Stocks continued to rally higher this week. With so much momentum squarely in the bull camp, how much higher are prices likely to run?
Portfolio manager Lance Roberts & Wealthion’s host Adam Taggart discuss that in this week’s Market Recap, along with:
- how the market performed over the past week
- earnings season for Q2 is upon us. What have we learned from the initial earnings calls?
- VIX is suppressed & volatility is underpriced
- US Treasurys remain an attractive buy
- debt defaults are fast multiplying fast
- Lance’s trades for the week
Adam Taggart 0:04
Welcome to Wealthion I’m Wealthion founder Adam Taggart, I’m back here in the studio after a week away. I’m excited to be here at the end of the week with all of you for another weekly market recap, featuring my very good friend Portfolio Manager, Lance Roberts, Lance. How you doing, buddy?
Lance Roberts 0:20
Well, it’s, it’s a Friday so that’s always good news and just be aware there is a lawn man approaching nearby. I can hear his lawn more. So we may you may get a bit of weed whacking somewhere along the way here. All right, I
Adam Taggart 0:34
can’t tell if it gets too bad. That’s a bit it functions for I need to apologize to I’m still a little scraggly from having been away this week. That my mom’s service and then visiting family while I was back East. So forgive the scrappiness folks, but lots to catch up on Lance. So let’s just dive right into it. Okay, so another up week for the markets. Basically, all indices were up this week. In the s&p and the NASDAQ. I was looking at year to date charts, Lance like we are back to just sort of the dependable and extra bowl 45 degree trajectory month after month after month now.
Lance Roberts 1:15
Yep, absolutely. And it’s interesting. I was doing a Fox Business interview earlier this week with Charles Payne, and he had this chart of annual returns. And he was like, Look, you know, we normally we have bear markets. It’s a very long period of time. You know, before you get back to all time highs and stop the man was like, yeah, look at that chart again. You know, when you have the bear market in 1974, it was years before you get back to all time highs 2000 years before you get back to all time highs 2008 years before you have backed all time highs. And that’s the difference, as we talked about before here on the show is that is the hallmark difference between a bear market and a correction. And right now we are on track we’ve had a 78.6% retracement of the decline. That’s some technical mumbo jumbo stuff. Don’t worry about it. But it’s a Fibonacci retracement scale. And when you have a 78.6% retracement, you always go to all time highs. So we are on track to hit all time highs by the end of this year now doesn’t mean we’re not going to have a correction in the next month or so. But you know, that would be a buying opportunity. And we’re likely between December, January, February, March somewhere in there, we’re probably going to be talking about all time highs on the market.
Adam Taggart 2:32
Okay, so let me ask you this, then do you think that that is the likely outcome at this point in time? Technically, yes. Technically, yes. Okay. And look, we’re gonna talk about a lot of the macro data and whatnot. But at the end of the day, the markets are what the markets are, you know, I look at this trajectory, you know, this, this just 45 degree, you know, ramp that the markets have been doing pretty much all year, certainly since March. And it does just look and feel like the markets did, you know, going into 2020 20, before the pandemic hit, and certainly afterwards, right, where it just feels like it feels like a QE market. Right, it feels like this rising tide of stimulus and liquidity, just just pushing prices up. And we’ve been so conditioned to that over the past, you know, 13 years or so. Now, technically, we don’t have a QE market right now. Right? It’s interesting, what why are we seeing this type of behavior, even though we don’t necessarily have the underlying liquidity? Or maybe we do you know, you and I have talked recently about liquidity and that, you know, it switched from net negative to, to net positive around October of last year. Is there a rising tide that’s pulling this up? Or is it something else?
Lance Roberts 3:53
Well, that’s actually part of the subject of this weekend’s newsletter, which is talking about this turn and both sentiment as well, not just consumer sentiment, but also investor sentiment. Both of those are improving sharply. And one of the things that we’ve got to remember is that there is a lot of government spending going on right now. We’ve had a very sharp rise in government spending over the course of the last really six months, the last two quarters, and that’s that inflation Reduction Act 1.7 trillion that’s hitting, you’re hitting municipalities and cities, this is why you’re seeing industrial stocks, material stocks, transportation stocks, that’s why they’re doing so well is because there’s a lot of money flowing into the economy from that that’s a that’s one reason why we’re not seeing a big slowdown in the economy. That’s why we’re we haven’t had that recession everybody keeps talking about but that’s also why you’re seeing an improvement in you know, some of the economic data now, you know, when you take a look at services as example, they’ve already turned, they’ve already turned back up into expansion, territory, manufacturing It hasn’t yet, but services tend to lead manufacturing. So, you know, it’ll be interesting in the next couple of months, three months, we may be talking about an improvement in some of the economic data, and everybody’s gonna go, what the hell is happening here? Where was the recession, and that’s because we still have so much liquidity, microwave, still a lot of monetary supply sitting around the economy. And, of course, a lot of federal spending. Now, there’s a caveat to that, which is the student loan repayments. If those actually have to restart, and the Biden ministration can’t figure out a way to work around the Supreme Court decision, then that’s certainly going to put a damper on retail sells later this year. So some of this can certainly change with, you know, that type of an impact, or if there’s a change to the economic environment. But right now, technically, the markets are doing fine. And fundamentally, we’re pretty far into a quote unquote, economic bear cycle at points where normally you start to see improvement.
Adam Taggart 5:59
Okay, um, so let me ask you this, but just leaning back here for a second. So like, you know, we had the, we had the pandemic hit, and, you know, we lost, I don’t know, it gazillion jobs. I mean, I think like 10s of millions of jobs, overnight, practically. And everybody thought that we were going to have the worst depression ever, right? And then we, we spent all this money. And lo and behold, we got all time highs in the market. And you know, now those jobs, come back and whatever, right. And now, even though we’re not passing, we’re not technically doing monetary stimulus anymore. And technically, it’s getting harder to pass fiscal stimulus, we do have the approved stimulus of the the inflation Reduction Act that you mentioned, right. And that’s the tune of almost $2 trillion. So that’s hitting the economy now. And maybe that’s keeping us out of recession, and again, continuing to push stocks up. So, I mean, if you’re a policymaker, or heck, even a voter, you know, can you just conclude from this, that just like, Hey, we should just always use the magic checkbook. And our problems always all go away? Like, what’s the what’s the risk in the story here?
Lance Roberts 7:15
Well, from the, you gotta remember, the average person doesn’t understand economics, right? So
Adam Taggart 7:21
right, and they’re just concerned about running their daily live. So sure, you gotta borrow some more, stimulate some more Go ahead. Right,
Lance Roberts 7:28
right. Well, and really know what’s happened in the, in the broader economy, just take a look at what’s going on social media, you know, as a good example of this, I mean, it’s just, it’s, it’s just proliferated social media, it’s capitalism sucks. You know, nothing’s fair, the rich people have all the money. And you know, I just want my share. And this is why we have demand your look, you know, California right now is having to deal with this whole reparations deal. That is going to cost billions upon billions upon billions upon billions of dollars. And nobody’s even concerned about where the money has to come from. It’s just that we should give these people money. And this is the this is the situation we’ve got ourselves into, is that the vast majority of voters don’t care. Well, they don’t understand basic economics, they don’t understand where the money has to come from. They don’t realize they’re paying for this stuff themselves. And this is why the Democrats rely so heavily on government handouts and you know, child support payments, and, you know, childcare spending, and, you know, whatever kind of spin, you know, paid parental leave, you know, you look at all the Democratic platform, none of it is about fiscal responsibility. It’s about how to give voters more money, because if I give voters more money, they’ll vote for me. And nobody cares on the voting side about where that money has come from. Because people think it just magically appears the government just, you know, you just, you know, they just got this money. So they have to give it to me, they don’t realize it comes from tax revenue, the interest expense on the debt is going to exceed a trillion dollars over the next couple of quarters because of this issuance of money we have to do to catch up with the TGA funding. And we’re now going to have more money going out just to cover interest expense. So security and welfare than we actually have coming in and tax revenue and tax revenues are declining rather sharply here, which is a potential recessionary indicator we can talk about later. But, you know, to your point, you know, the average person doesn’t realize where the money comes from. They don’t understand basic economics. All they know is that life isn’t fair. Life isn’t treating me well. I can’t make ends meet housing costs are out of control, so I can’t afford the housing and you can trace all of their ills right back to policy. You can trace the student loan problem right back to Obama’s policies. You can trace the housing problem right back to the government and federal and Federal Reserve policies. So every problem that we have in society they can be directly traced back to political and monetary and physical choices that we make in in the upper echelons. But nobody goes, Oh, well, that’s the cause let’s not do that anymore. No, we just want to keep having that, even though it’s destroying the economic stability of the society.
Adam Taggart 10:09
Well, so let me just stick with this for a minute. You know, because we said last week that the bulls are coming out of the woodworks now saying, Hey, you guys have been too cautious, right? You’ve been worried about this recession that hasn’t materialized, we have this massive bull market run. Sure, they can point to the stock charts now and say, Guys, look, we’re back to Easy Street, the street we lived on for much of the past, you know, since the great financial crisis, and you guys just don’t get it. Right. You’re missing out? And, look, they’re they’re certainly welcome to do that. And, and they’re right, in terms of just pointing to the tape and the tape is doing with the tape is doing. But that mentality, right, you and I, we spent a lot of time looking at the macro data and thinking ahead of where this could all end, right. But somebody might say, Hey, if you’re too early, it’s the same thing as being wrong. That’d be could they just say, Look, this is a problem down the road, maybe maybe after we’re gone down the road, right? I mean, this is kind of like eating your seed corn in the winter, or burning your, your furniture for warmth, when the winter first arrives, it feels fine for a while, the problem only comes when you run out, right? And somebody might say, Look, we could keep this going for so long that anybody who’s 40 plus right now, it’s not going to be their problem, right? I’m just curious, and I don’t necessarily. Well, to be clear, I don’t espouse this line of thinking, but I want us to explore it for a second just to sort of challenge our assumptions here. You know, is there enough? We’re talking about the pig in the Python with with, you know, all the stimulus that was put in post pandemic? But is there enough pig just sort of in the national, the Python of the national economy in the nation’s finances? Where could we keep doing this for a long time, and things go fine. For most of the folks that are watching this video,
Lance Roberts 12:10
you’ve got to define what fine is, I mean, Japan has been doing this for 50 years. And they’re fine.
Adam Taggart 12:17
People that started the policy, they’re, they’re dying now. So the consequences are missing them. Right? Right.
Lance Roberts 12:23
Right, but they’re fine. Now you look at the the up and coming youth, you think it’s bad here, go live in Japan, it’s really bad. You know, for the youth, they’re there, they you know, they’re not forming relationships, because they can’t find a job, they’re living with parents, because they’re no other place to go. You know, it’s not great economically, but they haven’t imploded in this in this comes back to the basic, you know, this is the problem that investors face, you know, I can make you a very bearish case over the next 20 or 30 years about how this is going to play out. And it’s going to play out that way. I mean, that’s just a function of, of choices we’ve made and the the and the endemic impact of what’s gonna happen with debt and deficits, that’s just, there’s no way around that it’s just going to happen. But, you know, 20 or 30 years from now, most of the a lot of people are gonna be dead. And, you know, or they’re way past the point of, you know, they they’ve missed so much of building wealth and the opportunities there to build wealth, that, you know, they have really damaged themselves far more than they would have just having, you know, trying to avoid this big CRASH CRASH. And this is the same problem we’ve seen, I mean, you know, when you take a look at where people that are extremely negative, negatively, sentiment wise, and you look at how their assets are allocated, they’re killing themselves, in terms of what their future wealth is going to look like, and their ability to supply and provide for themselves in the future on this assumption that the dollar is going to crash and the world’s coming to an end and you’ve got to have all my money in this type of asset. And yet they’re missing these returns of growing their capital that is available to them now and they could be building wealth now and went look these events when they occur, right? You’re not going to wake up one morning and the news headlines gonna be last night the dollar crashed. It’s all over guy sorry. That’s not gonna happen. You’re gonna see this stuff coming months and months and months years in advance, right? There’s gonna be this is a kind of a boiling frog situation, you’re gonna see these things, cargo very long periods. But in the short term timeframe, there’s going to be great opportunities to make money, we’ve got an opportunity to make money right now we need to be making money. The technical say, right now the markets are going to head to an all time high, if we’re going to have a correction. We are and that’s going to be a three to a five or 10% correction. It could be it could be significant. And that’s going to be a great buying opportunity. But when we start to have that correction, all the bears are gonna come back out and say, See, I told you that was a bull trap. No, that’s just a correction within this bull market that we’re now back into, because we are now clearly back into a bull market technically, fundamentally, we’re all back into a bull market. So we’ve got to, we’ve got to participate in that, in terms of managing our assets, it doesn’t mean you got to go balls to the wall in terms of risks, but it certainly doesn’t mean that you have all your money hiding out in cash waiting for this eventual, you know, kind of breakdown in the economy want plenty of time to see that coming, where we can reduce risk and portfolios, raise cash, do those type of things.
Adam Taggart 15:25
Alright. And on that point, Lance, I do want to revisit a little bit, your s&p chart that we pulled up last week that we said, we’re just going to kind of make a regular revisitation of the show to your point. There are key technical indicators that you look at a lot of the moving averages that will tell us when we’re going wrong out of the barrel, the bull market, right and that stuff doesn’t just change overnight, it just don’t plummet below the 200 moving day average overnight, right? So what we’ll see that in motion and be able to start hopefully taking advanced positioning if we need to. So I’ll move off this in just a second. But you know, I’ve just been reflecting. So again, I was I was back east dealing with my mom’s affairs, given her passing, and I was reminded of a conversation I had a few years ago. My mom did did not have she ended her life with no assets with no income. She was financially dependent upon my brother and I and at one point, I looked into seeing if we could get her Social Security wages adjusted higher. And it’s kind of interesting how Social Security works. And it’s you can my mother was married several times. So we looked at one of her past husbands and said, Actually, you might be able to claim a little bit more given how much this guy’s made. And so when I called the Social Security Administration, and got a live person, and they looked at my mom’s situation, and they said, Oh, yeah, you’re right, you know, this, this husband actually made enough that we can bump your mom’s security up a little bit. So it’s great. And then I said, and you know, I’m just curious. Not for my mother, just as a taxpayer in America. I’m like, Okay, so the social security administration didn’t expect that was going to make this call, all of a sudden, we need a little bit more money than then was currently on your radar. like, Where’s that coming from? And the woman the end of the phone said, Oh, the government just makes the money. And it kept trying? Yeah. But like, how? And where’s the Oh, no, they just make it almost like it’s sort of this magic money tree that they just go and pull off. Right? And this is this, the Social Security Administration, like, this is a branch of the government that has to fund people, right, and they have this magical thinking,
Lance Roberts 17:33
right, like, Well, have you come on, like, if you’re working it, no offense to look, you know, thank goodness, we have people that work at the Social Security, ministration those type of things, but their average Americans that got a job, they don’t understand, you know, we don’t teach economics and, you know, finance and these type of things in school to any great degree, we teach the very basics, right? We teach people basic economics want to watch this, okay, you know, move along with whatever else you’re doing. But you know, in terms of how money is, you know, how money is made, where it comes from all money comes from debt, ultimately. And so, you know, if, if that’s where it’s coming from this is the problem that people have is that the average taxpayer thinks the government just makes this stuff. And, you know, that’s okay. And this is one of the heat. By the way, this is one of the huge, huge fallacies of Stephanie Kelton and modern monetary theory, which was tried and failed miserably. So we tracked modern monetary theory, and it just completely fall on his face. And the reason that modern monetary theory is flawed, it’s basically under the premise that the government’s debt is somebody else’s asset. And that’s not true entirely. Because if that was the case, if every time the government went into more debt, everybody else would just be getting richer and richer and richer. And that’s just not how money works. And, you know, yes, the debt of the government is an asset of somebody else who was expecting to be paid back by that asset. But remember, they spent money to buy that asset, so that it wasn’t just a transfer of, oh, here’s a million dollars in debt. And I’ll just give it to Adam. Now he’s got a million dollars. No, Adam had to spend a million dollars to buy that piece of debt. And that’s how the government got its money to spend what it needs to spend. And so the big fallacy here is that there’s an Yes, on an accounting ledger, if I’m just you know, when you’re doing it basic accounting, for every credit, you have to have a debit, and it always equals zero. So on an accounting statement, the idea of debt being somebody’s asset makes perfect sense, because I have to have a positive and a negative to make it equal zero. But that’s not how it functions in the economy. And that’s the thing that everybody keeps missing about the importance of debt over time is that it erodes the ability and particularly when the debt is not productive. Now, if we were only spending down on productive investments, we were out every day building Hoover Dams that were generally Getting power that people are gonna pay for for the next 150 years, or the Tennessee River Valley Authority, if we were doing that kind of debt issuance and building productive, you know, investments that would pay for themselves over time, I got no problem with that. That’s great. That’s great business, and I’m all about leverage in the right way. But we don’t do that. I mean, we could be spending, you know, the inflation Reduction Act. As a good example, if you were to take the 1.7 trillion and then rebuilt the entire nation’s power grid, which is desperately needed. That’s awesome. That would have been, I would have voted for that in a minute. Because everybody’s going to pay to use that power grid, and they’re going to pay fees and taxes and revenue, that’s going to pay all that debt back. Plus, once that 1.7 trillion is paid back, it becomes a profit revenue stream for the government. I’m all for that. I’m not for spending money that just sends checks to households, because that is not productive. And what’s the money spent? Who’s gonna pay it back? Right, everybody else? It’s
Adam Taggart 20:58
taxpayer. So this is kind of where I’m going with this. And then folks, I’m gonna get back to the market stuff with Lance in just a second in terms of what what the markets been up to. But you and I have talked about that, that quote, by titler. Right? A democracy cannot exist as a permanent form of government, it can only exist until the majority discovers it can vote itself largest out of the public treasury. And there is part of me, that worries me that we’re at that phase right now.
Lance Roberts 21:27
We passed that phase 20 years ago,
Adam Taggart 21:29
it may be a bit I mean, I think like, you know, again, guys, like you and I, and many of the viewers here who are projecting outwards and saying, okay, because of decisions we’re making today, policy wise, we’re going to have repercussions x at some point in the future, if we’re just continuing to lean into this sort of magical thinking of look, you know, as long as we continue to issue money and issue stimulus and write the checks, and, and nothing bad happens tomorrow, right today, then, you know, we’ll be fine tomorrow. That may last a lot longer than people can imagine. And so it could be this, this basically bear steamroller. That just that the the the prudent and in the logical and forward thinking people, you know, they got steamrolled. 2009 until 2021, right, because there was just such this this inexorable flood of QE that just kept the system propped up, you know, are we back to that going forward? It’s TBD. You know, personally, I think that there’s more cracks in the system this time, and we might not be able to get there. But But to your point, you always have to be very open to the Contra of your primary thesis happening, right? And you’ve been very good over the past year of saying, Hey, folks, we may actually not be in a bear market, you know, until we see certain indicators, we’re in the correction of a bull market and don’t discount the bull. And the Bull has come back this year to you know, it’s been painful for these bears. And as I’ve just been talking about the trajectory we’re seeing here, you know, it doesn’t see it’s not showing any, any signs of abating anytime soon. Now, obviously, it could, but I mean, you got to play the market you have right now. And if you’re just hunker down in, in cash, or if if you were aggressive and said, Look, I believe the bears coming back tomorrow, and you went short. I mean, you are really feeling some pain right now.
Lance Roberts 23:30
And I’m looking at this, and this is the biggest mistake that we make as investors is you know, just and I know you’re gonna interview Dan Ariely here soon. And that’s gonna be a fascinating, you know, interview to watch. And I certainly encourage all your viewers to watch it. Because the, you know, from a psychology standpoint, this is the biggest mistake that all investors make and think about this for a moment. So I wrote an article recently talking about, you know, that we haven’t had as many secular periods as a lot of people think because if we talk about full market cycles, we do a mean reversion evaluation, there have only really been three major cycles since 1900. And this little bit different way to look at the markets. But right now, we’re still in a long term secular market that begin in 1980. And this is the importance about this is all about the psychological choices we make. So think about this for just a moment is that if, though and I’m gonna write an article, I’m gonna write another article on this soon, because when you take a look at the financial statistics of society that 80% of Americans live less than $500 in the bank, you know, we’ve been through all these numbers numerous times. The average person’s up to their eyeballs and credit card debt. It’s just financially not great. The, the backdrop of, you know, this great capitalistic system we have is not great because we just made bad financial choices, you know, decade after decade, really since 1980. When we do deregulated the financial industry and really kind of unleashed the financial industry on the on just the average consumer, and we just ate let’s, you know a little bit of credit, it’s great. Here’s a credit card, if you can breathe and fog a mirror, here’s another credit card, let me give you a low interest mortgage. So you buy a house, you really can’t afford any of the national Realtors saying, hey, buy this house, you really can’t afford it. But we won’t tell you that, you know. And so we did all these things to massively increase the lifestyle of Americans in the expectation of what lifestyle should be. But we never really explained to them what the financial consequences of all this are. But back to my point of the markets, if the markets functioned, and if investors did what they were supposed to do in the financial markets, and we wouldn’t have 80% of Americans, you know, being broke, the vast majority of Americans should be exceedingly wealthy, given the amount of wealth that’s been created on the stock market. Why isn’t that the case is because investors consistently do everything wrong, they buy high, they sell low, they do all the things that that Dan Ariely was gonna talk about from a psychological basis, you know, they chase returns, they chase markets, they, you know, they try to do loss avoidance, and all these other things. And all of that just compounds one mistake after another and keeps them from generating money. You know, I get a lot of people email me, it’s like, I’ve got eight different advisors, because I want diversification. Worst thing you can ever do, you should have one advisor managing your money period. Because once you get eight people, you have too many cooks in the kitchen, you got overlap risk, you’ve got you’re diluting your returns, you’re increasing your fees. And it’s just going to lead to a very, very bad outcome, ultimately, in terms of your returns over time. Another thing I get a lot of emails on is like, well, I’ve got a whole bunch of money sitting in cash, I’m gonna put a little bit in the market just in case it goes up. Well, now you’ve got a whole bunch of assets that are deeply underperforming inflation. And you can say, well, I’ll just put it in the market when I feel good about the market. Well, the problem is, you’re never going to feel good about the market. Because like, right now the marks are going up, and you’re going, I don’t want to be in the market, because it’s going to crash tomorrow, because Adam said, so you know that. And so we just keep, we just keep repeating these mistakes over and over again, that keep people from building wealth in the markets. And this is why you’ve got to step back from all this and say, Look, what’s the market doing? It’s going up, I need to be in the markets. I know, all this other stuff is sitting out there. And I’m certainly aware of it. But if you’re driving down the freeway, right, and the roads clear ahead of you, you go, you know, a car could come just swerving over the lane any minute and kill me and my whole family. So I’m going to, I’m going to stop, right. Even though you can see a mile down the road, you’re worried about this one event happening, that would be terrible. And I mean, I’m not, I’m not saying that that would be a horrible, terrible thing to happen. But you’ve got so much visibility on the road, if the cars coming at you and start swerving in your lane, you can move over and you can get off the road. I mean, you have to drive yourself into a ditch. But that’s better than getting hit, you know, head on. But you have visibility, you have visibility in the markets right now. And so what you’ve got to do is set aside all these emotional dramas that you have, it’s keeping you from investing the right way, and start looking at your money as I’ve got to put little hard hats on these dollars every day, pack them a little lunch and send them out to make money for me. That’s their job. Right? Get you got to get your money to work. That’s the important thing.
Adam Taggart 28:25
Okay, and I’m just gonna say for those that haven’t watched, you know, the many videos you and I have shot over the past two years. Yes, you got to put your construction hat on your guys give them their lunchbox, send them out to go make money for you. But you’re still doing that, you know, while having their backs. Yeah, yeah. You know, if you said to get visibility, if all of a sudden you see some storm clouds on the horizon, you’re gonna quickly you know, send these guys some umbrellas.
Lance Roberts 28:51
Well, yeah, look like anything in life. Right? We have rules, right? We have rules for everything. So you know, if you’re gonna go out working on a construction site, what do they require? They require you to wear a hard hat. They require you to wear safety glasses, they required a yellow there were a yellow vests, you know, all these things? Why do I have to do all this? Well, because we’ve had people killed from stuff falling on their head, we’ve had people go blind from stuff flying in their eyeballs, whether it while they’re welding or cutting or whatever they’re doing. We’ve had people hit by other people, because they couldn’t see them, because they didn’t have a reflective vest. And that’s why we have all these safety rules. And you know, this is why we have these safety meetings and all these type of things. It’s the same thing in the market. Yes, you can invest. But you have to do it with a set of rules. And you have to have a discipline that you follow, and you’ve got to work on being safe as you do it. And you know, if you start to violate that rule that gets people into trouble, then you got to sit on stop in there. I’m going to go fix that problem. And look, we do that too. We have we have that same problem in our shop earlier this year. We were too defensive. We recognized that we were too defensive for the market. We had to make changes. And so we were adding you know, reach You know, banks, right after the crash in March, we’ve added small cap mid cap, we’ve added to our technology holdings. That doesn’t feel great doing it here because you’re, you know, just like everybody else. I’m looking at markets when this is insane, but I’ve got to get money made for my clients. That’s my job. But I can do that. As long as I’m following a set of rules. If things roll over, we start breaking moving averages, we start violating trend lines, we start violating the rules, then I’m gonna start taking that money back off the table again.
Adam Taggart 30:29
Okay, okay. All right, well look back to where we are in the markets this week. So q2 earnings season has started. Yep. What are we learning so far?
Lance Roberts 30:40
Not as bad as we thought. So, you know, one thing everybody was really kind of looking for. And so that and by the way, two things so far, is it mostly we’ve just had banks up to this point. Now over the next couple of weeks, you and I are really start talking about tech earnings. And, you know, kind of really what’s going on with the rest of the industrial and manufacturing sector of the economy of so far. Banks. And but that was the big thing, right? Every after March, we had this big financial crisis with the regional banks with Credit Suisse get absorbed, Silicon Valley Bank, Republic, National Bank, etc. So everybody is really looking at these regional banks. Yes. You know, their earnings came in about in line with expected some a little bit better, some a little bit worse. But overall, the outlook for the banks was pretty good. You know, if you look through the current earnings, the forward look on those earnings are actually not bad. And they’re certainly not talking about, hey, I’ve got big credit problems on the horizon. I’ve got, you know, yes, they’re increasing loan loss reserves, which you would expect pretty good with commercial real estate. But we’re not seeing massive jumps in in that and the prices of a lot of these banks are already reflective of probably the worst case outcome because of that big decline we had back in March. So these companies are reporting earnings, and we’re seeing them rally, for the most part on their earnings. They’ve actually been doing pretty good. From the other companies, where, you know, it was interesting, because we’re not hearing a lot of talk, United Airlines as an example. We’re not hearing a lot of talk about, oh, you know, we, you know, last week, just all of a sudden, like, somebody flipped the light switch, and people just stopped spending money. We’re not seeing any of that news, the outlook for earnings going forward and consumer spending so far, and again, we haven’t heard from Amazon, we haven’t heard from a lot of other companies. Netflix, actually, you know, big subscriber growth, and despite the fact that they put on, you know, these password sharing bans, etc, their subscribers increased, revenues have increased, so people are still paying their subscription fees. So far. And again, we’re down again, let me just reiterate, we’re really early, really early in the earnings cycle. So you know what I’m saying right now could all change next week. But so far right now, the outlook isn’t that, oh, the economy’s falling off a cliff, you know, get super defensive. We’re just not hearing that yet.
Adam Taggart 33:04
Okay, and just as a reminder to folks, Michael Kantrowitz is hope framework. And actually while I was away this week, we ran the interview with with Kantrowitz, H O, P. E, the P, in the hope framework stands for profits or earnings. And again, these are the indicators that sort of show you when you’re falling into recession. We obviously had seen some weakness in earnings over the past year. But what you’re saying is right now, still hanging in there. And even the the outlook that we’ve heard so far from the few companies that have reported so far, not too many warning bells.
Lance Roberts 33:39
So far, and I look, earnings are down. Right, earnings are definitely down from last year. If you take a look at the bank earnings as an example. Both earnings and revenue are down from this time last year. So earnings are definitely weaker because of what’s going on the economy. But what it looks like right now is that we may actually be kind of troughing, that earnings base now and we may start to see an uptick in earnings come next quarter. And that will be kind of that first turn that will need economic improvement in order for that to happen. So if the economy starts to weaken substantially, then we’re gonna see earnings start to come down again. But right now, based on estimates, you’re kind of looking at probably this is the low point for earnings, and we’ll see improvement next quarter. And that’s kind of what the markets are betting with this kind of recent rally.
Adam Taggart 34:25
Got it? Good. Okay. All right. So the day in which we’re recording this end of the week, it’s a interesting day, because it is the we have a record number of expiring options in July. So it’s to almost two and a half trillion 2.4 trillion, I think going on right now. And a couple of interesting things around that. But But let’s start with that first. So So what what’s notable about today
Lance Roberts 34:55
was just to say, well, first of all, you have a lot of options expiration but you also have the rebalancing of the NASDAQ going on So the NASDAQ is remind folks of that yeah, if you can’t Yeah, so and we wrote about this earlier, that’s it’s gonna be a nothing burger. Everybody was like, oh my God gonna rebalance the NASDAQ and take 7% out of the top 10 stocks and they’re gonna you know, and that’s really kind of been going on all week but index funds calf to rebalance on the day that the rebalancing occurs. And so you could see a little bit volatility today and Monday, particularly in the tech sector, but everybody was expecting this is gonna be this kind of waterfall event we and we wrote in our daily market commentary on think Tuesday or Wednesday of this week that it probably be a nothing burger. And so far, it’s turned out to be just
Adam Taggart 35:37
that. Okay. In the midst of all this, okay, nothing burger on the rebalancing. And again, the markets were given fair warning of this so you can safely assume they could have repriced all this stuff in the OP x that’s going on right now, though, there are a couple of sort of knock on effects about it. I want to talk about but at a high level. Is that pushing anything around in any material way? Right now?
Lance Roberts 36:03
Yeah, you know, we’re definitely seeing some rotation in the markets. You know, over the last, you know, couple of weeks, when you and I were sitting here talking, we were talking about how the market was really bifurcated. I was showing you some sector rotation analysis where you had in the overbought category was tech communications and discretionary now everything else was you know, kind of in a very big oversold area, and you know, was was deep dark green and meaning they were oversold and all that we were talking about the fact that we’d see rotation in the markets from that and here I’ll just kind of share just share some updated charts with you here real quick just you can kind of see the difference now. And again, if you if if you didn’t you know, kind of see this before. Previously in these lower right hand areas are stable, everything was red, like super bright red, and then everything else was green, meaning it was oversold now everything is just super overbought. Wow, look at that. Yeah, that’s a big difference. Yeah. And then of course, this is the factors of the market. So this is small cap, mid cap, large cap, international semiconductors equal weight s&p 500 everything. It was basically Ark large cap and, and, you know, big growth up here. That was it. And everything else was over in this oversold oversold areas of the market. Now you can see that everything is now moves up into the right. So everything is began to participate as of late. And you can see it also in just the sectors of the s&p 500. Everything is now moved from that deep oversold area moving up into that upper right quadrant of being overbought. So again, the market breadth has really improved here recently, we’ve seen a big pickup, and that’s part of this options expiration, as well as feeding into that. But over the last few days, in particular, we’ve seen that tech stocks really underperform. And you know, our healthcare stocks and our financial stocks and our utility stocks have been really performing well, over the last few days, because we were kind of set up your split between this growth of technology and, and kind of defensive, more economic centric areas of the markets that we’ve seen that big rotation finally occurred that we were talking about, you know, three weeks ago.
Adam Taggart 38:15
Yeah, although I do want to just underscore, I think I made this point last time, it’s not a rotation. Yeah, it’s not that the capitals come out of the overvalued parts of the market, it’s that it’s just pulled the other it’s gone into the other part it more capital has gone into the other parts. So now everything is over on that overbought.
Lance Roberts 38:35
Exactly. So just basically what was happening before you had 33 cents of every dollar going in those top 10 stocks. And basically it was now it’s 10 cents going into the top 10. And they’ve kind of shifted down. So it’s just money managers, you know, and again, we’re moving into a new quarter, this is the beginning of the third quarter. And so asset managers have to get a look, we were super underweight equity earlier this year, we’re now barely underweight equity, we’re about 55% equity out of our 60% target. So us along with everybody else, we’ve been having to get that money out of safety and into the markets. And that’s what’s been driving this market has just been this need to catch up with performance, so to speak, and get money allocated. And that’s been driving the market.
Adam Taggart 39:21
Okay, so there’s, there’s a lot of implications coming out of all this and I want to bang through a bunch of them get your reaction to it. One is a chart that I’m going to show here. And it’s showing that that the DIS the strike distribution of options right now is what’s called very call sided. So I guess not super surprising, you know, when when everybody starts feeling really optimistic about where things are going, and prices just keep going up and up and up. People feel comfortable going further and further out the long risk curve, right and we heard over the past couple of years about how you know, investors who really hadn’t gotten into options in the past, were now beginning to really embrace them. And they were buying call options on Tesla and meme stocks and all that type of stuff. But if you look at the general distribution of options right now, it is very cold sided is the way it’s being described here. And, you know, this is one of those things that does make the market more vulnerable to a downside risk, because you’ve got everybody on the long side of the boat, and they’re levered long with these options. So how big an issue is this? Well,
Lance Roberts 40:36
it’s a big issue, actually. And, and I wrote an article Tuesday, I think, on the website, and you know, here, let me just look it up real quick. Give me one quick second here. But I wrote an article kind of relating to the same thing right now what we have going on, is basically we have put, hey, nobody wants puts, because markets are going up. And that makes complete sense. So you know, as markets continue to improve, why, why do I want to have money that’s being lost and having this put, so obviously, the markets never coming down again. So why on earth would I buy puts, and you have everybody kind of piling into too long call options, because they’re betting on the market keep going up. So you have this big bifurcation in the markets at the moment between this foot hate and these call options. And normally, that’s what you see near short term market peaks. Now, let me be very clear here. Because I don’t want anybody going, Oh, see, Lance just said a bear market is coming. No, we’re going to have a correction. And as I’ve been saying, we’re going to have a three to five to a 10% correction, people are going to come out so you see that was a bull trap, the bear markets back, no, you’re having a correction within a bull market. And that’s what you would expect to occur. And right now, you’ve got a lot of people on the long side of this, you know, kind of call option basis, all betting markets are going up, nobody wants puts. And that would that is a great setup for that correction, because retail investors are all and even professionals are generally always on the wrong side of the boat at extremes the right in the middle, but at the tops and the bottoms. Generally investors are wrong on a regular basis. Let me show you a couple of charts from this article that I wrote earlier this week as well because it feeds right into this. This This article is talking about the VIX, because we have the VIX running at extremely low levels now, and everybody’s been gold blends the VIX going up, the VIX has got to go up eventually. Well, we have a couple of things going on. And what the VIX tells you, there’s an inverse relationship between volatility and between investor sentiment. And so if I take a look at retail and institutional sentiment on stocks, that is, you know, kind of, and that’s this black line on this chart, that’s been rising very sharply. So retail investors and professional investors are getting very optimistic about stocks. The top line is an inverse is an inverted chart of the VIX, right? So the VIX is approaching a very low level, so but if I invert it, what you can see is, is there’s a correlation between investor sentiment and low volatility levels exactly what you would expect that to be. And so when we can, we can make a composite out of this. And so the red line is a sentiment and inverted vix composite index. So I just put those two together, create one composite index and overlay that relative to the s&p 500. And lo and behold, what happens is that when markets are when investors are extremely bullish, and volatility is extremely low, that tends to be near a peak of a bull market top and then you get some type of correction could be minor could be three to 5%, could be 10%, could be 20%, kind of like what we saw during the Fed taper tantrum and the Brexit issues back in 2015 2016. So we’re in that range to where you should expect, and because of this very bullish attitude of investors that you should expect some type of correction. Here’s just the VIX relative to the s&p again, you see the same thing very low levels of the VIX tends to you know, correlate to short term peaks in the markets. And that tells you that we’re there and look, low volatility that gets high volatility. And whenever you have a period of low volatility, you’re going to wind up with a period of high volatility. And what’s interesting is, is that really since 2008, but particularly when we started quantitative easing three with Ben Bernanke in 2013, when he was afraid of the fiscal cliff and we needed to come in with all this liquidity we have now shorten those periods of low volatile ability versus high volatility are occurring a lot more regularly now. And this is because of the dysfunction of the markets. Because of liquidity, you know, we’re no longer working on fundamentals. And we’re no longer working on valuations. We’re simply working on liquidity. And these ebbs and flow of liquidity are now creating these periods of high and low volatility much more frequently. And this is what’s becoming a much bigger challenge for investors is having to deal with that. This last chart is basically that same Composite Index of sentiment and volatility overlaid against Fed funds. And what you’ll notice is that when fed funds tend to rise, so is that index until it peaks. And again, as we’ve talked about before, eventually these Fed funds are going to rake into the economy, slow earnings down. And we’re going to have a you know, a kind of a realization of, you know, this lag effect on the economy. But that could be 20, late 2024, could be 2025, a recession risk is to still sitting out there, but it could be a lot longer out there than you think. But that would also correlate back to this, this high volatility, this low volatility environment with this high cinnamon environment. And it just hasn’t been through yet.
Adam Taggart 46:13
Okay, I’m really glad you brought those charts up, because that’s exactly where I was headed with this vix as your charts have shown here is that a trailing 12 month flow, right? So your charts did a great job there of showing how Hey, low volatility generally begets higher volatility, which means at some point, to the extent that vix as a measurement of volatility still works, you know, we should expect an upward surprise. And at some point in time, there was a chart that I’ll put up here that shows that if you look at the realized, move performance, the move in the stock following its earnings release, that it actually made versus what the implied move was, relative to volatility readings. It’s the highest it’s been since q3 of 2020, or sort of 2008. Right. So the last time we saw this sort of imbalance between how things were supposed to move versus how much they were moving, was back right before all the wheels came off. Right. So it’s another one of those indicators, that just suggests that volatility is really mispriced right now, which is what I think most of your chart said. So yes, we should all you know, basically, have an eye out for the status quo changing, right? That’s what that basically says to us. But also, in you said this earlier, Lance. You know, you just use the term put hate, right, everybody loves cars right now, nobody wants put, you know, puts, I guess is the right way to say this may look very cheap right now. And you know, if you want to buy some downside, you know, we’ve just spent all this time talking about how this market is just grinding higher for all these other reasons. But if you believe even your, you know, hey, there might be a three to 10% correction in here, right? This may be a really good time to buy some, I don’t know, mid dated puts, right? I actually had to, I won’t name them because they didn’t give me permission to but but one of the guests that has appeared in his channel not that long ago, emailed me the other day and just said, I can’t believe how cheap January 2024 puts on the s&p Er, right now. And so, you know, does it make sense to maybe think about buying a little bit and just saying, hey, look, it’s just insurance, right? It’s just,
Lance Roberts 48:35
that’s it. I mean, in so we actually, were running the same exercise for our Platinum accounts, just last week, and we were running out numbers and, you know, you can spend 20 to 30 basis points of the portfolio to hedge you know, roughly about 10% of your equity risks. That’s pretty cheap money. And so you know, and especially start looking out into you can go out as far as June of 2025. I mean, you can get, you can really buy yourself some time to allow the lag effect of the Fed policy hikes and all of this to play catch up, but you need time. You know, the problem with buying puts in a momentum driven market, which is where we are now if you buy the January 2020 fours, you’re probably going to lose your money. Because we’re going to have a little bit of correction this summer, we’re going to rally into the end of the year because it’s just what statistics and technicals tell us. So you buy January 2024 Put that’s probably going to expire worthless. And typically, what happens with options in February it crashes, right. So you just bought a little bit more time here. Okay. But you know, is there is there a risk here, this market is going to have a another 10 to 20% correction at some point. Yeah, it absolutely will at some point. The problem is, you know, we just don’t know when so if you’re gonna buy put options, you need to buy a lot of time and You need to, you know, and again, we’re gonna make a lot of mistakes are going to buy way out of the money puts, because they’re super cheap. And then if the market can decline enough to kick those into favor, then you’ll make some money. But odds are, you had this time to pay a premium over time. So you’ve really got to buy, you got to be able to, you got to be willing to spend some money by closer to end the money puts hedge your portfolio with a lot of time. And if you’re really worried about a big, you know, big downside, you know, break, then, you know, buying some insurance certainly doesn’t doesn’t hurt. But the mistake that investors make is twofold with options is they buy them, and then they buy the back when it doesn’t immediately start to work. So they wind up wasting more money, or they don’t buy enough time. And then the event they expect to occur occurs after the option expires, and they didn’t buy a new option because they just lost money on the other option. So again, we go back to Dan Ariely. These are all psychological mistakes.
Adam Taggart 50:59
Yeah, so just on this, and I’m not I’m not telling people to make this trade by any stretch, talk with your major professional financial adviser. But it does sound like it’s a good time to buy this type of insurance, given the relative affordability of it. If you want to have if you want to take a position against a, hey, the bear market comes back at some point here, the lag effect really matters, all that type of stuff. Yeah, to your point, you know, go further out by yourself more time, especially when things are this cheap, right? You’re not You’re not paying as much for the time premium than you normally are. But even the January 2020, for one’s plants, I mean, if you if you’re thinking, hey, odds aren’t bad in the relatively near future, let’s say the next one to three months, we’re going to have that steam come out that you’re talking about that that that smaller correction first, that then will power higher, that’s maybe not a bad trade for them.
Lance Roberts 51:56
It’s not a bad trade for that. But you’ve got buy in the money and those aren’t cheap. Right?
Adam Taggart 52:01
But but they’re not that expensive. I look. They’re actually relatively they’re relatively cheap on where they’ve been trading, right? Yeah, no, they’re not giving them away. But But I mean, they’re cheap,
Lance Roberts 52:11
yeah, you’re gonna, you’re gonna wind up spending some money, though, because, again, you gotta buy in the money to make it work, but especially have a shorter time timeframe that you’re working on, because you have time to pay a premium. So you’ve got to buy closer than the money options to make it work. And yeah, it’s a good trade. But again, you have to measure that against in my in my just buying a position to try to capitalize on a downturn, which maybe I just buy one contract, right, which won’t cost me much in terms of my portfolio, I’m just buying 100 shares of the NASDAQ versus I’ve got to buy if I want to try to hedge off 30% of my portfolio, now maybe talking about a significant sum of money to buy enough options on the contract to hedge that 30% risk in my portfolio. So a lot you’ve got to do, it’s not, I just want to be clear, it’s not as simple as it sounds, you got to do some math here, and try to understand what it is that you’re actually trying to do. When you when you make this trade, you know, we’re not doing that trade right now. Because there’s not visibility at the moment of where we are in the middle of earnings season. And we want and when we lay on that trade, and we probably eventually we’ll, we want better visibility, on what the next couple of months is going to look like. And with earnings right now going on, there’s too much upward pressure in the markets. And that’s going to that’s going to erode my premium in those options. So if I buy him today, I’m going to wind up eroding a bunch of my premium because of the time decay period. So I want to try to time that entry a little bit better as well.
Adam Taggart 53:44
Okay. So you’re, I think you’re making the main point I’m trying to make here, which is, there is opportunity here. But you’ve got to be smart in how you pursue it. And but it’s a good time to be talking to your financial professional about, hey, how do I take advantage of this? And, you know, what do we want to let’s set the strategy now. So in case we get the indicators we want, while they’re still affordable, we can move when we feel like we’ve got the odds in our favor.
Lance Roberts 54:09
And, and plus, you know, you’re gonna have to set up margin on your account, you’re gonna have to get approved to trade options on your account, which means you got to have experience with options trading. There’s a lot of other words, if you want to do it, you just can’t call your advisor and go, hey, buy me a put option. You got to jump through a bunch of hurdles before you even get to that point.
Adam Taggart 54:26
So right, so start jumping through those hoops. If you decide you want to do this, you want to do this.
Lance Roberts 54:30
Yeah, you need to start getting your paperwork in place and getting your margin account set up and all that.
Adam Taggart 54:36
All right. And real quick, just because you mentioned that earlier. You said hey, for our Platinum members, what makes somebody
Lance Roberts 54:43
but not not Platinum members, we have a model that we call our Platinum model. And it’s just a it’s a it’s a model that we use for very kind of just for accredited investors for the most part, but it used a lot of optionality. And so you know, it’s just it’s one of those things. That was just in our, in our kind of our suite of portfolio models, we have a model for high net worth individuals that uses a lot of these opposite strategies.
Adam Taggart 55:08
Okay, great. By the way, you know, I’ve got my typical long list, I’ve crossed three things off of it now. So out of like, 15. So
Lance Roberts 55:17
when you’re putting this show together, just pick three.
Adam Taggart 55:20
I know I should, I should, but there’s so much I want to talk about with you. And we’ll, we’ll get through a bunch of this. So I wonder too, in the midst of of this sort of, you know, heavy summer for bowls right now, if there isn’t a danger of too much of a good thing. And one example, I mean by that is, so hedge funds are actually having a rough time right now. They are we’re seeing a real increase in forced liquidation, what’s called Market wide D grossing. And let me let me just read this real quick. Hedge Fund engrossing is starting to broaden out as fundamental long short returns have continued to lag behind market benchmarks. Due to a sharp deterioration in short side returns, manager started experiencing meaningful destruction and short sight Alpha around late June. And this trend has further worsened in July. So this goes to your charts, right where everything is crowding into the overbought side, right? So I’m a hedge fund, I’ve got my lungs, I’ve got my shorts, my lungs are going up, because I’m invested in those those magnificent seconds, seven stocks, I’m feeling great. The problem is everything’s going up. So all of my the most shorted stocks are also going up. Right? So it is much of a good thing here for these guys. Right?
Lance Roberts 56:38
Well, again, this is this is this is a, you know, from the investor standpoint, right, this is a lack of understanding between, you know, what their, what they invested in, and what they expect. And, you know, we’re seeing this a lot with, you know, people that, you know, call us up, and they’re like, Hey, we’re interested in you know, what you’re doing your portfolio, I’m super conservative, I think the world is going to end and we said, Well, hey, you know, we’re, you know, we’re adding a lot of equity exposure right now, because that’s what our markets tell us. And they’re like, why don’t want to do that. And, you know, you know, if you’re going to buy a hedge fund, which is long and short, then don’t expect you’re going to get market related returns. And this is the problem with we go back to psychology behavior, all this is that investors say one thing all the time is like, I’m super conservative, I just, if I could just make 4% a year, I’d be super happy. And as soon as the markets up 10, they’re like, why aren’t we getting 10%? Well, because you didn’t want to take the risk. So you’ve got to decide as an investor what you want. But again, this is what happened with hedge funds, people are piling into hedge funds, thinking, like, Oh, these guys are gonna make us better the market rate of returns, it’s called a hedge fund for a reason it is hedging risks. And if you hedge anything, you’re not going to pace the market. On the upside, you may do it one year or two years, it’s very possible that you have the right exact mix of long stocks and short stocks. But you’re hedging risk. And so when you hedge anything, you’re going to underperform a benchmark. And particularly you’re not in perform a benchmark that pays no fees, pays no taxes has no cash, as a substitution effect has the ability to you know, just rebalance the portfolio in terms of market cap weighting, which doesn’t exist in an actual portfolio. None of that does. So you’re always gonna have a performance differential. And so but this is what happens is that people go, Well, you know, I could just be in an index and so they pull the money from the hedge fund and move into the index at just about the time that hedge funds can start outperforming again.
Adam Taggart 58:31
Yeah, well, it’d be interesting to see what happens but but what I found interesting by this was a couple of things. One, you know, the hedge funds were to finally hit a great good year, again, after a terrible year, last year, you know, are all of a sudden, surprisingly, getting destroyed by their short books, right. The last time we saw this happen was actually right before the COVID crash. Now, you know, like you said, luck, it’s nobody could have seen the pandemic coming. But we did see a lot of market indicators that the that there was something was afoot anyways, and the pandemic was just the thing that tipped it. Maybe we’re at a similar stage here. Who knows. But in this article, there was a really key point made, which said, what’s going on is that gross leverage is now literally off the chart as hedge funds scramble to extract every last cent of collateral to maintain their to maintain their same set of net exposure by pushing gross exposure to never before seeing levels, right. So it’s forcing these guys just to be uber speculative, right? Which is a problem because should something happen to the long leg of the popular hedge fund trades, ie the AI bubble bursts? It will be quote, a bloodbath of historic proportions.
Lance Roberts 59:50
Yeah. Be careful with that. People always say that. And again, great headlines, wonderful stuff. You know, beer sales. Yeah, it’ll be Add, you know, honestly, but you know what, but with something happens on the AI bubble that’s going to drag down those top seven stocks and yeah, it’s going to pull the whole market down with it. And yeah, you’re gonna unwind leverage. But you know, it’s going to be bad for hedge funds because they are very levered up. And that’s that’s the whole issue with with margin debt leverage. But hedge funds are very good about seeing the game. This is why they’re in business and why we manage billions of dollars. Ray, Dalio is a good example. They have a good vision, they have a good vision about what’s coming. And they will, they will deep roast their book very fast, and get on the short side of the book, when that starts to occur. So they’ll take a hit initially, but then they’ll start D grossing as they need to,
Adam Taggart 1:00:42
they may I again, just want to put it out there sort of one of these, you know, we think of them out with a market as sort of a house of cards. This is one of the cards that’s looking, you know, maybe you’re probably here.
Lance Roberts 1:00:57
You’re awfully bearish.
Adam Taggart 1:00:59
No, no, like, we just spent a whole bunch. I don’t feel bad pulling up some of this bearish stuff now, because we just were super bullish. I’m actually skipping over a bullet here I have that says, let’s make the bull case once again, because I was fearing we were gonna get too bearish too early. That said, though, can you can you pull up the your chart there of the s&p that we were looking at last time, like, let’s just look at where we are, given the current moving averages and whatnot, I think we’re still probably very safely in bull lift off.
Lance Roberts 1:01:33
Yeah, now, I’m pulling up here as we speak, just give me one second, and I’ll share it with you. Because this is actually just a couple of things there are, there are a couple of little warning signs here so to speak, that I think are certainly worth paying attention to let me share my screen. So this this first chart, I’ll show you a couple, I’m gonna show you a couple of different ones. So this first chart is the s&p 500 overlaid against the red line is the 50 day moving average. And the blue line is the 200 day moving average. The top chart is the relative strength index. And you can see that we just take a peek in that relative strength index. And so the market has really declined much yet here. But you are starting to see a little bit of struggle here with the markets over the last couple of days in particular. And normally when you kind of have these peaks in relative strength that tends to align with correctional periods now in during kind of the correction we had last year, they were much bigger declines. But if you go back to the previous kind of bull market cycle, you know, you would get little minor corrections in the markets that come back down, they retest the 50 day moving average, maybe go a little bit below it and then kind of rebalance and go higher from there. So if we’re in a bull market, from those October lows, you should expect this market to come down and retest that 50 day moving average, that also kind of correspond with this bottom chart, which is the MACD, this is the moving average convergence divergence indicator kind of an oscillator. It also very overbought, like relative strength index. And so this, this is what’s setting us up for this fight, you know, three to seven questions somewhere in here, a correction back to the 50 day moving average right now would probably be in that 5% range. So again, very normal within a given year. And I’d actually be a great entry point to kind of add some additional exposure to portfolios on that type of pullback. That’s why one reason we’re holding a little bit of cash here, in terms of just you know, you’re looking for an opportunity of this pullback, to try to get a little bit of additional exposure, just one second, there’s no leeway. The point is, is simple. It’s the Bollinger Bands show you the same thing except it’s just simply going saying the markets have moved to kind of a two standard deviation level above the 50 day moving average. And we’re probably gonna get a pullback, but both charts are telling you the same thing. Markets are overbought on a short term basis, expect a little bit of a pullback here.
Adam Taggart 1:04:02
So I couldn’t I couldn’t help noticing glance at the chart you were showing. Looking at the 50 day moving average and the 200 day moving average. Where they cross, right, those seem like relatively good indicators of where the markets going to head next, right. So if the 50 day cross, it’s if it’s been below the 200 day moving average. And then the 50 day crosses the chase that the Golden Cross and I can’t remember what those titles are, right. But that basically sort of says game on, right. And then and then I think we have the death cross, right, which is when the 50 day drops below the 200 moving average, right? And if you just waited as an investor for those crosses. To me, that seems kind of like a good Pareto strategy, maybe where it’s like I’m not going to catch you know, I’m not going to top pick the top or bottom pick the bottom but um I’m going to get Get the majority of the move that’s ahead of me. It might be overly simplistic here. I mean, it’s very simplistic, but
Lance Roberts 1:05:06
no, no, it’s not. And that’s, you know, this is an indicator that, you know, the the Golden Cross desk cross is an indicator that a lot of technicians use to determine the difference really between a bullish market cycle in a bearish market cycle. And, you know, we saw the 50 crossbow tuner day and 2022 and declined. And then once that decline finished, and that was kind of October, you didn’t get the October bottoms. But once it turned up, and that 50 day moving average crosses above the 200 day, it’s kind of been off to the races ever since.
Adam Taggart 1:05:37
Yeah, okay. So it if indeed, this was a good sort of finger to the wind gauge for us, hey, you know, the 50 day is still pulling ahead of the two it’s above the 200 day moving average and still pulling ahead here. So you know, we shouldn’t shouldn’t have too many worries in the near term until we start seeing that gap start to close a little bit.
Lance Roberts 1:05:59
Yeah. And also to Importantly, the slope of the moving averages are very important. So when you take a look at a moving average, is it sloping up or down? And so right now, we have now turned that slope of both the 50 and a tunity. Moving Averages, they were sloping negatively last year. And so let’s back up right, what’s a moving average, it’s just the average price of stocks over or some index or a stock price, whatever it is, is the average price of the stock over 50 days, 10 days, 20 days, 200 days, the longer the time period, you have the better indicator it is to the trend of price, right? So if the 50 day moving average is sloping negatively if the 20 day moving averages sloping negatively the trend of the price is negative over that timeframe. So when you take a look at 2022, both the 50 Day and the tour day were sloping negatively suggesting the market was in a bearish market. Now they’re both sloping positively both the 50. And the tuner day moving average are now turning up that slope is positive. So the suggesting that we are now in a bullish trend of rising prices, and that’s why we want to participate in the market.
Adam Taggart 1:07:16
Okay. All right. Well, look, moving on here, just in the interest of time. You’re colleague Michael Liebowitz there, who has been on this channel several times educating our audience about the bond market. He released an article this week basically saying, Okay, this is our elevator pitch for bonds. Right. And I appreciated him doing that because it was fired me.
Lance Roberts 1:07:44
The article was a bet. So it’s about it. We bet each other so the problem that we have with writing reports, right, is that to explain a report a report Well, right. And so you got to start with the premise that you need to lay out some basic facts. And just getting that part of it done even before you kind of get to the meat of the article. And then the conclusion. People don’t want to read anymore, right is, you know, TLDR too long, didn’t read, they just want to pick your and a bullet point, right. That’s why Twitter does so well. Threads didn’t do well. But Twitter is doing okay. But people just don’t want to read they don’t want to put the effort into it. And so when you’re writing blog posts, the goal is is to write something with 900 words or less, because people just can’t read past 900 words. And so we have to consciously make this effort to try to explain things as easily as possible, but keep it under 900 words. And that can be a real challenge on a complex topic, like economics or debt deficits or the market right? Be really hard. So the challenge was a bet Mike a beer that he couldn’t write an article that was shorter than 500 words, and he did it. He got it. 481 words.
Adam Taggart 1:09:01
Alright, so he won the bid. So what did he win? It’ll be a beer. Okay. Yeah, not bad, right? Well, well, I’ve got a number of those words. I just want to read here, because it was a good just sort of revisitation. And look, you know, when the markets start getting hot, everybody, the stock market grabs everybody’s attention. And that’s pretty much what we’ve been talking about all video here so far. But Michael says the following, if you think as we do, that the last three years are an economic fiscal and monetary anomaly. And presumably, I think he’s talking mostly about the pandemic and the unprecedented ridiculous rescue efforts that followed it right. Not likely going to be happening on an annual basis going forward. I think it’s a relatively safe bet, then the opportunity to earn 4% or more on the longer term bond is a gift. We think yields will revert to extremely low levels when the pre pandemic economic and inflation trends reemerge. Now Negative interest rates are not out of the question. So you mentioned earlier, Lance, you know, last year, we had a lot, I mean, even before honestly, before the pandemic, I had people saying, you know, I don’t really trust the market at these crazy heights, I just wanted to get a safe 4%. And boy, if I could do that, I do that all day long. Then, of course, we had 2022. And people were saying, Oh, my God, if I could get 4%, you know, forever, I’d be I’d be happy, right? I desperate, nothing more, right. Now, all of a sudden, the markets, you know, the stocks are doing well, and people are leaving, you know, what they thought was their attractive date to the dance for for somebody that they think looks even better, right. But we got to be really clear, like, a risk free 4% or close to risk free 4% is in many ways a gift. And if you you know, if you’re if you’re not a speculator, if you’re being really honest with yourself about the type of investor you are, the off the market is giving you a really good opportunity here to lock in some very attractive, risk free rates that also have the optionality on top of them that Michael was mentioning there in that statement, which is if if policy reverts to if data and policy reverts to pre pandemic status, which we can make a pretty good argument it’s likely to over time, then interest rates could come down, yields could come down, and bond prices could rise pretty substantially. And then you’re getting paid nicely, and getting some pretty substantial appreciation. So I want to give you a chance to speak for Michael here about what the markets presenting right now.
Lance Roberts 1:11:37
Well, no, I mean, it is. And again, you know, this is exactly what I told you what happened last year. So you know, everybody’s, you know, making mistakes, they’re all running out. They’re buying these two year treasuries to get 5%. And, you know, as soon as the market starts running again, they’re going to start selling their bonds to go back into the stock market. And that’s exactly what we’re seeing. I mean, we’re, we’re, you know, I talked to a lot of people is like, well, you know, I’m in all these bonds, what do I do now to get into the stock market? It’s like, well, you know, why did you buy the bonds in the first place? You know, this is this is always the problem that we run into. But look, the bottom line is that, you know, yeah, bonds aren’t doing great right now, because of concerns over, you know, the Fed and everything else. And that’s certainly understandable. And there’s a bit of a bit of an imbalance in the markets right now, stocks relative to bond stocks, or these are extremely overvalued relative bonds, which are extremely, extremely undervalued. So if you’re a fundamental investor, you buy bonds all day long here. But what drives as we said before, what drives the yield on the 10 year Treasury is inflation and economic growth. Where’s inflation? Now, we were talking about 9% inflation last year, we’re now down to three, that’s going to be heading towards one in the course of the next year. So you got economic growth, that’s right now chugging along about 2%. But the overall growth rate, the economy’s going to slow back down to 2% or less just because of the debts and deficits. So if economic growth and inflation are running at 2% or less, the yield on the 10 year treasuries is going to wind up at 2% or less, and that’s going to just track there’s just a long term correlation between those two, because that’s what ultimately drives those yields. And so if yields go from four to two on the 10 year treasury, that’s a very nice appreciation on bond prices. Plus, you’re getting your 4% payment.
Adam Taggart 1:13:21
Right? So curious, we’re gonna get your trades in a little bit. But But what are you guys doing right now, relative to bonds? Do you just have your position and you’re sitting in it? Are you actually actively gardening right now? No, no, we’ve
Lance Roberts 1:13:32
been adding to that bond position, it was about 8%. Earlier this year, it’s now 12% of the portfolio, it will eventually be 20%. As we kind of go further into the year, but yeah, we just every time we get an opportunistic, you know, kind of a spike in the bond yield because of some fed announcement or whatever, we step in and buy a little bit more and add to our position. But that’s let’s see, this is the problem for investors is they’re going well, you know, I’m losing money on my bond side, who cares? bonds mature at face value, I’m gonna get my 4% yield. So I’ve got no risk there. And this is a long term play, right? This is something that’s going to take two or three years to play out, but in two or three years, you’re gonna make a whole lot of money by owning bonds simply because what’s going to happen economically, and that’s just, that’s, that’s just simple math. And, you know, you’re gonna wind up in that position down the road, but you got to be patient allow
Adam Taggart 1:14:22
it to work. Okay. All right. And then, of course, you know, bonds also can catch a bid if we end up getting some sort of crisis in the mix to which, you know, again, we’re saying the markets not worried right now. We may have a big period of tranquillity ahead of us here after last year’s surprise downward surprises, but you never know. And here’s what
Lance Roberts 1:14:47
you decide. The other thing that investors make a mistake on is they look at their statement and they go, this this position, my portfolio is down, you know, 8% or whatever, they just throw out a number. So my bond position is down eight. percent and then they go off, I’ve lost 8% of my money. Well, no, you haven’t. And plus, you’re not counting the fact that you got a 4% return on that from the yield kicking off. So, you know, it’s we investors always kind of look at their statement, they owe the capital value, but they never take into account the dividends and interest payments that are coming in.
Adam Taggart 1:15:16
Okay. And let’s reemphasize that that’s really important. So if you’re an investor who’s invested in bonds, and say, Your advisor has you in bonds, you look at your monthly statement, and you say, oh, gosh, that bond is down X percent, I’m losing money. But you’re saying this is not if it’s a bond that you can hold the maturity, right, I guess you can hold any bond to maturity, but But I mean, it very well may be coming due in six months, two years, whatever. It’s like a, it’s not that long to wait to get your principal back, and then you’re gonna get the yield on top of that. And then that’s the worst case scenario, right? The bond may actually end up, you know, increasing in value if conditions continue to improve for bonds. So I’m going to bang through a couple of things that could you know, I don’t want to say destabilize. But but you know, we’re talking about how the markets not really seeing any any major issues ahead. You and I in the past have spent a lot of time talking about the lag effect and what it could the surprises, the negative surprises that that could and should bring to the macroeconomic situation. If indeed history has any basis for judgment, obviously, the markets don’t think it is there. They’re like lag effects mag effect. We don’t care. It’s a big, nothing burger. But Moody’s just released an announcement that US corporate debt defaults have now surpassed last year’s total. So we’ve had 55, so far in the first half of this year, versus 36, and all of 2022. Right, so we still have this, we’re still well ahead of last year, and we still have half a year to go here. We saw the same with bankruptcies that you and I have talked about, they’ve almost they almost a beat last year. So far, we’ve had 340 so far this year corporate bankruptcies compared to 374 from last year, but bankruptcies are now at the highest as they were. Last time they were this high was in 2010. And again, we still have the second half of the year to go from here. But what’s interesting is Moody was talking about that, that, you know, this is coming from banks, really tightening their lending standards, right. It’s become a lot more expensive to borrow. This I thought was really interesting. A Heritage Foundation economist Peter St. Onge said, banks are battening down the hatches hugging their bailout money, instead of lending it out. That credit crunch means not only do we get bankruptcies like in any recession, but on top of that, we get a lending wall that cuts off even the healthy businesses and of course, their jobs, go down with them. So you know, it’s interesting that that, you know, the support that banks are getting, you know, cute QE, we would give them money to banks, and then in theory, the banks would go out and lend more because of that, really not happening this time round. Right. You know, again, markets don’t seem to care here. But this is, you know, this is a potential shoe that could drop here. Related to this, another CNBC talking head said, yeah, look at the cost of debt, you could reasonably get that financing for four to 6%. At any point, on average over the last 15 years. Now that cost of debt has gone up to nine to 13%. I mean, it’s basically doubled. Right. And so Moody’s is saying, Look, we’re not saying this is going to happen. But our models are worst case scenario, models show that globally, corporate debt defaults could exceed the record that was set in 2008. Right. So again, TBD if this is all going to happen. But this all sort of gets placed into our lag effect bucket that nobody’s really paying much attention to right now. So I gotta start winding things up. But anything you want to add to kind of this debt default rescue?
Lance Roberts 1:18:54
No, but one thing we are seeing is, is we are seeing defaults, delinquencies on credit cards starting to rise, we’re seeing credit card, sorry, auto loan delinquencies starting to rise. And to that kind of that, you know, recession risk, you know, kind of indicator thing that we’re talking about. The rejection rate on auto loans and credit cards are now rising at a pretty steep pace. So in other words, consumers are going to the bank going, Hey, I need a loan. They’re going No don’t qualify, right and
Adam Taggart 1:19:24
center up. But we’ve talked about this, right? We’ve talked about the danger of that debt saturation wall where either the consumer can’t take on any more debt because then they can’t service their other debts, or they can’t take on any more debts, because the lenders just saying you’re cut off money.
Lance Roberts 1:19:37
Yeah, exactly. And then one of the thing I’m writing an article on this, I think for either late next week or the following week, but tax receipts, as a percent of GDP are falling rather sharply. That is also a very good pre recessionary indicator historically, because obviously, if you’re collecting less tax revenue, that means that incomes have fallen so on both a personal and corporate basis. So that’s that’s also just kind of tying back. Oh, it’s there. Certainly, you know, and I don’t want anybody to walk away from this one oh, answer just being super bare Uber bullish and he’s just not paying attention anything. No, you know, please go to our website, real investment advice.com. read our articles we write article after article after article talking about the risk, we’re aware of the risks, we understand the risk, we evaluate the risk, we understand all this. But right now we have a bullish market that we have to participate with. But we are well aware of the economic recession risks that are sitting out there. We just think it’s now getting pushed out into later next year, just because of the momentum cycle of the market that we’re in. And that’s going to go ahead,
Adam Taggart 1:20:44
no, good. That’s exactly where I was going. So when I sort of pressed you earlier, what you thought was most likely, you said, Hey, technically, you know, we’re in a bull market, and there’s sunnier skies ahead. I know your position to be more nuanced than that. And that’s what you’re clarifying right now, where I think you’re saying, look, the technical data is super bullish, I’m gonna put words in your mouth, feel free to rearrange them, the macro data, super bearish, some parts of it getting a little bit better, but maybe some parts of it getting a little bit worse, right? And that net net, it sounds like you think, look, the Piper is going to need to be paid. But that reckoning dates probably getting pushed out at 2023 in the next year. Yeah.
Lance Roberts 1:21:23
And look, there’s look, there’s clearly what’s going on, if you haven’t taken a look at Consumer Sentiment lately, right? The University of Michigan consumer consumer sentiment and Sentiment Index, I’ll spit that out. And even the conference, sports Sentiment Index, if you take a look at it, those have turned up. And you should expect that right consumers are feeling better, why consumers are feeling better not because they’re getting paid more at their job, they’re not getting you know, they’re not getting extra vacation time or you know, things like that they’re feeling better because the stock market’s going up, they’re looking at their 401 K plan and going oh, man, my 401 K’s up you know 6% from earlier this year, whatever the number is, it’s up five grand. And so I’m gonna go you know, I’m really kind of been wanting this new you know, jigsaw or whatever from my garage. Tell him a guy loose at a golf clubs, you know, whatever, are going to be really nice. Buy my wife a new vacuum cleaner. Don’t do that. Don’t take
Adam Taggart 1:22:17
my advice on that. No, do not ask this way to spend the anniversary night on the couch. Yeah, exactly.
Lance Roberts 1:22:23
No kitchen equipment, no fitness equipment, no fitness clothes. No, stay away from that. Anyway, but they’re feeling better. So they’re going yo, I can go spend a couple of grand here or grand over here and spend $500 over here because my wealth has increased my brokerage account is up my 401 K plan is up. I feel better. That’s that wealth effect. So go back to 2010. Ben Bernanke launching QE two says, Why are we doing QE to raise asset prices in order to boost the wealth effect to increase economic growth? So because we’re seeing consumer sentiment increase? Don’t be surprised if you start to see some improvement. In the economic data. There’s a very good correlation between consumer sentiment and terms and indexes like the leading economic index, manufacturing indexes, etc. So pay attention.
Adam Taggart 1:23:14
Okay, just a quick preview for folks. Sentiment very important to track as Lance is saying. Peter Atwater is one of the economists who focuses most on sentiment, we’ll be interviewing him in just a couple of weeks. So just keep an eye out for that interview when it comes out. All right, Lance, I’m gonna have to skip over some of my other potential shoes to drop here. There were all kinds of lag effect related stats on the housing market on commercial real estate, etc.
Lance Roberts 1:23:44
Next, just next week, we’ll do lag effect week. Right. So
Adam Taggart 1:23:47
okay, I did it with Michael, I’d love to do it with you. So what we’ll do, like effect will also, I did want to circle back to your expected implications from the student loan repayment. If that if that does indeed go back into effect here.
Lance Roberts 1:24:03
I think that’s the biggest risk we’ve got. I know you do. And that’s what I really want to dig into that. Yeah. Yeah. I think that is, I think that I think that so you know, what is it that brings the market down. It’s something that is unexpected exogenous event that is not fully appreciated by the markets. And I and I could be entirely wrong. But I think that student loan deal is not being appreciated nearly enough by the financial markets.
Adam Taggart 1:24:27
Okay. So let’s hear or mark that to get into in depth next week. I mean, ask you about your trades in just a second. Real quick. I had some interesting territory we’re gonna go into in terms of our, you know, human element that we like to end on, but I’ll just pull out, you said the consumers are feeling more more optimistic because of the wealth effect. Men they sure are when it comes to concerts. So Taylor Swift she’s got her tour going on right now. I don’t know if you saw this. But um, The Federal Reserve said her tour alone is boosting the US economy. That the estimate is that it’s pumping 5 billion in spending into the economy. And it’s pretty amazing when you think that one individual can be responsible for that much. But I’ve got a younger daughter who loves music, she has been trying to scheme every which way that she can, you know, get her parents or somebody to finance a ticket for her. And now here, you know, the nosebleed seats go for over a grant. But they’re saying that the average Taylor Swift Concert Attendee spends 1300 bucks per show on tickets, outfits, travel, and food. Right? Which, when you when you think of these coliseums, like, you know, she’s playing out here to 60,000 person Coliseum. And if you put an average of 1300 bucks on each one of those 60,000 people, that is a lot of spending.
Lance Roberts 1:25:55
Well, yeah. And again, remember, so how does the economy work? And this is very important. Beyonce is also doing the same thing. Yeah, not really, to the degree that Taylor Swift is, but she does her fair share. So you put those two together, you really get it. But you know, you know, think about all the you know, so Taylor Swift shows up at Anaheim Coliseum, right? So she’s got all of her people that she’s got to pay, which are also spending money, then they’ve got to hire all the people, just security guards, and you know, all the people to work the concession stands and the you know, all the gear and they’re, I mean, you just you start going down all the the hundreds upon hundreds of people. This is not a small event. Right. Right. And that’s just
Adam Taggart 1:26:36
the tour. Right? Yeah. And this goes into hotels and the airlines and Yeah,
Lance Roberts 1:26:41
exactly. And so it’s all that knock on effect that that, you know, helps keep the economy going. And it’s very important. So yeah, it’s, but it’s quite phenomenal what she is doing. Her career is quite phenomenal.
Adam Taggart 1:26:56
It’s cool. And sometimes we’ll talk about how I actually met Taylor, when she was 15, I think. And just starting out, when I worked at Yahoo, we owned a company called Launch media, which eventually became Yahoo music, and it was all about launching new talent. So my girls just can’t believe the story where like, I was walking across campus to go get some food at the cafeteria. And there’s this little 15 year old girl on this little makeshift stage who’s singing and there’s probably like, 10, or 15 people listening to her and walking by like, Oh, she’s not that bad, right? And who knew back then that would become Taylor Swift. But one of the things I was going to talk with you about, and we’ll punt this to later on, but is, hey, look, you know, I’ve I’ve, years ago took both my daughters to Taylor Swift concerts, for different birthdays of theirs. But I mean, when you get to the point where you’re paying 1300 bucks for a concert, any concert, right, but let alone like the nosebleed seat of you know, some place where you can’t even see or as a speck on the stage, right? I mean, it really is saying something about how much we value, you know, $1, right. There’s some threshold that personally, I think is way below that amount, where you’re better off just, you know, buying an album and enjoying it, right?
Lance Roberts 1:28:08
Yeah, no, it’s, it’s, you know, you know, it is interesting, what, and I was actually having this conversation the other day with my wife, because when our kids were small, you know, we took them to Disney once, right. And it was super expensive. I’m like, I, you know, it’s great. They had that experience, my daughters were in love with the princesses. And you know, it was amazing experience for them to see the princesses. But we did it one time. And I said, Well, never doing that again, because that’s just way too much money to spend for that. And you know, but you know, it’s always interesting, the people make financial choices. And it is it is always interesting to me, what they value more than saving or investing for their future. And again, this whole YOLO conversation, you know, when you start talking about to people 2600 bucks, whatever, to go see a concert, you know, you’re putting a lot of value on that entertainment, and the I get it, it’s, you know, it’s super cool. I’m not bashing your decision to go do that, if you did, I’m not talking to you specific I’m just talking about in general, it’s always fascinated me the choices that people make on how they spend money on an experience that is very short lived, has a great memory, but has no follow through effect versus using that same amount of money to do something that could give you a lifetime of benefit. Right, exactly. But it’s not nearly as fun
Adam Taggart 1:29:31
not just fun in the moment but you know, like not even cat food you know, later in life is pretty fun to to be
Lance Roberts 1:29:38
exactly. I understand it, I understand it. I’m not bashing it at all. So please don’t think that I’m just saying I always find it fascinating from a human perspective, how we value money, especially when I
Adam Taggart 1:29:50
get to it and I’m bashing it and this is this is where I want to go later on, you know next time whatever we have more time to do this justice, but is there is a threshold by which I think you are, you’re being irresponsible with your money. Because you’re, you’re buying something that’s not worth the value of what you’re how much you’re paying, right? And you’re diminishing your future prospects as a result. Now, I mentioned two quick things, and then we’ll just wrap up here. One is this, the people who are paying 1300 bucks per show on everything that’s 730 bucks more than their intended budget. Right. So these people were going not expecting to pay nearly that much, but they’re going way over budget when they go there for a whole bunch of reasons when you’re there, and you just can’t say no, or, you know, whatever. But, you know, that’s, that’s not a responsible business decision, when you were basically paying, you know, whatever, 150% more than than you expected to. Secondly, I’ll just mention this one move on, but like going to like a, like a major league sporting event now. Right? I mean, it out here in the Bay Area, if you take your family say to like, you know, go watch the San Francisco Giants play. If Dave football game for people, even if you don’t get expensive seats, I mean, you’re still paying somewhere between 55 Sorry, 500, and a grand when you wrap in, you know, tickets and parking, and the cost of, you know, $18 drinks and hotdogs and stuff like that, right. And at some point, it’s sort of like, look, you’re much better off, you know, economically and enjoying Joy meant like just watching the game from home. Or even better, go go to your local high school baseball team, you’ll know everybody personally, it would be much more emotionally invested in the match. And you’ll spend, you know, 15 bucks for your family, right? So you know, this, this part of like finding value in how you spend your money and in controlling your personal finances. We’re kind of dancing around the point here, Lance is that there’s a lot of people right now that are, whether it’s just poor education, or they’re just not thinking about it, either ignoring the bottom line, or they have magical thinking around money. They’re making immediate decisions, for some sort of fleeting benefit that are going to come by them down the road rant for a different day. Okay, well, let’s end on your trades here. What trades have you made over the past week, the only
Lance Roberts 1:32:19
trades we really made this week? Well, we only really made one and that was we added to our regional banks after the earnings, the earnings came in better than expected. So we added a little bit of exposure to our regional banks, and our ETF model, we add a little bit of a regional bank ETFs on top of our normal, kind of, you know, SLF, kind of financial banking sector that we have as well. But that’s really pretty much it. Most of you know, again, we’ve already been kind of creeping up our exposure over the last several weeks, you know, we added to our big mega cap stocks, we’ve added to, you know, energy, we’ve added some other areas, you know, so So again, you know, we’ve seen this rotation in the markets now that’s really kind of helped the performance of Oh, portfolio, that’s been nice. And so now our next step is really going to be looking kind of looking into evaluate where maybe we start reducing a little bit of risk just temporarily, for potentially this bit of a correction, we may say,
Adam Taggart 1:33:13
okay, great. Be very interested to see next week, if you get to that point. And we’d love to see
Lance Roberts 1:33:19
next week, maybe too soon, you know, the correction could be probably won’t be until August,
Adam Taggart 1:33:23
September. Okay. Okay. Also to just over the next couple of weeks, we’ll have more data on the earning side of things, too. So that’ll be interesting to see your guys’s thought once you have more data. All right, well, look, as we wrap up here, folks, you know, part of what I was planning on ending here, Lance, which did involve some of this messaging about being more mindful of the value you pay for life’s experiences are rooted in this experience. I just had this past week, having been home both from my my mom’s service, but also reuniting with a lot of old family and old friends that I haven’t seen in some cases for, for decades, weirdly time to the night before. My mom’s service was my first high school reunion ever. So it gets some interesting life lessons out of that, that I will punt. But, you know, a lot of these things, a lot of the key takeaways that I had were germane to this topic of planning for yourself for those in your life who are entering their senior years, right and really kind of beginning to do end of life planning, right to make sure that the last years that the seniors in your life have their being as taken care of as best as possible. And also for when they pass on. All the estate planning stuff is hopefully buttoned up long before and you don’t have a lot of challenges that honestly the majority of families do, because most people don’t do estate planning, trying to figure all this stuff out on the fly which tends to engineer less than optimal outcomes for everybody the senior themselves, the family themselves, and you and I’ve been talking to About the fact that we were going to line up in end of life webinar, end of life planning webinar for the Wealthion. Audience. You’ve been working with the folks on your team, Richard and Danny. To make that happen. We’ve now put in the date in the calendar. So just to let folks know, so you guys can mark your schedules. That free end of life webinar is going to be held on Friday, October 22, August 25, at noon, Eastern 9am. Pacific folks will remind you as we get closer to that date, but I did want to let you know, we said we were going to lock a date. And we did thanks for making that happen, Lance. Also just real quick and mentioned one or two of these, but we do have a really good now that I’m back, you know, I just had a week of replays so that folks had some content while I’m gone. We’re back to creating new daily interviews going forward. And we’ve got a great set of experts lined up for the coming week. We’ve got art Berman, we’re going to be talking about the oil markets and what’s going on there. I’ve got Dan Ariely who will be recording later on today. Dan is one of the top behavioral economists out there. And if you’re not familiar with the field of behavioral economics, totally fascinating. I know Lance is really interested in how that interviews goes. I can’t wait for it. It’s going to be super interesting. We then have the great Lacey hunt that I’ll be doing an interview with next week. And then at the end of the week, Stephanie Pomeroy is going to be recording an interview with Jim Rickards, one of the items of focus on that is going to be this potentially new commodity backed bricks currency that may be announced in August. So stay tuned for that. As we wrap up here, just want to underscore Lance has done a great job, both on the bullish and the bearish side in today’s discussion, talking about all the things that a you know, really competent, experienced, seasoned financial advisor has to keep in mind when they’re trying to charter, the client capital they have to safe passage through all that might be getting thrown at them this year, I highly recommend that you work with a professional advisor, financial advisor who can do that for you. If you’ve got a great one great stick with them. They’re rare if you don’t, or if you’d like a second opinion from what he does, perhaps even Lance and his team, they’re real investment advice. Just go to wealthion.com Fill out the short form there, we’ll set you up with one of those. Again, these free consultations don’t cost you anything. There’s no commitment to work with these guys. They just offer it as a free public service to help folks get positioned as prudently as possible for whatever might be coming down the pike. And if you enjoy these weekly market recaps as much as Lance and I do, you’re glad that we’re back in action. I’m back from from my time away. Lance is back from his time in the penitentiary or wherever he’s been. Do us a favor. Please support this channel by hitting the like button, then clicking on the red subscribe button below. Well, there’s that little blue icon right next to it, Lance. As usual. I’ll give you the last word.
Lance Roberts 1:37:56
That’s it. We’ll see what happens next week with earnings and we’ll be back next Friday.
Adam Taggart 1:38:00
All right, everyone else thanks so much for watching.