and now again we've had this very very big run Market's overbought breath is deteriorating here a bit and now we're sucking in kind of the retail investor the retail investors are now starting to jump into the market kind of with both feet and that that's kind of that setup that we're going to get some type of reversal but that could be you know you know we could go another 100 points higher on the S&P before we have that [Music] correction welcome to thoughtful money I'm thoughtful money founder and your host Adam tagert welcoming you back here at the end of the week for another weekly Market recap for my I didn't come up with an adjective for you this week oh we'll just call it cranky today I'm cranky cranky okay my cranky good friend Lance Roberts portfolio manager of real investment advisors um well we you gave me the opening Lance why cranky because um you know I've been you know you and I we we really watch take care of our health and you know we try to eat right we try to exercise and I've had Ace for a long time which is coffee with a little bit of sweetener in it not a lot just a little bit of sweetener in it so I have now given up my last Vice which is sweetener my coffee so I'm cranky oh man and what's this for just you know just you read more and more stuff about the impact of sugar on your cortisol levels as well as your insulin levels and you know it's it's just uh you know has a lot of negative byproducts and so trying to take care of my health is just trying to give up one of my last vices so I'm cranky all right I get it man and that's tough um you know one of the one of the nutrition books I read early on that kind of you know set me on my my healthier eating plan had a chapter in it called sugar is the devil yes and I think if if you take that mindset actually uh it really does help uh you know begin to see you begin to become aware that sugar is in absolutely everything it's a really hard thing to try to get out of your system refine sugar well and it is and and you know and it it it really slow you know it's great like we have all these drugs now um you know to help you lose weight you know Eli Lily of course that stock just taking off to the moon on this whole you know this whole issue of semi Glu tiddes and it's all great it's fine and dandy that you know what these drugs do is just make you not want to eat and you know but we're not changing the dieting behaviors of individuals so as soon as they come off the drug they immediately gain all the weight back because that's just how the body reacts and one of the the biggest problems with trying to lose body fat is sugar because your body when you exercise it wants to it'll burn sugar first instead of burning fat so if you're if you're trying to lose body fat sugar is one of the worst things that you can intake to to break down body fat well absolutely and look this is a nutritional podcast but you know even if you have a little bit of sugar uh when you're eating something to your point your body says oh sugar that's the easy stuff right so it it burns that and then it just stores everything else that you're eating you know as F so even even even not that much sugar in your mind can actually still be a real forart to your plans if you really want to lose weight right and it's not even that it's not just sugar it's you know artificial sweeteners and everything else that the body well and simple carbs too which burn down into you know simple sugars that the body then Burns yeah and so so now I'm on this whole new this whole new agenda doing what's called carb cycling and you know that's where you know look you need carbohydrates to lose body fat which goes against a lot of you know kind of The Fad diets that are out there but you actually need carbohydrates to burn fat and so but it's important to make sure that when you consume your carbohydrates that you're consuming those carbohydrates on days that you're having really intense workouts because the body needs that to help build muscle burn fat Etc on days that you're not working out or you're just going to go for a long walk those are the days that you really cut back on your carbohydrates so this carb cycling and this is how you know when you see a lot of actors and actresses they'll lose a bunch of weight right before a movie that's what they're doing uh that's the secret to losing body fat really quickly is doing carb cycle um all right folks well look uh we're obviously changing the name to thoughtful Health welcome to the thoughtful Health podcast I know it's probably not of interest to anybody but it's but you and I but but you ask me while I'm cranky that's why I'm cranky all right well look as as you know you see a future podcast folks as Lance just gets thinner and thinner and thinner you know you'll know why now um all right well look well I'm taking the family to Greece this summer so I gotta get my you know my uh oh you're getting your beach body exactly oh nice um uh all right well look uh lots to talk about Lance you told me you got a bit of a time constraint today you said you weren't going to talk very much and I knew that that was only going to last about three milliseconds and here we are talking about you know carb cycling um but let's see um uh let's start with the markets um the run in the S&P continues um so I don't know where we are now but yesterday ended up you know well over 5,000 right 5,25 or something like that when I looked at it yesterday um so uh we're going to talk about the inflation numbers in just a minute but when the the January inflation report came out um the market actually had a little bit of a swoon didn't last very long um so it seems like the animal spirits are still in control here um uh what what are you seeing in terms of the momentum of the market well no that that's that's it I'm actually writing an article for Tuesday right now talking about why you shouldn't fear all-time highs and you know and it's always interesting because when markets are making all-time highs people are going oh my gosh you know the Market's going to crash now um no it's just you know this is a function of exuberant and it's a function of psychology and confidence and you know if we take you know we've talked about our technical indicators are you know running at very very high levels right now but you know that's part of that exuberance in the market you know people are just you know as an example um you know there's a stock that is you know had an announcement by Nvidia it's a it's a small cap Russell stock SM smci um which is like a little little little bitty small Semiconductor Company the Stock's up like 800% or something in the last three weeks I mean it's just gone just virtually parabolic it reminds me a lot of the AMC days when we would see AMC and some of these companies just go straight up as as kind of all the Reddit Traders start chasing and we're seeing that exact same bullish sentiment now starting to invade you know kind of some of the retail areas of the markets call options by retail investors on the Russell 2000 Index are extremely high right now so you know we're just seeing a lot of that that bullish exuberance people are just jumping into the markets you know the Market's just going to go up from here it's fantastic and and that can last a lot longer than you expect so don't fear all-time highs just understand that that's a function of psychology and we are getting rather late into this game you know this this type of attitude where investors are kind of throwing caution to the wind and just buying everything now is something that happens kind of late in that game remember this Market started rallying back in October back in October nobody wanted to own stocks you and I were sitting there talking about the extreme negative sentiment everybody was like oh this bare Market's back and you know it's they just going to go down from here we were like nope you know be careful when we get November December BuyBacks come back you got super negative sentiment this is all a good setup for a bull market run and we've had a very strong bullish Advance since November and this can continue for a while longer now having said that it's important important to understand that we are kind of getting into a seasonal period here February and March tend to be a little bit weaker so we could see this Market kind of flop around here consolidate a bit um and then we get another run into the summer now September and October wouldn't be surprised to see a five to a 10 per correction sometime this Summer that would be very normal uh a for the market just to have a correction right so it's not bad that's actually a good thing but normally markets correct going into a presidential election because we don't know for sure uh who's going to win the election so you know if Biden wins then I I kind of know what I'm going to get policy-wise but if Trump wins I really have no idea what I'm GNA get policy-wise so we could see markets sell off going into the election and then get back onto a bull track you know after the election once we know who the who the candidate who who the new president's going to be and then we can start pricing and what we think policies are it's going to be tax cuts or tax you know whatever it's going to be okay um so help me help me Square the circle then in the short term here because I hear you saying um Don't Fear The the higher prices they don't necessarily mean the system's going to correct hard anytime soon right um but then you say but you know we're getting really stretched in in in some of these technicals and we're seeing these sort of late stage signs that we oftentimes see in kind of a a top that then then gets reversed um so how are you holding those two things in your mind at the same time here they they sound somewhat oppositional well they do but just understand that a five to a 10% correction in the market you know like we had last summer um you know you and I in June July last year were talking about hey we're gonna have a five to 10 perent correction of the market um very similar to where we are today uh had technical indicators at very very overbought levels we had cinamon extremely high back in June July it was all about the artificial intelligence Chase and we were like Hey we're going to have this correction during the summer and we had that 10% correction completely normal by the way um but that was just that reset that reverted that big deviation between the 200 day moving average and where the market was we now have a bigger deviation between the market and the 200 day moving average that we had back then so a reversal back to the 200 200 day moving average completely normal very healthy for this for for Market um you know if it happened tomorrow if the markets went down to 200 day moving average tomorrow it' be about 4 40 4550 4600 um on the 200 day moving average so that's a 400 Point decline from you know where we are at 5,000 all right do do you want to pull up your your normal S&P chart here just so we can sort of see how much room there is to to fall if we do get that kind of Correction while you're doing that I'll me I'll mention and let you comment on this but so I grew up in New England in coastal New England and there were times of the year where the Bluefish would run and you know what they would do is they would you know Chase schools of fish into a an inlet or wherever the fish couldn't escape and then the blue fish would just was like Feeding Frenzy right um and you the Bluefish fishermen would say you don't even need bait during that time like you can just cast a naked hook out into there and be catching Bluefish because they'll just bite anything right are we kind of getting to that sort of equivalent in the market right now yeah in in a way yes um you know we're still we're still not seeing a a you know we're not seeing you know one of the concerns we have right now short term is the um so if you take a look at the number of stocks trading about and sry you glitched out there for a second we didn't get the keyword that's the concern what's the concern the concern is breath the breath of the market is is not fantastic if we take a look at the 50-day moving average the stocks above their 50-day the stocks above their 200 day moving average stocks above their 10 or 20day moving averages those aren't real healthy and those are actually the climing we have a negative Divergence between bread and the market itself which is typically a a decent precursor to having some sort of Correction and and so if you kind of look back at where we were last July we had a fairly big deviation between the market and the 200 day moving average this black line down here markets were overbought we were flirting around with the sell signal up top finally got that sell signal in Late July had the reversal back to the tday moving average and now again we've had this very very big run Market's overbought breath is deteriorating here a bit and now we're sucking in kind of the retail investor the retail investors are now starting to jump into the market kind of with both feet and that that's kind of that setup that we're going to get some type of reversal but that could be you know you know we could go another 100 points higher on the S&P before we have that correction and so you know this is what I'm saying about you know alltime highs those aren't things to fear it's just understanding that markets are very exuberant right now and we're eventually going to have a correction this is why on Monday last week we just started taking profits and rebalancing the portfolio a little bit just to kind of prepare for you know some type of corrective action in the markets when it comes all right so let me restate what you're saying then and see if I'm understanding it correctly you're saying uh be cautious right now because the odds of a correction and I'll put five to 10% in your words out there sure the odds are rising for that but but don't fear it in the sense that um oh that means when the market turns you know we're going to get some massive crash that's going to be the big one you're saying it it we may just have a a nice little corrective pause or or you know little dip in this run but then markets could could recover and go even higher yeah absolutely and and look this and again you know kind of the point what that I'm I'm really trying to make here is not to OV exaggerate your moves um you know I get you know generally when I say something like you know hey the markets are set up here for a five or 10 percent correction immediately I emails well why don't you just sell everything and go to cash and wait for the correction well you know the problem with that is is that the market could be five to 10 percent higher before that ever occurs and you know this Market's been overbought since really December of last year so if if I just acted on that notion say hey Market's overbought I'm going to cash and weight well I've missed all the rally in January and February by sitting in cash and and so this is why it's important for investors to understand what the risk is understand that there is a potential that there is going to be some corrective action in the future begin to take a few profit so in other words if you have a a position in your portfolio that's 5% of your portfolio normally and it's now six because it's had a big runup trim it back to five take those profits in put those in cash and then wait for a better opportunity and that's what that's what we are doing and when we do have a 5 to 10% correction we'll be looking to buy you know on the way down just like we if you remember last year Adam we were talking about in October you know we were buying stocks in October while the market was going down everybody's like why are you buying stocks they're just going down it's like because we're getting ready for a rally and I want to try to buy some of these things a little bit cheaper than they were you know back in January February so you know that you know use markets to your advantage don't be afraid of them use markets to your advantage to help you manage your portfolio longer term okay and in in managing your risk of the short-term correction that you think could happen here um are you primarily just selling some positions and building more cash um right now or are you using any other downside Hedges like I don't know you know puts or anything like that to to to cushion should indeed we get a five or 10% correction well not not yet because again the Market's giving you no indication that we're going into corrective mode so I don't want to start short okay so when we manage a portfolio there's a couple things we can do one uh the step one is kind of small action so step one is just to sell positions that are over Target weight bring those back to Target weight stocks that are under Target weight but that we like um you know maybe we add to those a little bit we just kind of rebalance the portfolio to get the volatility structure we want relative to the market um the second step is is to actually begin reducing Equity exposure so as the market breaks the 20-day moving average starts to maybe break the 50-day moving average now we start reducing we've got clear sell signals across the board now we're going to start reducing Equity exposure so this is where we go from you know 60 or 70% Target Equity to you know 40 or 50% Target Equity or 35 to 40 if the if the if the indications are that this is more than just kind of a normal run-of-the-mill short-term correction then we do what's called shorting against the box and that is where we then add short positions to offset long positions that we don't want to sell period right so there's there's companies that we will probably in our portfolio have no intention of selling anytime soon uh we'll be looking to buy those a lot cheaper but I can short against those temporarily to hedge off portfolio risk but that's when you're in a a much more uh directed decline in the markets 2022 really you know we had such big rallies in the 2022 selloff it was never a good Market to short against because as soon as you got a signal to short the market would take off running on hopes the Fed was about to start cutting rates and so you kept getting whipsaw in your short positions but if you get into a more normalized kind of bearish Market correction where it it's kind of just trending low over time that's a great Market to start start shorting against the Box okay all right um well look uh you know it doesn't seem that there's much that can really that has um diminished the Market's enthusiasm right now um as I mentioned we got the a few days ago we got the January uh inflation numbers uh CPI of course CPE um and they both increased more than than Wall Street was expecting right and um you know we can argue and everybody already is you know whether that's just a blip or whether that's a sign that inflation's going to be stickier uh to tame uh you know the last remnants of inflation are going to be harder to to get rid of than what's been brought down so far um but we don't know yet we'll find time will prove out but but that can't be super helpful to the FED right you know the the FED basically you know it had its its doish um JW boning pivot in December and financial conditions have just like completely loosened right um and then now you know the it's the official numbers that the fed you know says it it watches are kind of going in the wrong direction and so you know potentially and maybe sensibly well that might push out the arrival of rate Cuts right um and and you know maybe we'll get three this year but maybe they're going to be pushed further out in the year or at some point if if we continue to get more prices it may actually impact a number of rate Cuts right um but the market seemed to care for maybe a day you know maybe maybe not even quite a full day uh and then it said forget that who cares right so um I'm just wondering what what what's your reaction to the latest inflation data and is it meaningful and the markets just ignoring it the way that it did all through last year um or do you think this is just kind of a blip and yeah don't worry about it um it's it well in the CPI so we got two reports out we have CPI and PPI so let's talk about both of those so the CPI report and we even talked about this um on our radio show which was uh the day after we kind of went and analyzed that data and there was a big Divergence between shelter and actual rents and that's not going to stick around for very long and so the the shelter component of CPI went up a lot but the actual rent uh that people are paying is actually going down and there is a huge over supply of multif family apartments around the country on a national basis so rents are going to continue to be under pressure as that over supply of of of apartments are out there so we're going to continue and and as the economy slows down that pressure will also come down on rents so that anomaly between and that's what the market saw through so by the end of the day on on Tuesday the market actually recovered off the bottom fairly nicely so we sold off pretty sharply on oh my gosh CPI is too hot and so the fed's not gonna be able to cut rates so much and then by the end of the day the market said oh what that's that's not going to stick so they started rallying and then then of course Wednesday the markets were up pretty decently um Friday the markets were down early in the morning on the PPI report which also came in stronger than expected but again pay attention to what's going on with the data retail sales basically just took a a huge dive uh this week we saw a big decline in retail sales um we're seeing slowing economic data and other indicators as well the national Federation of Independent Business came in weaker than expected we're we're watching other indicators that are kind of more macro oriented showing signs of of still sluggishness and even some of the manufacturing indexes which did improve the internals were not great new orders and things like that employment were not fantastic so there's clear evidence that the the economy is slowing down that's provide more of a drag on inflation so most likely both of these numbers this month and again what you have to remember we measure inflation on a year-over-year basis so so all we're doing is comparing prices today to where they were this time last year and there's certainly some evidence we had strong retail Sals during during the holidays we've had strong economic growth in the fourth quarter so not surprising that inflation ticked up here a bit but that's like and that's a lot of that's due to all this Federal stimulus and federal spending that we're doing uh the increase in the deficit the chips act all that inflation reduction money uh this all kind of now hitting the economy we we've seen that tick up in economic activity so not surprisingly we would see a pickup in some of these inflationary pressures on a year-over-year basis but that's going to continue to wne as we kind of move forward it's going to be the the rate of decline in inflation is going to be slower than it was because we're not comparing year-over-year to a 1% increase in inflation we're now be comparing it to you know 0.2 to 0.1 and 0.1 to03 and these type of things so the rate of decline in inflation is still going to take longer but you know if you take a look at the three-month average of inflation you take a look at some of the other indicators out there like the true inflation index we're already below 2% on inflation so we're going to head towards that Target for the FED over the course of the next 12 to 18 months all right um I just want to note for folks too you just mentioned true flation there Lance um which uh it's funny I just talked about this um in the video I recorded yesterday with your partner Mike libowitz which actually is going to release after this video releases um but he brought up true infation as well and he spent a fair amount of time talking about how you know the current uh inflation measurement by the B BLS you know is highly distorted by you know her istics and all the monkeying they've done to it over the decades where true flation really does try to to map much more to people's just regular lived experience um so anyways uh I am interviewing the founder of true flation um I can't remember exactly when but it's in like the next week or two so I just want to let folks know that that interview is going to be coming on um had a lot of people like you Lance that that are citing true inflation more and more so I figured hey let's just hear from the horse's mouth no no I no I think it's great again it's just you know it's it's just another measure of inflation you know one thing that that I take a look at is I look at three measures of inflation so we look at CPI we look at core CPI and then I look at CPI less housing and healthare see what's going on there and the reason I exclude housing and healthc Care is is that for most of us right so I rent I rent my house right now right I've been renting my house here for a little over two years and my rent hasn't changed in two years I'm not paying more than I was two years ago I've not seen any inflation in my rent at all over two years why is that well because my rent was contractually fixed over the last two years now Adam you may be different because you were in a rental house and then you changed houses so your your rent may have gone up because you changed houses and maybe you you rented a bigger house or maybe it's a same siiz house but because of you know because of what's going on in the economy your rent went up right so but for a lot of people the two things that are fixed in their life and particularly if you own a if you own a home your mortgage payment is fixed that doesn't adjust every month to inflation and your health care costs are fixed because those are contractual so those just change once a year when you reup for your benefits at work or whatever there may be an adjustment to rental cost but but or health care cost but in between that your health care costs don't your health costs are fixed for a year so when you take a look at that index that index is actually still declining fairly decently towards that 2% that's kind of more that's so that includes everything that you know people about right so that's food and clothing and the stuff you spend money on every day energy cost all that that's still in that number and that number is actually still declining as well okay um all right so you you brought up the retail sales disappointing number that just came out yesterday um which the market didn't didn't impact the market at all and it's it's we're in this weird you know world where like bad news is good news right bad news means the fed's not going to uh not going to have to go back to tightening um but but even good news is sort of like well yeah inflation went up but if nobody really trusts the housing part of it anyway so forget that right it's just like kind like any news is good news right now in the market right and hey that's that's psychology that's that's that right there is all Market psychology and again you take a look at investor sentiment it's at extremely high levels investors are extremely bullish they are very much in speculative territory so again when they're in that attitude everything is good the you know if it's bad news oh that means the FED won't have to hike rates if it's good news well maybe the FED will have to hike rate I don't know you know figure it out but the market keeps coming up with excuses as to why these things don't matter uh the reason that PPI isn't going to stick is because of the retail sales data again you know if you look at PPI the biggest jump in PPI was Services cost which is going to ultimately get that's that's driven by retail activity so we're going to see you know that Services component probably come down in the next month or so okay um so I'm going to there's Direction I want to go with this and I'm just looking at everything I want to talk about um you're making it hard for me that you've got this constraint today but we're gonna get through as much of this as we can um just move quick yeah well let let's put the markets aside for a second because we kind of feel like it's not a super trustworthy indicator right now right it's just in full party on mode right right um so let's try to help people see where the puck is heading right um we had this disappointing retail sales I I think it was the worst year-over-year decline in retail sales that we've seen since like March or April of 2020 right which is when we started shutting down the global economy right so it's it's a little bit of an eye-catching stat now we when data point isn't a trend so we got to keep our eye out for this um but we we had that disappointing um drop in retail sales that that begins to just question hey maybe the consumer isn't as strong as we keep hearing about and maybe you know they're beginning to uh get near the end of their ability to continue to fund their lifestyle on the credit card that the way they've been doing you know over the past two years um I've got I've got a bunch of points here that I'm sort of working my way towards with this we'll get to it in a minute but I want to add to the retail sales disappointing number this stat that tax refunds are really coming in a lot less than expected um and here's a headline I pulled tax refunds crater a recessionary 57% sparking fears about a collapse in lowincome spending so basically if you're looking at the tax data that's come in so far this year um there have been fewer returns received that's actually a big drop it's like negative 19% year-over-year um but there are fewer returns that are containing refunds so only 19% so far versus 48% last year at the same time um so basically there fewer people that are having I guess enough income to have to do a to to to to pay taxes on those that are submitting returns have much fewer refunds than they did a year ago um and of the refunds that are being given it's a smaller average refund uh per return and that's down almost 30% year-over-year to date so what I kind of like about that data is that's more kind of like like real data right like if you if if you're paying taxes that means you must have earned some income right so it can you hold on there real quick though we're a little early for that data point what here's what mean um so you know look there's mid February I get it right it's only mid-February taxes aren't do that for 15th but we do know a couple things one we do know that tax um tax revenue has declined sharply over the last two years um so there's certainly something going to to your point there's certainly something going on on the tax income tax Side Of The Ledger there is less tax revenue coming into the government over the last two years years and and you know I I'll look at it over a two-year period to try to smooth out anomalies like late filing periods for California because of weather related events Etc so it Smooths all that out nonetheless the rate of of tax revenue is declining so having said that there is been a very interesting uptick I'm seeing a lot of videos and articles and you know getting questions from people going like hey I've never had to pay taxes before every year I get a tax refund and now I owe taxes this year so and the reason so the reason I stopped you was is that if there are individuals using things like Turbo Tax or whatever and they're like oh yeah I'm just going to whip out my taxes real quick get it out of the way get my refund early and all of a sudden it's like what I owe 500 bucks or owe a, dollar I don't have that now they're instead of filing their taxes they've got to wait to file those taxes because they can't pay the money they got to go try to find the money first so my point is is we may see a rush of filers closer to actual tax filing day if if if what we're seeing in the data is real and again I'm just all anecdotal here so don't go jump off a cliff and do anything just you know this is just anecdotal stuff I'm seeing I'm just saying is that if this trend is correct and and the reason people are owing more taxes because a lot of the tax cuts that were put into place under the Trump administration had a sunset provision and we've hit that Sunset so all of a sudden some of those tax cut Provisions are going away and that's impacting tax filers so we may see a rush of filings to my point to you Adam is we may see a rush of filings closer to April the 15 okay well we won't have that long to to find out I mean that's only two months away so we'll we'll know but certainly it seems like uh you know uh I mean humans procrastinate to the last minute anyways right which is why most people pay their taxes the night of April 15th or whenever the deadline is well you procrastinate if you owe money you don't procrastinate if you're getting money back well that's what I was about to say I mean what we generally see is if you're getting a refund well then you file early and and that period we do see now and I think that's why this article was written is it's really catching people's eyes which is like wow a lot fewer people are getting refunds and the refunds they're getting are a lot smaller so anyways you know that seems to um you know that with the the I mean who knows we we'll see if the retail sales continue to weaken um and there's a bunch of other data points I'm going to get to in a little bit um but you you put that stuff together and it it starts making an argument that economic growth is going to continue to slow um and that yeah you know maybe maybe uh maybe inflation will get under control um on the you know on a timeline the FED wants um I personally think it probably will but it's going to be not because of anything done this year it's going to be because of things that were done the past two years and it's the lag effect of all that beginning to kind of catch up with things here uh you're nodding a little bit here as I'm saying this so um I want to I want to get to to my list in a second but but before we do I I want to give you a chance to talk about the article that you recently wrote um about those divergences you know that you're seeing um and the uh the technical warnings that you're seeing in in some of your technical indicators um just one because I want to make sure you get those out there if there's stuff about that we haven't talked about yet but you ended that article with sort of four bits of practical advice for investors and I wanted folks to hear those sure yeah so I tell you what let me uh jump over to that real quick and let me just pull this article up and we'll share some charts just to kind of punctuate what we're talking about a couple of these issues will probably end as of the end of this week because depending on where the market ends we may not be setting a new High um but you know there there's still a lot of things are going on that are worth paying attention to so so first of all you know from a warning side of the markets as we've been talking about you know we've had 14 out of 15 weeks positive in the markets that's a very very long run and again this doesn't mean that we're about to have a big crash and that the markets are going to just fall off the cliff um it just means that we may go through a period of consolidation or or some weakness and and the last half of February and March tend to be week or months so this Market may just have trouble uh moving higher in the near- term until we work off some of this kind of more extreme positioning in the markets and again you know it's interesting now because when we look at the market where we are today and you know we talk about Ai and and talk about market cap of the AI versus you know the rest of the market for instance you know Microsoft Apple and Google have a bigger market cap together than like three of the three economies around the world so you know it's just it you know there's there's so much focus on this AI Chase of magnificent 7 and that's very reminiscent to the to the late 70s when we were talking about the nifty 50 and we had the nifty 50 running up and it was you know the these companies are driving the world and that was right before the 1973 74 bare market so again you know we kind of go back and look at similarities between you know today and the 70s you know we we see you know these kind of situations that are going on um I have a good friend of mine uh Albert Edwards over at sck genen um super nice guy very smart did a really great piece of analysis that I was going through and and this is what I'm talking about taking a look at the it sector of the market you know it's back to where it was in 2000 um in terms of market cap you know when you talk we talk about earnings we we've got companies that are beating earnings but it's all in the tech sector where we're beating earnings outside of the tech sector forward earnings are actually declining and getting weaker for companies and these are the companies that are really driven by the economy and consumption and what's going on so once you kind of get outside of the nvidias of the world and and and and companies that are kind of tied to that AI chase at the moment you know earnings aren't growing and and again we talk about valuations and what you pay for things and there's a big gap right now between what Wall Street expects earnings to be and what's actually happening with earnings there there's this big gap between trailing earnings what's actually reported uh for tax purposes versus what Wall Street expects there to be and again this kind of goes back to that whole valuation issue is that we're paying a lot more for stocks right now than they're actually worth and it doesn't that's that's not any any big crisis moment it's just saying that at some point there's going to be a reversal as markets have to repic for what's actually happening in earnings and right now that big gap is existing between the fed the markets which still expect the FED to cut five or six times that's got to realign itself at some point that's why I'm saying sometime this year we'll probably get a five or 10 Perc correction and that'll be because the market finally has to acques and cut its expectations of five to seven rate cuts to three and and if you're only going to get three rate Cuts that's a very different valuation story for the markets from hey real quick just go back to that that chart for a sec um and just asking because my brain's stuck on it um so the red line is forward EPS the black dotted line is trailing EPS is that time shifted so that they line up yes like another okay yeah so if I'm looking at that if I'm looking at the same vertical line it is the here's what we thought was going to come in a year from now now but here's what actually came in and we're comparing the two okay yeah so massive Divergence at the end there between expectations and what we're seeing right and again you and the tech sector is basically absorbing all the inflows of money so all the money that comes into the market again this is that mindless robot everybody's buying you know either the S&P which is market cap weighted or they're buying the tech sector index or they're buying an AI index whatever it is but those tech stocks are just absorbing all the inflows coming into the market so you got this hey real quick interject again just because of that point so important so um for folks that didn't see it earlier this week I interviewed Mike Green who is the guy who coined that term the giant mindless robot that that Lance just mentioned and Lance he said he said I'm now actually beginning to see what I've been worried about and he put up a couple of charts that show that the the net capital inflows are flattening and in some cases starting to reverse um so he said look I'm watching this really closely I don't know exactly what's going to happen from here but I just want to say that he sort of rang the bell saying hey I'm starting to see that thing that I've been fearing so we'll watch that really closely going on but obviously folks if those net capital inflows become net capital outflows boy that changes things well it does in a way right but you know this is one of the the interesting issues and this is what happened during the 2020 kind of correction that we had because it wasn't a bar Market as a correction um and and same thing that we saw in in 2023 or sorry 2022 during that correction in both of those events you never had people dumping ETFs in mass and so while a lot of these big cap stocks came down some you know if you if you go back to 2022 as an example A lot of these little small tech companies we we talked about Arc and the you know those disruptive technology companies yeah they got destroyed they got destroyed they were down 80 90% most of the big cap names they were down 20 25% you know maybe and everybody's like oh Fang's dead but nobody was actually selling their ETFs we never saw that that regurgitation of money flying out of ETFs that's what's going to ultimately have to happen if we're going to get to the if we're ever going to see another 50% downturn something's got to happen that gets the average retail investor to go screw it I'm out I'm selling all my ETFs that's and then that reversal of flows that Mike Green's talking about he's absolutely right that 35% of the money that goes into goes into Apple Microsoft Google the top 10 stocks that's when you see that reverse and those stocks lead on the way down and then that that just is the giant sucking robot that just pulls everything down with it but you've got to get the selling to occur in those companies and that's going to be a function of ETF dumping by retail investors so uh lastly just real quick on on this is that you know Global Equity risk love right we're we're in the massive Euphoria stage so again just wherever you kind of look you know the market is just really you know investor sentiment extremely bullish um you know and this is the what I was talking about earlier about the number of stocks on bread that bread is deteriorating so this is that deterioration of the bread relative to uh and this chart is courtesy of of signal sigma.com so they they do they put this chart together but um this is that declining in that sentiment versus the market that's continuing to go up so as that bread deteriorates that's that negative Divergence that suggests normally that's where you begin to get a correct and you can back over here this is where the market started correcting in July we had that the market was still going up and the breath was declining and then eventually the market caught onto it right so you know we're we're it's more protracted now uh than it was back then and so that's what I'm saying is like we're likely going to see some type of of corrective action occur you know probably sooner rather than later so again it's why it's worth paying attention to all right now scroll back to the bottom um because you you kind of rang a bunch of warning Bells here but um I think you give some pretty good advice to investors at the bottom of this oh oh yeah yeah sorry I know that I forgot about that so yeah you know and this is this is what we were doing in our portfolio this week um and really this is the the the kind of the points that we're talking about here is you know we we win our portfolio and this is the the actions that we kind of follow which is take look at your winning position stuff that's been doing great if it's supposed to be a three or four or 5% position in your portfolio it's easy for us to go oh this is going up I'm just going to let it run forever and it gets to be a much larger piece in your portfolio so then when it eventually corrects and it will it become it it does more damage to your portfolio because it's too big of a position relative to your portfolio so this what we call concentration risk so you know it's easy to get greedy and allow these positions to to creep to be larger positions portfolio than they should be on a risk basis and that's why if you ever look at any great investor throughout history they always do position size management and and they always measure their position sizes because that's where risk comes from so if it's supposed to be four or 5% of your portfolio or three whatever it is and it's now larger than that trim it back to its original weight so now you take a little bit of profit off this just a great way to take profits right we just trim it back to what it's supposed to be it's like going out to your garden and you've got tomato plants you don't pull the whole tomato plant out of the ground to to get your Tomatoes you just pull the tomatoes off and that's what you're doing here um positions that aren't working um if they haven't been working in this market and this Market rolls over they're not going to work in a down Market down Market either so these are stocks that you either sell entirely or reduce or you know replace with something else but there's something going on with those companies that the Market's not tacking onto and when you've got a market where everything's kind of going up together and they're not that's something to pay attention to move your traing stop losses up we use like you know we use moving averages so depending on the stock we may use the 50 or the 200 day moving average we look for those previous levels where the stock continually kind of bounces off support um if it breaks that level of support then it's likely going to go down lower so you can use a a moving average as a really easy way to establish a stop level uh for your stock and then just review your current allocation it's easy to get kind of out of whack to what your goals are because we all get excited trapped up in this bar oh I need more I want more and more return um but then you go back and what was my original goal my original goal was I just wanted to create you know four or five percent growth in my portfolio and I'm really getting very greedy here I need to kind of go back to my roots a bit and rebalance my risk relative to what I'm trying to achieve and if your goal is not to lose a lot of money measuring that risk relative to your portfolio um will keep you out of trouble more often than not and let I'm curious I I know that you have um folks on your team who are um kind of the Frontline when somebody reaches out and says hey you know I want to talk with you guys about uh potentially working with you you're more the portfolio manager who's determining how to allocate the the client portfolios but um I'm just curious are you seeing any sort of increase um what are you seeing right now in terms of the sentiment that are folks who were calling you up are they nervous about how stretched the market is or is are they more like fomo is like oh you know like I my brother-in-law is making a ton of money I want to make a ton of money too right now no it's actually the function that over the last couple of years they were got super bearish right because the world was going to end and they were in the bunker and you know everything was terrible and and the debt was going to destroy the markets and you know and and you you know I had these conversations about that really bearish kind of sentiment that was sitting out there by a lot of a lot of you know kind of commentators and so people that kind of bought into that narrative have been sitting in in cash or you know a bunch of precious metals or whatever and they're they're now realizing that they're missing an opportunity to grow their money and so now and this is always the case right it's always that reversal of of sentiment they're now going okay I made a mistake doing that and now I need to get back into the market so how do we how do we go about doing that remember you and I had this conversation around bonds everybody was jumping into short-term treasuries going I just want the 5% yield and now the the markets are going up 5% in two months and they're realizing they're in the wrong place so now we're starting to see that sentiment shift where look I've got to get back in the market I've got to be more rational about my investing so we're seeing a lot more of that okay okay um and of course uh you know as we always say making any decision you know based on strong emotion um is usually not a good decision um you you want to make sure that you're making a a a very planful you know non- emotionally charged decision um and do a the question I want to ask you Lance is is is does this tend to be this a late stage sign right in other words like do do do people who have been resisting getting into the party because they were they they doubted the reasons for the party and when they finally start to capitulate how often does that kind of being like breaking at the right at the wrong time where you jump in right as the part's ending well that's that's why you know when people show up we don't just go throw them into the market right away because that is typically the case you know look we you know prior to when we were you and I were having this conversation back in 2018 2019 you know as well is that you know we had people showing up then this was prior to the pandemic that had been GFC yeah since 2009 and like okay I've got I've got to get back in and then of course you know then you have the big crash um but yeah you know that's it is it's it's a function of that change in sentiment that eventually you know and this is why we're so you know just every week you know when we're here we continue to kind of I know it gets annoying but you know we kind of continue to pound that drama you know be careful with these one-sided bets where you just kind of Bank everything on on some type of scenario occurring because you know for instance a good example was dollarization you know we're gonna have this big crash in the dollar and it was because of all these reasons and the dollar has been rallying strongly ever sense and you know so everybody that made that bet on dollarization you know missed you know everything else that occurred after that so Brent Johnson would say they had their milkshake drinking yeah yeah exactly and and and you know and and that's you know you and I've had this conversation but that's the problem with one-sided beds there's nothing wrong there's absolutely nothing wrong if if you have an inherent belief that the debt or the deficit or something is going to be the end all scenario at some point it's going to you know it's just going to cause Mass Devastation there's ways to play that to where you can take a very small portion of your portfolio and use a position that if you're eventually right it's G to make you a ton of money and if you're wrong it's not going to hurt you right so there's ways to do that with the options Market we can bet you know we can buy long-term options on the dollar or the you know hey I think the I've got a client of mine who's who's very pessimistic on the markets super nice guy very intelligent but he's got this kind of long-term very bearish attitude I'm and so finally he and I came to an agreement I said here's the deal I'm going to run the portfolio but I'm gonna buy you long-dated S&P puts so in the event that you're right and I'm wrong I'll be getting out of the market when the markets are crashing but that put we're going to buy that insurance that's out there it'll kick in for you and it'll make you a bunch of money if that happens and you know that was that's a way to to hedge some of those more bearish bets on the market market so you can do that um it's just a function of of you know figuring out what it is you're trying to do and try to size it properly so that if you're wrong because 85% of the time the markets are going to go up and you know so you got a 15% chance of being right in your bet and you can size that bet where being wrong doesn't hurt you well and that's if you're bearish but I think the argument holds on the bullish side as well too right if you're just overly bullish and you have a one-sided bullish bet you're open to the same risks sure um the the the mindset maybe this worth talking about for a second I think the mindset to cultivate and you're the capital manager here so you correct me if this is wrong um is look so humans hate taking losses and research is super clear on this that we feel the pain of a loss twice as intensely as we feel the joy of a gain right yes um and so humans tend to be very like levere and so what most people do is they come up with an investment philosophy of saying which way do I I think I'm which is the path where I think I'm not going to lose right where I have a greater chance of not losing and then I want to put all my chips there right because I'm being influenced by my emotions to try to avoid loss right where I think to be a successful long-term investor you have to get the mindset of hey I'm G to lose I'm G to take losses every day somewhere in my portfolio because I'm diversifying it and I've got you know strategies that'll do well in in one type of market and strategies that'll do well in a different type of market so I've just got to get comfortable with the fact that somewhere in my portfolio I'm going to be taking some losses now the the objective here is to be taking more gains in other parts of your portfolio uh on the same day and that over time you know your gains are outweighing your losses and so you've got net gains that grow over time right and and I think a lot of humans have a tough time thinking that way so you know it's really important from a mindset standpoint to say yeah whenever if if if I'm investing you know intelligently I'm going to see some red on the screen practically every day I need to emotionally get ready for that um and of course if I'm just not seeing more green than red over time well then yeah there's something wrong with my strategy but you you just got to be comfortable losing some in places it's just part of what comes along with the territory do you agree yeah no absolutely and and there is a problem with that strategy uh today that didn't exist prior to 2009 and and sorry with which strategy the divers one or they single bet no no I well both but it's been easier since 2009 it's been easier to be a single bet on the S&P right well absolutely because you've had the put you've had the Tailwind well that that's right and and and so the problem and and and you know in the uh you know in my presentation that I did for the economic Summit Adam you'll remember I I showed you know the S&P and the NASDAQ versus gold the dollar Commodities you know everything else and everything else so let's say I built a portfolio back in in 2010 using this diversification strategy because see diversification is Harry maritz that's modern portfolio Theory late 1970s Harry maritz does this groundbreaking study on Modern portfolio Theory all about diversification and specifically I mean it's exactly what you just summed up which was you have a little bit of loss in your portfolio over here but you've got gains over here and over time those Diversified assets because one's going up and one's going down and hopefully the ones that are going up are going up more than the ones are going down but over time you outpace markets over time because of this diversification and the rotation that occurs within markets the problem is is that since 2009 the FED has killed modern portfolio Theory because of zero interest rates massive liquidity not just the FED but also the government $47 trillion Worth or $43 trillion worth of you know monetary inputs and zero interest rates has led to this massive Divergence between the S&P and everything else so if if you've had this Diversified strategy you vastly underperformed domestic it doesn't mean you lost money it just means that you vastly underperformed what just being invested in the S&P is that's what's made it really really difficult for investors to run a diversified strategy because they're watching this Market go up every day and the bulk of their assets aren't performing I I tell you I see this all the time even with my clients is that you know we run a diversified portfolio in a way right so we've got stocks and bonds and you know it's it's when things are doing great they're happy with the things that are going up but you I get phone calls like well this one position is not working why don't we get rid of it right everything else is going up why is that one position not working you know that's just the environment we've gotten ourselves into by you know attaching ourselves to the mainstream media and watching the markets every day it makes it very very difficult for the average person to run a diversified strategy which is good and and Adam I'm agreeing with you that a good Diversified strategy is what you should do the problem is is that the media doesn't allow us to do that anymore and the FED because of this High correlation that we have now between the markets and fed policy right and and you know we had a really good I guess demonstration of that in 2022 where both stocks and bonds and almost every other asset it went down right and so the the the um negative correlations you usually count on to counterbalance your portfolio but but I just want to underscore uh I think you still agree with the point I made and I don't think you're telling people to concentrate I think you're telling them to to have an intelligent balance of different Assets in their their portfolios but want to give you the chance to really Hammer that home well no I'm just saying is that you know if you're going to do that you know it's it's you can't so for instance you know you can't have a port you can't have a portfolio today at the moment that is 25% stocks and 75% other stuff because you're going to vastly underperform the index and you're going to wind up selling all that stuff to buy the index probably at the peak of the market when the other stuff would eventually worked so you know that's so you've got to keep these bets that you make well aligned with what the probability sucess are going to be and again this is all about measuring risk and reward so this is why you know we do so much analytical work like in our weekly newsletter uh that you're now publishing on your substack we have all these analysis that we do you know at the bottom of the newsletter about risk reward ranges and and Market sector relative performance this type of stuff to measure that risk reward that you're going to pick up by adding some you know potential bet to your portfolio to capitalize on a small probability event so it's important to it's okay to have this diversification but you have to make sure and the waiting is incredibly important to the overall portfolio structure okay so you're you're kind of making a point here for I think diversification plus active management right which is if you're gonna diversify you gotta have active management that's the whole point yeah yeah well well but not a set it and forget it I'm just going to have 25% stocks 25% right you're basically saying hey look you know you you got to have somebody there who's really like looking at all those different uh uh divergences and performance and saying hey you know I might need to to concentrate a little bit more in this part of the portfolio and reduce a little bit here but but then be ready to change if if things on the ground change okay would' love to keep digging into that but I I'm I'm really sweating the time here now so um you know I I told you the other week that I went on Fox Business and it was so funny because um you know my first like major uh mainstream TV appearance and I I I didn't want it to be like a total disaster so I wanted to plan for it and uh I I uh as the date was getting closer I said what do you guys want to talk about and they said well we're not really sure and I said well how about I give you a couple of ideas and you can decide what you want and they said yeah that'd be great so I sent them five ideas and and they responded yeah these are wonderful I was like wait wait wait no no no you're supposed to pick one of those I got to prepare right so I prepared this whole thing this whole list of bullets of course TV being TV they actually asked me something totally different than what I planned for and in two and a half minutes you can only I probably only got through two of the bullets on this whole thing um but I thought it was worth it to go through this and I think these this you know weekend video with you is the right thing to do it um so my point was sort of um look uh we're all being told how strong the economy is and how we're in Goldilocks and how um you know things just look amazing and we're hearing that you know in all the headlines but we're certainly hearing it from both pal and Janet Yellen um and my my point was look if this isn't feeling like a strong economy to you personally right if if if if this is a part of the economy is is is having and you don't feel like you've been invited to it like you're not alone and actually you're you're you're not crazy either so I pulled a bunch of stats and I just want to bang through a bunch of them and then I'll I'll let you respond to them Lance um but mostly we hear that look inflation's coming under control the stock market's at new highs GDP is growing faster than folks expected and the job market remains Wicked Strong right um so let me just let me just unpack some of those for a minute so um okay yeah inflation is down in the the threes now right um so okay yay it's it's coming down but of course a decline in inflation still means prices are going up right I mean as long as it's still a positive increase in inflation prices are still going up they're just not going up as fast as they were um so uh consumer are still reeling from the explosion in the cost of living that we've seen you know since the pandemic and and those trillions and trillions of of stimulus that you mentioned their Lance um 60% of Americans report that they're living paycheck to paycheck groceries are up 25% since 20120 um and these are using official numbers I think true flation would probably have higher numbers um and uh and pre-co it was going up 2% a year right but now we've had 25% in in roughly four years um housing cars Insurance utilities they've all seen similar double- digit increases some actually a lot more than what we've seen in groceries so like we definitely have taken the injury of our cost of living's gone up substantially uh but wages have not not cut up U they have not increased at the same amount now we have had recently um positive wage growth um but 60% of workers report that their wages have not kept up with the cost of living all right so we're hearing how great things are on inflation but we're just saying look you know I'm I'm not seeing the the calry coming anytime soon um yeah stock markets has hit new highs which is great but as we've talked about who owns these right uh 93% of stocks are owned by the top 10% of households so the increase in the market isn't super directly relevant to most people out there um we're now at the part where you know this this increase in in financial assets uh is rewarding the top households so much that we have you know the worst wealth inequality that we've had in like forever we just passed the Milestone where the top 1% of American earners now own more wealth than the entire middle class right um uh and how healthy is this market and you just you know talked about this right it's got some of the weakest breath that we've seen ever um Equity risk premiums are super low and if the lag effects from you know all the things that we've talked about in this channel Lance the rate hikes QT you know all this stuff uh starts really hitting uh in force and corporations are are forced to start uh cutting cost to try to preserve their margins you know that that could turn stocks around in a hurry right who knows we're going to keep we're going to track it but but basically just saying the Spectre of the lag effects is still hanging out there the GDP growth yeah we've talked about how GDP now you know keeps going up I think it's still over 4% uh for for q1 right now in terms of their predictions um that's 2.9 as of yesterday because of the retail sales oh really okay so that did just roll over okay so interesting um so 64% of all employees say they're stressed about finances that that jumps to 90% for Millennials aged 35 to 44 right um housing's more unaffordable than ever we know that this stat blows my mind home prices are unaffordable in 99% of the nation for the average American right just bananas um it's all also now unaffordable for a record half of all us renters um so as a result we're seeing consumers um struggle to to continue to fund their Lifestyles and they're putting more and more of it on credit as we've talked about the explosion and and uh use of credit cards at uh record high aprs on those credit cards and we're seeing the rise of of new forms of um ways to finance like buy now pay later um which is a clear sign that consumers can't afford their purchases and the colloquial uh language we're now hearing terms like Doom spending uh emerge right which is where people are just so depressed about their prospects that they're kind of paying for treats now because I may as well do something that makes me feel good today even if tomorrow is going to suck worse right um and uh delinquency rates on credit cards and auto loans have spiked to their highest since the Great Recession even the wealthy are starting to cut down on their spending um we're seeing luxury Brands um start uh beginning to see uh profit disappointments um so there's there's a luxury Showdown which I know almost no viewer here is going to shed a tear for um but it shows that uh that that cohort of top Spenders are even beginning to sort of tighten their Pur strings a bit uh and a lot of data has suggested that they've kind of been what's continued to support consumer spending up until recently so you know maybe those people who were willing to spend the most are starting to spend less going forward um and then of course we've got the corporate maturity wall That's hanging out there um and uh I think there's roughly two trillion of corporate debt that's going to rate this year and next year alone last and then I'll I'll let you talk here the strong strong jobs Market um so uh layoffs are increasing there actually uh there were 98% more layoffs in 2023 than there were in 2022 uh but the activity uh in 2024 has picked up uh vastly faster than the rate of layoffs in 2023 itself um we've seen tens of thousands of folks already laid off in 2024 and those were across a whole range of Industries a lot of small companies but big ones too like alphabet Amazon City Group Charles Schwab Levis UPS Washington posts um if the pace of that picks up from here then everything that we were worried about just gets worse right if consumers start getting laid off in enough volume that that either they they can't spend because they've lost their job or they see their neighbors lose their job and say ah you know that could come to me I'm going to start saving more that just creates that vicious cycle of of less consumer spending going off um almost done um official payroll numbers from the BLS um you know I think nobody believes them anymore even the people that that used to cheer lead the BLS are saying I can't defend these numbers anymore um and we talked about the difference of the the latest BLS service with survey which had the amazing you know huge surprise in the 353,000 new jobs as reported by their establishment survey but then you go and you look over at the household survey it says we actually lost 35,000 jobs right um quits or declining which is showing that power is Shifting back to the employers um and uh uh the economy is um now 68% consumer spending um so end of the story here for everything I just mentioned here you know there's a lot of consumers that don't feel like they're part of this party they're not doing so hard and as as as consumer spending goes so so goes the economy so the whole point here was just basically to say look um if you're feeling like everybody's talking about this massive party and you feel like you got an invitation to it you're not alone the vast vast majority of the company is a country is in the same boat as you so I'll stop here and take my breath but I mean that's a pretty big preponderance of of data that says you know things aren't as perfect as we seem to be being sold here well they're they're not and I don't think you know none of that's really a surprise and you know ultimately it's it's going to matter it just doesn't matter right now because the markets are all enveloped into this you know AI Chase and uh the markets are going up so I want to be in the market and again you know when we talk you know you and I we're talking about markets every week and we're talking to a very small group of people I mean people that don't have any money invested they're not watching thoughtful money I mean they're they're doing other stuff today so you know people have money in the markets or they're concerned about their finances they're the ones that are watching you know this channel to make sure that nothing's going to sneak up and bite them that's going to ruin their retirement but that's a very small group of the population I mean I don't think people really really understand that if you have more than about 300,000 in the bank you're in the top two or three% of the population in terms of wealth you know and and you talk about you know 250 300,000 it doesn't sound like that much money but when you look at the average American and and we we talked about this I think last week I wrote the article about retirees taking on so much risk you know for retirement and you take a look at AC cross age brackets individuals think they need you know one and a half million 1.6 million to retire on and across all age brackets they all have less than $200,000 saved up for retirement at most so you know there's just this this you know when we're talking about markets and money and all this this has nothing to do you know there's this huge Detachment between what's happening in the markets because that's reflected in in valuations and what's happening in the real economy and those those two will eventually meet up at some point um at some Crossroad down down down the way and valuations will matter they just don't matter right now um you know I did an article today it was very interesting I thought you know cherome pal made a very interesting statement you know talking about un talking about employment and you just mentioned the employment numbers and that you know we have this big Divergence between the household survey well we also have this big Divergence between native born workers and foreign born workers we have a very big Divergence you know almost all the jobs created have either been government or temporary work um we're not and we talked about about full-time Employments declining I thought it was interesting Jerome pal said he was in an interview on 60 Minutes and Scott py asking he says why is immigration important now and now importantly we don't none of these conversations when we talk about immigration we never separate between legal and illegal immigration we just call it immigration but pal made a very interesting statement he says because you know immigrants come in and they tend to work at a rate that is at or above that for non-immigrants who came came to the country immigrants who came to the country tend to be in the workforce at a a slightly higher level than Native Americans so in other words what he's saying is is that nonnative immigrants that are coming in those workers they work at a higher rate in other words they work harder than average Americans right which which makes sense if if you fight to come into the country legally and go through all those Hoops you're doing it because you want to come here for the opportunity right but it's also on the legal side as well sure because they work for lower wages and this is something that we're seeing even the CBO uh recently did a study and they they said look when we talk about how employment works I'm just going to quote to you a couple of points from the CBO they said reductions in employment would initially be concentrated at firms where higher prices quickly reduce sales so that's where inflation makes an impact so where do they start cutting uh expenses the most important part which is layoffs that's what you're talking about so overall longer period however firms would replace low-wage workers with higher wage workers machines and other substitutes so again this is where why AI is so important this is why robotics is so important because we're replacing more and more of our Workforce with Automation and particularly in areas that can be automated like low W lower wage paying jobs manufacturing assembly work etc even if I'm going to onshore that I'm going to automate most of it because again I've got to reduce that cost of Labor as employers pass on those costs to Consumers consumers purchase fewer goods and services so that's inflation inflation goes up I buy less that impacts profitability for corporations so consequently employers produce fewer goods and services they spend less on Capital expenditures and when the cost of employing low-wage workers Rises the cost of in investing in machines and Technology goes down so you know as as as American workers start asking for higher minimum wages and all this they either get replaced by automation or they get replaced by lower wage workers which and and when you talk about where's all the jobs been created it's been where at them it's been in Leisure Hospitality retail fast food services and that's where a lot of this illegal immigration right the lowcost laborers yeah they they are lowcost labor and they're taking those are very for Native Americans that you know when you talk about 16 to 25 years years old their first job out of high school tends to be at fast food restaurants right they're lme cook or whatever they're doing at at Burger King or McDonald's that's their first work experience those jobs are not available to them and now we're seeing that translate up in into the into the workforce this whole article about that I wrote on Friday is talking about there's been numerous articles The Wall Street Journal uh business insiders and others are are having writing articles talking about these college students that are graduating cannot find work right which we talked about I think last week I mean I'm I'm seeing that in real time because I've got you know college age daughter and I'm seeing you know a surprising number of her peers who who are these were kids who really succeeded in college right coming out of a stem school and still having trouble finding you know entry level work uh where and I think in previous business Cycles these kids would have been snapped up you know almost at a sight on scene um all right so um I had a rant probably not going to get a chance to get to it because I I want to mention this which builds off your your recent Point here is um we're trending into a different topic you know the topic I wanted just to underscore with with with everything I just ran through here which is that when we talk about where the Puck's headed and I think you agreed with me Lance which is the market is quite disconnected from the trajectory of the market is is quite disconnected from the trajectory of the economy they're going to have to meet up at some point when that happens who knows I'm not you know I I think most of us would love for it to happen this year so we can just get back to some sane area it might not happen for a decade or two who knows right um the the video that I I released before this one is with Chris Hamilton of the the website um uh economy and um he is this prolific chartist um in Lance I don't know if you recognize the name but you definitely recognize his charts if you've seen him you've seen them all over Twitter and and Zero Hedge in a lot of the places that we you know your contents shared um and one of the things that he really focuses on is demographics and so we did a deep dive into US demographics and he he basically showed how um economic growth super highly correlated with your population of workers in the 25 to 54 age band and uh and you can see you know over the 20th century we were growing the absolute number of people in that age cohort I think up until I'm doing this from memory but I think up until like the 80s um and it's been declining ever since and as it has declined the the amount of debt that we've taken on has head to continually increase and essentially what we've done is we've we've switched from using people power to power our economy to to uh using debt to power economic growth and you know know using debt to power economic growth is pulling tomorrow's Prosperity into today so you're kind of stealing from your future and you get to uh you know uh diminishing returns where you need to have more and more debt to get the same amount of economic growth and eventually you get to the point where you know the that is just making the problem totally worse right so you're you're you've got your own charts that seem to be very similar of all this so it's great I feel like I'm preaching to the choir so what was what was critical about his charts is he said look if you look at um births and deaths in America um right now if status quo continues by 2035 we're going to have passed the point where where for the natural population of the country we will start shrinking never happened before in American history um and if you look at the current uh inflows and outflows for immigration both legal and illegal all of our population growth coming after 2030 is going to come from some form of immigration and even that will start declining by around 2050 so we're not that far away from the the period where you know we're not going to be growing our populace anymore and of course during that that trajectory as you've shown um one of the big things that's driving that to this chart is is we're just having a lot fewer babies and that's largely because the younger Generations it's just become a lot more expensive and a lot more uncertain and so the younger Generations are are are forming amilies at a lower rate uh and they're having fewer births um but that that that key cohort of 25 to 54 year olds keeps on shrinking as time goes on here so you had a this chart here which shows that our our elderly population uh the percentage of the population that's that's older and and increasingly unproductive is exploding right now right so where I'm kind of going with all this is it it just begs the question of how are you going to grow your economy when you're population becomes stagnant when your your population of productive workers is you know in an advanced Decline and you've gotten to the point where debt can't help the situation anymore right so we we you know we're going to have to reconcile that Pro problem that massive problem in the not too distant future you know a decade or two away from now yeah feels far away to some people but but historically that'll be here in the blink of an eye that's a big conversation we when when that requires more time than we have here but sounds like you are concerned about this sort of date yeah this deadline with with demographic Destiny well look there's an old saying it says demographics are Destiny and and look if you want to grow an economy you grow your population because the more population that you have that's of working age and consumption age that's where economic growth comes from We're 70% driven by consumption so if you want to grow the economy more people producing again in order to grow in order to consume we have to produce first so we need more people producing and when they produce more then they consume more and so that's what creates economics the problem is that you know there's no argument let me just be clear right now there is absolutely no argument we have to have immigration because we are not producing up children this is China's problem they've got this is Japan's problem Japan just went back into a recession so the reason that they have they have a demographic problem that's why they can't grow their economies and so at some point we're going to have to incentivize Americans to have children how do you do that well you give them tax credits tax breaks whatever you want um in order to incentivize them to have children unfortunately we have the Mi generation going on right now and you know younger people are like I don't want kids this is all about me I want to go live my life I want to travel I want to have big cars and houses I want to do all this stuff I see on social media well that but but you're going to have a bunch of folks saying hey I'm a millennial and it's freaking expensive and hard to have kids so it is keep that in mind yeah it is but you know you make you make doe right I've got four so I I never wanted kids but I've got four so be careful what you risk for um anyway you know but the point is is that we've got to have immigration the problem though is that we can't have illegal immigration and the reason you can't have illegal immigration is because you you import lower skilled lower wage lower education workers you want immigration that is legal but Merit Bas in other words we want to encourage people to come here that have higher levels of Education come here with capital uh they create businesses they employ other workers that's the type of immigration you need uh when President Trump was in office this was one of the things that he talked about in terms of immigrations having a merit-based immigration system to import those workers we have a we we we educate a vast majority of the world's doctors and engineers and everything else and then they go back home to be doctors Engineers Etc in other countries they go to MIT they go to Harvard then they go back home we want to retain those workers here unit States we want to retain that education it's just start to interrupt I agree one of the problems is is a lot of those guys want to stay here and they can't so we have policies that are actually pushing those guys away right now that that's well that's absolutely right and this is the problem with the immigration laws that we have we do need to rework our immigration policies to make it easier to immigrate I mean look there's a lot of things you could do and we talked about this before but you know if you come here to America and you create a business that employs 10 people over the course of five years you get your citizenship you come here and serve in the military for five years you get your you get your citizenship um you come here and you bring capital and create a business or you come here and and have your bring your education your skills you work for a company for five or 10 years you get your citizenship you can make the pathway to citizenship much easier and much less expensive it is so expensive I've immigrated people here before and it is so costly to go through the immigration process employers like me just don't want to pay for it it's too time consuming it's too expensive and it's and you know even though it's worth it the problem is is that once they go through that immigration process you sponsor them and you pay for it and it's all the the the the cost then they leave and go get another job somewhere else right once they're a citizen so you know it's very difficult to be an employer and you need to remove that barrier and allow employers to hire IM immigrants on a a a merit-based system and says hey I want that education to come work for my company make it cheaper make it easier make it faster for them to become a citizen so they'll stay here they'll pay taxes they'll raise families they'll they'll encourage employment those are the type of things you need to grow your economy long term all right so I totally agree with you and and I I hate the fact that we got to wrap this up quickly because this is such a a key key important topic and folks I I I do commit to Bringing on more Specialists to sort of talk about this key uh immigration issue be because you know the whole point of this um and I'm going to turn off your chart here Lance um the whole point of of this is if we if we want to grow our economy um then we need to uh we need to address this shrinkage we have of key working age uh American productive Americans right or or productive citizens um and to to do that we have to pull the levers that Lance talked about here right we've got to we've got to provide incentives for for folks here to have more children um but it seems pretty clear from the math side that if we want to grow if we want to continue to grow our economy we are going to have to to patch a lot of the gap for some foreseeable part of the future measured in decades by immigration so you know the question is is what immigration strategy is going to best serve us and I think that's the really important part of the discussion we want to have here um we'll have that in the future go ahead right but real quick there's one other really crucial point to this that that you can't Overlook and that is our social security welfare kind of our Medicaid Medicaid system um we had 16 people paying into Social Security when it was first formed we have less than two now and we keep adding more and more people to the role just this past week the Biden Administration rolled out a a policy that will now allow Arizona and Oregon to tap $1.5 billion doll worth of Medicaid to house the homeless right now I am not against housing the homeless but again what we've done over the years the reason that Social Security medic Medicaid is always underfunded and is on the brink of bankruptcy and these are all the conversations that we have cons consistently is that we keep adding more and more people every time there's a special class of people we want to help we stick them on to welfare and that just puts more people taking money out of the system than paying in so we need to bring in these high and again when we talk about immigration we need higher skilled higher wage earning individuals because they pay more in taxes yes illegal immigrants pay taxes but they pay it at the lowest level because they're lower wage earning individuals so we need higher taxpaying individuals that will pay in this welfare system to help support it long term so you need that population growth but you know we can pass you know a hundred billion dollar bill to on Ukraine but we can't pass a20 billion Bill to house the homeless you know but instead we're going to attack it onto Medicare Medicaid which is essentially an 80 trillion dollar unfunded liability and we just keep making it worse so so you're making my point for me which is there just this massive amount of policy reform that has to go along with this both in terms of who we bring in but also how we spend money and allocate it internally and you're right we've stolen from Peter to pay Paul for for so many decades and and look can kicking that's the superpower of today's American politician right but you can't kick the can any further down the road when you're dealing with reality constraints like we just don't have the number of people here to produce the economic uh growth that we want so anyways big hairball question but super like economically for us it's existential like we we really have to start having this discussion and figuring out what Solutions are the right ones and which ones we want to you know uh agitate for with our elected officials right so that's all coming up um we're going to have to just punt that for a later day here but thanks for kicking it off for me here Lance there's also one really big question which I just want to put out there which we'll address later on but is I said if you want to grow your economy you have to solve this problem there is a question that says hey look you know we've got a finite amount of land here in America right like we can't grow our population to Infinity so at some point in the future there's a Destin there's a date with a destiny of there's some maximum number of people that we can have here in this country and and what do you do when you get to the point where you can't grow your population anymore like what type of economy do you have will work in that world it's an interesting academic it is but look you you've got States like Wyoming that have a total population of 500,000 people oh yeah look it's gonna take us a long time we got tons we got tons of space for people we we we we do it's that's a long-term problem but just act intellectually to me that's an interesting question which is right now we have an economy that is based on Eternal forever growth you can't have that forever so economy do you have when you can't have that right but that's for a different day so real quick Lance uh trades from last week uh basically just a little nipping and tucking um we trimmed off Nvidia Microsoft Google Apple um added a little bit to Comcast and um um uh Fang which was Diamond Back energy uh had a great week this week because they acquired Endeavor so it's just been basically just a little a little movement nothing major okay I'm just curious has this been kind of fun start to the year for you guys just because kind of everything's going up yeah having a ball much better than uh than summer of last year so all right well real quick for folks um if you are um you know looking how to maybe take advantage of some of this stuff in the near term but probably more importantly figuring out okay how do I actually allocate given the fact that the part is still raging but there's lots of signs that it might be ending at some point soon and then we may have some of the uncertainty later on in the year that Lance mentioned highly recommend that most people watching here work under the guidance of a professional financial adviser who takes into account all the issues that we've talked about here U maybe even Lance and his team there at real investment advice um so if if you've got a great adviser who's doing that for you obviously great stick with them but if you don't or you'd like a second opinion from one of these guys that that thoughtful money endorses uh head over to thoughtful money.com fill out the short form there remember these consultations that you get they're totally free there's no commitment to work with these guys it's just a free public service that Lance and the other advisers offer um and if you um if you dream of a future where we've solved uh the the whole American population issue to power the economy for forever and ever to to better and better Heights um and uh and and want to see Lance uh at the Forefront of that movement do us a favor hit the like button and then click the red subscribe button below as well as that little bell icon right next to it a reminder as well that the 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you'll save the larger 50 you put 35 bucks in your pocket I'm totally happy with that I want you to get the lowest price all right all right and in wrapping up here Lance um I will let you have the last word as always what parting bits of advice do you have for folks look enjoy the markets while they last they're doing great nothing to worry about right now but if something changes we'll let you know all right Lance buddy it's always great having you on here look forward to seeing you next week everybody else thanks so much for watching
