The Market Only Cares About Oil, Ignores Conflict! | Michael Lebowitz
Summary
Macro Backdrop: The discussion centers on the Iran-driven oil price shock, its market impact, and how sentiment hinges on whether crude stabilizes in the 70s–80s range.
Consumer Impact: Higher fuel costs are crowding out discretionary spending on movies, apparel, and travel extras, pressuring Consumer Discretionary demand.
Bond Market View: The guest remains constructive on US Treasuries, expecting slowing growth and eventual disinflation to pull down intermediate-to-long yields, while cautioning that tight credit spreads make long corporate/muni risk less attractive.
Inflation & Fed: Headline inflation is elevated by energy (a supply shock), raising the risk the Fed stays too restrictive even as the labor market stagnates.
Airlines & Costs: Airlines are passing through fuel costs via bag fees and higher fares, with examples like Delta’s updates; consumers may offset by cutting other spending.
Gold and Silver: Precious metals have decoupled from traditional real-yield dynamics, seen as crowded with short-term traders; caution is advised unless truly buy-and-hold.
Dollar Dynamics: The US Dollar strengthened on crisis-driven demand and rate differentials, affecting global inflation and commodity pricing, including gold.
Equity Positioning: He favors select Growth Tech after a pullback, arguing some large techs look cheaper on forward metrics versus overextended staples/utilities.
Transcript
They say the fog of war. This is the fog of war. If people are spending more on gas, they're spending less on the movies, on sneakers, on clothes, on, you know, other things. And that stuff takes a little longer to trickle in. You need dollars to buy oil. You need dollars to buy military equipment. You need dollars, right? You can't buy that stuff in almost any other currency. Optimism has returned to the markets. This morning, as we're recording this on Wednesday, March, sorry, April 8th, here at around 8:00 a.m. Pacific time, indices are running. Gold, silver positive. Oil is down 15% roughly as we speak. But, uh, the markets seem to be exuberant. Um, earning season is upon us. Of course, we're getting first results are coming out. Delta reported this morning as well. Seems to be okay. outlook of course a bit uh uh dark and worsened but other than that like they seem to be happy with the spending of the consumers. So we'll have to do a deeper dive into the US economy, the US markets, what is really happening on the ground. I've invited a fantastic guest back onto the program. His name is Michael Liowitz. He's a portfolio manager over at Real Investment Advisors. He's got over 35 years of experience. Really looking forward to tapping into his brain today as we're seeing the markets open just about an hour and a half ago. Uh all in the green. So I'm really curious what he makes of all of this. But before I switch over to my guest, hit that like and subscribe button. Really helps out uh the algorithm of course and we just appreciate it as well. Now Michael, it is great to welcome you back on the program. Thank you so much for joining us again. >> Sure. It's great to be back. Love being here. >> Yeah, it's been a while unfortunately Michael. So I really we I want to start with you at the top real quick. Just get a 30,000 foot view of how do you assess the economy in the financial markets right now? >> That that's a that's a tough question. It's kind of a a two There's kind of two parts to that question. Where were we before Iran? Where are we kind of during Iran? And where do we end up on the other side of Iran? And it's um you know, Iran is you know, they say the fog of war. This is the fog of war. Like it's hard to know. You know, the news this morning is certainly better than it's been. Uh but that doesn't mean that this is over and we're going back to normal yet either. Um these has been very hostile and it wouldn't surprise me if it all reversed or if this was truly the beginning of some sort of much larger peace arrangement which would be great. Um so the way we're thinking about it is first of all where were we before the conflict started? Um the market was already starting to slide a little from record highs down a few percent not a big deal in part because the economy was gently weakening. The labor numbers have been meh you know not good not bad very little activity in the labor markets u and we've had some of this private credit and other you know kind of lower credit issues arising. So the market was technically you know starting to show some negative signs. Uh we had actually been reducing our exposure back in earlier in a year. Uh so when we got to Iran we we were not fully exposed and we took a little bit more off the table for Iran. Uh Iran comes price of oil more or less doubles. Uh, and you know, first of all, for the listeners, and this it's kind of sad to say, but the market doesn't care about the war. It cares about oil prices. And if you want any evidence of that, go back and look at Ukraine and Russia. Oil spiked on the Russian invasion. Oil came back down and then the market could care less about about that event. The market just rallied straight through it. and Iran is a very similar thing because it's very uh oil price sensitive to conflict. If the price of oil can somehow get down into the even the 80s and just stabilize, get that volatility out, the market will be looking beyond Iran uh towards more traditional the economy, corporate earnings, you know, whatever is kind of next on the horizon. So you know what we have to think about is what was the trajectory, the economic trajectory, the market trajectory before Iran. How does Iran change that? And how does it that trajectory come out after this foggy period? And uh you know sentiment will probably be lower because oil prices even if they come down to 80 are certainly higher than where they were. uh that will weigh on the lower end middle class consumers. Um so but net net uh you know I I think there's still more to see with what happens with Iran and oil prices before understanding where we are on the back end of this whole conflict. U but but you know I think what's important is to understand where we were draw a line when Iran started. understand the immediate market is just all about Iran. It's going to trade headline to headline. And then once that starts to slow down and calm down and we you get some sort of peace or or much bigger war, then we can start thinking about how that trend uh looks afterwards. >> Now, some really good points in there. Let me let me follow up on a few. Of course, oil I would consider maybe a leading indicator for economic activity perhaps and maybe earnings. You touched on that as well. While inflation, unemployment, they're all lagging indicators. Of course, they're being directly in affected by that leading indicator. Um, but it's used for decision- making as well, right? And that affects a lot of things, >> right? Um, and we need to maybe dissect that a little bit. You were talking about the economic indicators um slowing down, showing weakness. You talked about the labor market. Maybe we'll start there on the labor market. Um, how do you see that development? How do you see that being maybe a focus of concern perhaps for the Fed and maybe other institutions as well? >> Well, I think the Fed has is in a weird position right now. The labor market is basically we're not adding or subtracting jobs. The the monthly numbers are whipping back and forth. We were up whatund I forgot the number 180 something last month. We're down 135 or so the month before. net net we're basically not growing jobs even though the population of available workers is increasing at somewhere between 100 and 200,000 workers a uh month. So the situation is not great. The unemployment rate isn't necessarily rising. It's ticked up a little but it's not necessarily rising because the participation rate is coming down. So the the people that are looking for jobs that number of people has declined. Uh we know from ADP, we know from Jolts, we know from Indeed, we know from other labor uh market data sources that the the the labor market is just kind of stale. It's kind of like the real estate market. Not many buys and sells. It's not bad, it's not good. It's just kind of doing nothing. Uh so on the margin, I think the Fed is concerned about that. Uh at the same time they've been worried for a while, not worried but cautious because inflation has just been very slow to tick down to 2% to their target and they were starting to make progress. Um and then Iran happened. So we're going to get CPI data I think it's Friday or Thursday. Friday. Um and PC actually PCE on Thursday and CPI on Friday. And what it's going to show us is that CPI is up uh 08.9 1% for the month. But a huge chunk of that is going to be gas and energy uh without or what they call core CPI is going to be up 2.3 maybe point4 which is kind of more in line with that 3%ish inflation. Um, so I I think the Fed is potentially sitting on a mistake that they're making that if they're they're they're going to keep rates steady, possibly increase them because of this inflation that is really a supply shock that will heal itself that they have no control over and not focus enough on the labor market. Um so so the risk there is that they keep rates higher than where they should be because inflation especially the headline inflation not the core inflation is higher um because of not just oil but fertilizers and you know transportation and you know it feeds many other products plastics. Um but at the same time the economy by by necessity if people are spending more on gas they're spending less on the movies on sneakers on clothes on you know other things and that stuff takes a little longer to trickle in those price drop declines or stable you know not not increases. So, so I I think there's this balancing act going on and I'm a little concerned that the Fed is going to be a little late that rates are going to be too high here and that will on top of higher gas prices and energy prices weigh even more in the economy. But, you know, again, we'll see when we get to the other side of the Iranian conflict, uh, what the economy looks like. Again, we get corporate earnings starting later this week for the next few weeks. I I what I'm really curious is their guidance. Nike had horrendous guidance uh was that last week, two weeks ago, good earnings, good sales, good margins, and then they said sales were going to decline uh ba basically about 4% below what they had originally expected in part due to China, but in part due to the the negative sentiment due to higher oil prices in Iran. So I I think when we look at corporate earnings, people say that's nice that they had good or bad earnings and sales and this and that, but what what are they seeing going forward? Especially the consumerf facing companies, the Walmarts, the Costos, the the re, you know, the apparel type companies, uh transportation, those type of companies. I think their their forward guidance will be incredibly important. >> Yeah, I think Delta I haven't taken a closer look. I was just listening to to Bloomberg. I think Delta reported this morning or at least gave a press put out a press release saying, "Well, we're quite happy with sales, but we can see weakening of course, but the consumer is still happy to spend uh because prices have increased." And they just added more bag fees and all of that as well to cover those extra fuel costs, right? Um but maybe summarize what you just said. >> They've added a lot to they've added a lot to to we just booked a flight. it's, you know, it's probably 150 bucks more than it was. And that, you know, fortunately, we could just pay it. But I think there's a lot of people that'll say, "Okay, we we have to go. We'll pay it, but we'll stay in a cheaper hotel or and we won't go out to dinner for the next three weeks or and no movies." So, so there's going to be an offset somewhere. >> No, absolutely. Maybe just to summarize what you just mentioned as well. So the Fed is still caught between a rock and a hard place because they have a dual mandate and it's really difficult to be fair to equally fair to both, right? Inflation or the economy. And it seems like like based on what you've just said, Michael, maybe they should ignore the inflation part because it's a one-time shock. And I would add maybe that's depending on the duration risk of that, right? Absolutely. Um versus the economy, right? And maybe maybe just to follow up on that, Michael, how how what would you have done in the March meeting here? Cuz it seemed like Jerome Paul said, "I don't know. I have no idea what we're going to do next." Um, let's just wait and see, right? Would you have done the same? >> Um, I probably would have done the same, but I would have been a little more clear that we could be doing some we could be doing something at the next meeting. You know, the March meeting was difficult. We had just started the war. Oil was not up to 100. you know, it was it had only been high for a few weeks at a couple weeks at that point. Um, so that meeting fell at a really awkward period. Uh, I would not have been committal to the future at all. Um, and I would have kind of reiterated some of the things that I was saying before that he was saying before that, you know, we probably will lower rates in time. this Iran conflict may cause us to pause and see what the impact is, but there are reasons, you know, he and he said it, rates are too restrictive. He has said that almost every meeting there, if they were restrictive before I ran, they're even more restrictive now with higher oil prices and, you know, some some more credit problems that we're seeing in private credit and other areas. So, uh, you know, I I would probably would have been a little more dovish than he w than the whole committee was. Um, but you know, we'll see again, uh, when they meet, I believe at the end of this month, later this month. >> Um, so oil oil oil price aside, um, you you've been talking about lot increased volatility in 2026 in general, midterm elections, AI spending, unwind of the yen, carry trade. You gave a number of reasons. Um, what else is the center of your attention right now, Michael? Um, if we take the geopolitics out of it, what should we be focused on? Like you said, preIran that those were the themes. Are they still valid? Are we should we still be focused on that as well? >> I I think so. But what where I'm really focused is how does the war, you know, oil prices have been high for long enough. This isn't a oneweek shock. This has been going on now for five, six weeks. And look, even if there is a a a real durable peace agreement, oil's not dropping a 60, right? There was critical infrastructure taken out. Uh there's going to be a warp premium that that they price into the market. So I I think in a best case scenario for the next few weeks, month, two months, probably the best we can hope for is low7s and you know, the sky's is the limit on the other side if things start acting up again. And what what I'm really curious to see is how does that impact consumer 70% of the economy? How does that impact people's spending habits? How does it impact corporate behaviors? And the the hard part is that e government's economic data is delayed, right? We we're getting March CPI and it's April 8th today, right? best case scenario their their information is delayed by a month and change. Some of it's delayed two to three months. Um so it just takes time to really figure out we get you know there are private sector things like ADP the surveys um but those are very reactive and surveys are nice but they don't really tell us what's going on. It just tells us incrementally how people are thinking. Are prices higher than they were last month? Well, the answer can be yes, and that could be by a penny or that could be by a hundred dollars. There's no context for those changes. So, surveys are nice, but they're not the end- all beall. And uh you know, so so I feel like we're in a wait and see period to see what the impact was on the economy. Um and I look, I have to think it was negative. The question is how much and uh will it further impede some of these liquidity issues that were starting to pop up, private credit, private equity, etc. >> Now, um you you you mentioned like midterm elections, tariffs as well. I just want to maybe come come back to those topics because they they've been swept under a rug, but if we lift the rug, they're still there, right? The issues. um USChina relationship is strained because of the Iran situation now maybe even more so than before meetings have been cancelled so there's no dialogue as far as we know um going on between the two parties um how do you see that part of the equation sort of now develop um like the the topics that have been swept under the rug that were really important before this all broke out >> right I I think they're all still important and I think don't let the war take your mind off what was going on before the war that's kind of what I'm saying is understand what was happening before. We're now in this fog bank and we can't see anything. But when we come out on the other side the road on the other side of the fog bank, expect those same things to reappear and they could reappear quickly. um and you know I think it's important you know a lot of those were negative but there is a midterm election here um in November and President Trump will do whatever he can to get the stock market up which helps sentiment and to get oil prices down and to try to tackle that affordability issue u which means lower inflation uh how he does it I don't No. Uh will he do it? Probably not massively, but he'll he'll try. So that is a tailwind for the markets potentially for the economy. Um that you also have to factor into kind of everything else that's going on. >> You've been fairly vocal in in the past on the bond market and that might be you know our strongest ally in in this uh you know period of crisis, let's call it that. Um what what do you make of the recent moves in in bonds? Um bond yields have come down actually this morning. Uh maybe a bit surprising because I would have put them maybe in the safe haven category while this was all going on because apparently the US debt situation doesn't play a role anymore. Um but uh but now we're at 4 what is it 27% on the 10-year um in terms of yield. Just what do you make of the bond market these days? >> So so it's important to realize that bonds had got a little overbought on a short-term basis before the war. So, they were due to to rise in yield a little bit, not up to where they got to or where they are. Uh, but they're reacting to the inflationary aspect of higher oil prices. And, you know, some of that is fair. The problem with it is that this is a temporary impact. Um, and it will go away. The question is when. And you know, if you're looking at a three-month bond or a six-month bond, then then yes, that inflation rate over the next few months really matters. But if you're thinking about a 10-year bond, five-year bond, 30-year bond, that impact, you know, the the slightly higher inflation um is pretty minimal. So, uh I'm still in a bullish camp. Uh I think the economy will slow. I think rates are still restrictive. Um, and I'm kind of bolstered by the fact that I think the Fed is going to sit on our hands for a while, which will further weigh a little bit on economic growth. And because the front end of the yield curve, the very short maturities are tied to Fed funds to some degree, that gives the room room for the back end, fives, tens, 30s to fall a little bit more in yield. So again, I don't know what's going to happen in Iran, how that that will impact the price of oil. But assuming that we've seen the highs in oil and that oil continues to at a minimum stay where it is or andor fall further, I think the bond market should start coming back towards those yields, you know, at a minimum of where we were before the conflict started. O >> OECD put US inflation roughly at 4.2% for the year. I think that was their outlook if I'm not mistaken. Um 10-year yield is at 4.2% 4.27. Let's not be too uh too too pedantic or semantic here or whatever it is. Um so real yields are pretty much zero right now. Like how how attractive is that in general? >> In general that's that's not attractive, but CPI is closer to 3%. Everyone's going to look at it core. They're going to take out food and energy and then you're you know you're back below three. So, you know, we're kind of call it call it a percent to a percent and a half positive real rates, which is good, but historically, especially since the financial crisis, that's outstanding. Um, so, you know, I do think that we get inflation heading back towards two and I do think that yields, I mean, yields are extremely correlated with inflation and inflation expectations. So, I think the answer to the, you know, if you know, people are watching and they're saying, "I don't like what Mike says. How do, you know, how should I uh evaluate the bond market?" It's all about it's all about inflation. Um, it's it's actual inflation, it's inflation expectations, inflation expectations into surveys, and you can break it down into what the market is actually pricing in, looking at tips, looking at forward break evens. And you kind of take those three parcels of data uh which actually the Cleveland Fed puts out. It's their inflation uh inflation expectations index and that index has an extremely high correlation with bond yields. So so kind of make your assessment of where you think inflation will be and there's your answer to bond yields. Obviously there's other things. It's not just inflation. There's sentiment like you said. There's the budget deficits. There's other things that impact the sentiment. It's not always going to trade at a zero real yield. But understanding how much bullish or bearish sentiment is priced into it versus inflation is kind of the key to trading it. So, but but first and foremost, understand inflation and and have a forecast. >> Inflation is also a good segue to gold. Um cuz I'm I'm a bit puzzled how gold is trading and behaving these days. Um it seems to be counterintuitive. Um peace breaks out, gold goes higher, uh war erupts, gold goes lower. I think that's all a function of the gold price and inflation expectations. But maybe Michael, you can make a bit more sense of it for us. Maybe summarize like what what are your thoughts on gold and how it is behaving right now. >> So first of all, it's important to note that prior to a couple years ago, gold had an extremely correlation with real yields. Uh so when real yields were above zero, gold tended to trade poorly. When they were below zero, they traded well. And that correlation was great up until about a year and a half ago and then it just completely broke down because we've been in a period of high real yields. The Fed has been hawkish and that should be bad for gold and it hasn't been. So, I I think even before I ran, there was um if you go back to 2020, we've been through a series of what I've been calling rolling bubbles, meme stocks, uh NFTTS, crypto, um I'm drawing a blank, but there's uh the spaxs, >> cannabis, >> cannabis. I mean, there there's one after another, some big, some small. Um even private credit. Um, and I think gold and silver got caught up into like this bubble type thing and it was backed by the narrative that deficits were at a at a, you know, deficits, money supply, you know, kind of the typical fundamental backing. Um, but I think at the end of the day, their prices started rising, people jumped in, uh, just like all those other bubbles. And I I think they just got way ahead of themselves fundamental wise. Then you get the the war and what you really learn is that people need dollars, not gold when when a crisis hits. So they have to sell gold. Um the dollar really started rising, right? It was the dollar index was down to 94 95. It got over over a buck. Um so that made gold more expensive for foreigners as well. Uh so when you start factoring the liquidity function and the the fact that there were not a lot of uh long-term buy and hold gold investors but shortterm traders that could care less about gold as an insurance or gold as its kind of more traditional use case. uh that's it just set it ripe for volatility both up and down and I think kind of Iran kind of set that off even though some of that was happening before. Um so you know I think it divorced from its fundamentals uh being real yields and it will get back to that but you know the problem is right now I think real yields are still high which doesn't bode well for gold. If the Fed starts cutting, Fed starts doing QE uh real yields fall, that would be a better environment for gold in my opinion. But, you know, and silver, but they've gone a long way. And there's a lot of trapped longs that are not buy and hold investors. So, that's what you have to be careful of. But again, if you're gonna if you're going to buy and hold it for 10, 20, 30 years, pass it on to your children, >> you know, just buy and hold and and don't look at the price. >> Yeah. And know exactly like it really depends on >> I don't look at my insurance price. I don't know what I'm paying for my life insurance, but it's there. >> Yeah. No, exactly. That's the same thing, right? So, it really depends on your investment style and what you plan to do with it. But you mentioned something interesting there uh Michael just to follow up and it allows me to throw in another yet another asset class into the discussion here is the US dollar. You talked about the correlation of gold and dollar seems to be back to normal because it was disconnected for a while. Um cuz now gold is up today, the dollar is down. Is that really just a function of okay, we need less dollars or at least theoretically need less dollars because the war is over and now we can go buy gold again. Is that because gold's gotten cheaper in dollar terms? Well, keep in mind that uh the dollar is really is a function of interest rates and it's a function of money flowing around the world and the terrorists have changed some of those money flows. Uh so it's easy to say the dollar is getting debased. It's going to zero. You know, all these stories that we keep hearing because of deficits and everything else. But at the end of the day, the dollar is a currency and just like your wallet, sometimes you have more and more and you don't need as much. Sometimes you have less and you need more. And it's flowing. You know, it's moving with those flows. And as we got to the crisis, people needed dollars, right? You need dollars to buy oil. You need dollars to buy military equipment. You need dollars, right? You can't buy that stuff in almost any other currency. So, the demand for dollars spiked up. But keep in mind, before Iran started, the dollar was showing signs of basing and starting to rise. We had warned about that a couple times. Be careful the dollar. Not we didn't you know we we were impression and saw Iran happening but we saw from a technical basis that it was starting to look better. So uh you know and the dollar impacts inflation for the rest of the world not in the US but for the rest of the world because they're using dollars to buy things. So in America when the dollar goes up or down we don't really care. Everything's still the same price. But for the rest of the world, if the dollar's going up, things get more expensive. U and when it's going down, it gets cheaper. So that impacts not just the demand and supply of gold and silver, but everything. So you know understanding the dollar and where it's trending is a very important macro tool to think about and it doesn't you know it also has an impact on corporate earning you know international cor corporations their earnings sales um trade deficits etc. >> Michael maybe to summarize the conversation here but if you were to find a million dollars under your your couch cushion tomorrow um how how would you invest that? And again, that's not investment advice. Everybody's different, but how would you allocate that money right now? >> So, right now, I'd be a little cautious, but I would go into a diversified portfolio. Now, here's where things get really tricky. It's easy to say you're conservative, so you want to buy value stocks. But, what's happened over the last six months, starting really like last November, is that value stocks have been in almost I'm not going to say bubble, but a mini bubble, right? We've seen staples and utilities just going to the moon while while like the big the Nvidias, the Microsofts have been getting killed. Um so I think the real value is actually in those te in some of those tech not all of them but some of those tech stocks that have really gotten beaten up. If you look at their price to forward earnings PEG ratios that are all kind of looking at the future not the past they are much cheaper than the traditional value stocks. So, I would lean towards those growth stocks. Um, you know, you definitely want a decent amount of exposure to the market, but you may not want to go all in right now. I also would have some exposure to bonds. I would be careful about about buying longerterm corporate bonds or or municipals because the the yield premium that they get or the credit spread is just very tight right now. So, you're not getting paid to take risk over there. Uh, and you know, I would probably be very weary of gold or silver, uh, purely because I think they're still elevated. Even though they've come down quite a bit, I think they're still divorced from their true fundamental um, backing and, you know, it could take a while. But again, if you're going to buy and hold it, I I think you're okay. If you're going to trade it, that's a very different story. >> Yeah. really difficult to predict what gold and silver are going to do quite honestly and I'm in the gold and silver camp. I come from that side. It's really difficult to predict. If I look at the charts, I'm not a chart technician. It feels like there's more >> downside than upside right now personally. That's just my personal opinion. So >> yeah, and I always I always think about trap longs. So a trap long is someone that bought it at a higher price fairly recently and they have a different mentality than other traders, right? They bought it at 100. It's now at 80. And all they're saying is, "Oh, I wish it could get back to 100 or even 95. I'd be thrilled to sell it at 93." Right? So, what happens is all those trap longs create resistance. Not to say we can't go to 120, but there's all this selling that occurs that I just want some of my money back or all of my money back. I It was a bad trade. I want out. And it just creates resistance. And, you know, we have that in the S&P 500, too. We're right now in a peri in a a big there's a large volume of trap longs between where we are now in record highs. So that'll the market will have to work through that. And gold and silver obviously have a bunch of trap longs. Oh, gold's going to 10,000. I'm buying here now. I'm down 20%. What are you going to do? >> Yeah. Well, I call them tourists, not trap longs. I call them tourists. >> Exactly. Right. >> Right. Absolutely. No, Michael, wonderful conversation. It was great to have you back on the program. really really appreciate your time. Uh where can we send our audience to follow more of your work? >> Uh realinvestmentadvice.com. I publish uh we publish a daily commentary. I put out an article once a week. Actually put one out this morning on Apple and their what they're doing with AI. Uh quite a few other blog articles by my partner Lance Roberts as well. So you can find all our work over there. Realinvestmentadvice.com. >> Fantastic. Awesome. Michael, really appreciate your time. Thanks so much for coming on. really insightful. We'll have to do this again soon. Can't wait to to have you back, Michael. And everybody else, thanks so much for tuning into Soore Financially. Tremendously appreciate you watching, hitting that like button, subscribe button. Also, leave a comment down below. How do you things are happening? Are you a tourist? No, of course I'm kidding. All our investors are long-term holders in gold and silver. Um, really appreciate your time and patience here. Thanks so much for tuning in and uh don't let emotions run your investments for you. Take care.
The Market Only Cares About Oil, Ignores Conflict! | Michael Lebowitz
Summary
Transcript
They say the fog of war. This is the fog of war. If people are spending more on gas, they're spending less on the movies, on sneakers, on clothes, on, you know, other things. And that stuff takes a little longer to trickle in. You need dollars to buy oil. You need dollars to buy military equipment. You need dollars, right? You can't buy that stuff in almost any other currency. Optimism has returned to the markets. This morning, as we're recording this on Wednesday, March, sorry, April 8th, here at around 8:00 a.m. Pacific time, indices are running. Gold, silver positive. Oil is down 15% roughly as we speak. But, uh, the markets seem to be exuberant. Um, earning season is upon us. Of course, we're getting first results are coming out. Delta reported this morning as well. Seems to be okay. outlook of course a bit uh uh dark and worsened but other than that like they seem to be happy with the spending of the consumers. So we'll have to do a deeper dive into the US economy, the US markets, what is really happening on the ground. I've invited a fantastic guest back onto the program. His name is Michael Liowitz. He's a portfolio manager over at Real Investment Advisors. He's got over 35 years of experience. Really looking forward to tapping into his brain today as we're seeing the markets open just about an hour and a half ago. Uh all in the green. So I'm really curious what he makes of all of this. But before I switch over to my guest, hit that like and subscribe button. Really helps out uh the algorithm of course and we just appreciate it as well. Now Michael, it is great to welcome you back on the program. Thank you so much for joining us again. >> Sure. It's great to be back. Love being here. >> Yeah, it's been a while unfortunately Michael. So I really we I want to start with you at the top real quick. Just get a 30,000 foot view of how do you assess the economy in the financial markets right now? >> That that's a that's a tough question. It's kind of a a two There's kind of two parts to that question. Where were we before Iran? Where are we kind of during Iran? And where do we end up on the other side of Iran? And it's um you know, Iran is you know, they say the fog of war. This is the fog of war. Like it's hard to know. You know, the news this morning is certainly better than it's been. Uh but that doesn't mean that this is over and we're going back to normal yet either. Um these has been very hostile and it wouldn't surprise me if it all reversed or if this was truly the beginning of some sort of much larger peace arrangement which would be great. Um so the way we're thinking about it is first of all where were we before the conflict started? Um the market was already starting to slide a little from record highs down a few percent not a big deal in part because the economy was gently weakening. The labor numbers have been meh you know not good not bad very little activity in the labor markets u and we've had some of this private credit and other you know kind of lower credit issues arising. So the market was technically you know starting to show some negative signs. Uh we had actually been reducing our exposure back in earlier in a year. Uh so when we got to Iran we we were not fully exposed and we took a little bit more off the table for Iran. Uh Iran comes price of oil more or less doubles. Uh, and you know, first of all, for the listeners, and this it's kind of sad to say, but the market doesn't care about the war. It cares about oil prices. And if you want any evidence of that, go back and look at Ukraine and Russia. Oil spiked on the Russian invasion. Oil came back down and then the market could care less about about that event. The market just rallied straight through it. and Iran is a very similar thing because it's very uh oil price sensitive to conflict. If the price of oil can somehow get down into the even the 80s and just stabilize, get that volatility out, the market will be looking beyond Iran uh towards more traditional the economy, corporate earnings, you know, whatever is kind of next on the horizon. So you know what we have to think about is what was the trajectory, the economic trajectory, the market trajectory before Iran. How does Iran change that? And how does it that trajectory come out after this foggy period? And uh you know sentiment will probably be lower because oil prices even if they come down to 80 are certainly higher than where they were. uh that will weigh on the lower end middle class consumers. Um so but net net uh you know I I think there's still more to see with what happens with Iran and oil prices before understanding where we are on the back end of this whole conflict. U but but you know I think what's important is to understand where we were draw a line when Iran started. understand the immediate market is just all about Iran. It's going to trade headline to headline. And then once that starts to slow down and calm down and we you get some sort of peace or or much bigger war, then we can start thinking about how that trend uh looks afterwards. >> Now, some really good points in there. Let me let me follow up on a few. Of course, oil I would consider maybe a leading indicator for economic activity perhaps and maybe earnings. You touched on that as well. While inflation, unemployment, they're all lagging indicators. Of course, they're being directly in affected by that leading indicator. Um, but it's used for decision- making as well, right? And that affects a lot of things, >> right? Um, and we need to maybe dissect that a little bit. You were talking about the economic indicators um slowing down, showing weakness. You talked about the labor market. Maybe we'll start there on the labor market. Um, how do you see that development? How do you see that being maybe a focus of concern perhaps for the Fed and maybe other institutions as well? >> Well, I think the Fed has is in a weird position right now. The labor market is basically we're not adding or subtracting jobs. The the monthly numbers are whipping back and forth. We were up whatund I forgot the number 180 something last month. We're down 135 or so the month before. net net we're basically not growing jobs even though the population of available workers is increasing at somewhere between 100 and 200,000 workers a uh month. So the situation is not great. The unemployment rate isn't necessarily rising. It's ticked up a little but it's not necessarily rising because the participation rate is coming down. So the the people that are looking for jobs that number of people has declined. Uh we know from ADP, we know from Jolts, we know from Indeed, we know from other labor uh market data sources that the the the labor market is just kind of stale. It's kind of like the real estate market. Not many buys and sells. It's not bad, it's not good. It's just kind of doing nothing. Uh so on the margin, I think the Fed is concerned about that. Uh at the same time they've been worried for a while, not worried but cautious because inflation has just been very slow to tick down to 2% to their target and they were starting to make progress. Um and then Iran happened. So we're going to get CPI data I think it's Friday or Thursday. Friday. Um and PC actually PCE on Thursday and CPI on Friday. And what it's going to show us is that CPI is up uh 08.9 1% for the month. But a huge chunk of that is going to be gas and energy uh without or what they call core CPI is going to be up 2.3 maybe point4 which is kind of more in line with that 3%ish inflation. Um, so I I think the Fed is potentially sitting on a mistake that they're making that if they're they're they're going to keep rates steady, possibly increase them because of this inflation that is really a supply shock that will heal itself that they have no control over and not focus enough on the labor market. Um so so the risk there is that they keep rates higher than where they should be because inflation especially the headline inflation not the core inflation is higher um because of not just oil but fertilizers and you know transportation and you know it feeds many other products plastics. Um but at the same time the economy by by necessity if people are spending more on gas they're spending less on the movies on sneakers on clothes on you know other things and that stuff takes a little longer to trickle in those price drop declines or stable you know not not increases. So, so I I think there's this balancing act going on and I'm a little concerned that the Fed is going to be a little late that rates are going to be too high here and that will on top of higher gas prices and energy prices weigh even more in the economy. But, you know, again, we'll see when we get to the other side of the Iranian conflict, uh, what the economy looks like. Again, we get corporate earnings starting later this week for the next few weeks. I I what I'm really curious is their guidance. Nike had horrendous guidance uh was that last week, two weeks ago, good earnings, good sales, good margins, and then they said sales were going to decline uh ba basically about 4% below what they had originally expected in part due to China, but in part due to the the negative sentiment due to higher oil prices in Iran. So I I think when we look at corporate earnings, people say that's nice that they had good or bad earnings and sales and this and that, but what what are they seeing going forward? Especially the consumerf facing companies, the Walmarts, the Costos, the the re, you know, the apparel type companies, uh transportation, those type of companies. I think their their forward guidance will be incredibly important. >> Yeah, I think Delta I haven't taken a closer look. I was just listening to to Bloomberg. I think Delta reported this morning or at least gave a press put out a press release saying, "Well, we're quite happy with sales, but we can see weakening of course, but the consumer is still happy to spend uh because prices have increased." And they just added more bag fees and all of that as well to cover those extra fuel costs, right? Um but maybe summarize what you just said. >> They've added a lot to they've added a lot to to we just booked a flight. it's, you know, it's probably 150 bucks more than it was. And that, you know, fortunately, we could just pay it. But I think there's a lot of people that'll say, "Okay, we we have to go. We'll pay it, but we'll stay in a cheaper hotel or and we won't go out to dinner for the next three weeks or and no movies." So, so there's going to be an offset somewhere. >> No, absolutely. Maybe just to summarize what you just mentioned as well. So the Fed is still caught between a rock and a hard place because they have a dual mandate and it's really difficult to be fair to equally fair to both, right? Inflation or the economy. And it seems like like based on what you've just said, Michael, maybe they should ignore the inflation part because it's a one-time shock. And I would add maybe that's depending on the duration risk of that, right? Absolutely. Um versus the economy, right? And maybe maybe just to follow up on that, Michael, how how what would you have done in the March meeting here? Cuz it seemed like Jerome Paul said, "I don't know. I have no idea what we're going to do next." Um, let's just wait and see, right? Would you have done the same? >> Um, I probably would have done the same, but I would have been a little more clear that we could be doing some we could be doing something at the next meeting. You know, the March meeting was difficult. We had just started the war. Oil was not up to 100. you know, it was it had only been high for a few weeks at a couple weeks at that point. Um, so that meeting fell at a really awkward period. Uh, I would not have been committal to the future at all. Um, and I would have kind of reiterated some of the things that I was saying before that he was saying before that, you know, we probably will lower rates in time. this Iran conflict may cause us to pause and see what the impact is, but there are reasons, you know, he and he said it, rates are too restrictive. He has said that almost every meeting there, if they were restrictive before I ran, they're even more restrictive now with higher oil prices and, you know, some some more credit problems that we're seeing in private credit and other areas. So, uh, you know, I I would probably would have been a little more dovish than he w than the whole committee was. Um, but you know, we'll see again, uh, when they meet, I believe at the end of this month, later this month. >> Um, so oil oil oil price aside, um, you you've been talking about lot increased volatility in 2026 in general, midterm elections, AI spending, unwind of the yen, carry trade. You gave a number of reasons. Um, what else is the center of your attention right now, Michael? Um, if we take the geopolitics out of it, what should we be focused on? Like you said, preIran that those were the themes. Are they still valid? Are we should we still be focused on that as well? >> I I think so. But what where I'm really focused is how does the war, you know, oil prices have been high for long enough. This isn't a oneweek shock. This has been going on now for five, six weeks. And look, even if there is a a a real durable peace agreement, oil's not dropping a 60, right? There was critical infrastructure taken out. Uh there's going to be a warp premium that that they price into the market. So I I think in a best case scenario for the next few weeks, month, two months, probably the best we can hope for is low7s and you know, the sky's is the limit on the other side if things start acting up again. And what what I'm really curious to see is how does that impact consumer 70% of the economy? How does that impact people's spending habits? How does it impact corporate behaviors? And the the hard part is that e government's economic data is delayed, right? We we're getting March CPI and it's April 8th today, right? best case scenario their their information is delayed by a month and change. Some of it's delayed two to three months. Um so it just takes time to really figure out we get you know there are private sector things like ADP the surveys um but those are very reactive and surveys are nice but they don't really tell us what's going on. It just tells us incrementally how people are thinking. Are prices higher than they were last month? Well, the answer can be yes, and that could be by a penny or that could be by a hundred dollars. There's no context for those changes. So, surveys are nice, but they're not the end- all beall. And uh you know, so so I feel like we're in a wait and see period to see what the impact was on the economy. Um and I look, I have to think it was negative. The question is how much and uh will it further impede some of these liquidity issues that were starting to pop up, private credit, private equity, etc. >> Now, um you you you mentioned like midterm elections, tariffs as well. I just want to maybe come come back to those topics because they they've been swept under a rug, but if we lift the rug, they're still there, right? The issues. um USChina relationship is strained because of the Iran situation now maybe even more so than before meetings have been cancelled so there's no dialogue as far as we know um going on between the two parties um how do you see that part of the equation sort of now develop um like the the topics that have been swept under the rug that were really important before this all broke out >> right I I think they're all still important and I think don't let the war take your mind off what was going on before the war that's kind of what I'm saying is understand what was happening before. We're now in this fog bank and we can't see anything. But when we come out on the other side the road on the other side of the fog bank, expect those same things to reappear and they could reappear quickly. um and you know I think it's important you know a lot of those were negative but there is a midterm election here um in November and President Trump will do whatever he can to get the stock market up which helps sentiment and to get oil prices down and to try to tackle that affordability issue u which means lower inflation uh how he does it I don't No. Uh will he do it? Probably not massively, but he'll he'll try. So that is a tailwind for the markets potentially for the economy. Um that you also have to factor into kind of everything else that's going on. >> You've been fairly vocal in in the past on the bond market and that might be you know our strongest ally in in this uh you know period of crisis, let's call it that. Um what what do you make of the recent moves in in bonds? Um bond yields have come down actually this morning. Uh maybe a bit surprising because I would have put them maybe in the safe haven category while this was all going on because apparently the US debt situation doesn't play a role anymore. Um but uh but now we're at 4 what is it 27% on the 10-year um in terms of yield. Just what do you make of the bond market these days? >> So so it's important to realize that bonds had got a little overbought on a short-term basis before the war. So, they were due to to rise in yield a little bit, not up to where they got to or where they are. Uh, but they're reacting to the inflationary aspect of higher oil prices. And, you know, some of that is fair. The problem with it is that this is a temporary impact. Um, and it will go away. The question is when. And you know, if you're looking at a three-month bond or a six-month bond, then then yes, that inflation rate over the next few months really matters. But if you're thinking about a 10-year bond, five-year bond, 30-year bond, that impact, you know, the the slightly higher inflation um is pretty minimal. So, uh I'm still in a bullish camp. Uh I think the economy will slow. I think rates are still restrictive. Um, and I'm kind of bolstered by the fact that I think the Fed is going to sit on our hands for a while, which will further weigh a little bit on economic growth. And because the front end of the yield curve, the very short maturities are tied to Fed funds to some degree, that gives the room room for the back end, fives, tens, 30s to fall a little bit more in yield. So again, I don't know what's going to happen in Iran, how that that will impact the price of oil. But assuming that we've seen the highs in oil and that oil continues to at a minimum stay where it is or andor fall further, I think the bond market should start coming back towards those yields, you know, at a minimum of where we were before the conflict started. O >> OECD put US inflation roughly at 4.2% for the year. I think that was their outlook if I'm not mistaken. Um 10-year yield is at 4.2% 4.27. Let's not be too uh too too pedantic or semantic here or whatever it is. Um so real yields are pretty much zero right now. Like how how attractive is that in general? >> In general that's that's not attractive, but CPI is closer to 3%. Everyone's going to look at it core. They're going to take out food and energy and then you're you know you're back below three. So, you know, we're kind of call it call it a percent to a percent and a half positive real rates, which is good, but historically, especially since the financial crisis, that's outstanding. Um, so, you know, I do think that we get inflation heading back towards two and I do think that yields, I mean, yields are extremely correlated with inflation and inflation expectations. So, I think the answer to the, you know, if you know, people are watching and they're saying, "I don't like what Mike says. How do, you know, how should I uh evaluate the bond market?" It's all about it's all about inflation. Um, it's it's actual inflation, it's inflation expectations, inflation expectations into surveys, and you can break it down into what the market is actually pricing in, looking at tips, looking at forward break evens. And you kind of take those three parcels of data uh which actually the Cleveland Fed puts out. It's their inflation uh inflation expectations index and that index has an extremely high correlation with bond yields. So so kind of make your assessment of where you think inflation will be and there's your answer to bond yields. Obviously there's other things. It's not just inflation. There's sentiment like you said. There's the budget deficits. There's other things that impact the sentiment. It's not always going to trade at a zero real yield. But understanding how much bullish or bearish sentiment is priced into it versus inflation is kind of the key to trading it. So, but but first and foremost, understand inflation and and have a forecast. >> Inflation is also a good segue to gold. Um cuz I'm I'm a bit puzzled how gold is trading and behaving these days. Um it seems to be counterintuitive. Um peace breaks out, gold goes higher, uh war erupts, gold goes lower. I think that's all a function of the gold price and inflation expectations. But maybe Michael, you can make a bit more sense of it for us. Maybe summarize like what what are your thoughts on gold and how it is behaving right now. >> So first of all, it's important to note that prior to a couple years ago, gold had an extremely correlation with real yields. Uh so when real yields were above zero, gold tended to trade poorly. When they were below zero, they traded well. And that correlation was great up until about a year and a half ago and then it just completely broke down because we've been in a period of high real yields. The Fed has been hawkish and that should be bad for gold and it hasn't been. So, I I think even before I ran, there was um if you go back to 2020, we've been through a series of what I've been calling rolling bubbles, meme stocks, uh NFTTS, crypto, um I'm drawing a blank, but there's uh the spaxs, >> cannabis, >> cannabis. I mean, there there's one after another, some big, some small. Um even private credit. Um, and I think gold and silver got caught up into like this bubble type thing and it was backed by the narrative that deficits were at a at a, you know, deficits, money supply, you know, kind of the typical fundamental backing. Um, but I think at the end of the day, their prices started rising, people jumped in, uh, just like all those other bubbles. And I I think they just got way ahead of themselves fundamental wise. Then you get the the war and what you really learn is that people need dollars, not gold when when a crisis hits. So they have to sell gold. Um the dollar really started rising, right? It was the dollar index was down to 94 95. It got over over a buck. Um so that made gold more expensive for foreigners as well. Uh so when you start factoring the liquidity function and the the fact that there were not a lot of uh long-term buy and hold gold investors but shortterm traders that could care less about gold as an insurance or gold as its kind of more traditional use case. uh that's it just set it ripe for volatility both up and down and I think kind of Iran kind of set that off even though some of that was happening before. Um so you know I think it divorced from its fundamentals uh being real yields and it will get back to that but you know the problem is right now I think real yields are still high which doesn't bode well for gold. If the Fed starts cutting, Fed starts doing QE uh real yields fall, that would be a better environment for gold in my opinion. But, you know, and silver, but they've gone a long way. And there's a lot of trapped longs that are not buy and hold investors. So, that's what you have to be careful of. But again, if you're gonna if you're going to buy and hold it for 10, 20, 30 years, pass it on to your children, >> you know, just buy and hold and and don't look at the price. >> Yeah. And know exactly like it really depends on >> I don't look at my insurance price. I don't know what I'm paying for my life insurance, but it's there. >> Yeah. No, exactly. That's the same thing, right? So, it really depends on your investment style and what you plan to do with it. But you mentioned something interesting there uh Michael just to follow up and it allows me to throw in another yet another asset class into the discussion here is the US dollar. You talked about the correlation of gold and dollar seems to be back to normal because it was disconnected for a while. Um cuz now gold is up today, the dollar is down. Is that really just a function of okay, we need less dollars or at least theoretically need less dollars because the war is over and now we can go buy gold again. Is that because gold's gotten cheaper in dollar terms? Well, keep in mind that uh the dollar is really is a function of interest rates and it's a function of money flowing around the world and the terrorists have changed some of those money flows. Uh so it's easy to say the dollar is getting debased. It's going to zero. You know, all these stories that we keep hearing because of deficits and everything else. But at the end of the day, the dollar is a currency and just like your wallet, sometimes you have more and more and you don't need as much. Sometimes you have less and you need more. And it's flowing. You know, it's moving with those flows. And as we got to the crisis, people needed dollars, right? You need dollars to buy oil. You need dollars to buy military equipment. You need dollars, right? You can't buy that stuff in almost any other currency. So, the demand for dollars spiked up. But keep in mind, before Iran started, the dollar was showing signs of basing and starting to rise. We had warned about that a couple times. Be careful the dollar. Not we didn't you know we we were impression and saw Iran happening but we saw from a technical basis that it was starting to look better. So uh you know and the dollar impacts inflation for the rest of the world not in the US but for the rest of the world because they're using dollars to buy things. So in America when the dollar goes up or down we don't really care. Everything's still the same price. But for the rest of the world, if the dollar's going up, things get more expensive. U and when it's going down, it gets cheaper. So that impacts not just the demand and supply of gold and silver, but everything. So you know understanding the dollar and where it's trending is a very important macro tool to think about and it doesn't you know it also has an impact on corporate earning you know international cor corporations their earnings sales um trade deficits etc. >> Michael maybe to summarize the conversation here but if you were to find a million dollars under your your couch cushion tomorrow um how how would you invest that? And again, that's not investment advice. Everybody's different, but how would you allocate that money right now? >> So, right now, I'd be a little cautious, but I would go into a diversified portfolio. Now, here's where things get really tricky. It's easy to say you're conservative, so you want to buy value stocks. But, what's happened over the last six months, starting really like last November, is that value stocks have been in almost I'm not going to say bubble, but a mini bubble, right? We've seen staples and utilities just going to the moon while while like the big the Nvidias, the Microsofts have been getting killed. Um so I think the real value is actually in those te in some of those tech not all of them but some of those tech stocks that have really gotten beaten up. If you look at their price to forward earnings PEG ratios that are all kind of looking at the future not the past they are much cheaper than the traditional value stocks. So, I would lean towards those growth stocks. Um, you know, you definitely want a decent amount of exposure to the market, but you may not want to go all in right now. I also would have some exposure to bonds. I would be careful about about buying longerterm corporate bonds or or municipals because the the yield premium that they get or the credit spread is just very tight right now. So, you're not getting paid to take risk over there. Uh, and you know, I would probably be very weary of gold or silver, uh, purely because I think they're still elevated. Even though they've come down quite a bit, I think they're still divorced from their true fundamental um, backing and, you know, it could take a while. But again, if you're going to buy and hold it, I I think you're okay. If you're going to trade it, that's a very different story. >> Yeah. really difficult to predict what gold and silver are going to do quite honestly and I'm in the gold and silver camp. I come from that side. It's really difficult to predict. If I look at the charts, I'm not a chart technician. It feels like there's more >> downside than upside right now personally. That's just my personal opinion. So >> yeah, and I always I always think about trap longs. So a trap long is someone that bought it at a higher price fairly recently and they have a different mentality than other traders, right? They bought it at 100. It's now at 80. And all they're saying is, "Oh, I wish it could get back to 100 or even 95. I'd be thrilled to sell it at 93." Right? So, what happens is all those trap longs create resistance. Not to say we can't go to 120, but there's all this selling that occurs that I just want some of my money back or all of my money back. I It was a bad trade. I want out. And it just creates resistance. And, you know, we have that in the S&P 500, too. We're right now in a peri in a a big there's a large volume of trap longs between where we are now in record highs. So that'll the market will have to work through that. And gold and silver obviously have a bunch of trap longs. Oh, gold's going to 10,000. I'm buying here now. I'm down 20%. What are you going to do? >> Yeah. Well, I call them tourists, not trap longs. I call them tourists. >> Exactly. Right. >> Right. Absolutely. No, Michael, wonderful conversation. It was great to have you back on the program. really really appreciate your time. Uh where can we send our audience to follow more of your work? >> Uh realinvestmentadvice.com. I publish uh we publish a daily commentary. I put out an article once a week. Actually put one out this morning on Apple and their what they're doing with AI. Uh quite a few other blog articles by my partner Lance Roberts as well. So you can find all our work over there. Realinvestmentadvice.com. >> Fantastic. Awesome. Michael, really appreciate your time. Thanks so much for coming on. really insightful. We'll have to do this again soon. Can't wait to to have you back, Michael. And everybody else, thanks so much for tuning into Soore Financially. Tremendously appreciate you watching, hitting that like button, subscribe button. Also, leave a comment down below. How do you things are happening? Are you a tourist? No, of course I'm kidding. All our investors are long-term holders in gold and silver. Um, really appreciate your time and patience here. Thanks so much for tuning in and uh don't let emotions run your investments for you. Take care.