'This Market Reminds Me Of 1999': The ‘Tipping Point’ Is Here For Stocks, Economy | Ted Oakley
Summary
Market Outlook: The current market environment is reminiscent of 1999, with a focus on the potential tipping point for stocks and the economy due to interest rate changes and inflation concerns.
Federal Reserve Actions: The Fed's recent 25 basis point rate cut is seen as a risk management move, with ongoing debates about its effectiveness given persistent inflation and political pressures.
Labor Market Dynamics: Despite positive jobless claims data, there are concerns about the labor market's health, with employers holding onto workers amid a challenging economic environment.
Housing Market Challenges: High home prices, rather than interest rates, are identified as the main issue affecting the housing market, with potential shifts towards the rental market if prices do not adjust.
Inflation and Consumer Impact: Companies are beginning to pass tariff-related costs onto consumers, which could affect discretionary spending and overall economic activity.
Investment Strategy: Investors are advised to focus on undervalued assets, maintain a balanced portfolio, and avoid chasing overvalued stocks, particularly in the tech sector.
Gold and Bonds: Gold is recommended as a hedge against economic uncertainty, while short-term bonds are preferred over long-term bonds due to inflation risks.
Advice for Young Investors: Young investors are encouraged to maintain portfolio balance, conduct thorough research, and avoid over-concentration in any single asset class.
Transcript
That's the tipping point. This market reminds me a lot of 1999. You'd have to have a situation where that would some form or another would get the long rates down to try to to get activity going at the long end. What does happen if this so-called problem comes into fruition? What happens to the interest rate? What happens to inflation? What happens to asset prices? The FOMC cut interest rates by 25 basis points this week. markets anticipated this and uh what's remarkable to many observers is the fact that inflation is still running hotter 2.9% headline CPI is the latest CPI reading from the last month up from 2.7 the previous month and so it's obvious now to many market participants that the Fed is now more focused on the labor market than on their inflation mandate joining us today to talk about markets the labor market and the economy is Ted Oakley founder of Oxbow Advisors welcome back to the show Ted always good to see Good to see you, David. Thanks. Let's start by talking about the labor market because like I mentioned in the introduction, it probably is the Fed's focus right now or at least it appears to be. Maybe they cut by political pressure. Who knows? But I'll let you answer that. This morning, we got jobless claims. I'll just show you um the report here. Um this is an article from Bloomberg. Uh, initial applications for jobless benefits in the US dropped by the most in nearly four years, reversing an unusually large jump in the prior week and consistent with low levels of layoffs in the economy. Initial claims decreased by 33,000 to 231,000 in the week ended September 13th, according to the Labor Department. That's in line with levels seen throughout this year and not far off the preandemic trend. The median forecast and Bloomberg survey of economists called for 240,000 applications. So what do you make of the fact that uh we got these positive numbers, well relatively positive numbers which may signal the fact that uh companies are still holding on to workers to spiked previously anticipated weaker uh labor market um environments. Well, you know, David, if you look at it, uh, if think about this, if jobs available are going down, job openings, and unemployment's going up, that just basically means you have more people vying for fewer jobs effectively, what that means. And that's that's first time that crossover has happened in a long time, but that's where you are right now. And so I think I think employers probably would would do that. I mean, uh, every employer I talked to basically says, you know, I'll keep my good people and, you know, if it gets tougher and tougher in here, you know, we'll start at the bottom. The people are least effective and they're out of here. And and that's that's generally what we're seeing. You have to remember now too, one of the big employers, one of the big things going on in the country is housing, which is going nowhere. All right? And it's actually getting worse. So, there's a lot of factors going into that, but uh it looks like it's certainly a negative to me, but and the Fed just decided that's the way they want to go. I doubt if they're right. They they usually are not right. And so, uh we'll just have to see. housing has been going nowhere for quite some time. I I've seen reports heard from people that uh it's actually getting worse. So, uh you're what you're saying is corroborated by other sources as well. Ted, I wonder why though uh interest rates haven't moved and mortgage rates haven't really moved. Uh we may have downward pressure on mortgage rates now. So, why the weakness in the housing market? Well, it's price. If you look at the last four years, David, it's price. It's not the interest rate. But you look at it, if you keep a high price and they keep moving the prices up, you know, they were spoiled for many years, uh, where builders could come in and just raise the price, raise the price. Rates were really low, so it didn't make any difference actually. But now you get into a normal interest rate. This is not an abnormal time. If you go back over 60 years or 70 years and now you got a high price and uh you know and you look at high prices then you got insurance then you got taxes on that high price and if you look at a 30-year mortgage today it's only about a quarter less than it was a year ago. Even today I'm talking about today. So I I think people get confused on this. you could you'd have to have rates come a lot lower to effectively move anything on interest rates because the price is out of line. They're too expensive. Okay. So, one of two things is going to h well, one of a few things might be happening uh in the foreseeable future that either prices will come down to adjust to equilibrium, whatever that equilibrium would have to be. Uh real wages would dramatically rise to keep up with rising home prices. uh or um a lot of people are going to shift to the rental market and that sector is going to boom uh while the um first-time homeowner market is going to slow. What do you think is most likely? Well, I I've got a graph of of average hourly earnings uh just below the the management level. And that graph always compares to the price of housing. Yes. And so the last time it was really out of line was about 06. Okay. But now it's twice that out of line. In other words, it's so far out of line that you would have to have some of both. You would have to have your wages go up and your prices come down to bring that back business back into equilibrium because you can only make, you know, I've decided to make smaller houses, but I mean, you get down to 1,200 ft or so. Um, I mean, that's about all you're going to get here. You can't, you know, what are you going to do? throw up a 600T house and and sell it for to get in just to say I have a house. Well, no, cuz I can go rent something much nicer. So, that business is in a quandry, I think. Uh now, you'll always have the buyers that buy, you know, the upper level, you know, upper mid upper level range where they have the money. So, that that doesn't necessarily fit, but just in general, I'm talking about that's what we see out there. But that has an impact. It has an impact on employment, too. that industry touches a lot of people. Uh so you just have to see how it works out. Yeah. And if home prices do correct, that could have a real effect on consumer spending. It's been tied to uh well the price of your home and therefore your net wealth has been has been tied to discretionary spending even if your actual cash flow doesn't change according to studies. Uh so we'll monitor that. Going back to the Fed and the lab labor market, one interesting question that was brought up to Jerome Pow at the F at the Fed press conference by a reporter was um whether or not the tariffs have been eaten quote unquote eaten by companies on the labor side because apparently we haven't seen dramatic increases on inflation for all products across all sectors. That was according to this reporter. Uh what do you think? Do you think company margins will start to reflect tariffs? I think eventually pretty soon they will. I've talked to a number of company private now that that basically buy they're wholesalers but they buy product to bring into the wholesale area and what's been happening so far is those two those two have sort of split that a little bit so that on the retail side they didn't get hit as hard but they can only go so far with that and after a while they have to say you know what now we've got to pass some on I think they're starting to pass it on and um you know, you'll you'll have to see how much they pass on, but but it it we will get there. And I and again, I I think those that's going to show up in some of the numbers. All right, I'd like to play for you a clip of POW answering the question on why uh the decision was made. So, this is his justification. Take a listen. Uh Colobby Smith for the New York Times. Um, should we be viewing today's cut as the committee taking out some insurance against the possibility that the labor market is at risk of weakening or is it the committee's view that the dynamics of a downturn are already in place? I guess I'm just, you know, trying to square the shift in the rate forecast in the SEP uh towards more cuts than just um 3 months ago with the fact that the forecast for unemployment didn't change. Yeah, I think you could think of this in a way as a riskmanagement cut because if you look at the SEP actually um the projections for growth this year and next actually ticked up just a little bit and inflation and unemployment didn't really move much. So what what's different now? What's different now is that you see a very different picture of the risks to the labor market. You've seen, you know, we were looking at 150,000 jobs a month at the time of the last meeting and now we see the revisions and we see the new numbers. And I I didn't I don't want to put too much emphasis on on payroll job creation, but it's just one of the things that suggests that the labor market is really cooling off. And that that tells you that it's time to to take that into account in our, you know, in our policy. Okay, Ted, I like to get you to respond to that, but my my initial thought is this. Jerome Pal has been talking about cracking labor market signs for months. I mean he didn't use those exact words but he was cautious in the labor market ever since the sprig I remember and uh back then inflation was lower and so unless the labor market according to you and other analysts are is significantly worse now than earlier in this year I'm wondering why they made the decision to cut rates now given that inflation is much higher. Well, I know they're not going to admit this, but you have to think that getting together like that being they get beaten on every day, uh, you know, from the White House to lower rates and, uh, so they they do it. But, you know, again, the Federal Reserve the last 30 years has made it it's it's just a just nothing more than a whole 30 years of errors. And this is probably another era because you know uh you look out 12 15 months from now which I think inflation will be back up again and and then there then they're really see then they're caught between the rock and hard place and they there are certain things they can't control. Uh but I I I think a lot of this was uh you know they've been jawboned into doing it. I'm just personal opinion now. I don't have any I'm I have no no contact or anything, but if you just watch what's happening, I think that's part of what what happened. And so this oh, you know, we'll we'll do a little bit. But in order for if you're really going into recession and you got a pro, a real true problem with employment, well, a quarter of a point is not going to do you any good. I mean, you need you need, you know, 150, 200 basis points. But again, then you come back to inflation, you see. So that's why you've got a group here that probably doesn't know what they're doing, but they never have. So there's not a lot of difference in that. Gold is now above $3,600 an ounce, an unprecedented level. Now, you've heard me talk a lot about how gold and silver are smart ways to grow your savings over time. But what if I told you you can now do more than just hold gold? What if you could also generate income from it? Well, that's exactly what today's sponsor, Monetary Metals, is doing. They're redefining how people invest in gold and silver. Instead of paying to store your metal or letting it sit idle, now you can get paid to own it. Right now on their marketplace, you can earn up to 4% yield on gold paid in gold. That means your savings grow in actual ounces, not dollars, on top of any price appreciation. Yield is deposited monthly in physical gold, which you can redeem and take delivery of. Thousands of investors are already generating a consistent yield in silver and gold. So, it's about time you look into this as well. Go to monetary-metals/lin link down below or scan the QR code here to learn more. Well, you did mention in your notes uh said to me offline that uh moving from 4.5 to 4.25, basically a 25 basis point cut isn't going to do much for borrowing. So what what what needs to happen to the Fed funds rate for uh more stimulus on the borrowing front? You mentioned 150 basis points. Well, I think you'd have to go you look at right now prime is 7 and a quarter instead of seven and a half. And in order to in order to get people to take a lot of money, you got to get it where it's cheap enough to to borrow. To me, it's at a point where they can't get there because you would have to have, you know, you're gonna have to have a prime that's that's the 300 basis points lower it is now. And you're going to have to have a situation where that would some form or another would get the long rates down to try to to get activity going at the long end. That's another problem though because people see that inflation moniker out there and they're like, "Hey, you know what? I don't I don't know what's going on. I know what's going on the short end, but on the long end, I'm not certain I'm willing to loan that money, you know, like that. But if you go in a recession, you know, they'll they'll they'll do the same things they've always done. They'll they'll try to push it down. But right now, you you would have to have a number that gets it down to where you could do business borrowing. I mean at a to make businesses really jump out in my opinion having you know own part of a bank and everything you got you have to get it down to where they say well you know if I I could do that at 4% or four and a quarter maybe four and a half I can make those numbers work and so I'll go ahead and build that building or buy that piece of equipment u that may not be right that's just personal opinion but that's the way I would see it right on the topic of Fed independence let me just show you this article I want just I want to get reaction to this. This is from um a Goldman report. Gold could rally to almost $5,000 an ounce if the Federal Reserve's independence were damaged. An investor shifted just a small portion of holdings from treasuries into bullion. A scenario where Fed independence is damaged would likely lead to higher inflation, lower stock, and longdated bond prices, and an erosion of the dollar's reserve currency status. Analysts at Dul Goldman said in contrast, gold is a store of value that doesn't rely on institutional trust. That's a pretty big prediction from a big bank. Uh but the underlying assumption is the erosion of Fed independence. Can you comment on that? Well, if you look back in the 70s uh where Burns, Arthur Burns was, you know, he was succumbing to some of that pressure. So they would go up and down, up and down. But then every time inflation would be higher the next goround, you know, a couple years later, they'd have to go back in and, you know, they had to win, you know, with you with the win buttons and whip inflation now and all that. But but uh when you get in the situation where you stack an independent board with people that are just going to do, for example, what the White House wants. And let me give you a real good example. Vulker. Reagan did not agree with Vulker keeping the rates high. That's what broke inflation, but Vulker bucked the system and said, "No, we're not doing that. We're going to keep the rates high." And that worked in the long run. But if you've got a whole group of people now that just say, "Uh, we're going to we're going to do sort of what this particular party wants that's inside regards to the party, then I think you got a real then you've got a real problem." What does happen if this so-called problem comes into fruition? What happens to the interest rate? What happens to inflation? What happens to asset prices? Well, your rates would come down a lot. You know, they would keep on bringing them down. You would juice everything again. You know, asset prices would even become more extreme. But the flip side of that is inflation would take off. you wouldn't see it immediately the first month, but then you see inflation just like you did, you know, a few years ago, you know, remember we hit that 9% level. Then all of a sudden, here it comes and u and in inflation is a is a killer for middle income and lower incomes. I mean, that that's the one that buries them. And then all of a sudden, see, then that throws the whole economy out of line. But then they'll learn a real hard lesson, you know. But I that's what happens if you allow that to go on. Do we have the conditions today in place for inflation to return to 9.1% the previous high a couple years ago post pandemic? Well, not sustainable probably, you know, year to year maybe, but yeah, at points in time, sure, you could get there and you might back off. Um, but I think in generally inflation is going to be sustainable though. between three and four. That's why we don't own a lot a lot of long-term bonds. They actually might work right in here right now for a little while. But we think short-term phenomenon. Yeah. You own short-term bonds, Ted? Not long-term. Mostly less than 60 months. Okay. Uh I'm going to come back to the bond market in just a bit. Just finishing off in the economy. So POW described the current jobs market as low firing and low hiring. He noted young people and minorities are struggling to find work. Generally speaking, Ted, what needs to happen to stimulate the jobs market? What needs to happen to incentivize businesses and employers to start expanding again such that they'll need to hire more people? Us assuming, of course, people aren't quitting on mass because the labor market is just very strong. Well, we have a legislature in DC that doesn't really understand all those things. But if they did the right thing, what they would do is something like an investment tax credit. So you would say a co to an employer, I tell you what, if you will hire this type of person at this level of income, in other words, one that's a decent level. Okay, we're going to give you an investment tax credit for that for that. And that person's that then you're going to hire somebody. Hey, I need somebody, but now I can hire somebody and get a tax credit. You you have to use tools like that to really get it going. And sometimes you can get it going. I mean, you you'll go through periods where no matter what you do, you know, you're in a recession and you just have to keep on trying to work through it. What about labor is a supply side? What about the demand side? Based on research from your firm or research that you've seen or even anecdotal evidence, do you have any comments on where consumer demand is sitting at right now? In other words, even if the government were to provide this incentive tax credit like you s suggested, would that matter if let's say customers are walking through the front door of the shop? You're right. It might not. Uh yeah, I'm not certain that would that would happen because what's happening right now is is that you got two pieces of the economy and the bottom say the bottom 65 or 70% now, they're just they're just barely getting by. So this inflation thing which is still out there by the way is really affecting them and and so from that employment standpoint that's the fact but if you don't have customers coming through the front door you're right you got a problem and I think to a degree a lot of the consumer companies honestly I think they've been living off the stock market because people had a lot of value there a lot of far not value but they've had a lot of uh liquidity in that it's gone up they feel good they spend more of that money. Um, that's probably one thing that would affect it as well. But I think consumers, I think, in general been living off the stock market. Well, let's just flip over to what you said earlier. You said it's about time companies start raising prices. This is an article that basically confirms what you said, Ted. Tariff field price hikes have arrived, hitting these items first. Among the companies that say they are raising prices for some goods as tariffs take effect are home improvement giant Home Depot Macy's and camera maker Nikon. This came in uh the 12th of September last week before the Fed meeting. So what what does that mean for markets? What does that mean for investors when big box stores and retailers are finally starting to pass the tariffs on to consumers? Well, that that is that's the tipping point because all of a sudden I mean you know we're a 70% consumer economy. s or you get in a situation where uh the things that you don't necessarily need like a new Nikon camera, I'm probably not going to buy it, you know, or some of those some of the things you you don't really need is something you want, but you don't need it, but you want it. Those things go by the wayside. So, you go back to things that you need. And so, uh that's what changes in the economy at that point. Okay. uh are the wealthy people still feeling good about their wealth to the extent that they're able to absorb higher prices? In other words, let's say, let's take the Nikon camera for example. The people that can afford an expensive Nikon camera, would they care and 2025 in October, September that it price has gone up, I don't know, 20%. In other words, would it matter? Well, I'm starting to see a little bit of that even in people I know in our own Sure. They'll say, you know, uh I have something, let's say, whatever it is, piece of equipment, whatever, and it's and it's really good, still good. You know, they've got a new model, uh it's it's supposedly a lot better, this, that, and the other. When you're really feeling good about things and you think things are going to be, uh great next year, too, you don't mind stepping out and doing it. I'm seeing a little bit of that right now, but the markets haven't broken. So most of these people uh that have money are just uh they just spend it. That's all I can tell you. Uh they they they keep wanting. Now you have a 25% correction of the stock market, then you're going to see the consumer side break down. Now that the Fed has begun easing, what is the uh primary theme for investors into the rest of the year? We've got higher inflation, potentially a weakening labor market, and an easing cycle. interesting mix of monetary policy with economic growth. Well, investors right now feeling good because the markets just go up. This market reminds me a lot of 1999. Uh it just goes up every day. Nobody knows why. There's a narrative. They always have some sort of narrative, but they just go up. So, nobody really does anything. they don't do any selling and maybe they do more buying and uh and and the market just keeps right on going up and nobody's worried about it and in 1999 that's what 99 did all year long and so you never solely everything about it and I think now investors will try to chase the bonds which is a mistake by the way uh anytime you chase bonds I think you're wasting your time but if and what they should do right now if they're worried about the rates Instead of keeping it short, like talking about in a money market or something, you know, try to lock in a one year or 18month, you know, try to lock some of that money in. And if rates keep on going down, which they looks like they might, uh, then you've got some of that money locked up, but you're not out 30 years. You're just out a year or two. And that that's the only way to, in our opinion, to make that work. If you're not chasing bonds, what should you be chasing instead? Well, I don't think you should chase anything. Now, if you look at our our investing on the stock side, for example, we we ride with what we have. You know, we're we're still about the same. 40% in treasury, 60% in stocks. We still own a lot of stocks, uh, a lot of good companies, but we're not going to do this. Let me the biggest mistake investors make and we've all made this mistake and I made it much younger is that you the market's been going up a long time. You you think okay I want to pull the trigger. I want to get in. I want to buy more. I want to do and you finally get to a point like Stan Ducken Miller did in 1999 where he said you know uh I lost $3 billion in a short period of time. They asked him what he learned about. He said nothing because I already knew not to do it. And I think people, they know not to try to speculate here, but they do it anyway. And this is a point where a good money manager will tell you, "We're not going to buy it. I've already been down that road in my life." And you can't you can't start to change everything you've ever known about value, what's worth this, what's worth that, and all of a sudden say, "No, we're going to just jump on and try to ride this pony all the way." And I I think that's where the mistakes get made in this kind of atmosphere. You said this looks a lot like 1999. The implication is that it's right before a an inflection in the market. March or April 2000, I believe, was the peak in the dot bubble. So Ted, what can investors look at uh to to understand inflection points? In other words, what do you look at in the economy or the markets to know that this is the beginning of the end of the bull market? Well, you for us, we look, we know we look at the companies more than the market, but I will tell you the market I don't think they'll get anywhere close to hitting the numbers there. They're looking at 16% the estimates out there for increased earnings in 26. I don't think there's a a chance they can make that. But what we look at are individual companies and we see all kinds of companies. We don't own them. I'm just telling you this is what you see. You see all kinds of companies that are selling at 40 and 50 times sales, not earnings. Sales. You see companies that keep on losing money, never made any money, their price goes up. There's so much of that out there right now. It's incredible. the leverage is out there. We're leveraged in every single area, private equity, private credit, all that. And those are the things that we we look at to say, you know, you can't play in that minefield because some one something's going to go wrong there one of these times. When it does, it'll blow up the whole thing. And that I I think that's what we look at. There's I could show you so many companies today that actually have zero value. If you could, if they handed you the whole company, you're not going to make any money. But keep people keep buying it and they keep throwing these narratives out. We like to buy companies that have real cash flow, real dividends, you know, they're at a good value, they're at a cheaper price. That that's how you make money in stocks in the long long run. But at the top of these markets, you don't want to get caught buying into these things because you'll look up two or three years from now, like just like I said, and say, "Why' I do that for?" And it's just because you you can't help it. The greed button is coming and people will start to say, "I I've got to get more exposed." Worst time. Let's say you're somebody with a bunch of cash right now and you're facing an environment where the Fed is lowering rates and potentially we have higher inflation. And at the same time, like you said, now is not a good time to be chasing prices and momentum. So what what what do you do? Well, it depends on the age for one, but but I I will say that that's a big factor here on the age, but if you're younger, if you're younger and you have a lot of money all of a sudden, you know, you can you can put some of it in the market. I I I think you got to go low in the beginning though. I'm talking about less than 20%. uh the balance I think you have to keep at least for the time being in you know maturities that are 24 months or less probably treasuries maybe some higher grade munis um I I do think there's areas you can own which we own that are that are cheap may get cheaper in the short run like energy something like that you know but go looking for companies that will pay you more than the 30 if you look at the three-month treasury it's it's just now gone under four so there's nothing in in the treasury market that's less than two years now they'll pay you 4% anymore. That happened this week. So what happens is you have to decide I want to own a little some things that maybe would pay me five or six or seven but they're in the dividend route so I take a little bit more interest. So you get a balance. I think the balance but I think your balance right now ought to be towards safety. No matter how you balance it. Uh if you're older and you have that liquidity event you got to be careful. What is safety for you, Ted, right now? Uh, like you said, the bond market, if the long end of the curve keeps going up, well, that doesn't look great. Uh, gold, um, is gold still considered safety at $3,700 an ounce? Well, I think it is, David, because people misinterpret gold. I mean, gold gold is something by for when things go wrong. Okay. inflation, wars, countries all upside down, all sorts of things going on where there's fear and uh but right now it's also an item where if you look at the level of debt for our country and all these other countries then they don't have any faith in those countries and that's what so I think if you're if you're going to own if you're going to own bonds in here and you can pick what you want to own but I think if you're going to own bonds you need to own two year or less treasuries and you need to own a position in gold as a as a hedge. And people will say, well, you know what? What if it doesn't work? And it's it's an insurance policy on the long long run the rest of your life because hey, you'll buy if you have a home, you'll buy insurance every single year for that house. But you better hope your house doesn't burn down, okay? Because then it pays off. But it's sort of the same way with gold. Just because you own it doesn't mean you're looking for some sort of extraordinary. But I still think it has, if you look at the setup for debt and the things that are going to go on this decade, I think you have to own some gold. Okay. Uh the um Trump administration the well not sorry not the Trump administration the Trump family in particular has shifted a lot of the wealth from physical assets real estate predominantly occupying their wealth traditionally or historically now to digital assets. Trump media is now I believe the sixth or seventh largest holder of Bitcoin in the world depending on the day. Um, you know, is this is this a trend that some of your associates or institutional clients have mirrored? We we have some people that have bought Bitcoin. Yeah. You know, we have some I I don't uh it's not something we recommended to them, but if if they wanted to uh they they they bought some of it. I you know, it's not a producing asset for us. And so it might wait the next 10 years. I'm not saying it's not. I'm just saying for us it doesn't produce profits. It doesn't produce dividends. It doesn't produce uh you know the only thing you get out of Bitcoin is an increase in price. And uh I always say this to people but Bitcoin could go away and there's a numerous ways it could all right but gold doesn't go away. Undervalued assets. You mentioned that energy looks cheap to you. Is that am I am I quoting you correctly? Yeah, there's a number of single companies that look good too that you know we own right probably you know 45 plus companies uh but a number of energy companies but energies they're they're you know energy was you know oil was 130 3 years ago it's 63 now 64 um a lot of those companies have you know they've they worked their debt situations correctly and you know they're paying anywhere from you know four to to 6 and a half 7% on the dividend and the gas pipelines are paying seven or eight and so that group looks good to I I don't mind owning things that'll pay me five six 7% and I can wait a couple of years maybe and oil is higher um and it could be significantly higher in the next three to five years but let's just say it's higher a hundred dollars a barrel maybe$1und whatever and See, I'm getting paid to wait. I'm getting a good dividend. I'm only paying 20% tax on it. It's not like interest from a bond. Uh so, it's an area we like for a lot of those different reasons. Fair enough. Okay. So, finally, uh the most overvalued uh versus the most undervalued assets right now or sectors. So, we talked about uh tech stocks a little bit. Um how would you allocate your portfolio right now? Undervalued versus overvalued. Well, we like to think that everything we own is undervalued or we wouldn't own it. Uh, and we don't have I mean, if you go back and look at a lot of the AI names, you know, that have Nvidia and all that group, all that stuff, we don't have that. We don't own that. you we can't make the numbers work in those companies if you see the prices you pay because uh they're fad stocks and they're like a lot of the stocks were in 99 early 2000 um if anything you put the.com behind it it just soared but a lot of them went under and I think a lot of this a lot of this AI group is really overvalued in our opinion um I don't do you know we soon as we see them and see they're really expensive. You know, we don't we don't do any work in that area, but uh that that would be probably the most overvalued group I see. This would probably be one of the strongest bull markets in recent history if you discount the pandemic. Final note, Ted, for young investors entering the space right now, what would you say to somebody who has maybe entered the space a couple years ago um in an interesting environment? regime change, number one, uh Fed policy shift, number two, uh soaring AI driven stocks, number three, and then all pretty much all major asset classes, digital like Bitcoin, gold, and the S&P reaching new all-time highs, unprecedented levels in 2025. This person is probably thinking he's a genius if he's making a lot of money, which he probably is. Well, we've all been there, okay? And I promise you this, uh, anybody that's been around a long time has had their legs cut out from under them. Um, and and it it happens to everybody because that's part of investing. And I I'm not wishing illum on young people. I'm just saying that the lessons you learn typically in investing are when you're younger. All right? some good, some bad, but the main point is that you learn a lot from that and you look up and um you know that that's where you it makes you a better investor later on in life. But right now, if I was a young person like that, number one, just remember you're on your own. Okay? Don't believe don't believe all that stuff you hear. You're on your own. So you need to do a lot of work like that. Do a lot of reading. Do a lot of thinking about that. And then secondly, try to even if you're younger, try to have a pretty good balance, okay? Have some liquidity and have some thing, you know, have some balance in that portfolio. Don't get concentrated even though you made a lot of money in it and just don't get concentrated in in one or two areas because eventually even concentrated areas, they it gets tough to make money in them again and then they go down. And so you want to try to have some balance even if you're a young person. Balance is key as in all things in life. Thank you very much, Ted. Uh where where can we follow you and uh more learn more from you in the meantime? Well, the best place, David, is Oxbow Advisors. It's Oxbow Advisoadvisors.com and uh you'll see really we're very transparent. You'll see all of our market letters and uh different book. We've been in a lot of books. uh and and when we make video comments every quarter, those are on there as well. And you know, we're not trying to hide anything. We're real simple in what we do. So, that's that's the place to go look. Thank you very much, Ted. We'll speak to you again soon. And we'll put the links down below to Oxbow Advisors and also to the YouTube channel. I know uh you and your CIO Chance occasionally puts out very good educational videos on that channel. So, we'll put the link down below. Check that out as well. Thank you very much, Ted. We'll speak again soon. Take care for now. All right. Thank you. Thank you for watching. Don't forget to like and subscribe.
'This Market Reminds Me Of 1999': The ‘Tipping Point’ Is Here For Stocks, Economy | Ted Oakley
Summary
Transcript
That's the tipping point. This market reminds me a lot of 1999. You'd have to have a situation where that would some form or another would get the long rates down to try to to get activity going at the long end. What does happen if this so-called problem comes into fruition? What happens to the interest rate? What happens to inflation? What happens to asset prices? The FOMC cut interest rates by 25 basis points this week. markets anticipated this and uh what's remarkable to many observers is the fact that inflation is still running hotter 2.9% headline CPI is the latest CPI reading from the last month up from 2.7 the previous month and so it's obvious now to many market participants that the Fed is now more focused on the labor market than on their inflation mandate joining us today to talk about markets the labor market and the economy is Ted Oakley founder of Oxbow Advisors welcome back to the show Ted always good to see Good to see you, David. Thanks. Let's start by talking about the labor market because like I mentioned in the introduction, it probably is the Fed's focus right now or at least it appears to be. Maybe they cut by political pressure. Who knows? But I'll let you answer that. This morning, we got jobless claims. I'll just show you um the report here. Um this is an article from Bloomberg. Uh, initial applications for jobless benefits in the US dropped by the most in nearly four years, reversing an unusually large jump in the prior week and consistent with low levels of layoffs in the economy. Initial claims decreased by 33,000 to 231,000 in the week ended September 13th, according to the Labor Department. That's in line with levels seen throughout this year and not far off the preandemic trend. The median forecast and Bloomberg survey of economists called for 240,000 applications. So what do you make of the fact that uh we got these positive numbers, well relatively positive numbers which may signal the fact that uh companies are still holding on to workers to spiked previously anticipated weaker uh labor market um environments. Well, you know, David, if you look at it, uh, if think about this, if jobs available are going down, job openings, and unemployment's going up, that just basically means you have more people vying for fewer jobs effectively, what that means. And that's that's first time that crossover has happened in a long time, but that's where you are right now. And so I think I think employers probably would would do that. I mean, uh, every employer I talked to basically says, you know, I'll keep my good people and, you know, if it gets tougher and tougher in here, you know, we'll start at the bottom. The people are least effective and they're out of here. And and that's that's generally what we're seeing. You have to remember now too, one of the big employers, one of the big things going on in the country is housing, which is going nowhere. All right? And it's actually getting worse. So, there's a lot of factors going into that, but uh it looks like it's certainly a negative to me, but and the Fed just decided that's the way they want to go. I doubt if they're right. They they usually are not right. And so, uh we'll just have to see. housing has been going nowhere for quite some time. I I've seen reports heard from people that uh it's actually getting worse. So, uh you're what you're saying is corroborated by other sources as well. Ted, I wonder why though uh interest rates haven't moved and mortgage rates haven't really moved. Uh we may have downward pressure on mortgage rates now. So, why the weakness in the housing market? Well, it's price. If you look at the last four years, David, it's price. It's not the interest rate. But you look at it, if you keep a high price and they keep moving the prices up, you know, they were spoiled for many years, uh, where builders could come in and just raise the price, raise the price. Rates were really low, so it didn't make any difference actually. But now you get into a normal interest rate. This is not an abnormal time. If you go back over 60 years or 70 years and now you got a high price and uh you know and you look at high prices then you got insurance then you got taxes on that high price and if you look at a 30-year mortgage today it's only about a quarter less than it was a year ago. Even today I'm talking about today. So I I think people get confused on this. you could you'd have to have rates come a lot lower to effectively move anything on interest rates because the price is out of line. They're too expensive. Okay. So, one of two things is going to h well, one of a few things might be happening uh in the foreseeable future that either prices will come down to adjust to equilibrium, whatever that equilibrium would have to be. Uh real wages would dramatically rise to keep up with rising home prices. uh or um a lot of people are going to shift to the rental market and that sector is going to boom uh while the um first-time homeowner market is going to slow. What do you think is most likely? Well, I I've got a graph of of average hourly earnings uh just below the the management level. And that graph always compares to the price of housing. Yes. And so the last time it was really out of line was about 06. Okay. But now it's twice that out of line. In other words, it's so far out of line that you would have to have some of both. You would have to have your wages go up and your prices come down to bring that back business back into equilibrium because you can only make, you know, I've decided to make smaller houses, but I mean, you get down to 1,200 ft or so. Um, I mean, that's about all you're going to get here. You can't, you know, what are you going to do? throw up a 600T house and and sell it for to get in just to say I have a house. Well, no, cuz I can go rent something much nicer. So, that business is in a quandry, I think. Uh now, you'll always have the buyers that buy, you know, the upper level, you know, upper mid upper level range where they have the money. So, that that doesn't necessarily fit, but just in general, I'm talking about that's what we see out there. But that has an impact. It has an impact on employment, too. that industry touches a lot of people. Uh so you just have to see how it works out. Yeah. And if home prices do correct, that could have a real effect on consumer spending. It's been tied to uh well the price of your home and therefore your net wealth has been has been tied to discretionary spending even if your actual cash flow doesn't change according to studies. Uh so we'll monitor that. Going back to the Fed and the lab labor market, one interesting question that was brought up to Jerome Pow at the F at the Fed press conference by a reporter was um whether or not the tariffs have been eaten quote unquote eaten by companies on the labor side because apparently we haven't seen dramatic increases on inflation for all products across all sectors. That was according to this reporter. Uh what do you think? Do you think company margins will start to reflect tariffs? I think eventually pretty soon they will. I've talked to a number of company private now that that basically buy they're wholesalers but they buy product to bring into the wholesale area and what's been happening so far is those two those two have sort of split that a little bit so that on the retail side they didn't get hit as hard but they can only go so far with that and after a while they have to say you know what now we've got to pass some on I think they're starting to pass it on and um you know, you'll you'll have to see how much they pass on, but but it it we will get there. And I and again, I I think those that's going to show up in some of the numbers. All right, I'd like to play for you a clip of POW answering the question on why uh the decision was made. So, this is his justification. Take a listen. Uh Colobby Smith for the New York Times. Um, should we be viewing today's cut as the committee taking out some insurance against the possibility that the labor market is at risk of weakening or is it the committee's view that the dynamics of a downturn are already in place? I guess I'm just, you know, trying to square the shift in the rate forecast in the SEP uh towards more cuts than just um 3 months ago with the fact that the forecast for unemployment didn't change. Yeah, I think you could think of this in a way as a riskmanagement cut because if you look at the SEP actually um the projections for growth this year and next actually ticked up just a little bit and inflation and unemployment didn't really move much. So what what's different now? What's different now is that you see a very different picture of the risks to the labor market. You've seen, you know, we were looking at 150,000 jobs a month at the time of the last meeting and now we see the revisions and we see the new numbers. And I I didn't I don't want to put too much emphasis on on payroll job creation, but it's just one of the things that suggests that the labor market is really cooling off. And that that tells you that it's time to to take that into account in our, you know, in our policy. Okay, Ted, I like to get you to respond to that, but my my initial thought is this. Jerome Pal has been talking about cracking labor market signs for months. I mean he didn't use those exact words but he was cautious in the labor market ever since the sprig I remember and uh back then inflation was lower and so unless the labor market according to you and other analysts are is significantly worse now than earlier in this year I'm wondering why they made the decision to cut rates now given that inflation is much higher. Well, I know they're not going to admit this, but you have to think that getting together like that being they get beaten on every day, uh, you know, from the White House to lower rates and, uh, so they they do it. But, you know, again, the Federal Reserve the last 30 years has made it it's it's just a just nothing more than a whole 30 years of errors. And this is probably another era because you know uh you look out 12 15 months from now which I think inflation will be back up again and and then there then they're really see then they're caught between the rock and hard place and they there are certain things they can't control. Uh but I I I think a lot of this was uh you know they've been jawboned into doing it. I'm just personal opinion now. I don't have any I'm I have no no contact or anything, but if you just watch what's happening, I think that's part of what what happened. And so this oh, you know, we'll we'll do a little bit. But in order for if you're really going into recession and you got a pro, a real true problem with employment, well, a quarter of a point is not going to do you any good. I mean, you need you need, you know, 150, 200 basis points. But again, then you come back to inflation, you see. So that's why you've got a group here that probably doesn't know what they're doing, but they never have. So there's not a lot of difference in that. Gold is now above $3,600 an ounce, an unprecedented level. Now, you've heard me talk a lot about how gold and silver are smart ways to grow your savings over time. But what if I told you you can now do more than just hold gold? What if you could also generate income from it? Well, that's exactly what today's sponsor, Monetary Metals, is doing. They're redefining how people invest in gold and silver. Instead of paying to store your metal or letting it sit idle, now you can get paid to own it. Right now on their marketplace, you can earn up to 4% yield on gold paid in gold. That means your savings grow in actual ounces, not dollars, on top of any price appreciation. Yield is deposited monthly in physical gold, which you can redeem and take delivery of. Thousands of investors are already generating a consistent yield in silver and gold. So, it's about time you look into this as well. Go to monetary-metals/lin link down below or scan the QR code here to learn more. Well, you did mention in your notes uh said to me offline that uh moving from 4.5 to 4.25, basically a 25 basis point cut isn't going to do much for borrowing. So what what what needs to happen to the Fed funds rate for uh more stimulus on the borrowing front? You mentioned 150 basis points. Well, I think you'd have to go you look at right now prime is 7 and a quarter instead of seven and a half. And in order to in order to get people to take a lot of money, you got to get it where it's cheap enough to to borrow. To me, it's at a point where they can't get there because you would have to have, you know, you're gonna have to have a prime that's that's the 300 basis points lower it is now. And you're going to have to have a situation where that would some form or another would get the long rates down to try to to get activity going at the long end. That's another problem though because people see that inflation moniker out there and they're like, "Hey, you know what? I don't I don't know what's going on. I know what's going on the short end, but on the long end, I'm not certain I'm willing to loan that money, you know, like that. But if you go in a recession, you know, they'll they'll they'll do the same things they've always done. They'll they'll try to push it down. But right now, you you would have to have a number that gets it down to where you could do business borrowing. I mean at a to make businesses really jump out in my opinion having you know own part of a bank and everything you got you have to get it down to where they say well you know if I I could do that at 4% or four and a quarter maybe four and a half I can make those numbers work and so I'll go ahead and build that building or buy that piece of equipment u that may not be right that's just personal opinion but that's the way I would see it right on the topic of Fed independence let me just show you this article I want just I want to get reaction to this. This is from um a Goldman report. Gold could rally to almost $5,000 an ounce if the Federal Reserve's independence were damaged. An investor shifted just a small portion of holdings from treasuries into bullion. A scenario where Fed independence is damaged would likely lead to higher inflation, lower stock, and longdated bond prices, and an erosion of the dollar's reserve currency status. Analysts at Dul Goldman said in contrast, gold is a store of value that doesn't rely on institutional trust. That's a pretty big prediction from a big bank. Uh but the underlying assumption is the erosion of Fed independence. Can you comment on that? Well, if you look back in the 70s uh where Burns, Arthur Burns was, you know, he was succumbing to some of that pressure. So they would go up and down, up and down. But then every time inflation would be higher the next goround, you know, a couple years later, they'd have to go back in and, you know, they had to win, you know, with you with the win buttons and whip inflation now and all that. But but uh when you get in the situation where you stack an independent board with people that are just going to do, for example, what the White House wants. And let me give you a real good example. Vulker. Reagan did not agree with Vulker keeping the rates high. That's what broke inflation, but Vulker bucked the system and said, "No, we're not doing that. We're going to keep the rates high." And that worked in the long run. But if you've got a whole group of people now that just say, "Uh, we're going to we're going to do sort of what this particular party wants that's inside regards to the party, then I think you got a real then you've got a real problem." What does happen if this so-called problem comes into fruition? What happens to the interest rate? What happens to inflation? What happens to asset prices? Well, your rates would come down a lot. You know, they would keep on bringing them down. You would juice everything again. You know, asset prices would even become more extreme. But the flip side of that is inflation would take off. you wouldn't see it immediately the first month, but then you see inflation just like you did, you know, a few years ago, you know, remember we hit that 9% level. Then all of a sudden, here it comes and u and in inflation is a is a killer for middle income and lower incomes. I mean, that that's the one that buries them. And then all of a sudden, see, then that throws the whole economy out of line. But then they'll learn a real hard lesson, you know. But I that's what happens if you allow that to go on. Do we have the conditions today in place for inflation to return to 9.1% the previous high a couple years ago post pandemic? Well, not sustainable probably, you know, year to year maybe, but yeah, at points in time, sure, you could get there and you might back off. Um, but I think in generally inflation is going to be sustainable though. between three and four. That's why we don't own a lot a lot of long-term bonds. They actually might work right in here right now for a little while. But we think short-term phenomenon. Yeah. You own short-term bonds, Ted? Not long-term. Mostly less than 60 months. Okay. Uh I'm going to come back to the bond market in just a bit. Just finishing off in the economy. So POW described the current jobs market as low firing and low hiring. He noted young people and minorities are struggling to find work. Generally speaking, Ted, what needs to happen to stimulate the jobs market? What needs to happen to incentivize businesses and employers to start expanding again such that they'll need to hire more people? Us assuming, of course, people aren't quitting on mass because the labor market is just very strong. Well, we have a legislature in DC that doesn't really understand all those things. But if they did the right thing, what they would do is something like an investment tax credit. So you would say a co to an employer, I tell you what, if you will hire this type of person at this level of income, in other words, one that's a decent level. Okay, we're going to give you an investment tax credit for that for that. And that person's that then you're going to hire somebody. Hey, I need somebody, but now I can hire somebody and get a tax credit. You you have to use tools like that to really get it going. And sometimes you can get it going. I mean, you you'll go through periods where no matter what you do, you know, you're in a recession and you just have to keep on trying to work through it. What about labor is a supply side? What about the demand side? Based on research from your firm or research that you've seen or even anecdotal evidence, do you have any comments on where consumer demand is sitting at right now? In other words, even if the government were to provide this incentive tax credit like you s suggested, would that matter if let's say customers are walking through the front door of the shop? You're right. It might not. Uh yeah, I'm not certain that would that would happen because what's happening right now is is that you got two pieces of the economy and the bottom say the bottom 65 or 70% now, they're just they're just barely getting by. So this inflation thing which is still out there by the way is really affecting them and and so from that employment standpoint that's the fact but if you don't have customers coming through the front door you're right you got a problem and I think to a degree a lot of the consumer companies honestly I think they've been living off the stock market because people had a lot of value there a lot of far not value but they've had a lot of uh liquidity in that it's gone up they feel good they spend more of that money. Um, that's probably one thing that would affect it as well. But I think consumers, I think, in general been living off the stock market. Well, let's just flip over to what you said earlier. You said it's about time companies start raising prices. This is an article that basically confirms what you said, Ted. Tariff field price hikes have arrived, hitting these items first. Among the companies that say they are raising prices for some goods as tariffs take effect are home improvement giant Home Depot Macy's and camera maker Nikon. This came in uh the 12th of September last week before the Fed meeting. So what what does that mean for markets? What does that mean for investors when big box stores and retailers are finally starting to pass the tariffs on to consumers? Well, that that is that's the tipping point because all of a sudden I mean you know we're a 70% consumer economy. s or you get in a situation where uh the things that you don't necessarily need like a new Nikon camera, I'm probably not going to buy it, you know, or some of those some of the things you you don't really need is something you want, but you don't need it, but you want it. Those things go by the wayside. So, you go back to things that you need. And so, uh that's what changes in the economy at that point. Okay. uh are the wealthy people still feeling good about their wealth to the extent that they're able to absorb higher prices? In other words, let's say, let's take the Nikon camera for example. The people that can afford an expensive Nikon camera, would they care and 2025 in October, September that it price has gone up, I don't know, 20%. In other words, would it matter? Well, I'm starting to see a little bit of that even in people I know in our own Sure. They'll say, you know, uh I have something, let's say, whatever it is, piece of equipment, whatever, and it's and it's really good, still good. You know, they've got a new model, uh it's it's supposedly a lot better, this, that, and the other. When you're really feeling good about things and you think things are going to be, uh great next year, too, you don't mind stepping out and doing it. I'm seeing a little bit of that right now, but the markets haven't broken. So most of these people uh that have money are just uh they just spend it. That's all I can tell you. Uh they they they keep wanting. Now you have a 25% correction of the stock market, then you're going to see the consumer side break down. Now that the Fed has begun easing, what is the uh primary theme for investors into the rest of the year? We've got higher inflation, potentially a weakening labor market, and an easing cycle. interesting mix of monetary policy with economic growth. Well, investors right now feeling good because the markets just go up. This market reminds me a lot of 1999. Uh it just goes up every day. Nobody knows why. There's a narrative. They always have some sort of narrative, but they just go up. So, nobody really does anything. they don't do any selling and maybe they do more buying and uh and and the market just keeps right on going up and nobody's worried about it and in 1999 that's what 99 did all year long and so you never solely everything about it and I think now investors will try to chase the bonds which is a mistake by the way uh anytime you chase bonds I think you're wasting your time but if and what they should do right now if they're worried about the rates Instead of keeping it short, like talking about in a money market or something, you know, try to lock in a one year or 18month, you know, try to lock some of that money in. And if rates keep on going down, which they looks like they might, uh, then you've got some of that money locked up, but you're not out 30 years. You're just out a year or two. And that that's the only way to, in our opinion, to make that work. If you're not chasing bonds, what should you be chasing instead? Well, I don't think you should chase anything. Now, if you look at our our investing on the stock side, for example, we we ride with what we have. You know, we're we're still about the same. 40% in treasury, 60% in stocks. We still own a lot of stocks, uh, a lot of good companies, but we're not going to do this. Let me the biggest mistake investors make and we've all made this mistake and I made it much younger is that you the market's been going up a long time. You you think okay I want to pull the trigger. I want to get in. I want to buy more. I want to do and you finally get to a point like Stan Ducken Miller did in 1999 where he said you know uh I lost $3 billion in a short period of time. They asked him what he learned about. He said nothing because I already knew not to do it. And I think people, they know not to try to speculate here, but they do it anyway. And this is a point where a good money manager will tell you, "We're not going to buy it. I've already been down that road in my life." And you can't you can't start to change everything you've ever known about value, what's worth this, what's worth that, and all of a sudden say, "No, we're going to just jump on and try to ride this pony all the way." And I I think that's where the mistakes get made in this kind of atmosphere. You said this looks a lot like 1999. The implication is that it's right before a an inflection in the market. March or April 2000, I believe, was the peak in the dot bubble. So Ted, what can investors look at uh to to understand inflection points? In other words, what do you look at in the economy or the markets to know that this is the beginning of the end of the bull market? Well, you for us, we look, we know we look at the companies more than the market, but I will tell you the market I don't think they'll get anywhere close to hitting the numbers there. They're looking at 16% the estimates out there for increased earnings in 26. I don't think there's a a chance they can make that. But what we look at are individual companies and we see all kinds of companies. We don't own them. I'm just telling you this is what you see. You see all kinds of companies that are selling at 40 and 50 times sales, not earnings. Sales. You see companies that keep on losing money, never made any money, their price goes up. There's so much of that out there right now. It's incredible. the leverage is out there. We're leveraged in every single area, private equity, private credit, all that. And those are the things that we we look at to say, you know, you can't play in that minefield because some one something's going to go wrong there one of these times. When it does, it'll blow up the whole thing. And that I I think that's what we look at. There's I could show you so many companies today that actually have zero value. If you could, if they handed you the whole company, you're not going to make any money. But keep people keep buying it and they keep throwing these narratives out. We like to buy companies that have real cash flow, real dividends, you know, they're at a good value, they're at a cheaper price. That that's how you make money in stocks in the long long run. But at the top of these markets, you don't want to get caught buying into these things because you'll look up two or three years from now, like just like I said, and say, "Why' I do that for?" And it's just because you you can't help it. The greed button is coming and people will start to say, "I I've got to get more exposed." Worst time. Let's say you're somebody with a bunch of cash right now and you're facing an environment where the Fed is lowering rates and potentially we have higher inflation. And at the same time, like you said, now is not a good time to be chasing prices and momentum. So what what what do you do? Well, it depends on the age for one, but but I I will say that that's a big factor here on the age, but if you're younger, if you're younger and you have a lot of money all of a sudden, you know, you can you can put some of it in the market. I I I think you got to go low in the beginning though. I'm talking about less than 20%. uh the balance I think you have to keep at least for the time being in you know maturities that are 24 months or less probably treasuries maybe some higher grade munis um I I do think there's areas you can own which we own that are that are cheap may get cheaper in the short run like energy something like that you know but go looking for companies that will pay you more than the 30 if you look at the three-month treasury it's it's just now gone under four so there's nothing in in the treasury market that's less than two years now they'll pay you 4% anymore. That happened this week. So what happens is you have to decide I want to own a little some things that maybe would pay me five or six or seven but they're in the dividend route so I take a little bit more interest. So you get a balance. I think the balance but I think your balance right now ought to be towards safety. No matter how you balance it. Uh if you're older and you have that liquidity event you got to be careful. What is safety for you, Ted, right now? Uh, like you said, the bond market, if the long end of the curve keeps going up, well, that doesn't look great. Uh, gold, um, is gold still considered safety at $3,700 an ounce? Well, I think it is, David, because people misinterpret gold. I mean, gold gold is something by for when things go wrong. Okay. inflation, wars, countries all upside down, all sorts of things going on where there's fear and uh but right now it's also an item where if you look at the level of debt for our country and all these other countries then they don't have any faith in those countries and that's what so I think if you're if you're going to own if you're going to own bonds in here and you can pick what you want to own but I think if you're going to own bonds you need to own two year or less treasuries and you need to own a position in gold as a as a hedge. And people will say, well, you know what? What if it doesn't work? And it's it's an insurance policy on the long long run the rest of your life because hey, you'll buy if you have a home, you'll buy insurance every single year for that house. But you better hope your house doesn't burn down, okay? Because then it pays off. But it's sort of the same way with gold. Just because you own it doesn't mean you're looking for some sort of extraordinary. But I still think it has, if you look at the setup for debt and the things that are going to go on this decade, I think you have to own some gold. Okay. Uh the um Trump administration the well not sorry not the Trump administration the Trump family in particular has shifted a lot of the wealth from physical assets real estate predominantly occupying their wealth traditionally or historically now to digital assets. Trump media is now I believe the sixth or seventh largest holder of Bitcoin in the world depending on the day. Um, you know, is this is this a trend that some of your associates or institutional clients have mirrored? We we have some people that have bought Bitcoin. Yeah. You know, we have some I I don't uh it's not something we recommended to them, but if if they wanted to uh they they they bought some of it. I you know, it's not a producing asset for us. And so it might wait the next 10 years. I'm not saying it's not. I'm just saying for us it doesn't produce profits. It doesn't produce dividends. It doesn't produce uh you know the only thing you get out of Bitcoin is an increase in price. And uh I always say this to people but Bitcoin could go away and there's a numerous ways it could all right but gold doesn't go away. Undervalued assets. You mentioned that energy looks cheap to you. Is that am I am I quoting you correctly? Yeah, there's a number of single companies that look good too that you know we own right probably you know 45 plus companies uh but a number of energy companies but energies they're they're you know energy was you know oil was 130 3 years ago it's 63 now 64 um a lot of those companies have you know they've they worked their debt situations correctly and you know they're paying anywhere from you know four to to 6 and a half 7% on the dividend and the gas pipelines are paying seven or eight and so that group looks good to I I don't mind owning things that'll pay me five six 7% and I can wait a couple of years maybe and oil is higher um and it could be significantly higher in the next three to five years but let's just say it's higher a hundred dollars a barrel maybe$1und whatever and See, I'm getting paid to wait. I'm getting a good dividend. I'm only paying 20% tax on it. It's not like interest from a bond. Uh so, it's an area we like for a lot of those different reasons. Fair enough. Okay. So, finally, uh the most overvalued uh versus the most undervalued assets right now or sectors. So, we talked about uh tech stocks a little bit. Um how would you allocate your portfolio right now? Undervalued versus overvalued. Well, we like to think that everything we own is undervalued or we wouldn't own it. Uh, and we don't have I mean, if you go back and look at a lot of the AI names, you know, that have Nvidia and all that group, all that stuff, we don't have that. We don't own that. you we can't make the numbers work in those companies if you see the prices you pay because uh they're fad stocks and they're like a lot of the stocks were in 99 early 2000 um if anything you put the.com behind it it just soared but a lot of them went under and I think a lot of this a lot of this AI group is really overvalued in our opinion um I don't do you know we soon as we see them and see they're really expensive. You know, we don't we don't do any work in that area, but uh that that would be probably the most overvalued group I see. This would probably be one of the strongest bull markets in recent history if you discount the pandemic. Final note, Ted, for young investors entering the space right now, what would you say to somebody who has maybe entered the space a couple years ago um in an interesting environment? regime change, number one, uh Fed policy shift, number two, uh soaring AI driven stocks, number three, and then all pretty much all major asset classes, digital like Bitcoin, gold, and the S&P reaching new all-time highs, unprecedented levels in 2025. This person is probably thinking he's a genius if he's making a lot of money, which he probably is. Well, we've all been there, okay? And I promise you this, uh, anybody that's been around a long time has had their legs cut out from under them. Um, and and it it happens to everybody because that's part of investing. And I I'm not wishing illum on young people. I'm just saying that the lessons you learn typically in investing are when you're younger. All right? some good, some bad, but the main point is that you learn a lot from that and you look up and um you know that that's where you it makes you a better investor later on in life. But right now, if I was a young person like that, number one, just remember you're on your own. Okay? Don't believe don't believe all that stuff you hear. You're on your own. So you need to do a lot of work like that. Do a lot of reading. Do a lot of thinking about that. And then secondly, try to even if you're younger, try to have a pretty good balance, okay? Have some liquidity and have some thing, you know, have some balance in that portfolio. Don't get concentrated even though you made a lot of money in it and just don't get concentrated in in one or two areas because eventually even concentrated areas, they it gets tough to make money in them again and then they go down. And so you want to try to have some balance even if you're a young person. Balance is key as in all things in life. Thank you very much, Ted. Uh where where can we follow you and uh more learn more from you in the meantime? Well, the best place, David, is Oxbow Advisors. It's Oxbow Advisoadvisors.com and uh you'll see really we're very transparent. You'll see all of our market letters and uh different book. We've been in a lot of books. uh and and when we make video comments every quarter, those are on there as well. And you know, we're not trying to hide anything. We're real simple in what we do. So, that's that's the place to go look. Thank you very much, Ted. We'll speak to you again soon. And we'll put the links down below to Oxbow Advisors and also to the YouTube channel. I know uh you and your CIO Chance occasionally puts out very good educational videos on that channel. So, we'll put the link down below. Check that out as well. Thank you very much, Ted. We'll speak again soon. Take care for now. All right. Thank you. Thank you for watching. Don't forget to like and subscribe.