Portfolio manager Lance Roberts & Wealthion founder Adam Taggart recap the major developments of the week, including:
- Is the top in for the AI/Tech rally?
- Central banks are hiking rates again. How aggressively with the Federal Reserve resume hiking?
- Is inflation due to increase in the next few months?
- Unseasonably hot weather creating hurricane & drought risks
- The latest macro data still screams recession even though the market remains unconvinced
- The trades Lance’s firm made this week
Adam Taggart 0:04
Welcome to Wealthion. I’m Wealthion founder Adam Taggart welcoming you back here at the end of the week for another weekly market recap, featuring my great friend, I’ll upgrade him from good. Lance Roberts, Lance. How you doing, buddy?
Lance Roberts 0:15
I like getting promotions. It’s always a good thing. Adam, how are you?
Adam Taggart 0:18
I’m doing I’m doing okay. Been a bit of a rough week. For those folks that have been tracking. My mother did pass away this past week. It is very sad. There were a lot of elements of her passing that actually were fairly wonderful. If we get a chance to the end. I’ll share a little bit because it might be instructive for us to talk about Lance, a lot of things I’ve learned under duress over this past couple of weeks that may benefit from folks who also have parents who are aging at this point in time. But we’ll get to that in a bit. Let’s get to the current market action. I want to ask markets are down a little bit ending the week than they were at the start of the week? Are we beginning to see some topping here or just the pause that refreshes?
Lance Roberts 1:01
Well, unfortunately, we just don’t know yet. You know, it’s interesting that you know, too, so let’s kind of step back for just a second. Last week we were on the show. We talked about how the market was three standard deviations above moving averages, very overbought, we’re due for a correction. And so we got a bit of that correction this week. We haven’t triggered sell signals yet. So again, right now the bull mark is still very intact, even though the market did pull back a little bit during the week. What was interesting is though is and this is simply a function of momentum and psychology and bullishness is really getting very bullish right now, if you take a look at the American Association of individual investors, you can take a look at the institutional professional managers, all these all and just basically looking at asset allocations of managers and retail investors. It is basically everybody is now back in the equity pool. So they went from extremely bearish in October. And you and I were talking about how we have this extreme bearishness, which from a contrarian standpoint was a bullish indicator for the markets and suggested that markets would improve from that point, which obviously they have. Now we’re back to extremely bullish where everybody is only expecting markets to go up downside risk has been eliminated. Take a look at call options which are now we have the highest level of call options on record. Nobody wants to own goods anymore. And that’s just that that exuberance has now come back into the markets. I thought it was very interesting this week, Jerome Powell had testimony before both the House Banking Committee, House Financial Services Committee and the Senate Banking Committee. And what was interesting is that he went literally out of his way to make sure in state that they are not done hiking rates yet, and that inflation was not coming down as quickly as expected, unemployment was too low, and that more tightening was going to be needed in order to make sure that we don’t get a resurgence of inflation down the road now that that information is not bullish for long duration stocks, and what do I mean by long duration stocks? If I buy a stock where I am dependent upon future earnings to justify the current valuation that requires a lot of time, right, the company has to grow in to those valuations. So that’s a long duration stock that requires stronger economic growth, lower rates of inflation, and and basically low interest rates to help support the debt that goes underneath that growth. None of that is what the Feds talking about yet. Everybody’s still chasing tech stocks. So again, it’s very interesting. The market is completely ignoring what the Fed is saying, in fact, the market that the Fed said we’re gonna hike two more times and the market said, No, I think it’s just once you know, it’s like, you got fed speaker at the Fed speaker coming out, it’s like, we’re gonna hike more in markets, like I don’t believe you. So, you know, nonetheless, the markets around a lot of this momentum, a lot of this is end of the quarter positioning. Don’t forget that next week is the last week of the second quarter. Right after the fourth of July, we’re going to kick off earnings season already. I mean, we just went through earnings season now we’re gonna have it all over again. So millennial earnings season coming back, everybody’s gonna get a trophy because we’ve been cutting estimates again. But this is this this next week, we could see this market kind of travel all over the place. When support surprise me to see a little bit more of a sell off in the markets next week. Because if you just think about a lot of portfolio managers, so you know, pension funds, mutual funds, portfolio managers, anybody that runs any type of balanced allocation, so if they run, you know, 8020, stocks to bonds 6040 7030 3070 Whatever it is, whatever that mix is there now overweight equity because equity has gone up bonds really haven’t gone anywhere. This year, so what that will they will have to do is they will have to sell some equity in order to buy fixed income. So that’s just going to be that rebalancing that’s gonna occur at the end of this quarter. So that may put a little bit of additional pressure on equities going into next week, I don’t know. But that’s one one potential catalyst out there. And but again, there’s just a lot of momentum behind the markets right now, there’s a lot of people that all of a sudden woke up out of the Slumber from last year and go, Oh, crap, I gotta get into the market. And, you know, there was a lot of money sitting there that needed to go into equities. And we’ve seen professional managers just like everybody else chasing stocks. Because when those quarterly reports go out, at the end of next week, they better own and Vidya and Apple and Microsoft and Amazon will make better on those stocks. Even they may buy, they may buy in video on the last day of the month, but it’ll be on that statement when it goes out for the quarter. And then that way, when people read their statements, they go, Oh, look, my mutual fund manager. He’s a genius. He owns Nvidia. You know, he may have just bought it, but it’ll be it’ll be in the quarterly report.
Adam Taggart 6:05
Okay. All right. mentioned a couple of interesting things, one of which you were remarking on how the market just as totally ignoring, you know, what the Feds been saying. That’s been the case for the past six months more. Yeah, right. I mean, what’s interesting is the market has always been the one that’s been forced to move its goalposts. But it hasn’t mattered in terms of valuations in the market. Oh, I guess you’re not going to cut in June. But that’s okay. We’re still gonna bring the market higher anyways. Right. So it’ll be interesting to see you know how this game continues from here. We’ll talk about inflation in just a minute here. But real quick, while we’re kind of on the topic of, you know, what’s driving the market right now, still these top stocks, while there is some more breadth now it’s still largely that mega eight. AI is still the big theme. You just published a piece called speculation in AI may face challenges. I’m just wondering if there’s any key elements of that report you want to you want to share here before we move on from the topic?
Lance Roberts 7:09
Yeah, sure. You know it. So first of all, you know, I can’t tell you everything that’s, that’s in that article. Because there’s a video in there. It’s an interview with Roger McNamee, who’s with elevation partners. He is considered one of the geniuses of Silicon Valley in terms of investing in technology. And he has a really great interview, and I snipped some some notes out of that interview and put them in the article. So if you go to the website, real investment advice.com. And click that URL right now it’s the top article on our on our page. But you can watch the interview, I’ve got the link to the CNBC interview for you to watch. It’s a really, really good interview. And I suggest if you’re chasing AI stocks right now, which don’t blame me, if you are, I do suggest you read this. The there’s a couple of things that go on with AI. And again, we talked about before about this relationship between artificial intelligence and the.com bubble. And just before you jump off a cliff, I’m not saying that we’re having another.com, I’m just saying there is a similarity to behaviors and expectations in the markets. Adam will will, will support me on what I’m about to say, because he lived through this when he was going to work for Yahoo back then I’ll always support you, and I understand but to cooperate my story. Um, back in 1999, companies were literally just throwing up webpages and changing their names to you know, you know, Robertson taggart.com, right. They were just sticking.com on the on the end of anything. Because if you did that, immediately, people would run your stock price up because you were getting involved in internet. And here’s the important part about that. It was just believed at the time that the internet was going to change the world as we know it. And it did. It changed everything about our world, how we access information, how we work, how we operate, you know, how we communicate, it changed everything. The internet was this massive invention. The problem though was is it it never generated the revenue that was expected in the earnings and the Ford outlooks for a lot of these companies lives companies were trading at 1020 3040 times price to sales, on expectations that this internet adoption was going to create just this massive revenue boom for these companies. And you know, you had to buy them now. And if you paid 40 times prices sales today, it was okay because earnings were going to catch up sales were going to catch up. The problem was it didn’t happen. And the reason it didn’t happen was because people couldn’t figure out how to monetize the websites. And so yeah, everybody threw up a webpage and And it allowed small businesses to all of a sudden compete with Fortune 500 companies, right, because I have a web page, I can sell stuff nationwide, right? I wasn’t limited to Jackson, Mississippi, I can sell them anywhere over the internet. And it created two problems. One, the revenue never came. And B, it created a massive compression and profitability because all of a sudden, there was massive demand. And there was massive competition for the same products. All of a sudden, there was this was available to everybody. So a guy had a widget to sell, like, I want to sell this coffee cup. Well, there was 900 Other people selling coffee cups just like this. So if I want to sell the coffee cup, I had to cut the price of the coffee cup, which ate into my profit margins. So the problem was, is that the x now that earnings grow, absolutely did things that things improved? Yes, absolutely. Just not enough to justify 1020 3040 times price to sales. That’s what’s happening today is that we have no look it here’s the other thing about this AI has been around for 10 years. If you have an Apple phone, you’ve got Siri, that’s artificial intelligence, right? That’s been there for 10 years, we’ve been doing this for 10 years, the market needed something recently to get out of this malaise from last year. And all of a sudden, everybody’s just latched on to AI because of chat GPT. Well, the problem with chat GPT is it’s free, you don’t pay for it, you use it, but you don’t pay for it. But it cost a tremendous amount of money to build these AI models. So if you want to buy a GPU, it’s $250,000. You know, the other cards run about $190,000 a unit, and it takes multiples of these units. So you’re talking about half a billion dollars to build AI models that are actually going to run so how many cuts? The first question is, is how many companies you’re investing in, but can’t afford that kind of an outlay? And the second thing is, is that you’ve got garbage in information. The problem with chat GBT is is you gotta go back. In fact, check jet chat BT chat, GPT because the information that pulled puts out is just the information that’s calling off the internet from its test database. So if there’s any information, that is false misinformation, etc, in that, then that database of information it’s working from, it’s going to put out a false output. It’s the old statement and math, right, garbage in, garbage out. And then And then finally, the last problem is what I’ve just talked about. If Microsoft as an example, let’s say Microsoft is the only company on the planet that has an artificial intelligence, Bob, it works. Okay, just say that. And it’s doing well and Microsoft’s making money. What do you think’s gonna happen next, right, there’s gonna be 50 other companies that come out and go, Oh, I can compete with that. And I can do exactly the same thing, and I can do it cheaper. So the problem then becomes, so let’s talk and we talked about Nvidia before. And this is kind of the point of the article, competition is going to bring on lower prices, because Nvidia may sell a the NVIDIA may sell the very best GPU in the world, arguably, it is AMD now has a GPU, there will be other companies that come out with GPUs. And they’ll say, You know what, mine’s not quite as good as then video. I’ll admit to that, but it’s cheaper, and it’ll get you to where you want to go. So if I’m a smaller company that builds an AI model, and I can’t afford half a billion dollars of Nvidia units, I’m gonna go buy somebody else cheaper. Well, eventually, in videos, I’m up, start lowering if I want to, if I want to hit those 50% revenue growth that I need to do in order to justify 40 times price to sales, I’ve got to sell more units. That means I have to sell them at a lower cost. And it’s just simply a function that that innovation will breed competition competition, competition will breed and breed lower prices. But again, this is all kind of covered in that article on AI. And they face a lot of challenges. It’s not, you know, I’m not saying don’t buy an artificial intelligence stocks. I’m not saying that at all. There’s an opportunity there. They’re very expensive and very overbought right now, wait for a pullback. But the important thing is, is don’t forget to sell them. Because just like in 1999, there was a bunch of companies that were going gangbusters. And if you sold them along the way and took your money in you made money. There’s companies, JBS uniface, Cisco Systems that have never gotten back to their 2000 peaks. If you bought them back in 2000. You’re still underwater today, 23 years later. And that’s what eventually happened with a lot of these AI stocks. There’ll be a couple of winners. There’s gonna be a lot of losers over the long term. So if you chase that market now, just don’t forget to sell along
Adam Taggart 14:48
the way. All right. Well, well said and folks, you should definitely go read that article at real investment. advice.com making Lance’s shameless plug there for him. I’ve had a lot of great interview He’s recently and I feel bad that I can’t remember which recent interview this this was stated in. But the speaker was talking about how what we’re likely seeing right now, or what we’re seeing right now seems very similar to previous big run ups where there’s been a lot of excessive euphoria, particularly about a tech type of company. They talked about two examples. One was Amazon, back in 98, or 99, it was when Bezos was on the the Man of the Year time cover back before it, they still called it Man of the Year, they hadn’t switched over to Person of the Year yet. And I can’t remember what the price was, it might have been like 100 bucks or share or something like that at the time. But if you sold then you would have made a really nice gain. And then after the.com, bust, Amazon went down to something like, I want to say it’s like $6 a share. It’s like 94% decline. And it did eventually get back to $100 a share and then went way far beyond that. But that process took a decade and a half. Yeah, it took a long, long time, right. Same thing with RCA, which was, you know, a behemoth in the radio space. And then it was getting ready for the advent of TV to come in and change everything, right. And if you bought RCA, I think right before the big 1929 market crash. If you didn’t sell it, you didn’t get back to that price, even though all that technological development did happen. Right. So the promise of the technology in both cases was realized, it just took a lot longer for the underlying intrinsic value of the company, to rise back up to what the exuberant price was when the market first woke up to the promise. Right. So we very well may be saying the same thing here, I feel comfortable making the call that we are in companies like Nvidia, just, just don’t
Lance Roberts 16:59
let me just, you know, I don’t disagree with you look, and Vidya is probably going to have a 50% correction at some point just to, you know, bring earnings back down, and you know, in the some level of of valuation, that makes some sense, I mean, it’ll still be expensive, right? I mean, in video right now could lose 50% of its value, and still be trading at 10 times price to sales. So I mean, even a 50% correction, it’s still easy to start very expensive from traditional measures. But you know, that’s going to potentially happen at some point, there is a difference, though, this time between Amazon of the late 90s. Versus today and video today versus stocks and sound like 90s, these companies actually make money. You know, back in the late 90s, a lot of these companies didn’t have revenue, they didn’t have cash flow, they barely had business models that work. And, you know, we were, we were trading off these companies based on how many eyeballs per page they were getting. And, you know, so there, so I don’t, you know, again, there, you’ll see a lot of similarities. And you’ll see a lot of people putting out articles, and I’ve even I’ve even put out graphs, as well says, hey, look, you know, this, you know, artificial things running just the same way, as we saw back in 1999. But there are some fundamental differences doesn’t mean that you still can’t have a big correction, still doesn’t mean that you can’t have a significant pullback still doesn’t mean you shouldn’t, you know, take profits along the way and protect your capital. But, you know, just, I just want everybody to be careful going, Hey, this is just like 1999 Because it’s not, there are some very fundamental differences this time, you know, from last time, so just just be aware of that.
Adam Taggart 18:36
Okay, I think that’s good. I do think though, we’re still saying the same thing that the risk here is that a sheriff and video could be worth the same amount.
Lance Roberts 18:45
In uncomfortable number of years out in the future. Yeah. Yeah. No argument with that whatsoever.
Adam Taggart 18:50
Okay. All right. Well, look, I on this point I just wanted to put are two interesting things that I saw recently. One is
Lance Roberts 19:03
oh, wait was that interview you’re talking about was that GMB Jim Bianco you had on this week?
Adam Taggart 19:07
Yes, it was Jim Bianco ahead of history. I can’t remember it was Jim telling the story or not very well could have been my apologies to him if it was a great interview with Jim and we’re going to talk about Jim in a second when we talk about inflation. But but just to the sort of the the level of I guess we’ll just say, bullishness that’s in the market. One is is I saw a chart that was basically cheekily asking is the NASDAQ the new crypto because it was charting our tech the new crypto because it was charting the index versus the price of ether. Yeah. And it actually has outperformed the price of ether this year. Right. Yeah. So yeah, it just a warning sign. You know, is that speculation now we can debate on it. But
Lance Roberts 19:53
there is no doubt that we’ve gotten into a very speculative phase of the market just from a sentiment standpoint. As I said earlier, yours, you know, if you take a look at sentiment, it’s just everybody can’t get into the market fast enough. That’s that is simply FOMO that’s going on. So it is very, and this is the interesting thing, right? So we go back and look at 2020. And you know, you have the big crash and march 35% down. And then everybody comes in with $5 trillion worth of liquidity, and you know, just money has to go somewhere, right. And so one of us goes into stocks, and we’re speculating on GameStop, and AMC and memes, you know, Bed Bath and Beyond, right, most shorted stocks, etc. And, you know, we had that fantastic run. And it’s interesting now, because we’re seeing exactly that same type of attitude in terms of investor sentiment, but you don’t have this big liquidity push, right, you don’t have those big capital injections coming in at this point, to drive this, you know, to drive this market substantially higher. And there’s an interesting dynamic that’s coming up. And this is one thing, and I’m gonna say this, and then you can bookmark this for later we’ll see it or not, but you and I talked about student loan payments last week, do we not know? Yeah. Right. So that’s 40. That’s, that’s 40 million. It’s actually 44. But that’s 40 million people at $300 a month, that’s 12 billion a month in revenue. That is about to get sucked out of Amazon and Microsoft, you know, what, have people been using this money for buying computer and
Adam Taggart 21:26
trying to correct you? But it’s 12? It’s 12 billion of income? Yeah, this is this is people’s, you know, after tax money they’re gonna have to spend.
Lance Roberts 21:37
That’s correct. And so this is this is $12 billion less that they were spending at Amazon buying crap they didn’t need buying video games buying, you know, new iPhones, you know, when you here’s the funny thing about this is, when you extract $12 billion a month out of the economy, how is Apple going to sell $3,500? VR cents, right? It’s just, you know, and I’m not saying they won’t, because they will, because people will finance that stuff all day long. You know, debt is good. No, it’s not. But but, you know, that’s the one thing that, you know, when you when you talk, I hate to use the term, it’s different this time, because I’m not saying that. But that is a difference that we have right now. versus what we had back in 2020, when we have this type of speculative push in the markets, is that the liquidity, right, the ability to have cash to invest is getting extracted from the economy. And I don’t think and maybe I’m wrong, markets have a very good ability to price in things, right things that we didn’t think that the markets could price in the price they priced in the banking crisis, they priced in rate hikes, you know, the market right now is trading as basically taken out of the market, the impact of every rate hikes since last year, we’re because we’re trading back to March highs of last year. So all those rate hikes the Fed did the markets already recovered all of that decline? So the market has been amazing at pricing in all these impacts. I don’t think the market is priced in this extraction liquidity that’s coming when the student loan payments restart. And we debated the beta, it’s the end of August, beginning of September, whatever it is, but when those repayments restart, you know, we could very well see a very sharp, rapid decline in retail sales in a month. I mean, you can literally see retail sales drop very quickly. In the month, I’ve got an article coming out on this. It’s actually you know, by the time you hear this interview, it’ll be on our website. But I’ve actually got an article posted on Friday talking about the student loan issues. And sorry, that’s, that’s a complete lie. It’s next Friday, next Friday, I’ll have this article out Friday, I’m going through all the recession indicators. So on our website, we’ll have a new article going through every recession indicator that says we’ve got a recession coming, but why don’t we have a recession? So that’s that’s coming
Adam Taggart 24:00
up as well. All right, good. Well, I can’t read the rate to read that one. We might even touch on some points of that. Just to finish out this this bullishness. A couple of other stats one JP Morgan Report said its clients are the longest they’ve been in the market since 2019. There was a really interesting map that I saw someone posted to Twitter and I’ll see if I can post it here. It basically shows bullish sentiment by bullish and bearish sentiment by Google searches. And it shows the difference from one week to the next. And basically, I don’t know exactly when this week was it’s relatively recently but it’s probably about a week or so in the past maybe a little bit further. But from one week to the next the first week was every state except for one Florida had more bearish searches than they did bullish searches, right. A week later, is the almost exact opposite where 49 states had majority bullish searches, except for one state, I think it was Missouri. That was bearish still. So it just showed how quickly we hit that critical mass of sentiment in the country. And then the last point I just want to make, and I’ll throw it up here is the Barron’s cover saying that we’re now in a new bull market, which is always somehow the kiss of death. Right?
Lance Roberts 25:21
Yeah. Oh, that’s, that’s also that sentiment change on searches? Is that when the market got, you know, had rally 20% from the October lows, immediately, everywhere were headlines on it’s a new bull market. And so not surprising. Everybody went and google eyes like it’s a new bear market. New bull market really? And and, you know, so yeah, no surprise, you see searches kind of searched through the roof.
Adam Taggart 25:46
Yeah. And it shows how, you know, I mean, investors moving hurts right now. It’s the classic men, men lose their minds in herds and only regain them one at a time. Right. So all right. Well, look, I since we’re talking about sort of the, the bullish narrative now in stocks. You know, I’m sure we’ll talk a little bit further about things that might get in the way of that, but but forgetting recession and stuff like that for a moment, or breakages in the system or whatever. I just want to talk for a second about the investment environment we find ourselves in now where there is a really reasonable alternative to owning equities at this point, right? Where you have, you’ve got bonds, and you’ve got really safe bonds, like treasuries, that I believe their yield now now beats the yield on corporate equities. And so, you know, from a risk return standpoint, get a much better trade off being in bonds. And if you’re at all concerned about valuations now getting rich, you know, it makes a lot of sense to say, Okay, let me take some off the table on the stock side and just slip it over here into the safe bond side, like, how
Lance Roberts 27:06
bargaining, it makes perfect sense, but doesn’t cooperate?
Adam Taggart 27:10
Yeah. Well, I’m just curious. I mean, do you see potential here for bonds to start just vacuuming capital out of the, the equity markets? No. Okay. So
Lance Roberts 27:21
Well, first of all, so So you know, what, when I say this, when I say no, no, it’s not going to happen yet. Right? It will not yet. You know, the, so let’s back up to what you just said. So first of all, I can pick up 3.7% on a 10 year Treasury right now, I can pick up near 5% on the two year treasury. So why wouldn’t I want to do that. And we talked about that before, which is there’s nothing wrong with that. And if I buy a 10 year Treasury at 3.7%. Now this is this is the logical side, this is you and me talking, okay. So logically, I can buy a 3.7% yield, lock that in for the next 10 years, and I’ve got roughly 50 to 60% Upside when rates turn back to zero. So I’m going to effectively make more money owning bonds right now than owning stocks. So I’m not going to make that this year. Right, I’m going to make that over the course of the next few years, I’m going to outperform stocks by owning bonds. So logically, the best investment I can make right now is buying some treasuries and I can buy look, I can buy, you know, triple B and better rated corporate bonds and pick up six 7%. If I want to step down the risk curve a little bit, get into some double B pluses. Gotta be real careful what you own. But there are some double B plus bonds sitting out there, they’re yielding seven 8%. So there there there is a real alternative. And again, I buy that if I can buy bonds, corporate bonds. In fact, there’s a really good interview, if you catch it, Jeff, Jeff gunlock, did an interview on CNBC not too long ago, talking about this very specific thing. But if I can buy corporate bonds that are trading at a 50, or you know, 3040 50% discount to face value, in other words, these bonds are trading at 50 6070 cents on the dollar, because interest rates have gone up, then most of the risk has already been wrung out of these corporate bonds, assuming you’re buying good companies, right? I’m not talking about buying a company is eventually going to go bankrupt. You can look at the you can look at the balance sheet, determine its interest coverage ratio and those types of things. So if I buy a good fundamentally sound company, I can buy companies that are trading at a deep discount have gotten most of the risk run out of them, I’m getting a 789 percent yield to own them and then that bond is going to mature at face value. So I’m gonna get all that capital appreciation is that bond moves back up to par. Now, I get a guarantee I get a function of return of capital plus I get the yield while I’m waiting. Why would I want to do that? Because it’s not making me 10% Right now, or 164%. Since the beginning of the year, why the hell would I want to own bonds when I can own Nvidia and make 164% Since since January, are you stupid, that’s the that’s the, that’s the emotional trade off that we have going on. I look, I’ve seen this time after time after time, really example 2000 peak of the market in 2000, dividend CDs and banks, FDIC insured CDs paid 8% would not get anybody to buy them in December of 2019 99. And January of 2000. Ish, right? I was trying to get clients to buy these 8% CDs, because I was worried about the financial market going forward, and nobody wanted them because everybody assumed the market is gonna keep going up 15% A year as they just seen it do for the last five years. So nobody wanted 8% CDs. By the time we 1000 Everybody wanted but those yields didn’t exist anymore, because he looks better, we’re gone. So this, we have bear as investors, we have a very short focus on what the markets doing today. We don’t look at what’s going to market is going to do more. And this is why I’ve told you before you have to play chess when you’re making your investments. It’s not checkers, and see like a big mistake investors are making right now is they’re buying six month treasuries, one year treasuries, two year treasuries. To get that 5% yield, I go, I’m smart, because I’m getting all this yield, what are you going to do when that matures? Because at some point, if Adams, right, and we have a recession, or we just have an economic slowdown and significance, or if you do have something break, the Fed is going to drop rates to zero, when that bond matures, your alternative is going to be zero on yield. Now, what are you going to do? Right, you now you’ve, you’ve locked yourself into a very low rate of return by buying short duration bonds, and not looking out that curve, and giving yourself time to alternate because when that rate drops back to zero, you’re gonna have to figure out where you’re gonna put capital next. And that’s going to be that’s going to be the problem when you get outside of this very short window that you’re looking at. And this is the problem that all investors make. I’m not looking down the road two years, or three years or four years. I just know right now, if I can buy Amazon, I’m making 20% This year, so why don’t why don’t box that’s just stupid to buy bonds when equities are returning, you know, 5% a day tax. Right? So
Adam Taggart 32:13
all right, um, alright, I get it. And, you know, human nature way better than I when it comes to investing. And doing this for a long time. And I’m not, I’m not shocked that the, you know, the average investors, ability to get be dazzled and in be charmed by, you know, the latest bad. I’m just curious, though, from a, from an institutional standpoint, you would think those guys would be smarter. They not? They aren’t most of the time, right?
Lance Roberts 32:39
They can’t be it’s career risk. Right? It look, if I’m if I’m a look, I have the same problem as a portfolio manager. At the end of this year, you’re going to ask me a question next year’s like, how were your returns last year? Right? And so I better be able to say, Yeah, we posted a, you know, a, you know, we either beat our benchmark or match our benchmark, whatever it was next year, because we’re all focused on those your returns. That’s career risk. And every professional manager faces this. There’s, there’s not anybody out there with the exception of people like Warren Buffett and other big institutional investors that don’t have the the the capital constraints that most mutual fund managers have most, you know, portfolio managers have excetera, which is generating this annualized rate of return every year. We have these articles come out, and they say, Well, you know, the latest s&p 500 CV, you know, report says that 80% of fund managers underperform their benchmark. Well, of course they did they have to pay taxes, they have to pay fees, they have to, you know, they have other expenses that an index doesn’t have. But it’s a it’s it’s, it’s irrelevant, right? Who cares? If you know, a particular fund underperform from one year to the next I want to know what it did over the last 10 years. Right? What did it do over the last 15 years there’s funds out there like Fidelity Magellan like dodge and Cox and others that have just decimated the stock market by leaps and bounds if you’ve just bought them held them let the manager do their job Buffett did another right and those are you know that’s how we should be analyzing things but what we’re inundated by the media every day markets up today markets down today markets up today markets down today. How’d you do last year if you didn’t beat the market last year Whoa, boy, you better change managers and go get another manager that’s all Wall Street saying hey, put money in motion because that’s how I make feeds you’ve got to sell everything you own to buy everything new I make money off of that. So this is all about product marketing and it’s all about selling you selling you a narrative selling you a product you’ve got to get away from that and again, you know, I tell people this all times like man, turn off the media. Stop looking at your portfolio every day. It doesn’t matter if interested. You know, I get emails from the same people every day. Oh, interest rates are up today. Does that mean this right interesting today Does it mean this? No, it doesn’t mean any damn thing. It just means that the markets are repricing every day for what’s happening with yields. It has no direction, impact or influence over what’s happening long term, which is all about economics, inflation, and interest rates. That’s it. That’s all that matters long term. And so, you know, we get so wrapped up in the day to day thing that we get emotionally stressed. And then we start making emotional decisions that are the worst possible decisions we can make chasing AI, artificial intelligence now with no exit strategy, you know, trying to be all in money markets or trying to be all in bonds, because I’m worried about equity risk. Now, equity risks are taken off. Now I’m questioning what I just did. You know, that’s markets. This is why having a disciplined approach having an allocation structure and not worrying about what’s happening today. But looking down that road, look down the road, three to five years, where am I going to be in three to five years? How’s my strategy going to work? You will be a lot better investor over time, and you’ll make a lot more money.
Adam Taggart 35:56
All right. All right. Well, very well said again, you know, folks, this is why we have an experienced financial capital manager on this channel so that you can get the real skinny from them. All right, so let me just pull this read for a moment here, too. So you know, bonds may become even more attractive coming down the road, because central banks are still hiking. Right. So we got our skip from Powell. But it’s definitely a skip. It’s not a pause. He’s been saying, Look, we’re gonna still hike from here. The vast majority of the Fed board agreed that we would do the skip, but then we’re going to hike probably at least two more times. We’ve had several central banks. Now re hike. Right, so we have the Bank of England, we have the Bank of Norway, and they both hiked 50 basis points. I think both of those were surprises. And then the Swiss National Bank, just take 25 basis points this morning. So this very well may be a preview of what’s to come. And this is where I want to get into Jim Bianco is world so of course they’re doing this because of inflation. Right?
Lance Roberts 37:06
Real quick, just, I need to stop you right here. So we have a good baseline where we’re going off on great, it’s gonna be important. What the Fed is doing is to control inflation. That’s all on the short end of the curve. We talked about this before two years, unless that’s what the Fed controls. Yep. out there on the end of the curve, 10 years, 20 years, 30 years. That’s all economic growth and where real inflation is, right? And economic growth. So you know, when you start talking about long term over the next 10 years, where’s inflation going to be 10 years from now? That’s a dip the Fed does not control that in, that’s all economics on the short end is the Fed interest rates? So yeah, you’re right. Absolutely. These banks are hiking interest rates, the Fed is going to hike interest rates, again, the market right now does not believe the Fed. I think they’re stupid, don’t believe the fed
Adam Taggart 37:53
the Fed? Right? Well, so one of the things that might force the market to wake up here is a conversation I had with gym the other day, which is he was talking about the base base effects in terms of how CPI is calculated you and I’ve talked about this many times. And he is willing to go out and say inflation is gonna go up this summer. Because the base effect comparisons become a lot less generous. And he was saying that, you know, a year ago, June, the monthly CPI for that month was somewhere like a percent and a half, it’s much lower 1.2 1.2 Okay, 1.2%, much lower this time around. So CPI will come down in June, but then it was 0.0%. In July, right? Highly, highly unlikely we’re gonna have monthly CPI that low here. So CPI is probably going to tick up in July and he said there’s a few others like point ones point twos in there. So very likely, we’re gonna see CPI start marching up now I’m sure the Fed is aware of this, that’s probably why they’re still talking about doing some more hikes. But But optically, it just looks really bad. And it’s probably going to put a lot of pressure on them, especially as we’re going into an election year to be seen as being even more aggressive, you know, coming out from us
Lance Roberts 39:13
in the markets not expecting that markets expecting this decline and CPI to continue. There’s another effect that’s coming in, right. So you and I were talking about housing last year, right the slowdown in housing, housing makes up roughly about 40% of CPI so the homeowners equivalent rent thing, right? But all of a sudden, we’re starting to see housing activity pick back up again. So this this whole idea that housing was going to crash that was gonna be a big drag on inflation and there is a lag there’s about a three month lag to housing so it’s got to it takes about three months for prices to show up. But you know, usually look at the housing starts this month, huge jump and housing starts because there’s a good we talked about this baby boomers aren’t selling their houses, because if I sell my I can’t downsize because if I downsize my pain It goes up because of interest rates, right? So a lot of baby boomers get stuck in their houses. So existing home sells. There’s not enough inventory dried up. Yeah, yeah, they dried up. So now you’ve got this lack of inventory. Now home builders are trying to build inventory. And you’re seeing home construction pick up multifamily apartments are going like gangbusters right now because people can’t afford to buy houses. So all that’s going to feed in and keeping that homeowners equivalent rent probably a lot more elevated than what the markets anticipating. And so that’s one thing I’m watching really carefully. Okay.
Adam Taggart 40:32
You know, I just recorded a great discussion with Ted Oakley that’s going to air this coming week. And he did kind of, you know, clarify something we were scratching our heads about earlier, where we’re talking about, hey, this housing markets really looking pretty awful. How are the homebuilders at all time highs? And it’s basically because it’s not that dissimilar, what’s happening in the car market where in the housing market, the existing current units are not selling, because as you said, the people that are in them can’t really afford to move, right? They don’t want to get hit with a higher mortgage rates. The home builders don’t have that problem. They’re releasing inventory now into this market. Right? That’s really inventory hungry, right. And they’re able to actually out compete the existing stock by offering points and all sorts of little tricks and, you know, sleight of hand that they do. So they’re actually apparently, you know, having really good revenues right now, because there’s a hot demand for these new homes.
Lance Roberts 41:28
Yeah. And I’ll tell you that, you know, homebuilt, were talking about last week homebuilders are trading near all time highs are at all time highs, and their fundamentals are cheap. I mean, you take a look at some of these home builders that are trading it, you know, 1011 12 times earnings, you know, one two times price to sales. That’s though they’re fundamentally cheap companies and pay a dividend. So they’re really overbought right now you have to wait for a pullback, but I’ve got no problem with the buying homebuilders on a pullback.
Adam Taggart 41:51
Okay. All right. I’m trying to figure out if I would make that same statement. I still am kind of bearish for the housing market overall in the long run, but we’ll see. We’ll see. Alright. This is probably one of your statistics that you’re going to mention a new report that comes out tomorrow. But looking at leading economic indicators, they tumbled for the 14th straight month here. So I just wanted to pull it up as an example of the continued flotilla of macro data that belies the market optimism here. And this was one that you’ve reminded this many times, pretty much as a perfect track record of determining, you know, when recession when we’re in a recession, and certainly, we are well into recessionary readings on this indicator. Yeah,
Lance Roberts 42:41
the indicator you want to look at is not just the LDI index, it’s fine to look at just the LMI index, there’s nothing wrong with that. But really, what you want to pay attention to is the six month rate of change, and the leading economic index that has a near near it has a perfect track record of predicting recessions. So if it doesn’t have a recession, this time, this will be the first time since like, the 1960s, that it’s been wrong. So, you know, there’s there’s always the first time with an indicator being wrong. But you know, that’s where we are right now. That’s so the article tomorrow, or so the article yesterday, because this is on Saturday. Yep. So yeah, the article yesterday, was talking about these recession indicators. And I go through, I go through the leading economic index is one of them. And of course, we go through our own economic composite indicator, which comprises 100 different data points of service manufacturing, OECD indicators, I mean, just really a broad look at economic activity that’s in recessionary territory. You know, you go through all these indicators, they’re all just inverted yield curves, right, we have 100% of the 10 yield curves, we track all inverted. So you know, everything is screaming, you’re gonna have a recession, yet, it just doesn’t seem like we’re gonna get there. And what I think it is, and this is kind of a statement I make, is that, because of all that monetary liquidity, there’s still chunking around the system, I got that $1.7 trillion of the inflation Reduction Act going in, that’s been postponing. That’s been that’s been kind of, you know, giving the economy enough support, to kind of weather these economic downturns, you know, so far. But again, what’s important is, is that economic growth is slowing, we weren’t near 12%, nominal. We’re now down to two, that’s going to keep declining here. And at some point, we’ll probably get below zero at some point, but that’s kind of the point the article is that review all these recession indicators. They all say we’re going to have a recession, but just because we haven’t had one yet doesn’t mean that we can’t have one it just may be delayed until next year sometime.
Adam Taggart 44:54
And I’m curious having gone through this exercise as recently as you have where Lance Roberts was good. Come on,
Lance Roberts 45:03
you know, it’s look, this is this is I was having this conversation today. We manage money for some other firms as well, like so so we manage money for clients, I also manage money for other RAS for their clients. And I was having a conversation with one of the advisors there that they’re from. And, you know, he was, like, look, he says, I’ve been an analyst since 1998. I have been through these markets, I navigated, you know, 2000. Well, I navigated 2008. Well, I just don’t understand this market. And none of this makes any sense. So I’m like, Well join the club. As you know, nobody understands this market right now. Fundamentally, it makes no sense whatsoever. Technically, it makes no sense whatsoever, what’s going on? Is there is a clear bullish bias to the market. And this is, you know, this y’all have here is we’re trying to apply logic, you know, we’re going through all these indicators every week. And this is why, look, this is why I write articles saying, look, here’s all the recession indicators. This is what they say, and you know, they we should be having a recession. But we’re not. And so we have to go with the data that we have that says the markets are doing fine. Right now we’re in a bullish uptrend, those things remain until they’re not at some point, my gut tells me that we’re going to have a second leg of this market, whatever it is, as we try to process through all of this recessionary data now, that doesn’t mean that we’re gonna go down 50% From here, it good, right? But you’re gonna need something really break. I mean, you’re gonna have like, major credit risk failures, or something like that, to really bring this market down. And it’s got to be something that’s very sudden and unexpected, like, JP Morgan fails, we’re talking about a major is no, it’s going to have to end that my I’m not being facetious. I’m saying,
Adam Taggart 46:56
I’m laughing because that would like bring the world down at this point. Yeah, it would give it a systemic important, sadly,
Lance Roberts 47:02
but Well, yeah, it is. But it’s gonna but my point is, is it’s got to be something really big, right? That really just shakes the foundation of the market entirely. That’s what we bring the market down 50%. Most likely, the next leg of this is going to be a 10 to 15 to 20% decline, tacking on to what we did in 2022. will retest the lows of October of last year, maybe even set new lows as possible. But because we need to come back and we need to revert valuations to a degree, you know, one of the key defining differences between a bear market, which everybody said last year was a bear market, it wasn’t the difference between a bear market in a correction is a bear market reverse valuations. We never reverted valuations, valuations are still very elevated. In fact, the NASDAQ valuations have increased by about 30 to 40%. Since the lows of October, and are now challenging its peak valuations that we saw back post the financial prices and post 1999. So, you know, it is you know, we’ve had very, very steep valuation increases in stocks and NASDAQ and video, good example, that aren’t justifiable. So you’re gonna have another leg of this correction that brings down those valuations at some point. And that would be coincident with probably a much slower economic environment, that’s my gut. Whether or not that happens, you don’t bet on that, right. That’s the expectation that may happen in 12 to 18 months, maybe 24 months, maybe 36. The problem is, we don’t know when it’ll happen. We have fairly high confidence that will happen. And but between now and then this market could be up another 20%. And you know, before you get that correction, and so, you know, here’s the challenge. And I said this before, you can sit here today and go you know what, I’m out, right? Just get me out, this markets run just too stupid, where it is out. So great. You get out in cash, the market runs another 20% from here and you go, Well, I guess I’m wrong, I’m gonna get in and then it corrects bright back to where you are. And now it’s a much better risk, reward valuations have corrected, prices are better, you’re deeply oversold. And this is the opportunity to buy, you know, in the equities. But you’re right here where you were today, but at a point in the future. And that’s the challenge of this market, and why you can’t make these decisions that I’m just going to be out and wait, because by the time it’s pretty time for you to get back in, you’re gonna go well, it’s still overvalued because it’s where it was two years ago. That’s deeply different. Right? because of what’s happened with prices.
Adam Taggart 49:34
The difference between price and value is what you’re talking about. Yeah,
Lance Roberts 49:37
correct. And so this is why it’s so important not to let your emotional biases weigh in. And, you know, keep a view on the logical thing, right? Because we do the fundamentals matter. The logic matters, all that matters. And we’re paying very close attention to that. But right now, we also got to make money in the short term, we have opportunity. And then we have long term opportunity long term opera. tunity is coming where I can buy stuff, put it to work, and then you and I can stop doing videos because we’ll talk, you know, when it’s when it’s the next leg is over. But right now we’ve got a short term trading opportunity, we take advantage of the long term investment opportunities probably still coming. All right.
Adam Taggart 50:16
All right. And you made a really good argument for why we have you on the show one to give us that that big strategic line of thinking, but also the fact that nobody knows how it’s gonna play out. So we’ll have you here every week kind of tracking what is happening, right. And I tell you, I cannot wait for the day where you and I can be talking about the great valuations that are out there in the market. And which of the many of them, you know, do we want to pick as the best contenders for growth over the next five to 10 years? Right. I mean, that will be a wonderful time.
Lance Roberts 50:47
Now, that would be a wonderful time. And I’ve been waiting for that for the last 13 years. So
Adam Taggart 50:52
I know. But how nice will it be to have people telling us we’re being too bullish for change? Right?
Lance Roberts 50:57
Adam Taggart 51:00
All right, well look, just to just to stay on the parade of concerns for a moment. I’m gonna get to the state of the consumer in a second. But there was a headline that caught my attention. I just thought I’d throw it up here. I don’t know if you’ve anything to add to it. But it says that the Atlantic is very unseasonably warm right now are hot. And that may of this year has seen the highest temperatures of any May in the Atlantic since 1850. And I grew up on the Atlantic seaboard and up in New England, and you know, that hot season in the Atlantic means much more likely, you’re going to have more hurricanes and more powerful hurricanes. Because you have all that that heat energy that’s, you know, spinning the storms up. And climate change. Okay, let’s put that aside for a second. I don’t want to create a a huge,
Lance Roberts 51:57
you’re gonna hear a lot of it right. It’ll be oh, you know, the seas are getting warmer. It’s it’s climate change is impacting us that no, it’s El Nino. And we go through these phases in the the atmosphere of lemania, and El Nino. And we just went through the Nino phase, where temperatures are a bit cooler, we’re about to go through a phase where these temperatures are much warmer for the next couple of years. So we’re gonna see more hurricanes, higher temperatures, that’s just a function of the environmental system and the way it works. And that’s we’re just into one of those phases right now. And that’s why it’s freaking 100 degrees in Texas right now. And we were just preheating, we’re not even in the summer yet. As far as Texas goes. So you know, we’re gonna be seeing temperatures in Texas, we’ll be talking about record temperatures in Texas. And you know, demand on heat grids has nothing to do with climate change. It has simply to do with the linea and El Nino patterns that are going on. And we’re about to go into an El Nino pattern, which is a lot hotter.
Adam Taggart 52:56
Okay. So that’s going to result in more hurricanes likely likely going to result in more hurricanes. And so those are those are just kind of, like, you know, curveballs that Mother Nature throws at us during the year in terms of how damaging they might be. Right. So that’s, you know, potential outlays that we don’t have factored into our national budget yet at this point in time, right. And the disruption that that may have in certain parts of commerce, related to this weather. Just pulled up a headline here that says, I guess it’s pretty hot in Kansas right now, too, not too far, either. In Texas, yes, that that, that wheat farmers in the state will reap their smallest harvests in more than 60 years. So my point is just, you know, humans are generally bad at assessing risk, especially risks that aren’t immediate, incredibly visible. We’ve talked about this a lot in the past. And that’s just sort of general. But we do a really bad job of budgeting for the unexpected. And it seems like this year, we may have, you know, our health insurer, or maybe have an unfair share of the unexpected and certainly from a climate standpoint, or weather standpoint, it’s looks like it’s starting off that way. So anyways, just curious if you have anything to add to this in terms of like, you know, how destabilizing the mix could get with some of these natural curveballs that may come our
Lance Roberts 54:15
way. Ya know, the, you know, first of all buy utility stocks, right? Because utilities get paid on how much electricity you draw. And like I said, in Texas right now, we’re still preheating for summer, right? We are hot temperatures are July and August. We’re not even we’re really just about you know, the end of June and we’re already hitting 100 Plus, we’ve had 100 plus degree days for the last three days. Heat index has been hitting 100 800 910. I went out running last weekend, because on the weekends I put my miles in and when I got back from running I did about a five mile sprint and came back and my wife said did you go swimming because my clothes were literally just dripping wet. I mean, it looked like I had literally just gotten out of the pool. have, you know swimming, and we don’t have a pool at our house? So that was kind of a stupid question. But anyway. But you know, it’s hot, right? It’s hot. So that means, you know, even if you keep the temperature of your house at a higher level, right, so let’s say that, you know, you keep your house at 7576 degrees, right, you’re trying to conserve energy. So you put your temperature a little bit higher level. And in Texas as well, every every room has a ceiling fan, pretty much. So you know, we’ve constantly got air blowing. And that way we can kind of, you know, raise our temperatures a little bit. But the air conditioners running nonstop to try to keep you at 7576. If you’re trying to keep her temperature lower than that, you’re you’re about to get $1,000 electric bill coming in the door here pretty quick. So, you know, utilities, companies, like, you know, NextEra Energy and others, they’re about to have a huge jump in revenue as it’s going along. So, you know, those have been underperforming stocks as well this year because of interest rates, but they’re about to have a nice jump in revenue because of these these warmer temperatures. On the other side of this, yeah, definitely take a look at that. If you want to play commodity futures. Yeah, definitely take a look at wheat, corn, other type of commodities that are heat sensitive, because it’s going to impact and reduce the supply of those commodities in the markets, less supply higher prices. So cattle is the same thing. We’re going to see higher meat prices as well. Derivative of
Adam Taggart 56:25
wheat, yeah, cattle, or cattle?
Lance Roberts 56:29
Yeah, I mean, you know, there’s, there’s certainly weight my point is, is look, this is this is a natural event that occurs, it occurs every few years, and they cycle these cycles happen within the economy or within within the environment. And that’s going to have this warmer, this warmer environment is going to have negative impacts on consumers. And so there are ways to play it. And then you just got to kind of think through the process of okay, what’s going to happen? And where can I capitalize on that?
Adam Taggart 56:57
One memorable? Are insurers to these types of weather issues? Can they get hit harder? Do they have enough buffers? That they’re generally okay?
Lance Roberts 57:06
Well, it depends. You know, we’ve had, we’ve had warm years where we didn’t really have, you know, big hurricane impacts. And we’ve had years where we just had, you know, down the Gulf Coast, you know, from Florida to Texas, we just, you know, one hurricane after another, just, you know, making landfall and doing billions of dollars in damage. So it really just depends, and we’re going to know soon because we’re just about to get into hurricane season. So you know, you’re gonna start hearing a lot about tropical Tropical Storm Alice, and we make them alphabetically right. So you know, if we have a higher number of tropical storms that increase it, and the warmer the water is, the higher propensity that there is going to be for tropical storms to turn into hurricanes. And of course, if they’re forming in that gulf, because of the Gulf Stream, and the way the Gulf Stream, you know, hooks around from Texas over to Florida, when you know, when that hurricane enters the Gulf and hits that warmer Gulf Stream, it’s going to push that hurricane depending on where it enters up the coast. So if a hurricane comes in towards the Yucatan Peninsula, and Mexico is going to hook up into Texas, if it head towards Texas is going to hook up into Louisiana. You know, Alabama, Georgia, if it comes in on the further side is going to impact Florida because they’re hanging out there in the wind. So you know, it just depends on where hit. So if you have multiple hurricanes that hit, the insurers aren’t set for multiple billions of dollars of repeated impacts over a very short period of time. They’re good for one or two or three. But if we have four or five that impact the Gulf Coast, you know, it’s going to impact insurers.
Adam Taggart 58:40
Okay, all right. Well, look, who knows what’s going to happen here, but I just wanted to flag it for I’m not a meteorologist. So neither am I, but but I just wanted to flag it as an element in the mix here that we haven’t really given a nod to recently and just given these early readings, maybe it’s gonna be in play this year. Alright, just trundling over to the consumer. You know, it’s not looking so good for all the reasons that you and I have been talking about Lance, right. I mean, if you’re in the top 10% that owns the vast majority of financial assets, probably a pretty good year for you to be honest. But if you’re a regular Joe, or Jane, it’s probably a tougher and tougher year, there was an article I read on Zero Hedge that basically was just a compilation and these are just anecdotes but they were compilation taken from Reddit of people talking about guessing the board there, of just how it’s getting harder and harder to get by. And I mean, the stories are just human stories, and they really are like, you know, they tug at your heartstrings because many cases these are people some of them making six figures, collectively it just saying like look, there’s just nothing leftover or gosh, we’re having to dip into savings or hey, we’re having to make like really, really hard compromises right now in our to our lifestyle, and we’re not in a recession, and we’re making six figures, right? So if it gets worse than this one of us loses or die like we don’t know what we’re gonna do. Right So anyways, a couple of stats here coming from price group PriceWaterhouseCoopers just released their 2023 hopes and fears global workforce survey. It’s a big survey, it pulls about 54,000 people from 46 countries that says here, it showed that a growing number of households struggled to pay bills every month or could not pay bills, most of the time, the share of workers who said their household could not pay their bills, most of the time doubled from the previous survey. The percentage of workers who say their household can pay all the bills every month, and still have some money leftover to sock away or use on discretionary spending fell from 47%, the last time the survey was done to only 38% Now, and one worker and five, they found was doing multiple jobs had multiple jobs. And 69% of those said they were doing so because they needed the extra income to get by only 30% 36%. Were saying they were doing it to like learn a new skill to skill up. So you know, it’s just showing this deterioration in the consumer household that you and I have talked about forever, right? We’ve got what is it like 24 months in a row of declining real wages. I showed that chart the other week of the declining labor leverage ratio here that you know, for a little while their workers had some bargaining power, we had you know, quits were high, people were demanding all sorts of things to be able to, you know, come back to the office or continue to do work. Those days are now ending. We’re getting back into the great resignation becoming the great, you know, on retirement party and great please, sir, may I keep my job or get my old job back party, right? We’re seeing the rise in revolving debt. Now back at record high levels, because people are having to fund more and more of their lifestyle on plastic. We’re seeing that revolving debt charge the highest interest rates, it’s ever charged. savings rates, no surprise are plummeting at this point in time. And we’re starting to see defaults creep up, like in auto loans and things like that. So we’re just really seeing the consumer struggle here. And I haven’t read the report that you’re, you’re going to release tomorrow. So I’d like to kind of hear your thoughts on top of this. But like, from the data that I have looked at, I mean, I don’t see a lot of rescue here for these guys. And I can see potentially a recession at some point ahead, which could make this worse, right job losses kick into the mix here, it’s gonna get a lot worse.
Lance Roberts 1:02:35
Yeah. Well, that’s what the that’s what the Fed has been clear that they want. They want higher unemployment. And that, you know, that’s that’s, you know, you don’t want to wish that on anybody. Right. But you know, in order to bring down inflation, you’ve got to have unemployment.
Adam Taggart 1:02:49
So we have to kill demand. And that’s its mechanism for killing demand. Right? Yeah.
Lance Roberts 1:02:53
But let’s step back and explain that real quick, because I don’t think a lot of people understand this entirely. So our economy is 70%, based on consumption, right? So we’re a consumer based economy. The problem is, is you cannot consume unless you produce first. In other words, Adam has to do some form of labor. We don’t know really what Adam does for a living. But you know, what, whenever he does work, and actually does work and gets paid, that’s production,
Adam Taggart 1:03:21
pay, and if you figure it out, tell me, buddy.
Lance Roberts 1:03:24
So once Adam gets paid, now he’s got money, right? He’s like, look, I gotta check, and he can run out and he can go buy stuff, right. So the consumption part can only occur after the production consumption cannot occur. First, you have to produce first in order to consume and that’s just a function of the economy and how it grows over time. Now to what Adams talking about here is that in order to reduce that consumption, I’ve got to reduce the production. I’ve got to have people making less money so that they have less money to spend, once I can reduce the consumption 70% of the economy, then I slow economic growth, ie a recession, that reduces that reduction in demand and reduced economic growth brings down inflation, what is inflation? Inflation is simply prices, supply and demand. That’s all it is. I’ve got X amount of supply, I’ve got X amount of demand. And it’s the basic, you know, economics 101 graph, you know, you have supply demand, where they cross, that’s the price. And so in order to bring the prices down, I’ve got to either reduce demand or reduced supply one of the two, well, I’m not going to reduce supply initially, until I start getting into recession. And I reduce supply after it’s a lagging effect of reducing reduced demand. So demand has to decline first, then manufacturers go, Hey, I don’t have as much demand, so I’m not going to produce as much that brings down demand supply, all that comes down. That brings down your inflationary pressures in the economy. That’s what the Fed wants by getting unemployment higher. They want that to work. her again, that’s a bad situation, we don’t want anybody to lose their job. That’s just nobody wants to be out of work. But that’s what we’ve got to get to. And you know, right now a lot of people have a lot of savings still, right, there’s still a lot of savings that we gave people a bunch of money. They paid off credit cards. And so they they have the ability to one credit card debt backup, well, now they have, and those interest payments are coming in hot, but so far, they still got an extra 300 350 bucks a month that they weren’t having to pay on student loan debt to help meet those obligations. That’s about to go away. So this is what we talked about earlier, that the real the real catch here, potentially, for that big reduction in demand is coming with those student loan repayments. And again, as I said earlier, I don’t think the market is factoring in that just yet. The markets kind of overlooking is like, yeah, it’s student loans. Right. It’s couple 100 people. It’s not It’s 44 million people.
Adam Taggart 1:05:54
That’s starting it starting beginning of September, beginning October, when
Lance Roberts 1:05:59
I’ve had different dates thrown out at me. You know, I you know, the the most consensus that I get is around September the first. Okay, so let’s just go with that. I’m sure I’ll get the emails, dates.
Adam Taggart 1:06:13
Point is my point. Is this soon? Yeah. It’s just two months away. Yeah. Or three on the outside. Right. But it’s like, yeah, so this is this is not an academic risk that you’re waving here. It’s it’s relatively imminent one. All right, well, look.
Lance Roberts 1:06:31
Real quick, you know, just just, you know, it, you know, I’m very budget conscious in our household. And my wife and I both are we, you know, we have a function that we have a specific amount of money we live on every month. And, you know, it’s just, you know, we’re pretty cautious about how we spend money. And, you know, right now, all our ACs are running at 7677 degrees, because our electric bill was like, 500 bucks last month. So we’re trying to get that out some, you know, you know, but what is what is amazing to me, and is that, you know, the cost of living is expensive. I mean, it’s the other night, you know, we went to a fairly inexpensive restaurant, it was it was Father’s Day. So my son drove down from from Texas a&m to come visit. And so it was me and him, my wife and our two daughters. And we went out to dinner, and it was a fairly cheap, it was a Chinese food restaurant, right? So it’s Chinese food isn’t normally very expensive. But the tab was well over 100 bucks for Chinese food. Right. And normally, you know, a couple years ago, at that same restaurant, it’s been a household favorite fall in time, I went back and looked the same dinner for the same five people was about 70 bucks. Right? So it’s gone up dramatically, in terms of the cost of eating out, right. And so, you know, and I’ve been kind of wondering about this, because when I go out, you know, to, you know, do business or whatever, restaurants are full, they’re packed, and I don’t know about everywhere, but Houston restaurants are packed, and I’m like, How are all these people affording to eat out? Because it’s, it’s expensive, right? I mean, it’s really expensive. And then you start talking about electric bills, and all these other things. And I just scratched my head over, you know, if you’re not making 100,000 Plus, you know, it’s got, you’ve got two or three kids, it’s got to be tough to make, you know, kind of make ends meet and get all the bills paid, and taxes and all those type of things. So it’s quite amazing to me how resilient the consumer has been, over the course of the last, you know, year and a half.
Adam Taggart 1:08:42
It is to me, too. And it’s I’m glad that you sort of asked that question, like, how are all these people for it? Because I feel like I just live in that world and had been in that world for a couple of years now. Right? It’s just like, I look at the data. And I know that on average, these people are struggling more, but you go out, you’re like, God, it’s packed here. Right? So I’m glad there’s someone else asking that same thing. But like, you know,
Lance Roberts 1:09:05
two people in restaurants you go, how do you afford the
Adam Taggart 1:09:10
I vote for you to go ask that the first time. But here’s my fear. And it kind of maps back to your comment about like, yeah, people won’t go into bonds, because that’s just not how they think. Right? My fear is, is that people are, you know, kind of like, I think homeowners are right now, which is what is hunker down, and then we’ll just, we’ll make it through this part. And then the federal start cutting rates, and we’ll go back to the way that things used to be right. I think people are like, Look, I’m just going to put it on the plastic. I’m not going to downshift my behavior yet. Until I don’t have to and then maybe something good will happen before that, and then I can Yeah, and I don’t have to worry. There’s not going to be real repercussions from here. And I feel that that’s sadly a lot of times to the human nature is to kind of have that overly optimistic maybe sometimes kind of magical thinking And, and then you get the Hemingway problem, right, which is how do you go broke? Well, you know, gradually and then suddenly, right where it’s just like all of a sudden bang, I just cut off from my cards or something happened and I lost my job or whatever. And then bang, we are really unprepared for this. And I fear that there’s too many households that like that that might be kind of moving towards that destiny.
Lance Roberts 1:10:21
Yeah, no, I don’t disagree. And I think one thing that may be factoring into this right now is look, the markets doing well this year, right? And markets are up over, you know, 12% 13% for the year, whatever it is. So there is that wealth effect that is, so you know, people right now going, Yeah, man, I’m really tight. But man, my stock market portfolio is doing really good. So I’m not going to sell anything over there. But I can spend some extra money because, you know, I made $2,000 In my investment account this month, so I can go spend an extra couple of grand. You know, the problem is, is when that evaporates,
Adam Taggart 1:10:49
right, and ended at two Oh, everyone’s saying, we talked to the recession, so you don’t have to worry. Yeah,
Lance Roberts 1:10:54
so I think there is a bit of that, that kind of confidence. We’re certainly seeing that. And, you know, the the confidence indicators of both investors and consumers we’re seeing that are creeping back up again. Yeah. Yeah, consumer confidence has been ticking up since May, slowly, right. But it is ticking up. And once it leaves, you know, we’re seeing the stock market pickup as well. So you know, it is just kind of fascinating when, you know, you look at the in in that day, you know, we do a lot of discussions and talks about the average consumer, the average investor, the average person, and you know, the average person isn’t financially very well off. And you know, the average person doesn’t have a lot of money in savings, there isn’t a cushion to fall back on. If they lose their job, you know, most households are within a month of being evicted. Right.
Adam Taggart 1:11:44
Just to underscore your point there in the averages, the average numbers aren’t great when you look at the average numbers, but they’re deceptive because they’re pulled up by the people who have all the money. I just look at the median, right? It’s really bad. It’s much worse than the average. Yeah,
Lance Roberts 1:12:00
it is. And, you know, and look, you know, I just want to, you know, it’s always important to come back to this point, you know, especially when you make the comment, like, you know, when you look at all the people that have all the money, right? You know, capitalism still works, and we have the opportunity to take advantage of it, we have the opportunity to do better with ourselves financially, we just have to be willing to do that. And it’s interesting, I’ve been getting a lot. So you changed on your website, the income ranges for individuals, and there’s now a choice. So if somebody goes online says, hey, I’m interested in help, I have less than $150,000. That’s fine. No problem with that at all. But what I find interesting is, is that I send them an email, say, Look, if you have less than $50,000, here’s where you need to be starting. And especially a lot of these are coming in, they’re young, right? They’re 30, they’re 35, or 28, whatever. So they’re fairly young in age. And I’m like, first things first is take six months worth of that money, stick it into a money market account, don’t touch it, that’s your emergency fund, that’s in case you lose your job. Go fully fund your 401 K plan. So if you put in 23,500 a year right now into your 401 K plan at work. So do that, right? It’s 1875 months to change your allocation at work to do that, and to your 401 K plan and get the free money match if your employer match and get the tax deferral on that. And plus you get these are pre tax dollars that are going into that plan. So you’re not paying tax on that money today. Okay. So let’s say that, if you’re married, then go contribute $6,000 to a spousal IRA. And then after that, if you have any money leftover, start putting that into an s&p fund. And just do it every month. And don’t worry, just turn everything off. And just as dollar cost average on s&p 500 fund for the next 30 years, you’re gonna be awesome if you do that. And it’s amazing. It’s very simple, right? building wealth is super simple, you’ve got to save 30 to 40% of your income. And that’s exactly where the whole conversation stops. Because as soon as I say 30 to 40% of your income there, I can’t do that. And I understand, right, we’ve got to have cars, we’ve got to have houses, we’re gonna have all these things. Well, you have a choice to make. You can either do what’s necessary today to build wealth, and it’s gonna suck, right? There’s just no way around, as I say, in the military, in the military, embrace the suck, you’re just gonna have to do it. And it’s gonna suck for a few years, and then it’ll get easier. And as your income increases, guess what, so do your savings. And you’ll start seeing that stuff compound and you learn to live within that 60 to 70% of your income that comes in the household after taxes, you learn to live on that. And you learn to live within that budget and yeah, you may not be able to buy the new car this year or you may not be able to buy you know, the house you wanted right away. You may have to wait. And then you know, then the next one says, Well, I want to buy a house. Okay, well, that’s another 20% You got to save somewhere else, you know, so, you know, but the process of building and saving investing is not hard. There’s no get rich quick scheme about it. But this is the this is what we’ve turned on the markets into. And even even this, even you and I are having these discussions, the emails that I get are like, Okay, well, what’s the fastest way to build wealth in the market? There is no fast way, right? There’s only one way to do it to do it. Right? You may, you may speculate in the market now, and you may make a bunch of money this year. But let’s go talk about the retail investors back in 2020, that made a bunch of money in 2021, and then lost it all in 2022. That’s what markets will do to you. If you speculate and gamble and markets, you do it the right way. It’ll grow slowly over time. And you’ll have a lot of money to retire with. But it’s 30 years from now. And see that’s that’s the thing that we’ve got to get into and that we’ve got to do better teaching about is how to make the markets work for us. But that starts with creating cashflow at home, that starts with creating a lifestyle that will support wealth over time. And that does and that means that you can’t be driving them as driving today. Sorry.
Adam Taggart 1:16:09
Yeah, so I’m so glad you brought all this up. We’ve touched on parts of this in the past, but just to reiterate a couple really important points. I should have talked about it. Like, well, first off, I really should just remind everybody here you’re getting advice from guys, Lance lived, you know, in a car, for a couple of years, I had my own equivalent experiences of that. So you’re talking to guys who, you know, have lived what they’re about to say, but But you know, that’s our bias, right? Like, we know, it can be done, right. But you’re a fitness guy, I’m kind of into fitness too. I think about these as muscles, right? In ultimately, you want to have a well balanced, you know, musculature system, but there’s a progression with how you want to start developing these muscles. And I would say first start the earning muscle, right? You know, can’t do anything with income if you have no income, right? So so start figuring out how to earn income, invest in yourself, get good education, get good mentors, you know, get good work experience early in life, encourage your kids to work, you know, all that type of stuff, right. So start creating the best income stream or collection of streams that you can. The second is then the savings muscle, right? This was the frugal living part of life. And a reminder from The Millionaire Next Door. The number one characteristic that selfmade Wealth Generators have is frugality. Right? So you start earning, you start really practicing that and that’s what Lance is talking about, take that money, reduce your cost footprint as much as possible. Take as much as you can, ideally 30 to 40%, and shovel that into, you know, some sort of savings program where it said, set it and forget it, you know, s&p fund great write whatever, eventually, you will want to build your investing muscles. But really, you’ve got limited options anyways, until you have a certain amount of assets, you or a financial adviser, they just have limited things they can do with it, if it’s if it’s below a certain level. So your focus is to graduate the amount above that threshold, that then opens a whole bunch of new doors of opportunity for you. And that’s when you can really start to build the investing muscles of Okay, great. How do I diversify? You know, how do I value companies? How do I you know, think about stocks versus bonds, all that type of stuff. So that’s really the progression you should be going after, which is start with the earning, then focus like crazy on the savings, then start the investing. And of course, you’re continuing to exercise each muscle as you go to the next one. So when you’re saving, don’t stop burning and vice versa. So I think you agree with that progression, right?
Lance Roberts 1:18:42
No, absolutely. You know, in this, it’s always about trying to get the cart before the horse and and the reason that people want to jump into the investing part is because we’ve taught everybody the markets a casino. And so I can make a little bit of money and I can build all my wealth in the stock market. Nobody has ever gotten rich investing in the stock market. Right, Warren Buffet or a
Adam Taggart 1:18:59
couple of lucky people, right? But it’s sort of like the world we live in the media, social media. Yeah. They just show us all those successes. And you think, Oh, my God, I’m an idiot, of course, I need to be buying X or whatever, right?
Lance Roberts 1:19:10
And again, did they really buy it is the other story to this
Adam Taggart 1:19:15
object, but but you’re gonna go bananas on this. So you know, so people aren’t doing this. And a lot of reason for this is that a lot of people don’t have good models. So they haven’t been taught this. We railed about the lack of financial literacy in school. So then we get to the point of what are people being guided to today, right. And the role of social media is huge, especially in younger people’s lives, and the quality of information that is available in a lot of these platforms. And they say this as a guy who’s running a YouTube channel, right? There. Let’s put it this way generously. There’s a lot of variation in the quality. That’s a polite way to say there’s a lot of crap out there and Amy Nixon, who has been on this program before she’s Texas runner on Twitter. She just posted the TIC tock video of this, you know, 20 something year old bro who’s hanging out in the pool, and he’s talking about this great way to make money that you know, every every entrepreneur knows, but the average person doesn’t. And I’m gonna give you the skinny here and he basically says, I look here, these credit cards, I created a business, I took out, use these credit cards that I open to the name of the business to buy this Rolex, which is worth $100,000, I’m going to sell it back to a jeweler for $80,000. I’m going to get my cash out that way and then then declare bankruptcy. And that debt gets written off. And boy, isn’t this easy? And isn’t this the way to go? Right? Like they’re getting types of advice like that, right? So huge part is you’ve said many oftentimes, it’s just, you know, get yourself educated and the right way to do things.
Lance Roberts 1:20:45
Yeah. And like, this is the thing I have to go through with my kids all the time, because they see those same stupid videos. They say, Dad, what about this right Dad? What about this? I’m like, first of all, how does that guy make money? Right? Did he really go buy a Rolex? And it’s probably a fake Rolex one, that you really go do this right to? But no, I mean, they’re doing this stuff to get views and they get enough views. And they can get monetized by Tiktok or YouTube, or sponsor, whatever, yeah, or whatever. And that’s how they’re making money. You know, there’s an old saying, If You Want to Be a Millionaire, write a book on how to be a millionaire and sell million copies for $1. Right? You’ll be a millionaire. And people will buy the book, because everybody wants to know How to Be a Millionaire, right? So I could write a book and sell it and I can make a bunch of money. And then I’m going to drive around in my Lamborghini living in a big house and saying, uh, yeah, you know, my investing works great. No, I’m really just sold a book for a couple of million bucks. And, you know, there you go. So it’s always important to understand, you know, how people made their money. I mentioned Warren Buffett a second ago, Warren Buffett did not get rich investing. Right now. No, you’re Don’t argue with me. Just listen. What Warren Buffett did is he started a business and then got other people to invest in the business. Then he invested that money from other investors into other companies and he built this conglomerate empire that made him billions of dollars. Ray Dalio you know, hedge fund manager 100 $60 billion hedge fund. He’s worth billions. He didn’t get rich investing. He got rich investing other people’s money and getting paid for that, right. That was his business, invest, you know, people that build investing businesses make money on the backs of investing other people’s money. And look, everybody gets wealthier, right? The people invest in money, get wealthy, the business owner gets wealthy, everybody gets wealthy. So it’s fine. Just not that I’m not saying there’s anything wrong with it. But there’s very few individuals that go Oh, yeah, I started out with $1. And I invested it into cryptocurrency and I made millions and I didn’t lose it. All right, I sold at the top. That happens, right? There are people out there that did that the vast majority of people don’t. And the vast majority of
Adam Taggart 1:22:49
overwhelmingly vast majority of people don’t, let’s be
Lance Roberts 1:22:53
exactly. And all these people you see on the internet telling you how to get rich quickly. That’s 1000 schemes out there, right? Just get chat GPT to write a book for you and sell it on Amazon, you know, do drop shipping it look if I had a business that I was doing that was making me millions of dollars? Why the hell would I share it with you? Right? Because competition is gonna lower my margins. If I have a if I have a business, drop shipping something and I’ve figured out the niche and I’m making a killing with it. Why would I? Why would I get on the internet? And then get you to subscribe to my channel to get you to pay me to teach you how to do what I’m doing. Why would I want to dilute my business that makes no sense whatsoever? This is you know, people ask me all the time. It’s like, well, Lance, how do you do your business? That’s my business. I’m not going to tell you how we do things because that’s our secret sauce that we look and all look full disclosure. We’re portfolio managers. We get paid to manage people’s money, financial planning, those type of things. That’s our business. I am selling you a product right now. I want you to come into us with me. I would love for you to come give me all your money. And I’m going to charge you a fee. Right if I wasn’t promoting something, if I wasn’t providing a product, I wouldn’t be spending an hour and a half on Friday. I got better things to do on a Friday then hang out with this you so yeah. I like Adam and that’s why we do it. But let me just be serious. I’m marketing to you right now. And full disclosure, right? I have I don’t need your money. I don’t need you as a client. I have plenty of clients, my businesses My business is very successful. We’ve been building it for years. I do this because I enjoy spending time with Adam I enjoy sharing knowledge with you and I hope you find usefulness in this I hope you can take something that we say home and build and help you build better wealth for yourself that would make me very happy but don’t mistake that I’m here. You know not marketing to you because I am right you know the the articles that are right on our website, go to real investment advice.com read articles read our newsletter. I’m marketing to you. I’m I’m showing you I know what I’m doing. I show you that I have experience. And I hope that you will find value in that and you would like to become a client at some point. But if not, that’s completely okay. But on the internet, when you look at people, and this is what gets me about, specifically about what you’re talking about, is that I’m highly regulated. Right? The SEC, I’ve got to, you know, I’ve got to maintain records of every piece of advertisement, I do every piece of marketing I do. And at any moment, the SEC can walk in my door and say, Hey, I need to see all these records. Right? And in the you said, You did this, I need to see the record that said you did whatever you said you did.
Adam Taggart 1:25:39
Right, right, in that action is very high.
Lance Roberts 1:25:42
Exactly. But because I’m regulated, right, all these other people are out here on the internet with no no education, no degrees, no financial experience whatsoever, telling you to buy or sell this, and they have no risk of if you lose all your money, there’s no recourse on them, they have no risk to you, I have fiduciary risks to every one of my clients. And I have a responsibility to every one of my clients to protect their assets. These people on the internet don’t so the first thing when you listen to somebody on the internet, say what’s their risk? Right? What is it that they know? That? I don’t know? And are they really telling me something that is valid? And nine times out of 10? That answer is gonna be no.
Adam Taggart 1:26:24
Yeah, um, so got great topic, it didn’t really think we’d hit this vein, I’m gonna probably have to push some stuff off to next week as a result, but super important in in to that end. I mean, there are a lot of people out there, who, you know, we get painted with a brush, Oh, you guys are too bearish, right. And I like to think that we are literally just looking at the data and in revealing our best interpretation of it, and that of our experts, right. But there are definitely people out there that I do see as fear merchants where, you know, either look at their work, or perhaps even know some of them and just say, You know what, like, they are just saying this to sell a newsletter or whatever the product is, right? And so you have to be very, very cognizant of the source and how they make their money. When I totally agree with that the guy the example, I use the Tick Tock guy with a Rolex, you follow his advice, you go to jail. It’s not just like, uninformed advice. It’s like really dangerous advice, right? He’s, he’s used to having you tried to commit bankruptcy fraud, right, which they there are laws and protections against. So
Lance Roberts 1:27:29
there’s a lot, there’s, I’m seeing a lot of videos right now. You know, on a whole, you know, just create a business and then lease a car and then put it in this other business and do it, you’re gonna, you’re gonna be audited by the IRS to the end of time. If you don’t wind up in jail, I mean, there are certain people in this country get away with tax fraud, but most people can’t. So you know, be again, just because somebody on the internet tells you that you can do this, you better understand what you’re doing before you start doing some of these complex schemes, because you are gonna get audited by the IRS.
Adam Taggart 1:28:02
Well, and that’s why I tell people to every week to work with a professional financial advisor. And I’d expand that to say for anything, look, if you want to talk to a professional lawyer about some of these decisions too. Great. Go ahead. Like my whole point is, is like validate, right? And whether you work with Lance and his team are the guys that knew harbor or somebody else, I don’t care as long as they’re good. And they’re held to a professional standard so that you can feel confident that the advice you’re getting is being filtered through, you know, inappropriate level of expertise. Right. So anyways, folks, be careful. Who was it said, don’t believe everything you read in the internet. That was Abe Lincoln, right?
Lance Roberts 1:28:38
From PGI, Barnum and Bailey one of the two.
Adam Taggart 1:28:45
All right, well, look, we’re running out of time here. First, let’s get to your trades. Did you make any trades over the past week?
Lance Roberts 1:28:51
None this week, you know, because we were kind of already set up going into this week for a bit of a contraction. We had, we’ve kind of picked up recently a little bit of more conservative exposure, we did kind of shift and we talked about this last week, we shifted the duration of our bond portfolio a bit, but this week, we just kind of set still and just just kind of letting the markets sort itself out a bit. You know, we’ve talked about for the past couple of weeks about seeing this rotation in the market from, you know, tech and discretionary into some of these other sectors. And we did see some of that happen this week. We still haven’t, we still have more rotation to go. There’s still this this kind of pushing bias on tech and discretionary. But we are starting to see a little bit of a pickup in some other sectors. Notice what you said earlier, you know, we’re starting to see this market kind of broaden out a little bit. And that’s that rotation into some other sectors. And so, this week, we didn’t really need to make any changes. I think we’re pretty well positioned. We’re still underweight equity, we’re still overweight cash, but you know, we need we need more of a correction. We’re still in a buy signal right now in the markets and started a couple of months ago. Markets are very extended. We need a Still overbought. So we still need a bit more of a correction. And again, I wouldn’t be surprised to see this kind of a correction, or continue next week. Now, importantly, a correction doesn’t mean the stock price decline. A correction can also be the market just trading sideways, like we saw, you know, earlier this year, we went 45 days, we went nowhere. And then it took off running. So we can go through these corrective phases where market Cisco sideways, those moving averages catch up to the market. And that’s okay, that’s a good entry point, if we get to that point. So over the next 30 to 60 days, we’re going to have a price correction or a consolidation and allows for a better entry if you want to add exposure.
Adam Taggart 1:30:36
Okay, great. And folks, just a reminder, we’ll have Lance back on this program every week, or at least every week that isn’t of something better to do, apparently, I can be apparently is
Lance Roberts 1:30:46
the only thing I look forward to every week. So
Adam Taggart 1:30:50
I’m going to make that clip the teaser for this video, just absolutely. But anyways, we’ll have Lance, we’ll have Lance on here, folks to tell us, you know, every week where we are in that progression, alright, well, look, as we wrap up here. I did want to spend some time talking about some of the lessons that I learned through this, you know, crash course in the health care system with with my mom’s illness and then passing. We probably don’t have enough time here to do it. Justice. And I don’t want to give it short shrift. It’s a really important topic, I think, for a lot of people. Just a couple of quick things. So Atlanta, I think we sort of floated this idea, like a month or so ago about, hey, you know, should we do a webinar on planning for, you know, aging parents and how to fund our own, you know, health care needs later in life and whatnot, we did get a fair amount of interest in the comment section. So if you don’t mind now that I’m kind of reemerging from that whole crisis, I’d love to work with your team on getting a date for that, that we can communicate to folks that are right.
Lance Roberts 1:31:53
Yeah, absolutely. Would you mind out of the office today, I’m here with you. And I’m out office all day tomorrow? Would you shoot me an email? And I’ll take care of that for
Adam Taggart 1:32:01
you? Absolutely. Absolutely. So just a couple of quick highlights of sort of what we’ll be talking about, you know, what I did learn is the medical system really is designed to like, take all your money from you, right? I mean, it’s, it’s, it’s, it has a lot of flaws. In my mother’s case, she was, you know, an example of somebody who didn’t do a fantastic job of planning her later life and ended up in a position where she didn’t have a lot of assets or income, in fact, very little. And, you know, there were a lot of things that weren’t great about that in her last bunch of years. But from a medical standpoint, it was amazing to me even before this past couple weeks, the medical care that she could get for not having any resources, she qualified for a ton of health care services, but also like, you know, senior living resources, you know, subsidized food programs. You know, she got older and more infirm, qualifying for in home care folks who can come in and do things in your house a couple days a week and whatnot. It’s amazing how much is out there. Particularly for people who are below a certain socio economic level. The challenge is, is that finding out with AR is really hard. Like, you have to have a quarterback in this game to really play the strategy Well, or really find out what’s out there. The challenge is, is that you may have to be that quarterback a lot that there aren’t a lot of experts out there who just say, Hey, I have all the answers come here, I’ve got a really well laid out guidebook for you, you have to be out there kind of piecing all this together, there are some experts who can give you substantial chunks of the puzzle. And if you can find them, they’re amazing. But I wanted to flag this for folks, because I think a lot of folks watching here are gonna go through this themselves or have loved ones that are gonna go through it. And I want to, I want to, you know, had we been able to plan out what we had to kind of scramble through in these past couple of weeks and months. If I could to plan that out a few years in advance, it would have gotten way better for everybody. And so that’s what I’m sort of trying to help people here with as to maybe help them get this stuff, you know, laid out beforehand so that as they or their loved ones, you know, start really needing these services. It’s a it’s a gentle process and not a mad dash. There’s some other great things that I’ll talk about later on in depth when we talk about this. So let me just end on kind of a good note here, which is you know, my mom didn’t have a lot of resources financially or materially. She did have a lot of friends and a lot of community and it just want to say from just having been in the mix here, folks. At the end when when you know your time is up. The only things that matter are relationships. Audio relationships and you know, did you feel like your life had meaning it’s it’s really your memories and your relationships. Happy to say my mother, I think died a very rich woman in on those elements. And the passing was pretty amazing which again, I’ll describe we have more time. Very sad event obviously but but it really couldn’t be more grateful for how her passing went in terms of we thought we were going to lose her really quickly. We ended up having several days of her kind of recovering and being like completely with it consciously, and having phenomenal conversations and a lot of laughs. And she said all her goodbyes that she wanted to importantly, I was able to extract answers to a ton of questions that we hadn’t had the chance to ask her before, both like logistically and as well as just like, What do you want to have happen after you die, right and that type of stuff. So, and then she ended up gently passing away in her sleep, as her breathing got got less and less efficient, but just a super peaceful passing. So first off, I want to say thanks to everybody who had been checking in and let them know that my mom had a really gentle exit from the world, which is wonderful. But um, but in this process, one of the things that was kind of tearing me in different directions was my older daughter was graduating college. And I had to at one point, leave my mom in the hospital to go to my daughter’s graduation, which is really hard. But my mother was insistent we you know, sort of celebrate the key life milestones. And the college or the graduation, you know, professor who was giving the complication or whatever. Hey, this great comment where he said, Hey, the electrons in the atoms of our bodies were forged in the, or were sprung into existence with the Big Bang, right? They’ve been around since the beginning of the universe, the the neutrons that give us mass, they were forged in the supernovas, you know, over the billions of years since then. And through whatever process, you know, science, faith, evolution, God, whatever you want to say, we as humans have ever emerged, right? We’re this this conscious species, that as Carl Sagan put, it, gives the university an opportunity to understand itself, right? We’re conscious of how the universe works. We’re trying to understand our its rules. In many ways, we are the creation of the universe, that that finally is able to understand how the universe operates. So so when you sort of think of that arc, like, the gift of human life is so incredibly rare, and priceless, right? And so what matters is what you do with that gift. Now, he was talking about it with my daughter, but of course, I was seeing the the other end of that journey, which is my mom kind of evaluating her gift at the end of her life, and in large ways, you know, certainly relationally, you know, very happy with how she had spent it. So that’s kind of my parting advice to people here, which is yes, we talk about money a lot on this channel, right. But it’s really a means towards wealth. And in, you know, the wealth that really matters in the world isn’t the financial stuff. It’s not the material trappings, right? It’s what persists at the end, which is the relationships, the meaning the memories, etc. So hopefully, if you take anything away from today’s video, here, it’s maybe a little bit more of an appreciation and a focus for how to spend your time going forward, which is yes, focus on the money, stuff, that’ll be an important enabler. But really spend your time on the things that matter most, which largely is investing in your relationships, and spending your hours on things that you think give your life purpose and meaning so that when you reflect, and all you have are the memories, you feel good about it when your your time comes to leave. So I’ll end on that way and say anything else you want to know, before we wrap it up? No,
Lance Roberts 1:38:50
there’s there’s nothing I can say that would add to that conversation, that it’s a great point. But you know, as we talk more about this in the future, and yes, we’ll get there’s so many things that are available to help people, you know, a lot of people complain about the health care system, like, oh, health care, so expensive. Yeah, we also have the best health care in the world, bar none. And there’s so many programs to take advantage of to make health care affordable, but you just have to do the work. And as unfortunate, like you said, most people don’t know about these programs that are available. And there’s just so many of them out there. And there’s so many opportunities to get assistance where you need it. When my father passed, I went through the same thing as you and you know, going through that whole process of you know, paying, you know, hospital costs and care costs and all the hospice costs. You know, there’s so much financial support out there for that, to reduce the burden of the cost of a family, you just but again, you gotta know where to look. And so we’ll we’ll certainly do a similar, you know, a session on this and try to help people, you know, figure out how to start planning for
Adam Taggart 1:39:50
these type of things. Yeah, so totally agree. And I will say, Look, I’m from a family of doctors and healthcare workers. There’s a lot of valid criticism to be slung out At the US healthcare system, but I gotta say, I mean, the amount of the quality of the care that, that my mother just got going through this is somebody with no assets was unbelievable. And maybe that’s part of the problem. And maybe we’re spending too much money at the end of life for really old people. But I will tell you, from a data point of one, you know, our family was just incredibly grateful for all that. And I will say to ICU workers, hospice workers, Blanche, those people are freaking saints.
Lance Roberts 1:40:32
They don’t do it for the money, let me tell you,
Adam Taggart 1:40:35
they don’t and the fact that they can come in day after day and treat people like royalty and see in many ways, you know, some really horrible parts of, of human existence and, and still be so positive and not let it crush him. It’s just I don’t know how they do that. But thank God, they’re, they’re doing it. Alright. So to wrap things up, folks, just a reminder, as I said I was going to do, we always encourage people to work under the guidance of a professional financial advisor and trying to navigate all of the issues that Lance and I talked about here. If you’ve got a good one who has created a personalized portfolio plan for you, and is executing it for you, while keeping you well informed. Fantastic, you should stick with them. But if you don’t have one of those, or you’d like to a second opinion from when he does, perhaps even Lance and his team, their real investment advice, then consider scheduling your free consultation with one of the advisors that Wealthion endorses to do that, just fill out the short email@example.com set up a consultation with these guys. Again, they’re totally free. There’s no commitment to work with them. It’s just a public service that these guys offer to help as many people as possible make decisions prudently now in advance of what might be coming. And with that, if you enjoy these, these weekly market recaps that Lance and I do that increasingly just kind of spiral off into the big questions of human existence. So do us a favor and show your support by hitting the like button and then clicking the red subscribe button below, as well as that little bell icon right next to it. Thanks, buddy. Thanks so much for being with me on this journey again this week. I really do value these talks, even if nobody watched. It’s my favorite hour and a half of the week.
Lance Roberts 1:42:14
Mine too. And we’ll do it again next week.
Adam Taggart 1:42:16
All right, everyone else thanks so much for watching.
Transcribed by https://otter.ai