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Stocks and bonds are range-bound right now. Is the recovery from the swoon in August fizzling out? Or are assets just consolidating & preparing to power higher for the remainder of the year? (as recent technical analysis expert Sven Henrich predicts)

Portfolio manager Lance Roberts & Wealthion’s host Adam Taggart discuss those developments in this week’s Market Recap, along with:

  1. Lance’s reaction to Sven Henrich’s bullish outlook
  2. The growing strain between bullish technicals and bearish fundamentals
  3. The growing divergence between GDP and GDI and why it suggests a recession is very likely
  4. Why a lost decade of no net growth may lie ahead for stocks
  5. Why missing the 10 worst days of the market matters much more than catching the 10 best days
  6. Lance’s trades for the week


Adam Taggart 0:04
Welcome to Wealthion. I’m Wealthion founder welcoming you here at the end of the week, where I’m joined by my excellent friend, Lance Roberts, Portfolio Manager from real investment advice. So we’re going to talk about everything the markets done in the past week, as well as some pretty big macro developments. Lance, how’re you doing today brother?

Lance Roberts 0:22
I’m good. It’s been an interesting first kind of, you know, technically, we have to call this the first week of September, it was holiday shortened week, because Labor Day was Monday. So for the first full week of September, you know, it’s now over for the most part, and we can we can start looking forward to what’s coming.

Adam Taggart 0:39
Okay. Well, alright, look. So markets pretty range bound right now. Right? They’re still trying to find their footing here. I know that from the past couple of months, you had, you had first predicted that things had gotten pretty overbought, you said, look, there’s highly likely to be a pullback said put it in like the three to 10% range. We’ve seen that, you know, not not a little more than three, not quite 10. And markets have then tried to recover. But they’re just having trouble finding their mojo, they’re having trouble deciding at this point, which direction they want to go? And what are things looking like here? What do you think’s more likely from here? Do we break out and start climbing again? Or is gravity kicking in? No,

Lance Roberts 1:26
it’s just simply the markets doing exactly what you’d kind of expect it to do. As we talked about, in July, to your point, we said, you know, three to five or 10% correction completely normal in any given year, we had a 5% correction ish. Since then, you know, markets have tried to rally here, just a tad. And, and again, you know, as September, you know, we’re in August and September, week, months of the year, typically, sloppy kind of trading action set in September, Europe’s pretty much mostly closed down for the most part. So you have a lack of liquidity, a lack of volume, so markets tend to kind of drift sideways. If you go back historically, you’ll see a lot of analysis, as you know, September is one of the worst months of the year, which is true, because for some reason, whenever you have a big crash in the markets, whether it’s, you know, Black Friday, or, you know, whatever it is, and always happens in the month of September, for some reason, so your Lehman crashed in September. So, you know, though, if you strip those out, kind of those anomalous situations that occur from time to time, and why they all kind of clustered in September, I don’t know. But if you strip those out, the month of September is still weak, but it’s not exceptionally weak, but markets tend to kind of just drift for the month, that typically set you up very well for that October, November December period, which are the start of the seasonally strong six months of the year. The reason that is, is because portfolio managers then have to start putting really kind of putting money back to work, they need to catch up with portfolio performance, they need to be fully allocated as they head into the end of the year for recording purposes. And of course, this is also when you get your holiday shopping season. So things tend to improve in terms of, of economic activity, typically. And we’re also going into a pre election year. So all of that is going to kind of lay in here that likely this market is going to kind of consolidate here for a month or so. And then we’ll probably have a move back towards the July highs as we head into year end.

Adam Taggart 3:25
All right. So I recorded an interview just a couple of days ago with spent Henrik that just ran on the channel and spend like you, Lance, you know, said, Look, you know, I think the macro data is, you know, really pretty dismal in many ways. But he said, you know, if you look at the TA, there’s a lot of data and historical data that suggests that that stocks actually should end the year higher here. And, you know, he said, as you and I you’ve been talking a lot about this year is the fundamentals really haven’t mattered much to the market’s direction this year, it’s been a market that’s been very driven mostly by TA and narrative. So you know, spend is basically said, Look, you know, I have a really hard time making a bear case here, right now. While this is the case that the markets are responding TA and the TA looks bullish. Let me just put up one chart let you respond then. So he went through a ton of charts and I’m not going to repeat, you know, every chart that he mentioned, and folks, if you want to go watch that video, you really should to hear spends, you know, see his litany of of TA on us. But one chart, which isn’t really even technically TA is this chart here of seasonality of the s&p. So this is basically the blend of the past 20 years of performance of the s&p and he said its base this year has basically played out almost exactly on this trajectory so far. It If you look at it coming in here into September, you know, actually looks like it should pop up for a little bit and then cooled off a little bit in October and then just make this run into the end of the year here, right. And he’s saying, Look, we, who knows if it’s going to continue to stick to script, but we’re, you know, two thirds through the year so far, and this is how the script has been playing out. So you got to kind of have some respect for this correlation until it breaks,

Lance Roberts 5:26
just leave that chart up for a second, don’t think at all, because I want you to look at that run up in that big decline in the market. That’s Lehman. So that was when Lehman crashed. And so when you have these kind of outsized movements in the markets, it tends to kind of skew the data. September 18, was Lehman. So that’s kind of where you are on that clot. So again, if you strip that out that you don’t quite have that big bump, it’s more of a sideways trend. But very importantly, if you look from the beginning of August, through the end of September, Mark, it kind of goes nowhere. And you strip out that Lehman moment, and you kind of get the right, a better picture. But again, this is where we are right now, again, is that seasonality play that we’re talking about. And then the the year, its positioning and that type of stuff for the bulls. Real quick. I was there. I didn’t mean to interrupt you. But you know, what you said was very key to the overall view, you said, Well, you know, you take a look at the fundamentals, the fundamentals are pretty dismal. fundamentals are terrible short term indicators, because it takes a long time for the markets to recognize the fundamentals. So when we talk about things like valuations or fundamentals, these type of things, this is what gives you the best idea of what your returns will be over the next five to 10 years. So if I look at the fundamentals of evaluation, stock returns are going to be very low over the next five to 10 years x a massive surge in monetary liquidity. In other words, the Fed going back to massive rounds of QE and zero interest rates, if you go back, and we can put that into more kind of finite numbers, if we strip out what happened from 2009, through 2022, really, because of all the Fed stimulus and all that we get a much better picture of what markets kind of do over the long term. And so from 1900 to 2008, markets grew on average about 8%, which is exactly what you would expect, given the economy grew at 6%. And dividends, on average, on average averaged about 2%. So 6% plus 2%, is basically 8% growth. And so the markets kind of grew in line with the economy. However, you see the problem then really from 2009 to 2022, because the market grew at 12%, on average during that period. So not only was the economy growing at 2%, and dividend yields were growing at 2%, you had the market growing and that’s four percentage points above what the long term average was from 1900 to 2008. And that’s all that monetary liquidity. So exiting out that monetary liquidity, if we look forward over the next 10 to 20 years, returns on stocks should return to some level of economic growth, inflation and dividends. So 2% economic growth is where we’re headed back to inflation will be at 2%. Interest rates will be at 2% or less, and, and ultimately dividend yields will be at 2% or less. So do the math, two plus two is four, four plus two is add inflation adjustment of 2%. That’s 6%. So the best you’re going to be looking at really over the next 20 years is probably a 6% rate of return. Now, here’s the critical part about this. Throw in valuation, Jeanette now looking at basically 0% Because the markets already priced in overpriced in that 6% growth rate over the next 10 years. So now you’re at zero based on valuations, that doesn’t mean that your stocks are gonna return zero every year, what it means is you’re gonna have 10%, one year 10% One year. So if you’re up 20%, then you’re going to lose 20% in the markets and then you’re going to grow at some level. And when you look over that 10 year period, you’ll be exactly where you were when you started. Lance, that’s never happened before in history. Well, from 1955 to 1970. Exactly what happened you actually lost 10% after after inflation 2000 to 2013 on a real basis, your return was absolutely zero. So yeah, you go through these very long periods in the markets where valuations and fundamentals matter dramatically in the short term, six months, 12 months, eight months, 15 months, 18 months, 24 months, fundamentals and valuations matter zero, it’s all about market momentum psychology, trends of asset prices, the rush to the FOMO the fear of missing out so all that matters over a one to two year period is technical analysis fundamentals have nothing to do with the market at that point.

Adam Taggart 9:53
All right, so much there to dig into. So I’ll make another call. meant showing another chart from spreads that I think you’re going to have a interesting reaction to but um, you know if all that matters right now is or in the short term is technical what? Because that that seems to be all that’s been mattering this year. Right. So it’s sort of like, we have to assume it’s going to continue up until the point that it doesn’t, right. But when you talked about, you know, the markets potentially offering a projected return from here of zero, you know, going forward for some period of time. One, that’s, you know, the argument that John has been, you know, has long been making with his charts, the guys from new harbor, they bring up husband’s charts a lot. And I just want to I just want to clarify a point you made. So, when you did the math there, and you said, okay, you know, the economy was growing at 6%, and we had the 2% dividend yields. And then that that was the 8% that match the average 8% market return over that long arc of the past century, more or less. Now, post 2008, the markets have grown a lot more than the underlying components. That delta, which is you said, was being made up by the Fed stimulus and intervention, you can basically say that that is basically pulling tomorrow’s prosperity into today. Right. So essentially, what they’ve done is they’ve they’ve taken returns that we would have experienced in future years, and they pulled them earlier in along the timeline, meaning, the further you go at the timeline, well, the Piper eventually has to be paid. And you’re going to have these years of underperformance because you’ve pulled all that performance in and advanced. Correct.

Lance Roberts 11:33
Correct. And so look at the end of the day, why why do markets appreciate in price, right? So so that’s, so that’s the question you have to answer you say, Okay, well, the reason that stock prices appreciate is because people are paying for a future value of cash flows and a future value of earnings. So if we take a look, and let’s just take a look at 2008, through 2022, as an example. So from 2008, really, it’s kind of a, let’s call it 2009. So from 2009, we’ll get through the Lehman crash from 2009 to 2022. Revenue, which is what happens at the top line of the income statement has grown in cumulative total, right, so the total growth of earnings over that period is about a little over 100%, about 105%. So in other words, if I had $1, if I was earning $1, in 2009, as a company, today, I’m earning $2, I’ve increased my revenue by 100%. The bottom line has grown by over 400%. So that’s all the accounting manipulations. That’s all the funny the funny math that we use, we use operating earnings versus real, real real reported earnings to Boost Earnings and boost valuations, stock buybacks have been a huge contributor to the to the fudging of the numbers. So you know, now what earnings are, what people are doing is they’re paying up, way more for inflated earnings base are all this accounting gimmickry. And you’ve got to start to look back at the basic point is at some point that that math runs out, I can only buy back so many shares, or eventually I’m Private. I mean, there’s only so many shares I can buy back. So all these the all these accounting gimmicks and things that they’re doing to Boost Earnings per share, to justify valuations is all mostly accounting gimmicks, and those all have a finite nature. So at some point, the return of what happens. And again, to your point, we’ve been pulling forward, all of this Pope about the future is like okay, I’m going to do this now. And hopefully on the other side of this, we’re going to get much stronger economic growth, consumers are going to start spending a bunch more money, my revenue will start to grow. Again, at stronger rates to help support these valuations upon as we just never get there. The revenue growth hasn’t really been increasing at a level of support the rate of earnings growth underneath and you know, all the accounting gimmickry and machinations etc. It’s fine. There’s nothing wrong with any of that. It’s just got to go ahead. Well, I’m just saying it’s, there’s nothing illegal about it, right? You know, it’s fine what they do, but even the Wall Street Journal did a study and found out you know, they surveyed all the CFOs and roughly about 10% of earnings are all fun. I mean, they all admitted it says we fudge about 10% of our earnings numbers, because we have to meet those numbers. Because otherwise if we don’t meet the estimates from Wall Street, then you know, we get pummeled in price and so there’s this kind of incestuous relationship between corporations and Wall Street to meet to meet these estimates. And this is why you know, we’re always talking about the beat the estimate game every time we get you know, into the end of a quarter I was like okay, well how are we going to beat the estimates this time around? Of course, we lower the estimates by Wall Street lowers the estimates so companies can kind of hurdle over them and thereby tears that we’ve been beating estimates. But this is this is how again, this is why in the short term fundamentals don’t really matter. It’s all about psychology. Right? Did I beat the estimate? Yes. Okay, buy the stock. But we don’t really dig in to say, Well, what really happened here with earnings? Are we really growing revenue? Well, we haven’t grown revenue, you know, there’s companies out there that are trading at massive valuations that haven’t grown revenue in five years, right. I mean, you know, their earnings have improved a bit, but they’re, you know, they’re, they’re not growing revenue, they’re a fully mature company. And we’re paying very large valuations for those. And so at some point that will come home to roost. But in the short term, it doesn’t matter. And you’ve got to remember, take everything else aside. Back in the 60s and 70s, we used to invest really long term, the average holding period was six to eight years for a stock. So fundamentals value really meant a lot back in the 60s and 70s and 80s, when we were buying stocks, because we were buying stocks with very long outlooks. And so if we’re buying something, and we’re going to hold it for 678 years, I better make sure that earnings growth is there to support my outlook for that long term period. Today, the average holding period is less than six months. So earnings and growth and fundamentals, if your holding period is less than six months, none of that matters. It’s all about market momentum, psychology, kind of Wall Street views. And because again, we we trade on earnings estimates, earnings estimates going up and boy look at Nvidia, we better buy that because earnings estimates are going up. I’m just using it as an example. But that’s all that matters in the short term. So all this fundamental talk is great, fine dandy, the economy’s doing this, and this sucks over here. And that’s great over there. None of it really matters to the stock market, except in the short term. It’s all about price momentum in psychology, because

Adam Taggart 16:42
it’s a great, great point. It’s like a game of hot potato, right? Where it’s like, as long as you can hand it off before it cools that said somebody else’s problem to figure out, right? It’s the greater fool theory. Yeah. And I was gonna mention that video. But I think video is a poster child of what you’re talking about right now, where, you know, any way you look at the valuation right now it’s, it’s priced for, I was gonna say perfection, but I think it might be for better than perfection, right. And there is a potential universe where Nvidia meets, you know, all the expectations that are placed on the stock price right now. But as you’ve said, you know, competitors are going to be coming into this market, you know, at some point and this, we see this happen again, and again, right, where just expectations keep getting ramped up to the point where the stock is the Wonder stock until at some point, there’s that disappointing quarter where people realize, oh, my gosh, you know, what, we really got a little ahead of our skis here in terms of what’s possible for this company, and then you have these big massive, you know, price adjustments, right.

Lance Roberts 17:44
Just Just one last statement on this, and then you can set aside the whole passive indexing effect that we’ve talked about so many times, either,

Adam Taggart 17:51
right, the giant mindless robot of just of an increasing percentage of every dollar that goes into the market goes into just a few stocks, which power the index indices higher. As you were talking, you were, I was thinking about your kind of this, this collusion between corporate America and Wall Street’s to kind of keep this great game of, you know, wink, wink, NOD, NOD deception going on. I was talking to somebody recently, sort of reflecting on the Tour de France. And, you know, in particular, the Lance Armstrong era, right, where I actually actually know a guy who wrote on Team postal, and was involved in all of that, and it’s really interesting conversation, probably more than we have time to really dig into here. But you know, there was massive collusion, right, massive collusion of the team owners, the team doctors, you know, the, all the racers, right? To be engaged in the doping and stuff like that, to keep the game exciting, right, and to keep a champion like Lance, you know, that story going, because everybody loved it, right. And even even the race, we had the Tour de France, people who ran the race, who, you know, were in charge of the regulator’s who had to inspect the riders to make sure that they weren’t doping, whatever, you know, they were clearly in on it, and they didn’t want to expose what was going on, because they didn’t want to ruin the gravy train of all the ratings and sponsorships and everything like that. So, you know, there’ll be things like if they were going to come test you, you know, they would tell you, and they would give these guys and oftentimes, you know, several days of warning notice or whatever, so that they could you know, clean their systems out and you know, do the flushing and everything like that so that they could pass the test right? It was just it was something that everybody just sort of said Oh, yes, of course we police you know the integrity of the sport but wink wink nod nod, you know, we know you’re going to do that and we’re going to look the other way. Right. It’s, it’s very much kind of got that kind of feeler, which of course, can last for a long time. I mean, how many championships do Armstrong wins seven or whatever it Good Stuff we didn’t come out until after he retired.

Lance Roberts 20:02
Right? You know, and when we look at that, you’ll will Why would they do that? Right? It all comes down to the money. Yeah, it was a gravy train. Right? It was because Lance Armstrong attracted viewers to television networks. Lance Armstrong was writing it. I mean, I watched this Armstrong ride, and I don’t even know that much about biking. But I would watch the Tour de France to watch him right, because he’s my namesake. But, you know, the point is, is that when you have a look, we can go through every major sport, right? You know, you go through baseball, you go through football, you go through all these other things. And we’ve caught people in baseball, you know, using steroids or courting bats, you know, whatever it is, because they attract viewers, and they put people in seats, and you can’t discount them not my point is you can’t discount the fact of what money drives. And and this goes the same way with Wall Street and companies. I’ve done I’ve done articles on our website talking about where do you write the average person fall into the importance of Wall Street? Where is the consideration for you? You’re at the very bottom,

Adam Taggart 21:08
the bottom rung of the ladder? And then what’s below that? Yeah, exactly.

Lance Roberts 21:11
I mean, your way down and what comes first, it’s, it’s, you know, corporate profits. It’s, you know, it’s investment banking, it’s, you know, the important relationships with their pension funds in their in their managers, what matters to analysts? Is it really it, you know, if you look at analyst estimates, they are wrong all the time. Like they’re never analyst or never, right, ever, ever, right. And, you know, nobody cares about that. Because the reason the analyst always ready to come in, and this is why, you know, there’s no cell ratings on companies, they every analysts rates, accompanied by a worse though rate of a hold. And the reason is, is if I’m going out for investment banking, and I want to get your secondary offering, which makes me millions of dollars as a company, and I’ve got a sell rating on your company, you’re probably not going to want to do business with me celebrate, you know, this is all a very incestuous relationship that all revolves around money. And, you know, this is the one thing as an investor, you got to understand is that you can sit home and and, you know, sit on the sidelines, I was like, I know this markets gonna crash, look at the economy, whatever. And yeah, maybe, but there’s a huge incentive to keep this game going by Wall Street. And that’s where all the money is, the money that drives the market is not retail investors, you got your influence in the market is at the bottom rung, and maybe a little bit lower. It’s all about institutions, pension funds, hedge funds, and all these guys have a very, very close incestuous relationship. He keeps the game going, because it makes them money.

Adam Taggart 22:41
All right, and so look, we’re not trying to depress people though it can be a little depressing.

Lance Roberts 22:46
Truth, right? Well, you

Adam Taggart 22:47
gotta understand the game that you’re in exactly right. If you’re going to swim in these waters, you’re gonna understand that there are whales and sharks and whatever, you know, you’re probably a guppy. So you just gotta learn how to navigate as a guppy. Alright, so spend spend me to so again, I don’t know, if you had a chance to watch that video was spent Lance, but you should, because I think you would agree with a lot of it. Because a lot of the same, you know, his overarching point is sort of the same as the drum that you’ve been beating this year, which is, yes, there are lots and lots of macro reasons to be very pessimistic, this market and be worried about a major correction or whatnot. But that doesn’t mean it’s necessarily going to happen tomorrow in the way that the game is played, you know, they, they can push reality off for a long, long time. Right. And so that’s allowed you to, you know, not be caught on the sidelines this year. Right. So you’ve been able to participate in the run up here for your clients. You know, you’ve said, Hey, you wish you had gotten back in a little bit earlier, a little bit bigger in some of the names like Nvidia, but still, you know, there’s a lot of people that totally went to the sidelines, you know, back at the end of last year, understandably, because it looked like we were about to fall into recession, and everything look terrible. And they’ve missed out this entire rally. Right? And of course, that’s that’s the risk of perhaps being, you know, 100% in on a given thesis, right. You want to have some diversification, to make sure that if your primary thesis doesn’t play out, you’ve got some hedges in place, right. But anyways, you have also cautioned bears, you know, people not to be too too bearish. And you’ve had a number of reasons for doing that. But then, who, you know, I think he’s kind of bearish by nature. But but at the same time, he realizes you gotta be long something to make money, right. He brought up this great chart just as just as like a sanity check for bears. And this chart shows the major corrections and the major rallies in the s&p over the past, I don’t know 15 years or so. Now, not 15 years. Sorry, past six years. Yeah. And basically you look at you look at this, and you say, Okay, wow, like, the bearish corrections in the market are short, they are quick, like, if you’re gonna make money on the bear side, like, you don’t have a lot of time to do that, right. And the bullish periods are much longer, right. So like the system supports the bulls, at least the systems, the way that it runs, it’s a lot easier to make money as a bull, because you can jump in and one of those longer rallies and just kind of ride it, right. Whereas if you want to position yourself bearishly, you got to get your timing really, really right. Because, you know, they don’t happen all that often. But when they do, they’re just over really, really quick, right?

Lance Roberts 25:50
bear markets historically, going back to 1900s, are fairly short in nature, you know, look, and let’s just for you know, let’s be a little bit more loose about the definition. And if you look at 2022, Pika 2022, through the end of October, let’s make up one big red box, right, I could have shorted in January 2022. And in October, I’m feeling really good about my short position, right, recessions coming, everything looks terrible, the Feds hiking rates. And then now my short is almost underwater again, you know, and so, you know, this is the nature of bear markets in general, they tend to be very short lived 12 to 18 months, is about the longest of most bear markets on record. And I’m talking about real bear markets here. And this goes back to what you and I have talked about previously, not one of those things on there that you’re looking at is a bear market. And, to me dispense point, these are corrections within a bullish trend. And this is the huge differential between a bear market and a correction. Corrections are extremely short term in nature, they are fast, they are swift, and then the market quickly recovers back to all time highs. And so what you notice is that most of these so far, and again, when this market gets back to all time highs, at some point, you know, we’ll look back and say, Well, look, the bullish trend was never broken. If you draw a line across the bottom of that entire chart, you’ll see that the bullish trend never broke, the market never reverted from rising prices to falling prices, we simply just got very extended and 2021. Because of all that money we inject into the system. And 2022 We just returned back to the bullish trend. That’s all it happened. There’s been nothing hugely negative about this market really, since 2009. And so to his point, and to his credit, he’s absolutely right, it’s been very tough to be a bear since 2009, because every correction we’ve had has been very short lived. By the time you realize you’re wrong, you’re underwater, and it’s just been easier to be long, right? And just kind of write it out.

Adam Taggart 28:00
Right. And so that was sort of his point here, which is, you know, not Don’t be bearish. But but if you are, again, just be aware of the conditions that have to play out for you to be right. And and as long as we’re still in a bullish uptrend the way that we’re talking about in a secular basis. Yeah, if you start making some money, you got to ask yourself real quick, you know, on the bearish side, okay, you know, do I need to? Do I need to lock in my gains here now or not? Because these tend to be pretty darn short. Right. So, like, I’m not telling folks not to be bearish. And so I’m certainly not telling folks not to be conservative here. I think we should actually definitely be conservative, given these macro concerns that at some point, you know, should matter. But don’t be overly bearish in the way that you have been counseling folks not to be lanced. Because, you know, while we’re still in this bullish uptrend here, that’s just sort of the way the game plays out.

Lance Roberts 28:53
Look, and look, we’re very conservative as investors, right? I mean, we measure we measure our risk, we monitor our risk, we, you know, we rebalance our portfolio to adjust for what we see as risk in the markets. So don’t think for a moment that we’re just saying, Hey, don’t be conservative with your money, but there’s a huge difference between being conservative and being out of the market, right? You can be conservative and be fully invested in stocks in the market, that that is completely doable. You mate, you’re just not going to own seven stocks. So you know, just talking about a portfolio. Let’s say that you’re very conservative by nature, you don’t want to risk a bunch of money, that’s fine. You can still have 100% equity in the market. That’s fine. You’re not going to own seven stocks, that would be hugely aggressive and hugely risky. But I can I can balance my portfolio across sectors of the market across stocks in the market, because there’s a lot of companies out there that simply trade very cautiously very conservatively, they don’t go up a lot. They don’t go down a lot. They kick off a dividend and during times of market stress, they’re not going to hurt you. They’re basically kind of above On an equity disguise, so that’s certainly very easy to do. But we often confuse this idea of, oh, if I’m in stocks, I’ve got all this risk. So I’m going to be conservative somebody all in cash. And then the market takes off and like, well, now I’m all in cash, I gotta get back in the market, of course, now you’re buying the market, probably at a peak, because by the time you realize that you’ve missed the boat, it’s the markets already made its move. So you buy at the top, then you wind up losing money, so you get all back out again. And this is why the average investor over time vastly underperformed the markets because they buy high, they sell low, they do exactly the opposite of what you need to be doing.

Adam Taggart 30:35
All right. All right. All right. So let’s gotta move on from here. That’s all we can do a whole show on this. We totally could. But folks, again, I highly recommend watching that video with with spin. Alright, we’ll just stick it on markets for a moment. So bond yields, US Treasury yields remain elevated. Here at this point in time, we were talking a little bit about this before we started recording plants, but the 10 years, like back in the 4.2% or so ranges we’re talking here. So anything notable about yields right now, in terms of US stocks are struggling to find their their feet here?

Lance Roberts 31:11
No, no, not at all. I mean, yields really haven’t done much of anything here, we just kind of keep trading back and forth. And we’re trading in a range it. And again, you know, kind of, if you look at kind of where we are economically at the moment, we’re still kicking off about four, four and a half percent economic growth, we’re good, you know, the Atlanta Fed right now is projecting roughly about a 5% growth rate, nominal, for the third quarter. So if the economy is growing at four to 5%, inflation is running at 3.3 percentage, so four, four quarter percent rate on the 10 year Treasury is about right, where it should be, you know, give or take a little bit. So you know, as economic growth continues to slow as inflation continues to decline, then interest rates are ultimately going to start to trade in a range relative to economic growth and inflation, because interest rate function of economic growth and inflation, that is what drives the yield, if I’m, if I’m loaning out of money, and I go, Okay, I’m gonna give out of money for 10 years, I have to compensate for what economic growth is going to be opportunity cost, basically, could I invest in something else, you know, if the economy is growing at three, but I think it’s going to six, you know, I need to charge more. So I’ve got opportunity loss, that’s going to occur over a 10 year period, as the economy continues to get stronger. You know, if inflation is running, I’ve got to adjust for my lending rates so that the money I have on an inflation adjusted basis gives me my rate of return, of course, I gotta compensate for his risk of repayment. But with government treasuries example, there’s a risk of repayment. So there’s no adjustment for that. So I’ve got to factor all these things in, that’s what generates that, that that yield, or that coupon, you know, on these bonds. And so that’s why there’s always historically a very high really high correlation between interest rates, economic growth and inflation. And so as those things continue to slow, and they will, interest rates will also come down. But right now, interest rates are about right, where they shouldn’t be.

Adam Taggart 33:08
Okay, I should note to just before fully moving on from some of the commonalities between your outlook and spend, I did sort of ask him to look forward, and, you know, share his trajectory of how he thinks the markets are gonna play out from here. And he basically said, luck, you know, until, until we see some breakages of some of these key technical levels. Right. So like, as you as you’ve said, you know, even the correction that we just had, you know, we didn’t take out, the lower the longer moving averages, right, that we didn’t get anywhere close to the 200, DMA, that type of stuff. Right. So he said, as long as this market sort of still following the TA, you know, he thinks it’s gonna go higher from here for some period of time how long he doesn’t know, right? But he does think that something will break, you know, that that interest rates, this high cost of debt, this high for the government, for corporations for households, is going to break something, the Fed is going to have to intervene. So basically, the fundamentals are going to matter at some point, right. And so he expects that there will then be a pretty sharp market correction, you know, in that process to be followed by, you know, dramatic central bank rescue efforts, that will then probably eventually reinflate things and, you know, research the markets, again, very similar to you and maybe the people that are on this channel, so he’s not saying it’s going to be bullish forever. He’s basically just saying like, you know, we have to keep our eyes at that on the door, knowing that at some point, the fire is going to break out in the dance hall here, but music still playing, you know, right now, nobody sees any flames or smells when the smoke, right.

Lance Roberts 34:57
Well, that’s why I said you know, technical analysis is is great for six to nine months, 12 months because it just is a reflection of market psychology, just remember that the market is a big giant organism. Right? That’s. So it’s a living, breathing thing that is comprised of two types of people, you have buyers and sellers. And that’s why it’s called a market, right? Because every day, every moment, every second of the trading day, there’s a bunch of people over here thinking they’re smart by buying something. And there’s the same number of people over here selling stuff, thinking they’re smart. But it’s all about psychology in the short term. And so that’s why technical analysis really in the short term is all that matters. But yes, we analyze fundamentals, we own companies that fundamentally are very cheap. And we know that long term, we’re gonna get paid handsomely for owning those stocks. But we also have a portion of the portfolio that’s dedicated to momentum and psychology and what’s happening in the markets because that’s what generates returns in the short term. While we’re waiting for those longer term fundamentals. soulfully matter? And Stan is absolutely right, is that in the next 612 1824 months, the higher cost of debt is going to be problematic. I wrote about this in last weekend’s newsletter, there’s a tremendous, there’s a tremendous debt wall coming up over the next couple of years refinancing is going to be problematic, tighter financial conditions across the board, we’re now reaching some levels on financial conditions that have always always preceded recessions. Now, real real quick, I got an email on this last week. And I just want to clarify something when we’re talking about financial conditions, we’re talking about economic financial conditions, there is a another financial conditions index, it gets circulated around the market a whole bunch it says Look how easy financial conditions are. That is all market based. It is debt yield spreads, it is the market and other some other factors that are comprised that, yes, that indicator shows a very loose financial condition market because nobody’s worried about risk, right yields are very compressed right now, because nobody’s worried about a blowout in high yield. Yet, when that begins to occur, that financial condition index will catch up with everything else, because that will always kind of be the opposite side of the story. Because as real financial conditions start to loosen, that will be tightening at the same time. And that’ll be because the Fed stepping in to bail out things, something’s broken, you’ve had a recession, whatever it is, but it’s always important to understand what the drivers are financial conditions, when we look at the economic financial conditions, interest rates, the dollar, you know, the Fed funds rate, etc. Those are very restrictive and debt levels. And I built some composites that I’ve been producing lately on our website and on Twitter, showing that these are very, very restricted levels. And they have always preceded a recession when you’re at these levels. And that’s just simply because we have so much debt in the economy, high interest rates are going to cause a constriction in consumption at some point down the road, it’s just a question of when we get there. And when you do that, then earnings are going to decline and market prices and valuations will have to readjust to compensate for that. So yes, fundamentals will matter at some point. But that’s why we allow the technicals to tell us when to start making that more movement back towards cash and other areas. Okay, one more statement. And this is the best indicator, right? Sell the last Fed rate hike. If you go back through history, every time the Fed stops hiking rates, you’re within six to nine months of an economic recession. So there’s kind of an axiom in the market, you sell the fed the last Fed rate hike, and you buy the last Fed rate cut.

Adam Taggart 38:46
Okay, now, of course, the Fed is never going to tell you for certain this was our last hike, right? You got to take some guesstimate in there. But yeah,

Lance Roberts 38:55
but you’ll you’ll know because they’ll start that will go, you know, six, it will go, you know, three, four or five meetings where they don’t hike rates. But again, you can you don’t have to worry about that. Just wait until they say hey, we’re going to cut rates. And then when they get to zero, start buying with both hands, because once they get to zero, they can cut you more.

Adam Taggart 39:14
It’s so funny, you talk about, you know, this indicator that has just always double extra, you know, been correlated with recessions. And I get it that people today are just kind of like yawn, right? Like, I mean, okay, let’s add that to the list. Right? That hasn’t mattered all year, right?

Lance Roberts 39:30
Just because it hasn’t mattered in a year doesn’t mean it won’t. And again, we talked about

Adam Taggart 39:36
what I know when you and I talked about the time store for beating that drum.

Lance Roberts 39:42
You know, everybody last year was all recessions coming recessions coming and I was telling you this, like, Hey, we’re probably gonna have a recession until the end of 24. Because, you know, everybody’s expecting a recession. You know, Bob Farrell, you know, everybody expects something that happens, something else needs to occur. Now. Nobody expects a recession. That’s actually great. Um, but importantly, it’s always about, you know, interest rates and Fed rate hikes and those type of things. And we’re just now entering that six to nine to 12 month period to where the clock is now ticking for that next recession. So we’re in September, add nine to 12 months, you know, next September next, you know, October, November, December, we’re probably gonna you and I will probably be sitting here talking about, you know, economic growth and risk of recession.

Adam Taggart 40:26
Alright, so it seems like you and fan and so many other people, you know, think that that general arc that I described a few minutes ago is what’s going to play out, right? Yeah. And part of that arc, right, involves debt spreads blowing out. Right. So you said, you just said, Look, nobody’s worried about risk, right? Credit spreads still super tight. Right? So to me, that kind of seems like I always say the word sure bet. They’re no sure bets. But it seems like a highly confident gamble or highly confident bet that at some point, they’re gonna blow out. Right? And we don’t know if it’s gonna be tomorrow, or if it’s going to be nine months, whatever. Right? Yeah. I mean, does it make sense, while in theory, they’re super tight, and therefore, you know, something like a leap on them would be super cheap, that you’d want to start Dilys dollar coverage cost averaging into some instrument that’s going to benefit when those spreads start blowing out. If you feel like that is sort of an essential step on the way to this this arc unfolding?

Lance Roberts 41:37
You know, it’s look, it’s, it’s, you know, kind of going back to trying to short the market here. So here’s the problem that you’ve really had since really about 2018. You know, it took about from 2009 to 2018. You know, we had the government keep, you know, the Fed kept stepping in and bailing stuff out. And everybody was like, Okay, well, yeah, they’re buying at this time, but it’s not going to work next time. And then after the third time, everybody’s like, Okay, well, there’s gonna do this every time. And so, you know, kind of like training Pavlov’s dogs, we’ve now taught it by the if anything happens, the Feds gonna run in and bail stuff out. I mean, 2020 was a great example. Right? They actually bailed out junk bonds in 2020. Right, and they were buying junk bond ETFs, which totally against their ability to do, but they manufactured that through BlackRock, but that whole rant for another show. But, you know, the thing is, is, again, markets are about psychology. And right now, everybody’s bailing into high yields, like, oh, I can buy this high yield bond, and I can get more than the Treasury. And this is, you know, so making more money. Under the belief that no matter what happens, the Feds gonna bail that out, right? So if Boeing goes bankrupt, or if General Electric went bankrupt, pick a company, I’m not picking on them, I’m just throwing out names, Apple was gonna go bankrupt, that the government’s gonna step in and go, Well, that’s a systemically important company, we can’t let Boeing go under because, you know, we’re, you know, we’re manufacturing economy, it’s completely my mind, gee, right, to say that companies are so important. We can’t, I know, you’re gonna bleep that out. But your companies are so important, that we can’t let them fail is complete nonsense. This is a reason that we have bankruptcy laws in the country. But we have decided, as a country to bail out all these companies, we don’t want to allow anybody to go into bankruptcy, because that would just be terrible, people will lose their jobs. And again, it’s just nonsense. But this is all about politics at the end of the day, and getting reelected and keeping the money and moving in the right directions. So we’ve we’ve ignored, you know, our rule of law. And we’ve ignored our processes for dealing with these situations that would have allowed some of this excess to get pulled out of the market. And we talked about forest fires are healthy for the markets, as are for forest fires are healthy for the forest. But you know, recessions and bankruptcies are actually healthy for the market, it gets out the weak players, it provides opportunity for new players to come in and take advantage of a space that gets opened up. And we’ve and we build better, stronger, healthier companies and better, stronger, healthier economies. But we don’t want to do that. Because we don’t want the pain short term, right? We don’t want that. So now we’ve trained all these investors that I can take on an unlimited amount of risk, because I know the Feds gonna bail me out. So we may not see that big blowout of spreads that we’ve seen historically. I don’t I’m not saying that’s the case. Absolutely. But I’m just saying there’s a potential that if you try to make a bet on credit spreads balling out at some point that you might not get paid for that because the Fed steps in and you know, suppresses the blowout to keep it from rolling into the rest of the economy and the financial system. I’m not saying that’s absolutely the case. I’m just saying that’s your thesis while right doesn’t mean now that it’ll necessarily happen. So it’s the That’s true. I mean, you

Adam Taggart 45:00
could say that for any bearish bet, right, which is just hey, you know, Papa Feds gonna come in and just always make it right, right? Of course they didn’t 2022 But yeah,

Lance Roberts 45:10
yeah, but look, but nothing really melted down in 2022. I mean,

Adam Taggart 45:15
you’re right. I mean, that’s what they wanted to see. Right, they wanted to see some correction that didn’t involve a rescue didn’t need to have a rescue.

Lance Roberts 45:21
Yeah. And look, all your major companies went down a little bit, but not a lot. I mean, you look underneath the surface in small and mid caps, the the Ark investments, those those things got completely decimated. But those are such a small impact on the financial markets, and really the overall economy that the feds like, Yeah, whatever, as long as Apple, Microsoft, Google, those guys don’t go down with the ship. We’re okay. Right.

Adam Taggart 45:47
Sorry to interrupt, but like, yeah, you know, we on in the capitalist West, right, you know, we talk about the evils of communist regimes where, you know, everything is state owned, and, you know, you think of a company like Russia, you know, I remember, in my very early days, in investment banking, I was involved in a lot of international privatizations. And, you know, they just have these massive state owned companies that, you know, the one company that is responsible for all the electricity in the country, right, or, you know, all the, all the water, all the oil, whatever, right? And we talked about, you know, kind of how that’s so sclerotic, right, there’s no competition, you just have one big, you know, entity that owns the whole space, right? It’s like, it’s almost like our, you know, I know, we talked about how we don’t have capital to capitalism anymore, we’ve got corporatism, but it’s it increasingly feels like the same way right? Where we, we’ve let these cartels emerge, but now they’re protected by the government, right, like, so. Basically, what you’re saying is, is look, the Fed really care about all the other companies that didn’t care about the s&p 495. But it sure cares about the s&p Five, because there’s so much a percentage of the market value out there, and so much of a percentage of what’s driving the economy, that they’re gonna do whatever it takes to keep those guys gay, it’s basically just like a carbon copy of the communist model. In some ways,

Lance Roberts 47:13
it is, and we’re paying the consequence for that, too. You know, it’s, it’s, you know, we see this in the kind of the dysfunction of the markets, we see it in the dysfunction of the economy, we see it in the spread of wealth between the haves and the have nots, and we and we, you know, we talk about these problems, that long term are going to be very economically damaging, you know, for the younger crowd that’s coming out, and thank God, I’m old, I’m going to die soon, so you know, won’t affect me. But for the Gen Z’s coming up, they’re going to, you know, pay the price for this, and they don’t realize it yet. But it’s coming, and the debt matters, the debt matters a lot. And, you know, in our case, you know, we go, I’ll probably bring this up every week on the show is that if you just want a good, you know, kind of, you know, microcosm of where we’re headed, just gonna take a look at Japan, right, they’re 30 years ahead of us, but where they are is exactly where we’re headed. And unfortunately, for you know, I saw an interesting tidbit this morning, I think it was on Tik Tok, or somewhere, but it was a post by a very young person’s like, you know, when you mean to tell me that I’m gonna have to work a nine to five job for the rest of my life, right? This is this is, this is what I’m going to be doing every day for the rest of my life is coming to this job and having to work until five o’clock at night and then go home, you know, who signed up for this was his last kind of point, your what what is, you know, is this what life is supposed to be like, and, you know, this is the realization that, you know, eventually that group has got to come to is that we’re in a transitional time within the economy to where, yeah, the boom times that we had back in the 60s in the 70s, when we were producing and manufacturing and building and constructing and looking ahead, you go back to the state fairs in the in the 70s, where you had all the exhibits of you know, the future tomorrow. And we were we were visionaries, back then we look forward, you know, we were looking at going to the stars, and exploring space and innovating, growing and doing all these things. And now we spend all day with our faces and computers, you know, kind of regurgitating data all day long, guilty as charged. You know, so what we’ve moved into the service society, which is an immediate gratification society, and not a building society, and we’re paying and that has a service society has to be supported by debt, because you have slower rates of economic growth. And of course, the more debt you have the four growth you have, and it’s just a very vicious cycle that leads to more and more income inequalities across economies. And that’s something that eventually we’re gonna have to face. And unfortunately, it’s kind of like being You know, getting overweight, you didn’t get overweight overnight, you’re not gonna get skinny overnight, you’re gonna have to go through the whole process of diet exercise, and I know what sucks, and it’s painful and it’s terrible. But you eventually get back, you know, to being in shape and life is better, you feel better, you look better, you know, life generally just is better. You know, when you’re healthy, but you didn’t, you’re not going to get there overnight, and we keep looking for the quick fix, right? We want to try it, it’s like, Oh, if we just do A, B, or C, if we just do MMT, we’re gonna be fine. This will fix everything overnight, we’ll be able to pay for everything. And that doesn’t work. And it’s just gonna have to be realization when we get there.

Adam Taggart 50:38
Yeah, well, I mean, what you’re describing, right is sort of the cleansing element of the fourth turning, right, which is the pain and the cleansing, right? It’s, it’s where the status quo falls apart and something different, and hopefully better replaces it, and then you start a new growth cycle. And, you know, we’ve talked about that a lot, especially in the wake of the recent interview I did with demographer Neil Howe. And folks, you should watch that if you haven’t yet. Alright, but

Lance Roberts 51:08
we had a depression, you know, we went through the Depression, and, you know, went through a cleansing and so it’s just about time to do that again, unfortunately.

Adam Taggart 51:16
Yeah. And, you know, I’ve talked about this a lot with many folks in this channel, so we won’t go into the weeds of it. But you know, we have a, we have a monetary system that, you know, basically doesn’t have a limit on how much money can be created. Right. And this is not unique to America, right? It’s now the the major majority of the major world nations out there, really almost all of them at this point. And in to create money, it’s actually created through debt, the issuance of debt, right. And so we have this kind of endgame baked into our monetary regime here, right, which you just get to a point where you just have too much unserviceable debt, that the system just doesn’t work anymore. And, you know, it’s crazy as this, we’re just trying to your point, always finding the next quick fix, that’ll let us just kick the can a little bit further down the road. But nobody is asking the question of okay, but like, at some point, there’s just mathematically a point at which we can’t do that anymore. And the whole thing collapses, but nobody wants to actually admit that or deal with it, right? It’s someone else’s problem, hopefully, in the future. Well, yeah.

Lance Roberts 52:20
And that’s why, you know, as I said, you know, hey, I’m gonna run for president. And, you know, my platform is simple. First thing I’m gonna do is I’m going to cut government by about two thirds, I’m gonna return most of the department’s back to the state that the you know, almost be responsible for in Washington, is just national infrastructure and defense outside of that everything else belongs to the state education, oil and gas production energy, you know, everything that goes back to the state’s let them deal with it. Then once I’ve slashed the budgets and cut spending in Washington, then I’m gonna come to the American people and go, Okay, here’s what we’re gonna do. Now, it’s your turn, right? And here’s the sacrifices you have to make, we’re going to have to deal with Social Security, we’ve got to deal with Medicare, we’ve got to deal with all these types of things, we can’t do a lot of the stuff that you want to do, you know, in terms of just, you know, funding anything and everything that’s just not sustainable or usable. And we’re gonna have to go through this period, of course, you know, that’s gonna lead to a very depressive state in the economy for about two or three years. And but coming out on the other side of that, we’re going to be much healthier, and be able to grow much stronger. But nobody wants to deal with that two or three year pain to get there. And this was my argument about the financial crisis should have never bailed out the banks, we would have a much healthier banking system coming out in 2009 10. Because we wouldn’t have had, you know, five banks making up 40% of the banking industry now that make up 60% of the banking industry, we would have a much more diversified financial industry would reduce risk across the board. But we’ve been very painful. And a lot of people have lost jobs, and it would have been terrible people would have lost their homes. But the people who lost homes would have able to relocate to areas where there were jobs instead of locking them in,

Adam Taggart 53:54
we’d be 10 years into the boom by now, if we had done that, right.

Lance Roberts 53:58
Absolutely. But again, it’s it’s always about the avoidance of the short term pain, we as Americans have gotten very complacent. And we don’t want to deal with the short term pain, to fix things. And this is why things keep getting worse because we keep coming up with all kinds of new programs, about how to fix something without actually fixing it. And we just got a paper over it. And that goes from healthcare, to finance to Wall Street. I mean, he’s right down the road, instead of doing what it takes to fix these problems, and make things better, more affordable and more usable and letting capitalism actually grow and flourish. And, and work is disposed to because capitalism is very brutal. It’s very Darwinistic. Right? The strong survive the weak parents, that’s exactly how capitalism is supposed to work. And you have better growth out of that over time and better economic prosperity for everyone in the economy, not just the few.

Adam Taggart 54:50
No, and we’ve talked about this in the past, and we’ve got way more stuff to get through to get too distracted on this. But like

Lance Roberts 54:56
I’m just not I’m not ranting I’m just saying this is why nobody will vote For me, I keep running for president, nobody votes for me,

Adam Taggart 55:02
well, I’m gonna vote for you. But I definitely will encourage you to move the Oval Office up into space, because you’re gonna have a big target on your head as you force the country to go through these lean years. But, you know, you know, we are not the greatest generation, right, we just don’t have the, the spine, the fortitude, the Constitution of the society that clawed their way out of a depression and fought both world wars, and you know, all that stuff. And we have really developed a cultural aspiration to feeling no pain, right, you know, to being helicopter and guarantee the safe space and free of all aggressions macro or micro. Right. And that’s, that’s the antithesis of what we need to go through what you’re talking about. Right. So I also realized when I when I made that, that you all this messaging is vastly more important for Gen Z, right? Because that’s the generation and the ones below that are really going to have to come up with long term solutions to this, they’re going to feel the brunt of the pain as as older folks die off over the next couple of decades, right. But I realized that I made that comment about carbon being a carbon copy. It’s like, yeah, I tried any, any younger people listening to this probably actually have never seen carbon paper, they probably don’t get that analogy, right. All right. Well, look, you made a comment earlier and forgetting what it was. But it was a good segue to this next topic, which is you wanted to share, I think, a chart that a viewer had sent your way. But basically explaining that, while we have the Fed is, you know, as I’ve talked about, we’ve got the Fed jamming on the monetary breaks. But we’ve got the fiscal side of the equation, hitting the gas with all the deficit spending we’re doing. You’re saying actually, the Fed may not just be hitting the brakes, they may actually be doing some stealth QE. So can you elaborate on that?

Lance Roberts 57:00
Yeah. So it’s interesting, just as you know, we talked about that, he was like, Oh, the Feds got the Feds doing QT. And they are right. So they are reducing their balance sheet by 60 to $90 billion a month. And that’s very true statement. But there is, you know, kind of an interesting, you know, byproduct of that or been kind of an interesting backdrop to that as well, because, you know, this has been one of the arguments for why interest rates are gonna go to the moon because the Fed selling treasuries now that they’re in Qt. And that’s not really the case. And again, you know, we’ve talked about this a lot on this show. And we’ve been, we’ve talked about, you know, kind of our bond position and why we’re positioned in a certain way in our in our bond portfolio, what we’re expecting to come down the pike here very shortly, hold on. And while I’m talking, I’m just getting this chart put together. So what this chart is, and again, this is I wish I had the viewers name, and I apologize that I don’t and because if this is your chart, thank you very much, it was really well done. But what this is, this is a breakdown of the Fed’s balance sheet of by maturity, so you have fit, you know, bonds are maturing, and 15 days bond, maturing and 16 to 90 days, 90 days a year, one to five years, five to 10 years and over 10 years. What’s important here is isn’t that we talked about this before the Fed is doing Qt so people have assumed that the Fed is selling treasuries, and they aren’t really selling treasuries, unless they need to. And when they’re selling treasuries, they’re selling only fractional bits here. And they’re mostly what they’re doing is that over really since 2012 1314 1516 5018, all those years of doing QE, they were buying a lot of shorter duration treasuries, and they were buying things that were maturing and they were buying 10 year treasuries, but these 10 year treasuries might have only had, you know, five years to maturity or seven years to maturity at the time. And so fast forward, you know, 56789 years, a lot of these bonds are now maturing. And so the Federal Reserve is going okay, I’ve got these bonds that are maturing, I’ve got 60 Then just kind of this use of easy math, you’re just for everybody. Let’s say I want to reduce my balance sheet by $50 billion this month, but I have $70 billion worth of bonds that are maturing. And so I’ve actually got to go in and buy $20 billion worth of bonds. Now when you look at this chart, look at the orange line since 2018. That orange line has really been in sorry that said 2018 Apologize since 29, really 2019 early 2020 When we started kind of going through all our problems the Feds actually been buying long dated treasuries that orange line has been rising as the other bonds are maturing and you’re getting this roll off so as these bonds are rolling off, they may be having they are reducing their balance sheet if you look in q2 sable Lance the balance sheets coming down It is, but they’re just letting a lot of these shorter duration bonds mature, and they’re all and they’re buying the gap that they need to keep that runoff rate at 60 billion. So if they have 100 billion coming do, they may have to step in and buy, you know, 20 or 30 billion in a month to keep that one off rate at 60 billion. So you can just kind of see this as a percentage of the total maturities. And if you look at the purple line, which has been your biggest decline, that is bonds maturing over one to five years, that’s where the cuties happening. And then underneath the surface, they’re buying long duration bonds, the 10 year bonds that are maturing in over 10 years, that’s what they’ve been buying and shifting the balance sheet into.

Adam Taggart 1:00:42
So let me ask a couple questions about this. I don’t know if we actually know for sure. But are they? Are they necessarily buying the tenure? And more? Or is it just as the the shorter dated instruments roll off? The percentage of the portfolio that remains is increasing? Right? That’s part

Lance Roberts 1:01:07
of it. That’s is that’s also part of it. But you should also start seeing if that was the case, you’d have your if they weren’t doing some buying, and again, I’m not saying they’re just buying hand over fist don’t get me wrong, I’m just saying is that when they have more maturities coming due, then then they’re 60 to 90 billion a month, whatever it is, they’re wanting to tighten, they’re having to buy the differential. So if you’ve got 100 billion coming do I’ve got to buy an extra 10 billion, right. But if you if it was, if it was simply a function that, you know, it was just the decline and the one to five years, you would also be seeing big declines in some of the shorter duration treasuries, which they’re also buying. But those aren’t declining at a clip. So part of it is yes, just the we read the rebalancing of a portion of the overall balance sheet, because you do have a role shorter versus longer, but they’re also having to buy to make up the difference. But but the point is that really you want to make here is that there’s been a lot of talk about, oh, well, the interest rates are gonna go up, you know, kind of ad nauseam here, because the Feds just selling long elongated treasuries, and they’re really not. Okay, so, maturity game, the selling game.

Adam Taggart 1:02:18
So I guess we would assume that the tenure would be at a higher yield, right now, if this were not going on Friday. So we’ve had some people out there, we talked a little bit about this the other week, where, you know, everybody was like, oh, that’s gonna pivot that’s gonna pivot pivot to the pivot for, you know, year and a half, and boy rates are gonna come down. And as soon as that happens, right, to all of a sudden, oh, my god rates are just gonna keep going up now and the world’s ending because, you know, bond yields are going to the moon. And nobody wants to buy treasuries anymore. And Janet Yellen just announced that she’s going to release another 1.9 trillion in the second half of this year. So is could be what part of the Fed is doing there? It’s just trying to mop up the excess supply in treasuries so that yields don’t get too big.

Lance Roberts 1:03:05
Right. Well, also to hear let me let me share this chart one more time. And because they’re, you know, again, you know, when we talk and to your point about where yields are, so again, we had this decline, initially, so this is, so this is the second quarter of 2020. Right, so here’s the pandemic sell off. Okay. So to your point about inflation and interest rates and going back, so if the Fed wasn’t buying these longer dated treasuries, what should the interest rate be when inflation and 2021 and 2022? was running at 9%? Right? It shouldn’t be for for sure, right, because of inflation is running at 8678 9%. The the interest rate on the 10 year Treasury should align more closely with what and what was economic growth doing, were going at 12%, economically, interest rates should have been shooting off to the moon, we should have been at 678 percent interest rates, not barely clipping four. So there was a lot of buying in here to keep that longer end of the duration of interest rates down as well, because because the Fed has to know just like everybody else does. If interest rates on 10 year Treasury went to 789 percent, we would have been in a really massive recession pretty quickly.

Adam Taggart 1:04:25
Okay, so basically, what you’re saying is, the Fed is engaged in Qt along with a trade hikes trying to cool the economy, but it is trying to prevent something from breaking by doing what it can to keep the longer end of the yield curve contained.

Lance Roberts 1:04:43
Yeah, that’s just what tell that’s what the data tells me. I don’t know. I have I have not in communication with the Federal Reserve. I’m not looking at their buying and selling every day. But when I look at what interest rates are doing, and then you look at this breakdown of what’s rising in the balance sheet, what’s balling, it certainly adds some credence to the theory about why interest rates aren’t shooting off to the moon when everybody thought they were going to.

Adam Taggart 1:05:11
Okay. And I guess it gives us some confidence that man, if the Fed is even continuing to buy as it does Qt, that if it, if it takes the chains off and decides it really wants to get into rescue mode, it can just buy out the wazoo because it’s even buying when it’s technically selling. Okay, so let’s move on to another series of charts that you put out recently, just came out with a piece that I thought was really interesting about the importance of the difference between GDP and GDI. And how those are very diverged right now. But that divergence probably isn’t going to last forever. And that divergence is telling us an important story.

Lance Roberts 1:06:00
Yeah, so you know, this, and this is, you know, part of, you know, a lot of things that we kind of continue talking about. So, you know, again, let’s revisit our conversation a little bit earlier talking about, hey, the markets technically bullish and, you know, it’s all those things. I’m bearish by nature. I mean, that’s just my nature. You know, I’m very conservative. So I guess that puts me in the bearish camp, because I’m always kind of looking out for what the next shoe is, is going to fall. So one of the hardest things for me to do is be both the spot in the market,

Adam Taggart 1:06:30
and there’s the best for your an eagle. But instead of feathers, you’ve got fur, and you’ve got claws at the end of your waist.

Lance Roberts 1:06:37
You know, that’s, that’s, I guess that’s the best way to put it. But that’s why you don’t look up published a lot of articles lately. Is a recession coming? Or is it was one that we wrote just, you know, back on August the eighth, right? So, you know, I’ve been writing a lot of articles kind of questioning this, this theme of the market, this kind of no landing type scenario. You know, is that really a valid point this weekend’s newsletter, by the way, I’m going in to the link between oil and inflation and economic growth and all those other things, because there’s been a lot of talk over the last couple of weeks that, oh, rising oil prices is going to lead to a massive surge in inflation. Not really, because inflation is only about 7% oil. And we stripped that out. So you know, what really drives inflation. We talked about that. And then but we do look at the economic link between oil prices, and what happens the economy. So that’s in the newsletter this weekend. But today’s blog, so every Friday, we produce what we call a macro blog, macro view blog, and kind of touch on some of these bigger kind of overriding economic data points. And so let me let me I was while I was chattering there with you for a second, I was actually pulling up the article, so I could just share some of the charts with you. So first thing is, is that this is the City Economic surprise index. And, you know, so you can see in 2022, through July of 22, the data was vastly really disappointing what economists were expecting, so naturally, when the data keeps coming in a lot worse than than what you were estimating, because, again, you know, going remember going into 22, everybody was super bullish, you know, we’re just going to keep growing, don’t worry about what the Feds doing. It’s all good. You know, this economy is super strong. So nothing’s gonna, nothing’s gonna derail this train, right? This party is gonna keep going. So economists were bringing it on, economy’s gonna grow at 6%, or is m is going to be at 58%. And so the data as the economy was weakening, was coming in a lot weaker. So not surprisingly, you know, these estimates is the surprises were coming in to the negative side, well, beginning and really July of last year. The economic data has been a lot better than everybody because everybody got super bearish. All the economic analysts got very bearish. They were coming in with very low estimates. And now the data is beating him. So obviously, since we’re all humans, if I’m getting beat every month by the economic data, what am I going to do? I’m going to start ratcheting up my estimates. So now we’ve gone from definitely having a recession back in 2022. To Well, obviously, look how good the economic data has been no recession whatsoever now. And that’s that’s the cycle that we’ve been in. So now this is what we talked about earlier. Now we have the potential for the economic data to start disappointing again, as we go forward. But this, this all is going to lead us into this conversation about GDP versus GDI. So GDP as a function is the gross domestic product. So this is a measure of, you know, how do we calculate GDP, it’s almost 70%. It’s like 68%, personal consumption expenditure. So it’s what you and I do the rest of that. So let’s just say it’s 70 just easy math. The other 30% of the economic equation is is business investment, government spending and imports less exports. So it’s net exports. And so that’s how we calculate GDP. We also take a look at and this doesn’t get any type of coverage whatsoever, but is gross domestic income, which is the income that’s produced in the economy. And so logically, and we’re gonna get into charts on this in a second, but just logically in your mind, income, and production should probably be pretty close in nature, since one goes to the other. We’re gonna talk about this in more detail here in a second. But if we take a look at and here’s the important part about the debt we talked about earlier, everybody keeps expecting we’re have these stronger rates of economic growth in the future, you know, the market right now. And economists are saying, Oh, we’re gonna start growing at 3%. Lots of talk recently about the neutral rate needs to go from 2% to 3%, because the economy is going to be growing a lot faster now. So the 2% neutral rate, which is where interest rates in the economy are kind of neutral, they’re, they’re not impeding each other. And they’re all kind of operating normally, that needs to be moved up, right. And so at the recent Jackson Hole Summit, Jerome Powell said, now, we’re staying at 2%. That’s our that’s our, that’s our rate. And the reason for that is the debt. And what you’ll notice is that when we have very low debt levels back in 1947, through really the late 80s, the economic growth rate was about 3.2%. Real, that’s after inflation for a very long time. And that was until 2007. And then after the financial crisis, we started growing again. But that growth rate went from 3.2% to 2.3%. Then after the COVID crisis, we’re now going to step that rate of growth down again, to probably somewhere sub 2% 1.8 1.9%. And this is just a function of the increasing of debt over time and the impact that debt has on economic growth, because it diverts income and production away from productive sources that create economic growth to debt service, right. So this is why we keep having these lower rates of growth, and why we will continue to have slower rates of growth, as we continue to increase the debt. Okay, but let’s get back to GDP and GDI, and all this other stuff. So when we start talking about the economy, there’s an important relationship you have to understand, which is the function of production versus consumption. So I just told you that 70% of GDP is based on consumption. So it’s what you and I spend every day. So right real quick, before we get there, if we take a look at financial conditions, and the economy, so gross domestic product, if a lot of our economy is debt driven, then we can take a look at financial conditions in terms of lending standards and interest rates, and see that every time that financial conditions have been this tight, now this, the red line is lending rates and interest rates inverted. So whenever there’s been a big decline in that index, on an inverted basis, GDP follows exactly what you would expect. Because if I can’t get credit, and I’m a debt driven society, if I can’t get credit to spend money, then consumption has to fall. And so this is this is where we get into this relationship of GDP, versus GDI. So in order to consume now, this is the only lesson economics 101 That you didn’t take away from today’s speech. In order to consume I have to produce first, right, I’ve got to get up in the morning. And I know Gen Z’s won’t like to hear this, but I’ve got to go to work from nine to five, I’ve got to earn a paycheck, I get this little magical deposit of digital currency in my bank account. And then I can go buy stuff, right, I can go on Amazon, or I can go out and have an experience whatever it is, but I gotta produce something first, in order to consume. Now, once I consume that generates the revenue for companies from which those corporate revenues generate earnings, as I’m getting an increased level of earnings growth, because I’m producing more now I’m consuming more. So companies are having more demand, they go out and hire more employees to meet that demand. That change in demand also requires me to pay more wages, etc, so that I can continue to hire people in order to produce more product. And then as those people produce more and higher wages, they consume more so forth and so on. And this is the virtuous cycle of the economy, but production comes first. So when I when you start thinking about things in this manner, and then keep me coming back now talking about the economic deficit and what’s going on, if I’m using debt to supplant the production side of the equation, in other words, I’m just giving money or I’m printing money to create activity, that activity is a very short life in nature. So it works temporarily to create this productive movement. Right. So we’ve got this inflation Reduction Act going on right now. So we’re running out building property, plant and equipment. That’s great. We’re creating some jobs short term. But when that, you know, building roads and bridges are fantastic, but once that job is done, there’s no more production. The Sugar Rush is over. Yeah, right. Right. So that’s why that continues to fail, what we need to be focusing on is things that produce more productive income. So now this is the like I said, there’s an order

Adam Taggart 1:15:33
ongoing, productive income, sustainable, productive income, right.

Lance Roberts 1:15:37
And this is the important part, that’s a full time job. Right. And so when we take a look at a lot of job growth that we’ve seen, we’ve had a lot of part time job growth, we’ve got workers that are working three part time jobs, instead of one full time job well, full time jobs paid more than even multiple part time jobs. And so to create a sustainable a sustainable standard of living in the economy, we need more people working full time. Well, we’ve only got 50% of the working age population working full time right now, that’s actually on the decline over the last couple of GDP. Employment reports. We haven’t even gotten back where we were full time employment wise, in 2019, before the economic shutdown. So you know, we talked about how strong and robust the employment recovery has been, it really hasn’t. What we did was put all the people back to work that we laid off full time we’ve hired the back, you know, when the administration says, Oh, we’ve created 12 million new jobs, no, you didn’t, you just put 12 million people back to work that you forced out of work when you shut down the economy. That’s not creating economic prosperity. And so when we start again, moving to scored, now, we’re talking about incomes and production, right. So the income, the gross domestic income side of the equation is where people are working, and they’re generating activity, and gross domestic incomes, it has consistently been underperforming the gross domestic product on an inflation adjusted basis. And importantly, since the big, really the fourth quarter of last year. And so far, two quarters of this year, that gross domestic income has actually been negative, versus the gross domestic product. And that can’t that is not sustainable, long term. So you know, so let’s get into some of the charts that really kind of show this again, as I said earlier, it’s not surprising to see that gross domestic income since income comes first, and then we can go consume stuff, that income and production track very closely, the differential between the incomes and the black line is all the other government stuff, right? Look at that divergence that we’ve had really, since the fourth quarter of 2022, that gap is unsustainable. So either, we’re about to have a massive surge in employment growth. And and, and that will allow incomes to catch up with the economy, or gross domestic product, the economy is gonna have to slow down and we can go back through history. So this chart goes back to 1947. It looks at the gap. So has there ever been a gap before between GDP and GDI? Yes, it has. And if we go back and look at the three quarter growth rate of the gap between GDP and GDI, we are now at the highest level on record. But importantly, when we go back and look at previous periods where you’ve had such a spike between GDP and GDI, it wasn’t GDI catching up with GDP, it was a recession that caused GDP down to GDI. Right. And so this is just another one of those really, really good indicators. And again, when you look at the probability of recessions, looking at yield curves, and all these other type things, even though we’re not in a recession yet, and I’m not saying we are, but all of these indicators suggest that the probability of recession remains very high. And that gap between GDP and GDI is just another one of those indicators that suggest that at some point down the road, the economy is going to have to play catch up. Again, we look at financial conditions. This is based on the spread between the 10 year Treasury and the neutral rate that is also at a level that historically always precedes recession. So again, it’s just a function that the economy is driven by a lot of artificial short term stimulus that ultimately is declining and will evaporate from the system. Yes, it’s keeping the economy in a growth trajectory for now. But as that liquidity evaporates from the economy, reality will play catch up, and you’ll eventually have a recession. But again, as I’ve said before, probably not till 2024, maybe even early 25. By the time we get all that excess liquidity out of the economy.

Adam Taggart 1:19:44
Okay. So, I think very important data series. That’s why the Secretary David Rosenberg, you know, says that he thinks we’re in a recession now because the classic definition is back to back quarters of neg And of GDP growth, he says, Well, I’m doing it by GDI. Because I think GDI is more realistic here. And you just said you just shared, we’ve had actually three consecutive quarters of negative GDP growth. Alright, so you know, back to the arc that I described earlier of, you know, we get some remaining, the last hurrah, you know, in the markets, then something breaks. And that’s going to require the central planners to intervene, you’re basically saying, it’s just more data points here that something’s gonna break, right? You know, this divergence is highly likely going to be histories are going going to be GDP, falling to catch up to GDI versus the other way around.

Lance Roberts 1:20:38
Yep. And listen, this, this, this is our whole thesis on why interest rates are going lower, not higher, right. I don’t have time to get into it today, because we’re running short on time here. But if you go to our website, real investment And, and read our newsletter this weekend, you can subscribe on the front page of the website. And I’ll email you the newsletter, this weekend newsletters covering the link between the oil economy, but there’s a video clip in there that Michael Liebowitz and I did this week explaining why we sold TLT and bought a 10 year 20 year treasury bond. And all the reasons behind it. We’ve been talking about this here on the show for the last couple of weeks that we were going to do this transaction. That was our trade this week that we actually did. And so if you want the full kind of explainer video, it’s actually in this weekend’s newsletter on our website, real investment

Adam Taggart 1:21:34
Great, folks, you should definitely go watch that. What Bond did you buy?

Lance Roberts 1:21:39
It just we bought a it’s actually a 20 year duration bond newly fairly newly issued. It’s a it’s been age. So it’s about two months old, I think. But a slight discount to par, which gave us it’s gave us about four, five eighths yield to maturity.

Adam Taggart 1:21:55
Okay. All right. All right, gosh, just so much to talk about so little time. We’ll get to your trades in just a second. One of the points I wanted to bring up here, and this is going to reference an article that you wrote about a week ago, when I got some really good life advice, when I was graduating Stanford Business School, we had a dean, they’re super popular, the Dean of the Business School was guy named Michael Spence, who then later on was recognized by the Nobel Committee to actually win the Nobel Prize in Economics for research he had done prior to becoming dean there, but just a really nice guy, really smart, obviously. Really cool, too. He was the dean that would like, you know, leave school early on a Friday to go windsurfing. Just a cool dude. But I remember it was right as we were getting ready to graduate. And he kind of just, you know, he spoke to us, but basically just said, Look, I’m your journey, here’s kind of over, I’m happy to answer any questions. And one question that he was asked, was this guy who said, Hey, I’m trying to decide between these two offers, and the one that I’m really leaning towards, I’m really excited about it. But it’s in an industry that I haven’t worked in before. So I’m going to have to, you know, taking the risk that I’m going to have to learn it, and hopefully that goes well, but who knows. And my wife and I were gonna have to move cross country for this job. And my wife and I are now thinking of starting a family. And so I’m trying to figure out whether I should take that or take this other job that’s safer, because it’s kind of close to what I was doing before I came into business school. And Dean Pence said, he said, Look, I’m generally bias towards encouraging people to take risks. He said, That’s how you actually you get gains by by taking a risk, right, taking, taking a smart gamble on something. But he said, I am, I am against taking too many risks at once. Right? If you load yourself up with too many risks, you definitely begin to multiply the danger of you know, one or more of them going awry, and then kind of ruining the prospects of everything for you. Right. So it’s sort of this, you know, risk management lesson, right. And that really stuck with me. And it’s, it’s almost kind of like, you know, you know, the Powell Doctrine, in terms of using military force where he’s like, generally you don’t want to use it right? You want to try not to get in the fight if you don’t have to, but if you have to get in the fight, like line up everything to your advantage, so that when you come in, you just come in hard with with, you know, everything you’ve got that’s, you know, is highly likely to overwhelm the other guy, right? Just stack everything to your advantage, right. So, I think that that is a good approach to taking risk in investing, you might have a difference of opinion. I’ll let you chime in on it, you’re kind of nodding as I’m saying this. But you wrote a piece where you said, you know, when people talk about average returns of the market, you know, if you strip out the 10, best days, during those periods, returns tend necessarily not to be all that great, right? So there’s a couple of days that are just working super extra hard, and you can’t thump your chest too much about how great an investor you are, because you’ve got those 1010 big days really pulling you up. And you said, look, as an investor, you may actually have a better return if you focus on trying to avoid the 10 worst days in the market. So let me hand the baton to you here and that I’ve sort of set the context up here for this. But it seems like actually, by being conservative, you can actually get better long term returns.

Lance Roberts 1:25:52
So but no, this is, yeah, that’s absolutely right. And, you know, I wrote and I have to write this article about once a year because it’s almost without fail, that as soon as you get into a bullish trend of the market, after a correction of any magnitude at all, somebody writes this article about well, you just need to buy and hold. Because, you know, if you miss the 10 best days of the market, you vastly underperformed the s&p index. Well, what they never tell you is, and again, if you go to our website, we’ve got this article, it’s the meme of the 10 best days, what they fail to tell you is, is that if you missed the 10, worst days, you increase your returns by four and a half times. And the reason is that the worst, the best days of the market happened when, during the worst periods of the market, when did we have the best days of the market in 2020, it was during that 35% decline, we’d have these rallies of four and 5% in a day in the market, then the next day, the markets down, you know, four or 5%, the next day. And so these best days of the market that you’re not ever supposed to miss, first of all the random, but most of the time, they’re always in the midst of a bear market exactly when you don’t want to be invested. So that’s why if you just focus on missing the worst days, your return is gonna be so much better. So being conservative, and this is why value investing outperforms growth investing over long term. Because if you pay for value, you get rewarded over time. And the short term buying growth and momentum will make you money short term, but it’s gonna wind up costing you more than you gained when the correction comes value won’t do that to you. Because money during corrections during bad periods, money rotates into value. So this is why conservatism always works. Better active management, though, to avoid downturns in the market, is key to long term success. Getting back to even is not making money. And you know, this is the thing that always fascinates me about the mainstream media, look, they’re selling you a product, they just want you to buy an ETF and hold it so they can charge you a fee. And that’s fine. There’s no that’s the business, right? So they tell you these stories about oh, just buy and hold, because you’re gonna do so much better over time. And you really don’t. There’s some great managers out there mutual funds that have killed the markets over time. And you know, Peter Lynch, and so many others, Berkshire Hathaway has killed the Absolute Return of the market over time. And they’re not, they’re not passive. They’re actively buying and selling companies and managing risk and making bets on the market. But importantly, what they focus on is about not losing capital, that’s it doesn’t mean they never lose capital, it doesn’t mean that prices don’t decline. It just means they work to avoid big declines, big declinations and destruction of capital, because if I spend four or five years getting back to even, that’s fine. But I’ve also, I’ve gotten back to even Yes, after five years, so I’m back to where it was. But that five years of not making my 6% growth puts me 35% behind the market on a compounded basis. So you know, those are the things that nobody tells you. So this is why it’s important. Don’t focus on your portfolio from January to September, that means nothing. Look at your portfolio where you are today. Don’t worry about what the markets doing. Look at how your position for returns over the next 10 years, next 15 years, next 20 years, manage that risk. And yes, some years you’re going to underperform, some years you’re going to outperform and the key years that you really want to outperform, or when the market declines 20 or 30%. That’s the biggest separator between making long term wealth versus not.

Adam Taggart 1:29:28
All right, and this is why I think if you’re working with a financial advisor, which I think most people should do, and I’m going to make that claim, as I always do at the end of this video, too. But that risk management should be such a key part of the decision making that you use when choosing an advisor. You know, as Lance alluded to earlier, you know, most advisors out there one, you know, aren’t, don’t have the depth of experience of a guy like layouts, and they generally have the mindset of I’m gonna take care of you in the long run, right? So I’m just going to keep you fully invested all the time because over the arc of your life, if markets will go up, right, and not that that’s necessarily untrue. But the point is, is that you can have a much better return and hit your goals a lot sooner. If you deploy good risk management,

Lance Roberts 1:30:12
yes and no to that statement, and let me give you a couple of good examples of what I mean by that. You know, most people when they start seriously saving for retirement, they’re 35 ish, maybe four years, right? And because think about what goes on prior to 35, right, you’re getting married, you’re having kids, sending kids to college, buying a house, there’s not a lot of money to say, right? People don’t really get serious about saving and investing for their future until they’re 35 or 40 years of age. Okay. So now let’s tack on 20 years to that. So I’m 35 on retire 55. Right. So 20 years, 40, I’m going to retire at 60 and 45, and retire 65. So people on average, save about 20 years, right? So this is why it’s so important to understand about your starting point when you start investing, if I started investing in 1960, I lost money for 20 years, so I had less money on an investment basis when I got to 1980 than I did in 1960. When I started, if I started investing in 2020 years later, I barely had any more money than I started with, I’m not anywhere close to ready for retirement. And that’s assuming I didn’t sell out at the bottom of the market every time. So buy and hold and the theory works great. As long as you happen to be starting at a point in time where you had depress valuations, you have a big blowout in the market 2008 As an example, you had a big blowout in the market. And now you’ve got some you got kind of a wind at your back so to speak for a recovery that allows buy and hold work, buy and hold is absolutely worked since 2009. Didn’t work worth a damn from 90 From 1993 to eight. So it’s all about your starting point. If you’re going to do buy and hold, just understand it’s all about where you start the process.

Adam Taggart 1:32:02
Right, which is sort of like saying it’s all about luck, because you have no idea. You have no idea what the next 20 years are going to do. Right? Yeah. All right. Well, look, we’re here at the end of the time again, Lance, lots of topics that didn’t get to we’ll just push them off to next week’s video. Real quick, though, what trades if any you guys make this week,

Lance Roberts 1:32:23
not what I told you. The only trade we made this week because it took us all week to put it all together was the bond swap. So swapped the for an individual bond. Now, if you’re a simple visor subscriber, we in simple visor, which you know, I show you here from time to time on the show from a lot of our research and analysis platform that we have in that model, which is a live account, by the way is actually a live live trading portfolio that we replicate on the website. We had to swap TLT for ETV. And the reason is, is that we don’t have an active data feed for a specific bond that will give us the daily price changes. So and again you know if you when depending on when you start you won’t be able to buy the same bond that we bought. So it makes it very confusing on the website. So on the website, we swapped TLT for ETV, but in our client managed portfolios, we actually swapped TLT for an actual individual treasury.

Adam Taggart 1:33:23
Okay, thanks for clarifying for that. If anybody has any questions, I’m sure they can just email your team, they’re an RA. Alright, well, as we wrap up here, just want to remind folks that the Wealthion fall online conference is coming up next month, Saturday, October 21. Ticket sales have actually been going great so far. So if you are thinking about going and haven’t registered yet, I highly recommend you do so soon because you want to lock in that early bird price discount of almost 30% And if you’re an alumnus of our previous conferences, check your email inbox, you should have a code for me that’ll let you get an additional 15% discount on top of that 30% earlybird discount but those aren’t going to last forever so make sure you both lock in your seat and lock in those discounts by going and registering soon just a great lineup there anyways, I won’t go through all the names right now because we’re short on time but if you want to find out who’s going to be there with they’re going to talk about go to has all the information there as well as how to register and then just as I you know do every week and Lance did a great job explaining this multiple times in this discussion. I highly recommend that most people watching this video because you don’t have the expertise, the time the market experience that a guy like Lance and his team there at ra have but you also have a real life right you got to deal with you got to go to work, you got to focus on your family etc. I highly recommend that most people approach their wealth building journey by following the guidance of a good professional financial advisor. Obviously, you want them to be good. But you also want them to be steeped in all the macro issues that Lance and I talked about here. And there really aren’t that many that do that. Well, and there are many that don’t do it at all. So anyways, if you’ve got a good advisor who’s doing that for your great stick with them, but if you don’t, or you’d like a second opinion from one who does, maybe even Lance in the team there at raa, set up a free consultation with one of their financial advisors that Wealthion endorses to do that just fill out the short only takes a couple seconds to fill out these consultations are totally free. There’s no commitment to work with these guys. It’s just a public service they offer to help people get as prudently positioned as possible. In advance of some of this, you know, these fundamentals finally mattering, that Lance had been talking about here. And if you enjoy hearing Lance and I bet around the intellectual football a week after week after week on this channel and want to hear more of it in the future, show your support for that by hitting the like button and then clicking on the red subscribe button below. As well as that little bell icon right next to it Lance as usual, you get the last word.

Lance Roberts 1:36:04
Last thing to say is if you’re interested in the bond trade and why we did it and kind of the reasoning behind it, there’s about a 15 minute video clip that will be in this weekend’s newsletter. So if you go to real investment Again, shameless plug. But if you want that video clip to really kind of Mike Mike Liebowitz and I really kind of dig in depth into all the reasonings behind why we made the swap now, both the economic side of it as well as the portfolio side of it. That will be in this weekend’s newsletter. We’ll email it to you for free. Should you subscribe? If not, you can download it right at the website on Saturday.

Adam Taggart 1:36:39
All right. But thanks for another great week. Wish you well. See you next week everybody else thanks so much for watching.


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