Market Regime Shift: Guest argues we’re in a new regime marked by higher rates, stagflation, deglobalization, and greater geopolitical conflict, unlike the prior 40-year decline in rates.
Election Cycle Risks: Populist-era data show strong presidential years but weak, drawdown-prone midterm years; 2026 is flagged as high risk for significant volatility and losses.
Non-Correlated Strategies: Emphasizes true diversification across uncorrelated strategies (trend, long/short, commodities, merger arb, etc.) as the “cheat code” for superior risk-adjusted returns.
Options Overlay: Advocates replacing equity exposure with out-of-the-money call options to cap downside premium while preserving upside participation in potential blow-off moves.
Long Volatility: Recommends a small (~5%) long-volatility allocation as portfolio “brakes,” enabling rebalancing that can raise total returns and Sharpe while reducing drawdowns.
Value/Quality Bias: Prefers value and quality over pure growth for better risk-adjusted outcomes, enabling prudent leverage and more robust compounding across volatile cycles.
Liquidity & Tails: Warns market-driven liquidity is reflexive; left-tail risk is fat, yet a sharp upside rally is also possible before a larger decline.
No Single-Stock Pitch: No individual tickers were promoted; the focus was on macro regime positioning and process—risk management, diversification, and capital-efficient tools.
Transcript
It is my view that we are in a broad topping process here. Um I think valuations reiterate that. Um I think there's all kinds of reasons to believe that uh even though it is very hard to call to the week, to the month, the quarter or even sometimes the year we are getting very close to another kind of move down that is going to you know when you zoom out over a decade going to look like a lot of chop back and forth. Welcome to Thoughtful Money. I'm its founder and your host, Adam Tagger. Today's guest is the perfect expert to discuss a year as volatile as 2025 has been. Jim Carson is founder, chief investment officer, and managing principal of Kai Volatility Advisors and Kai Wealth. He's widely known as Jim Cissant on X Twitter. Heading into 2025, Jim warned us that he predicted it would be a year of heightened volatility, and that certainly proved true in the first half of the year and again in recent weeks. But what about the road ahead? Are we through the worst of the bumps, twists, and turns that the market will throw at us, or will the ride remain rocky in 2026? Let's hear straight from the man himself, Jim. Thanks so much for joining us today. >> Good being back, Adam. Good to see you. >> Thank you. Great to see you. Um, first off, let me just reiterate the props. Um, because I remember interviewing you uh going into 2025 and you said, "Hey folks, I think this is going to be a more volatile year than the past couple ones." And that certainly proved true in spade just a couple months later with the whole, you know, April swoon and the liberation day freak out and all that stuff. Um, it did kind of get less volatile as the markets just took an escalator higher for much of the rest of the year. But then, you know, starting about a month ago or so, it started getting kind of bumpy again. Um, where are we in the volatility story here? Is have have we seen the worst of it? Did we get it out of our system or is 2026 looking like it's going to be a repeat of 25 from a volatility standpoint? >> Yeah. So, if we back up four or five years ago, I was very clear we are entering entering a 15 plus year 15 to 20 year period that looks very different than the last 40 years. I not to start like so off the ground. >> Very helpful. So yeah, please please do the refresher. >> But it's so important to to understand that we are not in Kansas anymore. This is not the same environment of uh you know a Fed dominated globalization increasing uh you know tech uh low interest rate environment right a techdriven world. Um now some of those things are still with us. Um, but I've been very clear that that, you know, the way we're likely to move forward here, which in my opinion, and I've been very clear about this, is driven primarily by a demographic and populist kind of impulse. Um even though it will be through many quarters and years of uh counter trend things along the way are largely going to be a period of rising interest rates um of of increasing uh inefficiency, deglobalization, increasing global conflict um uh you know a period of of likely towards the end slowing um uh you know antitrust and slowing uh corporate earnings growth. Um that's that sounds really scary and and you know it's it's not going to happen overnight. This is a a big process. Um but again we started really talking about this in in 2021. Uh and uh and again correctly called it 22 almost to to the week the beginning of the decline there. Um, you know, the view is that in nominal terms, we're likely going to have a lost decade to 15 years >> um in in equity markets and in in real terms likely real meaningful losses uh to a portfolio. And the way you invest in that environment is dramatically different than how you invest in a environment where interest rates are increasing secular decreasing I apologize secularly. Um uh and globalization is increasing all the things that come from from regime. Um, I like to say that if you got the broad picture right, that interest rates were going top left to bottom right for 40 years, you and and you would have gotten very clearly a a tremendous amount of profits over 40 years. That one understanding was incredibly important. You would have had uh been invested in growth. You would have bought the dips. You would have stay stayed very long beta. you would have been uh focused on um you know real upside convexity for 40 years and you would have been incredibly wealthy and a lot of people got that right whether either lucky or otherwise. >> I was going to say sounds like a lot of boomers. >> Yeah, exactly. But if you get this one thing right and I want to be clear which is very different than that environment that you're focused on non-correlated investment focused on capital efficiency right and taking advantage of the the tools of a period that looks much more like uh more recently you know 65 to 85 or 63 to 83 right that 20-year period or you know again heaven forbid a period like uh 1930s and 40s right you are going to um you can succeed there's incredible opportunities during volatile periods like that, but it's not as easy as buy and hold and you need to have a very different playbook. Um, we are fortunate to live in a time where there are more opportunities [clears throat] to take advantage of that type of um outcome and there are tools but they are not uh necessarily as easy as buy and hold. Um, so that is the big picture and we have we've called for that and again I I think that is where we are. Where are we in the context of that? Well, we had a a 22 decline of 25%, ended up down 18 or so, and then we had a incredible run from uh late 22 all the way through 23 and 24 uh into again here the more volatile kind of call it sideways to slightly up 25. Um it is my view that we are in a broad topping process here. Um I think valuations reiterate that. Um I think there's all kinds of reasons to believe that uh even though it is very hard to call to the week to the month the quarter or even sometimes the year we are getting very close to another kind of move down that is going to you know when you zoom out over a decade going to look like a lot of chop back and forth again I think you can go look at the 60s and 70s as a proxy for what this ch kind of generally looks like it rhymes uh a lot of the structural drivers are the same um but Again, that doesn't tell you much of what's going to happen uh this year per se or this quarter or this week. Those are those things are driven more by flows and we can dive into that um here as we we we kind of zoom in a little bit. But, um, before we do that, to get to get us more now in the neighborhood from big picture down to kind of the the the right zip code, um, I think it's important, this is something I referred to about two years ago, um, about a year and a half ago in early 24. I I brought a very interesting kind of data set out to public and people kind of get captured on it and it was incredibly valuable for a lot of people. Uh, it was talking about election cycles. Uh I don't know if you remember this. Uh some people will who who are are followers or have listened to kind of some of the things we've talked about. 2024 was a presidential election year. And if you really dive in and think about presidential election years, most [clears throat] people are like that's incredibly those are incredibly positive years is what the general kind of sidegeist is or or thought is on that. The reality is they're about >> because the current administration people think have juiced everything to try to make it look great going into the election. Yeah. And it's not just this administration. If you take 120 100 years, apologies, of of data on presidential years, there's a lot of stuff that'll go out that'll say something. It's I think it's about 13 and a half. I have to go look at the exact numbers, but largely quite positive um years, right? And the idea there is most administrations going into the presidential election want to be in a good footing because if the market does well, historically, they get reelected. Right? Mhm. That's the theory. That's the idea. The interesting part is if you dive in a little bit deeper and and this is this was started from a qualitative perspective, not a data mining perspective. I think that's important. I've talked about the 60s and 70s, how they're similar in a lot of different ways. If you go look because of this populist period, if you go look then at the elections that specifically happened during that time and again driven by populism, populism itself is political, right? So it would make sense that elections are important, maybe more important during this period. >> And if you go gather those presidential elections, again, not the midterms, not presidential, we're going to get to midterms here in a second. There are five elections that happen from 62 to 82. five elections. Okay. All five of the elections had doubledigit positive returns and the average returns for those five year five elections is 21 and a half or something. >> Wow. >> If you take out it's it that's amazing, right? But if you >> the consistency to scale is pretty amazing. But what's more impressive is if you take out those presidential election years, five of them, and there's 25 total elections, right? every four years, 100 years, the average return is actually 5 and a half% for presidential elections, which is way below the long-term average. >> Yeah. >> So, they are very concentrated, very consistent. It is not that all elections in my opinion are presidential elections are positive years. It is presidential elections in populist periods. Now, what happened in 2020, which I would argue is the first popular real populist election, 18 and a half% annual return. What happened in 2020? Four, 25% return. >> Mhm. [clears throat] >> Average return of 21%. Right. Um, again, could be a coincidence, very consistent. Another very impressive thing, those five election years, actually this is even more impressive. Those five double-digit election years during the 62 to 82 period, do you know what the nominal return was from 62 to 82? Nominal, not real. Real was way worse. 0%. >> I was going to say pretty flat. >> 0%. 62 to 82. 20 years nominally zero. Real terms a loss. Actually, not nominal. Sorry. In real terms, a loss. I apologize. I misspoke. and real returns about uh uh zero uh in in uh nominal terms that there was a gain but relatively small I misspoke there but importantly really low returns and of those 20 years five a quarter of them have a 21 and a half% nominal return so what do you think happened the other 15 years >> right >> three negative three and a half% on average the other five 15 years so dramatically black and white type uh outcome here for presidential we talked about about this at length in early 2024 we were talking about how why you know how how based on that that is one major reason you really want to be really bullish into 2024 and as I mentioned 24 was at 25% sure what we didn't do a year and a half ago which I wish we did is go look at those other three years of the election cycle more closely >> because I just was like oh the other three years are just bad let's just say like they're bad in general incredibly new consistent piece of information that is again is screaming at you is so like stands out dramatically relative to the other data. Midterm years 1962 to 82 you have five of them. All five were negative and meaningfully negative. They had draw downs between 23 and 49% peak to trough. >> Whoa. Wait, 29 was the low? >> 23 I think is the low. >> Sorry. 20 like the best of the years was down 23 that's the worst that's the least sorry those are draw downs so that's the smallest draw down that happened in >> right that's what I meant your best year was only down 23% yeah >> um that was the that was the smallest draw down right that doesn't mean that's how the year ended um and >> oh okay okay sorry draw down throughout the year not >> throughout the year have meaningful big draw downs is the point and they're all I believe all but one are negative years in total. Um most of the draw downs end in about October. Uh again, if I showed you a chart, it's like it's eyepopping. Um and the consistency, um a lot of those declines begin in uh either in Q3, sorry, Q4 of the year prior or early into the midterm year. Um why does this happen? Why such consistency? Why does, you know, again, I've already said the presidential election cycle itself matters tremendously during a populist time. It ma it makes sense. I want to also reiterate this is the other interesting fact that I think we all know in the back of our minds, but just to verbalize it. 62 to 82, we have how many presidents? 20 years. We have five. The average presidential term was just over four years. Nobody, almost nobody got re-elected. If they did, like Nixon, they got impeached, >> right? And but Kennedy got shot. Yeah. >> Correct. So, but those the important thing is yes, there's kind of things that seem like, oh, they're incidental, but assassinations, people getting kicked out of office. >> These are all tied to the anger and aggression that happens due to the populist impulse and the frustration of the young. So it's not just elect being kicked out of office via elections. It's being kicked out of ele out of office through violence through political other means. >> Yeah. >> And and and when you go look at the last 40 years, you know what that average election kind of term is? 7.1 or two. Dramatically different. >> Mhm. And and so and again it it just falls in line with uh how contested the elections are during these populist periods and that contested environment leads to more need to stimulate during the presidential year to drive positive outcomes so that the hopefully there's some ability to get reelected. Right. Sound familiar? Does that any of this sound familiar by >> it also? It sounds like the movie that's playing in been playing in front of our eyes. >> Correct. And then what happens they this inevitably the last party gets kicked out of office which has happened the last two elections right um for because the problem is bigger than the person elected by the way and and the change agent or the uh entity that's coming in to be the new president soon as I I said very clearly at the beginning of this year just wait just wait because the pitchforks will be on his lawn next It's just how it works. And where are we? That's exactly what's happening. We just saw a massive uh Democratic landslide. Uh we we are starting to see real uh anger and political like the polling numbers are in freef fall for for Trump. There is a major title wave. You saw some of his MAGA base now defecting over the Epstein issues. there is a dramatic move um counter and that's classic in this period. And as that belief that we're going to get change or resolve the problems now fades to anger, more frustration, even more desire for change, eventually you head into the midterm years and they start to lose control. Nixon came in as a Republican that was supply side economic driven and the first policy he passed was tax cuts for the rich and attempt to roll back populist policy. Sound familiar? >> Mhm. >> Within a year within a year he was already deploying new populist party policies. In a year and a half it was in he was he was forced into price control. This is how it plays out. Now, it's going to rhyme. It's not exactly the same every time, but if you can't see that what's happening under the hood and and see this trend, I think you're missing the big picture. And it's incredibly consistent. >> So, in the context of that, you have to think, okay, again, we've gone from 20-year period down to election cycle, right? Y >> we are entering a period that you should be largely cautious and it's driven primarily by a likely loss of control by the administration. despite despite the general view that oh he's going to be able to do X and they're going to stimulate and they're going to the political environment is not is going to make it hard for him to control his base. it's going to make it hard for him to control uh different outcomes. And in terms of an inflation, again, we're entering a stagflationary environment. I've talked about that for several years, clearly seeing it. The most recent data coming out from Black Friday and all these other this uh this this this period show um it really interestingly uh you know, a meaningful 7% um increase in prices sold with a meaningful I think it's a a a 2% decrease in actual uh volumes. It's all driven by inflation. >> Inflation. Yeah. We're spending more on fewer things. >> Fewer things. Exactly. And so that stagflation environment. And by the way, not a coincidence why like why we're not getting CPI numbers and unemployment numbers anymore. I mean, people, again, this is not a conspiracy like uh you know, they're trying to control the narrative. That's what politicians do. It's not just a Trump thing. It's you know, what happens, right? um and uh and they're increasingly finding it difficult to do that. The pressures in the system are making it difficult for them to continue to control um a a very difficult situation, a stagflationary environment and ultimately given valuations, given flows, it is likely now they can thread the needle, anything is possible. This could go another year. they can make it, you know, um but but the odds uh in terms of the actual pressures in the system are going to lead to a higher probability of of um of a of a problem at some point here. Um and liquidity markets are the biggest driver of liquidity in the world. It's a reflexive loop. We've talked about that. Um bigger than the Fed, bigger than the Treasury, bigger than the economy, and all those things matter. They're all big. But ultimately, the biggest driver is markets themselves. And if the economy starts to go and liquidity is being pulled from there, which it is, which the Fed if the Fed is not able to react to aggressively, even if they're just kind of on the sidelines and the Treasury trying to do it all, the Treasury is likely to not be enough. And all it takes is a little bit of market volatility and a bit of a decline and then liquidity can really drive kind of a a very different direction than it has been going. And that really is what will uh if it happens will likely um lead to a bigger um issue here. Um now this is not a [clears throat] sky is fall the sky is falling uh story. Again, I'm not sitting here saying, you know, go buy go buy puts and scale and get short, right? This is a distributional story, right? The reality is when you get to this point of the cycle, the fat the [clears throat] left tail gets really fat and we're at this point in the election cycle where the odds are increasing as well. That said, I started the bit in the business in 98. Uh saw 989, 2000, 2001, 2002. incredibly like that was my initial education in markets. I'm telling you at the end of a bubble which is where we are right uh in particularly in this type of populist environment it it is not going to end well >> but but could we see a 20% 30% type rally before a decline absolutely 100%. This is a you know this is a bigger picture uh reality and but there are ways to take advantage of understanding where we are in that distribution and that is way easier particularly on a riskadjusted basis than trying to just be long the market or short the market. >> Got it. Okay. Yeah. A lot to unpack there. Uh but >> no no no I want to compliment you. So um you like an interviewer's fantasy. Um you you paint a broad landscape in beautiful color. So I just have to sit back and listen. Um so um I I understand why you think uh volatility is going to be uh certainly greater for the next where are we in your 15 year cycle? Two three years. So, for the next 12 to 13 years, um, and in particular, 2026 is likely to be a rough year for all the reasons that you just mentioned about about midterms. Um, so to a point you made earlier, a lot of people made a lot of wealth by basically just being long and living their lives for for for much of the past 40 plus years, right? uh they got a little bit of a wakeup call during CO u but honestly the policies from CO helped them out and for the past three years if they were just long and didn't worry they've been fine. So my question to you Jim is is that bololis of investor are they sleepwalking into all this because they might have heard some of these warnings before but they're just looking at their portfolios like yeah you know this this year was a little scary at times if I checked my 401k in the wrong month but otherwise it's going to finish up 16 plus%. Um so are they literally you know willfully blind to the risk that you're talking about here? >> Yes. I mean the answer is after 40ome years right of one regime it is almost impossible to convince people no matter the facts and I have lots of I could show you charts and graphs of why this is an absolutely awful time to do exactly what you did for the last four years >> but it doesn't matter people don't >> nobody listened to Cassandra at Troy right because hey you know >> correct [laughter] >> if the Greeks aren't here then why worry >> what's the longest track record record you've seen for anything? Is it anything longer than 101 15 years? >> Right? >> I mean, a 40-year track record is >> like, why would you why would anybody argue with a 40-year track record? So, what I'm talking about is again, if you dig into the details, if you understand what the force is and what's driving the big picture, to me, it's clear as day. It's that clear. But it's really hard unless you really take somebody by the hand for hours at a time and show them all these things to to explain uh the why and the how. And it's much easier to just say, and by the way, the incentives in the system also drive RAAS and people to just be like, it's simple, low cost, buy and hold, set it and forget it, and it'll work. >> Oh, yeah. I mean, the the RA system in general is set up to be a trust me, bro system. it. >> Just give me your money and just trust me market will take care of you. >> I mean, I think I've mentioned this to you before, but I think this is one of the most important things I can say. Uh, if you ask I was on the phone with a a relatively big RAIA today. I won't name names, right? And I asked the same question I ask whenever I get on with a big RAIA. What is the sharp ratio of the S&P 500? What do you think? >> And it's like, >> they don't have an answer. They don't even know it yet. >> No idea. Yeah. >> The simplest measure, the most basic measure of riskadjusted returns, people are being hired to help people get the best returns relative to risk. You would think zero zero zero idea. Um the answer for the N any listening [laughter] is 35 over 125 years of data. The S&P 500 has a.35 sharp. 6040 also has a 37. [snorts] No diversification benefit >> of 6040. It's just driving slower. Um there is no diversification that portfolio. You can achieve two sharp type returns with true diversification, not rocket science. And there are dramatically like very well doumented ways to for free improve those risk adjusted returns. So um that is what people should be thinking about is risk. What is risk? And there are tools to manage risk. That by the way is the expertise in investing. It is easy to go buy stuff and go away for 125 years and make money. >> Right? The problem is there are three and a half almost four 20 year periods 20 not one decade two decade long periods where in real terms 60 40 makes no money over the last 125 years. >> Yeah. A and in those same periods, somebody who does invest with the type of outlook that you're recommending here, there's the opportunity for loss avoidance, right? Okay, I'm not going to get I'm not going to sleepwalk into these downdrafts, right? I'm going to have some protection against them. But then there's also the ability to catch some pretty massive rallies, right? >> There is more opportunity during these periods than other periods. there is more divergence in outcomes dramatically. So that's actually the whole point is that there is this is a time of lack of loss of control of central bank and interest rate dominance. It is a time of delobalization and global conflict which means you have a dramatic dispersion in outcomes of assets which leads to some huge winners and some huge losers. Mhm. >> And so if you are prepared for these times and you understand broadly what's happening, you can find yourself in a actually a way better situation than you would have in these other periods. >> Right. >> And can I make a comment for for you to to to clarify here, which is I can make a Mchavelian argument and I can make an altruistic argument w for for for your type of investment strategy here. the the Mchavelian one is is hey you can make a boatload of money here and and in and maybe like um life station changing envir uh wealth right where like hey in a regular market everyone's doing pretty well and it's going to be harder for me relatively to change my station to be ahead of where I am now whereas here you're going to have potentially a lot of people at the top end starting to lose because they're playing the old playbook so you can actually go from being in whatever strata you are into a higher strata, right? So there's that that's the personal incentive mode. But then there's the altruistic one which is like, hey, probably a lot of people you know are going to be in that that loser category, right? Might be your parents, right? Might be your siblings, right? The the folks that you said after 40 years really hard to talk them into changing their minds, right? So maybe part of the message here too is, hey, you've got the ability to be the responsible one who will hopefully outperform in here and then you can be a resource to those in your family who kind of got caught by surprise by all this. Is there truth in what I just said there? >> 100% and actually from a personal level I cannot think of and people will laugh at this argument, but I cannot think of of honestly a higher calling at this point. you I'm I'm able to educate on what I think is an incredibly important thing, hopefully help a tremendous amount of people in a tremendous amount of and with a with a tre tremendous impact while still being in a business by the way which has the largest total accessible market of any business on the planet which is the 500 trillion dollar asset management world that is 99% managed in a very incorrect way at the exact worst moment. So yes, incredible profit opportunity to be invested in not only as as a investor but also to be in the business of that if I am right which I'm you know I have great conviction that I am and very much at the opposition of what 99% of the world is doing. >> All right. Well, Jim, if if you prove to be right over time here, I will be part of a group that builds the statue to you, just so you know. >> Well, again, don't need a statue. Uh I think just helping people and doing being involved in that. Uh what incredible opportunity. So, >> okay. All right. Well, look, um I think you've kind of woken people up to the fact that whoa, if nothing else, Jim thinks that this could be a year coming year where there's going to be a draw down in there. There's highly likely to be a draw down in there of at least 20some percent. Maybe even twice that, right? Um, so going from sort of problem to solution side of the discussion, you've said several times, you know, there are tools and there are strategies to be able to navigate this type of period. What are they? >> Yeah. So, you've asked me before about options. We've talked not just macro and big, we've talked about options, right? And um and I know options are scary or confusing for people, but what they are is the ability to be much more precise in terms of your positioning, right? Options represent a each option, each strike at each expiration represents a moment on a distribution of outcomes for any asset, right? And so instead of owning a stock which is just the expected value or a bond or whatever asset the the value of that asset is just the expected value of the whole distribution. And so if you are able to instead express the opinion you have about an asset much more precisely that takes dramatic risk off. If I own a stock or a bond or any asset I'm taking the whole risk of the whole distribution. It is both capital inefficient to do that because I'm making a bunch of bets and putting a lot of money into things that I don't like or that I don't want to be invested in and two I'm taking on a bunch of risk that I don't want to be taking. So the right way to do this and again this is hard for some who are in very who who are still investing in 2D world right >> is to go replace the whole asset with the part that you want okay and so what parts are worth investing in right now I just said the distribution is getting very fat tail we are have a very high probability we're really far off the ground. Valuations are very high. There are a lot of risks. If things go badly, it's not going to go bad small. It's going to go bad big, right? So, that's a fat left tail. Probably don't want to be short the out of the money put or the put in markets, right? So, there's part of that stock that you own. Part of a stock or a bond is the put is the downside. Don't be short that. Okay? I would argue, you know, anywhere on the downside, you don't want to be long short. I would also argue the right tail is very fat. If we go up this year, it is not going to be a small up year. Why? Because there is a lot of short interest in the market. People are worried because we're at record valuations, rightfully so. Markets are efficient. Bubbles generally don't end with a whimper. They end with a bang. Right? >> Like a blowoff top. at blowoff top and that happens because of the very realities of people are underinvested. The entities in power know that there are problems and are trying. Again, I call it a sumo market. We have tectonic plates pushing against each other, right? That's not the same thing as two little wimpy guys pushing on each other. The market may go nowhere at at one point, but these sumo rustlers eventually when they push off each other are going to go uh too much fatter. tails and and that is very much true for where we are in in markets right now. So the right positioning right now is not to be long stock. It is to be long out of the money calls. Maybe a 25 delta 30 delta call something out of the money. If markets go down, you don't participate on the losses to the downside. You lose some premium. And if we do continue to go higher, it will likely not be slow and it will be volatile. By the way, I started calling for this several months ago. We've seen market up volop into the rallies and we've had a more dramatic decline. So, this approach has been incredibly profitable. >> Put put options love big moves in a short period of time. >> Correct. That's exactly right. Now, the difference of why put options are are less favorable to me than call options as a replacement. I know that's confusing. People are like, "Wait a second." >> Yeah. And I'm sorry I meant call, but yeah. Go ahead. >> Yeah. Call options are the upside have much lower implied volatility also structurally because of all the buy right people own stock they're naturally long assets they sell calls they buy out of money puts they yeah because they're selling calls all these buy rights exist there is a compression to the right tail in terms of implied volatility where there is no real volatility risk premium there is no actual risk premium to calls >> and so not only are they incredibly cheap >> and they are um and a great way to manage risk. There's no cost to them in the uh historically and in this environment if I am correct about the the distribution about where we are which I think historically is is highly likely then they're you're getting the medic credit. So you're getting risk protection for a meaningful credit if that's the case and that's again what we've been saying for several months and that's been an incredible opportunity. Now this is just one of the tools. I know you asked me like what is what does somebody do? You're asking a much bigger question. I dove right into options and people like probably like tuning out right outside of tools like options there are incredible much easier set of tools that you can use one diversification it's investment 101 yet so few advisors do it 6040 stocks and bonds over the long run there is zero correlation b decor there's zero Zero diversification benefit of bonds versus stocks zero.35 sharp versus.37 over 125 years makes sense in a sense if you bonds are the bottom of the capital stack equities at the top they're still exposed to the same asset right one's just delevered >> right to the occurrence until it happens it doesn't matter but then once it happens it's it's dramatic right risk is the same thing as equity exposure and so 6040 doesn't actually diversify exposure historically. So most RAS don't deploy any true diversification and it's the one cheat code. People think hedge funds are some these guys are geniuses. Like there's got to be like you got to be extra smart to take advantage of what hedge funds are doing. Blah blah blah. By the way, Millennium is run by guy named Izzy Englander, right? is Englander [clears throat] was a floor broker on the floor of the options exchanges. He wasn't the market maker. He wasn't a sophisticated trader. He just knew everyone. He was a broker and he brought everybody together. Diversification is the cheat code. It's the simplest thing on the planet. If I have 20 different managers who make 10% per year on average over a decade, sometimes they're down, sometimes they're up, but 10% on average. They each have a 6 sharp. They each have a 15% annual draw down per year and they're all invested in similar things. Guess what? My sharp my draw downs are all going to be the same. That's not diversification. But now imagine you have true diversification. When the market goes down, one might lose 15%. One might make 15%. >> So this is this is your non-correlated assets that you're >> non-correlation. you truly and by the way it's not just assets it's strategies I want to be clear there because okay >> sometimes just being an asset is a correlation right and so there are I can name 20 strategies that are truly non-correlated just off the top of my head you know trend following managed futures event driven strategies commodity commodity strategies long short equity long short credit FX trading life settlements legal settlements global macro you know managed futures Right? These all these things are relative value, some type of timing edge, you know, merger arbitrage, convertible arbitrage, these things are nichy. They don't necessarily have a straight market exposure. And they're not just non-correlated with markets. They're non-correlated with one another. >> Now, you have 20 strategies that make 10% on average a year, still have a 6 sharp. Each one has a 15% draw down. On its face, they look the same as the correlated assets. But this magical thing happens. You put 20 together, you still make the 10%. But your sharp ratio goes to two. Your draw down goes to four. >> Wow. >> Because you have only 12th of each investment [clears throat] with each risk. You have completely diversified your risk. You don't have a single point of failure. If you're at if you're at home and you have a risk that to one thing going wrong, the whole house the whole your whole everything falls apart, you would never take that risk, >> right? >> Yet that's what we the average RA does. We have a single point of failure. If equities go down 50%, you lose 50% of your money. And bonds are just a deleveraging to that. There's no diversification. Instead, if you put all your bets or all your opportunities different in to to all kinds of different things, guess what? Your risk drops dramatically. Diversification is the cheat code. It's investment 101. Yet 99% of raas do not deploy the simplest idea on the planet. We should be diversified. It's that's the key to risk management. And you can achieve the same returns. You don't have to give up returns. And Jim, is is that is it just because they're lazy? >> Yes. It's not just lazy. It's it's confusing to people. >> Yeah. These are the experts. These are the guys who who who get, you know, licensed and go through training, you know. >> So 1982, interest rates topped at 19%. And it's been a straight line down of interest rates for 40 years. Yeah. So these guys got to be on the trend on the tailwind >> too and it's easy and it's cheap and it's scalable. These are sales machines. They're aggregators of AUM and it is much easier to tell the story that stock number go up. Stocks go up over the long run. It's easy. It's simple for people to understand. Businesses make money over the long run. Okay. It's recency bias. Passive investing. This is going to blow some people's minds. Everybody thinks it was a technological innovation, a new idea that Vanguard had that completely changed the world. It It wasn't a It wasn't uh around before. It wasn't something that people um knew how to do. The Dow Jones Industrial Average has existed for over a hundred years. Indexing has been around forever. Passive investing is just indexing. Why did we not passively invest until 1985? Because it didn't work. >> Because the conditions weren't favorable the way that they were. >> It didn't work. >> Yeah. >> It's worked for 40 years and now it's the biggest thing on the planet. 6040 stocks and bonds. That idea did not exist till the late 1980s. It worked for 40 years. And guess what? That's what everybody does because it's been easy. Recency bias. It's not rocket science. If it works, people do it. But people are always too late on the turns because what worked before is doesn't necessarily work in the future. If you take a wider lens and you look at why it's worked is because interest rates went top left to bottom right. And now the big question is after 40 years of interest rates going from 20 to zero, now they've gone to four and a half. And by the way, there's about a five to sevenyear lag. Again, well documented because people borrow for an average of five to seven years. Corporations borrow for five to seven years. So there's a lag. >> And now that we're in a period where it's more likely that interest rates are going to normalize, even if they just stay here and don't go lower, we feel >> you get this refinancing at the higher rates and that starts being gravity. Yeah. And now that we're entering this period, nobody's asking the question, what if the most important thing in finance, which is interest rates, it's the discount rate is not going to keep going lower. It's maybe going to go the opposite way. What does that change? And the answer is very clear. If you look at longer terms of history, 6040 and passive investing does not work in those periods. >> Right. And so I'm going to guess too that you you are not surprised at all that despite the administrations and Wall Streets and the Feds and everybody's uh hopes to get the the 10-year Treasury below 4%. Just hasn't proved successful this year. Anybody who's been following me for four or five years know we were we've been years ahead of >> the stackflationary trend the inflationary structural realities the populist u policies they're all connected um and everything we've talked about for four or five years is happening under the hood it's happening >> okay so so beyond the diversification um at at uh Thai volatility advisors and Kai wealth what what are you what else are you focused on right now heading into 2026 >> so risk management is not diversification is the easy part right the next step is using options I highlighted one way yeah >> which is a kind of I think the best easiest way I want to get that out there because I do think it's one of the best ways to do it in this environment which is stock replacement with calls but volatility itself is an incredible tool my friend David Drudge uses this metaphor for I think it's by far the best one that you can use. Your average person looks at something like a long volatility strategy, which we recommend a 5% allocation, too. >> Okay? And looks at it and says, "This this strategy makes 0% over the long run, or heaven forbid loses 2% each year on average, and says, why would I ever invest in this thing? Because I can make on average 10% in equities per year, right? I'm deleveraging to the long-term realities. That's how the average person thinks, >> right? >> And I get it because they don't understand portfolio theory or how this stuff works. But after diversification, there is another cheat code. And again, well documented. There's a ton of academic research about this, which is looking at long [clears throat] volatility and saying, "How fast is this going to make me go?" is like looking at brakes on a race car saying, "Dang it, these brakes slow me down." [laughter] Just because brakes make you go slower or can slow you down, give you more control, doesn't mean you should be driving a race car without brakes, >> right? >> A [clears throat] a race car with brakes wins races. Not only does it make sure you don't fly off the track when you go around the turns, you don't have to go slow, you can slow into the turns and accelerate out of them. They allow you to take risk. They allow you to seek upside exposure. They allow you to take opportunities at exactly the moment they arrive. They allow you to accelerate out of the turn. There's a ton of academic research for this. If you put some long volatility, just you don't need a lot 5% into the portfolio, it doesn't lower your total returns through a process of natural rebalancing. It improves your total returns, yet dramatically reduces the volatility of the portfolio at the same time. Your sharp ratios go through the roof by simply having breaks and gas. Again, an idea that seems simple but is completely misunderstood because people are way too simple about looking at each investment and saying, "We're just going shopping. I like that thing that makes 10% per year. I like that thing. It makes 10% per year." diversification plus some tail, a little bit of tail to help rebalance, gain control in the in the portfolio and to be more aggressive when times are right and be less aggressive when times are not right. Make for a much more robust portfolio. That's the second concept. Incredibly powerful. Third concept, as it comes to equities, there is another cheat code, Warren Buffett. Not everybody's like, "Oh, that Warren Buffett's a genius." He'll tell you himself he's not a genius. The concepts that he uses again very simple idea. Value and quality investing over the long run has very similar returns to a quality sorry to a growth type of investing. Very similar but half the volatility. Growth stocks make tons of money in certain periods then they lose tons of money over other periods. This is a diversified investment. Yeah. Can you pick the right one and get lucky? Sure. Right. If you have that skill, great. Everybody thinks they do. Nobody really has that skill. >> Nobody does. Yeah. >> In a diversified approach, value investing on a riskadjusted basis. I say value, I don't mean like value as a value trap. really again a Warren Buffett type discounted cash flow analysis growth matters right in that but but what do we know the quality of of the investment if you if you take that approach you dramatically outperform on a riskadjusted basis which again similar to brakes on a race car allow you to add leverage and take risk at better times in better ways so you actually can dramatically outperform right if I have a better riskreward I can add leverage I can take more risk So your returns relative to risk are better and hence returns end up being better. Invest with quality. Invest with value. Don't worry about the 20 years or 15 years you underperform like Warren Buffett did for 15 to 20 years over 65 years. He dramatically outperformed not just the total returns but on a riskadjusted basis as well. Third concept simple. people just have to be patient and take a very riskadjusted approach to doing the simple things that work and you will end up in a dramatically better place in the long run, but particularly given everything we talked about at the beginning of the conversation right now. >> So what what I'm loving about this is is this is giving me like shades of money ball, right? where um you know your point on diversification it's it's the analogy I'm thinking of is is like fantasy football or we can call fantasy baseball in this example >> where yeah you could you could bet on the team but the team might have a lot of players that you think are stinkers like one or two standouts right but so why not field your team like in a fantasy league of of the exact pitcher right fielder catcher you want right you're you're shaking you're nodding as I'm saying all this >> absolutely it's statistics it's statistics >> yeah And similarly to your point about value stocks over the long run, that's like the Billy Bean strategy of like, hey, let's look at what really matters on base percentage, right? Guy doesn't have to be a massive hitter, right? Uh he doesn't have to be the fastest guy on the team. He just has to prove that he can get on base more often than the average guy, right? So you're you're combining all these things very much like he did. And it it it obviously worked for them him. >> And when you add them all together, each one of these is meaningful, but it can be dramatic. you can achieve through diversification, through a little bit of long ball and and improving your geometric returns with rebalancing through a value investing approach. You start putting these together and you take a 6440 portfolio which has a.37 sharp over 125 years and you can achieve not twice that not three times that 400% like hundreds of percent better riskadjusted returns. These are simple concepts. You do not need to be a rocket scientist. Now, you can do things on the margin that can even improve it more. I'm not even talking about, you know, a lot of the other, you know, timing and getting the probability distribution of like none of this involves the timing stuff we were talking about at the beginning. The thing that everybody wants to know where are we going, when are we going now? Like, right, if I can provide value there, then we even >> have dramatically better outcomes, >> right? This is just a better investment process at baseline at any time. >> So, let let me ask you this then. So, um we're we're beginning to come up on the hour and I don't want to short change you in any way. Um but, uh you know, you've clearly it's like Liam Niss from Taken. You've clearly got a very special set of skills here that uh that make you feel like you know you you you see kind of the the the large tapestry pretty clearly and that we are getting very close to when the world is likely going to wake up to the fact that you're on to something here, right? And it's probably going to take the world sleepwalking into the next really big, you know, volatile year to wake them up to say, "Hey, the passive playbook isn't working anymore." So, uh, how how excited are you for 2026 given the Kai model here? >> In the words of Warren Buffett, [clears throat] you never know who's swimming naked till the tide goes out. Yeah, >> it is very hard to know when the tide is going to go out. >> Y >> that said, there are certain things that lead to higher probabilities of the tide coming at certain times, >> right? Like the midterm data you had shared with us earlier. >> So, in my opinion, and I think uh I'm on very solid ground, risk management is in short supply and very few people do it. We swim with a swimsuit. I've been swimming with a swimsuit for a long time. I get a lot of like, "What's the deal with a swimsuit? Looks uncomfortable. What's the deal?" It's not that hard. And guess what? It's just smart and it doesn't cost me much if anything if I'm right and the probabilities are higher the tide going out, there's going to be a lot more interest in risk management and ways to do it going forward. So, yes, I think the probabilities are high. Will it be 26? I think there's a decent odd. If it's not, I'll tell you what, I think in the next five years, the odds are incredibly high, right? Of the risk management part being really, really important. And when we start talking about prediction, again, a lot of academic research on this. This is Schiller's thing, you know, fundamentals really don't matter over a one-year period or a two-year period, >> right? >> Over a decade, they're incredibly predictably. >> Yeah. And so I think my prediction that the strongest prediction I can give you is that the next 10 years are not going to be great. And I think that's on very solid ground. I'm not the only person who says that. We talked to you know Dr. Miller and gazillion other people who are in that same boat who are very much much much better known than I am. Okay. And that prediction if it's right alone right what we're talking about is incredibly important. And again to your point, not just a benevolent incredible opportunity to help educate people and help them in the next decade, which is what really matters, >> but also incredible opportunity in terms of business and opportunity uh in potentially the biggest total accessible market of any business on the planet. >> All right. Well, look, uh whether it takes 5 months or 5 years, Jim, um we'll have you on this channel as often as you want to come on to keep us updated on where things are and and when things start getting real, then please come on anytime to call an Audible and let us know, hey, this is what I was looking for, folks. This is what we're doing. But um uh I I I I very much respect uh and appreciate what you guys are doing there at Kaiwealth. Um, and uh, and and anything we can do to, you know, um, magnify your voice, not just for my audience, but for all audiences that are willing to hear it, I would love to be able to do. >> Thank you, Adam. It's a incredible opportunity to have this platform with you and and hopefully we're reaching some people out there, uh, like you said, helping them um, along the way. So, anytime anytime, I'm happy to hop on. >> You're very kind. And and so a question that's hanging in in folks's minds right now is okay, well geez, if if I want to benefit from some of this, you know, risk mitigation that that uh Jim's talking about and maybe, you know, have my portfolio structured in this way. Where can folks reach out to you to follow you and your work or potentially become a client? >> Yeah, kywealth.com. Um, we uh we we're also out on on Twitter or XJam Jam Croissant or Quissant depending on your pronunciation. Um, you know, we we uh we definitely uh you know team up with with high net worth clients and and are are expanding our footprint there. So, please reach out. >> All right. So, Jim, I'm going to edit this. I will put up the links to Kaiwealth and your your exhandle there on the screen so folks know where to go. Folks, the links will be in the description below this video as well. Um, Jim, is there is there anything about what you're focused on right now or what you're implementing at Kaiwealth that I just haven't thought to ask you about yet? >> Honestly, um, again, we we try and keep the uh the process straightforward. Again, not not as straightforward as just buying stocks for the long run, but I do think the the implementation is more straightforward. you know, we're on Schwab, we're on uh Fidelity and Interactive Brokers and really trying to make it as as straightforward for clients as possible, >> meaning an average person can implement this. >> Absolutely. Yeah. And I think that's that's really important. Uh this is not uh something scary or confusing. We really do try and work directly with clients to make sure they understand how important these principles are and and how to deploy them. So, >> all right. you. Just in closing, one thing I'll I'll tell folks that maybe I'll give more detail on in a future video is the power of statistics. Um, I was pretty terrible at statistics, but I was smart enough to realize how just unbelievably powerful they can be and that the people who understood them, what an unbelievable advantage they have. It it almost looks like magic. And you're smiling as I'm saying this guy, but there's so many things that that statistically the folks that know how to dig into the numbers. They can pull out correlations that make no sense to to me or a regular person, but they find it in the data and it's like black magic when they say, "Hey, if this is going to happen, that's going to happen." There's a ju just real quick, there's a um problem called the birthday problem. and um my statistics professor in business school started the first day of class off with this where there was about 60 of us in the class and he said um look I'm going to bet uh I'll put $5 on the table I'll bet that two of you in the class have the same birthday not not the same year but the same you know month and date right >> of course somebody bets him and people start naming their birthdays and three or four people in somebody says well that's I've got that same birthday too right and he said well I'll bet you again and he kept betting and he kept winning and people are like eventually like surely we've we've done all the matches here and they keep betting him and they keep losing and the reality is is I'm doing this from memory but I think as long as there's like 40 people in the class he's got like a 98% chance of winning the bed I don't think it drops below 50 until you get down to like 23 people right some you're like there's 365 days in the class there's only 50 of us of of course he's not going to get a match right but it's it's stuff like that that the people who really understand statistics like you and your team, [clears throat] you have such an unbelievable advantage if you if you use that that knowledge to to your benefit, which of course you are and that of your clients. So, I have a huge respect for what you're doing is what I'm saying. >> I I appreciate it. It's uh again, you don't have to be a mathematical genius to do these things. I'm not saying they're easy, but but statistics is a well-known field and there's there's very simple ways to understand the basic concepts and then deploy them and use them to your advantage. >> Yeah. But but but very few people do. So it's almost as if you are a mathematical genius. Feel free to wear that crown. But I I would say to the average person, if this sounds compelling to you, then recruit your own mathematical genius. Get them on your team. >> Well, common sense isn't common, I think, is is is the phrase, right? I think the reality is there are simple things that work um and deploying them works, but often uh people don't take the basic steps to do those basic things. But, um, yeah, incredible opportunities out there at this incredibly important time to do that. And, uh, you know, hopefully this gets through to enough people to to start thinking about these things. >> All right. Well, Jim, as always, super fascinating, super valuable, uh, and a privilege. Thank you so much for coming on the program. >> Same, Adam. Thanks for having me, bud. >> All right. Well, now is the time of the program we bring in the lead partners from New Harbor Financial, one of the endorsed financial advisory firms by Thoughtful Money. I'm joined as usual by lead partners John Lodra and Mike Preston. Gentlemen, great to see you. Mike, why don't we start with you? Um, as I was interviewing Jim, I was thinking, okay, well, I think there's going to be a fair amount here that that, you know, New Harbor's probably going to see eye to eye with. Um, especially Jim's focus on risk management. Um, especially for the type of environment that he sees us heading into. I know that's in specialization of of you guys at New Harbor. So, what were some of your key takeaways here, Mike? >> Hello, Adam. I really enjoyed that talk uh by Jam and I' I'd like to just share some of the high points, things that we agree with here and maybe one or two things that we disagree with. Um but I really enjoyed the talk. Jam talked about the last 40 years was a was a regime, a different regime than what is likely to happen going forward. We couldn't agree more. We think that we're actually at the you know near the crisis and climax of a fourth turning. And anyone that if if your viewers know about fourth earnings, they know they only come around every 80 years or so. I know you've had Neil How on your program many times. The >> author we'll have him back on in uh I think early January. So he's coming back. >> Excellent. Always enjoy uh Neil and his talk and uh and in and the two books u the the original one and the new book that says uh well the titled The Fourth Turning is here. We talk a lot about that paradigm because it's a paradigm that we really resonate with and it makes it easy to explain where we are in this in this time this cycle because not every cycle throughout history is the same and this one is not the same. It is more dangerous than anyone before at least over the last 80 years or so. So JAM talks about the last 40 years has been the regime of globalization outsourcing jobs and manufacturing and buy every dip. And I'd state that it's also the regime of interventionist central banking, which I think has had a lot of negative effects. I could probably argue that this had a lot of good effects, too. But the negative effects that I don't like is the increasing risk environment, the bubble and bust cycle, plus the insane wealth disparity that we've witnessed in the last 10 to 20 years. Now, he says he thinks we entered a new 15 to 20 year regime back in 2022. Not sure I completely agree with that. I I think we're still in the final days of this 40some year regime. And I think that once we hit the crisis and climax of this fourth earning, this market will fall hard and will be an L-shaped move this time down and sideways for years. Doesn't really matter how we label these regimes. What we have to know is that the regime over the last 40 years is different than what we're likely to see going forward. Whether we're in that new regime yet or not is up for debate. I think it doesn't happen until we get the kickoff of the crisis, which is likely a stock market crash. Jam also talked about the fact that we're going to have to live with higher inflation and interest rates. I think that's ultimately going to be right. Um, over the next couple years, we think interest rates are actually going to go lower, probably in response to a falling stock market and a panicking Fed. Likely will at least drive rates down to 3% or below on the 10-year, at least in the near near term. Long term, I think the the effect of this, the effect that we're probably going to drive global debt to at least 50 trillion dollars, which is currently at 37 or 38. Balance sheet, who knows what on the Fed will be something crazy. We're probably going to see higher inflation that's going to stick and higher inflation rates. We might even see a headwind for the US dollar over the next 10 plus years. In other words, a different regime. Is it going to be the end of the world? No. It's still going to be okay. But it might very well mean that our standard of living goes down 20 or 30% for the average person. So something different. Now he says that he thinks the regime going forward is going to look like 6 1962 to 1982. I think that's pretty much right. Maybe there's going to be a lost decade or two in stocks. So it's just it's a high-risisk environment. We have to think about that. Jam talked a lot about risk risk risk, how to handle that. So that does resonate with us and that's how we manage money here. Couple other things he mentioned. Um 2025 has been volatile like predicted but it's been okay. 2026 he basically sees either you know a blowoff top then a then a bare market or straight into a bare market. we we think that we might very well get this blowoff top. And he talked a little bit about replacing, you know, uh, some of these darling stocks with longdated call options. I'm not sure that most people should actually do that. It's complicated. You face time decay. So easy to lose money buying options. Trust me from experience that probably you're better off in our view not doing that and then just getting reducing your equity exposure down to something like 30%. something that you can sit with through whatever comes and something also that will allow you to get more engaged in the market if we see that big drop. Also talked about um passive 6040 and 100% long indexes are just going to get killed. We know that. So we talk to people that are either clients or you interested in maybe becoming clients or just want to talk to us. They say that their adviser if they have one is always in 6040 or 8020. That's what Wall Street is, particularly after 40 years of nothing but up. That's exactly what everyone's going to do. And there's no safeguards in place on how to protect those people going down. They're just going to have to sit with it maybe for the rest of their life because if we go down, it could be 10, 20 or more years before we really have meaningful recovery. So that's why most are in danger. And I guess I'd like to just finish my comments with what he thinks this new regime is or how you should be invested for this new regime. Jam talked a lot about true diversification 15 to 20 genuinely genuinely uncorrelated strategies like futures, long short commodities, reinsurance, life settlements. Let me just tell you that most people shouldn't bother with that. I this is not an insult to what he's saying. I just don't think that most people can really get their arms around that. If we're right and it's going to be a big bare market, just go into treasuries here for most of that money. You don't really have to do all of that. Most people are not going to be sophisticated enough to do that. That's not to say that JAM can't be uh successful doing it and that some others can't be successful. Maybe they can. He talked about long, permanent long. It acts like breaks on a race car. That's that's true as well, but buying volatility long is difficult. You're going to have to roll VIX calls. uh V VIX being the index of volatility which in itself is flawed and you're going to be facing a lot of decay in those options every single month until it eventually maybe pays off. So probably wouldn't recommend that either. He talks about value and quality is better than pure growth stocks. Can't argue with that. And um you know lastly I guess I'd say that he talks a lot about fat tails and how to protect yourself. Again for most people just go mostly to cash. Do the tea bill and chill really. It'll it'll be okay with T- Bill and Shill. You're going to probably need some help on how to get in. Reach out and talk to us or somebody that you trust or just sit and wait for the market to fall, you know, 30 plus%. Probably more if if I had my way and watch for Treasury Bill uh yields to go back down. That's going to be the dangerous time that the T- bill and chill people are going to want to get in. But talk to us. We'll be happy to help. And so big bull markets don't end with a whimper. Jam says, they end with a bang. So, that probably is going to be, in my opinion, an all-in moment of fireworks up followed by a crash. So, be careful and um talk to us. We'll be happy to help. >> All right, great. So, two things, Mike. So, um a good summary. Uh I I think you would say because I know you guys are big followers of uh John Husman's work. um Jem's concern that we may be having, you know, looking at a lost decade ahead of us, really at the last sort of 15 years that that meshes very well with um Husman's forecast, and you guys pull up his chart often here, right? Which which shows um doing this from memory, but it's the uh expected annual return, average annual return on the S&P for the next 12 years, I think. And the last time that that you guys put that up on the screen, it was negative somewhere between4 to6%. It's around -6. Yeah. >> Yeah. So that's that's you know a little bit over a lost decade ahead. Um now of course that's not just going to be happening like clockwork every year. Negative 6% per year. It's going to be wildly uh up and down. It's highly likely to be wildly up and down. Some big down years, some big up years. Again, that's everything that that Jim is trying to capture here. And just just to make sure I'm capturing what you said earlier, yes, Jim's strategies are sophisticated. Um, I think Jim would say they're they're not that sophisticated, but just for most people, a little bit of mathiness and and and dealing with instruments that they're not familiar with gets pretty overwhelming pretty fast. And and so your your general point, which I would totally agree with, is is look, if you're not familiar with this stuff, don't learn it on the fly now on a DIY basis. either play it safer with some of the simpler strategies that you just mentioned or you know recruit your your math genius as I was talking to to Jim Jim about you know either recruit him to do those strategies or work with a firm like you guys to do something similar but maybe a little bit more um understandable to the average person but I don't think you were you were you were saying his strategy won't work it very well could work very well for him it's just the average person trying to figure it out on the fly for the first time some of those strategies might be a little bit too sophisticated that capture your your Yeah, absolutely. I certainly don't want to appear to be condescending to your viewers are certainly not the jam because I'm sure that his strategies work and work well. You know, my statement is that there is a learning curve involved with all of these products and there's a tuition to be paid and we don't want people to >> basic options which you talk a lot about, right? You know, we always say work with somebody else for a while to look over their shoulder and learn how to do it before you play in that sandbox alone. >> Yeah, options are tricky. We're very, we use options a lot and frankly have [clears throat] have, you know, at least personally in the past paid the tuition that was necessary to get there. Just want I want to help people shortcircuit the tuition necessary to get there. That's that doesn't mean don't learn it. Do learn it, you know, and then some of these things are really interesting and you can find a niche. If you're a self-directed investor, there's a niche for everybody. Selling options is a great niche. Um, some of these volplays could be a great niche. buying options, although harder in my opinion, is another niche. So, there's a lot of really neat tools and the the stock market is an infinite environment. That's what's really cool about it, but it's also what's really dangerous about it because it can be a really hard place to learn and a hard place to find out what your own personality defects are, you know? So, and lastly, if you can make 4% over the next year, which you can close to anyway in a treasury, and we think there's going to be a huge down market, you know, think about that for a minute and think about how much you want to learn right now because there's plenty of time to learn. >> If the market's down by double digits of positive 4% return in the safe instrument feels pretty heroic, you know, at that point. >> Exactly. Exactly. >> All right. Uh, thanks, Mike. All right. So, John, coming over to you first off, um, anything that you want to add to what Mike said about the the GEM interview? I think Mike covered the bases really well. I guess the only thing I would add and um you know as much as we would likewise be uh critical of of the likely success of a kind of a passive buy and hold in the years to come. I also want to caution viewers that even though um the the state the table seems to be very very well set for a forth turning kind of crisis and volatile market like like Jam described and we certainly believe is is the path ahead. you can equally become um stuck in the mud with that view as well. All to say is that um that kind of information is really important to have an awareness of and a uh a framework to understand the environment we're in. But it doesn't mean put your head under the the the the pillow or in the sand, so to speak. It just means um being much more tactical and having a system having a a an emotionless system to to navigate what are likely to be rocky waters. um you know we're about 45% in equities right now if we don't include uh you know 10 to 15% in gold mining equities um you know based on valuations alone if if we were forced to buy and hold the stock market the S&P for the next decade we could make a good good case to be virtually 0% in equities but we're not and why are we not because we think there's plenty of opportunity but one that uh is going to be we think kinder to more tactical strategies that take on risk, take off risk when the market signals suggest that's the way to be. So, I just want to caution folks. It's easy to become so bought into a um a non- buy and hold scenario that you simply just run for the hills uh improperly. So, so you can kind of hurt yourself both ways, so to speak. Um you know, I guess I would really love to to chat about the options uh you framework. Um as Mike said and you alluded to, we do quite a bit with options. We use very simple option strategies and as complex as they can be and hard for most people to understand they're actually quite simple especially if you bring it back to what the objectives are you know quite simply I can say quite simply options are just a simple way if used properly to take an unknown scenario and put bands around it put certainties around it so you know when you buy the S&P 500 today you're going to get whatever the market gives you if it goes up you're going to get that return. If it goes down, you're going to get that negative return. Options have you can use options in various ways and combinations and very simple strategies to say, hey, you know what? I can have upside of x%. But I can guarantee that I'll have no more downside than y%. That's just one very simple framework to think about what options can do for you. It allows you to take the unknown and put some known around it. That is incredibly helpful when especially when one is paralyzed that they have this feeling of FOMO, but they also are worried about the the risk they feel in their bones. You can kind of have it both ways. There is no free lunch. And what I just described there, you're willingly giving up some upside beyond a certain level, but in return for that, you're you're guaranteeing a protection level below a certain level. That's really in a simple lay person's word what options can do for you. they can take the unknown and put defined bands around it, uncertainties if you will. >> All right. So, um, a couple of things. Uh, so for folks that haven't seen the, um, kind of basic options 101 tutorial that you and Mike put together for this audience. I think we recorded that what, like a year, year and a half ago. Uh, folks, you can go watch that at thoughtfulmoney.com/hedging. Uh, if you just want to get sort of a foundational grounding in how these things work. But as Mike said, John, you guys are happy to talk to anybody, you know, for free that that wants to call and inquire about how they might be able to use some of those strategies for their own portfolios. Correct. >> Yeah, absolutely. We do it all the time. And and Adam, I'll just make a note. We uh we we put out a monthly client newsletter and actually just this month, we put one out on options. Uh just simple educational piece and option. We're happy to provide you a link to that if that would be helpful for your viewers. But yes, I I do encourage folks to to you know, [clears throat] look at the video that we did with you. Um we covered a lot of ground in there in in very basic ways. So um you know, absolutely educate yourself. You know, you know, take the mystique out. They don't have to be, you know, risky complex tools. They can be very simple strategies. You know, it's interesting. Um you know, uh just this week, I think Goldman Sachs announced that they acquired a ETF company called Innovator ETFs. And innovator is one of a small handful of ETF providers that specialize in what you might call buffered ETFs or structured ETFs that basically have these features that hey you can be invested in certain areas of the market and you can you know make sure that you have participation to the upside but you know you know limited downside. These are all built with options. Um now I'm a little critical of you know relative to just a simple buy and hold strategy. I think these can be useful tools to, you know, accomplish um, you know, risk management, you know, versus just simply owning a hyper overvalued S&P 500 and closing your eyes and hoping for the best. But with options, there is value to be added for tactical management. So, I actually did a little bit of a critical video on on these buffered ETFs several months ago on our YouTube channel. It's not to say they're not useful and can cannot be appropriate for folks, but they're they're not oftenimes all they're cracked up to be. Uh because let's take for example when when the market pulls back pretty dramatically, these protection elements kick in and and do what they're supposed to do. But it's in those times where a tactical option strategy would very thoughtfully reduce or remove those hedges so that the subsequent rebound can be enjoyed. oftentimes when you're when you have downside protection with options and you get a swift move down, if you don't reposition those options, you're going to miss the upside. So, you want to have it both ways, right? So, you know, folks can find that video if they want to to learn a little bit more about my critiques of that. Um, but I think it's really a sign of the times that you have and Goldman paid paid a rich price for this this company. I think they have like 21 billion in management and I think Goldman paid $2 billion for something like that. not a cheap acquisition. So clearly there's an appetite for uh risk protection even if they're imperfect tools. Um it just I think it just speaks to the times we're in and and people I think are understandably concerned and um you know talk to someone talk to someone who who can you know have a candid conversation about the risk and rewards. You know we're happy to do it of course with your viewers Adam we do it all the time. No strings attached. We just love to educate about what we are passionate about and uh if we can leave a little bit of um insight and prudence with anybody we talk to that's that's enough payment for us. >> All right. Well, thanks again for doing that. You guys have helped a ton of people in the past and continue to. So, thank you. Um all right. Uh we only have a few minutes left, so we got to be concise with this, but John, staying with you for a second. Um so, the conversation with Jim really was sort of looking at over the course of next year and maybe even the next 10 to 15 years. Um, as we look at the here and now heading into the end of this year, so just, you know, four weeks left in the year, uh, about a week ago, you know, we were we were wrestling with the oh gosh, you know, or maybe two weeks ago, um, did the AI bubble just peak out? Um, is this thing going to roll over? Um, last week, which had thin trading, you know, the market stabilized and folks thought, okay, no, maybe maybe the worst is behind us. Now, there's talk of, okay, are we going to get that year- end Santa Claus rally? Um, looking at your indicators, what are you seeing is more likely as we end this year? >> Yeah, so we've had a a pretty uh pretty much an an abrupt about face in in the last week since we talked at them. You know, our broad battery of indicators has has shown quite dramatic improvement. Doesn't mean that hey, we're uh you know, there's no worries to the downside. It just simply means that um the market has taken the bit uh back in a kind of an offensive posture and and we actually um couple weeks ago we reduced our acuity exposure by 5%. Just yesterday we added a cumulative 5% back in but we did so in different sectors. So for example we added a small slice of a healthcare focused uh sector play and a global um mining company uh play. you know, these are copper steel miners. Um, you know, so we added that back on yesterday. All because of our battery vindicator showed a pretty dramatic improvement in breath and regaining of some key technical support levels. And um, you know, it just speaks to the importance we think of, you know, not being too emotionally and and um, dogmatically bought into a narrative and and let the market kind of guide you. But we're still we're not 80% in equities. We think for most folks uh for all the good reasons, valuations and otherwise and and where we are in this cycle, having an underweight equity exposure is is uh almost certainly a prudent thing to do, especially for folks in their retirement or near retirement because um as much as a buy and hold can approach can say, "Hey, over 30-year periods the market's never lost and it's average this." When you're in retirement, sequence of returns is is critical. Uh I invite your viewers if they're not familiar with that concept, just do a Google search for sequences of return risk, you're going to come up with some really uh important stuff. Bottom line is, you know, when those returns happen and when the negative returns happen are critically important in terms of your retirement success. If you have a couple down years up front in your retirement, it could derail your retirement for the rest of your lives. Um and and that's really what's at stake right now. >> Okay. All right, Mike, coming to you again real quick. Uh they were talking here. Silver remains in breakout. Um I just recorded right before I got on with you guys uh a live stream dedicated to this exact topic with um with Andy Sheckchman. Um but would love to give you I know you know precious metals are an important component of your portfolio there at at uh at New Harbor. Um but you have been tracking them for us but specifically silver and I again I want to go back and give you props. um you know [clears throat] coming into this year you were talking about the technical setup in silver and thinking that it could really break out and this is back when silver was in the high 20s I think low30s uh and certainly this year has um had had several silver breakouts but we seem to be in another one right now silver was trading silver futures were trading above 59 right before we got on here um anything you want to say about this this breakout >> yeah let's talk about silver here let's take a look at the silver ET ETF or at least one of them. And for some people that tune in every week, it might be somewhat repetitive, but I think it's it's worth talking about. >> Well, it's higher than it was last week. >> It is. And so, I think last week we probably would have talked about this triangle compression right here. And so, this is the SLV on a daily basis. And let me just go to the weekly just to remind people or for the new viewers, they can see this. There's a there was a triple top right around here. One, two, three touches. And this was around 35 spot silver, 32 on this ETF. 31 or 32 on the ETF. And we were talking about, hey, watch out for this triple top at 35. Triple tops don't usually hold, particularly in commodities. And it didn't. And so we broke out of there, formed a triangle, broke out of there. Look at that move, you know, out of the high30s right up into the 40s. And then we we we corrected for a few weeks, created this triangle. Go back to the daily. You know, I'm a little bit surprised at just how strong this is. When we talked last week, it was in here. I was thinking it was going to compress and maybe maybe even have a little fake out to the downside just to get people out. But boom, look at that. I mean, we went right up to 53 on the ETF. Like you said, 59 on spot. I mean, these are these are target levels. You know, I was thinking the next spot for the next year might be 60 to 70, >> right? And just to be clear, 59 on futures. I don't know what the spot is today, but yeah, >> that's right. It's it's close enough. 58 or 59 high 50s. We can say that. >> Yeah. >> You know, so here it's one thing that's a little puzzling is how silver stocks haven't exploded even faster. Although I can tell you silver stocks have outperformed silver year to date. >> Uh it seems like it's just a really thin group and maybe Wall Street doesn't completely buy in yet the fact that these companies are doing this. But this is big. I mean $60 silver. I'm not going to tell people to go all in and we're not gold and silver bugs, but this is really positive. And take a look at these four days is just gap, gap, gap, gap. Yesterday, we decided as an investment committee to adjust our hedges. We had some short call options against silver, which effectively took us out of the position because we were above the strike. Yesterday, we said, you know what, we don't really know that we're going to get a pullback. we might just literally have another 5 to10 uh dollars higher vertical with short covering before we get some sideways or down action. So, we actually bought back that call yesterday and rolled it out, giving us some more upside. And as you can see, yesterday it was like a little uphammer here and and today we're just pinned right at the top. Wouldn't be surprised to see it move higher. That's what happens as as shorts get a little bit panicky, people rush to get in. Eventually, that causes a short-term top. But I've learned the hard way. Nobody knows where that top is, you know. And I guess I just show you some of the junior min miners quickly because I was noticing that GDXJ is forming a little bit of a handle. Here's a cup. 3 days of handle. And then if we get a breakout higher, that's going to be a really bullish sign for GDX. Uh GDXJ, I should say. GDX looks similar but a little less defined, but it's very similar. GDX broke out of this triangle here along with silver and gold which did a similar thing even though I didn't show it and it's building a handle. So look for some consolidation to break higher. Lastly, I guess I'll show SIL or SILJ which is the the juniors and the these are the silver majors. Same thing triangle breakout forming a handle. And if I show you the juniors, same thing. Don't take my comments as, you know, over bullishness or or fanaticism. I want people to think long and hard about this because people do get emotional and they tend to get out on the swing lows and in on the swing highs. But if you have the right allocation so that you can sit with this, I I honestly believe that a lot of these names that have already doubled, let's go back to SIL for a minute. Go to the weekly chart. We basically broke out of I don't know 35 maybe 35 to 40 was the long base. Take a look. We've doubled. Boom. Very common in a bullish kind of breakout situation. What I've also learned over the years is after a consolidation, if it's a real strong bullish move, these assets will likely double again. So, I'm not making a prediction, but don't be surprised to see SIL, for instance, be, you know, way up there in the hundreds. We might even see a double on the thing before it's over. But don't go all in. Don't get emotional about it. You maybe be We're 10% in minors. There's a reason for that. We talked to a lot of people that are 100% in it. We can't necessarily say that that won't make money. It probably will, but the ride is really psychological. So, very bullish. Be smart. Talk to us if you want some advice. >> Okay? And uh for folks that that want more about exactly what's going on with silver, go listen to that live stream that I recorded, the replay of the live stream that I recorded with Andy, um you know, Mike here has just been talking about kind of the technical appeal of the charts right now. Um Andy and I got in a lot of the um what's what's h happening with the actual flows of the physical metals in the depositories right now. Um, so there's a lot of kind of both fundamental and technical uh reasons to be bullish about where silver may head from here. Um, despite how far it's moved, it's just got a truckload of momentum behind it. So, um, all right. All right. Well, look, gentlemen, uh, another great week as always, folks. If you enjoyed the discussion with Jim, would like to see Jim Beck come on this channel back in early Q1 to give us an update on how things are going. Uh, please let us know that by hitting the like button, then clicking on the subscribe button below, as well as that little bell icon right next to it. Um, as John and Mike have very, uh, generously offered several times already, uh, if you'd like to talk to one of Thoughtful Money's endorsed financial advisors about your personal situation and, you know, a, we didn't talk about it this time, guys, but, but, you know, make sure you've done everything that you need to do in terms of your uh, end of year planning uh, but also setting your portfolio up for the start of 2026, but also maybe for this, you know, the future that that Jam is sees and his his outlook going forward. Um, well, anyways, you can you can uh if you don't have a good financial adviser to be holding your hand through all that to begin with, feel free to talk to one of the ones at thoughtfulmoney endorsed, maybe you might even want to talk to John and Mike directly themselves. So, to set up one of those consultations, just fill out the very short form at thoughtfulmoney.com. Only takes you a couple seconds to fill out the form. These consultations are totally free. There's no commitments involved. It's just a service these firms offer to help as many people as possible. John and Mike, another great week. Thanks so much for uh coming on here and making sense of it all for us. Uh certainly we live in interesting times and uh we're going to find out pretty soon how this year officially ends, but I very much appreciate you guys coming back on this channel every week here uh to give us your, you know, real time live color commentary about it all and really helping us keep track of of everything as it unfolds. >> Thanks so much, Adam. We look forward to seeing you again soon. Adam, we we too appreciate the time with you and and uh hearing from your invited guests. We learn something every time. And uh uh until next week, uh we'll wish you a great day. >> All right, guys. See you then. Everybody else, thanks so much for watching.
The Market Is Topping Out | Cem Karsan
Summary
Transcript
It is my view that we are in a broad topping process here. Um I think valuations reiterate that. Um I think there's all kinds of reasons to believe that uh even though it is very hard to call to the week, to the month, the quarter or even sometimes the year we are getting very close to another kind of move down that is going to you know when you zoom out over a decade going to look like a lot of chop back and forth. Welcome to Thoughtful Money. I'm its founder and your host, Adam Tagger. Today's guest is the perfect expert to discuss a year as volatile as 2025 has been. Jim Carson is founder, chief investment officer, and managing principal of Kai Volatility Advisors and Kai Wealth. He's widely known as Jim Cissant on X Twitter. Heading into 2025, Jim warned us that he predicted it would be a year of heightened volatility, and that certainly proved true in the first half of the year and again in recent weeks. But what about the road ahead? Are we through the worst of the bumps, twists, and turns that the market will throw at us, or will the ride remain rocky in 2026? Let's hear straight from the man himself, Jim. Thanks so much for joining us today. >> Good being back, Adam. Good to see you. >> Thank you. Great to see you. Um, first off, let me just reiterate the props. Um, because I remember interviewing you uh going into 2025 and you said, "Hey folks, I think this is going to be a more volatile year than the past couple ones." And that certainly proved true in spade just a couple months later with the whole, you know, April swoon and the liberation day freak out and all that stuff. Um, it did kind of get less volatile as the markets just took an escalator higher for much of the rest of the year. But then, you know, starting about a month ago or so, it started getting kind of bumpy again. Um, where are we in the volatility story here? Is have have we seen the worst of it? Did we get it out of our system or is 2026 looking like it's going to be a repeat of 25 from a volatility standpoint? >> Yeah. So, if we back up four or five years ago, I was very clear we are entering entering a 15 plus year 15 to 20 year period that looks very different than the last 40 years. I not to start like so off the ground. >> Very helpful. So yeah, please please do the refresher. >> But it's so important to to understand that we are not in Kansas anymore. This is not the same environment of uh you know a Fed dominated globalization increasing uh you know tech uh low interest rate environment right a techdriven world. Um now some of those things are still with us. Um, but I've been very clear that that, you know, the way we're likely to move forward here, which in my opinion, and I've been very clear about this, is driven primarily by a demographic and populist kind of impulse. Um even though it will be through many quarters and years of uh counter trend things along the way are largely going to be a period of rising interest rates um of of increasing uh inefficiency, deglobalization, increasing global conflict um uh you know a period of of likely towards the end slowing um uh you know antitrust and slowing uh corporate earnings growth. Um that's that sounds really scary and and you know it's it's not going to happen overnight. This is a a big process. Um but again we started really talking about this in in 2021. Uh and uh and again correctly called it 22 almost to to the week the beginning of the decline there. Um, you know, the view is that in nominal terms, we're likely going to have a lost decade to 15 years >> um in in equity markets and in in real terms likely real meaningful losses uh to a portfolio. And the way you invest in that environment is dramatically different than how you invest in a environment where interest rates are increasing secular decreasing I apologize secularly. Um uh and globalization is increasing all the things that come from from regime. Um, I like to say that if you got the broad picture right, that interest rates were going top left to bottom right for 40 years, you and and you would have gotten very clearly a a tremendous amount of profits over 40 years. That one understanding was incredibly important. You would have had uh been invested in growth. You would have bought the dips. You would have stay stayed very long beta. you would have been uh focused on um you know real upside convexity for 40 years and you would have been incredibly wealthy and a lot of people got that right whether either lucky or otherwise. >> I was going to say sounds like a lot of boomers. >> Yeah, exactly. But if you get this one thing right and I want to be clear which is very different than that environment that you're focused on non-correlated investment focused on capital efficiency right and taking advantage of the the tools of a period that looks much more like uh more recently you know 65 to 85 or 63 to 83 right that 20-year period or you know again heaven forbid a period like uh 1930s and 40s right you are going to um you can succeed there's incredible opportunities during volatile periods like that, but it's not as easy as buy and hold and you need to have a very different playbook. Um, we are fortunate to live in a time where there are more opportunities [clears throat] to take advantage of that type of um outcome and there are tools but they are not uh necessarily as easy as buy and hold. Um, so that is the big picture and we have we've called for that and again I I think that is where we are. Where are we in the context of that? Well, we had a a 22 decline of 25%, ended up down 18 or so, and then we had a incredible run from uh late 22 all the way through 23 and 24 uh into again here the more volatile kind of call it sideways to slightly up 25. Um it is my view that we are in a broad topping process here. Um I think valuations reiterate that. Um I think there's all kinds of reasons to believe that uh even though it is very hard to call to the week to the month the quarter or even sometimes the year we are getting very close to another kind of move down that is going to you know when you zoom out over a decade going to look like a lot of chop back and forth again I think you can go look at the 60s and 70s as a proxy for what this ch kind of generally looks like it rhymes uh a lot of the structural drivers are the same um but Again, that doesn't tell you much of what's going to happen uh this year per se or this quarter or this week. Those are those things are driven more by flows and we can dive into that um here as we we we kind of zoom in a little bit. But, um, before we do that, to get to get us more now in the neighborhood from big picture down to kind of the the the right zip code, um, I think it's important, this is something I referred to about two years ago, um, about a year and a half ago in early 24. I I brought a very interesting kind of data set out to public and people kind of get captured on it and it was incredibly valuable for a lot of people. Uh, it was talking about election cycles. Uh I don't know if you remember this. Uh some people will who who are are followers or have listened to kind of some of the things we've talked about. 2024 was a presidential election year. And if you really dive in and think about presidential election years, most [clears throat] people are like that's incredibly those are incredibly positive years is what the general kind of sidegeist is or or thought is on that. The reality is they're about >> because the current administration people think have juiced everything to try to make it look great going into the election. Yeah. And it's not just this administration. If you take 120 100 years, apologies, of of data on presidential years, there's a lot of stuff that'll go out that'll say something. It's I think it's about 13 and a half. I have to go look at the exact numbers, but largely quite positive um years, right? And the idea there is most administrations going into the presidential election want to be in a good footing because if the market does well, historically, they get reelected. Right? Mhm. That's the theory. That's the idea. The interesting part is if you dive in a little bit deeper and and this is this was started from a qualitative perspective, not a data mining perspective. I think that's important. I've talked about the 60s and 70s, how they're similar in a lot of different ways. If you go look because of this populist period, if you go look then at the elections that specifically happened during that time and again driven by populism, populism itself is political, right? So it would make sense that elections are important, maybe more important during this period. >> And if you go gather those presidential elections, again, not the midterms, not presidential, we're going to get to midterms here in a second. There are five elections that happen from 62 to 82. five elections. Okay. All five of the elections had doubledigit positive returns and the average returns for those five year five elections is 21 and a half or something. >> Wow. >> If you take out it's it that's amazing, right? But if you >> the consistency to scale is pretty amazing. But what's more impressive is if you take out those presidential election years, five of them, and there's 25 total elections, right? every four years, 100 years, the average return is actually 5 and a half% for presidential elections, which is way below the long-term average. >> Yeah. >> So, they are very concentrated, very consistent. It is not that all elections in my opinion are presidential elections are positive years. It is presidential elections in populist periods. Now, what happened in 2020, which I would argue is the first popular real populist election, 18 and a half% annual return. What happened in 2020? Four, 25% return. >> Mhm. [clears throat] >> Average return of 21%. Right. Um, again, could be a coincidence, very consistent. Another very impressive thing, those five election years, actually this is even more impressive. Those five double-digit election years during the 62 to 82 period, do you know what the nominal return was from 62 to 82? Nominal, not real. Real was way worse. 0%. >> I was going to say pretty flat. >> 0%. 62 to 82. 20 years nominally zero. Real terms a loss. Actually, not nominal. Sorry. In real terms, a loss. I apologize. I misspoke. and real returns about uh uh zero uh in in uh nominal terms that there was a gain but relatively small I misspoke there but importantly really low returns and of those 20 years five a quarter of them have a 21 and a half% nominal return so what do you think happened the other 15 years >> right >> three negative three and a half% on average the other five 15 years so dramatically black and white type uh outcome here for presidential we talked about about this at length in early 2024 we were talking about how why you know how how based on that that is one major reason you really want to be really bullish into 2024 and as I mentioned 24 was at 25% sure what we didn't do a year and a half ago which I wish we did is go look at those other three years of the election cycle more closely >> because I just was like oh the other three years are just bad let's just say like they're bad in general incredibly new consistent piece of information that is again is screaming at you is so like stands out dramatically relative to the other data. Midterm years 1962 to 82 you have five of them. All five were negative and meaningfully negative. They had draw downs between 23 and 49% peak to trough. >> Whoa. Wait, 29 was the low? >> 23 I think is the low. >> Sorry. 20 like the best of the years was down 23 that's the worst that's the least sorry those are draw downs so that's the smallest draw down that happened in >> right that's what I meant your best year was only down 23% yeah >> um that was the that was the smallest draw down right that doesn't mean that's how the year ended um and >> oh okay okay sorry draw down throughout the year not >> throughout the year have meaningful big draw downs is the point and they're all I believe all but one are negative years in total. Um most of the draw downs end in about October. Uh again, if I showed you a chart, it's like it's eyepopping. Um and the consistency, um a lot of those declines begin in uh either in Q3, sorry, Q4 of the year prior or early into the midterm year. Um why does this happen? Why such consistency? Why does, you know, again, I've already said the presidential election cycle itself matters tremendously during a populist time. It ma it makes sense. I want to also reiterate this is the other interesting fact that I think we all know in the back of our minds, but just to verbalize it. 62 to 82, we have how many presidents? 20 years. We have five. The average presidential term was just over four years. Nobody, almost nobody got re-elected. If they did, like Nixon, they got impeached, >> right? And but Kennedy got shot. Yeah. >> Correct. So, but those the important thing is yes, there's kind of things that seem like, oh, they're incidental, but assassinations, people getting kicked out of office. >> These are all tied to the anger and aggression that happens due to the populist impulse and the frustration of the young. So it's not just elect being kicked out of office via elections. It's being kicked out of ele out of office through violence through political other means. >> Yeah. >> And and and when you go look at the last 40 years, you know what that average election kind of term is? 7.1 or two. Dramatically different. >> Mhm. And and so and again it it just falls in line with uh how contested the elections are during these populist periods and that contested environment leads to more need to stimulate during the presidential year to drive positive outcomes so that the hopefully there's some ability to get reelected. Right. Sound familiar? Does that any of this sound familiar by >> it also? It sounds like the movie that's playing in been playing in front of our eyes. >> Correct. And then what happens they this inevitably the last party gets kicked out of office which has happened the last two elections right um for because the problem is bigger than the person elected by the way and and the change agent or the uh entity that's coming in to be the new president soon as I I said very clearly at the beginning of this year just wait just wait because the pitchforks will be on his lawn next It's just how it works. And where are we? That's exactly what's happening. We just saw a massive uh Democratic landslide. Uh we we are starting to see real uh anger and political like the polling numbers are in freef fall for for Trump. There is a major title wave. You saw some of his MAGA base now defecting over the Epstein issues. there is a dramatic move um counter and that's classic in this period. And as that belief that we're going to get change or resolve the problems now fades to anger, more frustration, even more desire for change, eventually you head into the midterm years and they start to lose control. Nixon came in as a Republican that was supply side economic driven and the first policy he passed was tax cuts for the rich and attempt to roll back populist policy. Sound familiar? >> Mhm. >> Within a year within a year he was already deploying new populist party policies. In a year and a half it was in he was he was forced into price control. This is how it plays out. Now, it's going to rhyme. It's not exactly the same every time, but if you can't see that what's happening under the hood and and see this trend, I think you're missing the big picture. And it's incredibly consistent. >> So, in the context of that, you have to think, okay, again, we've gone from 20-year period down to election cycle, right? Y >> we are entering a period that you should be largely cautious and it's driven primarily by a likely loss of control by the administration. despite despite the general view that oh he's going to be able to do X and they're going to stimulate and they're going to the political environment is not is going to make it hard for him to control his base. it's going to make it hard for him to control uh different outcomes. And in terms of an inflation, again, we're entering a stagflationary environment. I've talked about that for several years, clearly seeing it. The most recent data coming out from Black Friday and all these other this uh this this this period show um it really interestingly uh you know, a meaningful 7% um increase in prices sold with a meaningful I think it's a a a 2% decrease in actual uh volumes. It's all driven by inflation. >> Inflation. Yeah. We're spending more on fewer things. >> Fewer things. Exactly. And so that stagflation environment. And by the way, not a coincidence why like why we're not getting CPI numbers and unemployment numbers anymore. I mean, people, again, this is not a conspiracy like uh you know, they're trying to control the narrative. That's what politicians do. It's not just a Trump thing. It's you know, what happens, right? um and uh and they're increasingly finding it difficult to do that. The pressures in the system are making it difficult for them to continue to control um a a very difficult situation, a stagflationary environment and ultimately given valuations, given flows, it is likely now they can thread the needle, anything is possible. This could go another year. they can make it, you know, um but but the odds uh in terms of the actual pressures in the system are going to lead to a higher probability of of um of a of a problem at some point here. Um and liquidity markets are the biggest driver of liquidity in the world. It's a reflexive loop. We've talked about that. Um bigger than the Fed, bigger than the Treasury, bigger than the economy, and all those things matter. They're all big. But ultimately, the biggest driver is markets themselves. And if the economy starts to go and liquidity is being pulled from there, which it is, which the Fed if the Fed is not able to react to aggressively, even if they're just kind of on the sidelines and the Treasury trying to do it all, the Treasury is likely to not be enough. And all it takes is a little bit of market volatility and a bit of a decline and then liquidity can really drive kind of a a very different direction than it has been going. And that really is what will uh if it happens will likely um lead to a bigger um issue here. Um now this is not a [clears throat] sky is fall the sky is falling uh story. Again, I'm not sitting here saying, you know, go buy go buy puts and scale and get short, right? This is a distributional story, right? The reality is when you get to this point of the cycle, the fat the [clears throat] left tail gets really fat and we're at this point in the election cycle where the odds are increasing as well. That said, I started the bit in the business in 98. Uh saw 989, 2000, 2001, 2002. incredibly like that was my initial education in markets. I'm telling you at the end of a bubble which is where we are right uh in particularly in this type of populist environment it it is not going to end well >> but but could we see a 20% 30% type rally before a decline absolutely 100%. This is a you know this is a bigger picture uh reality and but there are ways to take advantage of understanding where we are in that distribution and that is way easier particularly on a riskadjusted basis than trying to just be long the market or short the market. >> Got it. Okay. Yeah. A lot to unpack there. Uh but >> no no no I want to compliment you. So um you like an interviewer's fantasy. Um you you paint a broad landscape in beautiful color. So I just have to sit back and listen. Um so um I I understand why you think uh volatility is going to be uh certainly greater for the next where are we in your 15 year cycle? Two three years. So, for the next 12 to 13 years, um, and in particular, 2026 is likely to be a rough year for all the reasons that you just mentioned about about midterms. Um, so to a point you made earlier, a lot of people made a lot of wealth by basically just being long and living their lives for for for much of the past 40 plus years, right? uh they got a little bit of a wakeup call during CO u but honestly the policies from CO helped them out and for the past three years if they were just long and didn't worry they've been fine. So my question to you Jim is is that bololis of investor are they sleepwalking into all this because they might have heard some of these warnings before but they're just looking at their portfolios like yeah you know this this year was a little scary at times if I checked my 401k in the wrong month but otherwise it's going to finish up 16 plus%. Um so are they literally you know willfully blind to the risk that you're talking about here? >> Yes. I mean the answer is after 40ome years right of one regime it is almost impossible to convince people no matter the facts and I have lots of I could show you charts and graphs of why this is an absolutely awful time to do exactly what you did for the last four years >> but it doesn't matter people don't >> nobody listened to Cassandra at Troy right because hey you know >> correct [laughter] >> if the Greeks aren't here then why worry >> what's the longest track record record you've seen for anything? Is it anything longer than 101 15 years? >> Right? >> I mean, a 40-year track record is >> like, why would you why would anybody argue with a 40-year track record? So, what I'm talking about is again, if you dig into the details, if you understand what the force is and what's driving the big picture, to me, it's clear as day. It's that clear. But it's really hard unless you really take somebody by the hand for hours at a time and show them all these things to to explain uh the why and the how. And it's much easier to just say, and by the way, the incentives in the system also drive RAAS and people to just be like, it's simple, low cost, buy and hold, set it and forget it, and it'll work. >> Oh, yeah. I mean, the the RA system in general is set up to be a trust me, bro system. it. >> Just give me your money and just trust me market will take care of you. >> I mean, I think I've mentioned this to you before, but I think this is one of the most important things I can say. Uh, if you ask I was on the phone with a a relatively big RAIA today. I won't name names, right? And I asked the same question I ask whenever I get on with a big RAIA. What is the sharp ratio of the S&P 500? What do you think? >> And it's like, >> they don't have an answer. They don't even know it yet. >> No idea. Yeah. >> The simplest measure, the most basic measure of riskadjusted returns, people are being hired to help people get the best returns relative to risk. You would think zero zero zero idea. Um the answer for the N any listening [laughter] is 35 over 125 years of data. The S&P 500 has a.35 sharp. 6040 also has a 37. [snorts] No diversification benefit >> of 6040. It's just driving slower. Um there is no diversification that portfolio. You can achieve two sharp type returns with true diversification, not rocket science. And there are dramatically like very well doumented ways to for free improve those risk adjusted returns. So um that is what people should be thinking about is risk. What is risk? And there are tools to manage risk. That by the way is the expertise in investing. It is easy to go buy stuff and go away for 125 years and make money. >> Right? The problem is there are three and a half almost four 20 year periods 20 not one decade two decade long periods where in real terms 60 40 makes no money over the last 125 years. >> Yeah. A and in those same periods, somebody who does invest with the type of outlook that you're recommending here, there's the opportunity for loss avoidance, right? Okay, I'm not going to get I'm not going to sleepwalk into these downdrafts, right? I'm going to have some protection against them. But then there's also the ability to catch some pretty massive rallies, right? >> There is more opportunity during these periods than other periods. there is more divergence in outcomes dramatically. So that's actually the whole point is that there is this is a time of lack of loss of control of central bank and interest rate dominance. It is a time of delobalization and global conflict which means you have a dramatic dispersion in outcomes of assets which leads to some huge winners and some huge losers. Mhm. >> And so if you are prepared for these times and you understand broadly what's happening, you can find yourself in a actually a way better situation than you would have in these other periods. >> Right. >> And can I make a comment for for you to to to clarify here, which is I can make a Mchavelian argument and I can make an altruistic argument w for for for your type of investment strategy here. the the Mchavelian one is is hey you can make a boatload of money here and and in and maybe like um life station changing envir uh wealth right where like hey in a regular market everyone's doing pretty well and it's going to be harder for me relatively to change my station to be ahead of where I am now whereas here you're going to have potentially a lot of people at the top end starting to lose because they're playing the old playbook so you can actually go from being in whatever strata you are into a higher strata, right? So there's that that's the personal incentive mode. But then there's the altruistic one which is like, hey, probably a lot of people you know are going to be in that that loser category, right? Might be your parents, right? Might be your siblings, right? The the folks that you said after 40 years really hard to talk them into changing their minds, right? So maybe part of the message here too is, hey, you've got the ability to be the responsible one who will hopefully outperform in here and then you can be a resource to those in your family who kind of got caught by surprise by all this. Is there truth in what I just said there? >> 100% and actually from a personal level I cannot think of and people will laugh at this argument, but I cannot think of of honestly a higher calling at this point. you I'm I'm able to educate on what I think is an incredibly important thing, hopefully help a tremendous amount of people in a tremendous amount of and with a with a tre tremendous impact while still being in a business by the way which has the largest total accessible market of any business on the planet which is the 500 trillion dollar asset management world that is 99% managed in a very incorrect way at the exact worst moment. So yes, incredible profit opportunity to be invested in not only as as a investor but also to be in the business of that if I am right which I'm you know I have great conviction that I am and very much at the opposition of what 99% of the world is doing. >> All right. Well, Jim, if if you prove to be right over time here, I will be part of a group that builds the statue to you, just so you know. >> Well, again, don't need a statue. Uh I think just helping people and doing being involved in that. Uh what incredible opportunity. So, >> okay. All right. Well, look, um I think you've kind of woken people up to the fact that whoa, if nothing else, Jim thinks that this could be a year coming year where there's going to be a draw down in there. There's highly likely to be a draw down in there of at least 20some percent. Maybe even twice that, right? Um, so going from sort of problem to solution side of the discussion, you've said several times, you know, there are tools and there are strategies to be able to navigate this type of period. What are they? >> Yeah. So, you've asked me before about options. We've talked not just macro and big, we've talked about options, right? And um and I know options are scary or confusing for people, but what they are is the ability to be much more precise in terms of your positioning, right? Options represent a each option, each strike at each expiration represents a moment on a distribution of outcomes for any asset, right? And so instead of owning a stock which is just the expected value or a bond or whatever asset the the value of that asset is just the expected value of the whole distribution. And so if you are able to instead express the opinion you have about an asset much more precisely that takes dramatic risk off. If I own a stock or a bond or any asset I'm taking the whole risk of the whole distribution. It is both capital inefficient to do that because I'm making a bunch of bets and putting a lot of money into things that I don't like or that I don't want to be invested in and two I'm taking on a bunch of risk that I don't want to be taking. So the right way to do this and again this is hard for some who are in very who who are still investing in 2D world right >> is to go replace the whole asset with the part that you want okay and so what parts are worth investing in right now I just said the distribution is getting very fat tail we are have a very high probability we're really far off the ground. Valuations are very high. There are a lot of risks. If things go badly, it's not going to go bad small. It's going to go bad big, right? So, that's a fat left tail. Probably don't want to be short the out of the money put or the put in markets, right? So, there's part of that stock that you own. Part of a stock or a bond is the put is the downside. Don't be short that. Okay? I would argue, you know, anywhere on the downside, you don't want to be long short. I would also argue the right tail is very fat. If we go up this year, it is not going to be a small up year. Why? Because there is a lot of short interest in the market. People are worried because we're at record valuations, rightfully so. Markets are efficient. Bubbles generally don't end with a whimper. They end with a bang. Right? >> Like a blowoff top. at blowoff top and that happens because of the very realities of people are underinvested. The entities in power know that there are problems and are trying. Again, I call it a sumo market. We have tectonic plates pushing against each other, right? That's not the same thing as two little wimpy guys pushing on each other. The market may go nowhere at at one point, but these sumo rustlers eventually when they push off each other are going to go uh too much fatter. tails and and that is very much true for where we are in in markets right now. So the right positioning right now is not to be long stock. It is to be long out of the money calls. Maybe a 25 delta 30 delta call something out of the money. If markets go down, you don't participate on the losses to the downside. You lose some premium. And if we do continue to go higher, it will likely not be slow and it will be volatile. By the way, I started calling for this several months ago. We've seen market up volop into the rallies and we've had a more dramatic decline. So, this approach has been incredibly profitable. >> Put put options love big moves in a short period of time. >> Correct. That's exactly right. Now, the difference of why put options are are less favorable to me than call options as a replacement. I know that's confusing. People are like, "Wait a second." >> Yeah. And I'm sorry I meant call, but yeah. Go ahead. >> Yeah. Call options are the upside have much lower implied volatility also structurally because of all the buy right people own stock they're naturally long assets they sell calls they buy out of money puts they yeah because they're selling calls all these buy rights exist there is a compression to the right tail in terms of implied volatility where there is no real volatility risk premium there is no actual risk premium to calls >> and so not only are they incredibly cheap >> and they are um and a great way to manage risk. There's no cost to them in the uh historically and in this environment if I am correct about the the distribution about where we are which I think historically is is highly likely then they're you're getting the medic credit. So you're getting risk protection for a meaningful credit if that's the case and that's again what we've been saying for several months and that's been an incredible opportunity. Now this is just one of the tools. I know you asked me like what is what does somebody do? You're asking a much bigger question. I dove right into options and people like probably like tuning out right outside of tools like options there are incredible much easier set of tools that you can use one diversification it's investment 101 yet so few advisors do it 6040 stocks and bonds over the long run there is zero correlation b decor there's zero Zero diversification benefit of bonds versus stocks zero.35 sharp versus.37 over 125 years makes sense in a sense if you bonds are the bottom of the capital stack equities at the top they're still exposed to the same asset right one's just delevered >> right to the occurrence until it happens it doesn't matter but then once it happens it's it's dramatic right risk is the same thing as equity exposure and so 6040 doesn't actually diversify exposure historically. So most RAS don't deploy any true diversification and it's the one cheat code. People think hedge funds are some these guys are geniuses. Like there's got to be like you got to be extra smart to take advantage of what hedge funds are doing. Blah blah blah. By the way, Millennium is run by guy named Izzy Englander, right? is Englander [clears throat] was a floor broker on the floor of the options exchanges. He wasn't the market maker. He wasn't a sophisticated trader. He just knew everyone. He was a broker and he brought everybody together. Diversification is the cheat code. It's the simplest thing on the planet. If I have 20 different managers who make 10% per year on average over a decade, sometimes they're down, sometimes they're up, but 10% on average. They each have a 6 sharp. They each have a 15% annual draw down per year and they're all invested in similar things. Guess what? My sharp my draw downs are all going to be the same. That's not diversification. But now imagine you have true diversification. When the market goes down, one might lose 15%. One might make 15%. >> So this is this is your non-correlated assets that you're >> non-correlation. you truly and by the way it's not just assets it's strategies I want to be clear there because okay >> sometimes just being an asset is a correlation right and so there are I can name 20 strategies that are truly non-correlated just off the top of my head you know trend following managed futures event driven strategies commodity commodity strategies long short equity long short credit FX trading life settlements legal settlements global macro you know managed futures Right? These all these things are relative value, some type of timing edge, you know, merger arbitrage, convertible arbitrage, these things are nichy. They don't necessarily have a straight market exposure. And they're not just non-correlated with markets. They're non-correlated with one another. >> Now, you have 20 strategies that make 10% on average a year, still have a 6 sharp. Each one has a 15% draw down. On its face, they look the same as the correlated assets. But this magical thing happens. You put 20 together, you still make the 10%. But your sharp ratio goes to two. Your draw down goes to four. >> Wow. >> Because you have only 12th of each investment [clears throat] with each risk. You have completely diversified your risk. You don't have a single point of failure. If you're at if you're at home and you have a risk that to one thing going wrong, the whole house the whole your whole everything falls apart, you would never take that risk, >> right? >> Yet that's what we the average RA does. We have a single point of failure. If equities go down 50%, you lose 50% of your money. And bonds are just a deleveraging to that. There's no diversification. Instead, if you put all your bets or all your opportunities different in to to all kinds of different things, guess what? Your risk drops dramatically. Diversification is the cheat code. It's investment 101. Yet 99% of raas do not deploy the simplest idea on the planet. We should be diversified. It's that's the key to risk management. And you can achieve the same returns. You don't have to give up returns. And Jim, is is that is it just because they're lazy? >> Yes. It's not just lazy. It's it's confusing to people. >> Yeah. These are the experts. These are the guys who who who get, you know, licensed and go through training, you know. >> So 1982, interest rates topped at 19%. And it's been a straight line down of interest rates for 40 years. Yeah. So these guys got to be on the trend on the tailwind >> too and it's easy and it's cheap and it's scalable. These are sales machines. They're aggregators of AUM and it is much easier to tell the story that stock number go up. Stocks go up over the long run. It's easy. It's simple for people to understand. Businesses make money over the long run. Okay. It's recency bias. Passive investing. This is going to blow some people's minds. Everybody thinks it was a technological innovation, a new idea that Vanguard had that completely changed the world. It It wasn't a It wasn't uh around before. It wasn't something that people um knew how to do. The Dow Jones Industrial Average has existed for over a hundred years. Indexing has been around forever. Passive investing is just indexing. Why did we not passively invest until 1985? Because it didn't work. >> Because the conditions weren't favorable the way that they were. >> It didn't work. >> Yeah. >> It's worked for 40 years and now it's the biggest thing on the planet. 6040 stocks and bonds. That idea did not exist till the late 1980s. It worked for 40 years. And guess what? That's what everybody does because it's been easy. Recency bias. It's not rocket science. If it works, people do it. But people are always too late on the turns because what worked before is doesn't necessarily work in the future. If you take a wider lens and you look at why it's worked is because interest rates went top left to bottom right. And now the big question is after 40 years of interest rates going from 20 to zero, now they've gone to four and a half. And by the way, there's about a five to sevenyear lag. Again, well documented because people borrow for an average of five to seven years. Corporations borrow for five to seven years. So there's a lag. >> And now that we're in a period where it's more likely that interest rates are going to normalize, even if they just stay here and don't go lower, we feel >> you get this refinancing at the higher rates and that starts being gravity. Yeah. And now that we're entering this period, nobody's asking the question, what if the most important thing in finance, which is interest rates, it's the discount rate is not going to keep going lower. It's maybe going to go the opposite way. What does that change? And the answer is very clear. If you look at longer terms of history, 6040 and passive investing does not work in those periods. >> Right. And so I'm going to guess too that you you are not surprised at all that despite the administrations and Wall Streets and the Feds and everybody's uh hopes to get the the 10-year Treasury below 4%. Just hasn't proved successful this year. Anybody who's been following me for four or five years know we were we've been years ahead of >> the stackflationary trend the inflationary structural realities the populist u policies they're all connected um and everything we've talked about for four or five years is happening under the hood it's happening >> okay so so beyond the diversification um at at uh Thai volatility advisors and Kai wealth what what are you what else are you focused on right now heading into 2026 >> so risk management is not diversification is the easy part right the next step is using options I highlighted one way yeah >> which is a kind of I think the best easiest way I want to get that out there because I do think it's one of the best ways to do it in this environment which is stock replacement with calls but volatility itself is an incredible tool my friend David Drudge uses this metaphor for I think it's by far the best one that you can use. Your average person looks at something like a long volatility strategy, which we recommend a 5% allocation, too. >> Okay? And looks at it and says, "This this strategy makes 0% over the long run, or heaven forbid loses 2% each year on average, and says, why would I ever invest in this thing? Because I can make on average 10% in equities per year, right? I'm deleveraging to the long-term realities. That's how the average person thinks, >> right? >> And I get it because they don't understand portfolio theory or how this stuff works. But after diversification, there is another cheat code. And again, well documented. There's a ton of academic research about this, which is looking at long [clears throat] volatility and saying, "How fast is this going to make me go?" is like looking at brakes on a race car saying, "Dang it, these brakes slow me down." [laughter] Just because brakes make you go slower or can slow you down, give you more control, doesn't mean you should be driving a race car without brakes, >> right? >> A [clears throat] a race car with brakes wins races. Not only does it make sure you don't fly off the track when you go around the turns, you don't have to go slow, you can slow into the turns and accelerate out of them. They allow you to take risk. They allow you to seek upside exposure. They allow you to take opportunities at exactly the moment they arrive. They allow you to accelerate out of the turn. There's a ton of academic research for this. If you put some long volatility, just you don't need a lot 5% into the portfolio, it doesn't lower your total returns through a process of natural rebalancing. It improves your total returns, yet dramatically reduces the volatility of the portfolio at the same time. Your sharp ratios go through the roof by simply having breaks and gas. Again, an idea that seems simple but is completely misunderstood because people are way too simple about looking at each investment and saying, "We're just going shopping. I like that thing that makes 10% per year. I like that thing. It makes 10% per year." diversification plus some tail, a little bit of tail to help rebalance, gain control in the in the portfolio and to be more aggressive when times are right and be less aggressive when times are not right. Make for a much more robust portfolio. That's the second concept. Incredibly powerful. Third concept, as it comes to equities, there is another cheat code, Warren Buffett. Not everybody's like, "Oh, that Warren Buffett's a genius." He'll tell you himself he's not a genius. The concepts that he uses again very simple idea. Value and quality investing over the long run has very similar returns to a quality sorry to a growth type of investing. Very similar but half the volatility. Growth stocks make tons of money in certain periods then they lose tons of money over other periods. This is a diversified investment. Yeah. Can you pick the right one and get lucky? Sure. Right. If you have that skill, great. Everybody thinks they do. Nobody really has that skill. >> Nobody does. Yeah. >> In a diversified approach, value investing on a riskadjusted basis. I say value, I don't mean like value as a value trap. really again a Warren Buffett type discounted cash flow analysis growth matters right in that but but what do we know the quality of of the investment if you if you take that approach you dramatically outperform on a riskadjusted basis which again similar to brakes on a race car allow you to add leverage and take risk at better times in better ways so you actually can dramatically outperform right if I have a better riskreward I can add leverage I can take more risk So your returns relative to risk are better and hence returns end up being better. Invest with quality. Invest with value. Don't worry about the 20 years or 15 years you underperform like Warren Buffett did for 15 to 20 years over 65 years. He dramatically outperformed not just the total returns but on a riskadjusted basis as well. Third concept simple. people just have to be patient and take a very riskadjusted approach to doing the simple things that work and you will end up in a dramatically better place in the long run, but particularly given everything we talked about at the beginning of the conversation right now. >> So what what I'm loving about this is is this is giving me like shades of money ball, right? where um you know your point on diversification it's it's the analogy I'm thinking of is is like fantasy football or we can call fantasy baseball in this example >> where yeah you could you could bet on the team but the team might have a lot of players that you think are stinkers like one or two standouts right but so why not field your team like in a fantasy league of of the exact pitcher right fielder catcher you want right you're you're shaking you're nodding as I'm saying all this >> absolutely it's statistics it's statistics >> yeah And similarly to your point about value stocks over the long run, that's like the Billy Bean strategy of like, hey, let's look at what really matters on base percentage, right? Guy doesn't have to be a massive hitter, right? Uh he doesn't have to be the fastest guy on the team. He just has to prove that he can get on base more often than the average guy, right? So you're you're combining all these things very much like he did. And it it it obviously worked for them him. >> And when you add them all together, each one of these is meaningful, but it can be dramatic. you can achieve through diversification, through a little bit of long ball and and improving your geometric returns with rebalancing through a value investing approach. You start putting these together and you take a 6440 portfolio which has a.37 sharp over 125 years and you can achieve not twice that not three times that 400% like hundreds of percent better riskadjusted returns. These are simple concepts. You do not need to be a rocket scientist. Now, you can do things on the margin that can even improve it more. I'm not even talking about, you know, a lot of the other, you know, timing and getting the probability distribution of like none of this involves the timing stuff we were talking about at the beginning. The thing that everybody wants to know where are we going, when are we going now? Like, right, if I can provide value there, then we even >> have dramatically better outcomes, >> right? This is just a better investment process at baseline at any time. >> So, let let me ask you this then. So, um we're we're beginning to come up on the hour and I don't want to short change you in any way. Um but, uh you know, you've clearly it's like Liam Niss from Taken. You've clearly got a very special set of skills here that uh that make you feel like you know you you you see kind of the the the large tapestry pretty clearly and that we are getting very close to when the world is likely going to wake up to the fact that you're on to something here, right? And it's probably going to take the world sleepwalking into the next really big, you know, volatile year to wake them up to say, "Hey, the passive playbook isn't working anymore." So, uh, how how excited are you for 2026 given the Kai model here? >> In the words of Warren Buffett, [clears throat] you never know who's swimming naked till the tide goes out. Yeah, >> it is very hard to know when the tide is going to go out. >> Y >> that said, there are certain things that lead to higher probabilities of the tide coming at certain times, >> right? Like the midterm data you had shared with us earlier. >> So, in my opinion, and I think uh I'm on very solid ground, risk management is in short supply and very few people do it. We swim with a swimsuit. I've been swimming with a swimsuit for a long time. I get a lot of like, "What's the deal with a swimsuit? Looks uncomfortable. What's the deal?" It's not that hard. And guess what? It's just smart and it doesn't cost me much if anything if I'm right and the probabilities are higher the tide going out, there's going to be a lot more interest in risk management and ways to do it going forward. So, yes, I think the probabilities are high. Will it be 26? I think there's a decent odd. If it's not, I'll tell you what, I think in the next five years, the odds are incredibly high, right? Of the risk management part being really, really important. And when we start talking about prediction, again, a lot of academic research on this. This is Schiller's thing, you know, fundamentals really don't matter over a one-year period or a two-year period, >> right? >> Over a decade, they're incredibly predictably. >> Yeah. And so I think my prediction that the strongest prediction I can give you is that the next 10 years are not going to be great. And I think that's on very solid ground. I'm not the only person who says that. We talked to you know Dr. Miller and gazillion other people who are in that same boat who are very much much much better known than I am. Okay. And that prediction if it's right alone right what we're talking about is incredibly important. And again to your point, not just a benevolent incredible opportunity to help educate people and help them in the next decade, which is what really matters, >> but also incredible opportunity in terms of business and opportunity uh in potentially the biggest total accessible market of any business on the planet. >> All right. Well, look, uh whether it takes 5 months or 5 years, Jim, um we'll have you on this channel as often as you want to come on to keep us updated on where things are and and when things start getting real, then please come on anytime to call an Audible and let us know, hey, this is what I was looking for, folks. This is what we're doing. But um uh I I I I very much respect uh and appreciate what you guys are doing there at Kaiwealth. Um, and uh, and and anything we can do to, you know, um, magnify your voice, not just for my audience, but for all audiences that are willing to hear it, I would love to be able to do. >> Thank you, Adam. It's a incredible opportunity to have this platform with you and and hopefully we're reaching some people out there, uh, like you said, helping them um, along the way. So, anytime anytime, I'm happy to hop on. >> You're very kind. And and so a question that's hanging in in folks's minds right now is okay, well geez, if if I want to benefit from some of this, you know, risk mitigation that that uh Jim's talking about and maybe, you know, have my portfolio structured in this way. Where can folks reach out to you to follow you and your work or potentially become a client? >> Yeah, kywealth.com. Um, we uh we we're also out on on Twitter or XJam Jam Croissant or Quissant depending on your pronunciation. Um, you know, we we uh we definitely uh you know team up with with high net worth clients and and are are expanding our footprint there. So, please reach out. >> All right. So, Jim, I'm going to edit this. I will put up the links to Kaiwealth and your your exhandle there on the screen so folks know where to go. Folks, the links will be in the description below this video as well. Um, Jim, is there is there anything about what you're focused on right now or what you're implementing at Kaiwealth that I just haven't thought to ask you about yet? >> Honestly, um, again, we we try and keep the uh the process straightforward. Again, not not as straightforward as just buying stocks for the long run, but I do think the the implementation is more straightforward. you know, we're on Schwab, we're on uh Fidelity and Interactive Brokers and really trying to make it as as straightforward for clients as possible, >> meaning an average person can implement this. >> Absolutely. Yeah. And I think that's that's really important. Uh this is not uh something scary or confusing. We really do try and work directly with clients to make sure they understand how important these principles are and and how to deploy them. So, >> all right. you. Just in closing, one thing I'll I'll tell folks that maybe I'll give more detail on in a future video is the power of statistics. Um, I was pretty terrible at statistics, but I was smart enough to realize how just unbelievably powerful they can be and that the people who understood them, what an unbelievable advantage they have. It it almost looks like magic. And you're smiling as I'm saying this guy, but there's so many things that that statistically the folks that know how to dig into the numbers. They can pull out correlations that make no sense to to me or a regular person, but they find it in the data and it's like black magic when they say, "Hey, if this is going to happen, that's going to happen." There's a ju just real quick, there's a um problem called the birthday problem. and um my statistics professor in business school started the first day of class off with this where there was about 60 of us in the class and he said um look I'm going to bet uh I'll put $5 on the table I'll bet that two of you in the class have the same birthday not not the same year but the same you know month and date right >> of course somebody bets him and people start naming their birthdays and three or four people in somebody says well that's I've got that same birthday too right and he said well I'll bet you again and he kept betting and he kept winning and people are like eventually like surely we've we've done all the matches here and they keep betting him and they keep losing and the reality is is I'm doing this from memory but I think as long as there's like 40 people in the class he's got like a 98% chance of winning the bed I don't think it drops below 50 until you get down to like 23 people right some you're like there's 365 days in the class there's only 50 of us of of course he's not going to get a match right but it's it's stuff like that that the people who really understand statistics like you and your team, [clears throat] you have such an unbelievable advantage if you if you use that that knowledge to to your benefit, which of course you are and that of your clients. So, I have a huge respect for what you're doing is what I'm saying. >> I I appreciate it. It's uh again, you don't have to be a mathematical genius to do these things. I'm not saying they're easy, but but statistics is a well-known field and there's there's very simple ways to understand the basic concepts and then deploy them and use them to your advantage. >> Yeah. But but but very few people do. So it's almost as if you are a mathematical genius. Feel free to wear that crown. But I I would say to the average person, if this sounds compelling to you, then recruit your own mathematical genius. Get them on your team. >> Well, common sense isn't common, I think, is is is the phrase, right? I think the reality is there are simple things that work um and deploying them works, but often uh people don't take the basic steps to do those basic things. But, um, yeah, incredible opportunities out there at this incredibly important time to do that. And, uh, you know, hopefully this gets through to enough people to to start thinking about these things. >> All right. Well, Jim, as always, super fascinating, super valuable, uh, and a privilege. Thank you so much for coming on the program. >> Same, Adam. Thanks for having me, bud. >> All right. Well, now is the time of the program we bring in the lead partners from New Harbor Financial, one of the endorsed financial advisory firms by Thoughtful Money. I'm joined as usual by lead partners John Lodra and Mike Preston. Gentlemen, great to see you. Mike, why don't we start with you? Um, as I was interviewing Jim, I was thinking, okay, well, I think there's going to be a fair amount here that that, you know, New Harbor's probably going to see eye to eye with. Um, especially Jim's focus on risk management. Um, especially for the type of environment that he sees us heading into. I know that's in specialization of of you guys at New Harbor. So, what were some of your key takeaways here, Mike? >> Hello, Adam. I really enjoyed that talk uh by Jam and I' I'd like to just share some of the high points, things that we agree with here and maybe one or two things that we disagree with. Um but I really enjoyed the talk. Jam talked about the last 40 years was a was a regime, a different regime than what is likely to happen going forward. We couldn't agree more. We think that we're actually at the you know near the crisis and climax of a fourth turning. And anyone that if if your viewers know about fourth earnings, they know they only come around every 80 years or so. I know you've had Neil How on your program many times. The >> author we'll have him back on in uh I think early January. So he's coming back. >> Excellent. Always enjoy uh Neil and his talk and uh and in and the two books u the the original one and the new book that says uh well the titled The Fourth Turning is here. We talk a lot about that paradigm because it's a paradigm that we really resonate with and it makes it easy to explain where we are in this in this time this cycle because not every cycle throughout history is the same and this one is not the same. It is more dangerous than anyone before at least over the last 80 years or so. So JAM talks about the last 40 years has been the regime of globalization outsourcing jobs and manufacturing and buy every dip. And I'd state that it's also the regime of interventionist central banking, which I think has had a lot of negative effects. I could probably argue that this had a lot of good effects, too. But the negative effects that I don't like is the increasing risk environment, the bubble and bust cycle, plus the insane wealth disparity that we've witnessed in the last 10 to 20 years. Now, he says he thinks we entered a new 15 to 20 year regime back in 2022. Not sure I completely agree with that. I I think we're still in the final days of this 40some year regime. And I think that once we hit the crisis and climax of this fourth earning, this market will fall hard and will be an L-shaped move this time down and sideways for years. Doesn't really matter how we label these regimes. What we have to know is that the regime over the last 40 years is different than what we're likely to see going forward. Whether we're in that new regime yet or not is up for debate. I think it doesn't happen until we get the kickoff of the crisis, which is likely a stock market crash. Jam also talked about the fact that we're going to have to live with higher inflation and interest rates. I think that's ultimately going to be right. Um, over the next couple years, we think interest rates are actually going to go lower, probably in response to a falling stock market and a panicking Fed. Likely will at least drive rates down to 3% or below on the 10-year, at least in the near near term. Long term, I think the the effect of this, the effect that we're probably going to drive global debt to at least 50 trillion dollars, which is currently at 37 or 38. Balance sheet, who knows what on the Fed will be something crazy. We're probably going to see higher inflation that's going to stick and higher inflation rates. We might even see a headwind for the US dollar over the next 10 plus years. In other words, a different regime. Is it going to be the end of the world? No. It's still going to be okay. But it might very well mean that our standard of living goes down 20 or 30% for the average person. So something different. Now he says that he thinks the regime going forward is going to look like 6 1962 to 1982. I think that's pretty much right. Maybe there's going to be a lost decade or two in stocks. So it's just it's a high-risisk environment. We have to think about that. Jam talked a lot about risk risk risk, how to handle that. So that does resonate with us and that's how we manage money here. Couple other things he mentioned. Um 2025 has been volatile like predicted but it's been okay. 2026 he basically sees either you know a blowoff top then a then a bare market or straight into a bare market. we we think that we might very well get this blowoff top. And he talked a little bit about replacing, you know, uh, some of these darling stocks with longdated call options. I'm not sure that most people should actually do that. It's complicated. You face time decay. So easy to lose money buying options. Trust me from experience that probably you're better off in our view not doing that and then just getting reducing your equity exposure down to something like 30%. something that you can sit with through whatever comes and something also that will allow you to get more engaged in the market if we see that big drop. Also talked about um passive 6040 and 100% long indexes are just going to get killed. We know that. So we talk to people that are either clients or you interested in maybe becoming clients or just want to talk to us. They say that their adviser if they have one is always in 6040 or 8020. That's what Wall Street is, particularly after 40 years of nothing but up. That's exactly what everyone's going to do. And there's no safeguards in place on how to protect those people going down. They're just going to have to sit with it maybe for the rest of their life because if we go down, it could be 10, 20 or more years before we really have meaningful recovery. So that's why most are in danger. And I guess I'd like to just finish my comments with what he thinks this new regime is or how you should be invested for this new regime. Jam talked a lot about true diversification 15 to 20 genuinely genuinely uncorrelated strategies like futures, long short commodities, reinsurance, life settlements. Let me just tell you that most people shouldn't bother with that. I this is not an insult to what he's saying. I just don't think that most people can really get their arms around that. If we're right and it's going to be a big bare market, just go into treasuries here for most of that money. You don't really have to do all of that. Most people are not going to be sophisticated enough to do that. That's not to say that JAM can't be uh successful doing it and that some others can't be successful. Maybe they can. He talked about long, permanent long. It acts like breaks on a race car. That's that's true as well, but buying volatility long is difficult. You're going to have to roll VIX calls. uh V VIX being the index of volatility which in itself is flawed and you're going to be facing a lot of decay in those options every single month until it eventually maybe pays off. So probably wouldn't recommend that either. He talks about value and quality is better than pure growth stocks. Can't argue with that. And um you know lastly I guess I'd say that he talks a lot about fat tails and how to protect yourself. Again for most people just go mostly to cash. Do the tea bill and chill really. It'll it'll be okay with T- Bill and Shill. You're going to probably need some help on how to get in. Reach out and talk to us or somebody that you trust or just sit and wait for the market to fall, you know, 30 plus%. Probably more if if I had my way and watch for Treasury Bill uh yields to go back down. That's going to be the dangerous time that the T- bill and chill people are going to want to get in. But talk to us. We'll be happy to help. And so big bull markets don't end with a whimper. Jam says, they end with a bang. So, that probably is going to be, in my opinion, an all-in moment of fireworks up followed by a crash. So, be careful and um talk to us. We'll be happy to help. >> All right, great. So, two things, Mike. So, um a good summary. Uh I I think you would say because I know you guys are big followers of uh John Husman's work. um Jem's concern that we may be having, you know, looking at a lost decade ahead of us, really at the last sort of 15 years that that meshes very well with um Husman's forecast, and you guys pull up his chart often here, right? Which which shows um doing this from memory, but it's the uh expected annual return, average annual return on the S&P for the next 12 years, I think. And the last time that that you guys put that up on the screen, it was negative somewhere between4 to6%. It's around -6. Yeah. >> Yeah. So that's that's you know a little bit over a lost decade ahead. Um now of course that's not just going to be happening like clockwork every year. Negative 6% per year. It's going to be wildly uh up and down. It's highly likely to be wildly up and down. Some big down years, some big up years. Again, that's everything that that Jim is trying to capture here. And just just to make sure I'm capturing what you said earlier, yes, Jim's strategies are sophisticated. Um, I think Jim would say they're they're not that sophisticated, but just for most people, a little bit of mathiness and and and dealing with instruments that they're not familiar with gets pretty overwhelming pretty fast. And and so your your general point, which I would totally agree with, is is look, if you're not familiar with this stuff, don't learn it on the fly now on a DIY basis. either play it safer with some of the simpler strategies that you just mentioned or you know recruit your your math genius as I was talking to to Jim Jim about you know either recruit him to do those strategies or work with a firm like you guys to do something similar but maybe a little bit more um understandable to the average person but I don't think you were you were you were saying his strategy won't work it very well could work very well for him it's just the average person trying to figure it out on the fly for the first time some of those strategies might be a little bit too sophisticated that capture your your Yeah, absolutely. I certainly don't want to appear to be condescending to your viewers are certainly not the jam because I'm sure that his strategies work and work well. You know, my statement is that there is a learning curve involved with all of these products and there's a tuition to be paid and we don't want people to >> basic options which you talk a lot about, right? You know, we always say work with somebody else for a while to look over their shoulder and learn how to do it before you play in that sandbox alone. >> Yeah, options are tricky. We're very, we use options a lot and frankly have [clears throat] have, you know, at least personally in the past paid the tuition that was necessary to get there. Just want I want to help people shortcircuit the tuition necessary to get there. That's that doesn't mean don't learn it. Do learn it, you know, and then some of these things are really interesting and you can find a niche. If you're a self-directed investor, there's a niche for everybody. Selling options is a great niche. Um, some of these volplays could be a great niche. buying options, although harder in my opinion, is another niche. So, there's a lot of really neat tools and the the stock market is an infinite environment. That's what's really cool about it, but it's also what's really dangerous about it because it can be a really hard place to learn and a hard place to find out what your own personality defects are, you know? So, and lastly, if you can make 4% over the next year, which you can close to anyway in a treasury, and we think there's going to be a huge down market, you know, think about that for a minute and think about how much you want to learn right now because there's plenty of time to learn. >> If the market's down by double digits of positive 4% return in the safe instrument feels pretty heroic, you know, at that point. >> Exactly. Exactly. >> All right. Uh, thanks, Mike. All right. So, John, coming over to you first off, um, anything that you want to add to what Mike said about the the GEM interview? I think Mike covered the bases really well. I guess the only thing I would add and um you know as much as we would likewise be uh critical of of the likely success of a kind of a passive buy and hold in the years to come. I also want to caution viewers that even though um the the state the table seems to be very very well set for a forth turning kind of crisis and volatile market like like Jam described and we certainly believe is is the path ahead. you can equally become um stuck in the mud with that view as well. All to say is that um that kind of information is really important to have an awareness of and a uh a framework to understand the environment we're in. But it doesn't mean put your head under the the the the pillow or in the sand, so to speak. It just means um being much more tactical and having a system having a a an emotionless system to to navigate what are likely to be rocky waters. um you know we're about 45% in equities right now if we don't include uh you know 10 to 15% in gold mining equities um you know based on valuations alone if if we were forced to buy and hold the stock market the S&P for the next decade we could make a good good case to be virtually 0% in equities but we're not and why are we not because we think there's plenty of opportunity but one that uh is going to be we think kinder to more tactical strategies that take on risk, take off risk when the market signals suggest that's the way to be. So, I just want to caution folks. It's easy to become so bought into a um a non- buy and hold scenario that you simply just run for the hills uh improperly. So, so you can kind of hurt yourself both ways, so to speak. Um you know, I guess I would really love to to chat about the options uh you framework. Um as Mike said and you alluded to, we do quite a bit with options. We use very simple option strategies and as complex as they can be and hard for most people to understand they're actually quite simple especially if you bring it back to what the objectives are you know quite simply I can say quite simply options are just a simple way if used properly to take an unknown scenario and put bands around it put certainties around it so you know when you buy the S&P 500 today you're going to get whatever the market gives you if it goes up you're going to get that return. If it goes down, you're going to get that negative return. Options have you can use options in various ways and combinations and very simple strategies to say, hey, you know what? I can have upside of x%. But I can guarantee that I'll have no more downside than y%. That's just one very simple framework to think about what options can do for you. It allows you to take the unknown and put some known around it. That is incredibly helpful when especially when one is paralyzed that they have this feeling of FOMO, but they also are worried about the the risk they feel in their bones. You can kind of have it both ways. There is no free lunch. And what I just described there, you're willingly giving up some upside beyond a certain level, but in return for that, you're you're guaranteeing a protection level below a certain level. That's really in a simple lay person's word what options can do for you. they can take the unknown and put defined bands around it, uncertainties if you will. >> All right. So, um, a couple of things. Uh, so for folks that haven't seen the, um, kind of basic options 101 tutorial that you and Mike put together for this audience. I think we recorded that what, like a year, year and a half ago. Uh, folks, you can go watch that at thoughtfulmoney.com/hedging. Uh, if you just want to get sort of a foundational grounding in how these things work. But as Mike said, John, you guys are happy to talk to anybody, you know, for free that that wants to call and inquire about how they might be able to use some of those strategies for their own portfolios. Correct. >> Yeah, absolutely. We do it all the time. And and Adam, I'll just make a note. We uh we we put out a monthly client newsletter and actually just this month, we put one out on options. Uh just simple educational piece and option. We're happy to provide you a link to that if that would be helpful for your viewers. But yes, I I do encourage folks to to you know, [clears throat] look at the video that we did with you. Um we covered a lot of ground in there in in very basic ways. So um you know, absolutely educate yourself. You know, you know, take the mystique out. They don't have to be, you know, risky complex tools. They can be very simple strategies. You know, it's interesting. Um you know, uh just this week, I think Goldman Sachs announced that they acquired a ETF company called Innovator ETFs. And innovator is one of a small handful of ETF providers that specialize in what you might call buffered ETFs or structured ETFs that basically have these features that hey you can be invested in certain areas of the market and you can you know make sure that you have participation to the upside but you know you know limited downside. These are all built with options. Um now I'm a little critical of you know relative to just a simple buy and hold strategy. I think these can be useful tools to, you know, accomplish um, you know, risk management, you know, versus just simply owning a hyper overvalued S&P 500 and closing your eyes and hoping for the best. But with options, there is value to be added for tactical management. So, I actually did a little bit of a critical video on on these buffered ETFs several months ago on our YouTube channel. It's not to say they're not useful and can cannot be appropriate for folks, but they're they're not oftenimes all they're cracked up to be. Uh because let's take for example when when the market pulls back pretty dramatically, these protection elements kick in and and do what they're supposed to do. But it's in those times where a tactical option strategy would very thoughtfully reduce or remove those hedges so that the subsequent rebound can be enjoyed. oftentimes when you're when you have downside protection with options and you get a swift move down, if you don't reposition those options, you're going to miss the upside. So, you want to have it both ways, right? So, you know, folks can find that video if they want to to learn a little bit more about my critiques of that. Um, but I think it's really a sign of the times that you have and Goldman paid paid a rich price for this this company. I think they have like 21 billion in management and I think Goldman paid $2 billion for something like that. not a cheap acquisition. So clearly there's an appetite for uh risk protection even if they're imperfect tools. Um it just I think it just speaks to the times we're in and and people I think are understandably concerned and um you know talk to someone talk to someone who who can you know have a candid conversation about the risk and rewards. You know we're happy to do it of course with your viewers Adam we do it all the time. No strings attached. We just love to educate about what we are passionate about and uh if we can leave a little bit of um insight and prudence with anybody we talk to that's that's enough payment for us. >> All right. Well, thanks again for doing that. You guys have helped a ton of people in the past and continue to. So, thank you. Um all right. Uh we only have a few minutes left, so we got to be concise with this, but John, staying with you for a second. Um so, the conversation with Jim really was sort of looking at over the course of next year and maybe even the next 10 to 15 years. Um, as we look at the here and now heading into the end of this year, so just, you know, four weeks left in the year, uh, about a week ago, you know, we were we were wrestling with the oh gosh, you know, or maybe two weeks ago, um, did the AI bubble just peak out? Um, is this thing going to roll over? Um, last week, which had thin trading, you know, the market stabilized and folks thought, okay, no, maybe maybe the worst is behind us. Now, there's talk of, okay, are we going to get that year- end Santa Claus rally? Um, looking at your indicators, what are you seeing is more likely as we end this year? >> Yeah, so we've had a a pretty uh pretty much an an abrupt about face in in the last week since we talked at them. You know, our broad battery of indicators has has shown quite dramatic improvement. Doesn't mean that hey, we're uh you know, there's no worries to the downside. It just simply means that um the market has taken the bit uh back in a kind of an offensive posture and and we actually um couple weeks ago we reduced our acuity exposure by 5%. Just yesterday we added a cumulative 5% back in but we did so in different sectors. So for example we added a small slice of a healthcare focused uh sector play and a global um mining company uh play. you know, these are copper steel miners. Um, you know, so we added that back on yesterday. All because of our battery vindicator showed a pretty dramatic improvement in breath and regaining of some key technical support levels. And um, you know, it just speaks to the importance we think of, you know, not being too emotionally and and um, dogmatically bought into a narrative and and let the market kind of guide you. But we're still we're not 80% in equities. We think for most folks uh for all the good reasons, valuations and otherwise and and where we are in this cycle, having an underweight equity exposure is is uh almost certainly a prudent thing to do, especially for folks in their retirement or near retirement because um as much as a buy and hold can approach can say, "Hey, over 30-year periods the market's never lost and it's average this." When you're in retirement, sequence of returns is is critical. Uh I invite your viewers if they're not familiar with that concept, just do a Google search for sequences of return risk, you're going to come up with some really uh important stuff. Bottom line is, you know, when those returns happen and when the negative returns happen are critically important in terms of your retirement success. If you have a couple down years up front in your retirement, it could derail your retirement for the rest of your lives. Um and and that's really what's at stake right now. >> Okay. All right, Mike, coming to you again real quick. Uh they were talking here. Silver remains in breakout. Um I just recorded right before I got on with you guys uh a live stream dedicated to this exact topic with um with Andy Sheckchman. Um but would love to give you I know you know precious metals are an important component of your portfolio there at at uh at New Harbor. Um but you have been tracking them for us but specifically silver and I again I want to go back and give you props. um you know [clears throat] coming into this year you were talking about the technical setup in silver and thinking that it could really break out and this is back when silver was in the high 20s I think low30s uh and certainly this year has um had had several silver breakouts but we seem to be in another one right now silver was trading silver futures were trading above 59 right before we got on here um anything you want to say about this this breakout >> yeah let's talk about silver here let's take a look at the silver ET ETF or at least one of them. And for some people that tune in every week, it might be somewhat repetitive, but I think it's it's worth talking about. >> Well, it's higher than it was last week. >> It is. And so, I think last week we probably would have talked about this triangle compression right here. And so, this is the SLV on a daily basis. And let me just go to the weekly just to remind people or for the new viewers, they can see this. There's a there was a triple top right around here. One, two, three touches. And this was around 35 spot silver, 32 on this ETF. 31 or 32 on the ETF. And we were talking about, hey, watch out for this triple top at 35. Triple tops don't usually hold, particularly in commodities. And it didn't. And so we broke out of there, formed a triangle, broke out of there. Look at that move, you know, out of the high30s right up into the 40s. And then we we we corrected for a few weeks, created this triangle. Go back to the daily. You know, I'm a little bit surprised at just how strong this is. When we talked last week, it was in here. I was thinking it was going to compress and maybe maybe even have a little fake out to the downside just to get people out. But boom, look at that. I mean, we went right up to 53 on the ETF. Like you said, 59 on spot. I mean, these are these are target levels. You know, I was thinking the next spot for the next year might be 60 to 70, >> right? And just to be clear, 59 on futures. I don't know what the spot is today, but yeah, >> that's right. It's it's close enough. 58 or 59 high 50s. We can say that. >> Yeah. >> You know, so here it's one thing that's a little puzzling is how silver stocks haven't exploded even faster. Although I can tell you silver stocks have outperformed silver year to date. >> Uh it seems like it's just a really thin group and maybe Wall Street doesn't completely buy in yet the fact that these companies are doing this. But this is big. I mean $60 silver. I'm not going to tell people to go all in and we're not gold and silver bugs, but this is really positive. And take a look at these four days is just gap, gap, gap, gap. Yesterday, we decided as an investment committee to adjust our hedges. We had some short call options against silver, which effectively took us out of the position because we were above the strike. Yesterday, we said, you know what, we don't really know that we're going to get a pullback. we might just literally have another 5 to10 uh dollars higher vertical with short covering before we get some sideways or down action. So, we actually bought back that call yesterday and rolled it out, giving us some more upside. And as you can see, yesterday it was like a little uphammer here and and today we're just pinned right at the top. Wouldn't be surprised to see it move higher. That's what happens as as shorts get a little bit panicky, people rush to get in. Eventually, that causes a short-term top. But I've learned the hard way. Nobody knows where that top is, you know. And I guess I just show you some of the junior min miners quickly because I was noticing that GDXJ is forming a little bit of a handle. Here's a cup. 3 days of handle. And then if we get a breakout higher, that's going to be a really bullish sign for GDX. Uh GDXJ, I should say. GDX looks similar but a little less defined, but it's very similar. GDX broke out of this triangle here along with silver and gold which did a similar thing even though I didn't show it and it's building a handle. So look for some consolidation to break higher. Lastly, I guess I'll show SIL or SILJ which is the the juniors and the these are the silver majors. Same thing triangle breakout forming a handle. And if I show you the juniors, same thing. Don't take my comments as, you know, over bullishness or or fanaticism. I want people to think long and hard about this because people do get emotional and they tend to get out on the swing lows and in on the swing highs. But if you have the right allocation so that you can sit with this, I I honestly believe that a lot of these names that have already doubled, let's go back to SIL for a minute. Go to the weekly chart. We basically broke out of I don't know 35 maybe 35 to 40 was the long base. Take a look. We've doubled. Boom. Very common in a bullish kind of breakout situation. What I've also learned over the years is after a consolidation, if it's a real strong bullish move, these assets will likely double again. So, I'm not making a prediction, but don't be surprised to see SIL, for instance, be, you know, way up there in the hundreds. We might even see a double on the thing before it's over. But don't go all in. Don't get emotional about it. You maybe be We're 10% in minors. There's a reason for that. We talked to a lot of people that are 100% in it. We can't necessarily say that that won't make money. It probably will, but the ride is really psychological. So, very bullish. Be smart. Talk to us if you want some advice. >> Okay? And uh for folks that that want more about exactly what's going on with silver, go listen to that live stream that I recorded, the replay of the live stream that I recorded with Andy, um you know, Mike here has just been talking about kind of the technical appeal of the charts right now. Um Andy and I got in a lot of the um what's what's h happening with the actual flows of the physical metals in the depositories right now. Um, so there's a lot of kind of both fundamental and technical uh reasons to be bullish about where silver may head from here. Um, despite how far it's moved, it's just got a truckload of momentum behind it. So, um, all right. All right. Well, look, gentlemen, uh, another great week as always, folks. If you enjoyed the discussion with Jim, would like to see Jim Beck come on this channel back in early Q1 to give us an update on how things are going. Uh, please let us know that by hitting the like button, then clicking on the subscribe button below, as well as that little bell icon right next to it. Um, as John and Mike have very, uh, generously offered several times already, uh, if you'd like to talk to one of Thoughtful Money's endorsed financial advisors about your personal situation and, you know, a, we didn't talk about it this time, guys, but, but, you know, make sure you've done everything that you need to do in terms of your uh, end of year planning uh, but also setting your portfolio up for the start of 2026, but also maybe for this, you know, the future that that Jam is sees and his his outlook going forward. Um, well, anyways, you can you can uh if you don't have a good financial adviser to be holding your hand through all that to begin with, feel free to talk to one of the ones at thoughtfulmoney endorsed, maybe you might even want to talk to John and Mike directly themselves. So, to set up one of those consultations, just fill out the very short form at thoughtfulmoney.com. Only takes you a couple seconds to fill out the form. These consultations are totally free. There's no commitments involved. It's just a service these firms offer to help as many people as possible. John and Mike, another great week. Thanks so much for uh coming on here and making sense of it all for us. Uh certainly we live in interesting times and uh we're going to find out pretty soon how this year officially ends, but I very much appreciate you guys coming back on this channel every week here uh to give us your, you know, real time live color commentary about it all and really helping us keep track of of everything as it unfolds. >> Thanks so much, Adam. We look forward to seeing you again soon. Adam, we we too appreciate the time with you and and uh hearing from your invited guests. We learn something every time. And uh uh until next week, uh we'll wish you a great day. >> All right, guys. See you then. Everybody else, thanks so much for watching.