Portfolio manager Lance Roberts & Wealthion founder Adam Taggart recap the major developments of the week, including:
- the April CPI/inflation number, which fell slightly to 4.9%
- the recent surprise jump in initial jobless claims
- the looming showdown over the debt ceiling & its potential repurcussions
- the bullish AND bearish cases for the markets
- the trades Lance’s firm made this week
Adam Taggart 0:04
Welcome to Wealthion. I’m Wealthion founder Adam Taggart welcoming you back here at the end of the week for another weekly market recap featuring my good friend Portfolio Manager, Lance Roberts plants. How’re you doing, buddy?
Lance Roberts 0:17
I’m glad it’s Friday.
Adam Taggart 0:20
To me too, and
Lance Roberts 0:23
I’m always happy to hang out here with you because I know it’s the end of the week. So that’s that’s kind of a good way to wrap up my week. Over after this,
Adam Taggart 0:31
I like to have that association with you. And it is a really fun way to wrap up the week, full disclosure to folks, we’re recording a couple hours earlier than normal. Because on my schedule side, I’ve got something I got to get to afterwards. So the market is still open as Lance and I are talking here. But lot happened this week, Lance, lots of data come out. So let’s, let’s let’s just go through it all. Probably. Look, let’s start with inflation. We got the latest CPI numbers this week, headline CPI came in just a hair under most of the forecasts. I think the average forecast was somewhere between like, you know, by 5.1 5.2 Some people think it was going to pop up a little bit. It actually continued to drop to 4.9%. I think core CPI was a little stickier markets. How do they interpret it?
Lance Roberts 1:27
Well, it was interesting, because on Tuesday, I think it was on Yeah, I was on Tuesday I did a I do it before the bell commentary every morning on our web on our website.
Adam Taggart 1:38
Can I share something with you about that? That is way TMI, way too much information is you know, I do my best to get a workout in the morning. And then usually, you know, it’s got me scrambling to get ready for my next recording. And so I’m trying just to get caught up in between the workout and taking a shower and getting ready for the the recording. And so I listened to your morning recaps while I’m like scrambling through the shower. Yeah, wait, you’re weird. I know I just made your way to a comfortable shower buddy most morning.
Lance Roberts 2:11
I just want you to know that now. Now I have that vision in my head every morning. So anyway, we’ll have to do it we’ll have to do a whole episode is on like on a Friday month. We’re like smoking jackets and do Hugh Hefner like, you know, alcohol and
Adam Taggart 2:33
sports, the bill but smoking jacket for next week.
Lance Roberts 2:37
So alright, so anyway, but on Tuesday, I was doing this before the bell video. Now with an image stuck in my head. Talking about the CPI report, I said look at the CPI report comes in a lot hotter than expected, like a reading of 5.5% or higher, just markets gonna sell off between one and one and a half percent. If we come in somewhere where you’re talking about a sub 4.5%, reading a big drop in CPI, you’re gonna see the markets up about one and a half percent, anywhere close to being on the screws is going to be kind of a nothing burger for the market. And that’s exactly what happened. The reading came in up four tenths it was right in line with what was the expectations were? I think the actual inflation read was like 4.9 4.5 4.95. But it’s 4.9 in terms of anybody else’s thing. But yeah, that was that was down from last last week last month reading and 5%. So again, you know, we keep seeing inflation come down in terms of that. And that’s in Look, that’s a function of the fact that we’re looking at data on a year over year basis. And now those comparisons. And you and I talked about this last year early on said, you know when these year over year comparisons get a lot easier, which is where we are now that inflation rate is going to start coming down pretty quickly. And that’s what’s happening. It’s just you know, if you take a look at Core CPI, it is remaining a bit more sticky than the Fed would like. But the headlines coming down quickly because of those year over year comparisons. PPI which came out on Thursday, also took a big drop. And one of the measures that I watched pretty closely is the spread between ppi and CPI, that is now negative 7.9. And that’s a fairly deep negative reading for that spread between those two indices, and it actually has a bullish and bearish tone to it. From a bullish perspective, markets tend to bottom when you have a negative spread between ppi and CPI, and the expectation there is inflation is coming down. And that’s going to allow companies that benefit from a disinflationary trend primarily technology, discretionary, communications, etc. They will perform better in that environment. And since those are the biggest market cap weightings in the index, it tends to drag the markets higher a lot. Basically what we’ve seen since the October lows and the the more bearish read of that is that that negative spread between ppi and CPI says basically saying companies can’t pass on inflation. And so Oh, that’s gonna start impacting profit margins, there’s a very fairly high correlation between net profit margins for corporations and that net positive the negative spread of inflation. Okay. Investing wise, make it what you want?
Adam Taggart 5:19
Well in you laugh but in a little while I’m going to ask for Lance the bowl to come talk to us. And then I’m going to ask for his brother Lance, the bear to come talk to us, because both have published articles this week. Yes. So in inflation, the the biggest component driving the inflation number to date still is shelter. And one thing to note about shelter, two things note about shelter, as you and I have talked about many times, it’s a very lagging read in the CPI number, it’s really reflective of housing prices from it’s not real time, it’s from generally months or quarters ago. And we know from a lot of real time data, that that’s coming down in real time. But even in this lagging data, it’s clear that the shelter component to CPI has peaked and is beginning to come down. And of course, as we look at all the more recent data and the real estate market, you know, we can have a good deal of confidence that that’s going to continue to come down and probably accelerate in terms of coming down. So that should be pulling CPI down as well as the shelter prices begin to catch up to what we’ve seen over the past, you know, quarter two,
Lance Roberts 6:31
yeah, absolutely. You know, headline, sorry, in the headline CPI number, kind of at core shelter, housing makes up nearly 40% of that index, it’s a very big chunk. And we’ve said this for a while is that when you know the housing effect takes hold, it’s going to drag if everything else was remain stagnant, that’s going to drag it down. I mean, we can even see inflation in terms of food prices and energy prices go up. But that headline component of housing is so big, it will drag down the whole index. So you know, it’s kind of that way. It’s almost we’ve been waiting on this data to show up. It hasn’t showed up yet. But it’s coming and it’s just a bunch of time now.
Adam Taggart 7:10
Okay, good. Yeah, that’s exactly what I wanted to highlight for folks. I also want to apologize, I don’t know if folks can hear the leaf blower outside my studio here. But Murphy’s law being what it is, the guys just showing up, I’ve told Lance to give me the cut sign if it gets too loud. He hasn’t done so yet. So we’ll keep going. But my apologies if that’s a distracting sound do
Lance Roberts 7:30
apologize, because I’ve got it going on on my side to just show it up. So in between, I’m doing lawn mowers as we tried to get through this recap this week.
Adam Taggart 7:40
Oh, my God. Yeah, the universe just does not want us to be able to get to the checkout part of Friday. All right, well, look. So what’s interesting this week is we had the inflation data come out. But then we also had the initial the latest initial jobless claims numbers come out. And that was a real surprise to the upside which in jobs, jobless claims is unfavorable. Right, you know, more more jobless claims. That’s not what you want to see. Right. And it was a pretty big surprise. I think it was a like a four sigma beat compared to the the expected value. So I’ll put up a chart here of both initial jobless claims and continuing jobless claims. And it’s really clear that they bottomed in around September of 2022. That’s where the trough was, and that we are now building looks like building momentum to the upside. And what’s really meaningful about this is the Fed has, you know, been fighting inflation. And it said, you know, Powell has been very clear, he said, Hey, look, I’ve got this dual mandate, right, I’ve got price stability, which is being very disrupted by the spike in inflation. And I have full employment and employment is super robust. And as a matter of fact, for a long time, he kept highlighting the, the gap between job applicants and open job positions and saying, Look, we just have way more available jobs and people who want to work them. So that really gave him confidence to say, okay, I can really lean in to fighting inflation because I don’t have to worry about the jobs market. I think looking at the BLS numbers, you can still make an argument, oh, given the government reported numbers, employment is still strong. But even those numbers are beginning to show a little bit of of weakening, at least beginning to and we talked about that when the jolts numbers came out last week. This initial jobless claims just adds further corroboration to the fact that that employment, you know, EA and that EA and the hope framework of Michael Kantrowitz that we’ve talked about, is now all of a sudden not looking as rock steady as it is. I don’t think we can say yet from the reported data, that we have a problem with employment. I don’t think we’re even close to that yet. In terms of the reported numbers may be a different story if we talk about other indicators that we’re seeing, but I think this is an important milestone along the way where all of a sudden the analysts are getting surprised to the negative side of it. jobless claims beginning to rise faster than than they thought. What do you think?
Lance Roberts 10:03
I think I think that’s right. You know, first of all, we got to keep this in perspective that yes, jobless claims are up, but not surprising where the economy’s headed. But you were still below 300,000. And, you know, normally when you’re below 300,000, the economy is still doing fine. We saw 1.1% growth in GDP in the first quarter, we’ll see, you know, 2% ish, probably, at least according to the Atlanta Fed right now. In the second quarter, that will likely change as we get closer to the end of the quarter. But you know, it is it is a function that those jobless claims are picking up. And what’s interesting is that we’ve had employment in terms of the BLS employment measure, beat expectations for 13 months in a row, that is the largest number of beats ever on record, that that’s ever happened. And it’s by a large margin. I mean, it’s not even close as to where, you know, previous sequences of you know, where numbers were beating estimates had occurred previously. And I thought was interesting. I posted out on Twitter, if I can, if I can share a screen real quick, Adam, go forth. Give me Give me just a moment. I put this out on Twitter this morning. And I apologize if you see balloons. I don’t know why balloons keep popping up on my twitter screen today. But every time I shift screens, all these balloons go everywhere.
Adam Taggart 11:21
It’s like a really indirect way of saying it’s your birthday today. Sort of Yeah, I think so. Hey, congratulations. Yeah,
Lance Roberts 11:28
we don’t celebrate it anymore. I quit at 45
Adam Taggart 11:32
Hey, bud. Hey, in the comment section below everybody wish Lanta Happy Birthday? Yeah, 58, it just did just doesn’t work counting anymore. Anyway,
Lance Roberts 11:41
this this chart is a an overlay of jobless claims versus employment. And you know what’s really interesting is if you look at this chart over time, it’s not my chart, by the way this was from JP Morgan. It was circulating around this morning. But it was interesting as looking at this chart is that there’s a very high correlation. When jobless claims start to rise, employment, unemployment starts to rise as well. And that hasn’t happened yet. So we’ve had this fairly noticeable surge in claims, and particularly on the initial claim side, yet unemployment remains at record lows. So I don’t know what to make of that, you know, we talked about, you know, we can certainly make some statements about you know, the data and what’s happening with the data. It is an election year coming up next year. So maybe that’s part of it.
Adam Taggart 12:26
I mean, that’s kind of hard not to leap to that, especially because for months, you and I have talked about how the BLS data just seems to have so many unbelievable components to it. But whatever.
Lance Roberts 12:38
Well, I said, and when you take a look at the numbers that, you know, we beat estimates, 13, straight, you know, months in a row, and again, something that is so abnormal, you have to question it. And again, I’m trying not to put a tinfoil hat on or anything else, I’m just saying is that there are some anomalies that are going on that haven’t happened before. And so you kind of have to scratch your head a bit and go, Okay, well, is this time different, and there’s a reason to make, you know, there is a reason to make that case, right? We can make the case that this time is different from the standpoint that we laid off so many workers in 2020, that companies have hired them back. And you know, it’s like my company as well, we have really, really good employees. And we don’t want to let them go, because we won’t be able to hire them back because they’ll get a job somewhere else, because they’re really good employees. So we’re gonna do everything we can to to hold on to those employees. And we know there’s probably a lot of companies right now that yes, we’re seeing some some, some layoffs, those are occurring. And companies like Matt and Matt and Google and these other companies that had a whole bunch of excess hiring, and 21 and 22. But for a big chunk of companies, they hired back good employees. And now we’re into this late what’s called labor hoarding. And this is the point in the cycle where companies go, I don’t want to let employees go, because I’m afraid I won’t get them back. And you know, that may impair my business to a degree. So I’m gonna hold on to these people as long as I can possibly before terminating them. And that’s not an you know, we’ve seen that before we saw a recording back and during the financial crisis, as well. So that may be one explanation for this divergence between the data. Ultimately, I suspect that this data will play catch up with claims it’s just a punch in time now.
Adam Taggart 14:21
Yeah, I mean, the thing is, like, you can look at that chart, but pull the chart back up for a sec. Oh, sorry. You can look at Oh, wait there. And you can see the job hoarding that you’re talking about? Yeah. Oh, there we go. So you can see how the blue line gets ahead of the orangey yellowish line there. But but it’s it’s not for long, and it’s you know, the the gap isn’t that extreme. And then you look at where we are today. Like it’s just unprecedented in this wet 25 year data set.
Lance Roberts 14:54
Yeah. And you saw it back here early in 2000. Going to that recession, claims are rising and unemployment. My employment was still falling. But then is a very quick all of a sudden when that realization the.com crisis set in unemployment surge very quickly. So again, we may we may have a similar situation, you know, coming up here again, I don’t know how long that’s gonna last but that I think that distortion is going to work its way through the system by the end of the year.
Adam Taggart 15:19
Yeah, well, and if it is labor hoarding, that that does sort of have like a tipping point, right, where you, you hold on, you hold on, you hold on, and you’re like, you know, I just can’t anymore, you know, like, we’re our profits are just going to negative we got it, we got to start going to layoffs. And that’s where you get that big snap. So who knows, if it is labor hoarding, maybe we see that orange line catch up real fast. All right, I’m gonna actually share my screen if I can. And so this is a chart of initial jobless claims. And that data series was revised relatively recently. And you can see here, the delta of the revised data, which is the red dataset here versus the original jobless claims, right. So you look at the original way it has been calculated, it’s not really flashing any warning signs, you look at the revised way it’s being calculated, you can totally see the September trough, and where it’s taking up here. And sort of, you know, to me, this is a bit of an IT additional indicator that suggests that, you know, a lot of the official reporting is quite generous, right? And it’s only when we see the revisions do we do we to them? You know, do we see that like, okay, yeah, maybe actually, it was really under reporting the stuff.
Lance Roberts 16:42
Yeah, and look, and that’s the problem with all these mathematical calculations that we use to look like a lot of the data is based on guesses and assumptions to start with. You know, we have data sources, we talked about this before, like with employment, we have ADP, and we have paychecks, and we have all these payroll companies, why we don’t just collect I mean, when you put an employee on ADP as an example, you say, Okay, I hired Adam, today, his salary is this he’s a full time employee, a start date is this, his first paycheck will be this date, it will be in this amount, withhold these taxes, etc, that all goes into the ADP system. So why we are still relying on telephone surveys to ask people Adam, are you employed or not? It’s kind of ridiculous in this day and age, because there’s so much real time data that we have access to that we can just look at it as purest form, how many full time employees that we hire in the last month from these six employment companies and you would have a much better read, you know, much better look at real time data than you do with you know, all these other kind of government plus, we can fire a whole lot of government people, we wouldn’t need all these people. But that’s a that’s a whole nother Detlef probably
Adam Taggart 17:54
why we don’t have this system. But yeah, exactly.
Lance Roberts 17:57
You know, those, what they call them? non essential workers. So yeah, that’s all there for compensation different day. But anyway, we have all this real time data that, you know, we could get a real look at the labor market on literally a weekly basis, we could know what was going on just by looking at the number of people hired or terminated in a given week. But again, we just we just don’t do that.
Adam Taggart 18:22
Yeah, well, look, I’m going to share my screen again here. So there is a talk about this with Stephanie POM boy the other day, there is another way to look at measuring employment, which is withheld employment taxes. Right. So this is reported daily by the US Treasury. So when we get the BLS employment numbers, they are generally what they’re monthly, right? So it’s like a monthly snapshot. And they have all these assumptions baked into them birth death models and all sorts of stuff. Right? This is a lot more like what you’re talking about, Lance, this is just how many withheld employment taxes did the Treasury taken daily, right now this is it’s a trailing 12 month average to try to sort of smooth out the noise here. And you know, what this shows is that growth in withheld employment taxes has basically been plummeting, since What’s that? End of 2021, right, where we turned off the liquidity spigots, and it’s now been plummeting. And it’s, it’s, you know, on its way to going negative here, right. So it just it tells a far different story than those monthly doctored snapshots that we have. And, you know, you want to look at a whole bunch of different indicators. And that’s what Michael Kantrowitz, you know, in his whole framework, he’s got like, you know, 20 different indicators for each of his four main categories. It’s not relying on any given one. But the whole point is, is you want to look at all of them to see you know, if you can get a really true or read and again, if you’re just relying on the headline, government jobs, numbers that are out there, they’ve been head scratchers for a long time as you And I’ve debated back and forth, but seeing some of these alternative sources like withheld employment taxes, you know, I think really does kind of pull back a lot of the covers that maybe had been making that headline data, you know, well, let me be generous. Yeah.
Lance Roberts 20:14
Well, look, you know, we’ve been talking about, you know, for the last year or so that we’ve had, you know, this big surge in wages, and everybody’s getting paid more now, because of this labor shortage. Okay. Well, if that’s the case, then why did income tax revenues decline this year? Remember, we just filed income taxes on April 15, for last year, and you’re paying income on your taxes that your that your income is coming in, right. So you get your deputies yesterday, 90 90k ones, etc. All the all that income tax collected down this year. So that also argues to this idea that, you know, the job market isn’t nearly as robust as a lot of the headline numbers make it out to be?
Adam Taggart 20:53
Yeah, so that’s kind of where I’m going to go with all this, which is, up until now, the Fed has been able to be really confident that it can continue to lean into its inflation fighting efforts, because it didn’t have to worry about the jobs market. Right. And way too early to tell here. But you and I have have have, you know, long postulated that, okay, at some point, the labor market might break, you start seeing the unemployment rate really start jumping up here, that then all of a sudden potentially, potentially starts tying the Feds hands or at least we’re really going to have to see how much pain Pao is really able to tolerate, right? Because that’s when pain becomes real. For the general public. Right? That’s when companies have to lay people off, people lose their jobs, people start screaming for we can’t have this, we gotta we gotta go back and pivot. So not saying we’re there yet. But I’m saying we’re beginning to see signs that, you know, this long awaited moment could be about to happen. Right? Well, I
Lance Roberts 21:54
look, there’s, you know, a good bit of data that supports that timing is always the issue. Right? And, you know, this is one of the challenges of the market and investing right now, which is getting that timing, right, because, again, the market saying one thing, the economic data saying another, and if the if the market tends to lead the economy by six to nine months, then the economic data is getting about to the point that it should start actually getting better, not worse. So this is the big challenge in this dichotomy between, you know, paying attention, what the markets doing, and investing accordingly, and paying attention all these economic numbers that, you know, certainly paint a much more dire picture. That’s that’s the big challenge.
Adam Taggart 22:39
Yeah. All right. Well, look, speaking of the big challenge, I want to do the lance the bowl, and let’s the bear conversation here. Real quick, though, right. Before we get to it, we got to talk about another big topic, which is the debt ceiling. So that’s kind of progressing as expected, right, where we’re seeing more and more dire headlines and all this talk about the X date, right, which is when the Treasury runs out of its ability to do the extraordinary funding measures that it’s been taking. US Treasury Secretary Janet Yellen has been saying that that might come as soon as June 1 right now based on the math that she’s doing. So you know, in issuing all sorts of dire warnings of, you know, it’d be an apocalypse, if we ever defaulted, the US has never done that. And, you know, it’s a lot of excessive catastrophizing on her side, which I get, because it’s a line, you know, someone in her position absolutely doesn’t want us to have to cross. Now, now, the real political theater like gets real serious now, I’ll try to find the chart while we’re talking here. But but there’s a way to be able to get a debt ceiling, deal done, you have to have all of the parties, both in Congress, and House, Senate, and Biden, all in DC at the same time. And if you look at their calendars, I think there’s only like four days left in the month, where they will all be there in DC at the same time. So if you do doesn’t get struck during that window, which I think is next week, and I’ll try to find this this calendar while we’re talking here. It doesn’t make a deal impossible, but it does make a deal more challenging to get something done before the X date happens here. So anyway, lots of hands going real quick, because I just want to give you a chance to respond to it. I’m sure you’re getting the same questions. I am Lance of people who are saying like, alright, well, I just bought more treasuries than I’ve ever owned in my life before we’ve got this debt ceiling. And am I in danger of the US Treasury defaulting on my my T bills? My Treasury notes? I think the answer to that is absolutely not chances are about 0.000001. But what do you think?
Lance Roberts 24:54
No doubt that the chance of the US defaulting on its debt is 00000. Are they going to happen? Look, we’ve been here before. And what’s interesting is, so first of all, Janet Yellen is not independent. She serves at the pleasure of the President, she totes the water for the President. So whatever the president wants her to say that’s what she says. And so her message is dire gloom, doom and gloom, and the world is going to end and we have a default on our debt since 1970 98, which is incorrect, Michelle, and we actually defaulted on our debt 1979. But this is the problem with media rhetoric and everything else, and then not not parsing between the actual data and what talking heads and people that serve a political agenda are trying to tell you. The the issue is ultimately is that when we get to the X date, remember we’ve been here before 2011. We were at this point, the s&p downgraded US debt to double A from triple A, the market slid by about 20% That summer, and we were all all, everybody was on vacation at the time, and so nobody could get a debt deal done. And then so finally, when everybody came back to Washington, we came together, we got this debt, this debt ceiling limit done, which raised the debt ceiling in exchange for putting together a bipartisan commission, that would come up with a trillion dollars worth of cuts that would have an automatic cut date on the first of 2013. And that had this bipartisan commission not come up with these cuts, these cuts will be automatically implemented. Well, of course, the Bilateral Commission didn’t do that. And that was when Ben Bernanke at the end of 2012, launched QE three, because he was scared about this fiscal cliff, because of this immediate cut of a trillion and spending, what that would impact on the government. But surprisingly, that didn’t happen. markets continued to rally because that trillion dollars in cuts happened across 10,000 agencies, and just goes to show you how much waste is in Washington, it didn’t even move the needle in terms of government spending, because it was so spread out. And so nonetheless, the market continues to rally in 2013 2014. Were up, you know, 70 80% on the index during that period of time. And everything’s fine. Now, during the 2011 debacle, interest rates did spike temporarily because of people repositioning over what was going to happen and then when we actually passed that debt ceiling, the Treasury had to issue debt to repay all the money they borrowed from the Federal pension system and from other areas of the economy. Now, we did pass that point to where the next day, you know, we were supposed to run out of money. And surprisingly, the government found other areas that they could tap into, to get money to keep paying the interest on the debt and Social Security and those type of things. But as we said before, there’s two sections of the budget, you always have to remember this, there’s what’s called a mandatory spending side of the budget, which is Social Security, Medicare, Medicaid, prescription drug benefits, military salaries and interest on the debt that gets paid period and the story that gets paid if money has to come up from somewhere else. And this is where Janet Yellen is going, Oh, no, I’m just not going to agree to prioritizing spending, which that’s hard just carrying in the Biden water right now, because Joe Biden’s like, I’m not negotiating on the debt ceiling, because you can’t cut any of the spending that I want to do. We have a debt problem, you’ve spent too much money, you’re gonna have to cut spending somewhere. I know, you don’t want to cut spending, because no president wants to cut spending, but at some point, you’re gonna have to cut some spending. So right now Janet Yellen saying, oh, we can’t prioritize payments, but that’s exactly what will happen. We’ll simply close down national parks will lay off 950,000 non essential workers that will get furloughed temporarily. And then as soon as we get the debts that we raise, they will get a free paid vacation or whatever time they’re furloughed, because they get all that money back plus their salaries going forward. So this will get resolved. It’s just a function of time until we get there. We’ve been here 79 times 49 times under Republicans the rest of it under Democrat. So this is a bipartisan issue of raising the debt ceiling. Ronald Reagan raised it 18 times alone by himself. So you know, this is this is not a new thing. And it is nothing that you should worry about the interest is going to get paid. And there’s a massive difference between a technical default and an actual default. And we covered this in last weekend’s newsletter in detail on the website, real investment advice.com. But a technical default is yes, we could potentially miss an interest payment. It’s exactly what happened in 1979. Because we were debating over the debt ceiling, we missed an interest payment. And five days later, the interest payment was made when they got the debt ceiling lifted, and everybody went back to work. So not paying your debt. In other words, a treasury bond comes due and they say, well, we’re not gonna pay your principal back. That is not going to happen, because we will pay those debts. We may be late on interest payments. We may be in technical default for a few days. But as soon as that debt ceiling is limit lifted, the Treasury will issue all the debt it needs. That will probably cause a short term spike in rates that will be a great Buying Opportunity for bonds at that point, when you get that spike in rates, I would buy a lot of long duration treasuries at that point when that occurs, because after that, once we get that done yields are gonna start to come back down rather rapidly towards 3% ish on the tenure.
Adam Taggart 30:14
Okay. So that was one of the questions I was going to ask you, which is any any increase in yields that result from the uncertainty of the debt ceiling, you just see is pretty much a good buying opportunity. Yeah,
Lance Roberts 30:26
we actually. So we we’ve actually just today, and then we’ll get to our trades later, but just today, we actually increase we so we add in our bond ladder that we have in our portfolio, we had some floating T bills, and are in our portfolio for very short end maturities, we now move that out to three to five year maturities, this as a start here. And then when this when this interest debt ceiling deal was done, then we’re going to take a whole bunch of the middle and longer duration and move it out even further. So. Okay, great.
Adam Taggart 31:01
That’s excellent. And I really do like to use these weekly videos, so folks can sort of monitor how you’re extending the duration over time.
Lance Roberts 31:12
Everything you know, baby, yep. And of course, just
Adam Taggart 31:14
just for new new viewers, here, you’re doing that because you anticipate yields to come down, you know, over the course of the coming year, and you want to ride the price appreciation, which is greatest at the furthest end of the duration curve.
Lance Roberts 31:30
Right. That’s a big mistake that a lot of people are making right now I get a lot of emails from your viewers right. And it’s like all went put all my money into two year treasuries, because I want 5%. That’s great. As we talked about before, investing is like chess, you have to be thinking multiple moves ahead. So if you went Put your mind above all your money in short term treasuries, the question is, what are you going to do next, because at the end of two years, when yields have now come down, you’re not going to be able to reinvest that money into two year treasuries, again, because that’ll be close to zero.
Adam Taggart 32:01
So you’ll be able to, you’ll just get a fraction of the money.
Lance Roberts 32:06
So you know, if you’re, if you’re you have to think about where we’re going to be a year or two years from now, when you’re buying bonds, and then figure out well, okay, well, when I get there, what’s gonna be my next move? Where am I going from there? And that’s a real important question you have to answer right now. And that’s a big driver of how we’re building our bond portfolio is looking out over the next 1357 10 years of where we’re going to be in terms of economic growth, inflation, those type of things. And that’s how we’re building our portfolio to participate.
Adam Taggart 32:35
Okay, so the discussion that I’m kind of seeing on the folks that are tracking the debt ceiling is similar to what you laid out Lance, which in terms of a contender before, we know, it’s going to get resolved, at some point, we’re kind of coming down to the wire. And first off, folks, I did find that calendar, availability of all the parties to make the decision of overlaid here looks like those next four days are today is one of them Friday, and then the first three days of next week. And then after that, you know, I don’t know someone’s going to have to get on a plane or something like that if they make a midnight agreement. But But the question that that sort of in these veteran experts minds is just okay. So the Republicans are going to hold this up for as long as they can to demand the concessions that they want out of the from the Democrats, the Democrats right now are taking the position of you know, we’re not going to accept any more spending cuts as a result of this negotiation. Honestly, they’re probably going to have to meet in the middle, right. And so the question is just how much stock market pain? Is it going to require to get everybody to come to a resolution or that just sort of seems to be, you know, like, they’re basically holding the markets hostage here. At this point, at some point, the markets will freak out enough, where somebody’s gonna want to make a deal to make the pain go away.
Lance Roberts 33:58
I know. But the markets have pretty much been telling you this week when the markets really haven’t done much this week,
Adam Taggart 34:02
right? I know, which is interesting, sort of why I’m asking this.
Lance Roberts 34:06
We had pack West back on the verge of default. Earlier this week, you had this inflation data come in, which is still too hot for the Fed to cut rates. And the markets are pretty much just floating sideways right now. So we’re, we’re in a sell signal. So kind of the the little bit of weakness we’ve had this week is not unsurprising at all, because we had a big rally from March, the mid March, when we talked about, you know, that we were getting a buy signal, and our target was 4200. We got a rally to 4168, which was close enough for jazz, as they say, and for my my previous music career. You know, that, you know, we got close enough. And that was a sell signal, and we’re working through that sell signal period. And yet, you know, markets really are just consolidating sideways at this point. And so if there’s really no concert, the market knows that we’re going to run this to the very last minute. They’re going to meet again next week. That was kind of The latest news headline out everybody on both sides. And this and this is this is also a bit more of a missed misnomer, right, which is Oh, the Republicans are holding this up. No, it’s not the Republicans holding this up. It’s not the, it’s both Republicans and Democrats, you have to sit down at the table and negotiate this out. And the first set of negotiations were, here’s what we want from the Republicans and the Democrats were like, We don’t care, we’re not doing anything. That’s not a negotiation, that’s being a crybaby. So if you want to have a negotiation, you have to sit into a room as adults. And again, the whole problem is, we have no adults in Washington at all period whatsoever. You sit around and say, Look, you know, you just spent $1.7 trillion of money we don’t have, we need to cut some of the spending back to try to move back to some of it. And you’re gonna have to give, we’re not gonna get all the cuts that we want, that’s okay. We’re willing to give up, you know, some of this because we know we got to do that to get a negotiation that that’s what should be going on in Washington. But again, we have children, and they’re all throwing tantrums and trying to make political narratives to their benefit. And this is the big thing, like I have a lot of I have a lot of acquaintances that work in Washington, and what you hear from these people in the media and what they say behind closed doors are two very things. You know, they throw outrage on television, it’s like, oh, my gosh, this, that and the other thing, and then behind closed doors are like, well, you know, this is really kind of what we got to do. And, you know, so you’ve got to really just separate all this stuff out for what it is at the end of the day. This will get resolved. Nobody, nobody wants on their record, that they cause the debt default. No button. I don’t care who you are Republican, Democrat, Independent president, Congress Senate, even Joe Manchin today one of the levers that that the Republicans may have is that even Senator Joe Manchin, who is a Democrat from Virginia came out today and said, this this spending is not kosher, right. We’ve we’ve got to get this debt ceiling done. And what the Democrats are asking for is not really
Adam Taggart 37:07
what he was reacting to is I read it is the blanket Look, we’re not going to accept any spending concessions. He just said, Look, that’s not realistic. And he said like, it’s not realistic, because it’s the way these things have always been resolved is like
Lance Roberts 37:22
so. So I stand corrected. We have one adult Joe Manchin in the room.
Adam Taggart 37:28
But he was like, Look, when we’ve been on the other side of this, we’ve wondered that like, basically just like you can’t you can’t take the cake come in with it with a blanket refusal, because otherwise this doesn’t work. We don’t find consensus. Okay, so
Lance Roberts 37:40
like, what, like once a day just to wrap that up? Yeah, we what has to happen? Right now there’s time. So there’s no pressure, right? Everybody can play their game to the best of their ability for media headlines sake right now. But when this gets down to the last minute, so like the Mission Impossible movie, it’s always, you know, five seconds, silicone detonates and right, ears off, five seconds before detonation will come to an agreement. That’s okay.
Adam Taggart 38:07
Okay. And that’s kind of where I was going with this, which is surprising. Maybe not surprisingly, but a little surprising. Are the markets haven’t seemed worried yet about this. Do you think that as the clock ticks down, we’re gonna see the markets begin to sweat,
Lance Roberts 38:21
maybe, again, you know, the the cohesive, the cohesiveness of the market has been very good. You know, there’s, there’s trouble with the market. And so that so don’t, you know, you can’t take what I say as a blanket statement, because when you look at this rally this year, it’s been driven by a very small number of big cap stocks, right? That’s been a big driver, Breath of the market has been pretty weak here. So we’re due for a good rotation, I’m looking forward to one where we can get some of the sell off in some of these tech names. Microsoft, Apple, Google, which are all trading three standard deviations above moving averages are very overbought, because I’d love to buy some more we own them. And I’d love to buy some more of them, but they’re just too expensive right now to buy. So I’m looking forward, I would love a bit of a sell off here to accelerate and I think this summer is a reasonable potential where we can maybe get a five to 10% correction in the markets, very normal that happens every single year, the markets, you know, historically, five to 10% correction completely normal in in most given years, you have at least one to two 5% corrections in any given year. So, you know, you know, that would be a good opportunity, but usually add some exposure to portfolios because the trend of the market remains bullish, the underlying function of the market still remains bullish until that changes. There’s no reason to get, you know, ultra ultra bearish at this point.
Adam Taggart 39:43
Okay. That is a great segue into this next section here. So, if I can, I’d like to talk to Lance Roberts, the bull. The fellow who put out this, this article this week, called the commitment of traders Extreme positioning suggests the bears may be wrong. So can you walk us through Parnell? You’ll
Lance Roberts 40:06
get him real quick? Be right back. So
Adam Taggart 40:08
okay, good, good. And let him know that if he wants to talk to any of the charts in this article, he’s welcome to screenshare, too.
Lance Roberts 40:17
Yeah. So yeah, there’s so so it’s interesting that So, when you take a look at the at the markets, right, there’s been a couple of things that have been going on in the markets in particular, and we take a look at the volatility index is an example. Extremely low. I mean, we’re trading below 20. And the volatility index. Now, there’s, you know, we’ve talked about before you and I about the zero days, to expiration option mania has been going on. And that’s been distorting the VIX to some degree. So there is that, but volatility as an assumption has been fairly low. Again, we haven’t had big swings in the markets this year, kind of like we saw last year where the markets are moving 10 and 20% in two directions. We haven’t had that this year. So volatility has been very suppressed. And so that got me kind of digging around what’s called the commitment of traders report. And what the commit there’s there’s basically three layers of traders and options and futures. And there’s the commercial hedgers. Now, these are people like farmers that are ranchers. And so they’ve got, they’re raising a bunch of head of cattle, or they’re raising corn, and they’re gonna deliver that to the market at some point. Well, you know, if you’re, you know, if you’re out in the middle of Oklahoma, raising corn, you know, it’s subject to tornadoes and everything else coming along, and you have these weather events that can wipe out your entire crop, or you can have some type of disease crop up that wipe out wipes out your entire crop. So these people so these farmers go out, and they hedge their their crops so that in the event something happens, they can lock in a price for that for that harvest. Right?
Adam Taggart 41:57
Right. They’re not speculating, it’s just pure insurance buying, basically
Lance Roberts 42:01
pure insurance buying. And then there’s the retail traders. And that’s a very small fraction of options, transactions that go on. The big movement in options is the non commercial traders. Now, this is basically Wall Street, hedge funds, Wall Street primarily, basically trading options on commodities, and, you know, oil and food and agriculture and everything. You know, this is the go back to the Trading Places, with Eddie Murphy. Right. But the whole orange of the orange crop report, right? The Duke brothers were the frozen orange juice concentrate. Yeah, exactly. So that’s the speculation, though is, is there going to be a shortage of oranges this year in Florida because of a drought, and that’s going to dry, that’s going to be too little supply relative to the demand for oranges. And so they’re going about long on the orange futures that, you know, there’s going to be a big price rise and oranges, right. So that’s how they make money. So you can have a look at this data on a, what we call a net short basis. So you take you basically look at how many people are long a commodity, or an index, or whatever it is, and how many people are short the index, and then that puts you out. And if more people wind up being long, right? You know, everybody, in other words, everybody’s expecting the markets to go up as an example. And everybody’s long. Typically, the way it works. And that’s a psychological thing within the markets. And contrarian investing basis, is that when everybody thinks one thing is going to happen, something else tends to happen. And same thing occurs when you have everybody assuming that prices are gonna go down. Well think about the market over the last year. And no matter what you listen to in the media, the press and everything else, everybody’s super bearish, oh, this interest rates are going up. And this is happening with the economy. And you know, this is going on with the Fed and we’re hiking interest rates. And there’s a million reasons why this market is going to have another financial crisis of 2008. Back, it might even be worse this time, we’re just going to be in a massive bear market. Well, there’s a lot of people that think that and so if you take a look at the net positioning of s&p futures, they’re negative, they are net short to a very, very large degree. In fact, they haven’t been this short the market since 2020, during the shutdown. So again, this just kind of goes back to that contrarian basis that when everybody assumes one thing is going to happen, something else tends to occur. Now, where this tends to play out in the favor of the bears is that during a bear market, right, so in a market that has a negative rending of prices, so go back to 2008. We broke the bullish trend, we were trending negatively we were trading below the 200 week moving average on a consistent basis. That’s a very negative environment for prices. That net short position was confirming that bear market during a bull market where markets are trading and trending above the 200 week moving average on a consistent basis which we are still doing today, then the net big net short positions, were actually buying opportunities. It was basically where the bottoms of corrections were occurring. And so if you take a look at the correction from January of 2022, to where we were in October of 2022, that correction came down tested the two and a week moving average, we have a big net short position in the markets. And that’s helped that big net short positioning is helping fuel this rally that we’ve had since those October lows. So that’s the that’s the bullish aspect to the market is that you have a buying support, or fuel, so to speak for the markets to go higher, because of everybody being that short, the further the prices go up, the more people that have to cover their short position, which feels more buying, which feels more short covering, which feels more buying, so forth
Adam Taggart 45:47
and so on. Okay, so largely and I’m oversimplifying here, the argument is just everybody’s over on one side of the boat. Yeah, when that happens, the opposite oftentimes happens. Position accordingly. Okay. So that’s Lance, the bull. Now if you don’t mind me call, but go ahead. Real quick.
Lance Roberts 46:10
Real quick. Before I finish that, though, you have the exact same setup on bonds, by the way. You have you have the largest net short positioning on Treasury bonds right now that you’ve had since 2020, as well, when we shut the shut the economy down so. And that, of course, you know, right after that was when yields fell to about half a percent. So you’ve got the same exact bullish setup on a contrarian basis in bonds that you have in stocks. That’s really the question of the article, which is, Can Can Can the bears be wrong on both stocks and bonds at the same time, and there’s a historical situation that has occurred ever since the Federal Reserve has become invested in supporting financial markets since 2000. Stocks and bonds have been positively correlated over periods. So prior to 2000, there was a negative correlation over periods. And so when stocks are going up, bonds are one down and vice versa. So there was a natural hedge since 2000. That hasn’t been the case. And we right now we have a negative correlation between stocks and bonds. But that’s likely temporary. And probably what’s going to happen is these big net short positions of both stocks and bonds are going to feel buying and that correlation will come back. And we’ll get both a rally in stocks and bonds at the same time, much like we saw since 2009, as well.
Adam Taggart 47:26
Okay, so help me understand this, I didn’t realize that the shorts were so concentrated in bonds. If so many people, if the market is still anticipating a Fed pivot, sooner than the Fed is guiding that it’s going to pivot. Why are so many people short bonds,
Lance Roberts 47:45
they’re still looking at inflation running at, you know, five, five and a half percent, five percentage, right? They’re still looking at Fed funds at 5%, they’re still expected to look and listen to most of the people that year, right? It’s like interest rates are here, that means that you know, the economy is going to crash and all this, all this bad stuff is going to happen. And so you get a lot of people that are shorting bonds as both a hedge for portfolios, but also, you remember, everybody looks at hindsight and see bonds were a poor performer last year. So every time you gotta get a rally, you get people shorting bonds, again, expecting that negative trend to occur, because that’s the recency bias that’s occurring in the markets,
Adam Taggart 48:22
I guess. So I mean, I just keep hearing that, hey, the markets forward looking, you know, it’s maybe already priced us through this recession, the bond markets, the smartest money in the markets. And so you would think if it’s calculating a pivot sooner that it would be more bullish on bonds.
Lance Roberts 48:40
But right, you’re just talking about two different groups of people, you’re talking about speculators versus investors. So what you have on the commercial on the commercial side is speculators on the side of speculators, those people speculating on short term price movements. And, you know, remember, these contracts are not 10 year contracts, if they’re buying these are very short dated contracts, you know, between a month and a year in most cases. And so they’re and a lot of these non commercial traders are basically hedging other positions for pension funds, hedge funds, this type of thing. So there’s more that goes on to this than just people saying, oh, there’s a bet here, you know, everybody’s betting the markets gonna go down. There’s more to it than that, because,
Adam Taggart 49:21
in other words, you might be you might be short, short bonds here. But it might be an offset trade to a long bond trade that you have somewhere else,
Lance Roberts 49:30
right. So even just think about how an option works. So there’s two people on each side of an option contract, there’s the buyer and the seller. So if you want to buy a bond contract for so let’s just say on Wall Street for the moment, and you’re an individual and you say Lance, I want to buy a million contracts on Treasury bonds, saying that the price is gonna go up and yields are gonna go down. So I give you a contract for that trade. And so that means though, that I have to take the other side of that trade. So I’m now short treasuries to get give you the option that you want, because there has to be both sides of a train wreck. So that’s how a lot of us occurs in the market. But the bigger issue of all this and not to get I don’t want to get too lost in the forest for the trees is that negative short position is fuel. So if yields start to come down rather sharply for any reason, we have a hiccup in the economy, whatever occurs, the Fed starts slashing rates all of a sudden, when that those yields start coming down, that’s going to force all these net short positions to cover, right, because those prices start to move against them. And that just add, it’s like margin debt, right? It just adds fuel to the fire when it occurs.
Adam Taggart 50:38
Yep. All right, great. Okay. So that was Lance, the bull. If his brother can come on in here, the guy that wrote why future returns could approach zero this way. Why don’t you walk us through that, and I’m doing this exercise to just to let people know, as you said earlier, like it’s, it’s a rough time in the markets, because you can kind of argue pretty easily both sides of the, the tape right now.
Lance Roberts 51:03
Yeah. And, you know, remember when these articles that are right, these are just me and Mike doing research, this is this is us walking through, you know, our kind of analysis trying to figure all this stuff out. And so the way that we do our research is we quantify things better when we write about it. So when you got to start putting stuff into writing, and you know, building charts and analyzing the data, and putting some contextualization around this data about what it means it gives us a better focus on what to do with our portfolios. And so when you read our articles, we’re not just making a you know, a lot of people write articles just for the sake of writing articles, they don’t actually manage it, but the business, we manage the book of client money, right, over a billion dollars worth. And so we write our research. So A is transparency, so you know, what we’re thinking, but also be it’s just how we’re quantifying our actions that we’re taking within portfolio. So that’s, that’s why, you know, I’m not talking about the two sides of my mouth and saying, look, I can make a bullish case, but there’s some boys do some various things we need to be aware of, because that’s the risk. It’s easy to be invested on the long side of the markets. But you got to be aware of the risk. And that’s what all this other work is about. Yeah. And I want to give you kudos for doing this one. I
Adam Taggart 52:19
mean, when you’re doing the work that that you should be doing as a capital Manager, which is your you’re doing your analysis, I mean, you hope that anybody who’s managing your capital is, is not just winging it based on gut feel that they’re doing real analysis, you’re actually showing that yeah, you guys do the real analysis. But but as you argue both sides, right, which I know you and Michael have to do is part of your discipline, right? You know, you sit down and when you take the bear side, when you take the bull side, you debate it, and then you decide at the end of the day, what to do about it, you’re making that visible to not just your clients, but to the world at large. And that’s a real gift. There’s a lot of, there’s a lot of managers that wouldn’t be willing to be that vulnerable. So I want to commend you for that.
Lance Roberts 53:03
Well, I appreciate that. Yeah. When trust me when we’re wrong, we get a lot of emails. And I’m just being nice to you, because it’s your birthday. I appreciate that. But yeah, so So there’s actually two parts. So it was interesting, I published this article on Friday talking about why futures returns can be zero. And I’ve written these articles before based around valuations and you know, a lot of other mathematics, right? And it was interesting, I posted this article immediately, some guy tweeted me back and he’s like, You should read husband’s work and understand he’s all mathematical basis. Like, I’m not talking about valuations in this instance, I’m not talking about valuations, valuations are a definite import of definite importance to future returns. What valuations tell you is that if you’re overpaying for an asset today, your future returns gonna be less tomorrow, right? If I pay $500,000 return for the $1,000 house, I’m not gonna make money on the house. It’s just the way it’s going to work. But this article has nothing to do with valuations. Because that is a valid argument. I’m not arguing against expensive valuations, which we have right now, that does argue for lower returns in the future. But this is a different take. And what we’re looking at is the impact of two factors primarily, which is massive amounts of liquidity, and 5%, money market rates. And those have a potential impact that people really haven’t thought about much as of late and really talked about much. And if you take a look at the market returns of the market, going back to 1925, and I used some some data from the New York State University. And you look at returns on an annualized basis from 1925 to 2008. And on average is exactly what you would expect the markets generated about 8% a year a little bit more, and that’s price appreciation plus dividends over that timeframe. And that pretty much aligns with economic growth, inflation and dividends. And that’s so that’s kind of exactly what you would expect in the markets that 8% rate of return well, since 2009, we’ve averaged 12% annually, that’s 400 basis points more than what we average from 1925 to 2009. Right. So just just, you know, you’re talking about a 50% increase in the rate of return and economic growth, that 2% Certainly does not support an additional 400 basis points or return over that timeframe. So where did it come from? Well, it came from the fact that we had zero interest rates money there was there was no ability to leave money in savings at that point. So money had to get pushed into either investments or markets or something, right, I’d be put out there, I either had to go take my cash and build a business with it, or I had to invest in the stock market or something, I had to do something to get some rate of return on my cash. So zero interest rates was a big provide a big function of that. And then another $43 trillion. In liquidity, we spent 10 times we spent $10, for every dollars worth of growth that we got out of the economy over that 12 year period. So that is just unsustainable. Right now, at least at this point, I don’t see any big spinning bills on the horizon, that is going to contribute another tamp, harp, HAMP Cash for Clunkers cash for utilities that we did, you know, following the financial crisis, I don’t see that in the pipeline right now. The Fed is reducing their balance sheet through quantitative tightening, there’s no reason at this moment for them to go back to quantitative easing. Because everything’s doing okay. And even if the Fed does cut rates, because the economy is slowing down, unless we have some type of financial crisis of magnitude, there’s gonna be no reason for them to queue to do QE. So there’s nothing really there to support that liquidity push is, at least at this moment, not there to support these above average growth rates in financial markets over the foreseeable future. So if that is the case, we’re gonna go back to what a market should return, which is economic growth, plus dividends plus inflation, which is four to 6%. Right? That’s just where we’re going to be. And then if you start looking at potentially slower economic growth, that’s how you start talking about inflation rates, sorry, growth rates coming back towards that zero rate of return level has nothing to do with valuations. Valuations are another problem entirely. But then there’s also the impact of 5%, money market rates at 5%. Money market rates, and just assuming the Fed leaves interest rates where they are they don’t bring rates back down to zero again, markets are doing okay, economy’s doing okay, nothing’s falling out of bed right now. So no reason for the Fed to cut rates. And everybody, the markets expecting the Fed to cut rates by 120 basis points by the beginning of next year. There’s no reason to cut rates unless something’s gone wrong, right? And nothing’s gone wrong yet, doesn’t mean it won’t, but it just hasn’t yet. So assuming everything remains status quo at 5%, why do I if 5% is my number in the bank 6% is my number in the stock market from taking risks by putting money in the stock market? Right 5%, I’ll just collect my 5% and go home, I don’t need the risk, I don’t need the volatility, I don’t need the headache. And so that extracts capital, from the markets as well. So again, that potentially adds another drag to this liquidity flow that we’ve had over the last decade. Now again, that’s just one kind of issue that is sitting out there just it’s just something we’re thinking about. It’s like, okay, we have all this money driving these returns, and we have money chasing ridiculous assets. What, what’s going to what’s the premise of the article basically is okay, well, if that’s what that was, what’s going to be the next driver of asset prices. That’s going to take apple and Mike, Microsoft and Google all the way to the moon? Well, the only answer then comes back to share buybacks and which share buybacks have made up about 40% of the return in the market since 2011. But there’s a limit to how many share buybacks you can have. Eventually Apple will go private if they keep buying back 90 billion a year. In stock buybacks, yeah. And
Adam Taggart 59:13
you know, beyond the very few super deep pocketed companies like the apples and the Microsoft’s of the world. A lot of share buybacks were funded by borrowing super cheap debt. Right, which isn’t there anymore. Right. So you have fewer and fewer companies that can afford to do meaningful buybacks.
Lance Roberts 59:33
That’s right. So again, you get a bifurcated market, you get a handful of stocks driving the markets higher, you get a bunch of stocks that are lagging the market. And most people don’t just buy 10 stocks, they have a basket of stocks. And you know, if you want to try and buy and hold an index, you can get average rates of return over time. You won’t get superior returns, but you get average rates of returns just buying an index but that average rate of return may wind up being zero over a decade and before you See that can happen between 2002 1015 the return on the s&p index was zero for 15 years. So it can’t happen has happened all throughout history.
Adam Taggart 1:00:13
There’s a, there’s a meme I’m going to put up here with a map to find it later on. But I’ll put it up here when we edit this, where it’s it’s three photos on top of one another. The top one is a mother with her child in the pool playing and laughing she’s like holding him above the water and it says like the s&p five and then beneath it, if you see this kid struggling to like, keep his head above the waterline he looks like he’s about to start drowning. And that’s the s&p 495 right beneath it, you see submerged at the bottom of the pool this like skeleton and a chair and it’s like the Russell 2000.
Lance Roberts 1:00:57
It’s that’s a terribly funny meme. But it’s unfortunately, it’s a bit true right now.
Adam Taggart 1:01:03
We laugh to the tears because it’s so onpoint. Right?
Lance Roberts 1:01:07
You actually put out a series of charts was actually very as Mike Lee was did this this morning. So every morning on real investment vice.com, we put out a daily market commentary, which goes to it’s three minutes to read it, we email it to you in the morning at 730. So if you subscribe to the website, we’ll email it right to you. But it was interesting this morning, he did a study of the NASDAQ the triple Q’s, the spiders and the RSP. Watch is equally s&p 500 index. And it’s very interesting when you take a look at the RSP the equal weighted index, it’s not nearly as bullish looking as the s&p or the NASDAQ which the top 10 stocks of the NASDAQ in the s&p are virtually the same. So those stocks are rallying hard, but because of the equal weighting in the RSP index, it doesn’t have near the performance because you don’t have that big market cap hangover that you have and spiders infused. Mm
Adam Taggart 1:02:00
hmm. All right. Well, look, I mean, this all just sort of underscores again, what a tricky market it is, especially for the individual investor to navigate because really smart, long experience. portfolio managers like yourself, can make you know, again, can pretty compelling arguments all along the the bullish and bearish spectrum here. We’ll get to your trades in just a bit. A couple of things I want to touch on with you before we end up here. Normally, we check in on on housing and layoffs. I’m going to skip the left Canada this week, we’ve talked enough about the employment market housing, I just want to ask real quickly because it just still just sort of blows my mind. homebuilder stocks don’t get these things are just they’re crushing it. I mean, they’re almost all at their all time highs right now. And I can’t see anything, anything in the macro landscape. That makes me feel like I should be optimistic at all, let alone the most optimistic for these guys. I mean, I guess they’re at a point in their business cycle where they can still make good cash flows or something here, right. But Well, again, is this just a screaming short? Or is there a reason that they should be up here?
Lance Roberts 1:03:19
It’s not a screaming short, that’s for sure. Because the trend has been so powerful. And those dots, this is not short covering, this is not, you know, kind of some anomaly was going on, there is a very strategic set of buying these stocks aren’t shooting straight up. It’s a very, it’s a sloping 45 degree. It’s just a consistent vibe in these companies. And part of the argument is, is that the supply of new homes is still short. So there’s not a lot of supply of new homes coming to market. So there’s plenty of room for builders to build. And when you look at existing home sales, that inventory has really shrunk a lot. Because if you know if I’m a home owner so go back in time here, I sold my house last July right at the peak of the market, I was like honey, we’re getting stupid prices for our house. We’re selling it and she’s like, Okay, fine. So we’ve been renting and we finally bought another house. But if I’m sitting in my house right now, and I’m going you know prices are coming down, maybe we’ve kind of thought about selling our house, but maybe we should go ahead and think about selling our house. Well the problem with that is is that your mortgage probably right now somewhere between two and a half and three and a half percent. So if you sell your house what are you going to do because now you go to buy another house and when you go to buy another house the house prices really haven’t come down that much. So now you’re going well if I sell my house I have to go buy another overpriced house and now my mortgage is going to be 6% Not two and a half or three or three and a half percent which means my mortgage payment goes up I’m just gonna sit where I am. So this is this is the problem now that exists within the existing home side is that you’ve got a lot of people that might sell but there’s no Wait for them to go. So they’re not selling the people that want to buy houses. They’re caught in between this issue of mortgage payments being too high versus the available inventory, and there and there’s a bunch of just sitting around going along with buy houses soon as prices come down, but they don’t come down. So it’s a very interesting dynamic that we’re sitting in. And I think that’s what’s feeding into these homebuilder stocks, which is and again, I’m not long any home builder right now, because I can’t justify the values. They’re cheap, but I can’t justify, you know, I’m doing the same middle. Cheap. Trade at 910 times earnings.
Adam Taggart 1:05:40
Really? Okay, the PE is there. Actually, I haven’t looked at the PS recently.
Lance Roberts 1:05:44
Yeah, well, look, I mean, here, I won’t share my screen. But here, let me just pull up a couple here just to look at real quick. But you like Toll Brothers, which is one of the bigger homebuilders in the country right now. I mean, they traded for PE of eight, their current P is five, their price to sales is point six, nine. You know, so their point three fingers over the last years, they grew sales at 12%, their quarter over quarter EPS was up 40%. So there’s nothing in you know, fundamentally speaking, looking at these companies is going you know, these are so expensive. I can’t buy it. Right. There’s the fundamentally, they’re, they look completely fine. They’re very overbought right now would buy them simply because they’re extremely stressed, Beazer Homes, trades at a forward P E of five has a price to sales a point to eight doesn’t pay a dividend. But you know, these are, you know, these are cheap stocks, and they’re still growing earnings over time. You know, I think there’s still going to be a bit of an upcoming in these. And again, one of the reasons I’m not buying the stocks right now on the humbler sides and probably y’all can, you know, in six months or a year say Lance, you were stupid for not buying homebuilder stocks. But I think at some point, I’m kind of in your camp saying there seems to be a disconnect between these homebuilder stocks and what’s going on in the hall and in the the housing space. And, you know, it seems like there’s gonna have to be a price correction to kind of catch up with just reality of what’s happening in space. But if homes start to improve, you know, we’re gonna be looking back going Yeah, homebuilder stocks in October, figured out that the bottom of the housing market was a lot closer than we thought and people started buying this. So the question is who’s leading who’s lagging right now? We’ll find out.
Adam Taggart 1:07:30
All right, God, Hey, maybe I should just bring one of these guys on for an interview to crawl in their heads and have them see what’s going on.
Lance Roberts 1:07:39
If you can get somebody from Toll Brothers geezers, you know, somebody that on your show, that I think it’d be a great insight as to what’s going on with
Adam Taggart 1:07:46
polti KB. Okay, well, I’ll look into it in flux, if there’s interest in that, you know, let me know if there’s enough I’ll bump it up in the priority list. All right. So given where we are time, I’ll I’ll begin to start sort of landing the plane here. But there’s, there’s there’s one thing I wanted to get your reaction to, which was about two, three weeks ago, I had had booked a guy named Ramit Sethi and he’s a personal finance Guru is a bit of a younger guy. You know that that space is kind of dominated by the Suze Orman’s and Dave Ramsey’s of the world. Remi is kind of the the next generation of that. And his folks, were really excited to have him come on this program that day, we were going to record it because I was gonna be able to launch it the same day is his new Netflix series, released. And I’m, I’ll pull it up here in a second. But I think it’s called like how to be rich, or I can make you rich or something like that. But it’s it’s a new series on Netflix, I actually just started watching it last night. And it’s kind of like a, like a financial makeover series, where he parachutes into the lives of individual people. And he finds out kind of what their current financial situation is. And most of these people have something some big issue going on. And he says, Okay, well look, you know, let me let me let me help you kind of get cleaned up and made over here and, you know, put you on a much better trajectory to hit your goals. And, you know, it’s good. I mean, I love seeing this type of stuff. I think we just need a lot more of it out in the world. Because as you and I’ve talked about forever, our education system doesn’t teach financial literacy. And most of these people have found themselves in bad into bad situations because they just didn’t know any better, right? So, you know, he’s helping them sort of understand the errors of their ways and come up with plans to to get things better. It’s not rocket science. I mean, these are pretty the advice is relatively simple and straightforward, you know, get your spending under control, you know, try to pay off your debts, you know, start trying to put some money away to build towards your future, all that type of stuff. But one thing you said that kind of, I just earmark that I wanted to talk with you About is one of the people to kind of pay off some of their debt and get some capital to work with. They sold their house and they lived in LA. So they were getting a lot of money for their house. And he asked, okay, great, what are you gonna do with that cash? And the woman said, Oh, well, I’m gonna give it to my financial advisor, he said, Oh, really well, is your financial advisor charging a management fee? And she said, Well, yeah, of course. And he sort of said, Oh, my goodness, like, I never recommend anybody do that. And basically, he’s sort of in the mindset of, you put yourself in sort of an age weighted, you know, index fund, and you let it ride. And that way, you get the market return over time, and you’ve got the lowest percent management fee. And, you know, I, that’s a different model than the financial advisors that Wealthion endorses. And being super clear, you know, I think there’s a, there’s a lot of value that an active manager can bring, we’ve talked a lot about on this channel about how we’re entering an era where active management is highly likely going to come back to the forefront is kind of a necessity for good returns going forward, we’ve had this luxurious kind of 20 plus year era where of just intense central planner intervention in the markets, where the markets were just on the steady kind of 45 degree ramp upwards over time and passive strategies worked great then. But we’re probably in an era right now where you know, the risks of downdrafts. And then losing years, perhaps sometimes even more in a downdraft becomes a lot more possible. And so having a good active manager who, at a minimum can limit your downside risk, but also perhaps help you get better upside by investing in, you know, the better the diamonds in a sector versus just the general sector, which, you know, general sector ETFs did great in this era that we just had. Personally, I think that becomes much more important. And I really value the management fee model, because it aligns the economic interests of the advisor with the economic interests of the client. But that being said, set the has his own, you know, opinion here, and I just wanted to address it head on, Lance, what’s your reaction to kind of his comment and his outlook there?
Lance Roberts 1:12:20
No, look, there’s a million people out there that are promoting financial planning, Dave Ramsey was the kind of a forerunner of this entire situation. And I agree with a lot of, you know, probably what he’s telling her, I get a lot of emails from people on Wealthion. And they say, you know, hey, I’m just starting out investing, or I’ve got, you know, $20,000, I want to get, you know, I want to start investing with them. And I emailed them back, and I say, Buy an s&p index fund, and stick as much money into it as you can every single month, and call me in 30 years, and you’ll be great. And, you know, the the point is, is that, for individuals that have a very small amount of money, but again, we go back to look at the people he’s dealing with, they have a financial problem that they’re trying to solve. These are not people that have their financial act together, that are now looking to grow and preserve their wealth over time. And that’s a, you know, we look at ourselves, often, as you know, where you go after you graduate, Dave Ramsey, right. So Dave Ramsey’s High School, you get yourself out of trouble. And then once you start getting on your path to building wealth, and you come talk to a company like us where we focus on and again, you know, people mistake the fact that you and I are talking, and we’re talking about what the markets doing, and we’re, you know, what stocks are we buying, and it’s all very sexy and glamorous. That’s a very small part of our business. I’m just the portfolio manager in our business. I’m not the guy that is your advisor in our business. So when you want to talk about your portfolio with me, more than happy to do that, but your advisor is a certified financial planner, deep, deep knowledge in in financial planning, so Security, Medicare, Medicaid, all these other insurance, all these others estate planning, all these other things that are so very important, not only building wealth, but preserving wealth over time. That’s what your financial advisor is for. If you’re just buying a financial advisor to go trade stocks for you go buy an index, because you will do a lot better over time doing that because you will get average you won’t get superior returns, you will get average returns over time, you will get the market less your expense ratio, so you won’t beat the market. You’ll still underperform the s&p, but you’ll at least kind of track what the index is doing over time. And as long as you don’t get into a period of 10 or 20 years of negative returns or zero returns, you’ll probably get to your retirement goal. But that’s the important differentiator again, so when you go to talk to a financial advisor, what are they doing for you to get you from where you are to where you want to be and what is the pathway of achieving that it’s not not just the portfolio management that if you are expecting to invest in the markets and get rich from that, and that’s going to solve your financial needs by investing in the markets, you are going to wind up losing a lot of money. And you’re going to have less money than what you started with down the road. And the reason is, is that if you treat the market like a casino, it’s going to treat you like a casino, it’s going to take your money, the house always wins. If you treat the market for what it is, which is a place to grow wealth over time, you keep your expectations realistic, and actually be conservative about your expectations great the market that six I grew for awesome, perfect, that means you’re taking less risk, you will preserve that growth over time. And the important thing about building wealth is how much money you can save not how much money you invest. So the more money you say, the higher the propensity of you reaching your financial goals are going to be there. And again, all the all the market is there to do is to ensure that the purchasing power of your savings is the same 30 years from now, as it is today. That’s why you you invest and invest conservatively over time. But again, it’s the speculation that gets people in trouble every single time.
Adam Taggart 1:16:11
Yeah, well, and I’m gonna try to prevent ending this thing and a long rant, but like you and I have talked about how we have increasingly because of central planner intervention in the market, we have pushed people largely to become speculators, right. So up until just recently, you couldn’t get a material return by kind of playing it safe and conservative, right. So people who otherwise should have been and wanted to be conservative, we’re being forced out the risk curve, I always liken it like kind of being pushed out on a on a pirate ship, plank, you know, sort at your back kind of deal. Because people that needed to live on a fixed income weren’t getting any return. So they had to be another instruments to get that return. Or, you know, the younger generations, were just saying, like, look, you know, everything’s gotten so darn unaffordable, the only way I’ve got a shot at being able to kind of afford the general American dream, being able to afford a house, you know, that type of stuff is, I gotta catch a winning lottery ticket here. And so I gotta jump into immune stock or a crypto that’s shooting the moon or whatever. And then, of course, with with the central planners, setting the tune of the markets by, you know, crashing interest rates to record lows for so long and pumping so much, you know, QE into the market. Everybody switched from analyzing the fundamentals of companies, to just trying to speculate what the Fed chair and a couple of other people around the table, you know, in the Eccles building, we’re going to decide to do next,
Lance Roberts 1:17:47
right? It’s even more than that, though. I mean, look at what we’ve done to society. You know, it’s a very sad statistic, there was an article out the other day, don’t quote me on the service source, I believe it was Pew Research, but I could be wrong. But it was the think tank, just go with that. The but it was showing the the rise in both teen loneliness, as well as teen suicides. And, um, this has a point of what we’re talking about. So just bear with me one second. All right, I’m right there with ya. But this has been a very sharp increase. And that increase started with the launch of Facebook, you go back in time, so Okay, where did they like now Facebook launched, when did it go public and right about the time that Facebook really started to gain traction with the population in the US, these suicide rates and teen loneliness, rates, etc, you know, shootings, etc, have all kind of accelerated. And the point is, is that we can trace back a lot of actions back to social media, we’ve raised an entire generation to have this dopamine addiction. And you know, we need the likes, and we need, you know, we need people to retweet our stuff. And, you know, Adam looks at his views every day, how many people are viewing my videos, and I just but it’s that dopamine, right. And that’s what we like that feeling right? And it makes us feel good. And we’ve done this with the financial markets back in, you know, pre 1990, we’ve actually invested money based on fundamentals and the way you knew what was going on with the stock was you had to wait for the Wall Street Journal to get delivered to you. And you open it up and thumb to the back of the Wall Street Journal and look and see what the stock price did yesterday. And so it was a very slow effect to try to get that information. So the average holding period for stocks in the 60s and 70s and 80s was about six years. Today, it’s less than six months and this is because we changed the whole market to this you know, this casino of flashing red and green lights and it’s this big driven dopamine effect that oh, look, that stock went up 100% yesterday, so I need to jump into it today and I don’t want to miss out and you know, we talked about Robin Hood before you know they would you buy a stock and we give confetti all over the screen. And so You know, it’s like, Oh, I’m getting rewarded for buying socks. Isn’t that great? Robin Hood’s going 24/7 Now trading so you can now trade your brains out for 24 hours a day coming up. You’re pretty sad.
Adam Taggart 1:20:09
It’s the old day casino now. Yep. Yeah. And but this is
Lance Roberts 1:20:14
we can all have this attitude and the sentiment and things that have happened in the financial markets back to what occurred on what occurs and is still occurring on social media. You know, all these means stocks. The reason those meme stocks took off is why because people were on Reddit on their app on the phone, you know, whatever, what reading Reddit and going, Oh, look, everybody’s buying, you know, AMC, and I was writing articles saying, hey, this has happened before you’re not getting Wall Street by the tail, they’re gonna wind up winning in the end. And they did that badly. But this is just, this is nothing new that is going on in the markets. There’s nothing healthy about what’s going on the markets. And this is why it’s important. And it’s always, no offense to you, Adam, you know, I love you like a brother. And I think we do our best job of giving people information they need. But if you want to be better at managing money, when you come into my office, there is no CNBC. On there is no Fox Business on there is there, there’s no news channels on whatsoever. I do tweet in the morning, at between 630 and seven, I put out my tweets for the day, I don’t look at Twitter again for the rest of the day. Don’t touch it until the next morning when I put up my next set of tweets. And that’s just to give you all something to feed on. You know, but during the day, when I’m managing money, I look at data. That’s all I look at, I don’t look at news, I don’t look at headlines, I don’t read articles, none of that. You know, so that’s if you want to be a better investor, turn all that other crap off and focus on what matters. And that’s the numbers and that’s the technicals.
Adam Taggart 1:21:49
Hey, let me let me ask you a question about that. So I just interviewed Katie Stockton, of fairlead strategies. She’s a technical analyst. And she I don’t know her personally about who she is. Okay. Yeah. So she’s, you know, she’s a very disciplined technical analyst where she basically says, Yeah, sure, like, I’ve read the, you know, look at the fundamentals, and I have an opinion on them. But she’s like, in my day job, I don’t, I don’t think about it. I’m just about price action. Right. And it fascinating interview. In fact, if folks, if you haven’t watched, it would be a good one to watch after this video here. I’ll put up a link to it right here. But she basically just as in to me, she’s sort of like the purest essence of what you talk about of like, just trading the market, you have not trading the market you think should exist, right? And she’s like, look, you know, if there’s a turning point in the market, I’m going to let the market tell me that there’s a turning point in the market. And yeah, I might, I might, you know, ride the beginning of the downturn, but But hopefully, I get out pretty quickly. Once I see the technicals returned. If I get this sort of thesis that the market is going to turn, and then I take a, you know, I switched my allocation in advance, and then it doesn’t happen, you know, I’ve kind of been deceived by all the noise, right. And so, I don’t know, it, just as she was talking, I was like, a bit, Lance’s got a pretty, you know, pretty interesting point of view on this, because, you know, probably the right thing is some sort of marriage of the both, which I think you tried to do a pretty good job of doing. But she’s just like Vulcan, right? She’s just like, like, I don’t I don’t let anything come in to influence my emotions. I’m just in my isolation chamber, just looking at
Lance Roberts 1:23:33
price action. Yeah, so for me, and I appreciate her work, too. She’s, she’s very good at what she does. For me, it’s a little bit different. I can’t run a purely technically driven portfolio. I have constraints around turnover, and other things like that. So, you know, because we’re managing retirement capital for a lot of people. So, you know, tax, capital gains considerations are important, and tax losses, and all these type of things. So there’s other factors that weigh on how we manage money. But you know, we do have a very, very strong technical component. We talked about buy signal sell signals, and we follow those very closely. And, you know, we, you know, reduce exposure in February, we increase exposure in March, we reduced it, you know, back in mid April. And, you know, so as those signals occur, we’re making portfolio adjustments. But there’s also some other factors that weigh on that to keep us from but, you know, because, again, I can’t have a portfolio that has 200% of your turnover, right? So if I was running a purely technical portfolio, I would just by its very nature of it being a technically driven model, that would have a lot more turnover that I just can’t work with. So there is a for us, and again, I’m not saying anybody, everybody raises money differently, so there’s no right or wrong way to do this. We do it. We have to apply this kind of fundamental overlay on top of our technicals to try to keep that balance in somewhat of a check
Adam Taggart 1:24:57
right well in the right way to do it. is to deliver the best returns for your clients over time, right? Trying long ways to do it,
Lance Roberts 1:25:07
right. And there’s no guarantee of any of that, obviously, I mean, we just do the best we can, we’re human, we’re going to make mistakes, we’re going to make wrong choices and things that we think are going to happen aren’t going to happen. And you know, we go back to talking about MetaTrader last year, I bought meta, we got stopped out of it on earnings day, I didn’t I didn’t get back into it in time, big mistake sucks up 100%. Since then, the fundamental story was right, the technicals tripped me up and I completely screwed up that trade, but that’s just part of managing money. I’m a human. And eventually, when I get artificial intelligence to replace me, that’ll stop happening.
Adam Taggart 1:25:43
Well look, when you know, you’re stupid, I love about these weekly series, as they give you a chance to, to, you know, a showcase what you’re doing, be talking about the wins and analyze the losses, right, and you’re getting, you’re very good about putting your neck out to say, hey, look, you know, here’s something that didn’t go the way that I thought, but the reminders we sort of talked about is like, you know, a 300 hitter, you know, in Major League Baseball, that’s a great hitter. But that guy’s missing, you know, seven at every 10, you know, pitches he gets right. Or swing to the text. So just on that that point to there was an interesting stat that I heard the other day of one of the most important things from a performance basis, not not just in finance, but in sort of all aspects of life, in business is the ability to say no, right? Is is you you, you spend the first part of your career really trying to hone your expertise to take advantage of the opportunities in front of you. But then what tends to happen is then the world comes to you and wants you to participate in kind of everything because it wants to tap your expertise, when you get to say no to that stuff to not get distracted. But also you Stan Druckenmiller and I did a video yesterday with the new harbor guys talking about a lot of the stuff that Druckenmiller is kind of worrying about right now. And he talks about the fact that he just doesn’t see any fat pitches right now. And so he’s sitting on his hands and that term fat pitches is really important because it’s a great example of how a great investor becomes and stays a great investor, which is they wait for the fat pitch. And the the sort of background I heard about this is actually in Major League Baseball. This ability to say no is super, it’s like the number one factor that pitching coaches say or batting coaches say makes a great batter is there’s a lot of pitches that are almost perfect, but they’re not quite and you as the batter have to resist swinging at them, because your odds of hitting a not great shot are still possible, where it’s just like just wait for the perfect pitch. And if you can have the discipline to wait for the perfect pitch, your potential success rate your batting average generally tends to, you know, dramatically increase, right. So this whole part of like just not getting distracted by everything being willing to accept the strikes that aren’t the perfect pitch so that you can then be prepared to go for the perfect pitch when it happens. Do you have an allergy to investing? I imagine right where you gotta say, Look, I’m yeah, I’m gonna have some losses, the some are gonna come, some are gonna go. I just have to make sure I’m really good at the fat pitch when it comes my way?
Lance Roberts 1:28:33
No, it’s funny, because I’m writing about that in this weekend’s newsletter. We’re talking about the NFIB data that just came out, which is sending out numerous recessionary alerts. Right. And so we’re talking about being bearish again, right. So here’s the market doing one thing, and then we’ve got more data out that says, you know, hey, there’s a recession at hand. You know, and so we can’t ignore that data because that recession, that NFIB data is very important and has a very high correlation to market outcomes that return over time, that type of thing. But I’m actually writing what things are writing a newsletter at the bottom is always right about, you know, this is not we’re trading this right now. And I said, Look, right now, we’re underweight equities. We’re overweight cash and bonds, and I’m willing to accept near term underperformance I don’t like being underperforming. That’s not my job. But I’m willing to accept some short term underperformance in the market not to have to be trying to make up a big decline in the market making up losses is a lot harder than making up opportunity, right? So if I’m just underperforming, and I avoid that big decline of five or 10%, whatever it is, I’m not talking about 35 or 10. I’m not gonna avoid that, then I’ve got a really good opportunity to buy things, put stuff in the portfolio and then capture the next run in the markets and I can make up that underperformance. But right now and I agree with with Druckenmiller on this is that outside of those five or 10 stocks, which are now grossly overbought, there’s nothing really compelling in the markets right now that I want to go stick a bunch of money into.
Adam Taggart 1:29:58
Okay, That’s a great segue into your recent trades. What if anything, give you that?
Lance Roberts 1:30:04
So this week we we had bought AMD and Nvidia last year, we traded that both of those we sold between 50 and 100% gains on those. We’re still out of Nvidia right now we want to own that stock longer term because of the rise of what is happening with artificial intelligence, they’re going to be a big beneficiary of that, because of their GPUs and things that they make. But we did buy a starter position in AMD on Friday. I’m sorry, not on Friday, sorry, on Wednesday, we bought a starter position and AMD. So it’s a very small position, it’s a feeder position. Hopefully, we can get a bit of a pullback in that stock over the next couple of weeks. And so I can add more to it. We also had on the Albemarle for a long time, the world’s largest lithium makers. And of course, batteries aren’t going away anytime soon. And the more stuff that we were going to do requires more lithium, though that eventually changed because lithium can’t supply the battery needs that we need. So ultimately, there’s going to be a rise of a hydrogen battery or some other type structure to contain electricity. But for right now, we don’t have an alternative. And Albemarle has had a huge correction last year, we made a lot of money with that one previously, and decent size position. And we just started, it’s gotten very oversold. It’s kind of trying to hold a support level here. So we started buying a little small starter position that as well. And then like I said, earlier, we moved our T flow position, which was our floating rate treasuries and a shorter little bit longer duration, three to five year treasuries in our portfolio and our bond side. That’s all Okay, great. We’re very small.
Adam Taggart 1:31:39
You mentioned just a few minutes ago, when you’re talking about the NFIB that you may be becoming a little bit more bearish from here. Seems like most of your trades that you just did this week, were all buys. Do you expect to do some sells in the future? Or right now? Are you just still buying? You know, it’s where you see value.
Lance Roberts 1:31:58
But it just these two companies had gotten beaten up pretty well. And technically, they’re on collecting up some early buy signals. But again, there’s still they’re very small position. So it didn’t they don’t move the needle much. I mean, if 1% position, if they go down 10% in the portfolio, it’s a negligible move for the overall portfolio.
Adam Taggart 1:32:18
Yeah. And I get that you’re you’re buying values that you’re seeing emerge right now. I’m just curious, are you looking at the rest of your portfolio? If indeed, you’re becoming a little bit more bearish and saying, All right, well, here, it looks like we should maybe start selling?
Lance Roberts 1:32:30
Yeah, there’s will depending on what happens right now, the markets doing fine. Again, the market has not done anything wrong at this point. And it’s and we’ve actually been consolidating in a tighter and tighter range of the market. So we’re gonna have a defining point over the next two months, this market is going to make a decision one way or the other, it’s either going to break down, or we’re gonna have a five to 10% correction, or it’s gonna break to the upside, and we’re gonna make a fairly, you know, probably a 5% move or so higher. I don’t know which way it’s going to be. But we’re in that type of a range right now. So if the market begins to deteriorate, yes, we’ll we’ll probably take some profits. And you know, we’ve got big runs and things like Comcast and Apple and Microsoft and some of the other discretionary stocks in our portfolio. So we’ll probably take some money off the table with those if we need to raise some more cash.
Adam Taggart 1:33:19
Okay, that’s pretty nice to be sitting on some big runs. Alright, there, Lance will look well, we’ll have to wrap it up here for the week. We’re at the right time. Great conversation as usual, folks, just a reminder, Lance did a really good job of of giving both the bull and the bear case and talking about how he’s trying to navigate all that. But understand that that’s generally very hard. For the average investor try to navigate. So if you’re feeling confused, a little overwhelmed, daunted by how to, you know, protect your wealth through all this stuff, I highly recommend that you work under the guidance of a professional financial advisor who takes into account all of the macro issues that Lance and I have been talking about here. If you have a good one, who’s been a good guide for you, great stick with them. But if not, or if you’d like a second opinion from wonder does maybe even Lance and his team there at real investment advisors, just go fill out the short [email protected] to fill out a free consultation with these guys doesn’t cost you anything, there’s no commitment to work with them. It just offered as a public service to help as many people as possible to get prudently positioned for what may lie ahead. Folks, if you’ve enjoyed this week’s discussion, we’d like to see this weekly market recap continue in all of its glory. Please do it’s my favor and support this channel by hitting the like button and clicking on the red subscribe button below was that little bell icon right next to it and most importantly, folks before your click away, please go into the comments section and wish Lance a big Happy Birthday. Let’s hope you have a great one. Hope you have a great time this weekend. You definitely should be well celebrated 58 Look dude, you don’t look a day over 60 For
Lance Roberts 1:35:01
exactly way I feel about it too. Like 73 I think. All right, but
Adam Taggart 1:35:07
but but have a great one. And thanks again just for your commitment to this show and all the time you put in and all the great insight and information and inside baseball that you share with everybody here. Have yourself a great weekend, buddy. See you next week. All right, and everybody else thanks so much for watching.
Transcribed by https://otter.ai