Will 2026 Be The Year Dangerously Overvalued Stocks Revert To The Mean? | Lance Roberts

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When you look at returns over the last 15 years, we're running returns 50% above the average return of the market since 1900. So over 125 years, in the last 15, we've run average returns, you know, 50% above norms. You can't sustain that forever, particularly when the economy is growing at 2%. So that increases this risk of of potential downside. And and reversions to the mean is the most powerful force in investing. Again, when you look at any asset class, stocks, bonds, crypto, precious metals, whatever, watch the mean because that mean average is where price is going to revert to at some point. It's just a function of time. Something will cause it and you're going to have this reversion to the mean. And when you're trading at two standard deviations or three or four from long-term means, that reversion becomes much more probable. Welcome to Thoughtful Money. I'm Thulful Money founder and your host, Adam Tagert, welcoming you here at the first day of 2026, which also happens to be our first weekly market recap of the year. I'm joined as usual by the portfolio manager with that new car smell, Lance Roberts. Lance, how you doing? >> I'm doing well. I'm doing really well. Maybe I think somebody left a fish in there, but other than that, yeah, it's all good. Well, new year, new car smell. Uh, I see you've got the fireworks behind you there. I hope you and your wife especially, but you and your family had a a great time ringing in the New Year's last night. >> We Well, actually, it was very low-key last night. Uh, so we're just just for everybody's awareness, we're actually recording this on Thursday. Um, and so we'll have a full trading day on Friday um in the market. So, whatever we talk about today may change tomorrow, but tomorrow is my wife's last chemo. So, we're everybody's getting prepared for that tomorrow and then we'll be done. >> Great. And hey, very appropriate you've got the fireworks there. That is a phenomenal milestone to celebrate. Last time you gave us an update, um you said that uh things were going about as well as one could hope. Is that hopefully still the case? >> Oh, yeah. Yeah. Absolutely. No, it's better than we could have hoped for. you know, there's uh, as we talked about last week, we ran this blood test that basically looks for evidence of disease in her system, and there was none. So, there was no, she's she's termed what's NED, no evidence of disease. So, it's a very good, it doesn't mean she doesn't have cancer. Doesn't mean she's cured by any stretch of imagination, but it is a very positive, you know, outcome for the test. And so we get through this last chemo and then for the next 5 years we'll be on three month visits, uh, blood test, checkups, those type of things. And then in 5 years, if she has no return of cancer, then she'll be considered to be in remission. >> All right. Well, look, um, everyone watching's got their fingers crossed. They're continuing the prayers to come along. Hopefully those five years go by uh swiftly and uh and cancer-free and we all get to celebrate uh in five years uh when you and I are probably still doing this. >> I was going to say let's let's not do the swiftly part because that'll put me at 65. But yeah, let's just get through the next five years. >> All right. And um I I I just I I I hope you know I I know the chemo you don't feel great after it. Um but hopefully after that um that's behind her and uh and she just starts feeling better and better and better. >> Absolutely. Um real quick before we get started in in the the the show today um I just wanted to remind everybody to make sure and if you haven't got your tickets yet for our 2026 economic summit that's coming up just in about two and a half weeks. It's on January the 17th. Um so again, Adam's going to be there the night before. We actually have a mixer where you can hang out with us and you know visit and talk and we've got a really good lineup of of speakers covering uh you know everything from cryptocurrency and stable coins to artificial intelligence. We've got a guy from Black Rockck coming in to talk about that. Uh myself and Mike will be covering an outlook for stocks and and for bonds uh for next year. And then also Ed Slott who is America's financial planner um will be there talking about financial planning for 2026. So, if you're nearing retirement, thinking about retiring, uh this is really the guy you want to hear to talk about what kind of steps you need to take for next year, particularly because of the enactment of the one big beautiful bill. So, um go to our website, realvestmentadvice.com, and there's a link right at the top of the page for the economic summit. You can register. It has all the details for you. Um and but, uh I would get your tickets if you're going to come. We'd love to have you. And we also have a block of rooms set aside at the hotel um at a at a discounted rate. So, but those rooms are filling up pretty quickly. So, if you are interested in coming, love to have you. It'll be a lot of fun. Um but be sure and get your tickets here pretty quick. >> All right. And just to point out, >> yeah, go to Real Investment Advice and then look up at the top of the page there. You've got that yellow register now button. That's what you press. Yeah. >> Exactly. So, yeah. Anyway, so shameless plug, but thank you very much for that. >> No, no, no. Glad you did. And that's coming up real fast. It just occurred to me that that is just a little more than two weeks away. So, that'll be um be here before we know it. Always a great time. Um looking forward to see you again in person, Lance. Looking forward to seeing your wife, too, and giving her a big hug. Um and obviously looking forward to meeting a whole bunch of thoughtful money viewers who come. Uh I always love getting to interact with you guys uh in in the real world. It's really where I get my most valuable uh insights in terms of what I should focus on with this channel for the coming year. So folks, look forward to seeing you there. Um, >> absolutely. >> All right. So, um, uh, we'll see how much we have to talk about. This might be a slightly smaller or shorter, uh, you know, video than normal, though, when I say that, they're usually longer. Um, we'll see if that that streak continues into 2026. I do have a rant. I can imagine that you've got a lot to say about, Lance. Um, so we'll get to that in a bit. >> Sure. Um but yeah, it has been, you know, um a little bit more of a quieter uh you know, week in the markets. Um actually two weeks because I we you were out last week. Um and so we had Michael there, so I haven't seen you in two weeks, but the markets haven't done all that much and we've had a number of holiday trading days there. Um or you know, days of non-trading. Um, I guess my question for you, Lance, is and maybe we would we we just start by bringing up uh the S&P and and looking at the the TA. Um, the market doesn't seem to have really gone anywhere since like late October. And looking at that now, I'm starting to smell a little bit of of uh what I what we did back at the end of 2021 when the market, you know, just couldn't couldn't seem to get to to permanently higher highs and then everything kind of rolled over at the beginning of 2022. And you know, who knows if the same thing's going to happen here, but we are entering the year like we did then with valuations at, you know, pretty much record extremes. I think in some metrics the only time they were exceeded was at the end of 2021. >> So I'm just curious, are you hearing similar echoes as I hear? >> Yeah. Yeah. And look, I mean, it's something you should definitely be concerned about. I mean you you've got bubbles in a variety of asset classes and you know you know I use that you know that you got to be careful with that term you know bubbles immediately kind of elicit this whole environment that the world's going to crash and you know that's you know things can remain elevated for a lot longer than people expect and you know that's kind of the old saying about logic and emotion but you know look you got you know gold at record highs silver at record highs stocks near record highs you know Bitcoin is about the only thing that that kind of crashed this year. Um it was down about 10%. >> Crashed. It was down what? A couple single digit percent for the year. >> Yeah. No, it's down 10% for the year. But again, when everything is up, you know, double digits or more, you know, that's terrible outcome, right? So, you know, but like I said, you know, every asset class did. Even bonds did well this year. So, you know, it's it's been one of those years where everybody's very complacent about risk. Everybody's got a narrative for why their particular asset class is doing well versus some other asset class. And it's kind of fascinating to me is you know everybody goes oh look there's a bubble in stocks but there's no bubble in precious metals. I it's just you know it's just you know everybody's got a narrative for where bubbles exist. But you know what what all all that eventually matters is price deviations from long-term means. And and the reason that is the most critical aspect going into next year is that markets solely function on one outcome which is the demand of buyers versus the demand of sellers. And right now you've got an imbalance of buyers versus sellers. In other words, you have more people wanting to buy the market than those wanting to sell. And that drags up the price because in order to get a seller to come to market, you've got to pay me enough to sell the asset that I have to you, right? So you want to buy my you want to buy my Nvidia, you're going have to pay me more for it tomorrow to buy it if you want it if you want me to sell it. >> Well, eventually you run out of sellers. Um or you run out of buyers, one of the two. And if you run out of buyers willing to pay a higher price, prices are going to mean revert fairly quickly. And and again, we'll all point to some reason. Um, you know, uh, you know, this asset went down this year because of geopolitical risk or this asset went down because of this reason over here. But whatever the reason is, it's just the event that caused the imbalance between buyers and sellers to reverse. And that's the big thing going into next year is to look at, you know, where assets are trading in terms of their deviations from means and understand that when you have very large deviations, you have a bigger risk of reversion than not. And I think that's a huge risk for stocks next year. >> Okay. Um to that point, um and again, maybe you can pull up the the TA Lance, so we can just sort of see the the band that stocks have been trading in for the past couple months. Um, uh, I think the answer is no. Uh, simply because I've been asking you and Michael every week recently, but given that risk, have you guys done any material de-risking yet in your portfolio? Um, I'm guessing you haven't done too much until you start to see some technical breakdown, but you tell me. >> Yeah. No, that that's that's absolutely right. I mean, you know, the the latest move that we made was in our all-weather portfolio, which uh is the portfolio that has all of our precious metals in it. We cut our exposure to silver back to its normal base level um last week. Well, actually, I forget what week I'm in. The last Yeah, not this week, but last week. Um we reduced that back to target weight. Took profits there because of that deviation from long-term means. >> But other than that, no. Everything else is fine. markets are trading fine. Um, you know, assets are trading well right now. There's not a lot of risk in the over perceived risk in the overall markets. So, there's no reason to make big moves to to to derisk. And this is one of the big mistakes that investors make over time is they identify some risk, right? They say, "Oh my gosh, you know, the the debt's going to cause the markets to crash by 50%." Okay, maybe, but it might be five years from now. And so they get out of the market and then they miss the market takes off running, keeps running and then they're drugged back in towards the highs of the market. It's like, oh, you know, I I've got to get back in. I'm missing too much. And then that's about the time that whatever the event that we're worried about actually happens. So, you know, the the big the big thing that we have to identify as investors is understanding there's certainly some risk out there. In fact, I'm writing an article. This weekend's newsletter is going to kind of be covering, you know, outlooks for next year. And I've been writing a lot about this over the last uh really two weeks. I just wrote an article uh Friday before last talking about the valuation ranges and what to expect in markets if markets have to revalue for either higher or lower valuations. Um that's a pretty big range 8,100 on the upside to about 4600 on the downside. So there's a there's a pretty big range of potential outcomes in the markets for next year. Um, you know, one of the other big risks next year is economic growth. Everybody's expecting really, really strong economic growth next year, but there's no guarantee that we're going to get really, really strong economic growth. Employment certainly a concern. So, there's a lot of variables that are going into to the markets next year, but you know, for right now, the market's looking past most of that and looking mostly at is the Fed going to cut rates and is economic growth going to be good next year? And and and so for right now, the markets are fairly convinced. If you look at the average analyst estimate right now for the for the S&P next year, uh they're expecting between 12 and 17% returns next year for the market. >> All right. 12 to 17% return. So that would get us to a four year. >> Yeah. You get 8,000. >> Yeah. But but that would be, you know, we've been talking about how a a three in a row string is rare and a four in a row string is extremely rare. I would consider 12 to 17% in 2026 a four pete year of you know really good double digit returns for the market. So the the market is still feeling uh you know it's feeling frisky. Um how are you feeling about the odds of a 12 to 70% year? >> Um I I don't really look at things that way. Um you know >> but you guys have to come up with your end of year target at the beginning of the year. >> Yeah. Yeah. Well no it's it's I like I said I just published the range of outcomes. I don't pick a target. I pick a range. And here, let me just let me just show this real quick. >> Well, that's a pretty easy range to make. >> Well, no, no. And the reason is to No, no. Here's where this is where investors make all their mistakes, >> right? They go, "Oh, I want somebody to tell me that next year the market's going to hit 8,000 or it's going to hit 5,000, one of the two." And so they bank their whole outlook based on whatever quoteunquote guru told them is like, "Oh, markets are going to, you know, Ed Jardini, markets are going to 8,000 next year." Okay, maybe. What if they don't, right? The whole point of managing assets is to manage risk. And you can't manage risk if you only have a one-sided outcome. >> Do you understand that? >> Oh, you know, I totally get it. And keep going because you're going to talk about the important things that a good financial adviser does, which is say, "Here's the here's the spectrum of probability. Here's how I'm positioning for each part of that spectrum. Right. >> And so, Right. And so, if we have multiple expansion next year, which is what we've had for the last three years, then you can get an upside target of 8,100, but you're banking a lot on this multiple expansion idea. If we can just maintain the same multiples next year, the market should run to about 7,300. That's about a 4% advance from here. That's not great. Um but if anything happens next year that causes say we have an economic slowdown. You could have a contraction and and again this is all based on valuations and what what are valuations? Valuations are simply a function of what the market thinks companies are going to earn next year. It's about earnings price divided by earnings. So if earnings if the economy slows down earnings are going to slow down. We're not going to hit these you know $330 a share in earnings. And so that will put you at about 6,200 if we have a a correction back to 22 times earnings. We're we're currently at about 25 times earnings on the S&P on a reported basis. So we're only talking about a 3% collapse in in valuations. That's not a lot, but that would pull the the index down to about 6,200. If you have a recession, which is not entirely off the table, and we get valuations back to long-term means, which is around 1718, talking about 5080. So these are really this is a really important you know look at next year because this this range of probabilities is what we have to manage risk with and again when you look at returns over the last 15 years we're running returns 50% above the average return of the market since 1900. So over 125 years in the last 15 we've run average returns you know 50% above norms. you can't sustain that forever, particularly when the economy is growing at 2%. So, that increases this risk of of potential downside. You've also got, you know, kind of looking at three-year returns, as you just said a second ago. Look at, you know, we've had three of of just huge return years in the markets. We're at at at two standard deviations above the three-year moving average. And and reversions to the mean is the most powerful force in investing. Again, when you look at any asset class, stocks, bonds, crypto, precious metals, whatever, watch the mean because that mean average is where price is going to revert to at some point. It's just a function of time. Something will cause it and you're going to have this reversion to the mean. And when you're trading at two standard deviations or three or four from long-term means, that reversion becomes much more probable. And so when you start looking at, you know, the fact that next year we've got this kind of mix of environment, you've got to start looking at your portfolio in terms of ranges. You know, what's my upside potential? What's my downside potential? And how am I managing my risk looking into next year? So this is why we've lately been adding some defensive positioning to our portfolios. We still have our growth, right? We still own Google. We still own Nvidia and Microsoft and Amazon, those guys because the markets are doing okay. But we're also starting to add in this defensive positioning just in case something unexpected comes along. Because the thing that that causes the market to correct is not anything you're talking about with any of your guests right now. If there's somebody on your show talking about the housing market's going to cause the crash or it's, you know, credit or it's the government debt or whatever, they're all wrong because that's already priced in. If somebody knows about it and has talked about it, it's already priced into the markets. There's no original thought in the financial markets. What's going to cause the correction is something that is completely unexpected. Remember um last year in March, Trump, President Trump comes out and he holds up this sign at the Rose Garden with all these tariffs. Nobody was expecting that. And that's why the markets crashed 20%. Because there was nobody knew that was coming. Everybody thought it was going to have 10% tariffs. We were all good with that. That was already priced in. Nobody was expecting 50% tariffs or 100% tariffs on China. >> Yeah. Let me let me interject on that because we've talked about this a lot and and I I totally agree though. Even though we we can't see the the black swan that's coming, >> right? We we we by definition it wouldn't be a black swan if we could see it coming. >> You can anticipate the buckets that it would be in. Right. This is something that's going to >> No. >> Change the Well, let me finish. this is something that's going to No, but you you've got you've got different risks out there. Okay. Um m multiple expansion, you know, might not continue or earnings might be lower than expected, right? So you could say, "Ah, this black swan just happened." And that's likely to repric earnings expectations, right? So you can you you can today say, "Okay, here's my playbook if we get a surprise in each one of in in these buckets, right? So you you you don't know what the black swan's going to be, but you know how you're going to react to it once you know what bucket it's in. >> Well, yeah. Yeah. But but saying but you can't define the bucket. That's my whole point. Think about it this way. Um I take a bunch of wood, right? I make a big pile of wood in my backyard and then I pour gasoline all over it and then nothing else happens, right? It'll sit there for years. The the gasoline will eventually evaporate. the wood will rot, but nothing will ever happen until there's a catalyst, right? Somebody throws a match in it, gets struck by lightning, whatever it is, and all of a sudden I've got a huge fire. That's the whole point about the market. These things, you can look at all these risks, housing market, valuation risk, all these type of things. Nothing is going to change the market dynamics until a catalyst is induced. And the problem is we just don't know what that catalyst is going to be. And so you say, okay, well, if this if we can start looking and say, okay, what are all these potential catalyst and how would that affect different asset classes? But the problem is we don't know what it's going to be or when it's going to happen. And that's the big challenge for investing is that we can make the decision to go all into one particular I think I think the the the dollar is going to crash next year and it's going to be the end of fiat currency. Great. So I'm going to go hide out all all over in this other asset class expecting that to happen, but it doesn't happen. And you know, everything else moves, the world moves past you. And so that's the risk you got to navigate is understanding these risks are out there, but and we certainly have all of the we have the wood, we've got the gasoline, we've got the tender, we've got everything for a really good market correction at some point. >> Yeah. You don't know what the match is going to be and you don't know even if it's show up. >> And the big thing is it's I don't know what the match is going to be and I don't know when. It could be five years from now. >> That that's what I was just saying. So, so all I'm trying to say, which I think you agree with, is >> it's it's not fatalistic like, well, we don't know what's going to happen, so we're just going into this blind. >> You can say, look, here are the different types of categories of of of um repercussions that a black swan or a match could have. And I've got at least an advanced playbook so that if I get the world gets surprised by X, I can say, well, what's that likely to do? Okay, I've already got a playbook on the shelf for that and and I've taken some I I' I've given some probability to to that category here at the beginning of the year. I maybe only give it 5% because I don't think it's very likely, but whoa, okay, I get surprised by it. I can dial that up as as a much bigger percentage of my portfolio tomorrow because I've already put that playbook in place, >> right? And well, but that's also why, you know, Adam, we talk a lot about taking profits, rebalancing back to targets, those type of things. That's the management part for navigating risk environment. >> Yep. >> And and you know, so again, this is why we're always like, you know, what what trades did you make last week? Well, we we trim back this, we added to this, we did this, we did this. That's just that management process of risk over time because we don't know when or what is going to cause we we know, look, 100% guarantee. I'm going to agree with you, Adam. Here's the title for this week artic this week's video. Markets are going to crash by 50% or more. Right. There's your title, >> right? You just don't know the when. Yeah. >> But it could be 10 years from now. And and and you know, I want my job is to make money for my clients until that occurs. And then when that occurs, and this is the most important thing I I think this is the one thing that is is the biggest impediment to investors being successful is that they go, "Oh, you know, they hear some guy on on the media say, oh, markets are going to crash by 50% next year." Okay, great. Well, the problem is as market crashes, you're not going to wake up one morning and the market's going to be down 50% in a day, right? It's going to start deteriorating and then that deterioration is going to start to accelerate and then, you know, the event, whatever it is, will actually show up. Markets will know what's coming before it happens. And so, by the time the event shows up, the market will be down five, six, seven, eight, nine, 10%. Then the event will happen and we'll go down very quickly 50%. Um, but that'll still be over a period of a couple of months. And and the point about that is there's plenty of time after the market starts to deteriorate to begin reducing risk. >> And and so that's our that's our whole me methodology is to, you know, track the markets to trend with the markets to let the markets work for us, make us money while markets are going higher, but we're constantly aware of the risk. And when markets start to deteriorate, then we'll start aggressively reducing our allocation to equities. But there's no evidence of that right now. >> Right. Right. And and so a couple things off of that. One is I mean that's sort of why I asked you, hey, you've got some of these valuation concerns, but doesn't seem like you are um you know de-risking materially because you're not seeing any sort of technical breakdown in the markets yet, right? And maybe they don't even maybe we don't get them in 2026. Who knows? Um so so you're you're you're you know eating your your or you're you're following your own rule set there. Um let's put a pin in this part because it's going to be relevant to the rant. um you know the stuff you talk about all the time about position sizing and rebalancing and all that stuff. It is totally not sexy. I know you know that, right? It doesn't make for great headlines. People are probably tired of us, you know, talking about it so often, but as you said, it's just sort of a best practice of um of long-term wealth building. And um we're going to get into this to the rant. A lot of times it's the unsexy stuff that is the most effective in the long run. Um, and I'll I'll leave that as a little teaser for for why that's going to be relevant to the rant when we get to the rant. Um, let me ask you this though, Lance, with with everything that you just said. Agree with with all of it. Um, when I look through some of the the risks that you walk through in your charts there, >> y >> you know, earnings might be less than expected or we might get a recession or whatever, right? >> Um, personal opinion, you might not share it. Um, I feel we can debate more what's going to happen with earnings next year. Like there there there are arguments to be made on both sides, right? Like I know you think that small business earnings expectations are seem pretty out of whack or earnings growth for next year, right? It's like 50% uh expected earning in in in the Russell. Um that I agree that that that seems crazy. Um but who knows, right? Um, so you know, we can definitely say that, hey, Wall Street's gotten, you know, way ahead of its skis in terms of expectations, but then again, you can listen to arguments on the other side about all the tailwinds that are coming to the economy from everything that got put in place in 2025, right? And you might agree, you might disagree, we can have healthy debate. >> The area where I have a harder time, and this is where I want to get your gut feel, so it's not a prediction, just a gut feel, is on continued margin expansion, >> right? I mean, you showed the chart about how margins have just been going up year after year after year. We're now at at total nosebleleed levels that every time we've been anywhere near this in the past, there's been a market correction um following. And again, this is not a great timing mechanism, but it's it's a it's an indicator of risk. What does your gut tell you about margin expansion going over next year? Can do do you think the there are decent odds for it to go even higher in cape ratios and stuff like that? >> Okay, so two two things. First of all, you know, cape ratios are a function of pure valuation, right? Price and earnings. And so I just the the only reason I'm making this clarification is because I want to keep apples and apples together. >> Sure, please. >> So because you said profit margins and that's a little bit different than earnings, right? >> Oh, okay. But yeah, my question was more on the multiple expansion. what what what what P we're giving on the PE ratio, >> right? But no, but but profit margins are are crucially important. And now there earnings, it's the margin that I'm making for every dollar I sell. So if I sell Adam, you know, this bottle of water, as an example, and I I pay 80 cents for this bottle, I sell it to him for a dollar, my profit margins 20%. Profit margins have been skyrocketing for the last five years because of the fact that most companies had refinanced debt previously at near zero interest rates. So they didn't have a lot of interest rate cost burden. uh the inflation that came through from, you know, the the the tariffs, not the sorry, not the tariffs, stimulus checks, the households, um you know, all the uh the the inflation reduction act, all that money that went to the system that caused the inflation. That was great for businesses, right? >> They passed most of it on. Yeah. >> Yeah. Yeah. Well, yeah. because I gave you money to spend. You know, and this is the big thing about government policy and and and why you should wholeheartedly reject anytime the government wants to step in and give you money. But, you know, if you if you give subsidies for child care, child care is going to go up in cost to to cover that subsidy. And so, it it inflates everything. If you want cheaper health care, stop subsidizing health care because that just makes prices go up. So, you know, those those type of actions were great for companies. Now the risk so so now we've got profit margins at the highest level on record ever in history and and it's been great for companies the big risk is they can't maintain that profit margin because as inflation comes down as the economy slows down demand is already declining. Take a look at what's happening with employment and that's a reduction in demand. As demand falls companies now have to start pricing things lower to sell product. They still need to make money. They still need to sell their product, good or service, but they're going to have to charge less for it, and that's going to impact those profit margins. >> Yeah. And Jeremy Grantham, just real quick, you know, was famous for saying that profit margins were one of the most mean-reverting data series in investing, but not recently. >> Not re it look everything mean reverts. Everything mean reverts in time. Now, just because things can remain elevated for two or three or four years or a longer period than we're normally used to doesn't mean reversion is a thing of the past. It just means that mean reversion is going to be a lot bigger the next time it occurs. And so again, those are those are going to happen. And this happens in and again this applies to every asset class. There's no asset class that is immune from mean reversion and that's just a function of timing. Um, but now to your point about earnings, earnings are a little bit different than profit margins because there's a lot of manipulation that goes into earnings. Sure. Share buybacks, accounting gimmicks. Almost 20% of all earnings are a function of accounting gimmicks, right? I I cookie jar reserves. I move forward revenue that I haven't even collected yet. Um, book it as revenue this year. You know, those type of things occur and that really that that impacts that earnings per share number at the bottom. Again, that's why buybacks are so so critical to companies to meet earnings is because I buy back enough shares, I can make sure my earnings number per share beats the estimates. Um, but you know, we've seen a a big expansion in valuations and and the big point about multiple expansion is is that that means the market is growing faster than earnings. And so the price of the market, we're we're paying more and more more for the same dollar of earnings than we were willing to pay last year or for the year before. So if company earns a dollar two years ago we would pay a dollar for that dollar and today we're willing to pay $3 for that same dollar in earnings and that's called multiple expansion. Now that drives the market but that's all enthusiasm that's sentiment that's psychology and that's all a bet that the future is going to be extremely wonderful for companies but there's a lot of potential risk over the next couple of years. lower economic growth, you know, lower interest rates, lower inflation, you know, take a look at the EU as a good example of this. The US economy has grown by about 15 to 18%. Over the course of the last five, six years, the the the European economy has barely grown at all. Uh they don't have technolog technological innovation. Next year, the IMF predicts that the Europe the Euro zone will grow at about 1%. The G and GDP in the US will be about 2%. So, you know, when you start looking at these factors and looking at where asset prices are trading that just stuff just doesn't line up and you're eventually going to get that reversion back to econom because because at the end of the day, where do earnings and profit margins come from? Comes from economic growth. If you and I aren't out spending money, these companies don't make anything. So, you know, it it's hard to imagine how with the economy slowing down, you can maintain valuations where they are. But again, that doesn't mean this year. >> Okay. So, thanks. A little bit of a long way to answer the question, which I'm going to re ask again, which is let's just assume earnings flatline, >> right? >> So, they don't even have to shrink. The market could still go up if multiples continue to expand. >> Correct. That's the thing I have that not necessarily that the the earnings are going to flatline, but that's the thing I have the harder time feeling confident in is that multiples are going to continue expanding next year um because they are so stretched right now, >> right? And again, that is a risk, right? And and that was the same risk we had this year. Multiple >> I'm just asking you, how worried are you about that part? >> I was worried about it this year. Remember, I wrote the article at the beginning of this year called Curb Your Enthusiasm. Yeah, >> part of that analysis was based on valuation expansion and saying, look, you know, it just doesn't seem reasonable that we can continue to expand multiples at the rate we're expanding multiples, but we did it right. Um, so, you know, again, that doesn't mean that in 2026 we're not going to do it again and and push 40 times on a cape ratio or 42 times on a cape ratio. Maybe we'll hit the dot peak or exceed it. That, you know, that's the thing about markets. They can certainly do that. I I think it's a huge risk, but I think it's something you've got to to, you know, give some some at least some possibility to happening. >> So, is a curb your enthusiasm 2.0 article in the works? >> Uh, it's actually I'm using South Park this year. >> Okay. But but similar sentiment. >> It's it's a similar it's a similar uh kind of thesis uh which is expect more volatility, potentially lower returns. I don't know how you're going to bank. So since 2019, we've turned in near 20% returns every single year except for 2022. Um that's a very long stretch of very very high returns. And again, just and again doesn't mean a a crash, but you know, start thinking about a return to normal, which is 8 to 10% returns a year, >> right? >> Which will be very disappointing for a lot of investors. >> Yeah. Well, so this is sort of what I say, right? like, you know, your team wins the Super Bowl, you're excited, they win it again, right? A Super Bowl is about it now. Let's say NBA championships because we've had we've had these dynasties. >> Um, you know, you start taking it as a given. So then when your team only makes the playoffs, you're disappointed, right? You know, in your two or three. Um, now we have a had a team that's that's pretty much made it to the NBA finals, you know, three years in a row. And and right now the betting markets are suggesting that they're going to do it again. Uh uh so you know a flat year will be totally disappointing. Um to your point and I know I I know you wouldn't be shocked at all again not by a crash but by a couple years of negative singledigit growth right which would be totally merited from a mean reversion standpoint but would be totally disappointing to a market that has just become addicted essentially to double digit returns now. >> Yep. Well, no, and I just wrote an article uh last Friday talking about, you know, kind of the economic factors behind valuations for next year. And, you know, that's and I think I think the economy is probably one of the biggest risks because, you know, for investors, the biggest risk is that earnings disappoint. And earnings expectations, as we were talking about earlier, are very high. And and what's really interesting is they're very high for the bottom 493 stocks. They're expecting 12% earnings growth next year, which they haven't done that in five years. So, all of a sudden, we're going to get this massive expansion of earnings from the bottom 493 stocks. And the top 10 stocks that have driven virtually 100% of all the earnings growth over the last five years aren't going to grow as fast. None of that makes any sense, >> but that's what the market believes right now. >> Okay. Uh again, which is why you're you're cautious going into next year. You're not really changing anything yet because the markets are continuing to do what the markets have been doing, but you're kind of on alert to to things starting to wobble. >> Okay. You'll know. I mean, we'll start cutting exposure pretty aggressively. And look, we're we're probably going to cut a little bit of exposure next week, maybe >> really. And not not by a lot. Um, but we'll >> Well, no. And the only the only reason is is that we've had eight straight months of positive returns. That's a very long stretch in the markets. Normally markets can run five to six months on on average where you have consecutive every month, you know, you're putting out a positive return. Eight months is getting really long in the tooth. So you're going to have a month or two of potentially, you know, very, you know, slightly negative returns, those type of things. A lot of slop, uh, potentially. So, you know, again, we'll probably just come, we're overweight equities in our portfolio. So normally we if in our kind of our flagship model we run 60% equities and 40% uh fixed income. So right now we're about 65% equities. So we're overweight. So we'll probably pull that back to target weight. Maybe slightly underneath. Maybe we'll go to 56 57 55 um something like that. Just but just basically take profits and rebalance risk because I do think we're going to get a sloppy couple of months here particularly you know maybe the first of the year. Let me let me ask you something a bit tangential here. Um so this is a midyear election. Yep. >> Right. And uh you know the the current administration's nervous that uh you know historically they the current the incumbent uh party does poorly in the midterms because everybody's always frustrated that things aren't as great as they have been sold. Right. Um, what do you think would matter more to the outcome of the midterm election this year? Um, the stock market being sloppy, you know, just just underwhelming. Um, or the economy underwhelming. In other, let me put it this way. Um, let's say it's an underwhelming year in the markets, but the economy actually firms up. Um would that have more or less impact do you think than the economy being sloppy but the markets having a good year? >> Uh well look historically speaking the outcome of the economy in a in in a election is what matters. People vote their pocketbook and you know you and I both know that the vast majority of participation in the markets are in the top 20% of income earners. So the people that vote are going to be in that bottom 80%. they're more tied to what's happening economically. So, if the economy is weak and their their lifestyle is not improving, and I think this is a big risk in the midterms for the for the for the uh conservatives right now, the GOP, is that you take a look at sentiment indexes, etc., they're pretty poor. And that doesn't bode well for midterm elections. And so, we could see very much a potential change in power either in the House or the Senate. I'd probably not both, but it could be. Um, but you know, we could see at least a swap of power or control in either the House or the Senate, which would effectively put the government into gridlock, you know, for the next two years after that. >> Yeah. I mean, but so personally, I think that's the outcome. uh unless the administration makes people feel better about their pocketbooks. And and my question to you, which is sort of leading because I' I've share the same opinion as you is, you know, Trump has always touted the the S&P as as a scorecard, but I think what really matters more to people is really jobs. It's, you know, do I feel like I'm either going to keep my job and or get a raise and or I could get a better job than I have right now >> versus am I worried about my job? Am I losing out to inflation still with wages >> or, you know, um, if I want to if I want to skip to, you know, a different employer, but no one's hiring, you know, those are I think that's really what's going to do it. >> Yeah. And to be fair though, every president in history has used the stock market as a benchmark of performance. So, you know, everybody point, you know, every president points to the stock market. Oh, look at what the stock market did last year. I'm doing a great job. >> Probably true, but not as much as Trump. >> Trump wears it on the sleeve. >> Obama was a master at it. So, >> well, I I I don't know. We'll let people do that. >> But hey, it's your Hey, it's your political leanings. It's not mine. So, I'm just saying facts are facts. >> It's not my political leanings. It's just I I just don't recall a president touting it, especially his first administration. and and and we've talked about this. Trump Trump has started doing this. I think he's late to the game as we talked about when he got elected. You know, I thought first words out of his mouth when he got elected before even getting sworn in was, "Folks, it's going to be a rough year and a half while I dig out of this massive hole that my predecessor put me in and just blame it all on on the guy before." I feel like he really um he he didn't do as much of that nearly as I think he could have and he's now, you know, trying to sort of scramble and say, "Well, hey folks, you know, um the good stuff's coming, but it's going to it's going to still take a while." He I don't think he's got a lot of time to make people feel better about their their pocketbooks before people are going to cement who they're going to vote for. >> Oh, no. I said that when he was first getting elected. I said, "If I was President Trump, I'd walk in and say, "Look, the next three years are going to absolutely suck." But we're going to we're going to fix all these problems. We're going to fix, you know, the the fraud. We're going to fix the, you know, the immigration issues. We're going to fix the national security issues. We're going to fix the foreign aid issues. But it's absolutely going to suck in the economy as as we do that. But if you'll stick with me, things will get a lot better on the other side. He should have hung to that message. And and I think you could have you could have navigated this market better. But again, you know, there's a lot of stuff going on in the stock market that has nothing to do with with policy at all. It's speculation. It's retail investing. It's it's a lot of other stuff that's driving the markets outside of and again, you know, at the end of the day, policy has very little effect on the markets. We tie those two together a lot. We say, "Oh, look, the stock market's doing this, so that must mean the economy is booming." That's not necessarily the case, >> but that's just how we tend to function those things. So, >> yeah, not not necessarily. But to your example earlier, you know, tariff policy definitely kicked the market in the groin, you know. >> Yeah. For about 20 minutes, >> but well, tell that to the people who lost >> every and every one of the of the, you know, people you interviewed, uh, everybody that was out in the media, oh, tariffs are terrible. They're going to crash the economy. It's going to cause the economy go in a massive recession. And we were over here saying, "That's not true. That's not going to happen." And it absolutely didn't happen. We've had no inflation pick up. we've had, you know, the economy didn't crash into recession. Everything everybody said about tariffs was absolutely wrong. >> Well, I I I largely agree with that. Not everybody I interviewed because I had these debates a lot. Um, and you know, tariffs, they did have some good good some some goods price inflation impact, but it was a one-off. It It's looking very >> much more now that it was a one-off price shock like you and I had predicted it would be. Um but no no I mean look we could talk all about tariffs but I think um you know Trump Trump I think well I don't want to say he's looking totally vindicated on it but I think he is definitely you know looking a lot more validated than he was 6 months ago when you're right I mean every pundit out there certainly in the mainstream was saying it was it was going to ruin the economy. Okay. Um well look let's go through a little bit of a lightning round here. Um, >> so, uh, give me your 2026 outlook for on the following. Let's start with inflation. >> Okay. 2%. >> Okay. So, a year of lightning. We talked about this a lot two weeks ago, but it's going to be a year of disinflation, right? At least as measured by CPI. >> Yeah. I mean, look, look, I think inflation travels, you know, if you take a look at 10 year uh, five year and 10 year expectations, forget forget CPI. I if you want to do yourself a favor, forget CPI. I wouldn't even look at it. Just look at five and 10 year forward expectations on on inflation. That never rose. Despite the fact we had 9% CPI uh following the the pandemic stimulus, Ford expectations never rose. And right now Ford expectations for inflation are about where CPI is trading which which Ford expectations have been saying that for the last five years is that inflation was going to come down to that level. So I think you're going to continue to moderate around two 2.2% inflation. Um and that's about where your economic growth is going to be. >> Okay. But that is disinflation just just to be clear from where we are right now. Right. >> Oh on an annualized basis. Yes. >> Yes. Yes. Okay. Good. All right. And that but that's what hold on let's let's clarify something real fast. Disinflation is falling prices. We are not going to have falling prices. >> No no no no. Disinflation is a falling rate of inflation. >> I know. But but for people right when you say disinflation people think oh prices are going to be lower. This has been the big argument. >> Okay. But but just to be clear this audience is smart enough and I would say they know I meant deflation if I meant lower prices. So we're not saying lower prices. >> Perfect. Okay. I just you know we're not going to have lower prices. Prices are going to go up 2.2% next year. That's, >> you know, we're going to have inflation next year. That's a good thing because we want economic growth, >> right? >> But yes, we'll have a slower rate of inflation to your point. >> Yeah. And just to get super in the weeds on this, because inflation is a basket, we will to get disinflation, we will have parts of the economy that will be deflating, >> right? >> Namely, housing. >> Exactly. Yeah. Rents. Um Okay. Um, so tied to that question, bonds and bond yields, >> um, bond yields below four, um, probably somewhere in three and a half to 375. >> Okay, >> best guess. And that's it. That's assuming inflation returns back to 2%. >> Um, economic growth is around 2%, slap on a small premium, you're at, you know, 375ish. >> Right. Right. So, just to be super clear, that's a that's a a no recession um Yeah. environment you're talking about there. >> No, you get in recession now. You'll be 2% on rates. >> Yep. Okay. >> I don't want I don't want a recession, by the way. >> You what? >> I don't want a recession, by the way. >> I I know you don't want a recession. And and to your point there, recession is not in your default forecast for next year. Yeah. Um Okay. Jobs >> um weaker. Um my big concern next year is that you get a stagnation in job growth. Every single jobs report this year has been revised lower. Um so I think the big risk at least ear in the early half of the year is this kind of continuation of companies cutting back on employment to you and basically using AI to replace employment and we get a slower rate of employment growth and then I think that poses a risk economically and that's also one of the catalyst behind lower rates of inflation. So I think that's one of the bigger risks to pay attention to at least in the first half of this year. >> Okay. And um you know there's been so much debate over the quality of the jobs data that we've had. Um I don't want to I don't want to rehash all that. I just want to point out that if we look at things like the quits ratio >> um that is like at recessionary levels right now. Um and that that that tends to be a pretty good indicator of the true sentiment of the worker which is hey can I get rid of this job I have and go get a better one? And right now it is pretty resoundingly no. Yeah, this is this is the thing that I'm paying most attention to. Full-time employment. Full-time employment is the key to the economy, right? You know, if you've got three part-time jobs, great. Wonderful. You're working your ass off. You're not going to really make any any strong economic progress in your life, right? Just because part-time jobs don't provide benefits. They don't provide high enough wages to support a family of four, etc. So full-time employment is key in terms of economic output. Um provides benefits, provides higher incomes, those type of things. That rate of full-time employment relative to the working age population is falling pretty quickly. That only happens during recessionary environments. >> Yeah. And we're still seeing that fall right now, right? Where where we're where so >> the state is as of last Friday. >> Okay. So, so, so the impact of deportations, meaning two, two and a half million bodies that have presumably have been removed from the population, that doesn't seem to be slowing this at all yet in terms of, you know, freeing up other jobs that people, you know, might be able to >> Well, and again, you know, I, you know, I don't know what the mix was of the people that we were, you know, that people have been deported. Were those full-time workers at high wage paying jobs? Were they working in the oil and gas field or were they doctors or lawyers? I I probably would suspect no. Um so, you know, the impact to full-time employment and and relative to the working age population is probably not changing that dynamic much. >> Yeah. Well, clearly not in in the uh data you have here. You know, I think there's been discussion of, hey, you get a bunch of guys who were working construction sites or in the oil gas field or whatever who aren't there anymore, then maybe demand increases, maybe even wages increases for the remaining, you know, US citizens who are here who could be taking those jobs. >> But again, that's why I was asking it doesn't seem to be having any impact as you can see in the data yet. >> Not yet. But here's the key though. Um, this is the black line is that same chart. This is full-time employment as a percentage of the population. What you'll notice is there's a fairly decent correlation between the the es and flows of that versus inflation and personal consumption expenditures. So again, that this decline of full-time employment is a key driver why we're seeing a big drop in inflation as well as personal consumption expenditures. And if that continues, >> then we're going to see a lot slower rate of economic growth this next year, >> right? because fewer people employed full-time, the fewer people out there buying stuff. >> Correct. >> Yeah. Yeah. Um Okay. And this is one again just personal um point of view. I I've generally been pretty pessimistic about the employment market for the past couple years. And I think that has proven out >> and there's a big part of me that still wants to be leaning into that going forward. Um there is a part of me though as I've been bringing up recently that is you know at least hearing the administration especially folks like Secretary of Treasury Scott Bessant who is just saying hey don't underount what's coming folks um and uh we have seen certain segments of the economy that have started to see some pretty big job growth um especially around like data center construction and stuff like that um and so this is just one of those areas where I'm now less as confident in my leaning on it. Um because I feel it's sort of a wait andsee game here. Um and and I would love for the administration to be correct here. I'd love to see, you know, continued positive uh real wage growth and all that type of stuff. >> Um but I can easily see the the train going off the rails here if this employment data starts getting worse. >> No, so you make a good point. Um look, the data center construction is going to be an economic boom, right? Um it is going so if we spend right now it's estimated we're going to spend about $4 trillion over the course of the next five to seven years building these data centers and all the things go along with it. So that runs a multiple of about 3x in the economy. So you're talking about a 12 trillion addition to economic growth over the next, you know, five to seven years. So >> I mean that's that's a tremendous amount of stimulus. >> Yeah. Yeah. Yeah. Yeah. That's and and you know that's great, right? That's jobs, that's employment, that's wages. And so, yeah, we may see an economic tick up, right, for the next couple of years as all this activity kind of starts running kind of full steam. The problem though is that let's say it takes, you know, I'm I'm just throwing out numbers. Um, let's say I'm going to build one of these data centers like Amazon just built that's the size of like six football fields. >> Yeah. and it takes 5,000 workers to build it. Once it's built, I need 500 workers to maintain it. Right? That's the that's the the backside of this is that yeah, we may have this short-term boom in terms of economic growth and activity while we build all these things out, but then once they're built, that goes away. And >> oh, I'm I'm there with you. And this, you know, I've ranted on this with sort of AI and robotics. I mean, >> 10 years from now, I'm very very worried about job supply. Um, but I could I could understand the argument for next couple years. >> Yeah. >> You know, you build that that those 5,000 workers build that factory. Well, they got to go and build the next one, right? And then there's other factories that need to be built at the same time and all that type of stuff, right? So, >> so, so I think I think there's an upside. I think I think, you know, you take a look at deregulation, the one big beautiful bill, tax cuts. I was going to say taxes. I mean, they're saying that they're gonna Americans are going to see the biggest tax rebate this year ever. >> Yeah. Well, and we'll see. I'm looking forward to it. I could certainly use one. Uh >> yeah, but but but just assume that that's true for a moment. >> That >> that's going to really drive economic spending, right? >> Correct. And we could see a lot of stuff uptick near-term that would help benefit the markets. And that's why I'm I'm I'm not super bearish about next year. Um I I think that returns will be okay. um you know just from a statistical standpoint I think maintaining another 20% year while possible >> is is is becoming more and more unlikely for a variety of reasons but we could look and that doesn't mean that just because we see an uptick in economic activity that the stock market goes to the moon. Well, that's what I was that's what I was just going to chime in on is these things technically are different and you can have a good year economically but a bad year marketwise and a lot of that has to do with valuations, right? And I know that they're a bad timing element but a market can revert to the means even though the economy is growing, right? >> Yeah. And so, so yeah, there's a and again here's here's the other problem, right? So, and to to that point specifically, >> let's just assume for a second next year we have 4% real after inflation economic growth. That's a boomer year, right? That's double what we're doing now. >> So great year. Inflation's going to go up. If you have 4% economic growth, you're going to have 3 to 4% inflation. Those those cannot live in two different worlds. It's a function that they are one and part of the same. There's a very high correlation between economic growth and inflation over time. So if that happens, that's great. But the Fed can't cut rates anymore. The whole reason the market's been going up is because the Fed's been cutting rates. We want more monetary accommodation. So that's justifying high valuations having a lower discount rate. So to your point, and it's very valid, is that if we did have a boomer economy, it could be fantastic, terrible for the stock market because now we're having to tighten monetary policy. You have an inflation, you know, a pick up in inflation. A good pick up in inflation, by the way, >> provided wages are growing. >> Yeah. Higher wages, more employment, more activity. It's fantastic. Companies are able to charge more. You can pay more. You don't care because you're making more money. That's all good, but that's not really great for the market. >> Yeah. Okay. So, bottom line here, again, my my point of view, jobs is going to be even more important to watch this year to try to get a sense for which way it's going here. Yeah. >> Correct. >> Okay. All right. Housing. >> Uh, big conundrum. You know, I'm still I'm still working through that. Um, you know, it's interesting if you take a look at housing activity, there's nothing going on. U, you take a look at the number, you know, housing prices. When we talk about housing prices in general, we talk about the housing market, we're only talking about people on the fringe that are actively buying or selling a house. So, if you're just sitting on your house, you're not affecting the market, >> right? And and and a much higher percentage than normal of them are affluent, which is what's keeping the average prices. >> Exactly. And and there but there's no activity. There's no buyers buying a house. There's no seller selling house. I live in a neighbor where my neighborhood is. So, you know, a couple of years ago, Adam, you know, I was renting a house and we were renovating an old house from the 1960s. >> You moved into the ring, right? The really attractive part of Yeah. >> Yeah. So, no, no, I'm not in the ring. I'm outside. >> Oh, are you? Okay. I just remember you talking. >> I'm I'm I'm in the energy corridor is Okay. My So, we're just surrounded by energy companies. But anyway, it's a little pocket neighborhood. It's got a really good school district. It's it's a very quaint kind of housing kind of a neighborhood where all the neighbors know each other and and you're complet it's it's it's kind of this little paradise outside of the whole hustle and bustle of the city. Um and normally when a house goes on the market in this neighborhood, it's very highly sought after. And so if you can find a house in this in this neighborhood, it immediately sells. Generally, it'll be on the market for one day and it's sold. There's been three houses now for sale for six months that haven't sold and they're having to cut prices. >> Wow. >> If you want to be a neighbor of Lance, this is your moment. >> It's time to do it. Um but no, it's just very interesting, right? Um that we're starting to see more and more of that sitting around the market. So, you know, I think I think next year we continue to see housing struggles. Affordability remains an issue. Even if you bring even if you bring rates down, you know, the the issue we've talked about before is that I've if I've got a mortgage at 3 or 4%, I'm not going to sell my house to go get a mortgage of seven, six or 7%. It just doesn't make any sense. >> So, a lot of people are going to just sit on their houses next year. That's going to keep housing prices more stable than not because again, you don't have any activity going on and so housing prices don't crash as everybody's kind of expecting. And if rates go up, that's just going to make the housing market worse. >> So, okay, I don't disagree with much of what you said there. I I do think though that time is not the housing market's friend. >> I agree. >> And and we we now uh we passed a few months ago the the line where there's now more six plus% mortgages out there in houses than there are, you know, sub 4% ones or whatever it was, right? >> So, that lock in effect is is is diminishing. At the same time, um, if the job market isn't improving, um, people the the weight of not just higher in mortgage rates, but also just higher everything around home ownership >> continues to weigh on people and you just have the organic factor that builds over time of death and divorce and job loss and stuff like that. So, there is some sort of breaking point in there. I don't know where it is. We've certainly seen a number of markets where people have hit it and and really the trigger is inventory. Um that's really going to uh tell the tale. It's what has told the tale so far because we now really kind of have two housing markets. We've got some that are full-blown in correction and some that are they're avoiding it. And the the big differentiator between the two is how much inventory is on the market. So >> well and I think a lot of it too is just location location, right? I mean, you know, we I had this was having this conversation the other day with a a young person. And when I say young person, it's somebody younger than 40. So, but I was having this conversation and you know, he was saying, he's like, "Oh, I can't afford a house." And I'm like, "Well, where are you looking?" He's like, "Lang." I'm like, "Yeah, you can't afford a house in any of the major metros. You can't afford a house. You get outside of major. You go to Midwest, you can get houses pretty cheap. So, you know, location is very, very important. And unfortunately, all of our housing indexes are based on 20 major markets. So, you know, so prices are a little bit skewed by these housing market indexes because of where we measure them. Um, if we actually had an average home price across the country, things probably would look a lot more affordable than they do right now. But again, nobody wants to live in Wyoming, right? There's there's a reason only 500,000 people live in Wyoming. Well, it depends on where in Wyoming, but um >> Well, I'm just saying there's there's there's not a lot going on in Wyoming. >> Yeah. Well, yeah. And it's it's cold enough where I live. It's wicked cold in Wyoming. >> Personally, I would love to live in Wyoming, right? I just I just, you know, I I don't like people. So, you know, Wyoming would be perfect for me. >> Yeah. You you'd switch from land man to Yellowstone. Uh so, >> correct. >> Um Yeah. Yeah. And of course the the well the big determinant there though is is no matter where you live, you got to have the income to support the house that you're buying. So you got to find the right overlap of you know where can I make enough correct >> uh to to afford the type of house that I want. Um okay. So um >> but so the bottom line to your question is I really don't have a clue what housing's going to do next year. It wouldn't surprise me if it's about the same as it is this year. >> Okay. But I but I don't hear from you. I hear from you what I hear saying is be the same or worse. I don't hear you saying, "Oh, I think there's good probability housing, you know, enters a boom again." >> Yeah. I No, I I don't think there's any I don't think there's any supporting drivers right now to create a a resurgence of massive buying activity. >> Okay. Um I'm going to ask you about your trades to get to the rant and wrap things up here, unless there's anything else that's burning brightly on your radar I haven't thought to ask you about yet. >> No. Um only trade we did in the last really week and a half. Um and again, this was early last week. I said earlier in the show today is we just sold silver down to target. It just has had a huge run. Uh it's grossly deviated from this long-term mean and and now with uh and we just wrote I've got an article coming out next week on the risk in precious metals which is the CME hiking margin rates which I wrote the article and then they hiked them again. So you know that's that's one of the big risks coming up in the next couple of months. >> Okay. So we talked about that at length last week with Michael who I think scooped you by writing about that and publishing article. Um, so a couple things. So, first, uh, just kudos because, uh, who knows what's going to happen with silver from here, but if you sold a week ago, uh, you trim back before silver had its 15% price correction. Um, that being said, it's still trading at a very attractive uh, high for the year. Um, not an all-time high for the year. That's what it hit a week ago um, in the futures market. Um, and Michael did a good job last week, Lance, of explaining, you know, both the the chart history of silver when it has gone vertical, and it's only really gone vertical like this two other times before. Once it did, it it gave up pretty much almost all its gains and and was kind of dead money for a decade or more. Um, after >> there there's a giant reason for that. Did he explain why? Well, I mean, he certainly went through the margin hikes and how that was sort of the uh what do you want to call it? The the you know, it wasn't the first margin hike that did it. It it took several, but once it did, it really kind of broke the mania here. Um now, >> but there's a need, but see, there's a need to keep silver around 30, say 25 to $30 because it's such a big economic input. >> Yes. And and and this is always the one thing that people forget is is they try to tie it off to other narratives. But when prices for an important commodity like silver get out of whack, it causes inflation in things like, you know, you know, electric vehicles, right? Because I've got to pass on that silver cost. So, it's an inflationary impact. And when you have a very broad base of activity based on silver, which we do economically, it's not great for the economy. So, you get you get a couple things that go on. The reason, and it's always interesting to me because people immediately come out and go, "Oh, the CME is hiking margin rates to they're manipulating the market." No, they're trying to keep prices in line with delivery so you don't have failure to deliver. It keeps financial stability, which is hugely important, but it's also an economic issue. So, there's going to be a push to push silver prices back down into it. And you look take a long-term chart of of silver and look back over time, it averages about 25 to, you know, 20 $25 on average in terms of silver. And that's a good economic level. It's like oil, right? We don't want oil at $150 a barrel. It's not good economically. We don't want it at 40 either because that's not good economically. But there's a sweet spot where oil is really good for the economy to keep the economy growing. It's the same thing for silver. So in your in your write up that hasn't been published yet if you can really provide detail around that because the other side of that story that I've heard Lance which is true and and and actually silver is becoming increasingly essential and and you probably know the government just put it on a list of essential minerals right >> um so it it's becoming even more essential um and the demands for it are are getting larger and larger especially in an era of AI and renewable energy and all that stuff. Um, but the the argument is is sort of silver is kind of a gifing good, which is the more expensive it gets, the the more folks go to buy it. And and one of the reasons for it is because yes, it's used in all sorts of electronics, it's the best conductor out there. It's the most conductive element. Um, but it's used in such small amounts that like you know in in your iPhone which has silver in it to to work it could quintuple and it wouldn't really impact the price of an iPhone because it it's its component percentage is so small. It's a percent of everything else. >> So I I if you've got data that sort of says no, it's actually more uh it's a bigger percentage of the overall price. I'd love to see that to then be able to pull >> it's it's not it's not the function of an item. It's the cumulative effect across the economy. So again, you talk about EVs, you talk about iPhones, you talk about, you know, all the different components that we have. And and also don't forget the one thing that people forget is is that when prices rise to a certain level, it attracts supply. Um, you know, every time copper runs up to a big moon, you know, kind of does a moonshot, people go out and start stripping down everything that's got copper in it and they go sell it, right? So you get so you get a reversion of supply and and so right now you've potentially got a shortage of of you know this is kind of one of the arguments for it is that you've got a shortage of silver. >> Um but when prices get to a high enough level supply will come to the market. People will start selling off grandma's silverware. That's what the Hunt brothers back in the 90s is people are scraping off the back of Polaroid film you know to get the silver out of it. >> Right. And and there there is truth in what you're saying. Um and that's again one of the things I've been warning people about is I think a component of what's been going on has been a shortage of physical metal in the system and just kind of like during co you know system was caught up by by surprise our our supply chains really you know got wonky for a while but then the system was able to react and free stuff up and and and you know prices started coming down once they did that. There is probably going to be some component of that here. I totally agree with you. The one thing I just want to flag because I know folks are going to flag it when you say you in the comments to what you said. Silver is a little different than a lot of other minerals especially like copper right there are other copper mines out there. There are copper mines that are just not economic at this stage right that at a certain level they say okay we're going after that now we can pull it out and make a profit right? Silver is largely a byproduct of other mining uh operations. There aren't many silver mines out there. So, it's not like oil, right, where you can say, "Well, there's a whole bunch of wells that don't work at $50 a barrel, but they do work at $70 a barrel." We don't have that with silver mines. So, you can't bring new production online easily. Now, you can go raid grandma's tea kettle set and stuff like that. So, there there are there are ways for that, but it's it's less easy to bring on new silver supply than it is a lot of other commodities, >> right? But at the right price, I will drill an uneconomic mine. Right. >> Yeah. But that's my point is I don't know there are that many uneconomic silver mines just lying around to be tapped. There aren't that many pure silver >> mines out there. >> Probably a lot more than you think, particularly in Australia. Um so >> maybe and look, I'll invite the the uh audience here. Folks know if they're more informed on this, please let me know because I'm I'm not as >> No, no. But the whole point though is is that that the cure for high prices is high prices. >> High prices. Yeah. That's true for everything to a certain, >> right? Right. So, you know, again, you're you're going to attract supply to the market in some form or the other. And so, one of the big risk and again, you know, so again, let's let's not get too far off off topic, which is that, you know, eventually, you know, economically speaking, really high prices in silver is not good economically because it is such a critical critical part of the in terms of the mineral needs of of the economy. So when it gets to a very high price, that's not economically viable. So again, there's going to be a push through a variety of measures, either increasing supply, you know, hiking margin rates, whatever it is, to bring that price back down. And that's why, you know, and that's why after these spikes, you come back down in price and you spend a decade going nowhere. So again, it's it's just really important is that if you're a big owner of silver, you should take advantage of this spike because it will go away at some point and things will return to a a normal level where it's economically viable. And that's what And again, maybe it's not 20 anymore. Maybe it's 30, maybe it's maybe it's 35. I I don't know where that number is. It's just not 70. >> Yeah. Okay. So, um I'm going to leave it here because I know we've got people passionate on both sides here. The the couple things I'll say is >> one >> that's the whole point of the article. >> No, no, and I'm looking forward to reading it and you know there are other people out there who I think agree with you in the long run um that look you know this this may be a surge and it may come back down to a lower baseline. Um their question is is but how high is high? And you're you're seeing people out there who are making arguments for prices substantially higher from here and who knows what's going to happen. All I'm saying is is I probably wouldn't short here. >> No, absolutely not. And we're still And look, we're still long our silver position. We just trimmed it back to targets all we did. >> Yeah. You're just taking gains. We're we're currently long gold, palladium, platinum, and silver. So, oh, and copper. So, you know, it's, you know, we own all those metals and we just trim them back to target. But no, we're not shorting anything. We're not predicting a crash. All we're telling you is all we're saying is is from a riskmanagement standpoint and a profitability standpoint, if you're sitting on a bunch of silver, you should go cash some in. And this is also another thing is that people will figure this out as well. When prices start to drop, everybody that's sitting on silver will go sell it, >> right? And that that tends to be what waterfall these things down when they happen, >> right? And that's where that supply comes from. So, uh, you know, just don't forget to take profits. It doesn't mean sell everything. It doesn't mean the world's going to crash and end. Doesn't mean any of that. Could silver go to 100? Sure, it could certainly have to go to 200, maybe. Is gold going to go to 10,000? Possibly. But, you know, look, we've had predictions for years that oil was going to go to 300, 100, you know, 190, you know, 2,000, whatever, and it doesn't happen because, you know, something breaks and brings those prices back down. And, you know, whenever we're speculating, we always speculate things just only go up forever. Reality is that doesn't happen. >> Yeah. Um, so the only other thing I'll say on this just to show that I am listening to you, Lance, um, and that I'm following through on my cautions of people, which is just that vertical moves don't last long. >> Yeah. >> In in in anything in any asset. And so when silver was going just bananas, you know, a week ago and I was talking to Michael, um, you know, we I asked him the question about, well, what if you've got your your physical ounces of silver that you believe the price is going to continue to go higher in the long run and so you don't want to sell your your ounces. >> What are some ways in which you can protect yourself? We talked about some hedging strategies. >> Um, I did as as I think I suggested I would, although again folks, none of this is personal financial advice. I did put a hedge on my silver position. Um I have already taken it off uh simply because uh the price it was a short-term hedge and the price dropped 15% right away. So the hedge paid off very nicely. Um and uh you know I now get to think about do I want to put a a more midterm hedge back on here. But um you know I I I well Lance and I may I don't even know if we really do but we may differ on what Silver's you know longer term potential is here. Um, I'm looking at the same extreme uh tape activity as him and and had been concerned enough to put on a hedge. So, I'm I'm eating that document. >> And look, you know, I don't really look at things in terms of long-term, you know, I just look at risk, right? So, my whole job is just to manage risk. That's all I do. So, you know, if if Nvidia is a good example, let's just say Nvidia. Nvidia has been a great run. We've made a ton of money with Nvidia and companies like Genova. I have no idea whether those stocks are continue to to go higher, you know, next year, the next 10 years or whatever they are. Maybe they do. We'll participate as long as that happens. But when things get out of whack, that's where we start moving things, you know, doing some risk management to the portfolio, taking some profits, rebalancing, those type of things because that allows us to survive the corrections when they occur. Yeah, we took profits in silver a week and a half ago. Now they're 15% cheaper. If they come down some more, we'll add silver. So what'll happen and this is the way it works in the portfolio. Let's just pick a number. Silver's 5% of the portfolio. Silver goes from 5 to 7% on the way up. So I take it from seven back to five. And then the price crashes. It goes from five to three. I then buy it back up to five. So we're always working around that target allocation within the model. So we can buy cheaper, raise it up while it's cheaper, make money on it when it goes back up. When it goes from five back to seven, we trim it back to five again. that allows us to survive the long term, make money, and manage the volatility risk that goes along with it. What most people do is they buy stuff here, it goes to here, they never sell it, and then it crashes back to where it was or went lower, and then they sell at a loss. That's what happens to most people. >> Yeah, that's actually a really good just practical explanation of it all. And it's that So, we'll we'll use this as the jumping part into the rant. It's that boring, unsexy stuff that actually is what works in the long run. Might be the most meaningful thing in the long run, right? So, all right. So, we're definitely not going to come in under time. Uh this I'm shooting for I'm shooting for an average duration now. Yeah. Um >> Okay. So today's rant, uh, probably not a huge surprise to anyone who's been on the internet for the past couple of days, uh, is about the, um, fraud that appears to have been uncovered in Minnesota. Um, it all was sort of sparked off by a citizen journalist, kid, I mean, was it 23y old, 24y old named Nick Shirley, >> um, who basically uh, got a list of of daycare centers in uh, in Minnesota. uh that was compiled by a guy who's sort of been researching the suspected fraud for years uh and said, "Look, I think that there's just a an epidemic of these sort of fictitious um daycare centers uh where they're collecting state and federal uh monies uh to operate, but they're not actually operating." Right? So this kid Nick Shirley um uh walked around with this guy with his list and just knocked on a whole bunch of doors of these daycare centers in Minnesota. Uh and virtually everyone that he knocked on was either like completely deserted um or had somebody in there who didn't want to talk uh you know said no you can't enroll a kid in here. Um it it it just visually looked very validating of the the fraud u thesis. Um so it's it's set off this firestorm now where um you know a lot of people are understandably outraged by that. Um uh it turns out it's not just daycarees uh in Minnesota. Um it's also adult care centers, it's autism centers. So the the um suspected scope of this type of of bilking of of the state um seems to be you know potentially very widespread there. Um the current estimates I don't really know where the estimates are coming from so take them with a grain of salt but that it's like 9 billion in fraud which would be a pretty massive uh fraud. One of the largest some are saying the largest ever. Um, what's really interesting about this story is it it's it's raising a ton of questions, right? One, hey, is this fraud actually real? Um, two, if it is real, how has it been able to persist for this long? Um, a a number of the companies that that even were flagged in the Nick Shirley video, some of them have been flagged by sort of state investigators, Lance, like over a decade ago, like back in 2013. Um, so how could something that that might have been operating since back then be allowed to persist at such a widespread amount, right? And it it seems pretty hard to deny that um if indeed it's it's real and it's as widespread as it is that it's not just the fraudsters themselves that there is sort of a symbiosis with state officials who are benefiting from this fraud. you know, either from votes, either from getting kickbacks, either from getting, you know, fund funding of their their political campaigns. Um, so there it seems to be not just a a story of of criminal activity, but also corruption in politics. And then you add into that the media where a lot of people who are saying how has the media been so blind and asleep on this where a 23-year-old kid with a iPhone can uncover all this in an afternoon and the media, you know, misses the ball even though the story's kind of been in process for over a decade, right? And so there's a lot of people that are saying that there's media complicit here too. So it's kind of metastasized really quickly into this fireball of outrage. And um it's not just related to Minnesota. We're seeing, you know, a bunch of people pick up this ball and start doing Nick Jurly investigations in a whole bunch of other states that have been sus where there's been suspicion of this type of fraud as well. And there's already a bunch of videos you can find on YouTube of kind of similar results and I Ohio and uh Illinois and California and Massachusetts and Maine. Um, so I mean this may just be the tip of the iceberg here. Um, so it it's it's it's really super interesting. Um, I kind of put on a post as I was watching all this in real time on X and said, you know, what's really frustrating to me here is if this fraud is is real, like how long it takes for the wheels of justice to move here, right? Like how can these like if you suspect a rest if the health services suspects a restaurant of of viol health violation they shut it down immediately and they say look you can't serve another you know hamburger here until you prove to us that you've met our standards. So why have has the state been continuing to allow these things to stay open and to give them state funds even if there's a whiff of impropriy? Why don't you just shut them down and say, "Look, we'll turn you back on just as soon as you can prove that you're legit here." Right? So, I I wrote that because I think that captured a lot of the frustration of a lot of people watching the videos. Now, what's been interesting is since I posted that, not because I posted it, but since I posted it, uh the government, the administration has actually they they initially cut off federal funding, federal funds to to Minnesota daycarees. Uh, but I think they've now done it nationally and have said basically, hey, look, this fraud now appears potentially so widespread that we got to put a big pause button on it and we're not going to turn funds on until um, you know, daycare providers can prove that they're they're actually legit here. Uh, going to be really interesting to see what happens. There's been some push back against that decision. you know, yes, there I'm sure there are lots of legitimate daycarees out there that are probably, you know, going to have a, you know, a tricky time in the next couple of weeks, but if it's to staunch the type of fraud that might be going on here, if it's just 9 billion in in Minnesota alone, Jesus, where might it be with the rest of the country, right? So, I'll take a beat here, Lance. There's more that I want to talk about and I do want to tie it to the boring, you know, unsexy stuff, but um I'm sure you've got some thoughts about this. Why don't you jump in? >> Well, no. I mean, just this is why I'm against all government subsidies. I've I've always been against government subsidies. I don't think we should have child care tax credits. I don't think we should have any type of financial aid going out because again, it's just very easy because there's lack such a lack of oversight that it creates all kinds of economic problems. And you know, everybody wants to worry about the $35 trillion in debt, but nobody wants to do anything about cleaning up the kind of the fraud that goes on in the system, whether it's Medicare, Social Security, there's fraud in all of that. And this is the problem with government accountability and it's also a problem with subsidies. Look, child care is a very lucrative business. There is no reason you need subsidies from the government. Period. Right? you open up a daycare center that provides good quality child care, you're going to be inundated with clients. That's just a function of reality in the society we live in today. So, if you took away the the child tax credits, government subsidies, cost of child care would come down. Things would be more affordable because again, it's a function of supply and demand within the economy. But again, we keep affecting all of these market dynamics in the name of good. And again, there's plenty of arguments why people say, "Oh, well, we need this. you know, poor people need this. It doesn't help them. All it does is is increase the cost of of goods and services to them by giving them those subsidies. It makes things worse over time. You may help them for a year, but after the year, inflation will eat up any any ability that you gave them or any support that you gave them. And so, that's why things never improve. But so yeah, I mean if you're going to fix the problem either you need very strong stringent guidelines on how these things are going to work. There needs to be very look in my business we have all kinds of filings that we have to make every year with the SEC to make sure we're complying with all the rules. We have audits. We have all this crap that goes on that we've got to comply with. That should be the same thing for every government program that they want to pro put out there. >> And you know as a guy who's regulated by the SEC like I totally feel that right. It was one of the the things that was at the forefront of my mind. Um, so yeah, I mean, so we we've railed about this before, Lance, right? I mean, pretty much whenever the government gets involved in an industry, prices go up and it becomes way uh less efficient, right? >> Take a look at healthcare. >> Yeah. Well, healthcare, education, you know, we can just go continue going down the list here. Um, and it also opens the door to fraud, right? You know, you know, I really don't need to convince anybody in this, but we've all heard about the, you know, goldplated toilet seats and the $500 screwdriver and right, you know, all that stuff. Um, so, uh, so I'm I'm I'm right there with you, which is like, hey, part of a solution is just to get the this the government out of so many of these things, right? And and it does seem that the the way that these get created is is well, no, Lance, you know, people are having trouble making ends meet, so we need to subsidize uh their child care. So, we put this thing into place and then all of a sudden more and more funds get funded there and then we get, you know, we start getting kicked back and it begins to become a feature of the system, right? And there's a lot of really corrosive aspects of that which I'll I'll get to in just a sec. I do want to say though that not only is this in other states, but it's other forms of fraud, too, like other forms of entitlement spending. Um, in California, uh, they spend 25 billion a year on fighting homelessness and yet the homelessness rate just continues to go up, right? They they refer to it as the homeless industrial complex. And there's just a ton of industrial complexes like that now. Uh, the daycare industrial complex, the adult industrial, like there's just so many of these graphs going on right now. And why this is so important is um to your point, Lance, uh this is what Doge was was really concocted to to address, right? And I know a lot of people were disappointed with Doge's initial results, but I think one of the things that Doge, you know, stepped into was the fact that this is the feature of the system and there's so much resistance to trying to shed daylight in here that Go ahead. I was just say no. I mean, don't you remember every time Doge came up with something like, "Oh, there's this over here." The media would immediately rebut that and then a judge would file an injunction stopping the stop, you know, we like, "Hey, we're going to cease payments to this." And some federal judge that was elected by the Biden administration or whatever would step in and go, "No, we're you know that can't you can't do that. You can't fire government employees." And so, yeah, it was Doge was disappointing because they couldn't do anything. They didn't >> because it's it this is the system. These are the antibiotics of the system trying to resist change. Yeah. Exactly. So um so so obviously this has been past couple days been very validating for Elon, right? And he put out on you he's been covering this on his his ex account, but the thing that that he put out that really caught me was um two things. Um he said, "Hey, as bad as this looks in Minnesota and other states and the 25 billion for, you know, homelessness in California." He said, "You can wrap all that stuff together and it's a drop in the bucket compared to the fraud that's going on in the big three in social security uh and Medicare and defense." So he's like, "Look, yeah, that's a problem, but it's a nothing burger con compared to the real problem that's out there." And uh what the administration is now saying, which which I find pretty easy to believe at this point, is the cost of all this fraud is the national deficit. >> Yeah. >> Meaning, if we could just not deceive ourselves, we could actually be running a balanced budget, we could we could be not adding to our debts, right? We could be we could be, you know, uh we could be living within our means as a society. But it's because we've had, you know, potentially so much crooked uh fraud and abuse now kind of baked into the system as this feature. That's why we're living with all the perils that a lot of people who watch this video lie awake at night concerned about. The debt, the deficit, the declining value of fiat currency and all that stuff. In a large part, that's self-inflicted. And that to me, Lance, is really like that really hits home because that's not necessary. like we could have a much better economy and a much better society and and probably be able to fund a lot of the things that that we think should be funded that aren't today if we just didn't steal from each other. >> Yeah. Well, but again, it's just, you know, when there is easy money with no oversight, people are going to steal it. I mean, that's just, you know, that's just that's just a fact of life. And and this is just why. But again, you know, we elect these people to go to Washington to serve our interests. They work for us, right? But when we send them to Washington, they just wind up working for themselves and there's no oversight. There's no And again, even when somebody gets caught, I mean, how you know, you take a look at Congress, like a big chunk of them have criminal records, right? They've they've been convicted of something, >> right? Or they're under massive suspicion that would put you in and I in jail yesterday. >> Absolutely. Absolutely. And but it's okay. It's that's a bug in the system, right? and and you know, but again, it's all about elections and campaigns and and doing favors and scratching backs. And this is why I said for years, you know, you you got to get rid of lobbies, you got to get rid of packs, you know, these NOS's got to go and get all that money out of the system. And until you do that, and that'd be a very simple process, right? Be like, look, packs are now illegal, NOS's are now illegal, you you cannot you cannot do this, right? You cannot raise money on behalf of political figures. Period. End of story. These political figures are elected by the population. They work for us. They have a standard salary. That's it. So once you do that, all of a sudden you take all that fraud graft out of the system and the system would start operating a lot more efficiently and then put, you know, controls over the money you're spending. Great. I'm going to give you $100 million to do whatever, but I want very strict accounting of where that money went. I want receipts. And as long as that's valid, it works. And there's no reason we can't do that. We have accounting systems. We've got >> Exactly. We've got the freaking blockchain. I mean, we can track everything down to its most granular quantum now, >> right? There's no reason none of this can be done, but we just don't want to do it because there's too much money involved in it. >> And that's that's the thing that's killing me here, right? Which is like the the heart that people gather around with thoughtful money is is, hey, we're worried about, you know, all these unsustainable things that are going on. And I think the answer is is they don't have to be unsustainable. Like if we literally just clean up our own home, you know, uh a lot of these a lot of these really big problems either go away or get much more manageable. You know, we we extend the duration out generations in the future. So look, I don't have all the answers here, but to your point, Lance, you know, getting money out of politics, big part of it, super hard, right? But you you know, you get what you demand, right? And I don't know how I mean, look, this is feasible. I just don't know how realistic it is. You know, we've talked about how like when there's a um a fire in an oil field, one of the ways in which they put out the fire, right, is dynamite, right? You you you you explode the dynamite in in the the gusher of fire and it it consumes all the oxygen very quickly and then all of a sudden you just have gushing oil now because the fire's been put out, right? And you can count the well. I wonder if we could do something similar here where we literally just said, "You know what? Every incumbent gone. We're we're electing a brand new set of Congress and everybody and your mandate for your next term is rooting out fraud, is accountability. We don't you don't need to pass a new bit of legislation about, you know, any new program or anything. Your job is just making sure that getting fraud is out. That's your mandate, right? Could we just >> No. And here's why. >> Well, we could, but I don't think it's realistic. Yeah. >> Well, you can't because just as we saw with the look, we look, President Trump was elected on this mandate. His mandate was to go to Washington and clean up Washington. That was his whole thing. And that's why he got Elon Musk to come in with Doge. And what happened immediately? A firestorm. Elon Musk is going to steal Medicare and Medicaid from us. You know, he's he's he's, you know, he's going to do this. It's going to be terrible. Um the media was all over this just negative, negative, negative. And every time they came up with, hey, there's there's potential fraud here. Oh, that's not really fraud. There's this, there's that, there's this other thing. And then every federal judge in the country was going, oh, you can't do this, right? You can't stop funding of foreign aid. You can't stop, you know, firing, you can't go fire government employees. What are you going to do in that environment? You could elect a whole new slate of people with the same idea and it' be the same result because the system is going to keep it from working right. You're fire every >> So you're right. This is the quoteunquote deep state. I'm just wondering you know so and again I'm thinking idealistically here. So but I mean so yeah so I trust me I'm right with you. >> So so so yeah. So Congress but also the judicial system like sorry judge you guys you you know we're having snap elections. You know you can't run. You can run again maybe in two years. Y >> right. But right now we're just cleaning house and for two years everybody has the mandate of just balance the books. Right. >> Right. And the media can no longer report on anything. The the media's got to go. >> No, I don't care. They're going to get replaced by other new forms of media. Um I I I worry less about that one. >> But the new forms of media regurgitating the same form of old media, right? It's it's it's right versus left and it's just this constant argument, right? So, you know, this is this is the problem we have. We have a narrative problem, we've got a judicial problem, and we've got a administrative problem. >> There's actually one other problem that's really big I just want to put on here. I don't know if you've seen this video, but it was going pretty viral. Um, it was a woman from Brazil who lives in America. She might be a naturalized citizen now, but she's like, "Look, I'm from Brazil." She's like, she's like, "I'm starting to feel the outrage that the average American is feeling. You know, the reason why we're so upset by these videos is because we've been doing what we've been told, >> you know, which is the the fair thing to do. Work hard, you know, do what you you know, follow the rules, stay on the right side of the law, right? And we're seeing these scofflars over here who are totally bulking the system and making out like crazy. And I'm beginning to wonder like, why didn't I just open a daycare, a fake daycare, and just pocket all the money, right? Thank you. >> And she says, look, she's like, you know, I'm from Brazil. I've seen what happens when the critical mass of the populace loses faith in the social contract and then starts to look at the system as something that is going to screw me by default. And therefore, I'm I should screw the system before the system screws me. And that's why you have in so many other countries this pervasive distrust of the government that people use to justify corruption, right? Because they say, "Well, it's a corrupt system, so whatever." Right? and she's just like, "You don't want to have that happen here because it is so incredibly hard to win back once it's become established in the national psyche, right? It's a cultural thing." And I she's right like I don't know many countries that I can point to that say that they fell into that abyss and then they dug themselves out of it. >> Right. No, that that that's absolutely true. And this is look, this is your worry, right? I mean, you you know, you worry about the national debt, you worry about the deficits, you worry about inflation and, you know, those type of things. Most >> you worry about your kids just doing everything right but not being able to get ahead, right? Yeah. >> Yeah. Exactly. And and you know, but this is all very solvable. It's just that nobody's willing to actually solve the problem. And when somebody does, like President Trump, then there's this huge push back. Oh, we don't like orange man. So even though he's doing a good job, you know, this is one of the funniest lines of his State of the Union address, which is, "I could cure cancer and y'all would still hate me," which is very true. And you know, here he was trying to solve this very problem and all he got was grief for it, you know, and honestly, if I was him, I would have just said, "Fine. You know what? I'm not going to fix it. I'm just going to leave it the way it is." You know, you live with it. >> Yeah. So, and first off, you know, I know folks are going to the sadly this is a partisan issue. It shouldn't be, but I've definitely seen people interpret, you know, this recent data very from very different ends of the political spectrum. I I'll be the first to say, look, you know, I don't think there's any angels here. I think there's there's fraud on both sides of the spectrum. It might not be equally distributed. I'll let people, you know, argue that on their own, but um this is not a single party. Fraud is not a single party issue go going on here. Um >> you gota have you have to have in order for fraud to work you have to have two complicit parties. >> Exactly. Exactly. Um and like I said I think it has just become a feature of the system sadly. It's it's it's not a bug. But but what I am becoming I do maintain some optimism here Lance. So do I think we're going to get to my stage of just throw everybody out, replace them with people who have the mandate to clean things up? Sadly I don't think that's going to happen anytime soon. But I do think that maybe DOA's legacy has been infecting the system with a desire for accountability that didn't exist before and a spark of hope that it is now becoming more possible than it was. And you know, I think what Nick Shirley did there was part of that contagion, right? Was was somebody outside of the system saying, "Well, I'm just going to go see what I can do around this myself in this other part of the country here, right?" And now we're seeing a lot of other, you know, citizen journalists trying to trying to do the same. But this is where I get to the unsexy part, right? Like when you think of the big rackets that existed before, you know, Capone's uh, you know, Chicago era and whatnot, a lot of this stuff was ended up being brought down by the Bean Counters, right? You probably remember the movie The Untouchables, right? and and he Kevin Cosner built his team and one of the guys was this nerdy little accountant and Cosner was basically just dismissing him for you know half the movie until he realized he just couldn't get Capone these other ways and the guy said wait a minute I think this is an there's an Achilles heel here and Cost was like wait a minute tell me more about that right and they they use it to bring him down they brought a lot of the the the mob gangsters down on Rico charges and stuff like that right a lot of times it's this super unsexy stuff that wins the day in the long run and you know we are having new technologies that make it easier uh to do the forensic accounting that make it easier to find the lists of of organizations that are getting funding from the states so you can go and knock on the doors if you want to. Um, and I I do maintain some hope here that that when people vote in the future, yes, they're going to continue to to pull that lever mainly on how they feel economically, but how they feel economically is going to be start to be more tied to how much they trust the economic data and that they are going to be hopefully demanding more from our elected officials that fraud, waste, and abuse become something that that has to be on their scorecard for a person to determine whether they're going to vote for that person or not. Maybe I'm being too idealistic. I don't know. But I I I am hopeful that we are starting to sense a little bit of a cultural change here that you know what anti-waste is something that's important to me when I cast a vote. >> Yeah. I I look I think that would be great if people would actually start voting their conscience and start voting for a healthier you know rather than just voting on I don't like this person so I'm not going to vote for him vote is this person the best choice that I have for a better economic outcome because that's what affects me ultimately >> right but I just don't think I mean correct me if I'm wrong but I don't I don't think two years ago before two years ago anybody really thought about waste fraud and abuse when they went into a voting booth >> no you know look I think people are are fundamentally smart enough to understand that there's when you talk look we've been talking about $300 hammers at NASA for 30 years >> right >> but I guess the point is I don't think people felt like they had any control over I had no agency in that now they might feel like >> exactly and so instead of voting your political like your political leanings you we need to get rid of right and left we need to get rid of all that nonsense and we need to start just voting for this is the best person for the job regardless of anything else. I don't like his personality. His personality doesn't matter. Is he good for the job? I don't like the way he looks. Who cares? >> So, I'm right there with you. I'm just saying I think the definition of the job is now going to start including >> Yes. Yes. We need to start electing individuals that are going Look, there's no reason Congress has one job, which is to basically control the purse strings of government. That's really their main job. and their whole job every year is to pass a budget and to make sure that we're in line with that budget in terms of spending, right? We haven't had a budget since Obama took office, right? We do these continuing resolutions that automatically increase spending by 8% every year. And in that environment, fraud and abuse are going to be common, right? If you just keep giving people more money every year and not making them accountable for their budget because you don't have a budget, why not just randomly send money everywhere it wants to go? Because >> And isn't that like the most obvious truth ever? >> You make money plentiful and free with no strings attached. You're going to get fraud. >> Yeah, exactly. And why wouldn't you? So again, you know, we need to require Look, if we just required a budget, we could start solving some of these problems. Well, or to my point, if we solve these problems, we would balance the budget. >> No, no, they go hand in hand, but you got to have a budget to balance it, right? We don't even have a budget. >> Yeah. Yeah. And the Pentagon, you know, hasn't what? They've failed every audit for the past year. I mean, it's just >> there there the the the lack of accountability, and I'll end here, you know, has become the the feature. And we we need to make it more of the bug and then figure out how to, you know, bugs. >> All right. Um, and you know, with that motherhood and apple pie and everything else, but um, I I I do take I guess long story short, I do take some optimism from the virality of what's going on right now because I think the the culturally we may be hitting an important cultural turning point where we just say, you know what, we actually care about this. You've woken the sweeping giant. We didn't think we had any agency. We're now realizing we're beginning to and we're going to start holding your feet to the fire more in this type of stuff. And and this is where the administration needs to step in right now and says, you know, look, we're going to suspend all payments to every state, not just they they suspended payments to Minnesota. They need >> No, they I think they've now done it to every state. >> Okay, perfect. >> I think that just happened. Yeah. >> Yeah. That so they need to do that to every state and then say, "Okay, we're suspending all payments until we have verification that these programs are real." Well, that a and we need to see to the extent that there is uh there are political parties that are tied and involved in this, >> we need to see those people held accountable slash like sent to jail. If you don't if if the people perpetrating this don't see that there's a price to be paid, it's just going to keep going on. And understand this, when they suspend all these payments, federal judges primarily from blue states are going to file lawsuits against this. You need to understand that they are part of the problem. >> Yeah, that's an interesting conversation and we'll have to dig that for a later date. But if you feel, not making the argument, but I know people can and do. If you feel that our judiciary is captured in a similar way that a lot of people feels like the feel like the rest of our politicians are captured, what do you do about that? >> They they are. >> How do you clean that house? Cuz that's a harder house to clean. >> Absolutely. They are absolutely captured. >> Yeah. So it's it goes back to the old, you know, who's watching the watchmen, you know, h how do you who who replaces the watchmen when it's their job to be the guards, right? It's interesting. >> Do you have the watchers that watch the watchers that watch the watchers? >> I I I guess. Yeah. So anyways, different topic for a different time. Well, Lance, um, >> thanks. Another great week. Um, great start to the year. Wishing you and your family, particularly your wife, uh, the happiest and best of New Year's ever. Hope everything goes well with her tomorrow. Um, please give her a huge uh, you know, hug from the whole Thoughtful Money community on finishing the chemo. Great milestone. Uh and uh we just um yeah, we really hope even better things lie ahead for all you. >> Absolutely. And uh you know this is let me see if I can share this with you really quick because this was this actually kind of summed up my entire year. I was so I showed my wife this yesterday. Um, so yeah, Adam, I mean, look, I mean, 2025 was was something and I posted this video yesterday about hoping we wind up this year and get this behind us, but hopefully next year will be a much better year. >> So, put put that video back up for a second. So, I I saw this clip and so a couple things about it. one, the the company that made the robot was understandably really quick to um to post out there that this guy actually like hacked the software with some of his own programming. So, they're like, "Hey, this wasn't our robot's fault based on our software." But what he did is he programmed it to mirror what he was doing. >> Uhhuh. >> So, you see, he kicks and then it kicks him in the groin, but then he b, you know, hunches over the head hunches over too. So, but I thought this was ideal just for getting 2025 behind us and uh looking forward to a better next year. >> Yeah. Oh, great. And and it ties into the fraud, which is look, that guy's pain was totally self-inflicted. Um all right. Uh well, look, thanks so much again, buddy. Everybody else, wishing you the happiest of New Year's. And again, as always, thanks so much for watching.