I've lost all my money this year." No, no, you just gave up some of the gains, right? You still haven't destroyed your principle, and that's the only thing that matters long term. So, focus on what matters, you know, which is to grow your portfolio every year by some degree. And it doesn't matter what the high water marks are or low water marks are during a given year. It's how did you end up the year and are you on path to get to your goal? Manage that risk just by harvesting, pruning, weeding, you know, tending to your garden and you'll be fantastic. It's it's not difficult. It's just setting all the emotions aside. >> Yep. Um all right, we're going to get to um Bon Yields in just one second. I want to re ask that question just slightly differently, Lance. Um you know, let's let's whatever analogy you want to use. Maybe the Defcon meter, right? Defcon 5, Global Peace, Defcon 1, we're about to press the the nuclear button. Um, again, you've been in this industry for a long time, and I'm just curious like how does this compare to to past uh markets that you've dealt with. Is this one that you're you like? Is it one that you really distrust? I mean, obviously, it's at all-time highs, so it's not like we're in the depths of a of a bare market right now. Um, but I I do get the sense that you you distrust this market. >> That distrust is a strong word. Um, I don't distrust it because the the price is right. What the markets are doing, that's that's the market working. The market is telling you that earnings are growing, the economy is fine. Don't distrust the market. What I what I am what I am distressful about if again that's not really a good word. You know, what I'm concerned about, what I'm paying attention to, uh, what I'm worried about, you know, those are better words, okay? >> Is is just extensions. you know, prices are well above, well deviated, above long-term means. And typically, when you have that kind of deviation, markets are going to find a reason to correct. And and all it needs is a reason, some reason. It may not even be a big, it may not even be that big of a reason, but all of a sudden, the market's off. You know, just we just went through a 10% correction, you know, back in in March, April over this whole Iran crisis thing. And, you know, it's that that was the reason. And we just needed a reason that that all of a sudden we had to kind of start thinking about forward earnings, repric markets a bit. We did that and then the market said, "Oh, wait a second. I've already priced all that in." You know, the the the worst possible outcomes been priced into the market and so now I can start, you know, kind of reading to my positions and and that's what the market's been doing. And you know, so again, these these type of of markets are normal. They they are behaving in a normal manner. There's nothing you know, abnormal, you know, but there are some concerned things. You know, again, the amount of speculation in the market is certainly concerning. You know, when you take a look at the call, you know, there nobody wants puts right now. Nobody's willing to buy a put on their portfolio because everybody thinks the market's just going to go up and >> Yeah. Well, well, they just got steamrololled by the juggernaut, right? >> Exa Exactly. When nobody wants insurance though, that's a really good bet that that eventually the market's going to correct because every because now everybody's on one side of the trade. you don't have anybody on the other side of the trade. So those things always reverse over time and and that's when we pay attention to things like put call ratios. We pay attention to market volatility. Take a look at breadth. Breth is not fantastic. Um but but those things are typically leading indicators of a correction. Again, when I talk about corrections, we're talking about 5 10% not end of the world. Yeah. >> But you're going to have a pullback here where if you'll just be patient, and I know you feel like, wow, I'm just missing out every day. the market's going up. Lance told me to be patient and I'm just missing out every day. I got to get in. I'm missing the semiconductor rally. I know that's tough to to be patient, but if you'll be patient, you'll get a better entry price. Or you can chase it today and then try to navigate your way through the correction when it comes. But the correction is going to come. It's just a function of time. And how you approach that correction is solely up to you. >> Okay. So, your confidence in the correction is what made me use the word distrust, meaning you you don't you're not willing to leap into this party and and you know, >> pound shots with the rest of everybody. >> Um, let me ask the party the party analogy is really good. We're at the party. We're almost fully allocated in our portfolio. We're at the party, but we stopped drinking about an hour ago because I got to drive home. >> Okay. Yeah. So, all right. That that that's a good accurate analogy. Okay, great. I was going to try to take it somewhere very close to that. So that that was great. Let's end it on that. >> Um okay, so um a lot of consternation amongst folks about how bond yields uh have been moving upwards. Um we talked a little bit about this. I think it was last week we talked about the um >> 30-year US Treasury auction, the first one to price above a 5% yield, I think since 2007. Um so a lot of people are saying hey you know this is getting into the the breaking point for the economy. Uh it can't take yields this high. Obviously that's really bad for the government as well because they are trying to reduce the government's borrowing burden and rising bond yields fly in the face of that. Um I'll let you talk about it but from your recent piece this morning sounds like you're saying ah folks don't worry so much. >> Yeah. Yeah. You really shouldn't. Um, again, there's there's a a hundred-year-old uh economic model that's called was done by Irving Fiser. And basically just simply discusses um how interest rates work within an economy. And so basically what the what Fischer's equation says is that economic growth and inflation is what drives interest rates. And so when you look back over history, if you take a composite of of real economic growth and CPI, um you'll find out that interest rates pretty much track along with that. Well, right now, if you take nominal growth, real GDP and CPI, we're at 6% and interest rates are at 4%. Now again, you go back to 2020 and everybody's looking at this rise in interest rates going, "Oh, you know, this this rise in interest rates is terrible." Because, you know, we were at half a percent. Half a percent wasn't normal. So, interest rates have simply moved back up to basically their average that we've been at for the last, you know, 80 years, which is about in this range. But, but again, when you just take a look at market dynamics and how they function, think about you as a lender, and I've said this before. If I'm going to loan money to Adam, I've got to I've got to Well, inflation's at I'm just picking numbers. Say inflation's at 4%. So, I need at least 4% on Adam from Adam to just match inflation on my money if I'm going to loan it to him for, you know, 10 years or 20 years. And I've I've got opportunity costs. So, I need to factor in GDP growth. So, I should be getting some type of equivalent yield relative to inflation economic growth. It just makes sense because I'm loaning money to somebody. So, you know, so when you take a look at this over time, it's it's just the function of how it works. And so all we've done really in the past, you know, kind of really since the bottom, and this is this is actual the kind of the the math behind it. But as we as we kind of look at this, this is the long run relationship. You know, you can see that that that markets just basically track along this this trajectory over time. So all we've done is normalize yields. The bond market's very fine. You know, we've got foreign debt holders at record highs. Central banks are basically flat since 2012 and their holdings of treasuries. The only the only real change in the the value of their treasury holdings is just the price because interest rates go up, prices of bonds go down. So, you get some some fluctuation there. But basically, they're the the the quantity of their holdings have been flat since about 2012. Foreign holdings in general at all-time highs. So, you know, a lot of these narratives are simply just narratives, which are fine, but when you start to take a look at the actual balance between where yields are today, they are actually underpriced a bit. The yields should be closer to about 5% because of where inflation and economic growth is right now versus 4 and a.5% where we are today. So, 10ear yields are actually underpriced a little bit for economic growth and inflation, but they're certainly not spiking off to some level of abnormality. We're just getting back to normal where we should be, not 2020 where we had a half a percent rate on 10-year treasuries. >> Okay. Um, I highly recommend folks who are concerned about what's going on with bond yields to read this new piece that Lance put out there. So, you can read that on real investment advice.com or on Lance's Substack. Couple questions for you, Lance. One, do you have a do you have a chart there of foreign holdings and treasuries? Um because there there is such a strong narrative right now that the rest of the world is just abandoning US debt, right? >> Yeah. Give me just a second. It's not in this article. It was the one I wrote just previously to this. >> Okay. Um >> I'll find it I'll I'll find it while you're talking, but yes. >> Okay. Um and uh and and is the chart you're going to pull up is it a chart um based on um >> it's tick data treasury >> treasury data but is it is it the um dollar value of treasuries that are held by these people because another thing people are going to say is as well what really matters is a percent of foreign balance sheets that'll really tell the tale whether they're they're buying more holding or buying less. Um, so I don't know if your chart answers both of those questions, but >> it it it it does to a degree. But yeah, I mean, look, you know, there's as a percentage of holdings, you know, you know, if I'm hold if I'm holding treasuries, right? I own those in US dollars. Treasuries are reserve holding just like gold is. If I own gold versus treasuries, because gold's going up in price and treasuries are going down in price because interest rates have moved up. Gold is just a dollar reserve holding. it's not moving away from the dollar. It's it's actually a an enhancement of dollar reserves um within the markets. And and this is why this is really important to understand is that when you're talking about foreign reserves and there's I wrote this article um right here, let me so everybody can see this article. So this article is the dollar's plumbing conspiracy versus data. And this article goes through exactly this. So this is foreign holdings of US treasuries and you can see that this this now this article is a little bit old. I wrote this uh back in March. So it's >> well it's not that old. >> Yeah, it's a couple of months old but um you know foreign holdings of US treasuries at all-time highs and this blue line is central bank holdings and you can see that it's basically flat um since going back to 2012 2013 it hasn't really you know despite all these narratives that oh you know everybody's dumping bonds it's not really the case at all. >> Okay, sorry real quick. What is the orange there then? If the if the blue is foreign central banks. >> So blue is foreign central banks and orange is foreign everybody else hedge funds insurance companies everybody owns treasuries right. So uh corporates all that. So this is your foreign holdings of US treasuries because again remember that in in order to trade I need dollars. uh really really great example of this just recently article out I think it was yesterday Turkey has sold almost all of their treasuries because their their currency is absolutely crashing well why are they selling their treasuries if the if their currency is crashing because they need access to dollars and so I've got to get to dollars and so I I have two choices and this is why we saw gold prices sell off despite you know US and Iran and inflation going up you would thought gold would have performed better it didn't because they sold gold to go get access to dollars so they could buy oil. >> And that's a really just important thing to underscore. So countries just like people need to buy things. And the things a lot of the key things they need to buy can only be bought with dollars. And so if your domestic currency like in Turkey the Lera is plummeting and and your LRA buy a lot less oil and you need more oil than your LRA can buy, well you sell your dollar assets. You take the dollars you get as a sale proceeds, you turn around, you use that to buy the oil. Right. >> Right. And and one of the one of the good arguments lately I saw was is that China is going to issue a goldbacked currency so that they can trade in in you know the CNY or the RAMI and they were going to back that with gold and the gold would actually be held in Switzerland in vaults. >> Mhm. >> So that people would accept the currency for trade. So this is fantastic. Now think about this though logically for a moment. If China is issuing a gold back currency and holding the gold in Switzerland, which allows you a convert if for at any point you say, "I don't want your currency anymore. I can go get my gold." All that's saying is is you don't trust my Chinese currency. You really don't want my Chinese currency. You'll take it because I'm backing it with gold and you know that in any moment when you need your dollars, I can just go get the gold and convert that into dollars. So, it's a two-step conversion. But I've got all all China did was basically issue a currency in dollars. That's all we did. >> Um and so when you take a look at this, this is a chart that is the most famous. This orange line that's going down, this is China's official holdings. In 2022, the US sanctioned Russia and we started freezing a bunch of their assets and China said, "We're not going to do we're not going to play that game." So what they did was they shifted custody of their treasury holdings from US custodial services into Belgium and Luxembourg which is Euro Clear and and Clear Data. That's the clear stream. So that's that's over there. But this moved treasuries out of US custody. They're still long treasuries. This dotted line is the adjusted treasury holdings for China. You can see it's basically flat. So even though this decline was in in the US, this is what everybody focused on. It's like, "Oh, China's dumping all their treasuries." No, they just changed their custodial relationship. They still own the treasuries. They just own it in a different place. And this removes the sanction risk for China. So if we get into it, remember, so all that's been going on since 2022, we sanctioned Russia, then we're in trade wars with China. We're threatening tariffs on them. You know, we're threatening to restrict imports from them. They're not going to get access to our chips. Those type of things. Well, why would I want a bunch of US dollar custodial assets sitting in the US that the US government could lock down literally overnight and hurt me? I'm going to move those at least some of them into a place of safety. So that's all China's been doing. But you take a look at every other line. This is the UK central bank. This is Belgium, Luxembourg, Canada, Japan, China. They're all rising, right? So there central banks are taking on more Treasury debt, not less Treasury debt. >> Okay. Hey, real quick. Um, just head back up there again. Um, who who put this chart together? Did you guys put it together or somebody else? >> No, we did. This but Well, I I reconstructed this chart. This chart has been all over the place. Bloomberg put put it out originally. Um, about every every mainstream, you know, analyst has put this chart at one time or another out, but I went and reconstructed it so I could verify all the tick data. >> Okay. So, let me ask this question. So, I totally understand your logic here. Um, that said, I have heard the Belgium and Luxembourg, um, you can put the chart back up for a second. Sorry. Um, I've heard that the Belgium and Luxembourg line there. I've heard it attributed to China. I've heard it attributed to a bunch of US hedge funds that are operating offshore. Um, so the question hedge funds are in the Caymans. >> Caymans. Okay. So, h how messy if at all then is that Belgian and Luxembourg data? In other words, is it a one for one shift here? Are you just taking an increase in Belgium and Luxembourg and adding it to the China or or do you actually know how much of that Belgium and Luxembourg is is represented by China? >> So from the data, right, if you overlay China's selling and the the amount of remember Luxembourg and Belgium are extremely small countries. There's no reason they should be holding the the amount of reserve assets that that they have currently. No. and and other people certainly use uh you know Russia uses Belgium and Luxembourg, other countries use Belgium and Luxembourg. There's certainly other assets there. But when you start breaking down the relationship between the decline in China's holdings, there's almost an an a perfect inverse correlation to the rise in Luxembourg and Belgium holdings. Okay, >> it's fairly evident and this and this has been acknowledged by a lot of different sources um that a lot of that holding of Belgium of Belgium and Luxembourg belongs to China. Caymans are mostly used by hedge funds. >> Okay. All right. Thanks. That that just it's I'm sure it's something people are going to have questions on. >> Sure. Sure. >> Okay. So um the other question I had for you is you know you you you have your argument there about um uh GDP growth and inflation um and therefore interest rates should be sort of in a you know certain territory. Right. Right. >> And you said hey you know actually looking at today's current numbers they would justify you know a 10-year yield of around 5%. >> That's right. >> Four and a half. Right. >> Yeah. So, I don't disagree with that math. Um, I just remember talking to you, Lance, where were we years ago? >> When when bond yields started rising, you know, off of these sort of historic lows and you saying, and I'm not I'm not criticizing you here because I think you were voicing what what most people say is absolutely correct. >> Yeah. A lot of people were saying the same thing. You were like I asked you how high do you think the yields are going to go and you were like well they're not going to get above three because I mean Jesus the economy just can't stand that right and of course we've we've been able to withstand that is 5% sustainable >> it is right now because of the strength of economic growth. If you take a look at GDP now this morning 4.3% >> yeah it's over 4%. Yeah. But of course that that thing fluctuates so much I don't know how much we should trust it right now. Yeah. Well, no, exactly. Because again, that's all over the place. But the the reality of the of of the point though is is that we are seeing the transition of all that capex spending into the economic data. Um we're, you know, we're seeing, you know, ISM manufacturing numbers are going up, service numbers are going up. We're just seeing a lot of that transition into economic growth. So, we are going to have fairly strong economic growth. And that economic growth and all this capital expenditure that we've been pushing into the economy is good because it's got a big multiplier effect because it's productive >> and that's going to that's that's going to keep inflation elevated a bit because you're going to increase wages. Um you're going to increase employment. Then take a look at like the recent ADP report. We're starting to see a resurgence of employment again. We had you know kind of a sluggish first quarter but all of a sudden there's been kind of a big ramp up in hiring here over the course of the last couple months. So, you're starting to see that transition through. And and the point is is that yes, is that while yields could go up to 5%. And I even make this comment in the article is like, you know, if you're if you're looking to to invest in bonds, you know, the the reality is that bond yields are going to be lower over the course of the next two years and probably lower by the end of this year than they are right now. >> Yeah. A lot of people would disagree with you on that, but you and I have talked about this as recently as last week. I totally get your logic. >> Yeah. And especially if you solve the the oil price, you know, then then interest rates are going to come down because inflation will come down, right? >> So just if you watch inflation, um you know what inflation does will tell you where yields are going to be ultimately. But over the next couple of quarters because of what's going on in Iran and oil prices and if we have this shortage show up and it pushes oil prices to 120 130, you know, yields at 5% are are, you know, very realistic. So, if you're going to buy bonds today, expect that you may take some price pressure for a couple of quarters before it starts to pay off. It was interesting on Wednesday, I had this exact same conversation and I said, you know, honestly, if you bought bonds here, you're probably going to be good because yields are very very overbought right now. So, they're going to get they're going to reverse. Um, and I'm sorry, interest rates are are too high and they're going to reverse and come down. >> Bonds are over. Yeah. And then bond prices will go up. I said, you know, you might be patient, but I think there's a good trade here. Then the last two days, bond yields have spiked sharply higher. I'm sorry, bond prices have sharped higher and and yields have started to normalize a bit. But the point is is that in the near term there's a lot of volatility risk because of what's happening with oil prices, Iran, those type of things. Once we get past that, the economic data will come back into focus and all that's disinflationary and these high oil prices lead to demand destruction which is also going to slow down economic activity later this year. >> Ah, all right. So, so many things to dig into right there. One I want to note, I just interviewed Ed Dow. Um, one of his big trades right now is long bond duration. Um, because he believes that bond yields are going to come down. Uh, very similar to you. Um, so, okay. So, you're basically saying you don't think that 5% 10-year yields are kryptonite uh for the system that you think given where economic trends are, it probably can support that. So, this goes to a couple other things we've talked about in the past. So remember back at the beginning of this year, Lance, where you and I were talking and I was making the argument that um I was willing to take the over on economic growth this year expectations and you weren't disagreeing with me, but I I was laying out all the reasons why. Um and certainly the administration has been really trying to say, "Look, folks, expect the US economy to really start firing on all cylinders here after everything we did last year." Uh, and then of course we've had the war which has thrown a monkey wrench into this. But assume for a moment we hadn't had the war. Would you be feeling like I would have been validated by this point given what we're seeing? >> Well, the the ant. Yeah, probably. Economic growth would be stronger. Inflation wouldn't be where it is, right? We'd be closer to probably 3% inflation. Oh, sorry, two and a half percent inflation, >> right? And whatever drag this oil shock is having in the economy would not be there. So these numbers would be even better. >> Correct. So yeah, I mean I think you you know X ex the oil crisis, I think, you know, we would be doing okay economically with an outlook of slower economic growth as we get into 2027 because once we kind of get through this capex binge and the building gets completed, then we'll start to kind of revert to normality. So again, we just got this this, you know, this is very much like we saw in 2020 when we're sending checks to households. We had this big surge in demand. Uh it's kind of the same way. We've got all this spending from these companies creating a surge in demand and activity in the economy that will end once we get through the construction phase. >> So, let me let me ask you about that. I get that. So, in your analogy, we we're jamming our foot to the floor, the the accelerator to the floor. >> Next year, you're thinking the car might not move quite as fast because we're going to be easing off the accelerator. We haven't taken our foot off. We're not using a brake. We're just not jamming it to the floor as hard as we were before. But let me ask you this. So, what I think the administration would say, this is what I've heard them saying, is yes, maybe capex flows will start diminishing next year, although I don't know. I mean, they're still going to be spending these for years from now on. But also, you're going to get the multiplier effect that you're not building factories, you're now manufacturing things, and that has its own multiplicative effect in the economy. So, do you really expect a a net decrease in overall >> to GDP? >> Yeah. Well, again, what we're talking about though is we're talking about growth rates. So, we're talking about the second the second derivative, >> right? So, right now we're going basically zero to something. So, we've got this huge impact of that. Well, next year the spending is going to to if the spending is the same and it doesn't slow down at all, but it's not ramping up at at the rate it's going, the rate of change is going to be slower. It's the law of large numbers, right? >> And I get that with the capital spending. I'm just curious as you have more factories come online and >> you know increase production and has the multiplicative effect of that as well of all the ecosystems that build up around that. Could that actually keep the the juice flowing at the same second derivative rate for another year? >> Sure. Anything is possible. Um, you know, we'll we'll see. We'll see, you know, how that comes to to fruition. Again, right now, you're employing a lot of people to build data centers, but once they're built, >> those all go away. >> Yeah. Data centers need a lot less people to to um run a data center. But in parallel with this is a lot of capital that's coming in here to build things like factories. I mean, we we talked about uh the interview I did with um uh Scott Fuller uh Craig Fuller from Freight Waves saying that the industrial economy is positively booming right now and he sees that only gaining momentum from here through the rest of the year. >> But but a lot of that that he's talking about is data centers, right? We're a lot of that >> No, no, he's talking about manufacturing. That's shipping stuff out to the coasts and that's, you know, getting sold in the real world. >> Yeah. No, absolutely. But that's that's we're shipping stuff to build data centers in a lot of cases. You know, are we are we building here? Yeah, >> I don't know how much of that. So, you're right. >> Are we building a lot of new auto manufacturing companies in the country right now? Are we building are we starting to remanufacture or build factories to to to make blue jeans and t-shirts? Are we still are we still in you know, >> I don't know about blue t-shirts, but a huge part of these trade deals has been >> Yeah. You're you're you're Toyota. put your car factory here in the US and those cars will be sold, you know, I'm trying to think what it is that the your your the auto loans will be taxdeductible on that, right? And you'll get a bunch of tax cuts for building it here. So there there are a lot of incentives to do that. Yeah. >> Yeah. And and again and that that is occurring, but again at what scale? So I mean if you take a look at that at business capex, right? So you take a look at capex capex itself that's being spent in the economy versus the capex that's being spent just on data centers. There's no comparison between the two. >> Mhm. >> Right. So yes, some capital expenditures are being spent on building businesses and those type of things as they always are, but there's just so much money going into data centers that's that's causing this boom and and manufacturing because I've got to build all the products. If I if I'm a company that builds rebar or makes rebar, I'm I'm I'm sold out right now just trying to sell rebar to to to people building data centers because they got to pour concrete. If I'm a if I'm a concrete maker, sold out right now. Can't can't produce enough concrete. >> But that's all going to data centers. So So that that boom, that manufacturing boom is definitely occurring, but the end buyer is the data center. >> Got it. And and also too, you're just saying even if it's other manufacturing stuff, that investment kind of pales in comparison to the the title wave that is AI capex, which I get. Last question is is um >> I don't know if you've got it handy, um but I put up a chart last week, week before, and I believe it was of AI capex spending for the next couple of years. >> Um and I had a fuzzy version of it and you had a much clearer version of it. So, I'm wondering if you've got that handy because this will sort of help us determine how much of a drop off there's going to be next year or whether it's going to keep growing enough that maybe we won't see that much of a drop off. >> Yeah. Well, actually, uh, Michael Leewitz, uh, just launched an article on Wednesday. He's doing a two-part article on this very topic. Um, and so he's doing the AI economy looking beyond the facade part one. So, part one is the bullish outlook, part two is the bearish outlook. >> Okay. um and what goes in it. But >> are they both out now? >> No, no, no. Uh the the second part will be out next this coming Wednesday. >> Okay. Okay. >> So, this this is actually out on the website right now, but this is the chart you're talking about. So, this is hyper this is hyperscaler capex expenditures. >> Okay. I don't know why yours is fuzzy too here, but so it's 200 26 on the ed. So, >> estimated. Yeah, it's not. >> Yeah, I think the chart I was talking about went out a couple more years. >> Yeah, >> I don't have that one handy. That was one. It was uh I kind of grabbed that one off the cuff when we were talking last week. >> Yeah, don't worry. I'll try to find it while we're talking to folks. If I can't, we'll we'll pull it up next week. But that'll it's just going to be an important part a chart to revisit because depending on what the leap is from 26 to 27 and maybe even 27 to 28, it'll give us a sense of how much things might slow in terms of the economic growth. Um and then obviously I mean the key thing here though just real quick just to >> remind everybody the entire financial market right now are revolving around that spend right I mean the the the indices are basically priced predominantly on the expectations for for those uh those expenditures and if something were to happen that would impair those future expenditures that's where things could get wonky really fast. You agree, my friend? >> Yeah. Yeah, absolutely. I'm actually looking for a chart. >> Okay. Um but that that's where where as as long as this continues, I think it's going to be super hard for a recession to occur. It's probably going to be super hard for any prolonged market downturn to really occur. But man, if something were to get in the way of those flows, then it could be Katie bar the door. >> Yeah. And again, you know, what what markets are pricing is the impact of that capex spending on the economy that generates the earnings, right? So that's all this comes down to. When you take a look at forward estimates for EPS, you just see how sharp they're ramping up right now. And that's all capex. That's all that's all capex and data center spending and the flow through to all the the companies underneath. If you take a look at that growth rate in earnings, most of that is mag seven companies underneath that there that the the vast majority of that earnings improvement is mag 7. Just below that is, you know, kind of semiconductors. And then if you take a look at the other rest of the economy, they're barely increasing earnings growth at all this year. So yeah, most of the that's what I was saying before about your point about the you know about manufacturing in the economy. >> If manufacturing was booming outside of data centers, the earnings growth rates for the bottom 493 companies would be much stronger than they are. Yeah, this is like um maybe a terrible analogy, but it's like being an Eskimo um you know, ice sledder um where your your your um team of sled dogs is basically a bunch of Chihuahua with a huge bull in the front. >> And as long as the bull is pulling it, you are going faster than any other sled there, right? You're getting to your destination no problem, super quick. If that bull stumbles, breaks a leg, and you're just depending on the Chihuahua, you're going nowhere. >> Wait, wait. I look, I found I found that was not the chart I wanted. I It was It was It worked. This is the one I was looking for. This is MSI uh world EPS. So, you can see here's 2026, 2027 just kind of taking off to the moon. That never occurs. 2025 back to 2016, you've never seen that type of ramp up in forward earnings. Generally, forward earnings get tailored off as we get closer to the earnings announcement. >> Yeah. Um, but >> that's not happening yet. >> That happened here. But here's here's what I was trying to this was the chart I was talking about. So, here's the cumulative year-to- date change in consensus 2027 EPS estimates. AI infrastructure stocks 32%, energy is 19%, S&P 500 is 8%. >> Yeah. And and that 8% is being influenced by the hyperrowth and the two above. >> That's right. And then if you look down at the bottom, the gray line, S&P 500X AI, infrastructure, and energy at 0% growth. >> Okay. All right. Super useful chart. Totally underscores my point, which is just we unless we're unless you're rooting for a big market downturn andor a recession. You want these flows to continue at the way that they're expected to. >> Um, I'm going to replace your chart here for a second, Lance, with this one. I did find my version of the chart. I'm sorry it's so blurry, folks. Um, this one goes out to 2027. So, you can see we went from um a little under half uh trillion I think uh in last year to about 800 uh billion right now to uh 1.1 trillion estimated in 2027. Um so these are still pretty robust growth. I mean, it's it's not growing as a you know, the the second derivative is is not as high, but it's still pretty predigious growth if these numbers are hit, >> right? And and but the most important part is the second derivative because >> that's what earnings are forecasted on. So, if the rate of growth is slowing, the rate of earnings expectations will also slow, which makes valuations more problematic. >> All right. Well, >> still good. still all good. >> Yeah. >> Just don't forget the second derivative. That's the most important part. >> Yeah. And so again, just to beat the horse completely bloody, um we we we have these these in incredibly um aggressive projections for capex spend, right? So, um you've got that. Layered on top of that is the earnings expectations uh that analysts think companies will have from all this capex spend. Layered on top of that is the multiple that is placed on those earnings. And and right now I would probably classify all three of them as extremely optimistic, extremely aggressive. So you've got sort of three layers there of of aggressive optimism that needs to continue for this party to continue on the way that it is right now. I'm not saying it's all going to come down, but I'm just saying that if if any of that gets impaired, the knock-on effects will be extremely disproportionate to almost anything else that could happen in the system right now. >> Right. But but then you know, Adam, you take, you know, you take that analogy, which is absolutely right, >> and then you throw in stuff like the government coming in. And so I told you about four weeks ago we remodeled our growth focused portfolio >> into five areas. So it focuses now on robotics, space, AI, quantum computing and and infrastructure. And so we remodeled the whole portfolio. And then of course you have you have this stuff that comes along like last week where the government says, "Oh, we're going to, you know, give $2 billion to quantum companies and take some stakes in their companies." And these stocks are all up like 50% in a week. So you you have those anomalies that occur in the markets that are just outside of any type of logic or sense that goes on. And this is why, you know, it's important to, you know, pay attention to what's going on in markets, participate with them, but take profits, rebalance when you get when when something, you know, something abnormal hands you a gift, take some money off the table. >> Okay. Well, we say that all the time, so completely agree. Um, hey, let me just ask you this question. Um, Sure. Two questions. Um, one is any thoughts about the SpaceX IPO? I haven't talked about it at all on this channel. Um, but it's a big development. And secondly, do you know any analyst who would be a good guy to to bring on to interview about SpaceX? >> Uh, I'd have to you have to I'll have to get back with you on the analyst. I'll see if I can come up with somebody for you. Um, I know >> because I I think there'd be a lot of interest on this channel. And folks, if you're watching and you are interested, let me know in the comments section below. If it's high enough, I'll prioritize that. >> Yeah. Well, no, I'm sure you have plenty of interest. The problem is is most of the analysts aren't going to want to talk to you because they're in they're in blackout or lockups or whatever um prior prior to the IPO. So, you may not be able to get anybody until after the IPO. >> Okay. >> Uh but let let me let me reach out to a couple people I know and and see what their compliance issues are. >> If you've got somebody to be good, that would be great. >> Yeah. Yeah. Um, and actually since you're watching this channel today, if uh this is on Saturday, I have published my weekend newsletter. This this morning's bullbear report is out. It's on the website now. So if you go to realvestmentadvice.com or click on Substack at Lance Roberts, um today's whole report is on should you buy the SpaceX IPO. >> Oh, really? Folks, I didn't know that when I asked Lance's question. So >> So I went through the whole thing. I can kind you know the the bottom line is this. I went back and both Mike and I did some research this week. We went back and analyzed all the IPOs, you know, the the largest IPOs kind of in recent history and looked at them from, you know, where where they IPOed at and then what the returns were in those IPOs over the next period of time and on average the hottest IPOs lost more money than the cold IPOs over that time frame. >> And there's a lot of reasons for that. First of all, you know, this is a very small float that's going out on on SpaceX right now. Uh Elon Musk owns 85% of the shares. They're only floating about 10% of the shares out into the market. So, it's a very small float for the company. when you look and and calling it SpaceX as an IPO is a little bit of a of a misnomer because of all their revenues, the vast majority, five times more than every than all their other revenues, like 11 billion comes from um Starlink, four billion comes from SpaceX, and about four billion comes from uh XAI. And so you're really buying Starlink, you're not buying SpaceX, which is kind of interesting. They didn't call it the Starlink IPO, but it's kind of interesting >> from a current revenue standpoint. >> Yeah. From a current revenue standpoint. And and Starlink by far is is probably going to be the the winner long term because of they have more sat SpaceX has more satellites in orbit than every other country combined. >> Yeah. >> So it's just it's absolutely phenomenal. So when you start talking about internet delivery and and the data centers in space and all that, right, >> they become the world's internet backbone. >> Exactly. That's going to be Starlink. It's not going to be SpaceX, but SpaceX is cool. I mean, it's a very cool IPO, but the question is, should you buy it? The the reason that, you know, if look, if you Here's how I would approach it. If you're adamant that you've got to buy this the day of the open, buy, let's say that you're going to allocate 5% of your portfolio to SpaceX. I'm just picking a number. How much risk you want to take is totally up to you. Buy 1% on the day of the open. You're going to lose money on that 1%. High probability you're going to lose money on that 1%. In the next couple of weeks, buy another percent. You're going to lose money on that as well. In the next few weeks, buy another 1%. You might lose some money at that point, but it won't be a lot, right? You'll be getting kind of close probably to the bottom because during that time frame, you got to think about all these special purpose vehicles, all these people have been running around selling you an ETF or selling these SPVS like, "Oh, we've got access to the IPO the IPO shares." you know, you're buying a secondary of a secondary, but hey, we've got access to these shares. Well, in order for them to monetize that, they've got to sell their shares. So, there's going to be a lot of supply coming to the markets. At the same time, you now have the indexes working against you because the indexes are going to fasttrack these IPOs into the index, which is going to lead to a whole big shift within the indexes and the the liquidation process will accelerate at that point because when those indexes when those get included into indexes, everybody that's got shares, there's a there's a guaranteed buyer by the index of those shares. So the IPO holders, the people that own those inside shares have a direct access to sell all those to the to the ETFs, right? To the to the indexes. So the indexes are going to work against you as well in terms of providing support. So just be careful. It's very likely that, you know, look, don't bet against Elon Musk long term. We're going to own the shares at some point. We're going to own anthropic shares at some point. That's just a function of time. But I'm not going to buy them day one. I don't even care if I buy them higher once I can see all that secondary market get, you know, get resolved. And we're starting to see the the the the company actually perform on fundamentals, looking at their core one, quarter one reports, their quarter two reports, how are they actually performing relative to the expectations? That's going to drive the shares and we'll have a much better entry point into the stock at that point with a much better understanding and grasp of what our riskreward is. But right up front, you know, just be real careful with it because the odds are you're going to wind up losing money over the first couple of months. >> Okay. And when is the first day of trading for SpaceX? >> I don't know that yet. >> Okay. >> They've issued their S1. I don't think they've actually got a I may be wrong. Somebody may be able to correct you, but as far as I know right now, I don't know the actual date. >> Okay. Um All right. Uh well, thank you for that analysis. Very helpful. And yeah, if you do know somebody who's sort of lived and breathed this company as an analyst, would love to to talk to them and maybe I might even >> do it as a live stream so that folks can ask their own questions as well. >> Um, all right. Uh, starting to wrap up here. Um, just checking in. Um, credit spreads. I checked them right before here. They don't seem to be doing all that much. Um, you know, they're they're still increasing a little bit from their absolutely dead on the floor pancake lows, but um but but not really all that much. Uh is that your interpretation as well? >> Yeah. No, the the Yeah, they're creeping up a little bit because of inflation adjustments. So, what you what you would expect? I mean, companies that are higher credit quality risk are going to demand a higher yield in a higher inflation environment than otherwise. So that's starting to widen out spreads a little bit, but that's more of just the inflation adjustment uh on credit quality. So again, you're seeing an uptick a little bit, but nothing alarming at this point. >> Okay. Um but as I've promised, folks, I'll continue checking in with Lance on this every every week just to make sure because that'll be a canary in the coal mine for us. >> Okay. Trades. What trades have you made this week, Lance? >> Just a few things. Uh like I said, we just uh uh trimmed a little bit. We sold Nvidia. Just just trimmed, right? I mean, basically just took stuff back to target weights. Uh, we trimmed Nvidia, uh, Applied Dynamics, um, uh, Verdive because both those stocks have had huge runs, uh, just since we just bought them back in in, uh, kind of early April and they just they took off to the moon. So, we just took took those back to target weights. Our original goal was to buy a starter position, then then hopefully they would sell off, we could buy some more, but they just went straight up. So, you know, we're just going to we'll have to be patient till we get a pull back in those stocks to to add to them. Uh also trimmed off a little bit on Google. Just moving these back to target weights, raise a little bit of cash. Next move is probably going to be add duration to the bond portfolio uh a bit where we're where we've only got about four and a half% long duration. The rest of it super short duration. So, we'll probably add a little maybe just bring that long duration bond exposure up to target weight at 5% initially, but then maybe move it to six. Nothing dramatic, but I do think there's a a potential, you know, opportunity to increase duration risk here a bit, pick up some extra income while we wait and then get paid for it, you know, the next year or so. >> Okay. Um, but you haven't you haven't done that yet. >> Haven't done it yet. >> What are you waiting for? >> Well, um, bond yields kind of ran away from me the last couple days. So, >> so if they hadn't, might you have already done it? Yeah, if if they Yeah, I was gonna do it I was actually gonna do it on Monday and then I said, "Well, you know, I'll kind of wait till, you know, maybe I'll wait. Let's do the equities first. We'll do fixed income later this week and then, you know, that's that." My bad. >> Okay. >> This is why you should never never argue with yourself. If your intuition tells you to do something, you should probably do it because every time I talk like, "Oh, I'll just wait. I'll do this tomorrow." I missed the trade. So, >> okay. Now, would you want to see yields go back up before you pull that trigger or could you still potentially pull that trigger even if yields are where they are even a little lower from here? >> Uh, you know, if we get some good solid buy signals and start to see if we start to see evidence that there's a real agreement being put into place with Iran, >> you're going to move on. >> Trader removes, I'll buy the bonds. >> Okay. All right. Wherever they are, >> wherever they are, won't matter. Yeah. >> Okay. All right. Um, all right. Well, let's get to the rant here. Um, I don't really have all that much planned. Um, uh, I came across this, uh, tweet, uh, that really caught my attention and Lance, it made me think of you, um, growing up in the era that we grew up in. Um, so let me just pull it here and and and bring it up, by the way. >> Okay. Um, so here it is. Um, you know, anybody who grew up in the 70s, 80s or younger, um, you know, this probably looks a lot like your childhood, right? And this was from Super70s Sports, which is actually a really hilarious, uh, X feed. Um, but, you know, basically a sign of of of a bygone era for childhood. Um, and I just sort of added to this. I was like, uh, yeah, based on this photo, this happening in the 1970s, just another Tuesday after school. this were to happen in the 2020s, well then you'd have to call a child protective services stat. You'd have to charge the parents as unfit, dismantle the bike, add speed bumps to the street to prevent future triggering acts of unsafe velocity, and put all the kids here on SSRIs. Um, and obviously I was being snarky there, but certainly it struck a nerve because a lot of people um, you know, responded to it as sort of like, wow, it was so wonderful to grow up in an era of of I think what people feel was truly authentic childhood. And yeah, you could describe a lot of it as benign neglect. You could describe it as kids doing really stupid things without any parental supervision, but that's what made childhood great. And it also is what, you know, helped us develop social skills and learn first aid on each other and and and, you know, do something stupid and say, "Wow, um, it didn't kill me. How can I do that better next time?" Um, you know, all the things that that build resilience that, uh, develop learning, that turn you into a full-fledged human, and also, like I said, just just really help you enjoy life, suck the marrow of life. That's what childhood's supposed to be all about. So anyways, Lance, I see you smiling through this because I'm I'm imagining um you look at this with a lot of nostalgia as well. >> I did that. So I mean we we were doing that. We you know we were jumping garbage cans with bikes and uh building skateboard ramps that attached to the roof of houses. So it'd be like from the driveway to the roof of the house and you know Yeah, man. You know, it's it's you know David Layman. Wait, was it David or Carl? I can't remember. It might have been Carl growing up. But we were jumping jumping ramps and he missed the jump on the other side, hit his face on the handlebars, knock out all of his teeth. Um, you know, people breaking arms and legs on the skateboard ramp. That was just like you said, that was a Tuesday. >> Yeah. >> But we all survived for the most part. >> Yeah. Jumping off roofs with bed sheets trying to make parachutes. Sure. Absolutely. Our parents were like, "Yeah, whatever. Just go outside. Don't come home till the street light comes on. We don't care what you do." So, I think that might be the best part of this photo. If you can see here, this adult sitting here in the background, just watching, not lifting a finger, not shouting any warnings, just, you know, hey, whatever. Kids being kids, right? >> Yeah. No, it's it it was the the best of times growing up. And no distractions, right? I mean, it is like, you know, you had to drink out of the garden hose and so you drink like 150 degree water out of the garden hose when you were thirsty. That was completely normal. So, >> so what's what's interesting is um >> great stuff. >> C certainly hear the boomers and the exers, you know, talk nostalgically about their childhoods. And to a certain extent, you even hear the um the older millennials do. And um it is with a lot of both wisfulness, but also a lot of sadness in terms of how childhood just doesn't seem to be that way anymore. But you hear a lot from Gen Z about kind of feeling like they were cheated out of this wonderful experience that their generation didn't get to have. And I I in in large part I think that's that's very true. And we've talked in the past >> about you know some of the things that caused this. And I I I folks if you didn't see it I think one of the more um the more important interviews I've ever done on this channel was with Greg Lukianoff who was a co-author of the book The Coddling of the American Mind. uh and he and his partner Jonathan Hate talk about how um there was a a really big difference um in in mindset of people who were born pretty much before like 1996 and then after and a big part of that one of the questions I ask um people is uh you know what's your what's your first memory of being able to be out in the world you know walking the neighborhood whatever um without your parents >> with you supervising you and If you're born before 1996, it's like 5 years old, six years. >> If you're born after, it's like 12 or 13, right? Um and and and there's been all sorts of developmental shifts based off of that. And a lot of them not very good for the ones that were were born after. And this has a lot to do with um the advent of 247 news. And that came right around the time of like the Adam Walsh and the Polyclass kidnappings. And all of a sudden, every parent thought, "Oh my gosh, my kid could get plucked off the street." and and we started really helicopter parenting in a way that we had never done before. And then 9/11 happened which freaked people out even more about safety and security. Um so we've kind of you know over corrected towards security and safety and helicopter parenting and creating safe spaces and all this stuff and it really has I think diminished a lot of the experience of childhood you know for for the current generations. I I it's curious like I I'm hearing now that that certain well that that newer Gen Z parents right that they're just starting to get to the age where they're becoming parents they are starting to reject this quote unquote gentle parenting trend you know that was big before them. Um so maybe maybe we'll see the return of I hate to say it but benign neglect of our children but but in a way that maybe restores some of what we've lost. Well, no. I mean, it's it's, you know, when when we were growing up and again, so the worst thing that ever happened was Dr. Spock, right? And this whole put your kid in timeout, you know, don't punish them, negative, you know, negative reinforcement isn't good, blah blah blah. Well, we see how that turned out. Um, you know, but again, you know, when we were growing up, if you had a problem with your buddy, you punched him in the nose. >> And that, >> in other words, you f you worked it out yourself. Yeah. >> You worked it out yourself. You punched him in the nose, he punched you in the nose, whatever it was. You tussled on the on the ground and then you were all friends and everybody went on down the road, right? It's just but you you did your own conflict resolution and now everybody's like, well, you know, if you get into a fight in school, you know, got to expel the kids and they're not supposed to fight, blah blah blah. You know, it's like, what are we teaching these kids, right? And again, I saw that same study. By the way, there was a study out just recently that the younger the younger parents are now coming up. They're going back to more of this LZ ver approach, which is what we call latch key kids. So when we were you and I were growing up is that there were the latch key kid was basically there was a key that was hidden under the mat of the house or wherever and and you know in the flower bed or whatever, but when you got home from school, your parents weren't there. You'd had to let yourself into your house and, you know, make your own snack, whatever it was, and then you went out and played. You just had to be home by the time the street lights came on. That was the rule. And what you were And parents didn't know what the hell you were doing. I mean, we were, you know, running through sewer drainage pipes and throwing fireworks at people. I mean, we did all kinds of stuff growing up that we should not have been doing. Absolutely not. But, you know, there was no supervision for it. But you again, you know, if there was a problem, you you you worked it out, then you moved on down the road. Nobody was going to tell people's parents and all this other stuff. >> So, you know, so interesting. And I'll get back to your point about nobody telling other people's parents stuff, but um you know, it's it's it's all rooted in culture, right? And um you know, to a certain extent, it's it's how much do you trust your culture to let your kids run around outside, right? And one of the things I hear about people who travel to Japan, Westerners who travel to Japan are often times shocked because they'll see little kids, you know, elementary school age kids, kindergarten in some cases, kids walking themselves to school, taking this public transit to school totally unsupervised. And it it it shocks Westerners because they're like, "Oh my god, there's a there's a six-year-old who's traveling the city here and there's no adult with them." Right? And but culturally there was a sense that like you know we're a village our children are our children and you know they're while they're not hovering over the kids everybody on that subway train is kind of keeping an eye out to make sure that the kids okay right >> um and I think we've definitely lost that certainly in pockets here of the west um >> but this goes back to the media thing right the problem with the media in general is that we have now extrapolated everything that gets reported through social media as to being everywhere all the time 24/7. Right. >> Right. And we completely misjudged the risks. This is a super tail risk, but it's my kids, so I think it's going to be a 98% chance. Right. >> Exactly. And so, like, you know, look, I live in a neighborhood. It's a bunch of There's a bunch of young millennial parents on my street that have kids growing up. They're all nice as they can be, right? I mean, kids are running around. It it's it's a really cool neighborhood. Like I because when I'm working at home like today I have this big picture window that overlooks the neighborhood and there's kids riding their bikes to the park. They're going fishing at the park by themselves. Their parents aren't with them but they're biking their bikes to the park to go fish, riding their bikes around the park, you know, running up and down the street playing kickball, whatever it is that they're doing. Parents are around, right? But like you'll look down the street and there'll be like eight groups of parents sitting in the front yard drinking beer and all their kids are just running around everywhere. >> Right. But you know we call that we call that the 70s. I mean that's >> exactly that that is great is going on. I just don't think that that is the >> Well, no. But here's my point though about that is that you know I think that we've extrapolated media into thinking that this terrible thing that occurs is happening everywhere. You know kids are getting kidnapped off every single street corner. You can't let your kid out of your house because they're going to get kidnapped down the end of the street corner. And that's not the case. >> Yeah. No, that that that's that's what Hate and Luke and I were talking about. Yeah. >> And and I think we just need to get a better grip on reality versus look, are there risk out there today? Absolutely. There was risk in the 70s when I was growing up. There was a guy, you know, Halloween and there was a whole big story back in the the late mid to late '7s. I have to I don't remember exactly. I have to go back and look it up. But he was poisoning apples on Halloween. >> No, no, no, no. He was putting razor blades on the apples. Everybody had that story. Yeah. >> Exactly. And so that but that happened and that was >> caramel apples with razor blades talking about. >> Exactly. So So there was that story and you know it was on the news and everybody knew about it. But you know now it's like every little thing that occurs is magnified. It's put on social media. Everybody's bad. Nobody's good. And you know I think we need to realize that human nature in and of itself inherently is good. Most people, whether they're conservative or liberal, doesn't matter. They're inherently nice people. They, you know, doesn't matter what their political views are. And we kind of get all divided on which political side we're on. But when you get right down to it, I have friends that are liberal. I have friends that are conservative. I have friends that are all in the middle. Vast majority of people are in the middle by a large stretch of the imagination. >> And they're just nice people. All they're want to do is go to work, make some money, raise their family, love their kids, and not have to deal with a bunch of crap. That that's really 90% of people >> and enjoy their community. I mean, they they want to be involved in community. So, no, I I agree with you here. And um uh you know, again, it's it to me it's it's largely cultural. Now, there are other issues, too, like talk about the media, then there's digital media, right? which is most kids don't want to go out and play because they've got >> well there's that >> they've got Minecraft or Call of Duty or whatever, right? >> Um but uh but no, I mean it's cultural where you know we need to kind of develop a little bit more trust and faith in our fellow man. We probably need the media to pick up on more stories of the kid that does walk to school and the the neighborhood looks out for him and stuff like that to start making parents a little bit more cognizant of what the true the true risk is, which is probably lower than they generally imagine. And and what Luke and and Hate say is you you want to shift from the safety first culture, which you know, I I I challenged them. And I said, "Look, I totally get what you're talking about, but I just think it's really hard on an emotional basis for a parent who loves their perfect little child, right, to be able to say, I'm actually going to in you want me to increase the risk factor on my kid?" And their answer is, "Yeah, we're not telling you to put your kid in mortal danger, but we're telling you to not raise them in this sanitary, bulletproof, shielded, you know, safety bubble where they're not going to get to experience life." And so I said, "Look, it I mean, just statistically, a lot of large numbers, more kids on an absolute basis are going to get hurt and probably some amount die if we lessen the safety gauge here." And he said, "You know what? You're right." But he said, "If you look at it in the long run, we're going to save a lot more lives in the long run." Because what the data is showing us right now is while kids are kept probably too safe at a young age, by the time they get to adolescence and young adulthood, they have all sorts of behavioral issues and frustrations that the self harm and maybe even, you know, the suicide rate uh is much higher than it was in previous generations. And so therefore, if you want to look at this on a lives lost bas or lives saved basis, you're actually going to save a lot more lives in the long run by loosening the constraints when the kids are younger. Um really interesting. >> I agree with that. When we were raising our kids, like if a neighbor was like the neighbor down the street, their kid had the flu, we'd send our kids down there to play with them. >> The kid get immunity or just because you just No. To build up their immunities and and to be nice, right? The kid was at home. I had the flu. Couldn't play with any. >> Well, that's how I got chickenpox. My mom sent me to a chickenpox party when I was young. Yeah. >> No. And and and you know, I think, you know, we're so we're we're so afraid of, you know, COVID or whatever it is. There was a terrible article about a couple that just got arrested because they kept their kids locked up for like the last six years. >> Oh, yeah. No, no, I saw that. Um the poor kid like almost couldn't walk. Didn't know how to walk. >> Yeah. >> It was terrible. But you know, the point is is that we're so afraid of the stuff we hear on the media that we forget that exposing ourselves to negative environments makes us stronger, right? >> So, you know, you know, you expose your kids to, you know, sick other sick kids. So, they get sick. Yes, they get sick, but then they build up an immunity so they don't get sick in the future. And what you're trying to do is, you know, when we were growing up, like I said earlier, we were growing up, we're drinking water out of water hoses and all kinds of stuff, you know, drinking after each other. And, you know, nobody thought twice about it. There wasn't, you know, nobody's over there wiping the germs off the garden hose, you know, before you drank out of it. It was just you didn't even think about that stuff. Um but you know this is you know we we made a conscious effort raising our kids to expose them to negative environments so that they could build up immunities. They could build up you know be stronger personal wise be physically stronger um you know those type of things put them in in active sports activities where there was a risk of injury because that made them stronger made them more durable. So, we just exposed them to that type of stuff so that they could they could grow up and be good, strong, healthy kids, which, you know, has worked out well. But, you know, I think we've gotten so concerned about exposing our kids to negativity that it's just now we're oversheltering them and we're and and that's going to be more of a hamper than a helper in the future. >> Right. And and just a few things you said there. one is so I totally agree sports are super useful for for life for kids but also you know the pendulum has flowing way too far where kids are in these super formalized sports programs pretty much from the time they can walk. Um and not only does it you know probably leech all the fun out of the experience for the kids. Um, but it overstructures kids' lives. And I think a really, really critical benefit of this kind of benign neglect childhood that we were talking about is dealing with boredom. Like that like there's kids that created that that ramp with the jump right there, right? Like so much of all that came from kids saying, "I don't want to be here bored. I want to create something interesting to do." Right? And and it's that kind of creative thinking, collaboration to create something out of nothing. come up with makebelieve and all the crazy games you would play that you would invent on the fly. You know, there were all sorts of versions of like pickle ball type sports in the sense where the kids were just grabbing different things and say, "Let's make some weird sport out of this this afternoon." Right? There's just so much like brain development that comes out of that that you don't get when your life is completely structured as a kid and you're just being shuttled from one pre-arranged thing to another. >> This seems to be striking a chord with you. >> No, it is. There there was actually a very interesting that's part of the this kind of article that was talking about this LZ fair approach of the new generation. I have a bunch of my friends that not you know younger people I know younger friends that are raising their kids and they're all in these very organized you know travel ball clubs and those type of things and it's you know honestly it's more for the parents than it is for the kids. It can often be that way. And look, if you do it, folks, I'm not I'm not denigrating you in any way. And there's a lot of great that can come out of that stuff. My point was just don't make it everything. But anyways, keep going. >> And and like when we were growing up, we didn't when I was raising my kids, we didn't they participated in sports, but it wasn't travel ball. It wasn't these things. You know, they played a season of football, they played a season of baseball, they played a season of softball for the girls, you know, those type of things. Um, you know, we and we gave them a lot of different experiences. So, you know, like this year would be softball. Next year it would be some, you know, basketball or whatever else. So, they got exposure to different things, different sports, different activities, but there was a lot of just free time for them to go out in the neighborhood, ride scooters around the neighborhood, those type of things. And, you know, and like you were talking about earlier, our kids walked themselves to school. We didn't walk them to school. We didn't drive them to school. if it was raining outside, we gave them an umbrella, >> you know, but you know, we trusted them to be smart and, you know, get themselves to school and get themselves back home, but it made them responsible, >> right? They they learned how to find their way in the world, right? And another part of this, and then we'll wrap this up, folks, um >> is uh again from like a a development process. Um, you know, something happened kind of around that that same time frame I mentioned earlier of the the late '9s going into the new millennium where parenting became the family revolved around the child. So, we've got a kid. Well, the kids got these birthday parties and this sporting event and this thing at school and the whole family kind of rotates their schedule around the schedule of the child, which is, as you probably remember, Lance, completely different than what it was like beforehand, right? You know, as a kid, your parents, they drove the schedule. This is what we're doing, and you as kids are coming along for the ride, right? Unless you're going to go sleep over at, you know, Joey's house tonight. Um, and uh, the the downside of making it all around the kid is they they kind of almost develop this sort of you know this sort of god complex. I don't want to overexaggerate it, but this this sense of understandable entitlement well that the universe revolves around me because it has my whole life, right? Everybody in my life has has been in my orbit. Um, and then they go to college or they go out of the house and they all of a sudden realize, whoa, whoa, that's not how the world works. I'm expecting everybody to revolve around me and nobody's paying me any attention, right? And that's where they tend to have a lot of real behavioral breakdowns and stuff like that. And so, you know, again, I'm not saying don't love your child. I'm not saying don't invest in your child. I'm not saying don't don't increase your child's level of risk by pushing them out a third story window. Um, but it's it's, you know, let them learn how to be in the world the way that children have from time and memorial up until just very recently. Um, so I'll close on this one thing, Lancer. You were talking about some of the things you used to do their friends. So I grew up in this small town um in New England and um my parents divorced when I was real young and so my mom had two boys and I think probably just given her life situation, she met two other ladies her age who also had boys. Um so there were seven of us in town who just spent all our time together. I mean, literally from birth through seven, every day I got up and just hung out with with with the guys and it was like, "All right, what are we doing today, guys?" Right? And our mothers who were divorced and our dads who were divorced, had plenty of other things to focus on in life. So, like you, they were, if we weren't already leaving in the morning, they were shoving us out the door. Um, and it was like, "Come back for dinner or call me if you go to one of the other houses for dinner." And they didn't see us for the rest of the day. And I mean and I was like four, five, six during this period. So just roaming around town. We had a clubhouse, Lance. So this was a this was a coastal little town. We we had a clubhouse in this commercial boatyard. So you know, all these old, you know, boat and dock workers worked in this boatyard. And we as kids were there, you know, not supposed to be there, but we found abandoned parts of the yard with old ships holes that we could turn into a clubhouse. and you know pill for all sorts of things from around the boatyard as you know to make stuff out of to to play games with and things and I mean when I look back and kind of like those old you know little rascals uh TV show like this is kind of what we were like like our job was evading all the adults in the world to create our own little world ourselves in this this boat house and then go out into town and you know do something else get find other ways to get into trouble but I try to imagine people doing that today. And it just seems inconceivable to me, a that anyone would let kids that young just roam around freely. B that kids would be basically breaking into a commercial operation and setting up their own private clubhouse uh without getting arrested, eaten by Doberman's, you know, some high-tech alarm system. I mean, it just it it does when I think back on it, it just feels like such a different world. But I can't tell you how fondly I think back on those days, Lance. Well, no. And look, if you are going to push your kid out of a third story window, it takes two bed sheets to make an effective parachute. So, you know, just >> Yeah. >> trial and error. It took trial and error and a broken wrist and a sprained ankle to figure that out. So, >> yeah. And if you find an old mattress in the woods, that helps if you drag it under the window, too. >> Exactly. Absolutely. And bottle rocket wars. Those were the best. >> Those were the best. I think back to how many of our games were you play until someone gets hurt? >> Yes. You shoot bottle rockets at each other until someone gets hurt. You throw chestnuts at each other until someone gets hurt. >> And what's great about that is when somebody got hurt, everybody just scattered to the wind and just left them there. IT WAS LIKE, "OH, JIMMY'S MAN DOWN." AND EVERYBODY JUST RAN HOME. >> That's so funny. >> Middle of the field. >> Ours was almost the opposite because we had, you know, I had an older brother and and with these other families of boys, there were there were the older boys and the younger boys and we were separated by about four years. And invariably it'd be one of the younger boys that got hurt in those games. And the older boys would rush over and be like, "Okay, you can't tell mom." All right, suck it up. >> Exactly. Don't tell mom. It's all good. >> Exactly. >> If you tell mom, I'll kill you. >> All right. Well, look, um, we'll start wrapping it up here, folks. Just a quick reminder that we've had some really great content on the channel of late. Um, I mentioned the Ed Dow video that we just did. Man, Lance, that thing hit 100,000 views in the first 24 hours. That's awesome. Um it's still going strong. Um quite similar response to the um video we just did with Stephanie Pomboy earlier this week. And we've got Jim Carson uh coming out the day after this video airs. So if you're watching this on Saturday, it's it's coming out the next day on Sunday. Uh that's another great one all about risk management and and volatility. Um so keep your eye out for those ones, folks. And uh again, I will keep you all a breast of what happens with this potential um really high opportunity media event coming up for Thoughtful Money. Uh everybody cross your fingers. I hope to have really good news about that the next time I'm on here with Lance. 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Perhaps you'd like to talk to Lance himself there and the team at RAA. To do that, just fill out the very short form at thoughtfulmoney.com and the firms will be in touch with you right away. Lance, as usual, my friend, another great week. Um, you are what uh two weeks away from your uh your big speeder debut on the beaches of Italy. Yes, it is two weeks and I tell you, I was telling you this at this at the beginning of the show. I tell you, this no carb, no sugar thing, it's making my making workouts really hard right now. So, >> your energy stores are so much lower. Yeah, >> exactly. >> But you have two weeks to grind through, buddy, and then it's over. >> I know. That's I just keep looking at that. I got a picture up on the on my refrigerator, so it's all good. >> Yeah. Is the picture of Borat in his uh full body speedo? >> No, no, no. It's a picture of this of this uh from last year. Actually, when we went to Italy, the last time I took a picture of we rent an Airbnb there. It's a house that was built in World War II and it has a it's a it's on a lemon farm. So, there's these lemon trees that surround the house and but like big softball sized lemons, but it overlooks the Amafi coast. And so, down in the coast is all these $150 million mega yachts, those type of things all parked there. And uh so it's a picture of that. So, I just I'm going to be sitting up on that balcony looking at those boats and just, you know, drinking lemon cello while I'm >> I was gonna say sipping your own lemon cello. >> Exactly. >> Well, fantastic, my friend. Well, I think we get you for one more week and then hopefully we'll have Michael Ewitz take over while you're gone. Anyways, good luck, my friend. You can see the end of the tunnels in sight. >> Exactly. But yeah, definitely be here next Friday. So, hopefully something exciting will happen. >> All right. Um well, cross your fingers on that, buddy. And uh folks, another great week. Thanks so much for watching.