Portfolio manager Lance Roberts & Wealthion founder Adam Taggart recap the major developments of the week, including:
- How much does the market have left to run now that the S&P has crested 4300?
- Does the swift run-up in small cap stocks bolster the bull case?
- The surge in new US debt now that the debt ceiling has been lifted?
- Macro data still screaming recession risk
- The continued softening in the housing & jobs markets
- Most Gen Xers are far behind on their retirement planning
- The trades Lance’s firm made this week
Adam Taggart 0:04
Welcome to Wealthion and Wealthion founder Adam Taggart welcoming you here back at the end of another week for our weekly market recap featuring as usual, my good friend Portfolio Manager, Lance Roberts, Lance, how you doing, buddy?
Lance Roberts 0:16
Hey, it’s Friday, glad to be here as a whole week this week, you know, wouldn’t holiday short like last week? So I’m tired now?
Adam Taggart 0:22
Wow. Yeah, you had to work a full week I’m terrible. Terrible. All right. Well, look, we got a ton to talk about here. And let’s start with the big number 4300. Right, s&p Hit 4300 Here. You know, we’ve been sort of tracking the run up in the markets here. A lot of people are really jumping on the bull trade now, hey, you know, bears have been wrong. Momentum keeps going great. I’m making a lot of money in the market, you know, the bears are losers. They’re right so far for this year, I can’t can’t deny you have been warning on this program. First year, we’re winning on this program that that we may have a better year than the bears were calculating coming into the year. And of course, you’re right on that one. You’ve been warning recently about the one the narrowness of the markets and two that it might be getting ahead of itself getting really overbought. This week, we saw some breath into the market. Does that make you feel more bullish? Or are you still concerned about you know, how fast the markets run up, and the fact that there might just be even just to cooling off, you know,
Lance Roberts 1:35
correctly? You know, the problem is, is and we talked about this narrowness of the breath, that you take a look at what’s been driving the market since the beginning of the year. It’s you know, technology, discretionary communications. But really, if you if you break down those sectors, the biggest weights in those sectors are Apple, Amazon, Microsoft, Google Tesla, right, that’s, those are the big drivers of those kind of four sectors, those three sectors. So it’s been a very narrow market, each trip those stocks out, you’ve had no gains for the year. So we have been talking about this potential for rotation in the markets. We talked about this a little bit last week, you know, we kind of went to simple visor.com. And we showed the relative rotation analysis. And it was interesting, because this week, you know, small caps and mid caps were all the way in the big oversold category. And in three days, they weren’t overbought, it was just it was such a huge short covering move everything kind of to the top of the overbought condition. So Friday was, you know, that rotation was over, we were back to Tesla, Google Amazon kind of leading the way on Friday. So you know, what we need to see for a healthier market is a rotation that lasts longer. And we need to see the breadth of participation really start to broaden across and I wrote an article on Tuesday, in particular, talking about this kind of narrow market that went through the s&p 500, showing, you know, who’s you know, how many stocks are actually outperforming the market and who’s not. And, you know, and you can really kind of see at that point, that has been a very narrow advance. And so in other words, you know, for most people that are invested in the market, unless you just own the s&p, you’re probably underperforming the market this year, unless you happen to just own five or six stocks. And then you’re really going well this year. And there’s certainly people out there that threw all their money into AI stocks, and they’re doing great. But you know, we’ve seen this before. This is the mean stock rally that we saw back in 2020. This is the IPO spec run that we saw in 2021. This is the.com bubble that we saw in 1999. And the point about saying that is I’m not saying that all this is going to crash, right? I’m not saying that at all, I am saying that these these very narrow rallies can last a lot longer than you expect, it can be very frustrating. And because these are the largest stocks in the index, if you’re betting on a big downside move in the market. That’s frustrating because these stocks can support the whole market. And then then but it’s important to understand when you look at something like Nvidia trading at 40 times price to sales. It’s also important to remember that the earnings will not support valuations where they are today. And just like we saw in 2000 when reality collided with fantasy, there’s eventually going to be a retracement in these valuations at some point future doesn’t mean the market is gonna crash remember.com You know, analogy, but we are going to see that market rotate into other sectors of the market and just like today, we bought some coke. Coca Cola stock has about a 3% dividend yield. And staples as a function are grossly oversold relative to technology, communications discretionary. And a lot of those sectors that we talked about last week that were very oversold actually outperformed over the last week. So a lot of those stocks that we had talked about we talked about adding you know Energy recently that performed well this past week. So we saw we saw that rotation start to occur, we need to see it continue now, and we don’t have any early evidence of that yet.
Adam Taggart 5:10
Okay. So a couple things I want to pull on there. One is just give a little bit more detail. If I heard you correctly, how in a matter of just a couple of days, small caps and other parts of the market from oversold to overbought. Is it just a pure short squeeze? Or how do you get that covered that much distance in just a couple of days? Well,
Lance Roberts 5:37
so when you’re talking about relative performance, right, so it’s relative to some index. So in other words, let’s talk about race cars for a second. So what kind of car you drive?
Adam Taggart 5:50
I drive kind of a beat up Toyota Highlander. Oh, we have a Chevy Volt too.
Lance Roberts 5:54
Okay, so So you take your Chevy Bolt, and so that’s our benchmark, right. So I’m going to bring over my 1965 Barracuda with a with a, you know, 428 Hemi in it. And we’re going to compare that side by side. Right, there’s no way your vaults going to keep up with, okay, so that’s all fine and dandy, but the relative benchmark is just a function of kind of the pace. And so if you have something that’s been very oversold, and then in a small caps move four and a half percent in a day, right, I mean, you took an entire month’s move, and you did it a day. So all of a sudden, you have this very sharp move in in in one area of the of the market that was far faster than the move of the of the benchmark itself. And so that relative performance got overbought. Very quickly, if you take a look at IWM, as an example, for the small cap, mid cap Chase. Well, what that you know, you know, we were two and three standard deviations oversold. And in a matter of two days, we were three standard deviations, overbought, that’s how fast it moved. And, you know, it’s kind of like if you think about stretching, and there’s a, you know, if you think about physics, and we talked about stretching rubber bands, what physics says if I stretch the rubber band in one direction, right, and then I’ll let it go, when it snaps back, it will snap back an equal distance in the opposite direction before it comes back to the middle. And that’s exactly what happened, we’d stretch that rubber band, the downside, and it literally went the same distance to the upside in a matter of two days. So it’s sometimes that but that was all short squeeze. We saw, you know, options, just pile retail investors just piled into call options on small caps. Just it just it was just a very big surge all at once. And likely, most of that move is done for the moment, we’ll see what happens over the next week or so.
Adam Taggart 7:46
Okay, and I think kind of digesting what you said earlier, you’re sort of like, Hey, we’re still gonna wait and see. This is probably in some ways a positive step of, okay, there’s now money beginning to go in other parts of the market, besides just those very few stocks that have been driving things so far. But it’s so small and fierce in now extreme to the other side that you don’t put words in your mouth here. But I’m not getting a sense from you that you’re like, oh, this was really important. Now we’re seeing that breath come in, you’re like this was kind of a little, little fit a little start. But but we don’t yet know if this really is a broadening or real sustained broadening of the market, like you want to say,
Lance Roberts 8:30
yeah, what would have been better is if we would have seen a slower rotation and just see, you know, some of the high flying NASDAQ stocks just kind of start to stall a bit, and just start to see a gradual move in some of these other stocks and just saw kind of a gradual rotation of money within the market, that would have been a lot healthier than this kind of spastic move we saw last week. But unfortunately, that’s kind of what the markets are these days. It’s the spastic rotations from one side to the other. And it makes it much more difficult to manage money that way.
Adam Taggart 9:01
Yeah, well, I bet and things are getting to sort of more extreme in terms of the market setup. So I was talking to the new harbor guys, yesterday, they had a chart showing, I believe it was call option, volume, volume. And it was the highest that had been in the data series, which was I don’t know how many years but let’s say 20 or so. So even back, you know, two years ago, when everybody was buying GameStop, you know, hand over fist and they were buying Tesla call options at ridiculous prices. And we were all lamenting and how crazy the frothy speculation was back then. We may be at an even greater extreme right now on the call option buying,
Lance Roberts 9:39
ya know, we’ve taught a whole generation now of these younger investors really over the last, you know, five, six years. We’ve taught them all about, you know, and just for instance, I get a lot of emails from your viewers talking about, oh, I want to you know, I’ve got $100,000 I want to buy our buy options. I’m like, You’re ridiculous. But this is what we’ve taught. Not everybody now is that this is the best way to make money don’t don’t buy stocks, you buy options and leverage up buy options. 90% of options expire worthless. But you know, it sounds great in theory that you’re going to make all this money, unfortunately, more often than not, it doesn’t work out that well.
Adam Taggart 10:15
Right, right. But I’m just saying probably from a capital managing standpoint, you gotta feel uncomfortable, when there’s that much speculation in the market, and you’re seeing these extreme spastic movements, where you’re just like, God, I’d much rather have it just be kind of boring and a lot more sort of predictable than, like, I don’t know, what’s going to happen not even tomorrow, but like, in the next minute with this type of, you know, frothiness
Lance Roberts 10:38
No, no, it’s true. I mean, you know, you know, in video, you know, obviously, that’s the darling of AI right now. And, you know, it’s move after earnings was, you know, just, you know, grossly overdone. And now you’ve got this very interesting, you know, pattern that’s developing a video stock, if that company doesn’t, doesn’t hit all cylinders, in the next earnings environment, it’s gonna be, it’s gonna be very problematic for the company, because the expectations built into earnings for Nvidia are now so elevated, that they have no room for error at this point at all. So, you know, all these companies better show up and buy quarter million dollar GPUs? Because if they don’t, for any reason, the economy slows down whatever it is, they got problems.
Adam Taggart 11:19
Yeah, you know, I was gonna bring this up later, under a different topic under to the jobs but but I’ll pull it up here now, which is just hearing you talk like that makes me think about conversations we’ve had about the ESG movement, investing where just a ton of money was, has been flooding into the ESG space, for more, almost more philosophical reasons than anything else. Now, of course, it’s not just out of philosophical reasons, there’s a lot of capital that is got a mandate to go into ESG. Right. So a lot of people been playing stocks expecting more and more money to come in there. And you and I were talking about how, you know, the expectations for future fund flows into ESG, we’re getting really kind of, you know, excessively optimistic, right? Like, there was going to have to be a lot of continued capital to come in here. And we sort of talked about, you know, that there may not be enough sort of financial performance to really justify all that capital going in here. And if I told you on camera, but I know I’ve told you off camera about a good friend of mine, who got recruited away to work for a large ESG company that basically was in the business of helping companies like quantitatively measure the impact of their ESG investments, right. And for a while there, they were just couldn’t pick up the phone fast enough, just so much demand to work with this company. Because corporations are saying, Look, I’m spending all this money, I want to have some way to be able to prove I’m getting an ROI off a bit. And I remember warning this person, I’m not gonna say if it’s a man or a woman, because I want to protect their identity. But um, I remember talking to them, I don’t know, six, eight months ago, and just saying, hey, if if people start kind of questioning the return of of all the money that’s getting pumped into ESG, are you guys prepared if there’s sort of a shift in your business? And person said to me, quite honestly, no, we’re not right now. Because we’re just so busy trying to handle the orders that are coming in. That person got laid off today, the business and here’s one of the last men standing meeting in the past, like, two, three months or so the book of business just evaporated. For this company, this is one of the largest companies sort of in the ESG pick axes, you know, selling picks access to the minors type business. So it just shows and this is going back to your point about in video where it’s like, once the bloom starts coming off the rose that Oh, my goodness, we might not actually achieve perfection. Yeah, the Unwind can be way faster than you can imagine.
Lance Roberts 13:52
That’s right. That’s absolutely right. You know, and that’s, you know, it’s funny, you know, we’ve talked a lot about ESG, I’ve written a lot about, you know, the kind of the green mail that goes on behind ESG, before performance of ESG. And, you know, this is, you know, I’m getting a lot of people now that are starting to, you know, email us and go, you know, hey, I want you to manage money for for me, but I don’t want you to buy, you know, the stocks, right? I don’t want you to buy any of these book companies that, you know, are in there. And it’s interesting, because, you know, these companies, a lot of their policies are driven by their major shareholders and their major shareholders are companies like BlackRock, which is a huge proponent of ESG and kind of, quote, unquote, what principles and so it’s interesting, you know, we were boycotting a lot of these, you know, and Heiser bush and Bud Light you know, for the decisions they make, which are which is interesting because the company we should be all boycotting is buying anything related to BlackRock. You know, so if you if you really want to have an effect on changing corporate outlooks, stop buying stuff related to Black Rock, stop buying their ETF stop buying the companies that they invest in Because that’s, you know, once you heard black rocks, profits that will make a shift. Also these other companies that they really have they control $10 trillion of capital. Right. So they have a big influence as a shareholder over company decision making at the board level.
Adam Taggart 15:16
Yeah, the problem is I think if you said, I’m not going to touch anything that black rocks invested in, I don’t know what your consideration said is smaller than the general market.
Lance Roberts 15:27
Yeah, your options, because get slow real quick. But yeah, stop buying your ETF. That’ll help too. So
Adam Taggart 15:33
yeah, but it’s interesting, too, because I think at the end of the day, it really does all come back. I sort of say this a lot. Every time we go through a down cycle is you know, everybody has their their values, everybody has their that they’re happy to espouse publicly, everybody has the virtual signaling of some way, shape and form they do. But once it gets down to cash flows, right, once cash flows get tight, it just all comes down to the numbers for at least for corporate America, right. So no matter how much your company is telling you, we’re all in this together, no matter how much an investor is telling you their lofty principles about their selection process for we don’t invest in these types of companies, whatever. When the chips are down, it’s just like, we got to do whatever we got to do to, you know, protect the company, stay afloat, whatever, and they will just drop weight. And this is very true. Like, I think, the ESG narrative that these companies are still talking about, they’re still saying we should do it. But if you look at their actions, they’re totally slashing their budgets right now, as this company I just told you about is a great example of,
Lance Roberts 16:31
yeah, no. And you and I talked about this, by the way, you know, when we first started doing these podcasts, because that was when ESG was kind of the rage moment, I was writing articles about ESG. And I said, Look, you know, we’ve seen all this before we saw this back in the late 90s. You know, this is when we weren’t going to invest in any sense stocks right now was the big no, no, no pornography, no, no cigarettes, tobacco, no gambling, you weren’t supposed to invest in anything that wasn’t you know, you know, kind of No, no, these vices, right? No sins. And everybody was like jumping into that trains, like yeah, we’re not gonna buy those that all ended as soon as those stocks started outperforming everything else. And you remember, just in again, just a couple of years ago, oil prices are declining. Nobody wants to wait on oil stocks in 2021 Right as I Oh, II oils evil don’t we are they’re they’re anti climate, and all this don’t buy energy stocks. And then of course, they couldn’t get enough of them in 2022 when they were up 50% in the market was down 20. So you know it all at the end of the day, all these virtues and morals and things that people say they have is when it comes down to losing money, all those go out the window, it’s the other day, whatever is performing is gonna is gonna win.
Adam Taggart 17:43
Right. And that’s just sort of want to bring it back to your point about in video, which is the point here is not so much more ality Based Investing in Hey, you should invest based on your morals, and I’m not telling you to go against your values. I’m just trying to tell you what the market does, right where the market loves a narrative, but once it thinks it might start losing money, forget that the narrative goes out the window, and it’s just I gotta sell to protect what I have. Right? And so something like Nvidia, that’s ridic I mean, there’s no other word than ridiculous for 40 times sales, right? Once the market wakes up and says, you know, what, we might not get paid fully that in earnings, you know, don’t be surprised to see that potentially deflate really fast.
Lance Roberts 18:25
Yeah, and it’s just, it’s just an important part is to, you know, it’s, you know, regardless of what your beliefs are, leave that on one side of the table, our job as investors are to make money. And you may not like your company for one reason or the other. But if it’s cheaply valued, and it’s going up in price, and the fundamentals are strong, you should not invest in it just because of some personal belief that you have because again, our job is to make money with our money, leave, leave all the politics and everything else, you know, for other venues that you can espouse those in but when it comes to investing, just invest to make money and to protect capital, that’s what worked best over time.
Adam Taggart 19:04
Right? And I don’t want to get too moralistic here, but you’re you’re highly more likely to make a bigger difference in the world by making your money in the markets, and then philosophically deploying that to the causes that you care most about, right? Yeah, right. Exactly. Okay, so. All right. So you owe two things. First, you mentioned that you are beginning to put more capital to work in kind of the unloved parts of the market right now in anticipation and we talked about this a lot last week. We won’t have to really rehash it here but it sounds like you’re taking action this week, which is to say, hey, this mania and AI in these top you know few tech stocks is looking pretty long in the tooth at some point that rotation is likely to happen. Let me get into these more unloved more sort of staples, you know, value pockets of the market, where that that rotating capital is likely to Go. So you aren’t actually taking some some active? Well,
Lance Roberts 20:03
right. But if you’ve been listening to the show over the last several weeks, and we’ve been doing this for several weeks, you know, we bought regional banks. Previously, we bought, you know, we bought AMD, you know, before, it really kind of got on this whole AI train as well. So, you know, that stops that stocks up like 30%, since we bought it. So, you know, you know, there’s, there’s, we’ve been, we’ve been buying into these other areas of the market over the last really the last month. And so every week, you know, we talked about what trades did you make last week? Well, you know, we bought a little bit of energy, or we bought, you know, regionals or we regional banks, or we bought this or that. And that’s just been a building process, we’ve also been adding to our longer duration bond portfolio, because that signals are those signals are starting to really start to come into play now, that suggests that yields have probably topped here, and that over the course of the next 12, to 18 to 24 months, yields are going to be lower than where they are now. That’s a much longer duration play. But, you know, those are things that, you know, we’re building into our portfolio now expecting, you know, further rotations to occur as we move through the year. Okay,
Adam Taggart 21:11
all right. Well, look, I do want to move to you know, you basically said, like, what is going to really drive the action from here is going to be earnings, right? You know, are the earnings is going to come and support these crazy valuations? Are these questions like crazy these excessively high valuations that are in the AI space? But also to, you know, are there good values out there companies like the ones you’re beginning to put your money into right now, where earnings, everybody was predicting the earnings recession, but if earnings strengthen from here, you may be picking up really good values? You wrote a piece this week, titled, earnings improve, but then it has a little caveat, it says beware of Trojan horses. So walk us through the main insights from that pace.
Lance Roberts 21:54
Well, so So again, you know, if you take a look, and I’ve got like, the thing is just full of charts, and graphs and analysis, if you want to pony up, feel free to do so. But yeah, okay. But you know, the bottom line of this is really, that if you take a look at where we were in quarter for earnings, and then take a look at quarter one earnings, those actually strengthened, so we went from about $171, a share to $174 a share in earnings. Now these are I’m talking about GAAP, I’m not talking about operating earnings. I’m not GAAP reported earnings. So this is the real numbers. But those definitely did improve. And now analysts currently expect that trend of improvement to continue all the way through 2024. And that’s fine. There’s nothing wrong with that, except that you’re going to have to have really strong economic growth to support continued growth in corporate earnings. Because where do earnings come from earnings simply are a function of what you and I do as consumers, what we spend money on. That’s what you know, in other words, Apple just came out with their new, you know, their new headset, right? So 3500 bucks, well, if nobody buys their headset, obviously, they don’t have any earnings off that headset, right. So, you know, what we do as consumers and as businesses, that’s what drives these corporate revenue. So if we don’t have stronger economic growth, which means we’re making more money, then we won’t be spending as much money, the economy in the economy, which makes these earnings expectations, very hard to achieve. And so, you know, this is going to be the real challenge. Because, you know, a lot of people right now are still predicting, hey, we’re gonna have a recession, we’re gonna, we got to have a recession, all these things, say we have to have a recession. But if if we’re going to have strong earnings growth, then that suggests that we’re not going to have a recession, that earnings, that the economy actually gets stronger from here. So the point is, is there’s a real dichotomy between and this is a Trojan horse, right? Analysts are going hey, don’t worry about it, earnings are gonna go up from here. It’s kind of like Greeks bearing gifts, gotta be careful of what’s inside those numbers. Because the reality is, is that this is all going to come down to what happens within the economy over the course of the next six 812 months.
Adam Taggart 24:05
Okay, and as you said, that article is packed full with charts, folks should go read the article on your website, real investment advice.com. See, I gave the plug this week, Lance, thank you. But I do want to talk to one chart there in particular, where you’re showing how far ahead earnings estimates are from economic realities right now, and you basically show the actual growth in earnings with projected estimates there in the the dotted red line. But then you have the earnings growth trend line and EPS growth rate, you know, lower and higher bounce and you can you can basically see that right now, the forward earnings estimates to 2024 are above the high highest bound, right. I mean, they’ve they’ve so just just talk to ya. How much of an extreme is this?
Lance Roberts 24:52
Yeah, so what that graph shows is, so when you take a look at the long term history of of earnings And just for a moment, this will make, you know, again, going back to this premise, earnings have to come from economic activity. So if we go back to 1900, the economy has grown at about 6%. If we look at earnings growth, it’s about six and a half percent over time, there are periods, like coming out of a recession, where earnings can grow faster than the economy. But over time, and now this is the chart that you’re looking at that you’re showing here is that from peak to peak of earnings, so from one earnings peak to the next earnings, peak, earnings grow at about 6%, on average, which is about what you would expect from economic growth. So there’s this correlation between earnings growth and economic growth, exactly what you would expect. The long term trend line, of course, is that exponential growth trend of earnings over time and, and when you get very deviated above that exponential long term growth trend, and ultimately, because of economic growth, because of recessions, because of periods of economic slowdown, earnings have to revert back towards that long term exponential growth trend. And then from bottom to bottom, in other words, from earnings prop to earnings trough, that’s about 5% over that long term, saying Verizon, so you’ve got this very defined kind of channel, that earnings tend to stay well contained in going all the way back to 1950. You know, the problem now is, is that expectation is far above any previous level of expectations abroad, or of actual growth we’ve ever had within the economy. So there’s a lot of room for disappointment here, that we should see earnings contract back towards that long term exponential growth trend, because that’s what the economy actually generates over time.
Adam Taggart 26:44
I feel like a kind of ask you a version of this question every week, but like, what is driving that optimism? Right, so you know, analysts aren’t stupid, they can see the same chart, they they know that they’re out of the regular bounds, right of history, what is telling, making them feel confident that oh, you know what? No, I actually think we’re going to hit that number for a reason x. What is reason x?
Lance Roberts 27:07
Well, they don’t ask, they don’t actually think that right? What analysts do is they say, okay, earnings grow at 5%, on some basis, right? So the quarter over quarter, we should have earnings grow at two and a half percent or 3%. They have their number. And so they just go and if you take a look at SM s&p does this as well, they go, Okay, here’s our estimates going forward over the next you know, eight quarters. And if you want a percentage change on that it’s about two, two and a half percent. And they just, they just basically, mathematically, you know, just one a line out and say, your earnings are going to improve, and there’s a number. And then as and this is what we always know is is that as we start to approach that quarter, they walk it coming down, right? And we see these big downward revisions, and then we all beat the number and everybody’s like, yeah, and we beat analysts estimates, well, we haven’t beat analyst estimates, in 20 years, if you actually use their initial estimates, the market never beats those estimates, they only beat the ones that we lower the bar enough to let them get over it. And that’s a good example of this last quarter.
Adam Taggart 28:13
Okay, all right. Well, it’ll be interesting to see what happens. But obviously, folks, you know, extremes are called extremes for a reason, right? They tend to not persist. So the market seems to be priced right now, at an extreme in forward earnings expectations. Take that what you will, now obviously, Lance, what’s going to bring those earnings down and bring potential asset prices down? is declining earnings, right, disappointing earnings based upon these expectations, even the downward revised expectations, so I got a bunch of stuff that is sort of like recessionary, you know, storm clouds, and we’ll wade through some of it. But there’s, there’s something on my list here that may. You know, it’s an argument on the other side, that those storm clouds might not matter. I’m going to start getting into that discussion through the doorway of debt. I just want to put up a chart here real quick, from wolf Richter, which is showing that, you know, now that the debt ceilings been raised, you know, now it’s game on, to take on more debt. And he’s got a chart here that shows that the US national debt spiked by 359 billion on the first day after the debt ceiling was removed. So you know, that’s, that’s almost a third of a trillion, it takes more than a third of a trillion bucks. That just got bang, you know, added right onto the dead right after, you know, the handshake agreement was made.
Lance Roberts 29:44
By the way, right, you just hit a really important point and don’t gloss over it. Okay. We added $300 billion in debt and remember what everybody was saying, was it oh my gosh, as soon as this debt ceilings done, though, you know, everything’s gonna go to hell in a handbag. Asking because we’ve got to refund the Treasury this trillion dollars, we’ve already done 300 billion of it and the market didn’t blink. We did $140 billion option on T bills market absorb that without a hitch. There is so much demand for money market accounts right now that the absorption of that increased debt is not going to be a problem. It’s something we talked about last week. But
Adam Taggart 30:21
again, I do want to underscore that you did say you didn’t think it was going to be an issue because of that. Yeah.
Lance Roberts 30:26
Right. And so this is you’re seeing it happen right now. The markets, not the market doesn’t care, because they the market already knows that this is not going to be an issue. Go ahead.
Adam Taggart 30:36
Okay. So a bit a bit. Very good point. And I’m glad I got a chance to shine a light on your your accurate prediction there that you didn’t think that the TGA refill was going to create this market dyspepsia that many people thought and I admit, I was one of the people that was a bit worried about it. I guess one thing I’ll say is, is there’s still more to go. So we’ll see that operators
Lance Roberts 31:03
last 100 billion, it’s gonna blow everything. Yeah. So
Adam Taggart 31:05
I don’t know. I don’t know, we’ll see. But you’re right. It hasn’t mattered at all so far. But the point is, is, you know, we’re already you know, aggressively adding debt back on, you know, you know, as fast as we can, at this point, it’s, it’s, you know, there’s there was a time where third third of a trillion of debt was a big deal. Alright, so the thing that and, and one of the things we’ll flag was, hey, look, where we’re throwing all this debt back on, we’re now starting to refill the TGA. cuties. So going on, you know, there’s liquidity draining that’s going on here. And this is this is where I’ve really been on this journey for the past couple of months here is really trying to get an understanding of why how to measure liquidity, you know, there are all these different liquidity measures. You and I have talked about it you guys produce your own chart there at all right? There’s a Bloomberg article that talks about rising excess liquidity and the way that they measure it. They’ve got a chart, I’ll put the chart up here, if I can find it. But basically, what they’re saying is something that I think you were saying, recently, Lance, which is one of the reasons why stocks have been able to perform so well this year is because there has been net excess liquidity into the system. And yes, there are lots of macroeconomic, you know, there’s lots of macro and macro economic weakness out there. But if the flood of excess liquidity is big enough and can persist for long enough, it may be able to keep prices from having to materially come down asset prices to materially having to come down, and it may give the economy enough time to heal, that by the time that excess liquidity goes to net zero, the economy is actually performing pretty well again, and so the people who have been so concerned about recessions, and again, I’ll put myself in that camp, could be disappointed here that we may have a soft or no landing, because the excess liquidity is providing such a buffer, that it it becomes the bridge from one period of economic growth to the next period of economic growth without having to go through the trough of the recession.
Lance Roberts 33:23
Yeah, and this is something we’ve talked about before, take a look at em two, as a percentage of GDP is still very high, depending on how you calculate household savings, that’s very high. You know, so So again, this, you know, this problem that everybody was expecting of this drain of liquidity that was going to have this big impact. It hasn’t occurred. And you know, another thing that it’s also helped, and we talked about this, you and I talked about this, two or three weeks ago, we talked about rolling recessions, I wrote a newsletter on this, on our website, talking about how we were having this rolling recession over the last, you know, 18 months, where, you know, everybody was expecting this, this moment to where, like, the floor fell out of everything, right, you had this big kind of apocalyptic moment, and stocks are going to be down 3040 50%, and, you know, kind of reminiscent of 2008. But what happened instead was is that we had all the events that everybody was talking about, and we were talking about happened, right, we said, hey, look, you know, if you keep hiking rates, you’re gonna have some type of credit related event or banking prices are something if you keep doing this, you’re gonna have, you know, you know, problems, you know, with certain sectors of the market. And, you know, in what happened was that as you look back, we had all those events, right. They all occurred we had, you know, the IPO blow up, we had the SPAC blow up, we had the beanstalk blow up, we had the Silicon Valley Bank, we had the regional bank, but they were all spaced out. And so we would have these hits, the markets would decline 15% or so The market would absorb it, and then start to rally again, then we’d have the next event market would sell off, we’d absorb it, the market would rally again. And then we’d have the next event absorb it. And so that’s kind of that rolling recession took, you know, kind of took some of the sting out of the crash, you know, if you kind of think about like a shock absorber, right. And, you know, if a car has no shock absorbers, it runs into a wall, it’s just, you know, terrible. But if you have this kind of ability for the hood to crumble and have the shock absorbers, it softens that blow. And that’s kind of what’s happened with this rolling recession in the economy, that really, it hasn’t materialized. And I’ve got a chart, I’ve got an article coming out next friday, I think. But I’m going through all the recession indicators again, and there’s certainly a lot of indicators suggesting we should have a recession. But if you take a look at is m, manufacturing versus services, that’s suggesting that we’re not there yet. And whenever services have not been in contraction, but manufacturing has, we’ve had this kind of no recession scenario 2011 2015 1998. Those were all periods where services were not in contraction, but manufacturing was and we didn’t have a official recession until much later.
Adam Taggart 36:21
You know, what’s interesting about this is we’re at this period of time, and I’m getting lots of comments about this from viewers of these videos, where they’re like, Oh, I’m really having a hard time because this expert said this, but this expert said this, it was different and your people you’re talking to you aren’t agreeing. And I mean, when we talk to different people a week on this channel, I mean, not everyone’s going to agree about everything, obviously. But I think we’re at a really challenging time right now where like, I don’t think many people have a ton of confidence in much of what they’re predicting, because there’s so much up in the air right now. It’s just, it’s a really hard dataset to predict with confidence. You know, talking to Peter boockvar Earlier this week, he’s he’s still not 100% confident we’re gonna have a recession. I think he said he’s 99.99%. So he left a tiny bit to open there. But he says
Lance Roberts 37:16
there’s a chance there’s a chance.
Adam Taggart 37:20
But he said, it’s probably not going to be an event. Right? It’s not going to be like, Oh my gosh, is a sudden market correction, or Oh, my gosh, the economy just plunges into recession. He talked about it more just like a steady grind. Right? Just like just a steady grind downwards. So, so that’s, you know, that that’s one potential outcome here. And I hear you saying that a little bit here. Like, yeah, I mean, we’re talking we there’s a chance we could avoid a recession, I still think I have a hard time wrapping my brain around it. So it’s not my primary thesis, but I’m open to the fact that it could happen. But because of this shock, absorbency that, you know, the liquidity is providing, and because these things are well spaced enough, and when I talked to Joseph weighing that guy, that guy used to be, you know, he used to be one of the traders, the Fed. He did say, many months ago, he said the Fed wasn’t super worried about the impacts of its hiking campaign, because it felt it kind of had the monetary duct tape to hold everything together enough. So that by the time it achieved its objective, it could come in and really do the repair. But it was It wasn’t worried about the system just kind of blowing apart, you know, TBD. We’ll see. Like I said, the the opera isn’t over yet. The fat lady may still take the stage on that. But you know, there’s enough in there that for the folks that are just have been so rock solid, that the wheels are going to come off. They still may, but it may take a lot longer than we think. And they may not like all come off at once. It might be you know, a slower break down to the car versus a slamming into some sort of wall. So you’ll see, I just I want to give you a chance to opine on this because as we talked about, you know, people get so set on Well, surely this is going to happen. And we just have to keep ourselves open to that other opportunities may happen. And we’re seeing such a divergent right now divergence among experts on what exactly may happen. I think you especially have to keep an open mind right now.
Lance Roberts 39:21
But look, it’s a great point. And I need to now I need to, if you’ll let me share screens. Yeah, you should have the Okay. Before I do that, so a couple of points. First of all, nobody should agree. Right? And so if you’re listening to whenever, here’s a good piece of advice for if you’re ever listening to Wealthion and everybody agrees, then you need to watch something else as well because nobody ever knows more than about three days out what’s going to ultimately happen economy so if you’re if you’re listening, and if and there’s an old saying, right, Bob Farrell, one of the greatest, you know, technical technicians And, you know, in history work for Merrill Lynch, Frank and for years has a series of 10 kind of rules to follow to investment. One of his rules is, is when all experts agree, something else tends to happen. Yeah. Right. And so it’s an important but so it’s good, right? So when your viewers are watching this channel, and you’re getting this, this disparity of opinions, that’s a good thing, right? You should be thinking, Okay, well, this guy said this, how could he be wrong? And this guy said this, what could make him wrong. And this is the challenge of investing. That’s also what makes a market you’ve got to have buyers and sellers if everybody agrees, you don’t have a market. So you know, this is this is a very important point about consuming information is to make sure we talked about confirmation bias all the time is not to have confirmation bias. And again, if you read our articles on our website, real investment advice.com. Adam makes fun of me, because one, one article will be super bearish, the next article will be bullish, the next group will be bearish. Next article is bullish. And that’s us going through this same analysis of trying to work through this market, this market and environment that we’re in because there is a lot of negative data. There’s also a lot of positive supportive data. And you’ve got to try to figure out which one is going to dominate. So having said that, I do want to talk about recession real quick, because one of the anomalies that 2020 caused was in economic growth. And so what is a recession? Right? So no, not what is a woman? What is a recession? Let’s talk about that for a second. A recession is only two things and these are in recession, or it’s not a recession, there’s no other measures of that. So a recession is when you have negative economic growth. Okay, now, what is negative economic growth, that doesn’t mean the world is collapsing, right? That does not what that means at all. What it means is, is that last year, the economy was growing at $1. This year, it’s a negative dollar decline. So you have a recession. So it’s just very basic. However, to get from growth, to negative growth, you have to deteriorate all of that positive growth, right? So we’ve got it. So think about, I’m going to go from the top of the hill to sea level, into a valley that is below sea level. So before I can get to zero or sea level, I’ve got to go all the way down that mountain, right now. Now I’m at sea level, I’ve already gone down 1000 feet, right, I’m already 1000 feet down off the hill, and I’m still at sea level. Now I’ve got to go into the balance. Right before I get into this recession. Now, let me show you a chart. And this will help you understand why this has been a very challenging period. Okay, this is this is economic growth, this is GDP at a quarterly change and an annual rate. This is real, this is real GDP, so it’s inflation adjusted. What you’ll see here is that here’s the last recession that we had in 2020, we were growing at about two and a half percent. And so when we shut down the economy, we had to go from positive two and a half percent growth to zero. And then into negative territory, we were down negative 8%. On an inflation adjusted basis. Let’s go back to 2008. For a second, let’s just talk about the financial crisis. Back in the financial crisis, we had to go from about 3% growth down to zero, and then we went down about negative 4% on a real rate. Now let’s go back to 1999 2002 1001. To two we went from about 5% growth to zero, we actually never got into recession. But we declared a recession because of what was going on with employment, etc. But actual economic growth on an inflate now nominal GDP was negative. But on an inflation adjusted basis, it was not. And we still have a recession. But overall, if you go back and look at 1999 2000 2001 2002 Small caps did well, mid caps did well. The only thing that really sucked in terms of investing and and the economy was what was happening in the.com. Stocks, those all blew up. That’s why you had a recession because you had all those layoffs, etc. But now let’s go forward. And let’s talk about where we are right now. We just came off a period of 12% inflation adjusted economic growth now, everybody’s expecting this declaration of a recession and go, Oh my gosh, we’ve got this recession. We just had to wipe out a 12. We’ve gone from 12% growth. We’re now down to about 1% growth on a real basis. We’re not to zero yet, but we’ve already wiped out more in inflation adjusted growth than we did during the pandemic decline. We’ve wiped out more economic growth and inflation adjusted base Since then we did during the financial crisis. So this is why it’s so confusing. Yes, we still have positive economic growth. But you’ve got to realize that we have dramatically slowed economic growth within the economy over the last 18 months to get it to where it is now. So this is this is the frustrating part, will this eventually go negative? Maybe. But it is possible because of all this decline that we’ve already had an economic growth, because it’s already slowed down this much, that we may kind of have a repeat on an inflation, again, inflation adjusted basis, not nominal, that we could theoretically see something like we saw back in 2001, or two, where real economic growth gets around zero, we do see a pickup in unemployment, we do declare a recession, but it’s very mild. But again, that really doesn’t take away what we’ve already done in terms of slowing economic growth. So does that make sense?
Adam Taggart 45:56
Yeah, it makes total sense. It’s, it’s, we, the descent, the decline that we’ve had is greater than we’ve had in any of these previous cycles, you’re talking about there. And it’s almost sort of like, you know, this time around, we decided that the mountain we were going to come down from was Mount Everest. So we’ve said the longest distance to travel before we got to sea level. Yeah, so that’s actually really, really helpful, which is that we, we may not get to a point where we see negative real GDP growth, even though there is a lot of growth destruction in there. And, you know, at the end of the day, you know, charts are helpful, and all that stuff, you know, what I want to keep in mind is just like, but but what’s going to matter for the real person? Like, how are they going to experience this? Are they going to see any material decline in their portfolios or not? Are they going to potentially lose their job or not? Right? I mean, the things that we as regular people really care the most about. So we’ll get into that, because I’ve got a bunch of stats here that we’re gonna go through. You’re just you gave me though, an opportunity to just clarify something because of a number of the comments that I’ve been getting. Recently, especially as the markets have been getting increasingly bullish, you know, there are people who are saying, hey, you know, you had this, this expert on who’s, you know, six months ago was warning about a recession, we haven’t had it yet. So, you know, how can I trust anything that’s on this channel. And, you know, you’ve made a lot of my point for me, which is, look, this channel is to bring in the most credible, thoughtful, data driven, respectable analysts that we can find and let you crawl in their brain, we’re not trying to create an echo chamber here, we’re trying to get a diverse, rich set of thinkers in here, so that you can listen to each one, and then decide what to do. And so just to be super crystal clear for people, my job as the proprietor of this channel, is to try to bring on the best minds that I can get on this channel. And to bring out their story as fully as possible to get you as fully into their mind and their thoughts as I can. So that you have real clarity on what they’re thinking, your job is the viewer is to determine whose outlooks resonate the most with you make the most sense to you, and that you want to use his guidance for steps that you want to take from from here. Right. So that’s kind of the partnership that we have going together here is the guy that’s, that’s producing the content and you the viewer who’s deciding what to do on it. As Lance said, you know, I’m not trying to bring in a lot of people, even though people say, Oh, you have a lot of bearish people on the channel. It’s not like I’m calling people on the phone and saying, Hey, are you bearish? Great, come on my channel. I’m just saying, come on to my channel. You’re a respected analyst, they come on, you know, I don’t know what they’re gonna say when I ask them these questions. And the the right now, the preponderance of them have been concerned about where things are going for all the reasons we discussed on this channel. are a lot of them surprised right now. To a certain extent, although you look, you talk to guys like David Rosenberg or or Lakshman Achuthan, who I had on both last week, both of them are relatively pessimistic, probably Rosenberg a little bit more about where things are going. But both of them said, I’m not surprised at all with what’s going on right now. Because if you look at past cycles, this is the pattern that you expect to see you oftentimes see stocks rallying into a recession, you oftentimes see, you know, the employment numbers, you know, continuing, you know, unemployment continuing to be strong as you as you head into the recession once it’s been declared retroactively. Right. So, a lot of this stuff, you know, while it feels paradoxical to us, to a lot of experience, folks, it’s not now are they going to be proven right? I don’t know. But my point is, is, you know, again, my job is to get the full picture of these analysts, when they come on your job as the viewer is to actually figure out what you want to do with that.
Lance Roberts 49:46
Alright, just real quick, because it’s a very critical point because again, this is, you know, what I tried to do on Friday and why you have me on this channel, because obviously, you know, I don’t know what I’m talking about. But I do You know, the issue is, is you know, every week we talk about this stuff. And, you know, as I keep saying nobody knows what’s going to happen. So if you listen to a guy, and he says, this is going to happen, and this and this is the thing about the bearish case, the bearish case is always very logical. And it makes a ton of sense because it’s based on historical data, it’s based on, you know, past trends, it’s based on what happened previously, it’s based on and again, we’ve done a lot of that same work here, you know, looking back over history, say, whenever this and this has occurred, this is what’s typically happened. And the bearish case, as human beings, right, we have an innate nature of self preservation, right. So you know, we have, we have the base, the base tenants of of our nature, as you know, feed, flee, you know, fight those type of things. So we have a very basic need of self preservation. And so we tend to gravitate As humans, we tend to gravitate towards that bearish view, not because it’s right or wrong, but because it feeds into that innate preservation mode of how we think psychologically, and this is the big challenge for investors is to understand that, and this is why it’s always hard to buy bottoms right to buy the bottom of the market, you know, everything’s falling apart. And, you know, what are we supposed to do, we’re supposed to buy low, but we don’t buy low because well, Everything’s bad, right? So self-preservation says, Don’t buy here, it’s going to zero, we buy the peaks, because at that point, it’s like, well, it can’t stop going up from here. So I’m gonna buy in video today, right at 40 times price to sales. So we do exactly the opposite of what we should do as investors, because that’s the way our psychology is. But just understand that when you listen to Mr. X over here, and he says, okay, based on all my data, you know, housing is going to do X, auto sales are going to do Y, whatever it is. And this has always led to bad, bad outcomes previously, he’s right. The problem is, is that we can’t predict what happens in the future. And again, we’ve gone through all this before, you know, the best predictors on the planet are media meteorologist, and they’re right three days in advance. Outside of that, if you’re predicting anything, six months, nine months, a year from now, that is probably not going to happen. And there’s a reason, you know, for that to occur. The reason we haven’t had a recession. And the reason the market hasn’t done, what you would expect it to do with the Fed hiking rates and doing all these types of things, is because everybody was expecting a recession last year, right? We had it was recession mania all of last year. And when you have that type of psychology in the market, and it’s public, and everybody’s reading this, everybody’s talking about it. And this is this is Bob barrels rule, when all experts agree, something else happens. And the reason is, because the market adapts to that view. And it says, okay, earnings and valuations are here, that’s priced in that view. So if anything else occurs, that is not worse than that view. If it comes in a little bit better, markets are going to start to rally. And that’s what you’ve seen occur since October, the worst of that recession view was priced in last October. And the markets are rallying off of that. Now what we have to have in order to have another downturn is the actual So now everybody is very optimistic, right? No recession soft landing. Now if you start to have the the unexpected view, which would be a sharper slowdown within the economy, the market is not priced for that now. Nobody’s talking about a recession in the mainstream media. Now. It’s that’s pretty much passe. Nobody wants to all the bulls are back. So now the market is in a better position to have a decline on worse than expected expectations, in earnings and economic growth, etc, which could occur over the next 612 months. So again, this is how markets work. And this is why you always have to be careful, just because somebody said X last year doesn’t mean they’re entirely wrong. They’re just wrong for right now, because that view is already priced in by the markets. Does that make sense?
Adam Taggart 54:22
Totally makes sense. And we’ll move on from this point, because I’m gonna go through a bunch of bears, but that’s a good thing. Yeah. But um, I do want to underscore what you’re saying. And I’m trying to convey here. There’s a quote by F. Scott Fitzgerald, the author says the test of a first rate intelligence is the ability to hold two opposing ideas in mind at the same time, and still retain the ability to function. Right. And I think that that’s a great quote for an investor right, is it you have to take the sort of competing interpretation Asians have the same data and be able to say, okay, look, you know? Yeah, these are both too intelligent, you know, forecasted. What could go on one of them may be right or the other, or maybe they’re both going to be wrong, and something entirely different is going to happen. But my job is to try to consider them all understand them all, and then do my own calculus to determine which one I think is most probable, because then I can take action based off of that. I also just wanted to say to Ed Yardeni, right, would you call him a bull or a bear? Oh,
Lance Roberts 55:30
super bullish. He’s all.
Adam Taggart 55:32
He’s coming to the channel next week.
Lance Roberts 55:34
Adam Taggart 55:35
Well, we’ll definitely get to hear the Super Bowl. Super Bowl perspective.
Lance Roberts 55:40
I’ve been with him a couple of times on Fox Business. And yeah, he’s always the he’s the always the commensurate Uber bowl. So you’ll feel it, he’s very smart guy, you will definitely love his analysis. He’s very well spoken.
Adam Taggart 55:55
He’s a great chart producer. So, so anyways, you know, again, and I, I brought him on less than he’s the bowl that was, you know, a selling point because they’re harder to get than the bears. But, but also, just again, a guy has a lot of data, but interprets it’s differently than a lot of other people do right now. So really looking forward to that discussion. Okay, so I just want to dial through some of these things that are some of the storm clouds I mentioned. Now, you know, the the rising net liquidity may make these things moot. Who knows. But definitely, there’s been some developments that I think are just worth pointing out here quickly. One, you mentioned services, the services numbers have been pointed to of late as a real source of resilience in the economy. We got some new services data out this week, that was disappointing. The Global Services, the global s&p global us services PMI, that printed at 5.4, sorry, 54.9 In May, which is still you know, an expansion, but it was a miss of expectation, I ESM services printed at 50.3, just barely above contraction. And that that’s, you know, a low for a good while here. And that that caught the market by surprise. So, you know, these, these, this one month of data points doesn’t make a trend yet, but it is showing that services, you know, may not be as red hot as folks are thinking, I’m going to move on to GDI, anything to say about services,
Lance Roberts 57:29
actually, yeah, let me steal your graphic, steal your screen again, real quick. And I’ll share a couple of charts, because this is a very important point. And this is something that, like I said, I’m discussing some of the recession indicators next week. But this is, and this is this is an important analysis. So this is is m services versus the manufacturing index. And this is what I was talking about earlier. So if you take a look at services, which is the red line, the black line is the manufacturing index, the only time that you have recession is when both of them are in contractionary territory right now. And right now, services are not in contraction. Now, the important point about this is that they’re close though, just to be clear, they’re very, they’re very close, but they’re not there yet. And again, that’s why, you know, probably we have not seen that kind of recession at the moment. And again, doesn’t mean that we’re not going to, but we just haven’t haven’t seen it yet. But there’s also kind of another point about this is that when you take a look at services as a function, they are roughly about 77% of the economy. And so this is this is important because services have the ability to honor your pictures right in the way of my street. So this chart is is this is a composite index of isn and services. 77% of the economy is services and about the other 23% is manufacturing. Now manufacturing has a much higher what we call a multiplier effect within the economy. So when we manufacture something, think about building a house for a month, we’re gonna manufacture a house, I’ve got to go, you know, hire the architect, and I’ve got to get the engineers involved. And then I’ve got to hire the construction and I’ve got to buy the, you know, the lumber and the, you know, everything to build a house with the sheetrock, the roofing tiles, etc, then I’ve got about the appliances and, and so the point is that building a house has a lot of throughput into the economy, because all these other things have to be bought have to be bought, which create jobs and revenue for all these other companies. And so manufacturing has a very big input, but it’s a very small fraction of our economy today, versus where it was back in the 1970s when it was about 80% of our economy and that’s why we were growing at 8% Back in the late 70s services, on the other hand, have a very low multiplier effect of, you know, if I, if I hire an Uber driver, right, I pay him for the ride, and then that’s done, right? Yes, he buys some gas. But that’s about it. There’s not this big multiplier effect in the economy that comes out of services. So if I economically weighed the index services versus manufacturing, so in this, this is a composite. So in this composite ITSM services make up 77% of the index 23% is manufacturing. What you see here is that went previously, the long term capital management back in 98, the Japan shutdown in 2011, would last time we had a debt ceiling default US debt downgrade, the Euro Brexit crisis we had manufacturing was in negative territory, but the index, this economically weighted index was never even close. And so we didn’t have a recession. When we had the.com, crash financial crisis, pandemic shutdown, that composite index was deeply into that recession territory. Now, we’re right on the cusp of that now. So if services continue to weaken over the course of the next several months, or later this year, we will have a recession. This is part of that that, you know, recession article I’m writing on the website coming up.
Adam Taggart 1:01:14
Right, but or if manufacturing continues weakening, because it has a higher influence impact in this chart.
Lance Roberts 1:01:21
Yeah, that is correct. And it will drag that down further, but again, you know, right now, but the point is, is that the reason we haven’t had a recession yet, is twofold. One, see how high that that that index was back in 2021. Again, we’re back at the top of Everest. Yeah. So we had to go from Everest to zero. And we’re just now there. So again, you know, I think there’s a real possibility that we could see a recessionary environment later this year, that will slow earnings, that is going to pressure stocks, that doesn’t mean we’re going to have a massive, you know, market meltdown, but a 10 to 15% decline in stocks would not be surprising at all, I think it’d be a hell of a buying opportunity when that occurs. But I do think there’s some risk to earnings over the course of this year and into next year.
Adam Taggart 1:02:11
All right, great. And I’m really glad you went into this because I was gonna bring up that Lachman had talked about how manufacturing in his mind, he puts the multiplier at about six times, services. So he says, you really can’t discount the fact that manufacturing is a much smaller percent of the economy, because it punches so far above its weight relative to services. And as you know, manufacturing is in contraction right now, pretty solidly, as
Lance Roberts 1:02:41
you can actually pronounce his name correctly, that’s free. It’s like wash your sister sauce. I mean, you know,
Adam Taggart 1:02:49
although I grew up in New England, we call Worcester sauce. Alright, so um, so kind of on a related note, David Rosenberg, and we don’t have time to spend a ton of time on this, but he looks at, you know, he says, like, you know, yes, Diddy, we haven’t had, we’re not having negative quarters of GDP right now, he actually thinks that’s a little bit of a false indicator, he likes to look at an index, he’s critical GD plus, which is basically kind of an average of Gd GDP and GDI, gross domestic income, gross, domestic domestic income has had two back to back negative quarters. And so when he calculates GD, plus, I believe that that has been negative for the past few quarters. So by that metric, he says, we’re actually in recession now. And it’s part of Dave’s story is because he says, I think we actually might be in a recession now. We just don’t know it yet, necessarily. And it’s gonna get declared later on at some point in time. And he’s like, when it does, if they say we were in it at this point in time, you know, June 2023, is like, I’m not going to be surprised, at all. Alright, moving into a couple of things. Before we get to the really fun stuff to talk about. I just want to quickly mention jobs. Initial claims took a pretty substantial jump. Again, you know, too early to really be waving too many warning signs about this, but the clear trajectory of claims both initial and continuing at this point in time, you know, is is on the way upwards from here, we clearly bottomed last fall. You know, we keep hearing stories about layoffs and all that type of stuff. We’re not at the warning level yet where guys like Michael Kantrowitz are saying, Okay, this is it, the employment dominoes falling, but watching the trajectory, which we’re gonna continue doing, it is continuing to move towards the direction of higher unemployment. And the really interesting hires and quits are trending lower now. And what that really means is that labor leverage is declining. So here’s a chart here of a lady leverage the labor leverage ratio. And you can see that it’s in decline now. And this is a really clear indicator that the power dynamic shifting, right, so during the pandemic coming kind of coming out of the pandemic, where everybody was flush, and everybody’s retirement accounts had had, you know, recovered and were doing great. And everybody realized they could work from anywhere they wanted to and live van life and all that stuff. We had, you know, massive quits, right quits went through the roof, the huge, there was a huge take this job and shove it factor we had a lot of people retire early. And we’ve had this massive gap now in openings versus job openings versus applicants for them, right. Employers have been able to do that, because employers have been so short for workers that that folks could pretty much put a name, their price and their conditions and they had the financial padding to go off and take a couple of months and do whatever they wanted to do. or longer, right. Well, now we’re seeing that, you know, personal savings rates, you know, gone back to near record lows, and everyone’s having to finance their life now on the credit card. And it’s beginning to manifest here in this jobs data, which is just that the workers are beginning to have less and less bargaining power. And of course, if we get into a place where, you know, layoffs really start accelerating from here, we get into recession, that power dynamic could could really shift fast back to the employer. Part. And I’ve been warning about this for a longtime, really for about two years now that the great resignation movement may be morphing into the great, please may I have my job back movement? We’re not quite there yet. But but definitely that that decline in labor leverage ratio shows that anything on jobs for I get to housing lands?
Lance Roberts 1:06:48
Well, no, I mean, like jobless claims are definitely taking up, but they’re still low on a relative basis. You know, we’re not above 300,000. Once you get above 300,000, and jobless claims. Now we got something to talk
Adam Taggart 1:06:58
about. Keep tracking, like I said, Yeah,
Lance Roberts 1:07:02
but I mean, are moving up. So you know, that’s the important thing, you know, thing to really watch there are jobless claims, just continuing claims on people, how many people are staying unemployed? That’s the that’s the bigger issue. But you’re absolutely right on the employment, private employers are having a lot more bargaining power now. And it is interesting to start to see, you know, people were job hopping, and they said they’ve had to stop job hopping. And all of a sudden now companies even like Google are saying, Hey, you want to work for us? They’re coming back to the office? Yep.
Adam Taggart 1:07:28
So yeah, so I think it’s worth just beating this dead horse one more time in the sense of like, if you work for a paycheck, if you are dependent upon your employer here, you know, looking at the trajectory of this data, you should just be asking yourself, okay, you know, do I have a plan B in case my company, you know, starts, either, you know, actually issuing pink slips, but even just reducing hours asking me to do more for the same pay that type of stuff. If we keep heading on this trajectory, I think the likelihood of those types of developments is going up. All right, on the housing side. Again, I mean, there’s just so much to talk about with housing, but I’m going to keep it super contained here. Data from CNBC article, but the database really shows that the housing market has never been this unaffordable for new buyers, right. So from a purchasing perspective, the costs are so high in terms of home prices, still near record highs, seven plus percent mortgage rates, and then just all the fees that are in the system right now, it has literally never been more expensive for a new buyer, or sorry, more importantly, less affordable for a new buyer to get into a house at this point. So that helps unless one
Lance Roberts 1:08:58
plus you have bad credit right? Now you got this new fee, if you got gig. You’re gonna pay him more. So with no cash and bad credit, you get a better deal on the house. Yeah, you know, look, you know, housing, housing is not corrected as much as everybody thought except in certain areas, there are certain areas but, you know, like I said, and Houston, housing prices haven’t corrected that much. So it’s all about location is always the case.
Adam Taggart 1:09:22
It’s all about location. And you know, I do hear a lot of people say like, Well, hey, I know, you keep hearing this, but like in my area that houses are still going for above asking. Absolutely. Because your mileage is local mileage will definitely vary in the housing market story, right? Because it’s so local. But you know, for every story like that there are stories of oh my gosh, you know, we’ve seen some pretty substantial price declines in our market here And notably, two headlines. US homebuyers See, or do as homeowners see first annual home equity losses since 2012 In the first quarter of 2023. So we actually We are now seeing enough house pricing declines across the country, that there actually has been a decline in home equity for the first time and over over a decade, right. So it is beginning to bite. Same thing in the UK, US house prices book first annual drop since 2012. Right? So this is beginning to happen, you know, in it’s not just a US story, it’s a worldwide story. In fact, I think the UK is probably going to see it worse and faster, probably same with Canada, because the US is relatively unique in that, you know, we have all these 30 year mortgages, where most other countries, mortgages reset every five years. So pretty much every year, you’re getting a resetting of the market. So anyways, that’s we could talk about this forever. But important thing is, there’s just some really big indicators there where, you know, there are a lot of people out there still saying, I don’t think we’re really going to have a housing market correction. Look, the data is showing that it actually is really beginning to start. And when you have prices at record levels of unaffordability. You can’t be surprised if you know, buyers just start showing up to continue to pay the current prices.
Lance Roberts 1:11:06
Well, and again, you know, just just you got to be cautious with that, again, it is about location. And there’s also this other, there’s also another anomaly that’s kind of going on also, which is there’s not a lot of inventory in existing homes. And the reason is, is that because mortgage rates are so high, why would I sell my house at you know, a 3% mortgage to go buy a new house at a 7% mortgage? Right. So this is keeping a lot of potential sellers out of the market, which for the few sellers that are in the market on existing homes, they’re able to ask for higher prices, because there’s there’s just not enough inventory for that. So there is a supply demand imbalance on the existing home side.
Adam Taggart 1:11:45
Absolutely. And that is kind of unique right now, where the Fed, I talked about this a depth that Peter book fire, like the Fed has basically marooned a huge swath of American homeowners, right? Where even if even if they’re realizing that, hey, my home price has gone down? Well, I’m I’m not going to sell because I’ve got this cheap mortgage. And even if I move and get a lower priced house, given the mortgage rates, it’s still a lot more expensive than when I’m paying for right now. Right?
Lance Roberts 1:12:10
Yeah, downsizing isn’t an option right now.
Adam Taggart 1:12:13
Well, but what’s so interesting about this is, is you know, we there is always going to be some organic transactions that have to happen, right? You know, people get old, they die, they have to make we’ve talked about this, on the average, many times. So that will be the price discovery, right? It just may take longer this time around. But if we get into like a real recession, like let’s say there is a hard landing, right? What’s Also new this time round is you have a ton of houses that are owned out there by both institutions. But also people that have you know, been buying multiple properties to Airbnb him out, or just boomers that have been diversifying their retirement portfolio into, you know, investment property and whatnot. And you don’t live in that. So when times are tight, well, that’s the first thing you sell, right? So there is a potential inflection point here where it’s resist, resist, resist, and then all of a sudden, you start seeing tons of new inventory go on, right. So don’t know for sure if that’s going to happen, but it’s certainly a potential right. So like I said, we could talk about housing all day long. The only other thing I want to mention here on the commercial side is
Lance Roberts 1:13:21
merciless. Commercials are definitely different story,
Adam Taggart 1:13:26
different story, but this is just just to make the point of how like, price resets big ones can happen. And they are starting to you know, I met up in the San Francisco Bay area. We’ve had a couple of hotels here that have basically been jingle mailed back to the banks, right. Where Hilton, you know, basically what they’ve been CSO. So Hilton Hotel handed, I think two hotel properties back to their lenders, just in the past couple of weeks. And then two office buildings have sold recently, one that was owned by Wells Fargo when that was owned by Union Bank, they were sold for 70 to 75% below their last purchase price. No, I
Lance Roberts 1:14:12
told you before I do a lot of distressed investing and do hard money lending and those type of things. And one of the guys I work with just we were doing a deal right now on a building that had about $60 million in debt to a couple of big major banks that just bought the property for 28 million so you know there’s an there’s gonna be a conversion into you know, out of office space into kind of little details eventual, yeah, residential apartments and you know, retail stuff downstairs. It’s gonna be really neat opportunity. return potential is fantastic, but do that point. There’s a lot of that commercial real estate that is hitting the market at very, very distressed prices. There’s some really great opportunities in that space. If you can find
Adam Taggart 1:15:00
Yeah, and so look, and maybe we’ll do a show at some point on commercial real estate. I mean, most of our viewers are retail folks who aren’t going to go out and buy, you know, office building for $28 million, and then renovate it. But they might want to participate in the syndicate for that if there’s someone who’s doing that, but but the point is, is this may be giving us some sort of view into the future. I’m not saying that home prices are going to correct 70 to 75%. But but you may still see some pretty big price declines from here and be able to get some pretty phenomenal value if the market corrects. And of course, there’s some of the reasons we mentioned that may buffer that, but but we’ll see, but the trajectory is still more than on the correction side of things. Okay, moving on to the next topic, which is you have talked many different times over the past couple years about, you know, the 20 plus percent of the US corporate fleet, that’s a zombie company. And we have scratched our heads collectively that a lot of these companies were were having trouble, you know, surviving on their debt payments back when, you know, Fed funds rate was near zero, and now it’s above five, right? Where like, how are these guys still staying alive, right. And I think as you’ve said that the name of the game for a lot of these guys as well, the ones that that did capital raises, they’re going to be okay, until they have to roll that debt over. And that might not be for another year, or two or three, right. But we are now beginning to see some signs of some dying off here. bankruptcy filings so far in 2023, are the highest they’ve been since 2010. Right? So we’re beginning to really see some weakness here,
Lance Roberts 1:16:33
ya know, and that debt wall, for a lot of these smaller mid cap companies is in 2024. So we’re gonna see a bunch of refinancing needs to happen next year, that’s potentially where this is really gonna start to show up. And if interest rates are still where they’re sitting now, that’s gonna be problematic.
Adam Taggart 1:16:51
Yeah, 2024 is not that far away. I mean, I know it still sounds like that. But it’s really only half a year. And it’ll be here before you know it. All right. And then, oh, I talked about the the hotels defaulting on their debt. So yeah, so you know, that’s, that’s examples of, you know, people are beginning to just say, Screw it, I can’t deal with this anymore. Take it right, I’ll take the hit. Alright, so going on to the next topic here. So we’ve talked a lot about the boomer generation, you know, on this channel, and the fact that it’s, it’s got its challenges in preparing for retirement, we’ve talked about the millennial and Gen Z’s generations about how they’re, you know, they’re getting started, kind of behind the eight ball, you know, they got a lot of things that are that are making it more challenging for them. As usual, we’ve kind of ignored Generation X, because that’s just the lot in life from Generation X to get ignored. And I saw some stats that were interesting, and we got a lot of Gen X viewers here. Gen X of all the generations, Gen X is the one that is most anxious about not being able to make it or not being able to retire on time or retire at all. And they’ve got good reason for that. So just over half of Generation X have little to nothing socked away for retirement. So obviously, this is very good, because we’re getting near retirement age now. Right? If you’re Gen X, you were born between 1965 and 1980. In a big, big reason why they’re so concerned, besides not having the funds. So just looking at their bank accounts, is they are stuck in that sandwich generation, right, they’re looking at the money going out of the door, caring for aging parents and caring for their kids. And as we talked about, you know, they’ve, they feel when push comes to shove, I can’t say no to my parents, I got to take care of them. And of course, my kids, I got to help them out. And they are sacrificing their retirement planning for getting their kids started or for you know, helping their aging parents sunset. And look, everybody has to make their own individual calculus, you know, on this, but as you and I have talked about Lance, you have to, to a certain extent, draw some lines about what you’re willing to do. Because if you just completely altruistically, just spend all exhaust all your savings, you know, helping everybody else, you get to a point in life where you become a force dependent on those that you love. And for a lot of people that’s that’s really, once they hit that stage, they realize that that’s really not a good place. I shouldn’t have done this, right. So you have to help clients deal with this, you know, all the time.
Lance Roberts 1:19:44
And it’s terrible conversations, by the way, because nobody wants to do it. I mean, you know, the hardest conversations to tell somebody they can’t spend money on something. Right? You know, they have a belief that Oh, I have to help my kids with college or I’ve got to help my kid with their down payment. On the house because they can’t afford it.
Adam Taggart 1:20:03
And sorry to clarify, but it’s not, the harder part is not not that they can’t spend money on something, it’s that they can’t spend money on somebody that they love. Right?
Lance Roberts 1:20:12
That’s right. And we and we have, we’ve had a whole generation telling us that we have to do these things, you know, it is your moral responsibility to pay for your kids college, it is your moral responsibility to, you know, do whatever you buy your kid a car, whatever it is, you know, we just this, this has been just kind of ingrained in, you know, kind of society over the last, you know, 2030 years. And so it’s very tough conversations, when you sit down with somebody say, hey, you know, if you do this, it’s fine. Right? I just had this conversation just yesterday, you know, you know, you know, guys talking, I was like, Well, I’m upset with the returns on my portfolio, I’m like, why? He says, well, because my portfolio keeps going down in value I go, that has nothing to do with the returns in your portfolios, because you’re taking so much money out of your portfolio, the portfolio can’t keep up, right? And, and, and he’s like, What do you mean, I’m just taking out the money that I need to live on and to take care of my kids and do whatever I’m like, Yeah, that’s more than your portfolio is able to generate in returns, I mean, your portfolio would have to generate 50% a year to keep up with what you’re taking out. And, you know, those, those, that’s a real problematic, you know, situation that we’ve gotten ourselves into, is we have this, this moral belief on one side that we have to do certain things. And then on the other side, you know, there’s you the choices that you making are going to put you in a really bad position down the road. And you just have to make the decision between what you’re going to do is, and again, to your point, do I want to be a burden on my kids or not? That’s a question you need to ask yourself.
Adam Taggart 1:21:45
Yeah, so I’m living this in real time right now. Right. So in two weeks, going down to my daughter’s graduation from college, both of my parents right now are in the hospital. So like, they just live in the sandwich experience right now. So I totally understand, you know, the pressures that people are going under, I just want to end this conversation with this chart here. So I mentioned that over half of Gen Z has little to nothing saved for retirement, right. But two thirds of them have no retirement strategy, even though the oldest Gen Z was about a decade away from retirement age at this point in time, right. So if you are a Gen Z er, and you are one of those 67%, that does not have a retirement plan in place, like you got to go talk to a professional financial advisor like today, that’s going to be like your number one thing on your list today, go talk to an advisor and just say, Look, you know, help me out, help me figure out what I need to do here, I’ve got some of these really tough challenges I’m wrestling with about where to send money, you know, whatever helped me come up with a plan here, because it comes to retirement planning as you and I’ve said many times, Lance, if you plan to fit if you fail to plan, you plan to fail.
Lance Roberts 1:23:00
And look, if I make you a proper financial plan, one that takes into two accounts, variable rates of return, takes into account bear markets, not you know, if you do a financial plan, they say, Well, if you get 6% A year, you’re gonna be fine. Throw that out, it’s not worth the paper it’s written on, you’ve got to account for things that actually happen in the world, right? You gotta have you account for those what ifs. And you know, and once you start doing that, it’s a very sobering experience between what you’ve got now and what you realistically have to have in the bank to retire on. It’s not what you think it is, it’s worse.
Adam Taggart 1:23:33
Yeah, in general, it always is a lot worse, which is why most people don’t even want to start this, right, because they kind of have a sense of that. It’s like, I don’t want to look in the mirror and see how bad it is. But ya have to do that to be able to get beyond that point of of insufficiency to start working towards a place where it will be sufficient, right. And luckily, I won’t get into this, but but one of my parents that I’ve mentioned, I think several times in this channel, you know, did not do that. And the collateral damage of that just doesn’t impact that individual, it impacts the family oftentimes, at a much greater magnitude with much greater destructive force than the person ever would have, would have wanted to. But, you know, once you get to the end of the road, you can’t go back in time and redo things. So anyways, just plan. Alright, so I want to end with with a little bit of a rant, and then with a nice positive element here, and I think we got time to do both of them. Alright. So I sent a tweet out, that really hit a nerve with folks. And as it did, I was thinking God, this would definitely hit one for Lance. So I think we’re finally beginning to see a little bit of backlash against the explosion of what’s being called tipping culture. Right where, you know, since the pandemic, there’s been this explosion of new situations where we’re being asked to tip what or tipping was never a thing. You know, before the pandemic, of course, we were doing it during the pandemic to kind of help establishments and their staff kind of make it through a tough time. But now that we’re through all that, it’s kind of like the airlines were like they they, they add a fee on because they say, oh, you know, oil prices are really high right now we need this to just stay afloat. It’s a short time emergency fee, and then oil prices crater, and the fee never goes away. It’s just a permanent thing going on, right? So as an example of how extreme so I basically said, Does anyone else getting tired of being you know, asked to tip 18 to 20 something percent for things that never required tipping before and bam, a huge explosion on Twitter of people, largely saying, Yeah, it’s really gotten out of control, I’m done with it. As an example, I shared my $34 BLT that I bought the other week. And I’ll try to see if I can put the photos up here for it. But it is a very expensive sandwich to begin with. And you and I have talked about how you know, food inflation has been crazy. And as food prices are starting to come down, in certain instances, the food prices that the prepared food prices aren’t right. And these are the airlines with the new fees. So anyway, it’s it’s outrageous. This place sells a BLT sandwich. For from remembering here correctly. 26 bucks, right. Better be BLT, then you add? Well, I will tell you, in its defense, if a sandwich were worth this much money, this would be the sandwich. It’s an amazing sandwich. If folks want, maybe I’ll take a hit to the wallet. And I’ll eat one at the end of our next, our next weekly market recap. So folks can actually see what they’re different.
Lance Roberts 1:26:41
Yeah, I think I think if you’re gonna do this, you should buy every one for everybody viewing and we can all share it together,
Adam Taggart 1:26:47
I don’t think, Well, we did increase the debt by a third of a trillion dollars. So if I can tap into that, and then probably, but anyways, it’s 26 bucks, you know, menu price, then it’s 2810 or something like that, when California puts on its sales tax. And then at the kiosk, they flip it around, you know, and say, oh, you know, do you it’s got the do you want to tip 18% or 24%? Right. So at 18% tip there, you’re at 34 bucks. For the BLT, if you want to be more generous than that you’re paying 36 or more for it. Right. So you know, of course, I think any sane person would say, I don’t care if it’s wrapped in gold, you know, I’m not, I’m not paying near $40 for a sandwich going forward. But that’s how crazy it’s becoming the fact that like, you can charge somebody 28 bucks for a sandwich, that’s, you know, this is this is a sandwich shop. I mean, it’s not a sit down experience, you’re not getting wasted on there’s not all the bells and whistles that you use to, you know, justify a tip. And then just to turn that thing around and say, oh, yeah, can I make this a fifth more expensive for you? It’s hard not to feel like really kind of insulted by that. And again, I know the business is trying to hang on, I know, all of its input costs have gone up. I know the waitstaff is, you know, probably just barely scraping by. But my point is, is like, it’s getting to the point where, of course, this was an extreme example, but everybody else has their own stories, where the consumer is just going to start changing their behavior, they’re gonna substitute. And I do think that there could be a real, like, wipe out a lot of these small businesses. Because people just say, I don’t want to get emotionally blackmailed, to pay a ridiculous price for something that I never tipped for anyways. So just screw it, you know, I’m just going to start making it home or I’m gonna, I’m gonna change my behavior to go shop at a few places that aren’t demanding, you know, this type of tipping thing, and we could definitely see potentially a really big injury on a lot of, you know, otherwise deserving Mom and Pop establishments that we’d love to keep in our communities. No, I
Lance Roberts 1:28:53
agree. You know, it’s in this and they do it, you know, it kind of almost through trickery, which is, you know, they do they, you know, they have a little kiosk now, and they spin it around and there’s your tipping amounts, and there’s not a zero option there is there is actually a button at the bottom and small and before it Yeah, it says no tip, and you can hit that button but you feel guilty, right? I mean, it’s like,
Adam Taggart 1:29:17
you feel guilty and even even more for for food. Like, definitely I’m of the mindset that they shouldn’t ask you for a tip for food until it’s been delivered. Right? And you’ve consumed it because here you’re like, held hostage, like, alright, if I under tip hears this dude spitting in my sandwich as he’s making it, right.
Lance Roberts 1:29:33
Exactly. Yeah, no, that’s that’s, you know, like I said, it’s, I don’t like that either. You know, simply, you know, a guy I’m a good tipper. Right? So if we go out to a restaurant, and we get good service, and, you know, the food’s well prepared, and the way the waitstaff is, you know, doing their job and they’re really kind of on top of it, you know, I’ll tip 2025 30% You know, depending on you know, kind of what’s going on, but you know, when I’m buying it cup of coffee while I’m walking up to a counter, and they’re spinning it around going, Hey, do you have an 18%? Tip on a cup of coffee? I’m like, No.
Adam Taggart 1:30:07
Or a drive thru or pick up food. Yeah. All right, I thought you were gonna get a lot more ranty on that, but
Lance Roberts 1:30:16
I agree. No, no, I look, I am all my kids are all of all waited tables, I waited tables, I understand the plight of that job. And again, there’s a lot of people that, you know, one of the, you know, my kids would come home from work, you know, they’ve worked, you know, an eight or 10 hour shift at a restaurant, right? They come home, and they’d say, Well, I made this much in tips. But you know, you know, I waited on this one table, it was 12 people, and they didn’t tip at all right. And, you know, and just didn’t that’s very upsetting for them, because they get two bucks an hour plus, there’s absolutely yeah, and they have to, and now, of course, a lot of it is is they have to split their tips with the cooks and everybody else, so they don’t actually get the entire tip. You know, so I’m very sensitive to the need to tip properly because of my experience that industry and my kids experience in industry. And that’s why I tip well, when I’m serviced well, and that and I’m completely fine with that. But I do have a problem when somebody just hands me a cup of coffee in the morning, you know, an extra, an extra fifth of you know, the value of that cup of coffee just for handing me a cup of coffee, what you know, you didn’t really go that much effort. Right? I get it, but it does seem a bit excessive.
Adam Taggart 1:31:35
Oh, yeah. Yeah. And that that is the, you know, that the injury of the injustice that that Twitter, you know, thing really uncovered there, it was the nonservice, you know, situation tipping and, and it does sort of look, it smacks in many ways of like the, hey, if I can get away with it, let’s try to get away with it. And again, you know, these are, in most cases, smaller establishments, where, you know, they’re not rolling in the dough, probably, and they’re just trying to do whatever they can, but you know, it. I think it breaks the social fairness element that people are understandably justified and feeling. Kind of my bigger point, like I said, is, is I think it’s maybe kind of like a short term gain that actually may result in a long term, you know, outcome that nobody wants, right? It’s going to be a loss of business for these guys, that they don’t want to eventually maybe go into business because of it. And we don’t want these places to go into business either. To be honest, I don’t really know what the solution is here. Because I will tell you like living where I live, once you get to the point where a frickin BLT costs 28 bucks pre tax pre tip, you just don’t go anywhere. It’s just there’s, there’s nothing they could do to make that worth that much money. Right?
Lance Roberts 1:32:47
Well, look, I mean, this is, but this is the cost and consequence of raising minimum wages to exactly bucks an hour. You know, that’s all got to get passed through
Adam Taggart 1:32:56
right and of creation, that of inflation that the central banks and the fiscal policymakers have done right. This is it and it’s probably and this is sort of maybe where I should I should have positioned it as is. I fear we’re going to end this whole process with a lot more small businesses gone a lot of more, you know, jobs gone, local jobs gone, and fewer big chains. Yep. Right, that step in to fill the void.
Lance Roberts 1:33:22
Well, and then the other side of this too is is that once it’s good, some of these prices get embedded. This is this the sticky part of inflation, you know, inflation may go down, but that BLT will still cost you 24 bucks
Adam Taggart 1:33:35
yeah, yeah. And that I mean, that’s that’s why you have inflation so pernicious, right is it rarely do you get the dial the clock back to previous prices? And I don’t know i don’t know i All I can say is is that like my images changed years ago for me but you know, basically my dining out Yeah, once in a blue moon, you know, my wife and I will go you know, have a nice date somewhere. But I pretty much just go to the hotbar at the local grocery store where I can still buy you know, by weight. And there’s no tipping or anything like that involved it there’s no packaging involved. It’s all fresh. It is it is pound for pound the best deal in town. So like all the sandwich shops around here hate me because I just don’t go to him anymore.
Lance Roberts 1:34:16
Yeah, no, I absolutely agree with you.
Adam Taggart 1:34:18
Okay, all right. Well, ending on hopefully a nice positive note. There are two things that that I saw this week that again, I thought of you that we talked about her briefly. One is video, there was a video clip from the French Open where one of the you know, top players guy named Nicholas moot. He lost to Argentina’s Leonardo Mayer lost a match you really wanted to win, you can tell and he actually got quite teary at the end and he’s sort of sitting right if they shook hands he sits down he’s just kind of processing it. He’s he’s kind of misty eyed camera zoomed in on him. And then his his, probably like eight year old son runs out across the court and just you know, hugs his dad and you know, can’t hear what they’re saying. But of course, his son is comforting his hero, right? And, and the guy realizes that his son’s there and Composes Himself, He gets up, he grabs his son by the hand, they walk out the crowds, cheering and it was waving everybody. And it’s so interesting, because it’s a great touching moment. But you see the competitor who won this guy, Mayor, and he’s watching this, and you can see him kind of choking up. And you can kind of see his brain saying, like, wait a minute, I just won this game. But like, I think that guy’s the real winner here. Right? Yeah, it was just like a great kind of, you know, parent moment, right? Like, hey, you know, I had one of my my lowest moments ever. And then my kid basically just reminded me of what really matters in life. Right? Maybe think a lot about our conversation last week about Nicholas Winton, and the things that really matter?
Lance Roberts 1:35:56
Yeah, it is. And I think this is one thing that, you know, the current generation is making a mistake on and again, you know, there’s there was an interesting article that was written just recently talking about the impact to the current generation, and particularly not in some of the millennial generation, but really, the kind of this Gen Z is this generation that we’re in now, you know, live, you know, easy access to pornography, you know, easy access to dating apps. And if you take a look at marital statistics, they’re declining, if you take a look at, you know, people wanting to have children that’s declining, you know, rather rapidly got the lowest birth rate in history. There’s, there’s a lot of societal implications for that, you know, if you want strong, you know, there’s an old saying that if you want a stronger economy, you need to have children. And there’s what that’s what creates your stronger economy. And we’re certainly working against that trend right now. But the one thing that I think is going to show up is, you know, the greatest thing in life, you know, when I was 38, I did not want kids, I was like, I was building businesses, and I was participating in capitalism. And last thing I wanted to do at that point was to have kids and, you know, a couple years later, I have my son, and I would never regret that for a moment. And then my daughter, and then I got married and got two more kids. And, you know, the kids, the kids are now everything that I live in work for. And it completely changes your focus from being very selfish, in terms of, you know, what you’re trying to do and achieve in life to what’s really important. And I think this is going to be one of the things that we’re going to look back on at this current generation and say, you know, all these dating apps where, you know, no longer does somebody need to be involved in relationship. You know, if you throw up a red flag, I’ve got 15 other people that have liked me on Tinder or whatever, and I can just go to the next person. And I think we’re gonna see this, this, you know, this, this void of having children and this idea of this kind of more of a selfish culture, really have a lash back at some point down the road, where there’s a deep regret for not having gone through having children and experiencing what that can actually mean for you. Because some of the greatest moments in my life, I’m like, I can’t talk for everybody. And I’m certainly not trying to, but all I can tell you is that I’ve done a lot of fantastic things in my life, I spent a big chunk of my early years traveling all around the world, I’ve had fantastic experiences, I’ve done things that a lot of people have never done. I’ve had just a tremendous set of opportunities given to me, by people, I’ve met people, I’ve known things I’ve done, events, I’ve been sports I’ve been in. But none of those compare to the experiences I’ve had, you know, being with my children and going on vacations with my children and seeing them, you know, learn and develop. And, you know, even the day, I’ll tell you a funny story. My son’s in college. And so one of the one of the ways that we communicate is I play video games with EVE Online at college on the weekends. And so we’ll get online and play video game together, and talk and catch up and communicate because that’s what he enjoys. So it allows us to participate in something together. And it’s the best time we have the best conversations we talk about all the things that are going on in college. And you know, again, I would not able to be able to have that experience that or not have kids.
Adam Taggart 1:39:20
Yeah, yeah. Really well said and look, we’re biased because we’re fathers and we’ve,
Lance Roberts 1:39:27
you don’t know, it’s not that you’re biased. If you don’t have kids, you can’t understand it. Right, this again, you know, it’s when I was when I was single and didn’t have kids, you know, you go to a restaurant and some some parents, their their kids are screaming and throwing a fit. You’re like, oh my god, they just shut right. I can’t imagine having kids you know, it’s just God’s terrible, it’s got to be horrible. And then once you have kids, you understand, right? And you just you cannot understand what it is and look and especially when it comes to women and having children right there their perspective of children is something men will never understand. Because you didn’t grow that thing, right. So that’s a totally different view of children. But we as men, you know, we can’t understand that until you actually walk in those shoes. And again, it’s just, you know, this is, you know, a sad commentary, you know, when you talk about, you know, fatherless homes, and the the problem that we have with a lot of our society today that, you know, children are being raised and one parent families and these type of things, and this is causing problems within our culture, because they’re not getting that input of ideas and views and values that they should be getting from two different
Adam Taggart 1:40:43
parents. No, absolutely. And that’s actually kind of a separate issue, which is sort of the decline of the nuclear family in America, we have zero time to really get details of that the other day. And I agree, I agree with everything you said, especially about not knowing until you do become apparent. But look, you know, what I meant to say is like, you know, everybody’s lifestyle choices, their lifestyle choices, I’m not putting any judgment call on it. But to your point of I know you’re sort of talking about hookup culture and whatnot, in the fact that it’s more about me and less about being part of a family. But there is a growing movement called the I don’t know if it’s called the dink moment movement, but it’s di n k, double income, no kids, and it’s kind of like, look, we can have a great life forever, if we just decide not to have kids. And so let’s just have a great life together. And more and more couples are choosing to do that and more power to them if they want to. I’m not not trying to play judgment on that. I just want to underscore your point there about the meaning you get from having kids in your life, and especially for us guys, meaning we didn’t even realize fully we were going to get until we realized that his parents go back to my my comments about, you know, hearing advice from people who have lived past 100, you know, go on Google type in some centenarian advice. And it always comes down to those three things. It’s the quality, the number one is always the quality of your relationships, right, which which are heavily about family, usually not always. The second is purpose in your life. The third is good health, because you’re not going to live to 100 If you’ve got bad health. And so my advice to people who are choosing not to have kids, which is totally fine, is that’s totally fine. But but take into account how important relationships are in your life and say, okay, if I’m not going to have those type of really deep, meaningful relationships with children in my life, who am I going to have them in with so that I don’t, you know, age and find out that oh my gosh, my life’s really unfulfilling, because this, like number one requirement for a good, you know, fulfilling life, I don’t have as much in my life. So, anyway, okay, so I can fit on the topic of family, which actually blends into the last topic I’m gonna mention real quickly, because we’re really running short on time, is, I was sharing with a friend the other day, a band that I discovered on YouTube, and I was thinking about you as a musician, with this Lance, or at least the guy that likes to play the guitar. I discovered them years ago, and they’re a cover band. But what’s so fun about them is it was started by a dad who just a big passionate musician. And he had a daughter who turned out to be a really talented singer. And you can tell that he was instrumental in helping her really teach, learn how to sing well. And so the band’s called foxes and fossils. So it’s his daughter, and a few are her friends who are great singers. And it’s the dad and a few of his friends who are great musicians. And they just do these great covers of all the songs that we love. And they’re the quality of their musicianship. You know, the guys that play is really staggering. I mean, they’re great musicians. And the quality the vocals are amazing. These girls are great singers, the old guys aren’t bad either. And their harmonies are just out of this world. So it’s been so fun to watch them as he started when the girls were like 15 and now they’re in their mid 20s. Right? So there’s like 10 years of videos of them growing along the way and getting old better as a band and musicians. But they keep getting they got more and more discovered as time went on. So now they’ll do like, you know, he’s trained. And you know, the top comment is Cat Stevens saying Guys, I really enjoyed this you nailed it right? Do they do you know Crosby, Stills and Nash song and you’ve got Graham Nash saying, Guys, this is one of the best covers of a song I’ve ever seen. Right? So like, even the music community, like the greats have found these guys in or cheering them on. It’s such a great story, but at the core of it is this dad, who’s just having the time of his life doing what he loves with his daughter. It’s just so fun. Yeah, any parent any musician would just like so anyways, boxes and fossils. I’ll put their URL here to for folks to go check. I don’t have any relationship with these guys. I’m just a fan. If I can play us out here, Lance. I’ll try To play us out with a clip of one of their, you know, showing their great harmonies. I wouldn’t do that Google searches I was gonna say unless YouTube flags the video for for copyright infringement. Yeah. All right, folks, we’ll look, if you’re still here with us, thanks so much for hanging in for yet another week. A reminder, lots of head scratching stuff going on out there, which is why, week after week, we recommend that folks work under the guidance of a good professional financial advisor to navigate your wealth through all of this, but in particular, one that takes into account all the macro risks, issues and opportunities that Lance and I have talked about here, if you have a good one who’s doing that for you. And by doing that, I mean putting together a personalized portfolio plan for you, and then executing it for you while keeping you well informed. If they’re doing that great, you really should stick with them. They’re rare, and they’re worth their weight in gold. If you don’t have one though, or if you’d like a second opinion from wonder does consider scheduling a free consultation with the financial advisors that Wealthion endorses. Perhaps even Lance and his team, they’re at raa. To do that, just go to wealthion.com Fill out the short form there only takes you a couple of seconds doesn’t cost you anything. There’s no commitment to work with these guys. It’s just a public service that they offer. And if you enjoy these weekly market recaps want to see them continuing happening every week from here, please do Lance and I have favor support this channel by hitting the like button, then clicking on the red subscribe button below, as well as that little bell icon right next to it. Lance, I’ll give you the last word here, buddy as we head out,
Lance Roberts 1:46:28
basically, right now just you know kind of keep keep your head on the swivel, you know, we talked for about, you know, being able to be audible in this market. And I think that’s going to be the case for the rest of the summer. Again, I wouldn’t be surprised to see a little bit of a correction in tech, see a bit of rotation into some of the unloved sectors of the market that’s still you know, probable coming up but again, just, you know, be nimble.
Adam Taggart 1:46:50
All right, well said buddy, everybody else. Thanks so much for watching. If YouTube lets us we’ll we’ll play out here with a little clip from foxes and fossils. Otherwise, Have yourselves a great weekend.
Transcribed by https://otter.ai