Will The Iran War Crash The Markets? | Michael Lebowitz

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LAST CHANCE! REGISTER FOR THOUGHTFUL MONEY’S SPRING ONLINE CONFERENCE AT THE EARLY BIRD DISCOUNT …

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We're growing concerned. That's one reason we reduced our exposure by about six or seven%. Welcome to Thoughtful Money. I'm thoughtful money founder and your host, Adam Tagert. Welcoming you here at the end of the week for another weekly market recap. This time featuring my good friend, the portfolio manager, Mike Liboitz. Lance Roberts has the week off. Mike, how you doing? >> Doing great. How about you, Adam? >> I'm doing good. I'm doing good. Um, as you said right before we turned the camera on, this should probably be pretty quick. Not too much going on right now. Said obviously with a a heavy tongue and cheek. Um, so a lot has happened since last week's update with Lance. Um, first and foremost is the outbreak of war between the US uh and is US and Israel against Iran. Um and it's having a lot of implications. Uh so uh right now uh the price of oil is spiking I believe to multi-year highs here. Um uh Iran in response to the attacks by the US and Israel has been threatening to choke off the straight form and uh not much is going through there right now. Uh the world's really beginning to panic about that in terms of flows of oil and other things through there. Um this morning uh President Trump uh posted a truth social note basically saying uh there's no negotiation uh possible with Iran until they're willing to discuss unconditional surrender. I think that was the trigger for the latest jump in oil at least as of the day that we're talking here. Mike, um stocks are down. Um, they have been in a trading range, which Lance and I talked a bit about last week, you know, pretty much since October of last year, you know, Halloweenish or so. Stocks really hadn't gone uh hadn't been able to break out of this sideways trading range. Uh, Lance was looking at a lot of um, you know, technical levels and, you know, saying, "Okay, look, if it goes above here, that'll be a breakout to the upside. If if it goes below here, that'll be a breakout to the downside." I'm curious when we get to the the TA here for today's talk, Michael, whether we're seeing any technical breakdowns that make you and Lance more nervous that uh this consolidation might end in a breakdown. Maybe it was just a topping process all along. Don't know if we're in that danger zone yet. But like I said, lots to talk about. Of course, we got some really interesting new data out too around jobs and things like that. But let's start with the war. um as you guys at RAIA who are managing capital and have to preserve client capital um what's your status right now? Are you still as invested as you've been? Are you starting to take more defensive measures? >> So over the last few weeks we brought couple weeks we brought our exposure we were slightly overweight our benchmark. we brought it back down to to regular waiting. Um, as I'm going to show you in a little bit with the charts, the market really continues to just trade in a trend. Uh, part of the problem is that trend is kind of an arc like shape. >> You you can draw a rectangle and I'm going to do that, but there is an arc like shape to it and we're on the the right side of that arc. So that that is a little concerning. Um but thus far we really haven't any gotten any good technical signals to say start reducing get out. Uh at the same time our portfolios are sitting near their all-time highs on u what's today Friday. We closed out Wednesday at our record high. So our exposure to different sectors has and diversification and the way we've kind of moved around value growth large cap small cap with not just defensive in the finance way but defense stocks the palunteers RTXs has really helped the portfolio uh reduce the volatility and pretty much stay up at at our highs. Um there's a lot of within a portfolios a lot of winners, a lot of losers on a daily basis. But as you know, we always tell our clients to look at the bottom line. We build a portfolio to to affect the bottom line. And what we're finding so far, fingers crossed, is that we are pretty well hedged. And that said, we have no problem reducing exposure when those technical signals trigger or, you know, potentially other things happen. >> Okay. So, we'll get into this in a bit, but sounds like those technical triggers at least, you know, to the downside where it would force you to say, "Okay, look, we got to lighten up here." You haven't seen them yet, but sounds like you're watching the tape closely. Um I I want to thank you and and your colleague there, Lance, um for demonstrating what I this was the vision when we started these weekly market recaps with you guys of just giving viewers um a a a very transparent view into how quality financial advisor manages money for clients in good times and bad. Um, so obviously this is one of those times where diversification, you know, is is really playing its role. Um, and uh, you know, Lance and I talk about what makes a really good uh, capital manager is the willingness to be unsexy, right? To do to do the things that are kind of boring. >> I don't think that's a compliment. >> Well, you know, it at the end of the day, you know, it is if if if you're getting the returns that you want to get. Um, and uh, you know, Lance was saying, you know, coming into this year, um, hey, here's a whole bunch of reasons on why we're starting to, um, increase our exposure in the portfolio. You know, move a little bit away or take a little bit out of uh, the hyperscalers and the AI trade that that's been doing so great. and we're going to feed a little bit more some of these, you know, sort of value beaten down parts of the market that have been uh unloved. And you know, in the time you're doing that, you don't get a lot of kudos for it, right? Because people are saying, "Wait a minute, this thing's been redot. Why are you getting out of the red hot thing into these these boring things?" Well, for these exact reasons. And I again, I just want to commend you guys for doing it, being willing to take the slings and arrows while you're doing it. Um, but keeping this audience informed of what you're doing because you're really showing how an experienced framework-based uh, logical financial adviser, you know, does their practices their craft, >> right? I remember we got an email from a client back in November, December. We got the email the day we added to Walmart. We had Walmart already and we added to it and he goes, "Why do we own this dog?" Walmart has been one of the most red-hot stocks within the staple sector since pretty much the day we got that email. So, you know, I guess to your point, owning Walmart isn't very sexy. U but it gets the job done. Um the other thing I would say that that really helps Lance and myself are the gray hairs. It's the 30 35 years plus being involved in the markets and watching financial crisises, geopolitical crisises, all kinds of events that shake markets. And having lived through so many different types of things, you gain an appreciation to um, for lack of a better word, to avoid what your gut's telling you and focus on the data. focus on your technical analysis, your fundamental analysis, whatever your analysis is, and not let that feeling in your stomach or that voice in your head kind of get you out of positions or put you in positions depending on the different scenario. So, you know, I think we can attribute a lot to our systems, our processes, our mindset, but it, you know, you need to give equal credit to the to the u experience. I think it's critical in times like this. You know, the last couple years that experience was nice, but not as valuable as it is today when there's a lot going on and it's very easy to get freaked out. >> Yeah. Um, and you know, we talk about this all the time. Um, for most investors, most retail investors, especially the DIY crowd, oftentimes your worst enemy is yourself, right? It's your emotions getting you >> uh into into problems you shouldn't get into. Um and that's why not only the experience you're talking about but the framework right the having a framework that you can look at data and say okay look no matter what my emotions are telling me the framework that I've invested in built over years from my experience is telling me to do X and that's what I'm going to lean into. Um, all right. So, uh, back to the topic of the war. You know, whenever there's something geopolitical going on, you know, I I'll I'll be I'll take pains to ask Lance about it when I know what his answer is usually going to be, which is it's kind of a nothing burger to to the markets at least. um the markets uh usually are pricing in what's more likely to happen or they they've got some you know they've priced in every scenario and it's been weighted by whatever probability the market forces give it. But but generally big um geopolitical developments don't really change the market that much. You know maybe they'll royal it for a day or two but things will kind of equilibrate. Is that the case here this time? And I ask because this conflict is really impacting looking like it's going to impact the flow of oil around the world and that is something that can have, you know, a very demonstrative impact on the global economy. >> Yeah. I mean, you know, the problem with these events is they're very short term. All of the assets that we're purchasing are very long-term. We're looking at streams of cash flows that are priced based on the next 5 10 years and we're looking at an event that could be days, could be weeks, could be months, could be longer. Like we don't know. Um, so that's number one. Remember what you own, whether it's a bond, whether it's stocks, whether it's some other asset, they're long-term assets that that are not really impacted. How much is Nvidia or Apple or Clorox's earnings really going to get impacted because oil is high for two months? The answer is some companies very little. In some there will be an impact. Um but it's, you know, you have to kind of focus on the longer term understanding what's going on. Um oil is a tricky one, right? Because this geopolitical crisis revolves around oil and Iran is a a major producer and b they they run the toll booth at the the biggest uh waterway that really moves oil to the east uh and to Europe. So it it's a very important uh chokeold that they potentially have on the market. So what does higher oil mean? Well, it does there is a loose it's not as strong a correlation of CPI as you would think. Um we actually just put that in our daily commentary. I think it was today Fridays or maybe Thursdays. Um the R squared, you know, looking at changes in oil to changes in CPI is only like 020. So there's a correlation and if you plot it out you can see see the relationship but it's not great. Um second of all how does higher oil prices impact the economy? Yes CPI will raise because of oil but if we spend more on gasoline and energy we have less to spend on all the other stuff in our life. Going out to dinner, going to the movies, buying a car, whatever it may be. So there's a a natural drag that's also going on on prices. And that's why the relationship between one component of CPI oil to CPI as a whole is not as strong as you would think given how important energy is to the economy and to you know prices in general. Second thing is what do what does the Fed tell you every time whenever they quote CPI or PCE or PPE PPI they quoted core core PCE did this core CPI did that core excludes food and energy and they do that and and it's kind of crazy right because that's all we spend our money on is food and energy but they do it because there's so many external impacts or factors that drive those prices that are out of Fed's control, right? Weather. Weather had a huge impact on natural gas prices. There's nothing the Fed can do to change the weather and get natural gas prices to quote unquote behave. Same thing with the Iran war or with crops or with cattle or with so many different other things. It it's out of their control. So they the Fed looks beyond beyond kind of oil temporary rises in commodity prices in general. Second of all, let's go back to 2008. The Fed cut rates as the price of oil shot up from 80 to 150. In the first quarter of 2008, they cut rates one full percent as oil was going over a h 100red bucks a barrel. That's still what about 15 bucks above where it is today and was on its way to almost 150. The Fed never raised rates despite oil getting up to 150 and then they then it kind of got us to October se September October and they had to deal with the financial crisis. Oil plummeted, rates plummeted. But, you know, it's I think it what's what the Fed's telling you by that is that oil prices are they're important. I'm not going to say they won't tell you they're important, but it's a uh it's something they're willing to overlook, especially when it's event driven and that event timeline is unknown and not likely to be to be as it could be a very long timeline, but the impact it'll have on oil could be very short. >> All right, Michael. Um, look, I want to ask you a couple questions here about uh oil. So, um, I'm going to bring up this chart, which is a chart of the price of oil. This is West Texas, and you can see that um, you know, it's basically exploded higher since the outbreak of the war with Iran. Uh, it was at about $65 a barrel beforehand. Now, it's pushing 90 bucks a barrel. Um, so, you know, this is the the squeeze that we're talking about right now that the world is reacting to, the oil price shock. Um how much higher it goes, who knows? Um but let me contrast that with uh this chart here of the XLE um which really hasn't moved that much um certainly not in the way that that the price of oil has since the outbreak of hostilities in Iran. So I got two questions for you. Um, one is why not um why are we not yet seeing, you know, the the the oil energy sector um stocks respond uh to to the the big jump in oil right now. And then secondly, you know, if you look at the price of the SLE here, you know, back in Q4, I was talking with Lance and you, I believe, about how a lot of folks that I've been interviewing have becoming increasingly bullish on the oil and gas sector. And you know it it it certainly oil stocks um you know have really underperformed for a lot of years and they were beginning to to say hey we think this thing may actually start to turn and you can see here at the start of 2026 the XLE really started to move. Um, I'm just curious, is there any way here that the complex sort of sniffed out the likelihood of of of the US going to war in Iran or is this really just coincidental that that the industry was just starting to turn and and then everybody including the industry itself got surprised by this? >> I think it turned with value, right? Why did regional banks do so well over the last six months? Why did you know the market rotated from growth to value in Novemberish of last year. Energy stocks are one of the deeper value sectors. They're they they're kind of always known as value. And not surprisingly, they took off while the price of crude oil was languishing. And you know, we've written about this. I don't know if Lance talked to you about it, but the price of energy stocks had gotten well above where they should be given what's going on with the price of oil. >> Yeah, he had been warning about that. Yeah. >> Right. And and so you you get to this event and the market's like you're already very extended in price. There's not much more. They've been trading better in the market, but but your upside is when you get valuations and that's another way of considering valuations. Valuations so extreme so high there's it's hard to get more upside and that was one of our chief concerns going into this year is that valuations are high and therefore the amount of upside is limited. Um and I think that's what we saw with energy. You know the other thing is okay let's buy Exxon. What are we looking at if we want to buy Exxon? I want to know what their earnings are going to be going out to 2030, 2035, will they have a blip positive in earnings uh in 2026 because of this? Maybe. They hedge. They don't they don't just leave their earnings up to the whims of the oil markets. They hedge a good chunk of it. So, a lot of these gains won't flow through to the bottom line because they're hedged. Second of all, you want to go back. Let's look at Clorox in 19 in 19 in 20 2019 to 2021. Clorox was, you know, Clark is the most boring stock there is. Very slow growth. That stock almost doubled during a pandemic because demand was literally off the shelves. You couldn't buy Clorox >> bleaching everything. Yep. >> Right. Right. even ingesting bleach as our president >> as some suggested. Yeah. >> Right. Right. Um but bottom line is it helped their sales for a quarter or two and the stock is now well below where it was at the eve of the pandemic. So you know the point is that we're looking at streams of cash flows and those cash flows are hedged against changes up and down in the price of oil. So the impact on this over any kind of scale earnings is going to be minimal barring any kind of outlook or you know events that we just can't foresee that permanently raise the price of oil. I just don't see that today. >> Okay. So, so that explanation makes a lot of sense. >> Energy stocks came in very overvalued and you basically had priced in knowingly or unknowingly what was happening. >> Okay. All right. That that actually makes total sense to me. Um All right. So, anything else you want to say about the the war and its potential impact on markets before we transition to the regular technical analysis? What's going on with the S&P? Yeah, it's kind of an important behavior or I guess we'll throw it under the behavioral file. I don't know which file you put it under. >> Markets know everything there is to know. Doesn't mean they don't get surprised by events, but everything there is to know is priced into markets at any time. So if you think that the war is going to be different, you just need to know that the market or if you think you know three weeks ago you think that something's going to happen and the market is aware of that. It is priced in. Energy was priced in. So you have to think something differently than what the market is scared of to really think the market is going to fall a lot or rise a lot. And I think investors don't realize that that a lot of news, what becomes news is known by some people beforehand. And when that happens, the market prices in it. It's it's price is already adjusted for what may happen, for the odds of what may happen. So I I think as you're thinking about the worst case scenarios, the best case scenarios, they are all partially priced in and as they come to fruition one way or another, the price will move accordingly. But there are people that are trading these markets that know more than you and they're impacting the price. So, you know, from a kind of broad point of view, it's important to understand that. >> Okay. And so just to sort of make that actionable, what's your advice to people then? >> That you have to be careful about these doomsday scenarios regarding the war. You have to be careful about a scenario that it's going to end in negotiations this afternoon and everything's going to be hunky dory. You have to accept that the market is pricing in what has happened already. And if you have a forecast that's very different than a market, you potentially have an advantage, but it's a forecast. You don't know more than the market. So, you have to a have a forecast that's different and be right. And if you are, you want to put some, you know, put some money on that bet, that's fine. But realize you're going against the tide. >> Okay. And kind of what I hear you say is don't be too cute trying to predict what's going to happen geopolitically, whether there's going to be a truce or how it's going to end up, whatever. More sort of trade the markets we have. Um, rather than try to, you know, try to outpredict the people who know more than you in this situation. >> Trade trade the market you have. And when I say that no more than you, I'm not talking about financial people, guys that work at JP Morgan or Goldman Sachs. There are people that have that are politically hooked up that are that are in Iran that are in the Middle East that that are talking to Israel that are talking to our government that know what's going on and they're talking to the biggest investors in the world. So people have a much better idea than you can ever get from CNN or Fox uh or whatever paper you read. And that's kind of interesting which is look I mean the the the powerful are always there's always going to be an information asymmetry um between the really big investors and everybody else. I think one can argue that asymmetry has maybe reduced a bit with the advent of all the digital information that's that's out there and and hopefully programs like this one that bring in really smart analysts to share that their expertise with the average person whereas 20 years ago the average person really didn't get you know much access to that. But when you have periods of intense disruption like now, the the the value of information asymmetry is is even greater and you know these are people that have contacts and again not just in the financial world geopolitically etc who can kind of pay for that information and there's a lot in a time like this where you know e even the our government is not sharing the full story with us in many ways because they can't right they don't want to show their hands to the world with are trying to affect some sort of larger grander campaign uh goals. Um but there are very rich people who are politically connected or otherwise who can get access to at least some of that information which gives them a a more substantial leg up than they normally have over the general market participant. >> Exactly. So you said it best. Trade the market you have. Um, I mean that's just the advice and it's, you know, again, kind of don't let your gut or that voice in your head sway you to do things that are not that are um abrupt or u you know that that kind of go against really what you should be doing. Uh, stay your course, have rules, understand what your rules are, be vigilant, and if you break the rules, sell. Like we we Lance and I had a long discussion this morning. What does it take to start reducing exposure? And we we didn't talk about, well, if Iran does this or Israel or the US does that or or the Fed. We talked about technical levels, line in the sand, lines in the sand, technical events occurring. Um, so have that conversation with yourself. If if it helps you, write it down on paper and put put that sticky on your computer and and watch it, follow it, and live to your rules. You know, don't don't when you get there and you get a rule that's been broken, say, "Ah, but but something positive is going to happen this weekend. and I'm better off not not listening to my rules. So, that that's kind of the advice I would give. >> All right. Well, that's a great segue to the next section here of looking at the S&P and looking at the technicals. Um, Michael, I asked Lance this last week. Exactly. Hey, what are the things you and Michael are going to need to see to um conclude that it's not a consolidation? You know, the past se bunch of months haven't been a consolidation that's about to spring higher. that instead, oh, it's it's been a topping out process that's now starting to roll over. So, I'd love to hear what the outcome of your discussion this morning was with Lance about what specifically would you look forward to say, okay, we got to start lightening up. >> Yeah. So, I put together a beautiful presentation for you and u >> I'm actually starting I'm going to start with bonds. We'll work and I'm gonna end up with stocks. >> Okay? And uh I actually want to talk a little bit about value kind of once we get through some of the technicals as well. >> Sure. >> Um let me share my screen. So let's just start with bonds because I know you're going to ask me eventually. So so let's talk about what's going on with bonds. Bonds were trading well. The 10-year bond got below 4% right before I ran Iran hit. So right now I what you're seeing are 30-year bond futures. It's a proxy for bond prices, not yields, prices. >> Yeah. So, as yields go up, the price goes down >> and vice versa. Yeah. >> Right. So, you can see that the 30-year bond has gone from about 119 to 116ish, about three or four points. Um, yields have risen, right? The 10 years around what 415ish, I think. >> Uh, it was slightly below four before this started. So, That's a little contrary to people's expectations, right? Oh, there's there's chaos in the world. Capital's going to seeka safety and it's going to go into treasuries, but that's not happening this time, right? >> Well, the the the problem with this war is that the market perceives higher oil prices as inflationary, which is bad for bonds, and it knows, this isn't perception or forecast, that we now have higher deficits because of this action. How how much how long we don't know but what was already a troubling deficit situation by necess necessarily has gotten worse and bonds I think are reflecting more of that than the flight to quality >> um even today we got the employment number was a very weak number and bonds are slightly higher in yield so that tells me that the market is looking at Iran uh and the negative inflationary deficit implications than the economy. Uh which which is that's very helpful to know in this market what's driving because you can kind of use bonds as a proxy for other markets. Well, here's what the bond market's thinking. So, some of that same thought process is working through stocks or gold or the dollar or whatever other asset you're looking at. >> Um, but what I want to show here is that you can see these two light blue lines. We've been trading in a channel. I mean, you're going to see it, you know, in the stock the stock graphs, too. We've been trading in a channel, uh, in this point about a sixpoint channel since about September. And really they've been going sideways since more or less the beginning of 2025. Kind of up and down. This black line shows there is a positive upward sloping trend line that has that the ch the trend generally has been towards lower yields. It's just been kind of whipping around. Um hasn't been volatile but but it hasn't been just a nice steady line upwards either. the yellow line since October pretty much rangebound >> very much. I mean, even if you go back to February of March of 25, you know, you got the little spike around the liberation day, but other than that, it's been in a similar range. Um, so, you know, looking at it technically, we're coming up on the 200 day moving average. It's sitting right on top of it. We got this lower trend line that should support it, but we're we're in a period of consolidation and the typically consolidations end up with a breaking out or breaking down. So, like everything else, that's what we're looking at for bonds. Um, its RSI is pretty low. It's getting oversold, not grossly oversold. and it's MACD just went on a sell signal. So, some of this downward pressure in bond prices or upward pressure in yields may continue. Now, it may just be time we just stay where we just kind of slowly move around where we're at now, let the indicators become a little more bullish, then we rally or there's something really going on here and bond bond yields start taking off. Uh but these are kind of the technical gauges we're looking at here. The 200 day moving average hasn't been a great uh support resistance. Uh but we would like to see it stay, you know, within a point or so of the line. It's not a hard and fast rule, the number itself. Um and we don't want to see it breaking lower lows, which is, you know, call it 114. So another two points below where we're at. Mhm. >> Um on the upside, if it can get above that light blue line, 120ish, we can, you know, make a case that yields are going lower. Um, so some of this is just how does the bond market interpret what's going on with Iran and and in conjunction with the recent employment data with CPI coming out on uh I think it's Wednesday u and that the I'm going to diverge a little bit here but bonds are highly correlated to inflation. So, right now you got the oil inflation narrative seeping in, but we've been talking for a few months about trueflation, which has shown prices plummeting. Their inflation gauge is below 1%. And their inflation gauge has a very high correlation with CPI. So the question in in our mind is not whether CPI is going up8% because it's not in the next two months but what is trueflation picking why is trueflation picking up such a sharp decline in prices and will that flow through to CPI in time because we know CPI lags trueflation. So this CPI report is kind of our first look at this will be for February. true inflation started dropping almost on January 1st. So we may get a hint of it in this report if not the next report will show it or it doesn't show it and true inflation is just off. But the two have been so highly correlated that is just something to keep an eye on when you're weighing what could push this out of its range upward or downward. >> Okay. So couple couple quick questions here for you. one. Um, you know, it seems like what you're saying here is is in addition to the price action we've had, um, seems that the the current interpretation of the bond market is, hey, there's going to be at least near-term inflationary repercussions from the war, the increase in the price of oil, etc. Um, therefore, it wouldn't shock you if bond um, uh, prices continued downwards uh, a bit from here. Um but over the past year or so um probably longer but definitely in the past year you and Lance have said hey you know our our general analysis leads us to believe that you know over the course of the next year or so um inflation will will continue to disinflate and um bond prices will rise as yields come down as a result of that. Is that still your default assumption here? Or is is the the more recent math changing your opinion? >> No, I think inflation's heading back to 2% or even lower. Um I I think >> the the ch what's happened in bonds the last few days is less about the inflationary aspect and more about the deficit aspect. And that's that's we've talked about before. That's the term premium fear is that deficits keep rising and the bond market just has to deal with this supply of bonds in the market. Investors then demand higher yields and yields go higher. So I I think the market is more concerned about the cost of war in addition to all the other spending. And that's why, you know, bonds are trading lower today despite employment because there's really all of a sudden what went from looking like a oneweek war is looking like a war that's going to be extended. Um how long? We don't know. So I I think when you think about what's going on in bonds, think more deficit than inflation. >> Okay. >> Um but I but right now and look, this can all change. I think of this as a speed bump. uh on the way to where to higher bond prices, lower bond yields, and inflation working its way to two. >> Okay. >> Or below. >> Yeah. And folks, we'll we'll be checking in on this on a regular basis with Mike and Lance. So, you know, we if that indeed is what happened or something else happens, you know, we'll we'll be giving you real-time updates along the way. >> So, so while we're talking about bonds, what's been in the news has really been private credit. that's been a kind of bigger topic. So, you know, one of the things that that we know from history is credit spreads tend to be a good leading indicator of the financial markets. >> And when we talk about credit spreads, we're talking about corporate bonds. Private credit are loans that were made to smaller companies and they are they're having issues, delinquencies, defaults, some fraud. You know, we we've seen it in Citadel and Blue Owl. There have been MFS defaulted about a week ago. Uh there were two auto companies October, November last year that defaulted. So >> first brands Yeah. >> Black, right? Black Rockck put a gate on their private equity funds yesterday or today. They're only allowing private e these private credit investors to take out 5% of what they own. Apparently, the demand is for 9 or 10%. So, we're seeing gates put on these private credit uh funds. So, it's problematic. But the question is, you know, from us is we're not overly concerned until this starts hitting the corporate credit market. So what I actually have here is a little treat, I guess. This is our new Simple Visor. This is something we're still working on. It's not out there for the public, but we're redoing the face. We're adding some enhancements. U we're putting an AI twist on it as well. So, I wanted to share a couple screens that are done that that help us tell the story we're trying to tell. Um, so what we have here on the left side or we break it down credit spread. So, let me start over. What is a corporate bond yield? Say a 5-year tripleB corporate bond. What does that yield? And what is a five-year Treasury bond yield? That difference is the spread. And the the wider the spread, the more risk the market is pricing in. The tighter, the more complacency the market's pricing in. So, we can just kind of focus on this tripleB line. Right now, you get paid 103 basis points more than a treasury to buy a tripleB corporate. This is an index, so every bond's a little different, but the index is about 1% more over treasuries. So, the so that what does that mean? you know, that doesn't mean much, but we we need to go back and look at history. And history tells us that over the last 20 years, that's in the lowest, you know, 3 percentile. It's basically at all-time lows. It's very tight, as you say, in the bond market. But as we look over the last three months and even the last year, it's in the upper half. So spreads are widening. They're not as tight as they were. Um, you can see as you go down to like single C and B, these are junk bonds. They are they're basically around the highest they've been in the last year, give or take a little. Um, down at the bottom we have tripleB graphs. And we separate them out both shortterm and longer term. And the one on the left is our short-term graph. You can see they've been picking up the the spread, but it's still not that much. And it's really only back to average um over the last year. And if you you really see this on the 10-year graph, you know, if you look hard enough, I guess you can see it increasing, but you really have to squint your eyes to see it. So, the point is there's a little short-term stress in the credit markets, but it's nothing nothing like what we're seeing in private credit. Um, that said, these markets can move really quickly. So, what we're talking about today by next Wednesday could be a very different story. So, this is one of those screens I look at every day just to keep an eye on to to make sure that kind of that canary in a financial market um coal mine is still standing up. U so I I think as long as private credit becomes an issue with war going on with the economy a little bit unstable this bears keeping an eye on. >> Okay. So, I've been asking Lance about the private credit risk, you know, over the past couple months as we've seen more and more headlines about it. And he's basically said sort of what you said, which is um hey, I you know, like I I could get worried about it. There's a lot of lot of things I could tell myself to to be worried about it, but I'm not going to start to get worried about it until I start seeing visible stress in the credit markets, specifically looking at these credit spreads. Um, so kind of what I hear from you, Michael, is is, um, you're worried enough about it that you're watching this thing on a daily basis, but right now it's not telling you that, uh, there's a substantial level of stress that something important is breaking yet. Am I getting the right message >> correct? Um, and you know there's another way you can look and I just noticed this but my screen got cut off at the bottom but what we have at the bottom is an analysis of of LQD which is the investment grade ETF and junk which is the high yield ETF. So, you know, another way to look at is to watch the prices of those two every day. And if we're getting into a more uh concerning scenario, JNK should be underperforming LQD. And that has been happening to some degree. So, that's another way to keep an eye on the situation. And you can compare LQD to IE, which is the Treasury Treasury equivalent. and looking at those three, see how they're moving. And if you start to see JNK grossly underperforming LQD and LQD underperforming II, that's a sign that there's something going on. And you'll see it in these spreads as well. >> Okay. So, so, so just as I asked you to kind of, you know, prognosticate what might happen with bond yields from here, um, without the benefit of future data yet, how worried are you personally about the the private equity risk to the markets about about private equity, you know, as Lance and I have talked about many times, you know, it's opaque, it's unregulated. um h what what is your level of concern that that we're going to find a lot more cockroaches as time goes on to borrow Jamie Diamond's term? >> So this it kind it's a little reminiscent of subprime. The question really is is not not how bad is the private credit market and it wasn't really how bad is the subprime market. It's how much leverage and how much of that leverage was directly or indirectly on the major bank balance sheets. And I think that the answer is a decent amount less than the last time. So the impact to the the true liquidity providers is hopefully a lot less and whatever happens in private credit can happen without basically destroying the whole financial system. But you know if you know you could keep an eye on it by looking at like the stock price of Blue Owl and some of the other their competitors but also keep an eye on the banks the regional banks and the major banks um and see if they really start trading lower because that will trigger risk in the corporate bond markets as well. So you know again let's just watch and see and look for signs. The key is to know the key I think really in all of this that we've been talking about is to know what markets to look for and know exactly what you're looking at within all those markets. >> Okay. All right. Well, look, I'll let you keep chopping your way here down to the the stock stuff. Okay. This is perfect. I was literally just going to say is somewhere in these charts uh are you going to talk about the dollar? Here you go. >> Here's the dollar. The dollar has been one of the beneficiaries of this recent incident in Iran, but you can see the dollar's been rising since kind of late January. >> Mhm. >> Like every other graph, um, Adam, we got a nice blue rectangle, right? It's been rangebound since June of um 2025. So, how's the dollar going to break out? Um the dollar has been very the weak dollar and the weak dollar narrative because the dollar really hasn't been weak now for almost a year. The narrative about dollar debasement and dollar weakness has been what has partially driven uh gold and silver and foreign markets, emerging markets, developed markets. Uh so you know I I think everyone you know it's funny all the financial headlines about Iran are kind of focused on oil there. I don't see many on the dollar. The dollar may be more consequential to the economy to the financial markets than oil. And I don't see a lot written about that. Um, our daily market commentary on Monday actually leads off with that and explains why. But bottom line is everyone in the world uses the dollar. And now all of a sudden borrowing in dollars for all these foreign countries has become more expensive by 2 or 3%. It increases their borrowing costs. Um, all these financial assets that look good with a weaker dollar don't look as good to domestic investors because the dollar is appreciating. Multinational corporations that are that are transacting globally tend to be impacted negatively by a a stronger dollar. So again, it's another thing. How's it going to break out or are we just going to stay rangebound here? Um, and you may not like this graph, but it shows the correlation, the recent correlation of gold, silver, and the dollar. Soon as the dollar, you know, almost to the day when the dollar started rallying, that's when gold and silver kind of struggled. Um, not surprisingly because the, you know, the gold and silver trade as a function of the dollar. Um, so that's, you know, if you're in precious metals, that's something else to watch. The dollar, it's both the dollar appreciating the impact it has, but it also impacts that narrative of dollar debasement. How can the dollar be appreciating if it's being debased? And we've talked adnauseium about debasement, so we won't go there today, but but it kind of flies in the face of the story that the market has been telling. um which negatively impacts the precious metal sector. >> Let let me let me just repeat what I've done so far. Um looking forward from here u you know when you showed us the the you know 9month channel that the dollar has been trading within. It's beginning to approach the the upward part of the channel. What do you think is more likely? A breakout to the upside or just the dollar reverses and starts heading down to the other lower part of the channel. >> Some of this depends, you know, to be fair, this is where my cursor is. Right around here is where, you know, about Iran started. >> Yeah. >> So, some of this is Iran. Uh, >> meaning things quiet down there, we may lose some of that. >> Yeah. So, so you have to be careful not to extrapolate the last 5 days for the next 3 months. Um, I probably would have said that we stay rangebound, but but we do one of the risks that we've pointed out for a while now is dollar appreciation. That means that the dollar gets out the north side of that rectangle. >> So, you know, I think my base case is that we trend towards the upper part of that triangle. My concern for financial markets in general is that we break higher. Um, what would cause that? You know, it may just be a weaker glo global economy. Um, you know, believe it or not, the Fed cutting rates could cause the dollar to appreciate. So you know keep an eye on the dollar not just if you're gold and silver investors but all investors because that has been the backbone also for foreign and developed uh developed and emerging markets some other sectors you know commodity sectors as well and again it has a big impact on corporate foreign you know multinational type corporate earnings. Mhm. >> Um, so now we're going to move on to the stock market. And this is a slight I'm going to zoom in on this in the next graph, but this graph shows you kind of that topping curvature that's been going on that we've been getting concerned about. >> All right. And Michael, it looks like looks like the screenshot here is actually missing what this is. Is this the S&P? >> I'm sorry. This is the S&P. I You're right. It is cut off a little bit, but I'll explain everything here. >> Okay, >> so it's the S&P 500. One thing that's I know this is very crowded and and it's I partially have it crowded for a reason, but I'll get to that in a second, but when you look at the S&P 500, I'm going to skip ahead for one second. Here's the S&P 500 since late December, this box. Can you tell me where if I just said somewhere if we go back to January 1 and we're at a you know we're sitting down I say somewhere over the next three months there's going to be this thing in Iran and I tell you what it's going to be. And by the way here's a graph of the S&P 500 for the next three months. Tell me where the thing in Iran happened. I can't look at that graph and tell you where it happened. my gut would tell me, you know, just looking at this, it happened in early February or midFebruary. There's nothing here that tells me that there was an issue with Iran, right? As I know it sounds crazy because the market seems to be so volatile, but it's really hasn't broken out of its behavior. Hasn't it behavior really hasn't changed over the last two or three months. We have lower highs. That's not good. We're kind of drifting lower. I get all that. But if you just look at the size of these these daily candles, the color of them, is there anything here that tells you that if you didn't know any better that something pretty big geopolitically was occurring? >> Yeah, I guess if you can see the green candle there that drops below the trading range in the beginning of March. Maybe if that were a red candle, you could make that point. But the fact that it's green, I'm guessing, sort of kind of negates that. >> I mean, yeah. Yeah. And again, we're we're trading, you know, again, the market Let me I'm gonna go back. The market is starting to arc. That's not good. You know, we see this resistance line that's downward sloping. That's not good. But there's nothing in this graph that tells me the last five days is that different. And I think the market totally changed. It's crazy because if I would have not looked at a graph all week and then looked at one today, it's not what I would have expected. >> Mhm. >> Um, so starting at the top, the MACD continues to be a dare I say irrelevant. It's just been drifting lower with the the the MACD and its signal just going back and forth, not really giving us any kind of signals whatsoever. Like here we got a great signal. And when there's separation between the two lines, you get good signals. When it's doing this, you really get nothing. Um the RSI is at 40. It's starting to get a little oversold. Can certainly go lower, but it's just that too just drifting lower. And this bottom line is what's called the average true range. This is for the last 14 days. And it basically subtracts the high and the low from each day and gives you an average. Uh so you know the ext you know the high point of each day and the low point and it's it's first of all it's low but it hasn't really picked up you know again back to my original point it hasn't picked up appreciably not like you typically see during volatile markets. Mhm. >> So, you know, one takeaway is that I think what we think about the markets, myself included, is probably a little more volatility than what we see. Um, now, you know, when you dig into this graph, you could see one reason it looks so jumbled is because all these moving averages, the 20, 50, and 100 day moving averages are all right here. They're all next to each other. all the kind of support or resistance. You know, we are today we're below the 100 day moving average. That is one of our lines in the sand. Um and >> can you go to the next slide as you're talking about that? >> Yeah, I think this Yeah. So, this gets a little easier. >> Yeah, >> you can see the talk if you can about that. Yeah, the crossover of the 20 and the 50, >> right? So, we have a 20 50-day crossover. That's not good, but it's a relatively short-term moving averages. So, you have to be careful paying too much attention to that. And we got the 100 day, which we're trading below today. We'll see how we close. Um, and we closed it below it two days ago, and we've dip below it on a couple occasions, but that that is a line in the sand. And then, you know, we don't want to keep setting lower lows. So, we have this low all the way down here at 6700. That's another 100 plus points away. And then at the end of the day, what we have is the 200 day moving average sneaking into our picture at, you know, close to 6600. That's that's an important one. So, you know, we're we're we're growing concerned. That's one reason we reduced our exposure by about six or 7% over the last month because we've been seeing these patterns develop. Um, and you know, so, so when you say, okay, what's going to trigger us to reduce exposure? We got our close eye on the 100 day moving average, the black line. We're looking at these lows, which are not that much. They're another 40 50 points where we probably about where we're trading now. We're right around this line. Um, you know, the 20-day is probably going to go through the 100 day moving average. the 50 is not going to go through the 100 anytime soon. Uh and we got the 200 day moving averages. So those are some of the our lines in the sand. Uh conversely, if we get some good news, if the price of oil drops 10 bucks this afternoon or next week, we'd like to see get above these moving averages, break out this downward trend, and then ultimately start hitting higher highs. Um, so that's kind of our our road map for the >> All right. >> I guess week, two weeks, few weeks ahead. >> So, Michael, I I know you're kind of reacting to what you see in real time here, but like in your conversations with Lance, is there anything right now that's on your your short-term road map that if this happens, we will lighten up? Like for example, if there are three days that now close below the 100 daily moving average, would that make you guys say, "Okay, we want to reduce a little bit of exposure here." >> Yeah, possibly. Possibly. The the tougher question for us is how do we do it? So there's been a distinct and we'll get into this in a little bit a distinct u difference between you know a massive rotation which you know we've talked about I know you and Lance have talked about it between growth and value between large cap and small cap. So one of the things we've been finding is you know again that there are days where half our portfolio the stocks are up half the stocks are up 1% or more and at the same time half of them are down 1% or more. So and and those stocks it's not always the same stocks. So what do you sell that you know you want to keep this diversification but you want to reduce your exposure. So we could sell growth and value. We probably would sell more value. We've been selling value on the margin. We may want to sell more value because it's grossly overdone here. >> I was going to ask about that. Yeah, exactly. Because value of these value stocks you can't really call value anymore, right? Given their PE. >> Well, you're leading me right along the way. >> Um or we could just add a short position. We could buy the SH ETF and just say, you know what, we kind of like the portfolio, but let's just add a little insurance. >> So, we could do it any number of ways. Um, so, you know, back up here and here, I kind of was stressing to you that the market is relatively calm. If you, you know, if you didn't know what was going on behind the market, you'd say the market, and I actually wrote an article about this a week or two ago, the the not the not the implied volatility in the options market, but the actual realized volatility has been very low. But beneath that calm, serene surface, there has been some incredible volatility in rotations moving back and forth between different sectors, different factors. So what I have here is uh what this does this is from simplevisor. It looks back at the excess performance. So for instance, how did energy do versus the S&P over the last 75 days? And then it goes back in 75day increments before that. How was it the 75 days before that and the 75 days before that 75day period? So just look at some of these differences here. Sorry, I gota move my computer a little, but energy and I'm gonna actually leave off energy because some of that is impacted by Iran, but materials up and transports up 17% while financials and technology down four 5% versus the market. Those are big differences. Industrials, consumer staples up 12%. Um, and then you go back to the 70 five days before that. Look at look at some of these. Look, staples were down 12%. Healthc care and technology were up versus the market. So, we've had, you know, there's a fancy way of saying we've had a a big rotation. Uh, flipping over to our new simple visor. I'm looking at year to date. I love this is a grid I look at every day. It tells me I I look at on usually on a one-day basis. So, what's the market doing today? But year to date growth stocks are down three mega a large cap growth is down 3.59% value is up 5.65%. All the small midcap even growth and value are all up on the year. So you know you can kind of look at this in a nutshell and see what's going on. And it's basically that the mega cap stocks, the Magnificent 7 that were the greatest things ever are falling out of favor, right? And people are buying value. And you know what? We'll we'll talk about that in a second. What's value and what's not value. Uh where am I? And then I just w also want to show you down here. So again, I'm here to date and you can see how some of the sectors have been the divergences in performance has been crazy. And this is why our diversifi diversification in our portfolio really helps is because we have things going down, we have things going up, but it's allowed us to to beat our benchmark, beat the market for the year by by slowly shifting between what's working and what's not working. So with that, can we talk about what's value and what's not value, Adam? >> Sure. Yeah. >> Okay. So, here's what's funny, and we're well, let's just use Nvidia and Walmart, right? It's no secret the market's been selling the Nvidas of the world and buying the Walmarts of the world for the last three or four months, right? And in doing that, what they'll tell you is they're selling growth and they're buying value. But what is value? So this is from Finn Viz. Great graph. It's a heat map of the price toearnings ratios of the S&P 500 companies. The bigger the box, the bigger the market cap. So it's market cap sized, I guess you would say. The the brighter the red, the higher the price to earnings. Green is more valueoriented. So and they're all sorted by their sectors. technology and so we're going to focus on technology and defensive. This is consumer staples and technology. Um so the first thing that you see and this is what Lance and I started the year off with our concerns that valuations are too high and it's not just the Nvidas and the Googles of the world. It's everything just about. There's a little spots of green here, but you can see there's red in staples and utilities and real estate, energy, healthcare, you know, pretty much financials across the board. But look at the price to earnings of Walmart. It's 44. Costco's at 52, right? So, they're selling Nvidia at 37. They're selling Microsoft at 25. Google at 27, Amazon at 30, Meta at 28. to buy companies that are not necessarily growing that fast at 44 for Walmart, 52 for Costco, uh Pepsi at 27, Coke at 25, McDonald's at 27, >> right? These are your classic cash cows, the country companies that don't grow that fast, but they just >> don't grow. They have >> earnings that are very uh tied to economic growth that are somewhat very, you know, decently predictable. The problem with looking at price to earnings is you're looking at last year. If I'm buying a company, if I'm buying a business, what I want to know is I do want to know how it did last year, but I want to know is how's it going to do next year because that's what I'm buying. I'm buying the future. I'm not buying the past. So, we can look at it two different ways. Instead of looking at backwards priced earnings trailing 12 months, let's look at earnings for expected for the next 12 months. And just for context, the S&P 500 is around 2122. All of a sudden, Nvidia is cheap, cheaper than the market at 17. Google's at around the market level, 22. Meta's cheap to the market. Microsoft is about at the market. Look at Walmart at 37. Costco double the market. Um these name Coke, Proctor Gamble at the market, Starbucks at 33. Um so all of a sudden you're starting to see that they're they're buying what they think is value at at very high valuations and shedding growth companies that are also starting to look like value companies. But now let's take this one step further. This is really important here. So now instead of using forward earning one year forward, we're looking at expected growth rates over the next 3 to 5 years. Now I'll be the first to tell you that no one knows what's happening in 3 to 5 years, especially with the pace of AI, but these are based on estimates. So it's not as look, we know the trailing earnings are what they are. That's happened. it's it's already happened. Forward one year is decently predictable. It can be off, but you know, we have more insight into the next year. This extends it a little further. And what it does is it takes the forward PE and divides it by the growth rate. So how much you know it basically sizes PE to to to show you with the growth. Um it's >> just just to just to give you know say it for folks. This is the price toearnings growth ratio or what's called the PEG ratio. Correct. >> Correct. Correct. Um basically factoring in growth into the equation because growth is what you're buying. >> Yeah. >> All of a sudden, so usually a PEG ratio one is considered the borderline between cheap and you know you start getting expensive above two. But below one is cheap. And look what we got. Nvidia at 44, Microsoft at one, Oracle the beating down stock is around one, Broadcom at half, Amazon around one, Meta around one. Um, and what do we have up here? Walmart at three, Costco at four, Coke at three, Proctor Gamble at almost five. You know, Mo, look at the utilities. They're not much better. Um, so you could say, okay, but Nvidia's, you know, the I think the growth rate incorporated into Nvidia is something around 50%. They're not growing 50%. You may say that's fine. What if they only grow 25%. Which is well below the 60% growth rate they just reported. It still has a PEG ratio below one. >> Mhm. Then we got Walmart that whose earnings could not be more steadier around 7 8 9% at a PEG ratio of three. So, what's kind of really funny to me is that this whole value rotation is a rotation from value into very expensive stocks and no one knows it because they're in this world now where we just look at ETF names and assume that because it's the value ETF, it holds value stocks, >> right? And it's it's it's kind of become a farce. Um, you know, because we're not we're not as investors looking at individual names and looking at fundamentals. You're buying titles now. And because Nvidia is in the growth ETFs, it can't be value. It certainly is value at this point. And if you want to buy value, look at in Nvidia is is right up there. It's, you know, you don't see looking at this table, how many other companies do you see with a PEG ratio below 44 or even backing up with a price to forward earnings below 17. So, um, you know, this kind of goes back to the market. I know it doesn't feel like it, but it's been calm. But underneath you've had these massive rotations that have really distorted the market. Um, and with that comes opportunity. And that's why we have been shifting from quote unquote value to to growth on the margin because we think that relationship not thing we we have technical gauges that tell us that relationship is overdone and we're due for a shift to growth growth stocks. >> Yeah. >> The stocks that fall into the growth stocks category. Now what we don't know is is the shift going to last? First of all, we don't know necessarily if the shift will occur just because we think it does. But if it occurs, is this like a three or four week event where growth is back in favor and we hear about the me the magnificent seven and then value is kind of the predominant winner throughout the year. could be, but right now we're seeing signs that we're shifting back towards growth away from value. Um, you know, and you've seen that the last couple days those some of those names, Walmart got hit pretty hard. Uh, and even though it's a conservative stock to hold, it's just grossly overvalued at this point. >> Okay. So, uh, potentially the market has been throwing the baby out with the bathwater when it comes to the growth stocks, right? You've had the hyperscalers hit over the past couple months, um, as capital has left them and gone into value. Um, definitely a lot of software stocks getting just clobbered like they're almost going out of business. Um, so Michael, you know, you're saying, okay, wouldn't surprise you. In fact, you're you're doing some positioning already for capital to start going back to the growth growth way and your charts certainly make a compelling case. I want to ask you a question I've asked Lance in the past, which was when you guys were talking about rotation happening this year. Um, I asked could could the could the markets, the general markets, the S&P, c could that materially rise driven by the the value sector versus the growth sector? Um, and I expressed some skepticism for that because the market weight of the growth sector is so huge, right? Um, and Lance was like, "Yeah, I don't I don't think, you know, the the value sector alone can pull the S&P continuously higher." Um, and maybe that's why things have been so rangebound for so long is as capital's been flowing into uh it's been flowing out of the big guys into the little guys, and I'm painting with a broad brush here. you know, the markets just kind of stayed more or less the same. If you see a material rotation back into growth, does that make you begin to expect that the S&P may break out above the current range that it's been in simply because an increase in those larger cap companies will have a much more disproportionate effect on the S&P? >> Yeah. I mean, it's just math. >> Yeah. >> Right. It's really just a math equation. If if the stocks contributing the most to the S&P 500 go up, that should be good for the S&P 500. If the stocks that don't contribute nearly as much to the S&P 500 go up, but the biggest stocks go down, it's hard to expect the market to go materially higher. Now over time what happens is as the value stocks go up and growth goes down those size of those boxes I was just showing start to shrink and the size of the Walmarts and Costco start to get bigger. So over time, I think it can start to have more of an impact, but I think it's going to be really hard for the market to rally without the magnificent it's not even seven, it's really top 10 or 15 stocks. Um, and and so that's why if we do get a rotation of growth could be positive. Now if growth and value starts selling off in unison which we did we have seen a little bit of that from time to time then you could get the whole market coming down >> right but you know the other the other thing though is value has also supported the market while growth has gotten hit pretty hard right if you look at the returns on some of these tech stocks they're down decently and if I would have told people a year ago that the Microsoft's Google would be down I you know 10 the 20% you say oh the market must have fallen 10 20 30%. That's not the case because the value was able to offset it. So you know 450 stocks offset 50. Um but you know you really just have to think about it as a mathematical equation and it's almost impossible for those 7 to 10 to 15 stocks to rally and the market really decline. And vice versa. If those seven to 10 stocks are really doing poorly, I don't care what the rest are doing. It's going to be hard for it to have any kind of significant rally. But the key is to move in and out to to figure out what's going to underperform and outperform. >> Okay. So, you've you've um given some hints that you've you've been doing some trades on the margin. We're going to get to your trades in just a minute. Um, I just want to spend a tiny bit of time talking about uh the payroll data. Um, so we got the latest payroll data this morning. It was kind of a shocker. I mean, it was the first real big downward shocker I think we've had in a while. Um, I think it was a six sigma missed to the downside. Uh, so it was uh minus 92,000 uh jobs um for the past month. Um and the unemployment rate actually did it was enough for the unemployment rate to tick up from 4.3 to 4.4%. Um how material is this? Because you know we've been skeptical of of just the jobs data for a long time. I mean for years. Um but even of late uh the job market just seems from a whole bunch of other metrics uh to to be soft, right? We've sort of been trapped in this no higher no fire economy. But you look at things like initial claims and stuff like that, you you don't see they look fine. You you don't see signs of real distress in the jobs market here. This is maybe the first real data point in a while where people are like, "Okay, whoa, wait a minute." You know, may maybe there is some real trouble here. That said, we had, you know, snowageddon in February where a lot of people couldn't go to work. So, how much of this is something we should be worried about versus just the effect of of extraneous things like, you know, the the week or two of folks not being able to get to work? >> So, I certainly pay a lot of attention to the BLS report, but I've been over the last few years focused more on ADP. It's just using real data, >> right? It >> and it's been telling us the truth. The economy is growing. Jobs at 30, 40,000 a month. That's that's what's been going on. It's muddling along. It's not good because the economy or the population growth in the working age is about 150,000 people. So, there's an issue. We're only adding 30 to 50,000 jobs against a growing workforce. Um, that said, I hate the BLS January, December, January, February data. the seasonals are so extreme that it gets and then you get the weather impacts like you said that you get the remember the the number last month was probably at what three or four sigma to the upside. Um so you just get this volatility. Um, but if you look at the two, they're they're they net out to be about 15,000 positive jobs a month and I think that's kind of in the ballpark of what the economy is doing. >> Okay. So, you're not too triggered or worried by this particular payrolls report. Obviously, you've got some concerns about just sort of the anemic job growth that we have in general looking at ADP and other >> it kind of looks like that S&P 500 graph. It's, you know, it's arcing in the wrong direction, but it's not, there's nothing there to tell you that the the unemployment rate's going to 6% or we're going to start losing jobs every month. Um, but you know, the the the the hardest part with this is that personal consumption's twothirds of the economy. And when people feel um unconfident about their job prospects or you know they see their neighbors get fired or their colleagues lose their job or they don't get a raise or a bonus they spend less. So the question will be is does this anemic job market not bad not good feed into the consumer psyche and >> that's what we keep waiting to see. Retail sales today were minus.2%. They were 0% the month before. That's a bigger deal that no one's focusing on. And that's those are those are not real those are not adjusted for inflation. So if you say inflation's running at pick a number 3%. That means retail sales are declining on a real basis >> basis. So let let me ask you a question I just asked David Rosenberg in the video that launched before this one. Um, we've got this K-shaped economy. Um, the top leg of the K, the affluent folks, they spend, they punch way above their weight when it comes to spending. Um, you know, something like the top 10% is responsible for 50% of of consumer spending. Um, and we we've seen lots of reports over the, you know, past couple years that the the bottom leg of the K, which is the majority of people, is increasingly struggling. And the question I asked him was, I hate to ask it this way, but is the bottom leg of the K is it kind of immaterial what happens to it as long as the top leg of the K continues its spending? And David pretty much said, "Yeah, sadly, I think that's the case. What really matters here is the spending of that top leg." And what really matters to them is the wealth effect of asset prices continuing to go up, i.e. the market. Meaning if the market actually weakens or in his case says even if it just goes flat for for long enough that's going to be the biggest thing to impact the economy because that top leg will then start to restrain its spending and that's going to be really observable. Do you >> So this is the S&P question you just asked me. >> Yeah. >> What are the top 10 stocks doing versus the other 490? >> Right. >> And it's the same answer. Uh, and what's interesting is people, there's always this old saying on Wall Street that the stock market predicts the economy and it always peaks 6 to9 months before GDP starts falling and you go into a recession, right? Well, maybe it's not that it's has such great foresight because we know it doesn't. It's that it's the wealth effect, right? Bernani told us this when he launched QE1. He said he's trying to help the financial markets which improve spending ability for those people that own stocks. And he called it the wealth effect, the trickle down theory, the uh virtuous cycle, right? Everything's wonderful if stock prices go up. Uh and I think David's right. If the stock market continues to tread sideways, doesn't even really have to go down, you're slowly starting on the margin, taking away the spending of those top 10, 20%, 15%, whatever it is. And at the same time, we know that the bottom 70, 80, whatever that is, is already struggling, right? Savings rates are really low. uh they're using a lot of credit cards so there's not much room for them to expand other than wage growth which has slowed down materially. >> So yeah, I think largely that this could be another instance where no one sees a recession but the stock market starts stays flatline you know stays in its rectangular box or starts heading lower and that impacts the behavior of the top part the top leg of the K. >> Yeah. This goes to sort of like, you know, don't get too fixated on what you think the markets and the world should do. Just be fixated on what is. You'll have much better success. Like I I I hate the tenor of this conversation because it basically says it's rich people's world and the rest of us just live in it. Um, but as an investor, what it's telling me is is is don't stress as much about uh the jobs data as perhaps even I have in the past because it may not matter as much as it applies to the majority of Americans. What does matter more is where is the stock market going because that's going to then impact the big numbers that impact us all in the long run. >> Yeah. But there are some big social impacts and we could very easily see that in November with the election. >> Sure. Well, again, that's what I said to David is is is it it may be immaterial until it crosses some some extreme threshold where the pitchforks and torches come out and and that's when things change either at the voting booth or >> hopefully never in the streets. Yeah. >> Right. I mean, we're going to see the word affordability is going to be the Democrats rallying cry for the next uh what do we got seven eight months? You're going to hear that word more and more and it's exactly they're addressing that bottom leg of the K, >> the 70 80% that can't afford stuff and now the price of gas is higher. So, >> right. Well, the irony is is that that affordability was the rallying cry of the Republicans in the last election. >> Of course. Yeah. >> Yeah. >> Um All right. So, in wrapping up here, Michael, trades. What What trades have you guys made over the past week? >> So, we shifted the portfolio a little bit more from value to growth. Um, and actually, I don't know if Lance talked about it, but I it was either last Friday or Monday. I think it was last Friday, we uh true up Nvidia. So all accounts that are new and they weren't fully allocated or accounts that had added cash uh we brought we bought Nvidia up to the model weight. Um so it impacted maybe half of our clients to some degree or another. >> Uh we continued on that theme this week. We bought uh Salesforce and uh Service Now >> CRM and now we added 1% of each. They're both software stocks, >> right? Okay. And I think Lance mentioned that mentioned those because I think you did them last Friday. That that was entry positions, correct? >> Well, we just did it this week. >> Okay. >> Maybe you said you were go Maybe you said you were going. >> We were thinking about it. >> Okay. But but those are entry positions, right? You're adding them >> 1% each. We're dipping our toe in the water. We'd like to increase them, but you're still in a period where you're catching a falling knife. And that narrative is pretty damning. uh we don't necessarily believe it but again that's what's driving the price uh to make room again because we didn't want to increase our exposure we want to keep it where it's at if not we actually decreased it very slightly we sold Altria uh we sold Visa um outright uh we also actually brought Microsoft up to model which because it had done poorly meant that we added almost 1% of mic Microsoft to most accounts. So again, we shifted towards growth, towards technology and away from perceived value. >> Okay. And totally makes sense given everything you walked us through in your slides. >> And and Altria, Altria is pretty interesting. That stock we were forgetting the dividends and they pay a hefty dividend. We bought it a few months ago. We were up 20% on that. That of all the stocks that's a cash cow. That's just there is very little growth in that company and it just spits out cash. So that tells you how extreme this value trade has been. >> We bought that and Verizon the same day. They're both up roughly 20%. >> Wow. >> So they're really pushing stocks pretty far that don't really have that much growth potential. Altria has very little. Verizon has more. But uh so that's you know that that phase of our rotation where we went to value we're starting to peel back out of. That's kind of >> this is where your your decades of expertise really come into play where you can get to a point where you're like look we we hope to trade like this. The trade would perform like this but we know just historically it's gotten ahead of its keys. Time to lighten up. >> Right. And when I'm looking at our list of trades here, the last two weeks, three weeks before, they're all sells. They're all small cells, but they're all profit taking in almost in all cases value sector. Duke Energy, JP Morgan, Kinder Morgan, Altria, Verizon, Walmart, uh, Birkshere, Black Rockck. So, you know, we're just slowly shifting, you know, moving with those, not with the we haven't really had a move with what's on the surface, but with what's underneath the surface, you know, and back to what you were asking me, when are we going to move to reflect what's on the surface, and that's when the whole market, if it starts breaking down or breaking up, whatever may happen. >> Okay. All right. Well, look, um, I want to end with just a very short, uh, rant here, and this is a positive one this week. Um, so, uh, kind of thinking it in my mind as as helping the helpers. So, uh, you know, we had the the outbreak of the the war in Iran and I I I I read something on on X and I'm I'm going to do this from memory, but it was basically somebody's, you know, talking about the stresses that we all feel when a nation goes to war. And uh they were reflecting on uh something their grandmother had told them when they were young in life, which is um you know don't don't just be full of fear about the bad things that are happening. Uh the grandmother said, "Hey, when something bad happens, what I like to do is I like to look at all of the people that rush to help." Uh and that makes me feel better about kind of the human condition here. It gives me faith for the future. something bad happens, you get a lot of Samaritans and altruists who get out there and and try to, you know, basically help improve things. Um, and uh, my my really the claim, the credit goes to my wife. Um, but my wife and I did something this week that that felt great. Um, and and it's sort of a helping the helpers type of thing, which is, you know, we've moved to Reno uh, last year. We're still discovering the city and my wife uh found out about this organization called Liberty Dogs, which basically uh raises and trains dogs uh and then gives them to veterans who are returning from combat. Uh, and these, you know, they're all labs, great personality, and uh, you know, they're they're very well trained, both in terms of normal commands, but also things that are sort of specific to to the issues that the chronic issues that a lot of veterans have to deal with, the PTSD, the anxiety, the night terrors, that type of stuff. Um, so anyways, you can sign up to be a foster family for one of these labs, puppies, and you basically raise it. You raise it for like a year, a year and a half. Uh, and then it goes off once it's all trained up. It gets paired with a veteran. They bring the veteran out for a couple of weeks. They get to meet the dog, learn all the commands and everything, and then they go home with the dog. It's a wonderful organization. And we were we've got two dogs of our own. We're not ready to sign up for a 18-month commitment or anything like that. And honestly, I don't know if I ever could do it because I just it's personal failure, I'm sure, but I don't know if I could raise a puppy and then give it up. So, it'd be like giving up your child, right? Um, but what my wife signed us up for was um this kind of helper list so that the the the families that are fostering the the puppies, you know, they have life needs. They got to go out of town for a wedding or whatever, right? And so, um you can get yourself on a list to help them out and take their puppy while they're gone, right? So, we got we had this wonderful little puppy for the past three days. Um, so super fun. Um, you know, nothing but joy for us and we've got two older labs and you know, they they learned to love her and everybody had a great time playing together. Um, but just karmically just felt so good knowing that we were helping such a worthy organization, you know, helping such worthy people. Um, so anyways, I just wanted to share that. Um, I encourage, you know, everybody watching this to sort of think for a moment about like, well, you what could I be doing at some point over the next day, week, month, whatever to try to help some of the helpers in my community. I'm just coming fresh off fresh off it. I'm feeling that karmic high and uh really would love to see that spread to more people. So, anyways, I'll end the rant there unless you have anything you'd like to add to it, Michael. >> Nope. Nope. That that is uh that's really nice, Adam. I would take a puppy for a few days, but unless I'm going to keep it, that's it. A few days is enough. >> Yeah, a few days is enough. And it is funny, too, because like uh you know, every so often I get wisful and like, oh, you know, we should get another puppy at some point. You know, it does remind you it is kind of like having a toddler. You know, it is a lot of work. Um but but but the fun aspects way outweigh the work stuff. So, all right. Well, we'll wrap it up there. Um, folks, if you think one of the best ways uh to to help the helper in yourself uh is to continue to watch and listen to Michael and his his partner in crime, Lance Roberts, there on this channel every week uh to help guide your investment decisions. Uh let Michael know that by hitting the like button and then clicking on the subscribe button below as well as that little bell icon right next to it. if you would like to get some help from a professional adviser uh in um you know either maybe transitioning your portfolio a little bit more from value back to growth given what Michael has told us about here or just protecting against some of the risks that he's talked about here. Highly recommend you get that uh you get that counsel from a good professional financial adviser and importantly one that takes into account all the macro and market issues that Michael has been talking about here for us. If you've got to go who's doing that for you, great. Stick with them. Don't mess with success. But if you don't or you like a second opinion from one who meets those criteria, consider scheduling a consultation with one of the uh financial advisory firms that Thoughtful Money endorses. These are the firms you see with me on this channel week in and week out. Perhaps you'd like to talk to Michael himself and Lance there at RAA. So to set up one of those free consultations, just fill out the very short form at thoughtfulmoney.com. Only takes you a couple seconds to fill out the form. As mentioned, these are totally free. There's no commitments involved. It's just a service these firms offer to be as helpful as possible. Um, lastly, if you're watching this when this video launches, which would be Saturday morning, uh, you now have less than 48 hours, if you haven't already, to buy your ticket for the thoughtful money spring online conference at the lowest early bird price discount that we've been offering. I want as many people who go to the conference to get this lowest price as possible. So, literally folks, right now, pause this video uh and run don'twalk to thoughtfulmoney.com/conference and buy your ticket there. Lock in that low price. If you are a premium subscriber to our Substack, um check your email box. You've gotten a code from me that you can use to get an additional $50 off of that low early bird price that I mentioned. Uh the conference itself is going to be uh Saturday, March 21st. Don't worry if you can't actually watch the event live that day because everybody who buys a ticket will be sent replay videos of the full event, all the all the presentations, all the live Q&A, and you'll be sent out within hours of the conference's conclusion. Um, Michael, I'm just going to rattle through it real quickly, but this is uh an unbelievable faculty. uh probably the best we've ever had and it probably may be the most timely uh one of these we've ever done given everything that's going on not just in the markets but obviously in the wider world Iran being the prime example of that. Uh but the uh conference will be kicked off by Lacy Hunt and he'll be doing his usual graduate level keynote uh that he does for every one of our conference. We'll have first timers Ed Dow, Michael Oliver and journalist Matt Taibbei. We'll have um Luke Growman and Brent Johnson. Um, we'll have, um, let's see, we'll have, uh, Judy Shelton, we'll have Daniel D. Martino Booth, we'll have Michael How, we'll have Darius Dale, we'll have Stephanie Pomboy, we'll have Lance Roberts, uh, we'll have Lynn Alden, we'll have uh, Rick Rule, we'll have Darius Dale, we'll have Melody Wright, we'll have Andy Sheckchman. Man, I think there's one or two others I'm forgetting, but it's a massive murderer row. It's going to be really our best conference ever, folks. So again, uh, if you haven't bought your ticket yet, go to thoughtfulmoney.com/conference. And with all that being said, Michael, um, as I say, every time you're on, we should have you on more often. That Lance Guy should go on vacation more often. It's always wonderful to have you on here, to have the brain trust of the RA organization here to talk to us. So, uh, thanks so much. And I'll give you the last parting words if got any counsel for folks watching here. >> No, just first of all, thank you for your kind words. And uh look, we're in volatile times and this is when it's most important to be to have your rules and not let your gut get the best of you. So, or the voice in your head. The voice in your head's even worse than your gut. So, you know, I know it can be scary what's going on, but just because it's scary doesn't mean the market's going to fall 30%. But, you know, just just follow your rules. And if you do that, you will get out of the market when you need to get out of the market. You'll stay in the market when you think you should get out of the market. That's it. That's all I got. >> All right. Well, very wise words. All right, my friend. Thanks so much. Great having you on this week. Hope we have you back on again soon. And everybody else, thanks so much for watching. >> Byebye.