Stock Valuations Are The Most Deviated They've Ever Been In History | Lance Roberts

Summary

Market Outlook: Fed cut 25 bps and ended QT, adding a potential buyer to Treasuries and stabilizing yields; seasonally strong months and buybacks position markets for a year-end rally despite early-December distribution softness.
AI Theme: Extensive discussion of AI’s dominance, narrow breadth, and bubble risk; if AI falters, the market could see a 30–40% drawdown given index concentration.
Data Centers & Power: Massive data center buildout faces power constraints (nuclear/nat gas likely needed), with risks around chip obsolescence and the need for modular upgrades.
Key Pitches: Adding to META after a one-time tax charge; already owning NVDA and AMZN with positive capex-driven momentum.
Defensive Stocks: Holding COST and WMT as ballast for potential rotation, with staples positioned to attract inflows if mega-cap tech corrects.
Energy: Building a thematic energy portfolio; near-term oil risk to $40–$45, but multi-year upside expected given AI-driven power needs and structural underinvestment.
Semiconductors: NVDA and chip demand central to AI; investors should be mindful of valuation excess and the potential for rapid hardware obsolescence.
Risk Management: Narrow breadth, declining money flows, and RS divergences warrant rebalancing and selective rotation into oversold, lower-beta areas.

Transcript

valuation deviations from long-term growth trends is at 158%. Ne never in record at this level, right? I mean past the peak of 1929. So, you know, when you look at how deviated earnings are from long-term trends, valuations long-term trends, markets from long-term trends, you can have a massive correction in this market and still be in a bull market. That's the hard thing for people to understand. Welcome to Thoughtful Money. I'm Thoughtful Money founder and your host, Adam Teert, welcoming you for another weekly market recap here at the end of the week with my good friend, the ghoulish portfolio manager, Lance Roberts. Lance, happy Halloween, buddy. >> Hey, happy and actually recording this on Halloween. So, there you go. We'll do some extra scary stuff today. [laughter] >> All right. Yeah, some of these topics we have here might might be considered scary. Um, >> all right, before we get to them, let's just talk about the news of the week. Um, the Fed met this week or yeah, they met. They had their release. Powell gave his press conference. Kind of the top highlights of that are the Fed did cut 25 basis points as everybody was expecting. They also announced the end of QT to start on December 1st, which I would say most people were expecting. Mhm. >> I would say maybe the only real quasi curveball that came out of this was the market has been expecting uh the Fed to keep cutting from here and pal really did take pains to say hey look I'm not saying if we're going to cut or not and on December I normally say we're data driven and we're going to look at the data to make our decision but I'm saying more than that here. I'm basically I'm just want to make a point that if you are if you are dead committed to us cutting next month slow your roll. Um, so markets had to ratchet down their expectations for a rate cut in December. >> Yeah. And I don't think any of that surprised. You know, Mike and I have been talking about the fact that the Fed would end QT back in January of this year because we were watching what was kind of going on liquidity in the markets >> and that eventually they were going to have to stop QE all entirely. And so, you know, the to your point, it was widely expected that they were going to do this by now. It wasn't it wasn't expected when Mike and I were saying earlier this year. It's just, you know, now it became kind of apparent particularly with what was happening in the overnight repo markets. So, you know, there's some some good and there's some interesting things to that. So, you know, one thing that'll happen is that they're now going to shift all their purchases to treasury bonds. So, so if you don't understand what QT, there's a there's a lot of misunderstanding about quantitative easing. And the first is that the Fed prints money, which they don't. It's an asset swapped with banks to credit reserves in exchange for the the reserve credits which banks can then turn into money by loaning it out. The bank swaps treasuries with the Fed or mortgage back securities. So every month when we were doing full QT or full QE, right, we're doing 35 billion a month in in treasuries. So they were buying these bonds during QE. When we went to QT, they stopped buying the bonds and they were allowing bonds to mature off their balance sheet. That's why the balance sheet dropped. But what a lot of people didn't understand is they were still buying bonds in the market. So when they were down to 5 billion a month in QT, if they had 10 billion uh dollars worth of bonds matured a month, they bought 5 billion and allowed 5 billion to roll off. Now, why is that important to understand? Because what they're going to do now is they're going to get rid of their mortgage book. So they have a bunch of mortgage back securities on their book that they should not have been buying really during the they you know they bought mortgage back securities to stabilize the housing market back in the financial crisis and then they started buying mortgage back securities during the pandemic which really they shouldn't have and I think that that the Fed now understands that that's a mistake. >> So they're going to allow the mortgage back securities to roll off and all those roll offs will also be bought into treasuries. So while so in other words, so if I have $50 billion worth of bonds mature in a month, th that much is going to get bought back to keep the balance sheet stable, right? It's not going to increase the balance sheet, but they're going to be keeping the to the balance sheet stable. So the important thing about that is this now adds a new buyer to the Treasury market. So as the government is issuing debt um to finance spending, they've now got the Federal Reserve back into the game of of actually buying that debt. Now they don't and this is important the Federal Reserve does not buy debt from the government. They buy debt. They swap they do an asset swap with banks. So the banks the primary dealers when the government wants to raise capital they lo they create debt right? So they create a bond. We're we create money through lending. So the government creates a bond. The banks buy the bond. So there's a cash swap between the banks and the government. So governments gets cash to spend. banks get the bonds. The bonds then do an asset swap with the Fed in order to create the the flow, so to speak, for quantitative easing or quantitative tightening, whichever you're doing. But that's occurring between the banks and the Fed, not the Fed and the government. >> Yeah. And Michael and I talked a bit about this last week, but yes. Oh, good. Okay. >> Uh that that is how it goes. And I we should probably at some point really just do a refresher for people on this because even I myself after talking with Michael last week had to go back and just um watch a few videos to make sure that I was still up to speed exactly on how money gets created. Um >> well I've actually got an it's I'm actually writing an article for next Friday. >> Oh well there you go >> on that. >> This is always the case. >> Yeah, exactly. I I'm surprised not at all by that. Um okay. So I'm glad you you you mentioned that. Um so two things. One to your point about the Fed um probably regretting buying market back securities during the the pandemic. >> The Fed themselves I believe Lance actually came out and and they didn't say we shouldn't have done it but I believe they did say we did it for too long. So the Fed is actually you know it it Fed doesn't usually admit mistakes and I I definitely noted that. Um, and I'm glad you brought this up because this was a point that I asked, uh, and I can't remember if it was Michael last week or somebody else this week, >> but the Fed post GFC >> was by far the biggest marginal buyer of treasuries, right? They were really driving the Treasury market. Um, the Fed has been out of that game for all intents and purposes. Yes, they they were buying in the way you said during QT, but it was just to manage the pace of of the balance sheet runoff, right? >> Correct. >> No, they're not they're not stepping in in like a QE program, right? Um but they are going to be increasing their purchasing of treasuries on a going forward basis for the reasons you mentioned, right? Mortgage, they they want to freeze the balance sheet where it is now, right? So to do that, as mortgage securities roll off, as you said, they then have to buy treasuries to replace that on the balance sheet. So the Fed will be stepping back into the the Treasury market more forcefully. Um my question is is how material is that? Is it is it going to really matter or is it still too small to at this level to be a big factor? >> It's not a huge factor right now. Um it is going to provide some stability to yields. Uh in other words or would actually bring them down a little bit. It might bring them down a little bit, but let's just assume that for the most part it just kind of keeps them stable. But what this does open up is the ability for the Fed to return to QE in the in the future. And so if you you know with kind of what's happening with balance sheet liquidity and and those type of things that's occurring, you know, we're seeing what's kind of going on with the repo market, which was the same thing we saw back in 2019. If you remember back in 2019, we had this issue with repo rates starting to blow out and uh collateral was getting very expensive for banks to hold overnight. And so that you know kind of predated them going back to QE during the shutdown as well. So so again this you know stopping QT and just going to not QE uh just being flat it does open up that door for the next step to be a return to QE at some point. if needed. >> Okay. Um I guess it does beg the question too. I should I should pull up a I'll try to do it while you're talking next. A chart of the um the debt the public debt >> but what uh pre208 we were at what like 800 billion right on the Fed balance sheet. U not public debt but the Fed balance sheet. Um >> yeah, Fed balance sheet ran at about 300 billion for a very long time and then it kind of crept up to around 5 6 7 800 billion before the financial crisis. Yes. >> Right. So financial crisis hits the Fed basically doubles its balance sheet during that time and Bernanki said don't worry everybody this is temporary and uh you know we're going to we're going to go right back to you normalizing all this and getting back to where we started right after the GFC. And then lo and behold here we are. what you know 15 years later or so uh having hit nine trillion right and then now we're down to sixish and we can't go any lower right >> right >> yeah um so it it does and to your point I do want to talk a bit more about this I think I don't think the Fed is just in in love with six something trillion I think what they're saying is is hey we're actually starting to see some signs of stress uh begin to emerge in the credit markets not not not crisis, but just to your point, we're starting to see, you know, these repo activities start to pick up again. Um, we're starting to see credit spreads start to widen again. Um, we're starting to have some of these cockroach companies, you know, starting to roll over again. Um, and these are all just kind of precursors to what could be trouble in the credit markets, which of course is the thing the Fed wants to avoid more than anything else because its job is to keep the banking system running when the credit system is essential for that. So, >> and that was some kind of that was also kind of a key statement that they've been talking about lately is that we've gone from ample liquidity to just basically some, you know, you know, kind of primary liquidity. Sorry. >> Yeah. Like a steady state like we're not we don't have excess now. We just have just enough to keep things going. >> Yeah. Yeah. We're Oh, sorry. Sorry. That so their access Sorry, I misstated that. So, their their statement was is we've gone from abundant liquidity to ample liquidity. So that's to your point, it's kind of we're to that level where if we go much lower on liquidity to the markets, bad things tend to happen. And so that's really kind of the thing I think they're looking at more than anything else is that and to it it is kind of ironic, you know, we we started we did QE1 that was supposed to be temporary and QE1 ended and the market fell 20%. So So Ben Bernanki stepped in did QE2 and market rallied and then when QE2 ended the market declined and he said, "Okay, we're going to do operation twist." And then we had the whole debt ceiling debacle thing and we stepped in with QE3. So every time there's been this is the problem with the markets, right? So, I mean, at the end of the day, you know, I I just wrote an article about this recently that, you know, we've trained investors to buy crisis because every time there's a crisis of whatever reason, whether it was Brexit, the Eurozone crisis, um, just, you know, the the the fiscal cliff back in 2013, >> bank, >> yeah, Silicon Valley Bank, the Fed has been right there to step in. And so, investors have not been trained to buy the dips, right? just just buy every dip because the Fed's going to step in and bail it out and you know that's not been a bad trade and this year buy the dip is giving you one of the best returns of 30 years. >> So um we're going to talk about your recent piece which which talks about that. Um but my question for you at this point is is you know what does it say about not so much the markets but the economy that we can't normalize right without things starting to fall apart. Well, you know, but that's it. You know, at the end of the day that, you know, this is the problem is that we've all become used to this certain level of of standard, right? And we don't want the pain to go back to health. And, you know, it's interesting. Everybody talks about, oh my gosh, the debt, the deficits, and all these things are so bad. They're terrible. Okay, maybe. But nobody's willing to go to do what it's necessary to to reverse that, right? So, you know, you're going to have to cut spending. you're going to have to give up a lot of your, you know, your economic benefits, right? We're going to have to go into a very deep recession slash potentially depression, you know, to get the balance sheet writed again. And I'm not talking about the Fed balance sheet. I'm talking about everybody's balance sheet to get everybody's balance sheet back into a healthier state. But again, nobody's, you know, this has always been the problem with government is that whoever's in office doesn't want to to experience the pain because they want to get reelected, right? >> Yeah. And look, I don't want to sidetrack too much on this, but um I will give my bias and you can tell me if you share it or not. Um human nature being what it is, the political system being what it is, I I I I just don't see us materially reforming the system uh and avoiding, you know, some reckoning here. I feel like at some point here you get to a point and use the body health analogy where you've >> you've stimulated and juiced and you know done whatever you can to the body uh rather than changing your unhealthy habits and at some point the body starts breaking down. >> Yeah. No, I've said this for a long time is that you know you know you've got two choices. We've got we've got two choices right now in front of us. And we could choose to start making small sacrifices today in order to slowly reform the economic system over the next 10 or 15 years back into a much better state of health, but and this is really to your point, or we can choose to keep doing what we're doing and eventually the system's just going to say, "Nope, we're going to fix it now." And it's going to happen all at once. And it's kind of like your body just basically shutting down going, you've been smoking and drinking and, you know, overeating for 20 years. Here's your consequence, right? And that's the way it'll eventually happen. Hopefully I'm dead by then. But >> [laughter] >> um but yeah, I mean it'll eventually, you know, we're going to keep running this pace until the system eventually buckles. But again, you know, we're not anywhere near that level. We're at 118% of debt to GDP. You've got Japan at 320. You've got Europe well over 200%. So I mean, you know, we're nowhere near the levels that, you know, we're going to have this exogenous break, you know, within the next year to two. >> Yeah. I I So yeah, I mean, could it happen in the next year or two? Maybe. You know, is it likely far off in the distance? Maybe. Uh I don't know when it's going to happen. I agree with you. I don't think it's an imminent, you know, systemic breakdown is like an imminent threat. What I will say to your point though is is yeah, we could make small changes today versus the the much bigger changes reality would force on us on its terms. >> But I will say the changes we make today are a lot bigger than they would would have been had we done this >> Oh, sure. >> pre208, right? Like Oh, sure. >> And I So I don't want to diminish the fact that actually we've got some real problems here, right? >> Yeah. Yeah. >> Well, we we should have never done the stuff we did in 2008. I never cleanse. Yeah. >> Yeah. If you would have just let the system and everybody's but you know everybody goes oh but if you would let the banks fell then you know that would have been depression maybe reality is probably that no that wouldn't have been the case. We would have had ancient history now >> recession >> right. It'd be ancient history for a couple years. >> Yeah. Better providers step in and we'd probably be on a lot more sustainable course now. Yeah. >> Absolutely. And we wouldn't have the debt issues. We wouldn't have all these other issues. But again, you know, we those those and again, we did it again in 2020, right? We shut down the economy. Great. Shut down the economy. We have a recession. You know, go go stay at home. There was no reason for the government to start sending checks to households and doing and and the Fed to come in with 120 billion a month in QE. You know, you had another opportunity to cleanse the system without anybody taking any real responsibility for it, right? The government's just, hey, we're have to shut down the government because of this crisis. they had a prime opportunity to fix a lot of this stuff, but instead of doing that, we went right back to the old playbook, which was, you know, bail out everything, right? And and we just keep doing this over and over again. So, we keep the bad actors alive and it diminishes the health of the good actors. >> So, you you and I, I think, were talking about this in almost real time because we started doing these things back, I think, in late 2021 or early 2022. >> Yeah. And it was like you had a perfect gift from the universe to blame all this on co this pandemic nobody could have seen coming right and you just could have said man that was really rough and man let's all hate co now that it's behind us >> but but hey you know we took our lumps and then things were a lot better after that right but instead to your point we just we we took the deformation and we dialed it up to 11 okay we could keep ranting on this but I'll move on my only last question on this is is >> of the stresses that we're starting to see right now these signs the early signs of stress. Anything here worrying you, concerning you, or is it too small to really get nervous about? >> Look, you know, as as I've often said with you is that, you know, if you're going to make a prediction about something, it needs to be timely. It needs to be actionable and and those type of things. You know, there are certainly some things that are building up in the market that are certainly concerning, but I don't think those are things that mature. I could be wrong, but I don't think there's anything that doesn't mature until next year. Over the next couple of months in particular, you've kind of got the wind at your back. So, as of today, there's nothing that is overly concerning. There's a few things, and we'll talk about them. We get to kind of talk about the market. We'll talk about bad breath. We're going to talk about a couple of other things. Um there's certainly some some short-term technical concerns on the markets, but in terms of hey, you know, should you be like, you know, really ramping it up into, you know, safe haven type investments and cash, don't really see that just yet. We don't see any indicators suggesting that just yet. >> Got it. Okay. Um but I guess it's I just want to give people a useful analogy. So, we're not seeing any red lights necessarily on the dashboard yet, but are we seeing a yellow light or two? Sure. Yeah. No, absolutely. I I think there's some some things that you need to be paying attention to. Like I said, we we'll talk about breath here in a few minutes. Um but market breath, particularly over the last few days, you know, the the market ran up pretty sharply, you know, heading into kind of the the big mega cap earnings this week. >> And the breadth on that advance was some of the worst we've seen since 1990. So, you know, and again, just you know, that that doesn't necessarily mean that oh my gosh, you know, this is a terrible thing. But you know the you know strong markets are not driven by very narrow breadth. You need good broad breath to drive a market. And we're back to you know we were talking about this a couple of years ago about the the gap between S&P market cap weighted and and S&P equal weighted indexes. And that gap you know over the last 6 months is about 12% between two. So the S&P is up 24% and the equal weight's up 12%. you got a massive gap in performance on exactly the same index. It's all a function of waiting, right? That that shouldn't happen, but that's what's happening in the markets right now. >> All right. And and I I do have notes here to to get into this whole breath thing with you. Um and maybe we're just maybe we're just getting to it now, but there's a chart here from Torstston SLK I wanted to bring up here. Um it's gives way to your point there, Lance, which it shows here, you know, not not even just the market um prices, but profit margins for the Mag 7. Um >> it's pretty much where all the profit growth has been, right? Um they've all year they've risen for the MAG 7 and they've declined for the remaining S&P 493, right? So it's a K-shaped economy. We've talked about this, you know, not just for for people, but also for corporations as well. And right now, it really does seem to be >> a winner take all market um where, uh, you know, those big AI guys are are basically running away with kind of everything, which I guess we'll go straight here then. Um, so my [clears throat] question to you, Lance, is um two, um, will this only continue from here? And is this healthy? >> Uh, well, so first, let's answer the second part first. No, it's not healthy. That's easy. >> Okay, >> but you know, look, here's here's a really good example. Apple reported revenues this uh earnings this week. Apple hasn't grown revenues to any great degree in 5 years, right? Stock keeps going up, making new highs. Um, you know, on a fundamental basis, you would say, you know, Apple's not really growing anymore. It's a very mature company. So, I'm going to allocate my money elsewhere. Um, which is a decision we actually made too into companies that are growing much stronger. Um, but the reason Apple keeps going up is because of the big mindless ro the giant mindless robot, right? It's just that passive indexing flow into these companies and and the more that we have retail investors chasing ETFs and and again, now you start talking about leveraged ETFs, not not two time leverage or three time, we're now up to five times leveraged on ETFs. that you know that just all feeds those same stocks over and over again. So this bifurcation is being driven by the impact of passive investing and that has consequences but only when eventually something happens that causes the passive indexers to sell. And that's the that's the that's the hard challenge. And we can point to fundamentals, we can point to all these other things, but nobody cares about fundamentals if you're passive indexers. you're just buying the indexes and there's so much money that's flowing into that. It's just continuing to create this bifurcation between reality and fundamentals, right? And what's happening in the market and what's happening in fundamentals are two different things. And nobody's paying attention to the fundamentals. And at some point, you've got to something's got to happen to cause all those ETF holders to start selling their ETFs. And and I and I don't know what that is. There's got to be some catalyst that freaks the market out and gets them to sell. But that's the only thing that reverts this to any great degree. >> Yep. So totally agree. So to my point about healthy um let's assume for a moment that this does continue for the foreseeable future, right? Next couple years this trend just keeps going on, right? >> Mhm. >> This is the danger personally I think of of the sort of K-shaped bifurcation, right? Is >> on average on the headlines things will look good, right? GDP will continue to grow, corporate profits will still look good on average, right? >> But if if your economy is increasingly just seven companies and all other parts of the economy are starving, you know, getting more increasingly starved, >> uh that I mean that just doesn't lead to a society good place in my opinion. >> No, that that's right. I mean, look, I real quick I'm I'm struggling for a chart here real quick. I posted a chart this morning on Oh, here it is. But yeah, to, you know, to your point about this being a kind of a K-shaped economy. This is small business employment, right? That's and and small companies are dropping employment very sharply. But yet, you know, we're we're even seeing layoffs with companies like Amazon, Microsoft, others. They're laying off employees as well. So, you know, one of the big challenge >> Yeah. Yeah. And and again, you know, this is the whole challenge going forward. AI this this you know kind of you take a look at construction construction spending there is no construction spending ex data centers for the most part I mean data center construction is everything right now um you know AI development of what's going on that's where all this spending is occurring um you know so but once you strip all that out there's not a lot lot else happening though the economy is actually running fairly if you strip out AI construction for data centers the economy is a lot weaker than it actually looks like on the surface and and if you strip out what's happening with large companies and look at employment, it's a lot weaker than it actually looks. So, we've got this and and again, this doesn't even talk about the fact of how many people potentially you lose jobs once AI comes to fruition. That's a conversation we'll have another day. But, you know, [clears throat] there is a very big bifurcation within the economy between kind of what's happening with the Mag 7 and and data center buildouts, etc. versus what's happening with the rest of the economy. So, I'm I'm going to make an analogy and I'm I'm curious to hear uh how accurate you think it is. So, it's almost kind of like you're a basketball team and you are fortunate enough to have LeBron James on it or LeBron James type, right? So, he helps you win a lot of games because he's great. And so, the coach essentially starts stealing food from everybody else on the team to feed LeBron cuz he's so good and we need to have him, you know, do his thing. >> And he gets better, right? right? It gets even better, even more dominant, right? But you now have this team that is pretty much LeBron James and a bunch of skeletons, right? So, it's not good for the other guys on the team. And god forbid LeBron twists an ankle, you know, gets ejected for a foul or whatever, right? Like then all of a sudden you're just fielding a team of skeletons, starve skeletons, right? Like it's it's not good. And so, you know, the AI trade could continue forever, you know, for a long time, but it might not, right? there, you know, definitely risks you and I have brought up and stuff that just, you know, maybe the bloom falls off the roads for one of a zillion different reasons. Um, and if it does and really lays bare the fact, oh my god, we don't really have the rest, we don't really have a healthy rest of the economy to support all this, again, I just don't think this is a healthy trend. >> Yeah. Well, no, I mean, but this is this is what happens during the internet boom back when, you know, you and I were going through the dot boom as well. Well, but it didn't it didn't starve the rest of the econ the.com didn't starve the rest of the economy like this. >> Well, no, no, but I'm just talking about expectations were that this was going to be, you know, the everything thing and and and it did it did impact and it did impact a lot of the economy. I mean, there were a lot of jobs that were lost to the internet because of efficiencies, productivity increases, etc. Um, you know, that's what >> Yeah. Yeah. Yeah. And that's the same thing that happened over with with AI. I mean, you know, AI isn't going to replace all the parallegals tomorrow, but over the next 10 years, there may be no parallegals left, right? So, it just I'm just using that as an example, but you know, there's going to be a lot of jobs that are eventually phased out or lost because AI can just do it. But, but the question is is it will it be as effective as everybody thinks or will it just become kind of like the internet is? The internet was expected to just take over kind of everything, right? and it was going to replace everything and and really it just became a tool to help people be more efficient. And that's going to be the ultimate question for AI is is it is this something that eventually displaces a lot of work or does it just become a tool that makes workers more efficient, right, and and more productive? So, you know, there's there's so many questions out there, but you what we can't deny right now and and like I've told you before, you know, my wife's working with a a big company, one of the big mag seven right now to build out power for data centers. And that is that's going to be the next thing is how to power all of these data centers that are going to get built. And and what the end result of that is, you know, we don't know yet, but that's going to be a lot of job creation. That's going to be a lot of support. That's going to be a lot of economic impact just the just the infrastruct structure side of that. That's why we we launched that infrastructure portfolio a couple of months ago because that's going to be the big driver at least for the next year or two. >> Yeah. Okay. So, a couple of things in there. So, first off, I think you agree with my analogy and in the fact that >> this I I would have I would have used the analogy of Michael Jordan and the Chicago Bulls, but yeah, to your point, >> that's fine. I'm totally cool [laughter] with that. Totally cool with that. Um, okay. So, and look, per personally, here here's my biggest fear on the AI side from a market perspective. >> Yeah, >> I don't necessarily think, Lance, it's going to be a black swan, but it could be. I think it's just going to be like most bubbles where there's just some mathematical point that nobody knows >> where the marginal buyer flips to the marginal seller where they just say, you know what, we've overpriced this thing. We've pulled too much of tomorrow's value into today. And then you get that cascade as kind of the market realizes that, [snorts] right? So >> yeah, no I think that's a huge risk. >> No, I think that's a huge risk. I think expectations are way too elevated to what reality is going to be. But it's going to take time to get there. >> But it's going to take time to get there. But but even even if even if that doesn't happen or if that doesn't happen for too long from now, right? >> To your point, the success of AI is going to a uh probably make energy a lot more expensive for everybody, >> right? So not great for consumers. And I actually kind of disagree with you. Um or I have a different opinion of you, which is I do I think AI is going to be much more of a jobs threat than the internet was. Yes, the internet got rid of travel agents and secretaries, right? But those people were able to find other jobs in the economy that the internet enabled. Yes, AI will create some new jobs, but I think on net net, if it delivers on what it's going to do, I think it's going to displace a lot more jobs than that. And I think a lot of those jobs aren't going to come back. Uh, >> no, no, you and I, you and I absolutely agree on that. I said what I said was basically that is I think the threat. I said the other option is is that it becomes it's not as a big of a threat as we expect because it doesn't work as well as everybody expects but it becomes more like the internet where it's an efficiency tool. Right. >> Right. >> But I do think if if AI lives up to its promises, it's a huge job threat. >> Yeah. So to my my to torture my analogy of the basketball team, you're starting to get rid of additional skeletons on the team, right? >> Yeah. You're talking about having you're you're talking about building the team of the Chicago Bulls with just Michael Jordan on the on the floor and nobody else. >> It's like a two-man team now with him and one. >> Um >> it's one it's just a one-on-one basketball. That's all it is. >> Yeah. Yeah. And look folks, we're we're kind of looking at the dark side of AI and I'm sure there's going to be a lot of other good stuff. But but I do you know to your point on uh because I'm thinking about this all the time and actually today's rant is about AI, the good and the bad. Um >> yeah. Uh I I I do think that that there's going to be a bright future for the trades going forward for the most part. And I think, you know, learn to code is probably probably the better thing to say to people now is learn to weld, right? >> Um >> be electrician. >> But two things. One, um uh I can see that being like a job boom for the next 5 to 10 years, right? But then you have all your data centers built out and you might end up at that point in time with a lot less jobs in the corporate world and then a lot less traits people needed because you've done all the buildout, right? So you you could have a future kind of uh job demand uh drought uh over there. But but I think what's maybe just as likely is on the way there the whole AI mania, you know, may the bubble may burst and we we may we may could be wrong. we may slow the roll out of of the the buildout, right? And so these jobs might not material these trade jobs might not materialize at the scale that we we think they were. So I I raising a lot of questions here. >> No, look, there's these these are the risks, right? Another risk is is that we can't get power developed fast enough to meet the needs of these AI data centers. So, you know, like for instance, we were just talking about one uh just recently, you know, this whole deal with Oracle and the building out of their data centers is going to require two and a half Hoover dams and four nuclear or or andor four nuclear reactors. And we just don't have either one of those. So, at what point do you start building this data center going, I'm going to build this and the power will come, but yeah, the power comes, but it's a year or two later before you can get the infrastructure in place. So, there's a lot of risk that are out there and that's all we're saying. Look, you know, I'm not Look, we have an AI model. We've got a crypto model that has AI in it. We've got an infrastructure model. We built models for all these themes, right? Because that's where investing is going to happen over the next couple years. But you have to go into those realizing that there's a lot of potential outcomes that may not be, you know, just as rosy. I mean, talk about a company like Ollo as an example, which is going to build nuclear reactors. So, everybody's like, okay, rent out nuclear power plants. I'm going to buy Olo right now. You're paying a massive premium for it. This company has absolutely no revenues. Zero. None. They have not built one power plant yet, but it's all on expectations. And that's where you run risk with your investing. Is that what happens if all of a sudden regulatory requirements change or something happens and you know building a power a nuclear power plant takes 3 years or 5 years longer than expected. I mean, there's so many variables that could occur that could undermine a lot of this near-term hype in the markets. That's the risk that investors run up. >> Yeah. Now, just to look, I'm actually kind of optimistic um in the sense that just like World War II and the space race um led to all sorts of transformative technologies for us. >> Yeah. Like I I I I think it's probably more likely than not we end this cycle with big breakthroughs in energy especially in >> Absolutely. right where you know we get we get much more um energy dense at much lower cost solutions you know whether it's it's super efficient small modular reactors whether it's somebody actually cracks them on in fusion right I think there probably will be a lot of long-term good technologically coming out of here but there are all these risks you're talking about and here's one last risk and look I know neither you nor I are technical experts but I know you've given a lot of thought to this Lance >> with the internet and other previous um transformative technology infrastructure buildouts. So, you know, internet, railroads, that type of stuff. Um the way in which these worked is you you they were manias, they were bubbles where everybody got into this, threw a lot of capital at it, they could see the vision, and what we would do is we would basically overbuild, right? Um, so we built a lot of infrastructure that wasn't didn't have immediate demand. And that was sort of part of what led to the bursting of the bubble where the people realized like, oh my god, you know, we built all these railroad lines and we're just not we're not going to use all of them fully, right? Or we built all this fiber and a ton of it's going to be dark, right? And then what happened is over the ensuing decades either the survivors of the bubble burst or new companies came in and they they created businesses on that available capacity and it was attractive to them because it was cheap because you know it wasn't being used right. >> Yeah. Was Google. >> Yeah. So I wonder I wonder if this time things might be a little bit different because if we build out all this compute capacity the the chip technology keeps getting better and better and better. And so um a chip that was built a year ago is is is a subperformer in some ways maybe you know substantially to one that's coming out now or next year. So what happens if we build all these data centers and they end up with you know stocked with these old chips. I mean, yeah, I guess it does have compute power, but but but does this stuff depreciate faster than some of the other infrastructure that we built in previous trans? >> Oh, yeah, for sure. And, you know, if you think about uh you know, like the fiber, you know, we built out all this fiber back during the com, right? And Lucent and all these companies were building up fiber railways, you know, all across the country. And we had this massive abundance of fiber and then 5 years later, Google comes along and goes, "We have this idea for this thing called YouTube." And all of a sudden all that fiber capacity lit up because now we're just the thing about the the billions of hours of videos that people watch every single day. That's all running across fiber, >> right? And the fiber optic cables didn't degrade in that five plus year time. >> That's my point. That's what I'm about to get to is that so one of the challenges going to be is that you know we're going to build these data centers and you're absolutely right. you know, uh I you know, Nvidia loads it up with Blackwell chips today and in two years they've got a new chip out that's twice as good as the Blackwell. So one of the things that is going to have to get developed is modularity where these data centers can swap out you know and upgrade their technology constantly as technology improves because if I'm running remember somebody's running these data centers there's somebody building this like there's a huge data center getting built up by Dallas and so it's like $50 billion it's a massive project that they're building it's just just enormous but in five years if all their data technology is out ofd. People are going to go to whatever the new how how easy is it for me to migrate my data from one data center to another. Right? >> So one and so this is a benefit and a curse for the people building the data centers. They're going to have to be forward thinking and think about modularity to where they can swap components of these data centers out to stay up to date. For companies like Nvidia, this is a long-term win because they're going to constantly keep innovating the next new chip that they can continue to sell and create, you know, profits and revenue from. So, you know, the the the the, you know, the process of aging out of data centers as opposed to fiber is going to be at a much more rapid pace. >> Yeah. All right. Well, that's okay. Super interesting. And obviously folks will will keep on track of this um as everything develops. So last question on this, Lance, and then we'll we'll get to the market specifically. >> Okay, just assume for a moment, not saying you're saying this, but just assume for a moment the AI bubble does burst next year, right? >> What impact would you expect that to have given the overconentration that that sector has and everything? What what what would be the knock on effects of that? Let's say these stocks go down 40%. then the markets will be down 40%. Because the stocks that make up the V, you know, make up 40% of the index roughly now are all tied to AI. So if AI completely falls apart in the next year or two, you're going to have a market decline because it's unlikely that if if those big 10 stocks are declining, and this is that event I was talking about earlier where the passive indexers finally sell, it's really not going to matter that you own energy or financials or staples. They might get some minor rotation uh during that decline, but the index is going to fall much faster. Think about 2022 as a as a kind of an antithesis of what I'm talking about here. In 2022, if you owned a bunch of of stocks like Roku and and you know, Arc Investments, that type of stuff, your portfolio was down 60, 70, 80, 90%. Market was down 2025 at the at the trough. And that was because all these big mega cap companies held up. They were down a little bit. they were not down nearly as much as underneath the surface of the market. There was a lot of devastation. So the market appeared to only be down 20 25% depending on but your portfolio was vastly different depending on what you were invested in. If you were very speculative you got hammered in in a decline like you're talking about. If AI peelss apart then that's going to be in those big mega cap stocks. they're going to drag the whole index down and unfortunately it's going to drag down a lot of those related trades with it. So, you know, companies like Palanteer, PaloAlto Networks, um Salesforce, uh Broadcom, Oracle, you know, you just kind of start working your list through those companies. Those are all going to get hit really, really hard, >> okay? >> If that occurs, I'm not and I'm not saying that's going to occur. I'm just saying answering your question, if it occurs, >> it's going to be that, you know, 30 40% decline. And but here's the good news is that in a 30 or 40% decline, we're still in a bull market. So, you know, >> okay. So, so and again, yes, I I preface all this by saying this is just an intellectual exercise. You're not calling for this to happen. >> But because >> I'm not calling for that to happen. >> Yeah. But because we are in an environment now where the market tail really has now wags the dog uh in terms of the economy >> and the economy is largely being carried right now by the spending of the top 10 to 20%. Right? The negative wealth impact. So you could shrug and say ah 40% stock market drop. Yeah, that that hurts but you know we'll survive it. But would you also expect there to be economic knock-on effects because of this? um one from the the the negative wealth effect to the people who've been carrying the economy and then secondly if all these firms have been investing in AI all sort like there's just all of a sudden a lot of corporate uncertainty that comes along with this too. >> Yeah. No, I mean you're going to have big impacts to earnings. um you know yeah the economy is going to the economy will go into a recession at that point because you will get a curtailment of spending um as that negative wealth impact uh wealth effect you know triggers and people are going to cut back spending they're going to cut back investing those type of things so yeah I mean no nothing's good is you know going to come out of that all I'm saying is that if we are this market is so deviated from its long-term bullish trend that a 30 or 40% correction won't be a bare market >> it'll be a correction within a bull market that and that's the hard and the reason I'm saying that is that's really hard for people to wrap their head around about how deviated this market is from long-term means. Valuation deviations from long-term growth trends is at 158%. Ne record at this level, right? I mean past the peak of 1929. So, you know, when you look at how deviated earnings are from long-term trends, valuations long-term trends, markets from long-term trends, you can have a massive correction in this market and still be in a bull market. That's the hard thing for people to to understand. >> Yeah. Uh and of course then it begs, well geez, if we actually ever flipped into a true bare market, how how would the size of that correction need to be? >> Yeah. Now, well, now you're talking 60 70%. So, >> and hopefully, you know, that's now you're talking depression error type selloff. And let's certainly hope we don't ever get to there. >> Okay. All right. Well, thanks for going through. I did not have this much uh discussion of AI on my my bingo card [laughter] this together. So there's there's a bunch of topics I'll probably have to push off to next week. Um all right. Um back to the news of the week. Um we have a uh so President Trump has been in Asia. Um looks like uh we're we're we're close to two deals two big deals coming out of that. One with South Korea of course one with the big kahuna China. Um, nothing to my understanding has been signed yet, but there's been a lot of real positive um handshaking and back clapping and and and headlines coming out of that. Uh, I know generally you've said, Lance, that uh these trade deals are are kind of nothing to the market um with China. Does that remain the case or do you think that this may actually have more impact on where stocks go? Well, it removes uncertainty. You know what the problem has been? Like, you know, a couple Fridays ago, the market was down like two and a half 2.7% on the whole news that we were going to put 100% tariff on China. What markets don't like is uncertainty. The the tariff the tariffs really have very minimal impact on what's going on in the economy. They're a one-time impact and then it's done. It happens mostly with producers. We've talked about this before. But what markets don't like is this on again, off again, on again, off again type thing that goes on. It's like, oh, I'm putting a tariff on a day. Well, no, I'm taking it off to, you know, we're going to negotiate in this whole stick and carrot thing we've talked about before. Markets don't like that. They they markets like certainty. They want to be able to look forward and say, "This is what earnings are going to be. This is what profit margins are going to be, and stick a tariff on it." That's fine. As long as I can factor that in, I'm okay. But when you're fac, you know, if if you're, you know, imposing a tariff and taking it off, imposing it, taking it off, and changing it, it's really hard for Wall Street to factor out what that's going to look like in terms of earnings profits and margins, which is all that's the only thing that that Wall Street cares about. And and that's why there's such a high correlation between forward earnings estimates, the annual rate of change in those estimates, and the annual rate of change in the S&P 500. They're very high correlated because that's what the market's pricing off of. And if the markets can't establish with some firmity about what that's going to look like, it makes it very difficult for markets. So yeah, just getting a resolution to China, getting this out of the way so we can start talking about something else, that'll actually be good for markets. >> Okay. All right. Speaking of markets, we got um uh earnings from most of the mag seven out of the way so far. >> What has this earning season been telling us? It's been fantastic so far. Um, >> really not your Meta. >> No, Meta was awesome. If you look at if you look at Meta's earnings, their revenue growth and and their bookings, etc., it was a stellar earnings report. They took a $15 billion charge on taxes. It's just an it's a an accounting adjustment, and that's all that was. And and so the stock took a hit on on that, but that's going to be very shortlived. In fact, we'll be adding to Meta in our in our portfolio probably in the next couple of days. >> Oh, really? I don't I don't want to rattle Meta. I I thought it was because they they basically said, "Look, we're going to have to really keep spending a lot to stay in this AI race." >> You know what what Amazon just said? They're going to spend $160 billion and the stock's up 10% today. So, that doesn't really make that doesn't really carry water. And and I've had this I had this debate with Michael. He's he said the same thing to me. He's like, "No, it's because I have to spend so much money." No, no, no. Every every company's ramping up their capex expectations. It was solely that revenue hit that they took on the tax charge. It's a one-time effect. It's done. It's over with. You look at their revenue growth, earnings growth, etc. They were all stellar. >> Okay, last point of this, and I I can't remember if it was percent of revenue or percent of something else, but it seemed that Facebook had a higher percent of I guess it's revenue of of of capex spending, meaning it was having to spend more on a relative basis than these other guys. Maybe that was just a headline in the moment. I don't know. I >> I think that was a headline in the moment. No, they they you know, all they all all Meta said was is I think their previous range was like 62 to 72 billion and they raised it to 68 to 72. It was just the top end of their range. >> Okay. >> So, and and again, you know, but fundamentally the earnings were great. But but even beyond that, let's just go back to, you know, kind of what we're talking about. In fact, I wrote about this earlier this week. um 85% of companies are beating estimates right now and this isn't surprising right it's millennial millennial earnings season so we came into this you know we had been ratcheting earnings lower earlier this year and then went we had liberation day and you know he held up the sign of all the the tariff rates analysts slashed earnings and I mean cut like $40 a share off of earnings uh during that whole you know April selloff and once that resolution was done, they ratcheted earnings back up, but lower than where they were before liberation day. So, they came into earnings season way underestimated. They were too conservative on estimates, which set the bar low enough that every company could basically beat earnings, and that's what's been happening. So, you have one of the highest beat rates we've had in 20 years. Um, you know, but and overall, you know, companies have have done very very well. Revenue growth. We've got a very low number of companies espousing any type of economic concern. They're all like, "Economy is fine. It's doing great. Board outlooks are good." So now, this has been a very good earning season. >> H okay. Um how do you square that with the the bad breath of the market? If everything's looking good for everybody, how come everybody's not participating? >> That that's a whole another question because it's it's been very interesting. um particularly in the last few days, you know, as we talked about earlier, you take a look at the number of stocks above their 50 75 um and 150day moving average that's been absolutely just collapsing over the last here. I've got a a chart for you real quick. See if I can get away sharing something with you. Um but this is this is from Simple Visor, but this is we track the number of stocks above their moving averages. And you can just see just over the last four trading days, it's just taken a complete fall-off here, especially the number of stocks above their 50-day moving average. And if you take a look at breath, this was breath of the market this morning before the market opened. And it's pretty much just the MAG seven. The rest seven. Yeah. >> Yeah. Go back to that other chart for a sec. >> Yep. >> So, who knows what's going to happen next, folks. Right. But but this to me seems like something you would if there was a material market correction, this is something that you would point to retroactively and say, "Oh, this was an early tell." >> Yeah. And and I think that that I think that is a reasonable ex saying that, you know, markets are strong when breath is strong and markets are weak when breath is weak. And it makes complete sense. You just got a handful of stocks that are driving the markets right now. And it's just this this whole kind of concentration that we've seen occurring in the markets as of late, which continues to be concerning. Um, you know, again, you know, we normally have a we we run a diversified portfolio, so we've got some defensive stocks. In fact, I got a really good call earlier this week. It's like, why do we still own Costco and Walmart in the portfolio, right? Why don't we just own more of Nvidia and Amazon and Apple, right? Because that's all fine because those stocks are working right now. But when this market does correct, you're going to want to own the Walmarts and Costos of the world because that's where money is going to go to. And so you need those defensive offsets in your portfolio to handle volatility in the markets. And this is the thing that really where where people screw themselves up investing is they start piling in to the same levels of risk assets across the board. And in other words, you know, if you take a look at at assets, when correlations all go to one and you own all the assets, they're all correlated with each other, when the market sells off, they're all going to sell off at the same time. So, >> yeah, >> it doesn't give you it doesn't give you protection. So, you've got to have some diversification in your portfolio for things where when the mag 7 sells off, and they will for whatever reason, you've got some assets that that money that money's got to go somewhere. Money just doesn't leave the market. It just changes where it is. It's like it's like the old definition of energy. Energy just changes form. >> That's what happens in the market. So if if money leaves tech, where your thinking has got to be is like, okay, if money leaves tech, where's it going to go to? Money typically rotates into areas that have good solid fundamentals, dividends, stability, those type of things. That's the Walmarts, the Costos, the Exxon Mobiles, the, you know, the um Proctor and Gambles of the world, right? I mean those old boring stocks that nobody wants to own, that's where money tends to rotate to. And that's why, you know, we spend a lot of time on, you know, you know, we've talked before here on the show. Um, and and when we start talking about, you know, kind of markets in general is talking about rotational analysis of the markets. >> Hey, I'm going to ask a question and and just to integrate your answer in what you're saying here. Um, I think a lot of investors when they worry about overvaluation, um, they they think of like a a G a GF a 2008 style collapse where kind of everything went down, >> right? Um, how talk about the probability difference between that, right, where like capital to your point flows into tea bills, right, because everyone's just freaked out and they're going to safety versus capital leaving the overvalued parts of the market and rotating into the undervalued parts of the market, which happens more frequently, >> the the latter. Um, what you need, so remember, let's go back and talk about 2008 for a quick second, you know. So in 200 and so in March of 2008 whatever you had the bare sterns crisis and then markets rallied back to all-time highs and then they started selling off a little bit going you know kind of into June July August September and money was rotating into defensive areas of the markets and and it wasn't anything drastic we just saw some defense to defense rotation what caused everything to collapse at one time is when they forced Leman in bankruptcy and all of a sudden nobody could trade anything and nobody knew what was going happen next. So, at that point, you just sell everything and go to T bills because I don't know. I don't you know, you've just done something that's never been done before. You forced a bank into into bankruptcy and you've frozen all counterparty trading. I don't know how to deal with that. So, I just put everything in the T- bills. So, in an environment where you just have a normal correctional rotation, you're going to see money rotate from things that are massively overbought and, you know, into things that are typically very oversold. This is a good example of this. Here's technology way up here. Relative over relative and absolute conditions. It's some of the most overbought levels we've ever seen in technology down over here in that quadrant. >> Yeah. Yeah. It's all up here. Here's everything else down here. Right. So, here's staples, energy, transportation, you know, they're all down here. You know, uh materials and financials are deeply deeply deeply oversold right now on a relative and absolute basis. Um if we switch this over to factors which is a little bit better kind of view of the markets because this is kind of where um investors are investing right now. Megga cap growth. So this is the mega cap stocks you know it's up here all by its lonesome in the upper right hand corner. S&P 500 growth it's up over here. Uh high beta stocks up over here down here at the bottom. Midcap value Dow Jones micro cap um buyback achievers low beta stocks small cap value. These are the most oversold sectors of the market. So, you know, as a as as as a portfolio manager, what we're starting to look at is we're starting to look at these areas down here and say, where are some good opportunities in in low beta value? What stocks, you know, what stocks exist in low beta value that, you know, might be worth considering? And so, you know, this is where, you know, you can you kind of dig in a bit and look at things like, you know, real estate. if if we get a riskoff rotation in the market that's going to pull yields lower which will benefit y real estate. So you got, you know, DT Energy, WC Energy. Again, this goes back to energy being very oversold right now. There's some there's TJ TJX companies. I mean, these companies are very oversold in that sector and should and these have these stocks have very strong valuations to them. So, you know, that's where money is going to rotate to from a a safety perspective. >> Um, okay. And I I so I I I I think that's an important thing just to make sure that people get here, which is that um emotionally we fear the sinking tide that sinks everything, right? But you're saying what happens much more frequently is usually, you know, capital just rotates from one part of the market to the other. Um and therefore you don't necessarily want to get out of the market. um or at least not totally, but you may want to, you know, consider moving your capital in advance to some of these areas that are kind of being left for dead right now. >> Yeah. Let's let's so let's kind of work that through real quick. So, let's just say for instance, we're going to have that there's a catastrophic event coming. Okay? You and I don't know what it is, but let's just say September 1st of next year, there's this catastrophic event that's going to occur, right? So, we get out our our tarot cards and we can make this prediction. Um, and Magic Eightball. Don't forget the Magic Eightball. Gotta got to have that one. >> Or the Ouija board. >> Or the Ouija board. So, but but you and I come to the agreement that September 1st at 8:35 a.m. on a Tuesday morning, whatever day September 1st is, the markets are going to crash. Well, between now and then, right, the markets are going to start sensing that there's something wrong with the market. Um, credit spreads will start to widen. We'll see economic data begin to show some impacts. we'll see earnings, you know, start to slow down dramatically >> and markets will start to rotate and and you'll start to see the fractures in the markets occurring. And that's your that's your early warning signs that you're going to see and that's where you start doing some defensive rotation, raising some cash, adding some extra T bills to your portfolio. Nothing drastic, but just paying attention to it. Then as markets start to come down, they, you know, we're above the 20-day moving average right now, so we take out the 50-day moving average. um get a little bit below that rally to the 50-day fail and then go down, take out that low. There's another technical indicator. Hey, something's changing in the market. Dynamics's changing. Need to be paying attention. Reduce some risk. This is why we're talking about profit taking, rebalancing, those type of things. Continue that process. Then you take out the 100 day, things are a little bit more serious. 50 starts to turn down and starts heading towards the 200 day moving average. Market comes down, tests the 200 day, bounces off of it. That's good. Maybe we're out of the woods right now, but then it rolls right over, takes out the 200 day moving average. You've probably got something on your hands right now and want to reduce risk even more. And then September the 1st comes and the announcement comes out, whatever it is. And markets are down 10% over the course of the next week. It's okay. You've already positioned for it. You've already been raising cash. You've already been rebalancing. So now when the market's down 10, you're maybe down two over the next week. And that now, but you have cash. you've got uh stability in your portfolio and now I can start picking through the rubble going, "Hey, you know what? They're throwing the baby out with a bathwater here. I'm going to start picking up Nvidia that's down 80% from its peak and still growing like a monster. I'm going to start buying some Nvidia here. I'm going to buy some Amazon that's down. You know, I'm going to buy some Meta that's down 60% over the last, you know, 3 months." That's that's how good investing works over time. And that's why, you know, I just published a desktop traders guide on our website under our resources library because it's just it's 181 rules from the greatest traders of all time. And what they all say is none of them say buy and hold and none of them say, you know, sell, you know, sell the bottoms, right? It's, you know, sell the peaks, buy the bottoms. And that's what you want to be working on. >> Okay. Huh. It sort of sounds like buy low and sell high would be a good investing strategy. >> Yeah. Imagine how that would work. [laughter] Um, [clears throat] all right. And kind of in the spirit of this, um, I I always hesitate to share what what I'm doing personally because, um, I don't want people just to copy it, uh, because it might not be the appropriate thing for you given your specific situation, which again is why I always tell people, uh, it's always good to to work with a good professional financial adviser who can give you specific advice. But we've been talking for a good while now, Lance, about how the energy sector has been largely overlooked, particularly the fossil fuels, right? The oil, natural gas. >> Um, I did just take sort of a foundational position. I I'd had some exposure, but I but I I I I increased it to what I would sort of consider to be my my 1.0 position in this space. I am fully prepared for lower prices ahead. I can definitely think of things that could make low oil go lower, you know, in the near term and whatnot. Um, but I am, you know, through our previous conversations, uh, at the point where I feel like its prospects over the next couple of years are looking good enough to me to say, look, I I want to have some upside exposure to that. And I could be wrong about these fears about lower oil prices ahead. And so, if I am, I don't want this thing to take off on me while I'm sitting there waiting for a dip that doesn't happen. >> Yeah. So, like we own some we own a couple of energy stocks in our portfolios right now, but I'm actually building a 100% thematic uh energy portfolio to add to our thematic portfolios because I do think there's downside risk to about $40 a barrel on oil. But, you know, that's going to be a cyclical issue uh economic cycle, you know, economic cycle kind of market cycle type issue. But if you get down into the $40 kind of $40 $45 range on oil, which is kind of where my target is over the next couple of years, that you're going to have an opportunity to own some high quality assets are going to generate a lot of return both in income as well as capital gains, you know, over the course of the probably the following three to five years. >> And if you are correct on that, my plan is to dollar cost average in on the way down. >> Yep. >> Yep. And that's kind of the purpose of this thematic portfolio is to do exactly that. >> Okay. Um I had a note here on the energy thing just to mention. Um we were kind of, you know, chuckling because you mentioned this before we turned on the camera. Um but we we just had um Bill Gates, you know, surprise a lot of people kind of doing a reversal on the um >> the existential threat level of climate change. And folks, I'm not making a pro or con pro or con argument on this. I'm just noting that Bill Gates softened his stance and um there probably a number of reasons why he did that but I do think the timing is such that it's hard not to look at that and say you know he had one set of values up until he realized how much energy Microsoft needed to be successful going forward in AI and uh you know a lot of that's going to be provided at least by natural gas probably some other fossil inputs and said you know what uh May maybe maybe fossil fuels uh aren't as bad as I was out there saying. >> Yeah. Well, I mean, look, this is this has always been the problem with the you know, you know, whether or not you believe in climate change is entirely up to you. That's your, you know, priority. The the problem has always been though is that we have a an economy that's highly dependent on oil. Oil is in everything from the food you eat to the clothes you wear to the computers you're watching this on right now. It's in everything. It's it's and and you know the problem is >> not slowing. >> Yeah. Yeah. And and and solar and wind are great. There's nothing wrong with them, but they're not as efficient in terms of providing the power needed for building out the economy, much less powering AI data centers. Like I said, just what Oracle is doing with their investment is two and a half Hoover dams. You cannot create that type of electricity demand, you know, generation with solar and wind. So, it's not surprising at all that Bill Gates is backing up going, okay, you know, I said before that it's an existential crisis. It's not really in we need to be paying attention to climate change. Look, I mean, you know, you know, you know, there there's no doubt that we need to be, you know, conscious about what we do to our environment. It's where we live and we need to be doing things as clean and as healthy as possible for the ecology and for the environment. Absolutely. Nobody's arguing that point. But at the same time, we also have to sustain our ability to grow economically and to to meet these goals that we're trying to do. And Bill Gates understands that the amount of energy required to run these data centers is just enormous. And you're not going to get that from any source other than oil and natural gas. >> Yeah. And and also part of this folks um I would look at this as almost an example maybe this is a bit of a stretch but almost an example of of Michael Ever's you know mercantalist model which is that in a mercantalist system governments just do what they have to do and they will steal from one part of the economy to feed another part of the economy if that part of the economy is strategically important to the the nation's interests and AI I from my perspective you know this appears to the the arms race, the nuclear arms race of of this millennia here where we have just said as a nation, if we want to remain the superpower of the world, we have to win this. China's already way ahead of us on electrical production capacity and we got to do whatever we got to do. And and I I so I think you're going to see, you know, maybe some unnatural reversals of of certain policies or certain attitudes all in service of this. Hey, yeah. In a perfect world, we'd we'd love to take care of all this stuff, but we got to win this one thing first. >> Yeah. >> Yeah. And and look, Bill Gates was right in his statement, you know, he said he said the people that are hurt the most are the people the people in the lowest quintile of the population, right? The poor people, they're the ones that are most impacted by cl the the impacts of climate change, etc. And we need to do more to help those individuals. And he's right about that. I mean, you know, this is where we go back to economic policy. I think I'm not sure the AI buildout is going to be very beneficial for those same people, [laughter] >> right? Well, but that's increase your energy costs. Yeah. >> Right. Well, this is but that's where we've got to be conscious of that, right? is that you know as if an energy. So for instance things we can think about if Microsoft is building out a data center that is absorbing all the cost of you know or increasing the cost of electricity they have to pay an additional tax for that electricity usage to balance it out for just normal people right so if you have one consumer that's overweighing the the the gr and I don't have the answers I'm just throwing out examples right but you've got to come to some type of of structure that, you know, manages the cost of electricity for people who aren't involved in AI, just trying to pay their bills, right? And that's kind of point of Bill Gates argument is that we have a a level of the population that is going to be heavily impacted by this and we need to figure out economic policies. And I'm not, look, I'm not talking about tax credits. I'm not talking about giveaways and those type of things because those are terrible for the population on that end, right? you give them a tax credit, everything they everything they want to buy goes up in value because the provider knows they've got a tax credit for it. So the tax credit is completely absorbed and it just makes their situation worse. But we need to focus on economic pro uh you know uh economic outcomes for that group of people that makes it more equitable for them. You know job creation those type of things. You know things that will allow them to prosper within the economy alongside of the development this other stuff. Again, I don't have the answers, but these are things we we need to start thinking about now rather than later. >> So, I'm right there with you, brother. I guess I'm just going to say the skeptic in me says I'm not just >> Oh, yeah. We're all skeptical. >> I'm not going to hold my breath. I I just feel like we're we're treat potentially just going to trade one set of insults to that category of people for another. Um, all right. Look, um, we got to get moving on here. Um, so if we could do the TA real quickly, Lance, if you can just tell us where we are. >> Um, and along with it, only if you want to. If not, we can save it to next week. Um, talk to your recent piece, The Most Dangerous Era in History, or potentially the most dumbest era in history. [laughter] >> The dumbest era in history. >> Dumbest. Yeah. >> Yeah. We We can get there. If we have time, we can get there. Um, hold on a second. Let me uh I need to dress up my chart here real fast >> because I do have two other topics that I I'm pretty sure you're going to ram. >> We can we can do the most dangerous error next week and because I've actually got a follow-up piece coming out on Monday. >> Okay. >> So, So folks, if you if you don't want to wait until next Monday, um go to realinvestmentadvice.com and read Lance's most recent piece there. It's a good one. >> Yeah. Um so this is the TA and as you know, not surprisingly, there's not a lot of change going on. Um two things that happened over the last kind of week in particular is that we had broken. So, a couple of Fridays ago, we had that big 2.71% sell-off took us down to the 50-day moving average. Um, that correction was needed and got but it broke this bullish trend line that we had been in for really kind of ever since the April lows and then the market kind of gyate around. We tested the 50-day a couple of times, held that support, then climbed back above the 20-day. That was all super bullish for the markets, right? So, bull market's still intact. Nothing wrong with the markets right now. Um, we got back above that bullish trend and we're just trading within that trend channel right now. That trend channel is compressing, right? So, at some point we're going to break out of this trend channel in one direction or the other and and wherever that break is going to be is going to be, you know, potentially significantly lower. So, we break to the downside, you know, you're talking about a retracement back to at least probably 6,600 initially. So, that could happen. Um but you know one kind of the you know if if there's levels of concern um for the markets right now we talked about breath that's one two is declining money flows that's this orange shaded area in the background money flows are declining so participation in the market is declining on multiple levels >> okay >> and we have a negative divergence in relative strength which is also typically a sign that you want to be careful of last time we have negative divergence relative strength was heading into March and that April selloff go ahead >> okay sorry But ju just on on money flows, you expect that to increase going forward now that companies are coming out of their blackout windows, correct? And they can do buybacks again. >> In theory, yes, we should see we should see a pick up in money flow. Then I was about to So I was about to get to the the three kind of the three pushes for the end of the year. >> Okay. >> Um but yeah, starting tomorrow, starting on Monday is the beginning of the seasonally strong six months of the year. November, December, January, February, March, April. So your returns in January and November and December tend to be run around 7% in total. So the the bias is to the upside over the course of the next couple of months. However, even saying that the first two weeks of December typically you get a sell off in the markets because of mutual fund distributions for the year. They have to distribute all their capital gains, interest and uh interest income for the year. So you typically get a selloff in the markets. That could be something that reverts the market back to the 50-day moving average as an example and then you get a rally into year end as they position for their year of end reporting. But but between now and the end of the year, you've got 6 trillion to 7 trillion a day in stock buybacks. You still have a lot of momentum in the markets. Professional managers are way underweight uh the indexes right now in terms of their portfolio positioning. They're going to have to ramp that up for chasing performance in the year end. So we should see a performance chase between now and the end of the year. And then of course earnings are very strong. So you've got a lot of support from earnings between now and the end of the year as well. We saw Nvidia coming up. They report late November. So that'll be the last of the Mag 7. >> Okay. So you and I talked a few weeks ago after I'd had Mark Newton of Funstread on the program. He's a big TA guy. >> He said, uh, I I think odds are more likely there's going to be some, you know, pullback in the market in October or November. and you said, "Right now, from what I can tell, I'm going to see it as a buying opportunity for a rally into the year end." Um, you agreed with that at the time, and that seems to be the way the script is playing out. So, I guess my question for you, Lance, is is >> beyond the the the softness you think we'll see in the first half of December for the reasons you mentioned, have we had the pullback and it's now, you know, the dip the dip was bought and and ride this into the end of the year, >> right? >> Yeah. >> Yes. Sorry, sorry. I I thought there was more to that. Um, yeah. No, look, the market's been weak over the last few days. So, again, I think this market could drift a little bit lower here, but yeah, I think anything that gets you around the 20-day moving average, the 50-day at the most, you need to be buying it into year end. Um, I think you're getting a little bit of just market exhaustion right now, and then we kind of work through this over the next maybe next week. And if Trump gets a trade deal done with China, um, you know, we get some, you know, what would be great is we get the the the shutdown over with and start getting some economic data back out. That would be helpful, but I think all that would would should be at least supportive of markets over the next couple months. Now, let me just say this. There's no guarantee of anything. So, you need to make sure you're managing risk in your portfolio. So, you know, if you have, you know, just like recently, this past week in the in in the crypto model and the AI models, the infrastructure models, we did a little bit of rebalancing because we had stocks that they just run off to the moon. So, we just rebalance those back to target weight. So, make sure that you're following your procedures. Rebalance your portfolio to targets, raise a little bit of cash. Just because you sell something today to rebalance it to target doesn't mean you have to buy something today either. So, holding a little bit of cash here is a good opportunity. So, if we do get a pullback, you've got some money to invest. >> Okay. All right. Um, so we're we're heading into the home stretch here. Um, you just mentioned the shutdown. Um, >> I guess first off, let's say it doesn't resolve anytime soon. How worried are you about an impact on the markets if this goes on for more weeks? >> It's been interesting. It's like, you know, part of me goes, what shutdown? Does anybody does anybody realize there's still a shutdown going on? >> I'm kind of going here with this question. So anyway, >> yeah. >> Yeah, the market really hasn't cared very much and I don't think it does care uh at this point. You know, there's always this, you know, when you go into the shutdown, there's all these catastrophic warnings. You know, it was like if we shut down the government, we're going to default on our debt. This is going to happen. And we, you know, we of course we said back then it's like no, that's going to happen. Don't worry about it. And I think markets are largely looking past it. They know this will get resolved and probably get resolved before Thanksgiving. um there the markets have been very good about shifting their focus to other data to kind of get some indication as to what's going on with the economy. So, you know, markets are starting to look at ADP reports, paychecks reports, um you know, trueflation data, that type of stuff to try to get a gauge of what is going on with normally government data that they trade off of. They've been getting it from other sources, which I think is actually a good thing. I was going to say, is this actually kind of a healthy transition where we're like, you know what, all that problematic government data everybody's been so breathlessly anticipatory of, maybe we just don't really need it that much. >> Yeah. And again, you take a look at at the surveys, the survey data, it's like the participation rate, those surve survey data or reports have just dropped off a cliff. Nobody nobody participates in them anymore. So, yeah. No, I think it's all good. Uh, you know, honestly, but again, we're going to but don't be mistaken. And as soon as the government ends the shutdown, we're going to go back to looking at the economic data from the government, right? That's not going to change. >> It probably won't. But do you think we'll we'll place as much weight on it or will we now have a better balance between that and some of these other private sources? >> Well, I think it depends on who you're talking about. Will the media No, the media is going to pay attention to the government, David, right? They're just going to report what comes out. I think there's a lot of managers like us even that have already shifted and we and we did this a long time ago. we we have not always relied on government data. We've always used alternative sources for kind of understanding what's going on actually within the economy and I think a lot of man other managers have now kind of started to incor at least incorporate this other data within their processes as well. So yeah, I think it's a good thing. >> Let me ask you this. Um a relatively new entrant to the private data um portfolio has been these um betting markets, >> right? like Poly Market, right? Where where you know you're you're you're crowdsourcing and you know people are putting money on the line so presumably they're they're thinking hard about this before they commit too much money for things like politics they've been surprisingly accurate. Um how do you see them as a financial indicator? >> Um I think it's too soon to tell. you know, I I don't we don't use poly markets much in our analysis and so, you know, because the sample size isn't big enough. Um, I think though if if Poly Markets really takes off and you get a really big sample data set, let's say you've got a million people using this, I think it becomes a lot more accurate in that that part. You know, part of part of sampling is you need size. And you know, if you have a very small sample size, your outcomes aren't going to be very good. This is the problem with government data that the number of people participating in a survey has declined so much that the accuracy of the data is becoming less reliable. And so again, no, I think it's I think it's a very interesting data set. We do look at it. We don't incorp um only from the function that the sample size isn't that big yet. But if it does get to a major sample size, then yeah, I think it becomes a lot more important to the markets. >> Okay. Yeah, I just think it's interesting. Um it's funny it I will say when it first came on I sort of discounted it like ah it's just people you know kind of gambling but um the accuracy of it in other other spheres has been big enough where I'm like oh maybe it actually could be kind of interesting and helpful in finance. >> Okay. Um so this is not the rant so we won't spend a ton of time on it but to your point about the government shutdown um this I'm pretty sure this is true. I remember listening is I think it was a year or so ago. Um apparently the Canadian the Canadian government had shut down for I think two weeks, Lance, >> right? >> And like nobody noticed like I don't think I don't think it was widely publicized in Canada at the time, right? >> And pretty much like nobody noticed, right? And to your to your point, you're saying it's somewhat tongue and cheek, but like >> yeah, the government's been shut down for over a month now and like business as usual is pretty much, you know, continued. So, it does beg the question, and I'm not saying this raising it to be antagonistic to anybody with a government job, and I have people in my family that have work for the government. Um, but it does beg the question of what do these all these people actually do? And, you know, the question of like how many of these jobs do we really need? You know, how much of the how much of the government workforce is really kind of makework jobs versus jobs that are essential to running this country? Um, so I'll take I've got another question, but I'll take a pause for a second. Thoughts? >> No, no, I think look, this has always been my thing about government shutdowns is you're you know, you terminate 900,000 people, you fur you furlow them, right? You furlow 900,000 people and the government still operates. And look, there's certainly some things that are not we're not we're not getting government data is a good example. So there's things that are certainly missing because of, you know, people not working, but you know, we're all concerned and this is the interesting argument, right? So everybody's concerned about the the the debt, right? This government debt that we have. Well, a big chunk of that debt goes to funding government operations. So, you know, maybe this is a good time where we should all sit down together and say, "Okay, we're going to reopen the government." But when we start hiring people back, let's just hire back the people that we need to hire back instead of just everybody and start really thinking about reforming the employment structure of the government, etc. How many people do we actually need to run the IRS as an example? I don't know the answer, but you know, just pick a pick a department, whatever department is, Department of Energy, Department of Commerce, Department of Education, whatever. How many people do we actually need to run that and and you know, rebuild the government that way and you could save um you know begin saving money and and reducing the cost of running government? But again, we don't unfortunately we just don't do that. But it seems to me just as a layman that this is a prime opportunity to start rethinking about who we actually hire back and and what we actually fund. >> What was so interesting to me and it's not unlike academia right where you know it it from what I understand it's just really hard uh to fire uh teachers especially tenure teachers and things like that. um where in government uh and and I think we're seeing this right now where the the current administration is saying, "Hey, you know, we think we can actually, you know, we we we've been thwarted in a lot of our downsizing uh attempts and we think that the um the shutdown actually gives us the legal authority to not just furlow some of these people, at least in the executive branch that we control, um where we can actually do some riffs, some reduction in forces here. and and the the blowback on that has been tremendous. Right. >> Immediately sued. >> Yeah. Which is it's just a sign that it's really hard to fire government workers, right? And so um uh I I don't have a strongly informed opinion here, but um it it just these things that we're talking about like, hey, we a bunch of people are furoughed. We haven't really seen that much diminishment in terms of the the services being provided. We have a lot of questions about whether we we all these jobs are needed and we don't really even have the ability to do what you're doing. It's not unlike nutrition, right? Like, oh, if you're if if you have some health issues, one of the first things a a doctor might say to you is is, well, you know what? Cut a bunch of things out of your diet and then start selectively adding them back and see if they make you feel better or worse. Right? Like your your idea is a totally fine, sane idea. And I'm not trying to diminish the fact that you're you're you are impacting people's livelihoods here because you know >> this is all great in theory until it's your job that gets removed. >> But you know but but you know the government should be running for the benefit of the people and it shouldn't be having fraud, waste and abuse, right? The whole call of Doge. Um, and the fact that we just make it so hard to even just try to test and get the data and see what's going on here to me just sort of smells like kind of like academia where it's really where the system really protects it its own. >> Right. Well, you know what gets me is that you know I hear a lot of people they complain about the debt and then they say you know you know what's going on in government's wrong and all these people need to have their jobs back etc. You can't have both. >> Right. >> Right. You've gota you've got to pick an argument at some point about are you worried about the government debt or you know do you want government to run the way the government runs and because you can't have one you can't have both. You can't reduce the debt and have government run the way it runs. >> It's just not going to happen. You can't keep funding all these programs and reduce the debt. So you've got to pick your argument at some point and then build a case for it. >> Yeah. And I'm totally fine if the debate shifts into like, you know what, we don't just want to put all these people on the street immediately. And so let's let's have a program where we're identifying places in the private market where these people can go to whatever. Fine. If we want to have that, great. I'm all for it, right? Um but I think we should be able to, >> you know, look at how we're we're running the the business of government and say, how can we make it work harder for the American people? All right, last question on this. And and I realize we're probably dancing around territory, maybe even fully stepping in it that might um you know, not be popular with everybody watching this. But another thing that this this government shutdown has raised is um things questions about supplemental programs. So things like the SNAP program, right, food stamps or or food relief, right? Um, you know, I think you can probably get most people to agree to to say, "Look, you know, in we want to be a generous nation and in times of of true hardship, uh, we want to try to help people um, find a way to make it through that hardship." Um, but, uh, you know, a lot of these, um, transfer payment programs, uh, end up having people that never get off them, like a large amount. And so, so with SNAP, right, the number was what, something like 40 plus million households are on SNAP. And so the headlines are of course is, oh my gosh, you know, if the SNAP program gets delayed, uh, you know, tens of millions of people are going to be in danger of starving, right? And it raises a bunch of important questions that I don't necessarily have the answer to, but I'm just saying we should all think about these as as intelligent citizens of our country, which is what should the purpose of these programs be? Um, are these essential programs? So SNAP and and I think I've been super transparent about this. You know, my mother in her later years was was on government assistance and was on SNAP, right? Um so I know that the help and the difference it can make in people's lives, but there's a bunch of private solutions out there, charitable organizations, food banks, etc. Like it it it is rare that somebody in America is truly going to starve and not be able to find food if they can need it. So one of the questions is is what is the government's role here period right is this something that can be done better by the private and and charitable sectors and then two if the government should play a role for how long how much and how long right and and I'm I'm not I'm not actually necessarily looking at this as a I want to save the government you know dollars and cents argument I'm asking it more of do I want us to be creating dependent classes that never get off of this stuff right and human nature being what it is If if you if you provide if if you shelter them from enough of the pain of of true need, human nature being what it is, people will just say, "Well, I can just live like this." Right? And I don't think that suits anybody's interest in the long run. >> Yeah. So, two things. One is that it I've always found it fascinating. I didn't come up with this. I I was reading an article about the impacts of supple supplemental nutritional assistant programs on the US economy. And one of the statements that was made, I know you know, you've heard this before, too, is that if you go to a national park, it says, "Please do not feed the animals because they become dependent on the food that you feed them and they don't learn to hunt for themselves." And that's from the Department of Agriculture. And the supplemental nutritional assistance program is also run by the Department of Agriculture where we're feeding people and not teaching them to fend for themselves. So, it's kind of interesting, you know, we we we understand that if we feed bears that it creates an environment for them not to take care of themselves, but yet we are willing to do that with 20, 30, 40 million Americans, right? So, you know, and there was also a study out recently, uh, and they were actually talking about this on the radio this morning because this is a very hot topic right now, but that the the the mental state of people that are fully on SNAP, as an example, or EBT cards, and that's all that's all their income, they they psychologically lose their ability to have self-worth, right? So, you know, I'm just giving money and their kind of their need to aspire in life gets diminished, right? You lose that need to progress because you're you're being you're being fed, right? Just like the bears. So, you know, it it you know, there's no easy answer to this, but you know, a work requirement, you know, might be very useful in this. is like, "Look, we can you you are entitled to have, you know, if your income is less than a certain amount every year, you are entitled to have some supplemental nutritional assistance and and we want you to have that." But couple things that go on with that is that one, it should only be used for nutritional quality foods, right? So, I can't buy alcohol with it. I can't, you know, buy junk food with it, etc. I've got to buy milk and eggs. And >> if you look at the top 20 things that are being bought, I mean, like 17 of them are what would I would consider junk food. Yeah, >> correct. So that would be step one. And then say you have to have a work requirement. So if you want to buy the other stuff, right, you can use the money you make from your work requirement, no matter what it is, right? You can buy your junk food with that, right? Whatever. But at least you're out, you know, a contributing society. And hopefully, you know, as you're contributing society and and working that you start working yourself into a position to where you no longer need supplemental nutritional programs. And and so there there's a lot of look there's a lot of things that you know when the Affordable Care Act was first being put out back in 2009 2010 under the the Obama administration there was a lot of studies out at that time about providing you know further assistance to certain groups of of people and there's a and and they were showing people that they figure out how to game this the government system with all the different programs and they can make 50 $60,000 a year just gaming the system. And why wouldn't you if you could, right? >> Correct. Right. You're on EBT, you claim disability, you you know, you do all these other things and you can make a lot of income and not work. And you know, look, there's always going to be that group of people. There's no way around that. There's always going to be people that figure that out. But I think you could provide some very base level requirements just to help encourage better outcomes. Then again, you know, we do that for the bears, but we don't do that for human beings. >> Human beings. And so the the reason why I'm raising this and again it is absolutely not to beat on people that are are currently depending on these programs but is is very much what you just said there Lance is you know it it creates this dependency um which I think is toxic and then it creates generational dependency right children grow up in that environment and think oh well this is how it's done right and it just propagates >> um and one of the reasons why I'm particularly concerned about this is AI which is if AI indeed is the jobs eater that that I think it could be. Right? When you when you raise that risk to the people who are the big AI fanboys, where do they go? Oh, well, we'll have universal basic income, right? Which is essentially >> exactly what we're talking about here, right? It's just creating more and more dependency, right? Um and so I worry that that as bad as the system might be right now, you know, it could get a lot worse if if we graduate to that that place. And so I don't know. I I I just think this is one of those things you're saying like if we don't grab it now, uh dealing with this problem later on is going to be way bigger and way more painful than it is today. >> Yep. >> Yeah. Okay. All right. Um why don't you tell us your recent trades and then we'll get to the full rant and we'll we'll wrap up. >> So, um really just on recent trades, none this week. We had done some repositioning. We had bought some Amazon, Nvidia, some other stuff, you know, last week um kind of before the market ran up. So, you know, again, portfolio is in a good position right now. It's doing well. Our thematic models are doing exceptionally well. Again, I did a little bit of rebalancing this week and and a couple of the thematic models just because things like like Bloom Energy is up like 400% since the lows. Um, I've taken out more in profits out of Bloom Energy than, you know, I've taken out twice as much in profits in Bloom Energy than what I actually invested in the company. So, you know, it's it's been just phenomenal run. Just again, you know, I think important is just to continue to monitor your portfolio and do some rebalancing and just manage that risk because again, we're going to get a correction here at some point, three, four, five%. It's it's going to happen. When it's going to happen, I have no idea. But you want to have a little bit of cash kind of on the sidelines. So, when you do get a correction, some of these stocks that maybe you owned, you can buy a little bit cheaper. Um, or you know, stocks that you've wanted to own and have been able to get into, when they correct, you can finally get some money put into those. Okay. All right. Um [sighs and gasps] well, um when and if that correction happens, well, it'll happen at some point. >> Yeah, correct. >> We're we're going to have a correction at some point. Yeah. >> Not a crash, but 35% it's going to happen. >> Yeah. >> But when it happens, >> the first 217 a.m. Yes, >> we will we will hyper dissect it for everybody in real time as it happens. Um all right. Well, let me let me get to a rant and then we'll hop off of here. Um, so we we've been talking a lot about the um the potential um down dark side of AI. Um, it definitely has a a light side and I just want to be, you know, I want to be transparent. You know, there there's there's definitely a lot of good in there with with with some of these concerns. Um, I had a really interesting experience yesterday with AI. Um, where a kind of a friend of the channel had, um, I invested a couple of hours working with AI to understand thoughtful thoughtful money, the thoughtful money business. They were curious about it. They did all this analysis. They ended up giving it to me. It was like getting a like like a 20 30 page report from McKenzie. I mean, it really was super useful and helpful. And one of the things that that they did is they they use the AI tools a lot more than I do. And um certain tools have certain strengths. And so they would have Gemini do one part of the analysis and then they would have chat GPT then review the Gemini analysis and then add its its uh capabilities to it. And then they would have Claude take a look at that. Um, and so again, you get this really rich uh report and you get kind of these AI programs evaluating and riffing off of each other. It's really pretty cool. Um, so anyways, this can be a tremendously valuable market intelligence tool and I'm sure I'm not telling people anything they probably didn't already realize about it. But, um, I want to read apart from the analysis about the thoughtful money audience. Um, because you know, this channel is nothing without the audience uh that that comes here and supports it. And again, I get a lot of kudos for what we do here and I tell people, look, it's it's almost entirely undeserved because I have the easiest job in the world. I just listen to what you people tell me you want and I do more of that, right? Um, but I I after this guy did the research, he said, "Man, I got to tell you, Adam, you've got such a great audience there at Thoughtful Money. I'm I'm totally, you know, envious of of what that business has created in terms of a followership." Uh and because all you watching this, you are the people that have made that literally happen. Um I want you to hear what the report has to say about you. So this is a little long. Bear with me. It might be a minute two at the max and then then we'll get going. Um so okay uh the analysis reveals a highly specific and valuable investor archetype here and identified as prudent protector. The this individual is not a casual consumer of financial media but an active sophisticated investor seeking to safeguard significant wealth against perceived systemic and macroeconomic threats. The prudent protector is an experienced high- net worth individual typically between the ages of 45 and 65 who has successfully accumulated wealth and is now in a phase of capital preservation. Their primary financial objective has shifted from aggressive growth to the protection of their family's future and the establishment of a durable legacy. They're characterized by a deep-seated skepticism of mainstream financial institutions, official economic narratives, and conventional investment vehicles like stocks and bonds, which they often view as being in a speculative bubble. This worldview drives them to actively seek tangible non-correlated assets that offer a hedge against their core fears of inflation, currency debasement, and systemic market failure. Now, Lance, I know you might say, "Okay, there's a little bit too much pessimism and negativity in there." But I think that captures a lot of the common concerns that that we hear from people about the markets as they are today. In short, the thoughtful money follower is a conscientious learner, someone who might read economic reports for fun, track financial news closely, and engage in discussions about how to thrive amidst global challenges. They appreciate content that helps them think critically or thoughtfully about money. This psychographic profile, financially savvy, sustainably minded in terms of wealth, longevity, and personal personal responsibility, aligns well with investments that are both financially sound and grounded in real assets. So to me, that feels very largely accurate about what I've learned about this audience. And um I I think that that is, you know, if that sounds like you people, I think that that is largely something that you can take a lot of pride in. Um, again, Lance, you might chime in and say, "Hey, look, you know, you still have to play this game." Uh, and and and don't don't be so conservative that you're you're leaving additional prudent growth on the table. But I would also say prudent growth is something that the the prudent protector here, you know, participates in. So, anyways, I wanted folks to hear that. Um, I'm going to hand the baton to Lance in just one second. Um, that said, that I think is an AI win. Um, I want to talk about an AI fail. Um, so, uh, oftentimes when I'm searching for a name on on YouTube, um, it'll it, you know, how it autofills out what you might want to be searching for, it'll put net worth at the end of it, right? So, if I'm typing in, you know, I don't know, Lacy Hunt or, you know, Darius Dale or something like that, it'll put net worth up there. Um, and I've seen it so much, I was like, you know, I wonder what it thinks my net worth is, right? Because I've always wondered how accurate these things are. So there are >> now you're gonna get everybody now you're gonna get everybody googling Adam Tagert net worth. >> Yeah. Yeah. Well, they can do it now. But um so there are two Adam Tagerts that tend to get picked up in the media. One is an Australian soccer player uh who is way cooler than me. Uh and it it estimated his net worth between two and three million based upon whatever it could find. Right. For me, Lance, it estimated 20 to$50 million. [laughter] >> I knew you were doing really well for yourself. That's awesome. >> Yeah. No, but folks, I mean, I'm not even in the same freaking solar system as that, right? And so, it's a warning that yes, AI can hallucinate. And I don't know how it came up with that number. I don't know what it's was using to extrapolate on that. It is so far off. It's comical. I'm pretty sure it didn't get the soccer players uh net worth correct, but I am sure he has more than I do. Uh, so anyways, um, you know, as as as cool as AI can be for like market research like this, it can get some stuff colossally long like that. And Lance, don't think I didn't go then search on Lance Roberts network. Um, and it wouldn't give it to me. It just said, uh, you know, oh, he's got he had a radio show and he's got a firm like this, but we don't have enough public information. >> Exactly. Because I hide my assets very well. >> But I mean, I think I've got a lot less to go from, so I don't know why it came up with that, but anyway. So folks, so >> that's funny. >> There there's there's there's good and bad. >> Well, so so there there is an African-American underwear model named Lance Roberts. So you may get his net worth, though. >> Really? So you and I have have these other avatars that are way cooler than we are. >> Yeah. Exactly. >> Exactly. >> Yeah. So I spent, you know, you know, before I came back to the United States, you know, managing money, I used to hide assets for clients overseas. So Yeah. Yeah. You're not going to find mine. >> Okay. Okay. Um [laughter] well look um I I do want to hand the baton to you though because um as I understand it you guys are really leaning into AI pretty hard at RAIA. So how are you guys using it right now? >> Well so we're developing so on Simplevisor we use AI a lot. In fact we're developing a whole suite of new tools for AI to help individuals manage their portfolios etc. Um but internally within our own work we're starting to use a lot more AI in terms of modeling out uh you know financial you know trends etc. So if we're looking at for instance um you know power generation right we're starting to use AI a lot more and helping us determine which companies are the leaders in those specific areas which ones have the highest touch rate on you know say pipeline generation in Nevada you know wherever um to help us you know refine down our research into specific companies that we're looking for >> is it just as simple as asking it questions like give me a list of the top companies for XYZ or process No, we you you can do that, but you get a lot of garbage. >> So, you know, it's it's you know, we've been developing and and we we h we actually hired a guy in our office. His name is Bing, and he's our CTO now, and he's really developing a lot of of AI tools. U so we basically go to him and say, I need an AI tool that'll do this. And so, he's developing these AI tools to help us do our research, but we still have to filter out, you know, at this point, there's still a lot of garbage in that data. So, we still have to figure it out and and and filter it out through our more traditional metrics, but it is getting better. The the more we refine it and keep keep put and to make AI work, it's it's all about prompts. And so, you've got to give it the right prompts. And so, the more that we refine the prompts, get more specific, get very granular on what those prompts are, specifically telling it to ignore certain data sets, look at other data sets, those type of things, um your answers start to get a lot better. But if you just go in and say, "Give me 10 stocks in the AI space," you get a lot of garbage. >> Got it. Uh, two things. Um, one that person who did the AI report of thoughtful money, uh, told me that he said a really good kind of like hack with AI is after you've done your prompt, after you've gone through your prompts and you've gotten to the answer you want, you'd then ask the AI, hey, if I had wanted to get to this or something even better than this result, what would the best prompt have been? and it will actually generate good prompts for you to use going forward. Right. >> Right. >> Yeah. >> Um Okay. And then uh so prompts are super important. And then um with things like the type of analysis that you're asking it to do, are you telling it to go out and and scour the data sets or are you feeding it data and say analyze this data and give me an answer? >> Um both. >> Both. >> It depends on it depends on what what we're doing. So um trying to think so oh like so recently you know there's there's been a lot of topics about um you know central banks are you know buying all this gold right so you know we actually downloaded the actual data sets from the central banks and said okay here's the actual data sets from the central banks tell us what central banks are doing in terms of gold purchases and a function of of their percentage of total reserves and so it it analyzed that data and gave us the results of that. So, you know, so and sometimes we're doing that, but a lot of times we're telling it to either a use specific data sets that that or allowing it to use whatever data sets it want as long as those data sets are validated and verified and accurate, right? So, sometimes we let it kind of have a little bit of free reign too. >> Okay. So, two weeks ago, you had you were you were explaining about how the narrative of central banks buying more gold was really not quite that accurate, and you showed a chart. Was that chart the output of your >> Yeah. >> your AI exploration there? >> Yeah, that that that well, one of them, and we've got a couple of them now, but that was one of them. >> Okay. Um All right, folks. Well, hopefully uh you've you found this discussion of AI interesting and and one of the reasons why I I wanted to have it was one to to reflect back to you uh the very nice write up I think and accurate write up that that AI had of you. Uh but also, you know, we you've you've heard that saying um you're you're not going to lose your job to AI likely, at least in this first wave, you're you're likely going to lose it to somebody who is using AI well, right? And so um hopefully we're giving you ideas on on how you can be using AI if if you're not quite uh a engaged user of it yet. Um but uh I don't know. It's, you know, we got got a long way to go in this whole AI journey and there's probably going to be lots of uh lots of pros and lots of cons as we were talking about earlier. Um, but folks, if one of the greatest pros in your life that um makes you um most efficient uh and uh and just enhances your your quality of life is to continue to listen to Lance Roberts on his channel week in and week out. Please let him know that by hitting the like button and then clicking on the red subscribe button below as well as that little bell icon right next to it. Real quick, if you didn't watch our fall online conference that aired 2 weeks ago, uh you can still buy the replay of that over at thoughtfulmoney.com/conference. And if you would like to lock in your ticket for our spring 2026 conference at a 0% inflation rate, uh you can do that by going to thoughtfulmoney.com/2026. Um lastly, if you would like to get some help from a financial uh a good financial professional financial adviser uh in managing your portfolio for the road ahead, whether it's in the short term or the longer term, especially if they end up uh playing out like Lance has shared with us here, that he thinks they might, uh then uh consider scheduling a a discussion with one of the financial adviserss that Thoughtful Money endorses. These are the firms you see with me on this channel week in and week out. Perhaps you'd like to talk to Lance himself and the team there at RAIA. To do that, just fill out the very short form at thoughtfulmoney.com. All right, Lance, my friend. Um, another great week. Great discussion this week. I thought really good to have you back. You're looking good. Hope all is going well with your wife. I'll let you have the last word here. >> No, thank you very much. It is good to be back. Um, you know, I'll be out again uh in two more Fridays because that'll be our next chemo treatment, but other than that, I'm here next week. So, yeah, looking forward to it. All right, brother. All the best to you and yours. Everybody else, thanks so much for watching.

Stock Valuations Are The Most Deviated They've Ever Been In History | Lance Roberts

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