Transcription
Hey, hey, hey. Heat. Heat. Hey, hello everybody. Welcome, welcome to a special, special presentation. Uh, myself and Rammy, we're going to be talking about the eye of the storm. And we know we're not talking about hurricanes and uh, any crazy weather. Fortunately, we're having nice weather. Most parts of America, we are almost in summer. Hello everybody. Welcome, welcome. We know many of you are still piling into our Zoom room. I'm excited about what Rammy has to share with you guys today. So, while everyone's jumping in, let us know where you're from. Give us a big hello. Tell us where you're from, where you're joining us from. We've got some awesome information to share. This is not, I think by the time you're done with us here today, we're going to be nice and crisp and tight. Get right into it. I think by the time we're done, you're going to be very glad you were here on this call.
How many of you know there's a lot going on right now in the world? Lot in the world. Yes. Lots going on in the world. Not all good, but not all bad either. And it's very hard to make sense of things. It's very hard. Understand that pretty much everywhere else, pretty much every other new major news outlet, media source, even the people on YouTube, their agenda is very simple and clear. They want to continually scare you, keep you completely afraid, scared, out of your mind so you stay glued to their TV, stay glued to their commercials, stay glued, click more YouTube videos. And so we are absolutely here to provide you with very, very direct, transparent, factual information about what's really happening. Are there real risks? Of course, there's real risks. But as you're going to find out today, when we think about risk, when you think about risk in the stock market, what are we almost usually thinking about or talking about? When you think about stock market risk, my friends, are we, what, what do we, what, what do we usually think and have in mind when we hear stock market risk? We're thinking crash, loss, losing tons of money. And the fact is, Rammy is going to show you that there's something majorly happened last week, Friday, and there is absolutely real reason to be concerned. Pay attention that we could easily be facing and seeing a 20, 30% correction and crash. Ramy will show you why that is. Not just a headline, not just hype, not just fear-mongering. Here's what's happening. Here's the data. Here's why that's a real concern. So, we're going to show you why that concern is real and how to think about that and how to make sure that you are protected from seeing a massive 20, 30% or more, um, drop in your accounts. However, what makes this the true eye of the storm is there's also a major risk that most of you have that you're totally unaware of. And that risk is a risk to the upside. And that's a risk on missing out on what also could be one of the most significant stock market rips to the upside. And most of you, if you're working with traditional advisors, if you are in a diversified portfolio, you stand to miss out on a tremendous opportunity for wealth accumulation and wealth growth because if you're, if you or your advisor are playing by the old-fashioned rules of diversification, then you stand to miss a major, major move to the upside. So, there's two ways to lose money. You can lose money by losing money, and you can lose money by missing out on money you really should have made if you were following the right playbooks. So, to make sure you are well positioned for what is coming next, whether it's a major move up or a major move down, guys, blow it up in this chat. Help me welcome financial advisor, option trader extraordinaire, Rammy Khil. Ramy, what is up? Are you here, my friend?
I'm here. Pedro, can you hear me? Okay.
We can hear you. See you. Okay, Rom. And I think I got this thing set up for you. I'm excited to have you share what we went over. The people are ready for you. Ramy, I'm going to turn it over to you. Take it away.
Awesome. Well, I'm excited to share this as well. Like Pedro said, Pedro said something incredibly important, everyone. And that is that, you know, when you typically
Rom, real quick, Rom, make sure you have the right mic. You do sound a little bit distant.
All right, one second.
Make sure you have the right mic setting. Let's see here. Phone. How about now?
Go ahead.
Testing. Can you hear me now?
It's a little better.
A little better. Okay.
It's a little better. Yeah. A little better.
All right. Okay. So, let me know if that uh
Go for it.
Continues to be the case. But, you said it, you kind of, you, you said it right out of the gate. One of the most important pieces about what we are seeing right now is that there is dual-sided risk. There's risk on two sides. On one end, we're always thinking about protecting against losing money and the downside, but right now, this is an interesting time in the financial world where the risk isn't in a crash down only, it's also in a crash up. Meaning very quickly, because of the concentration we're seeing in the stock market and why today we're seeing that concentration. I think that many investors are about to witness completely being on the wrong side of a market, um, that could continue to reward the buildout that we're seeing in the innovation and AI. And so you have to ask yourself, are you positioned in a manner that lets you maximize the growth of the market where the market is showing growth while protecting against the reality that there are very real risks that could see the stock market easily correct to the downside right now? We saw it earlier this year and to be fair, we spoke about this back in December, right? From January to March of 2026, the stock market was flat only to then fall between February and March and be down almost 11%. Obviously, at the end of March, we saw the turnaround, um, into April and where we are today, that the S&P 500 was able to recapture those losses and squeak out new record highs. And that is exactly what I'm talking about. This is an econ, this is a market and an economy where the fact is the moves can be extreme on both sides of the equation. But I want to share some data that sometimes gets lost in translation. Some very important points that I want you guys to see right now about what's going on, why there are risks that we can't just turn a blind eye to and yet how to think about those risks correctly and so and those factors correctly. So, let me do this. I'm going to share my screen. I have some slides for you guys that I want to walk through and we will go from there.
Awesome. Rammy, you're sounding much better. And uh, guys, I'm gonna do my best. I'm gonna do my best here just to let Ramy do his thing, but I am the one looking at all of your faces on Zoom. Okay. How many you guys know that Ramy is really smart, very sharp, and sometimes Rammy gets caught up in his excitement and he starts to use fancy words, words that not all of us understand. Okay? So, I'm here to represent you. I'm here to be your advocate in this conversation to make sure when Rammy gets into nerd mode, into crazy, you know, investment brain mode, I can be like, "Hey, wait a minute. Let me just make sure that everyone is tracking and they get what you're saying because Ramy is going to be sharing some very valuable things." But if it goes over your head, then guess what? It's not that helpful. You're going to walk away going, "Gosh, that Ramy is smart." But, but I don't know what the heck he was saying. We don't want to do that. That's not our approach. That's how what other people do. They want to try to just like, you know, use financial jargon and you're like, "Oh gosh, you know." So, so from time to time, Rom, I'll jump in if I can see the people glazing over, if I can see they got questions. Okay. So,
Perfect.
Is that okay, Rom? If I jump in every now and again just to make sure that everyone's getting the value, the main points. Okay. Awesome, Rob. Take it away.
Awesome. Okay. Okay, so you guys should all be able to see my slides that I'm sharing and the storm clouds building. You know, Pedro talked about the eye of the storm. Here's the reality. The next three to six months in 2026, I believe in 226, I believe, carry elevated market crash risk. Okay? There are 10 different factors that every investor should be aware of that actually, um, are on the table today. And here's the reality. Typically, Pedro and everyone, we talk about the stock market and the economy being two separate things. And we talk about how the economy is not the market and the market is not the economy. This is one of those rare moments in time where the stock market and the economy, okay, are the same story, but they're split between businesses that are booming and consumers that are feeling the crunch because big tech is single-handedly, the big tech companies right now, everyone, are single-handedly carrying the growth, the GDP growth in the US. They're spending about 730 to 800 billion dollars a year on AI infrastructure. Okay? More than the entire late 90s boom in, in the dotcom boom every single year. But that money is staying inside of a closed circle. Okay? Where some of the big tech companies that are making chips and all of these themes that you're hearing, they're paying construction firms, they're paying skilled tradesmen, all of whom benefit. But consumers who are outside of that loop, okay, they're not inside of the tech world, they are getting none of the benefits, but what are they getting? They're getting all of the costs. Okay? Gas prices going up, mortgage rates increasing, no rate cuts from the Fed. Okay? And so, we're going to talk about this, um, and why that's been happening. So, what are those multiple risk gauges? Here's an overview. I'm going to break this down one by one, but we're going to take a look at things like the Schiller cap. We're going to look at the Buffett indicator. Okay? The Schiller cap's at the second highest level in the last 140 years. The Buffett indicator, folks love, I get emails from some of you to Pedro and I. I actually got a few emails this past weekend, Pedro, where literally some folks were like, "I saw Warren Buffett is sitting on the largest cash position in history of the company. Uh, does that mean I should be in cash? If Warren Buffett's sitting on the largest cash position, shouldn't I then be in cash? What does he know that you don't?" It's not what he knows that you don't. Just remember that even though they may be sitting on the largest cash position, they still have billions of dollars in the market as well. Okay? So, we have to think about the context of that. But yes, that the Buffett indicator is at a very interesting gauge. 30% okay of the growth in the market has come from the top five companies. 495 companies share the rest. The VIX, which is a gauge of volatility, has been at a very low level, kind of historically on average for a while. And what year are we in? We are in a midterm year. There's an interesting statistic about midterm years. And we're not just in a midterm year. Pedro mentioned something about last week. Two things actually happened last week. One of those things was that Kevin Walsh was confirmed as the new chairman of the Federal Reserve. And that is very important. That happened at the same time that the 10-year note, the 10-year Treasury, okay, which is like the foundation for interest rates, spiked above 4.7%. And when the 10-year, when interest, the the yield on the 10-year note is spiking above 4.7% everyone, that means 30-year mortgages are more expensive. That means that trying to get a loan to, to, to invest in a business is very costly. That, that is a note that is a rate that is very, very important to keep in mind. And so when we look at the Federal Reserve, let's talk about risk number one and why this is so important. Okay. Interest rates since 2022 have been elevated. We have seen higher rates above what most people are accustomed to and the Federal Reserve finally last year, just before last year had started to slowly cut interest rates and had to pause on rate cuts. Okay? They had to pause on rate cuts because inflation was still becoming persistent and a problem and they wanted to wait and become more data dependent because what happened last year? What did we see hit the market that actually sent the market into a 15% market correction last year? This word called tariffs, right? Tariffs hit the tape and all of a sudden the Fed said, "Well, wait. We can't continue to cut rates if there's going to be increased costs because of tariffs." And so we've been in this pause holding pattern with interest rates for a long time. And coming into this year, the thought was that the Federal Reserve would actually start cutting rates again. The stock market was pricing in that there would be one or two rate cuts coming into the year. As of last week, guess how many rate cuts the market is pricing in? What do you guys think in the comments? The answer, everyone, is zero. Not only is the stock market now, the futures market not pricing in a rate cut, it's actually pricing in a rate hike. Could you imagine what would happen if Kevin Walsh comes out and raises interest rates? Let me tell you guys, if that was to happen, the stock market is in for a very, very ugly time. Okay? And yet that is something that while I think they may try to pull on a different lever than that, that's something that we have to be aware of and we can't just turn a blind eye to, okay? That now there are no rate cuts. And as a matter of fact, um, you have some of the most prominent investors of all time like Ray Dalio coming out and saying the Fed would lose all credibility if they actually dropped rates based on the data that we've seen. And yet most investors and people know that, uh, that President Trump has been very outspoken against ch, uh, President, uh, Chairman Powell and has mentioned many times kind of jokingly that, hey, if we do not see rate cuts, I would sue Kevin Wars. Now, he says that jokingly, obviously, but he's, when President Trump makes a joke, right, people listen, they watch what he has to say because he is absolutely counting on a rate cut. And so the Fed is in one of the most challenging positions it has ever been. And to take over and inherit that problem is none other than Kevin Worsh, who is a very intelligent gentleman who's been around a long time. Used to be a Fed governor, one of the youngest Fed governors. But the stock market, please believe, the market is going to test this new Federal Reserve. They're going to test their theory on what they believe about inflation, how they measure this problem, and what solutions are they going to present that are any different. And the next Fed meeting, by the way, isn't June 17th. Between the 16th to 18th of June, the first FOMC official meeting under this new Fed chair is going to be taking place. And so that is going to be very important to make sure you know, one of the things that I would not want, I would not want to have my portfolio just out there without any plan for risk management going into this next FOMC meeting. That is absolutely paramount. Okay. So, we have this reality of a new Fed that is inheriting a big problem. And we're going to want to see, is it going to be more of the same with the prior administration or the prior, uh, uh, chairman of the Fed, or is there something different that they're going to be able to do to try to find a solution around this problem? Okay, this is even more of a challenge because of the heightened political environment that we're in. This is a midterm year and the fact is maybe this time because of AI is different, but we have to take a look at the fact that historically stocks are punished in midterm years before the vote. Okay? You typically see an 18% drawdown or loss in midterm years. That's happened since 1926. Okay? And so, you know, the question is, is this time different? Do we have enough of a tailwind in what we've seen with the boom in AI to actually carry us through, or has that momentum and theme kind of gotten a little bit exhausted and these headwinds starting to become more of a problem? Because so far, this has been the case and the question is, how are you positioned to deal with the traditional volatility of a midterm year? So, are we going to see an 18 to 20% correction, which is pretty historic and pretty average, um, or are we not? Um, that is yet to be determined. So, that is risk factor number two is the volatility that midterms bring in 2026. Okay? And we know costs of living is going to be a big conversation and a big theme. It already has been and that's not going to slow down. Let's move on to number three. Okay, this is one of those that Pedro might have to jump in if I start to use too much big language here, but the Schiller cap index, it is at its highest, second highest level in the last 140 years. So, what is this and why is this important? Okay, the Schiller, um, cap is a metric that evaluates whether the stock market is expensive or cheap. How many of you like to buy things that are on sale? How many of you like to actually pay less for things that are valuable than what they typically cost? Right? Well, let me just explain that that is not the stock market today. This is the second highest level in the last 140 years. And this is calculated by taking the current price of the S&P 500 and dividing it by the average of the last 10 years earnings, the actual earnings of the market. And when you look at valuing the market, why is Mr. Warren Buffett sitting on the largest cash position in the history of Berkshire, even though he's no longer the CEO? Why is the company positioned that way? Part of it is because of this. They do not like to overpay or pay more than the value of what something is worth. And that is the market today. You have to know where to invest to maximize growth. But just buying the index, diversifying in the index is very expensive. You typically historically, folks who are just doing that generally lose money when you look at the next 5 to 10 years of performance in the market. And so you have to know where to actually be positioned when you're looking at a market this expensive. Okay.
Ramy, let me jump in on that one. I think I think that is a big, um, I think it's important that we really kind of underscore, uh, what this is saying. How many you guys kind of understand that th that this this metric here, this Schiller index is really just kind of looking at measuring price and earnings, right? Price, PE, price to earnings ratios. It just helps understand how much are we as investors having to pay to get access to the profits that companies make. Does that make sense, guys? But here's the problem with this, and this is, this is kind of a major theme of the story. How many of you have ever try to make an example that I think you guys could all, How many you have ever been to a store, one store, not two stores, but you go to one store and in that one store you see something that you like, but you're like, "Uh, no, that price is stupid. I like that thing, but I'm not, I don't, I'm not want to pay that price for that." How many ever gone to a store, saw something that you liked, but the price was like, "No, at that price they can keep it." And, okay, yes, my hand is up. Even Pedro does that all the time, actually. Okay. But then in that very same store, not a different store, in that same store, you just maybe walk a little bit further, maybe a couple rows over, and then you see something that you're like, "Oh my god, this is amazing. I can't believe this is only," and you find like this amazing deal or value to you just two rows over from this other thing that felt like a ripoff. Has anybody had that experience? Okay, here is, that's that's what's happening right now. That's what's happening right now. And that's why looking at these, looking at all of these charts and all of these tools and all these metrics that are giving us all these, um, all these indicators, they're looking at the overall stock market. And guess what? The, there is at this point, guys, let's just, let's just say the quiet part out loud. There is no more overall anything. There is no more overall economy. Can we agree there's the halves and the have-nots? Can we agree America is essentially becoming much more like a, you know, thing you sometimes see in third world countries. You've got the rich and you've got the poor. The middle class has been getting their ass handed to them. Thank you to the government and politicians. The middle class has been getting squeezed and squeezed and squeezed. Can, is that just what's, is that not just the truth? Well, the same thing is happening with the stock market. There's the cool kids club, the rich are getting richer, and, and then there's a bunch of old companies who are struggling. But what is all the advice you're being told? You're, you're being told to buy the index, hold the index, be in the index, diversify. Well, all that advice right now is probably going to not age well. That advice is probably not going to age well when you're looking at buying the index of 500 companies when most of them are getting their ass handed to them, are, are struggling mightily, and there's really only a handful that are going to do very, very, very well. This is where all that advice about diversification and buying the index and being passive is really going to be very costly. And that's why we're here warning you about the risk to the downside. And at the, and with the ve, and with the same level of fervor, we're warning you that most of you are going to miss massive moves to the upside because you're overly diversified. And write this down. Wealth is always made in concentration. Wealth is made when it's concentrated. You don't make wealth being diversified. You can preserve wealth in diversification. Kind of used to be, sort of worked, but you can never make huge wealth being diversified. It's always through contract. Jeff Bezos doesn't own a hundred stocks. He got, he became a billionaire with Amazon, right? Mark Zuckerberg, Facebook, right? Elon Musk, Tesla, SpaceX, right? So, the problem is wealth gets made through concentration and you guys have been indoctrinated. And if you're not working with us already, you've got advisors that are going to have you probably overly diversified, which means you're still going to, that diversification approach is going to still have you lose tons of money in the down market. Catch this. Diversification has not worked in the last few market crash, crashes. So being diversified will still probably have you be down 10, 20, 30%. But will also have you miss out on the massive move up. So being overly diversified, which is what traditional advisory firms do, is going to have you pretty much lose, lose. You're still going to lose to the down, and you're going to end up missing out on all the gains. And that's, that's a real big theme of why you really need to just question if you should be following that traditional old-school playbook of buying the index and being overly diversified. Um, so Rahm, I'm going to throw it back to you. Your camera is off at the moment. So I'm not sure if you hit the wrong button or where you went.
How about now? Hold on.
No, your camera is still.
Okay, here we go. Okay, so and exactly, Pedro. And that's that's a big.
There you go. It's back. All right. Go ahead, Rob. Take it away.
I'm going to talk about why that's so important. It's about the correct level of diversification in the themes and where there's growth in value. And so, again, coming back here, I don't know if you guys can still see my, uh, slides, but so we have this reality where only 3% of the months since 1957 have had the market this expensive, just trying to buy the, the market. Okay, that's risk number three. Let's talk about number four, the Buffett indicator. Okay, the Buffett indicator is at an all-time record above Mr. Warren Buffett on looking at the market cap divided by the GDP above 200% and you are playing with fire, right? Well, he created the, these indicators for a reason. He follows them. Right now, we are at 231%. Okay? So the reality is this is the highest reading in the history of the market since we, since folks have been looking at the Buffett indicator and it's basically saying the same thing. Things are way too overvalued and are way too high for the actual earnings. This does not make sense. You have to know what to do strategically in a market like this. Understand the themes and where to actually be invested. Okay, so let's talk about this concentration and what has happened to the middle class, um, and why this is so important. We have seen an insane level of market concentrations that has only been equaled by looking back at the dot peak. Okay? So the Magnificent 7, 35% of the share, okay, in the S&P right now are the MAG7. 20% is the top five of the MSE, uh, MSCI World Index. Okay? That's the highest concentration in the last 15 years or 50 years, excuse me. Um, if you think about the CAPEX, what is CAPEX? That is capital expenditure. That's the investment these companies are making into artificial intelligence and the buildout. Okay? $630 billion with so much more spent or planned to be spent in next year. This is heavily debt financed. 57% of economists rank the AI valuation crash as the number one global risk. Um, and this is something, here's the key to this, everyone. Here's something else I want you to catch. You have people on one side that are saying AI is going to solve all kind of problems. It is going to be deflationary. Costs are going to go down. We're going to be so much more productive. And then you have the other side that are saying this is not only going to lead to major job losses, it's also going to lead to a major market crash. And here's the truth that is hard for most people to understand. Both of those things can be absolutely true. It is, which one happens before the other. You can see a 25, 30, even 40% market crash because let me ask you guys a question. When the dot-com crash happened and the stock market went down 50 plus, uh, 50%, half the market was lost and it took three to four years to recover. Did that cancel out the internet? Did the internet go away? No. The internet went on to change business, to change lives, to change the world. And if you were positioned in the right position in terms of how to benefit from that reality, that technology, you created an insane level of wealth. But what did most people do? Literally what Pedro, you just mentioned, a lot of folks were way too diversified using traditional methods, took a 50% crash or 50% haircut and took three to four years to try to just make back, lick their wounds, and missed out on most of the innovation that was happening at that time in terms of growing their portfolio. So this is the reality. It's having a plan. What is the punchline to this whole talk, this whole presentation? You want to have a strategy that avoids the unnecessary catastrophic losses that could occur over these next few months that also is positioned in a manner that captures the growth where innovation is actually happening. That is the point of risk management. Risk management is not to put your head in the sand and simply go sit in cash because you're, you're scared that the market's going to, uh, crash. Risk management is, how do I reduce my risk without reducing the growth potential of my portfolio? That is the key to risk management and what we do. Now, here's why there's been so much concentration. Here's why I said earlier, okay, this is something I didn't want you all to miss and I really want you to understand this. Okay, this is really very important to understand. The market has actually become the battery for the economy. The market and the economy are not supposed to be the same thing. Right now, the market is absolutely the battery for the economy because big tech is single-handedly, as I mentioned earlier, carrying GDP growth. So, let's, let me explain this closed loop, how this market rally has h, has helped. The big tech companies are literally stimulating the economy, but the money never leaves the loop. So the hyperscalers, which are the Google's, the Nvidias, okay, the Microsoft, those are the companies that are the hyperscalers. They're spending 725 to 800 billion in CAPEX, capital expenditure. That is that is that is going straight to the companies that make the chips, companies like Nvidia, that has a 75% margin. In turn, that flows that money flows to construction to build out the data centers. You guys understand the power it takes? The power that is needed to literally, um, be consumed by AI, by these data centers, is more power than it's, than, than literally just one data center uses more power than a small city. And this, and that is growing. And so you have this data center buildout and construction, you know, the skilled trades. If you're in the skilled trades, this is an incredible time because people that are in the skilled trades, right? Electricians, construction, they're getting crazy raises and, uh, that's all good and well. And then where does that revenue go, everyone? Where does that revenue go? Who's, who's actually the benefactor of that revenue? It's the hyperscalers. That's why this time it's different than the dot boom. These companies are cash cows. They produce tons of cash. They are massive companies. It's the Magnificent 7. So the consumer who's outside of that loop, they don't get any of the benefits, but they get all of the costs. And why this is also challenging is because this is why there has been so much mixed signals from the data, the economic data. What this has actually done is when the Fed looks at the data because there's still growth and when you look at like construction and you look at some of these sectors, they're still doing well. The data doesn't support cutting rates. The thing that the consumer who is not benefiting from this needs the most. It is like the worst-case scenario for them. That is the problem. And so you at least have to have your portfolio positioned to actually benefit from this.
Yeah, Ramy, I want to jump in here. Just, um, guys, if, if we had to call this talk something else besides the eye of the storm, we would have called it the tug-of-war because that's really what's happening right now. And again, hopefully you guys are getting the sense of what really is happening. It's, it's you've got all this momentum that is that is really disproportionately favoring a very small, concentrated number of people and the, and the majority of the market is on the outside looking in. And so, but, um, but one thing Ramy, I'm glad you made a big distinction. How many you guys were around for the dot-com crash? You guys remember that? You remember seeing your portfolio, guys? As we're going back now, 20, you know, 25 years, right? Do, um, here's the big difference, and Rammy hit it. But the dots, they were all losing, burning cash. So, if you're pets.com and you're burning through a million dollars a day, if you're, if, if you're some dot startup with no real business model and you're burning cash, what do you need to keep going? You need new investors. You need more, you need, you need more dumb investors to keep throwing money at the company. It's unsustainable. And that's why the dot-com crash happened because eventually people got tired of giving money to. But all of these tech companies that are thriving now, they're not losing money. They're making billions and billions of dollars. Like, they're, they're insanely profitable. So this is a, so what's the point? It would be a huge mistake to, like this tech boom of the AI era we're in now to the dot tech boom. Like that would be just, that'd be just a very, very, very, that's like, that's like saying, "Oh, these two dogs are the same. Here's a poodle and here is a trained German shepherd, uh, by the, like by the police force that's trained to eat people, right? They're both dogs. These are very different dogs, right? So, these are very different tech booms. One was funded through speculation. Companies had no economics. They're burning cash. And today is very, very different. So, I just wanted to kind of, Ramy, I, I'm glad you made that point. I want to underscore it, make sure people are kind of following along. Uh, because this, that's what we don't get with the news. There's no, there's no, there's no nuance in the news. It's broad brush. It's headlines. It's all for shock value. And we want to give you depth, meat, and nuance here in this conversation. Uh, you're doing a great job, Ram. I'll throw it back to you.
Yeah. And, and this isn't stopping. Here's something that just happened yesterday. Nvidia, the most consequential company arguably in the market, had their earnings call. And one of the things that was clear, because a lot of the pundits will say, "But Pedro, Ramy, this is cyclical. This isn't going to last forever, this buildout." That's true. Here's the problem. We might be in year two of a 10 to 15 year buildout between digital AI and then physical AI. Did you all see, I don't know if you saw this, Pedro, but there was a live, I think it was FIG was the company where they had a robot clearing packages, right? And then they had a live human and it was, and they were recording it. It was like 24 hours and they were just seeing would the robot outperform the human. And, and at the end, and it was crazy seeing the dexterity of this robot, literally like how I'm moving my hands and fingers, what it was doing. And, and it was funny because, uh, some of the, uh, some of the analysts and they said, "Hey, at the end of the day, the human, they have to actually even put a name on him that said human because people were like, "Wait, is that a robot?" Um, they were like, confused. They were like, "Which one is, are they both robots? What are you guys saying is happening here?" So he's like, "No, this is a human, uh, that's the robot, obviously." But the statement was, "This is the last time you will probably ever witness a human win." That is how fast these things are learning. And so we are early in this AI buildout. And yes, it is cyclical. It's probably not going to last forever, but that cycle could be a lot longer than what most people think when they hear the word cyclical. So inside the loop versus outside the loop. Who are the winners? You have Nvidia, 75% gross margin, $43 billion in profit in the first quarter of this year. Micron, 74%. I want you to think about these names because when I share with you guys at the end of this call how what our risk management portfolios are positioned, I want you to see why risk management works the way it does. Pedro, this is that K-shaped economy. Why do we call this economy in 2026 a K-shaped economy? Because everything went down, but then the owners of assets recovered, and consumers who are locked out continue to struggle and suffer. That is the idea. Things go down together, some things come back up, the other side of the economy no longer does. Semis, a lot of the semiconductor companies, up 54% year to date. Skilled trades, if you're in the skilled trade work, uh, force, you're seeing 25 to 30% raises to pivot into building data centers and data center infrastructure. And then obviously Google, Alphabet, because Google is like its own ecosystem, 28% year to date. It makes its own shifts. It keeps all the flow. That's why Google sees so much strength. The markets can go down any day. You look at Google and Google barely moves. And who's outside of the loop, right? What, what is outside of the loop? Gas prices more than doubled. The 30-year mortgage, it's over 5.5% as of last week. The median worker, okay, 3.8% job switch raise is now, it's, it's now at 3.8% versus 5%. It's down from 5%. Switching jobs. Okay. Labor participation is at 61.8. That's a multi-year low. And then, and it's evident in the consumer stocks. You look at the, the Nvidia's, everyone, Pedro, the Microns. And then you look at consumer stocks, stocks that benefit when consumers have money. Nike, massive lows. Lululemon, massive lows. Home Depot, massive lows. If those are the names you're in, buying in the index or in a traditional portfolio, you're getting hammered because that theme is not there. And here's the interesting one. People love to talk about crypto. This was one of the easiest and simplest tells. Bitcoin and crypto is saying what the headlines won't. This is a year where we are seeing risk on. What does risk on mean? When you guys hear financial people say, "Oh, we're in a risk-on environment." That just means we're in a year where the markets are aggressive. You could be aggressive. Markets are going up. And semiconductors are up 125%. While Bitcoin, which is on the farthest end of the risk curve, it's the thing people speculate in when they have extra money, crypto, it's down 23%. Because semiconductors and these type of stocks are institutional driven. Institutions, companies own those type of stocks. Crypto is retail driven. And never have we seen in a stock market that has been risk-on and crypto not being the best performing asset. So far, this is the first year. It's the cleanest evidence that what is happening to the consumers, they don't have any extra spare cash. They're not, there, there's no one is sending them a handout. The government hasn't come to their aid yet. The stimulus checks haven't hit. Rates are not being cut. That is why next month is so consequential. So, one signal is watching how Bitcoin starts to behave here. If it starts to rally, it is a signal. Okay. Um, why this isn't dot-com 2.0? I'm going to kind of go through this. Pedro, you already did. Very different environment. Cisco in 2000 was at 130x price to earnings. In 2000, Nvidia today is at 30x. Did you guys actually know today, as I'm giving this presentation, Nvidia is actually cheaper to own than Walmart? Today, right now, from a PE standpoint, revenue growth, 70%. Cash-rich hyperscalers. Do you understand that Micron and some of these companies are booked out? They can't even supply their customers until the end of 2027. And, and they get the guarantees. You have to order and guarantee that even if you walk away, that these companies get paid for those chips. That is how desperate that the innovation and AI and this buildout is. And these companies have real operating free cash flow. They're not financing this. They are financing this with their own money for the most part. Okay. So, it's more likely that the AI bubble migrates. Hey, if the companies start slowing down in CAPEX, here's a risk. A risk is if we start to see CAPEX slow down, these hyperscalers start saying, "You know what, Pedro? You know what, everyone? We're going to go ahead and throttle back now." Then you're going to see the market get rerated. Things are going to come down. Prices are going to crash. But what we've heard is that it's going to shift from CAPEX in chips to CAPEX in robotics, to industrial automation, to the physical applications of AI. And so you have to know how to be positioned for that. Here is the setup that just registered its first crack after two years of bulletproof corporate-led growth. Okay? The aggregate growth picture is showing some strain. Okay? So, basically right now, we're watching this because the flywheel, that loop that we talked about, it only breaks when one, when all three of these things here happen together. Okay? The compute margins have to get reset. Right? If those margins start to come down, we have problems. Okay? If we don't see a transition from, you know, compute and chips to robotics, if we don't see that, that investment in the future is being made in different layers, then that becomes a problem. And then if the consumer, here's the key, this is the important one for everyone on here, you and I. If the consumer doesn't rebound. This administration has been vocal on helping the middle class, on getting the consumer back into a good state. And this is going to become a massive theme from next month on as we get into the midterms. How are you planning to do that? Because that is not happening currently and people are going to start to become impatient. And so you have to watch out for a risk of complacency. When the markets are doing well, people and the markets can become a little bit too complacent. Volatility, the VIX gauge, it's like the fear gauge. It gets a little too low. We have seen when there's too much complacency, people are not paying attention. Then you get massive volatility events. Okay? So this is like watching the gauge in your car, right? Right? If you don't have those gauges on your dashboard, then, and you're just kind of looking at the fuel gauge, it's the only one you have. You're not checking the oil pressure. You don't know what's actually happening with the engine. You could blow up at a very inopportune time on your journey. So, these gauges are really important. The spreads are becoming tighter and tighter in the credit market. And all that means, I'm going to just simplify that for you guys, is that's complacency showing up. Typically, if you are going to invest in a junk bond, it has to have a much higher yield than a treasury note. Right? If I'm going to invest in a bond by the government for 5%, or I'm going to give, I'm going to invest in a junk bond, I want to see a lot more returns for taking on that risk. And we're seeing them tighten and tighten. And that's a signal that is a, that is risk number seven. Watching that environment. What that says is that the, the bond market is saying, "Hey, we think this is inflation and this is a risk of inflation and growth more than, than, um, default issues." And so these are just gauges. What this is, is putting the story together across different environments, the bond market, real estate, the stock market, different sectors in the market. We have record treasury issuance which is meeting a shrinking buyer base. This is the first time. Did you guys know that last year, I believe it was, was the first time that Russia, India, and China were buying more gold than US treasuries? The government is issuing debt and the buyers of the government's debt are shrinking. Do you know what that means? What the, what the world economies are saying? We are not so confident in holding dollar-denominated debt. We think the US is on a run rate into a fiscal nightmare and we don't know that we want to be part of that party. One, one, one, um, suggestion, one hint that we're watching is if the Treasury and the Fed rewrite the rules for banks to be able to buy more treasury debt to step in to help, um, as part of the buyer base because they're running out of buyers. Every auction that does not actually get met is risk that the market is watching. Go ahead, Pedro. I think you were going to jump in.
Yeah, I just want to jump on that one guys real quick because, um, Kam, keep the slides up. Um, it's because this is not just, uh, yes, America has a 38, 39 trillion deficit. Yeah. However, this, there's also this is now getting political, right? Um, this is getting very political. Whereas these major, these huge institutions and governments know by choosing to not buy treasuries, they're able to wage an economic war on America, right? Like by choosing to not hold treasuries and, and buy gold instead, what happens is that's going to force interest rates to stay high in America.
Okay? And here's something that is of that that that's that's part of this eye of the storm conversation. That's part of the risk that we're kind of calling out that that it's very unusual and not very likely that you can have a long sustained massive stock market rally. It's very hard to have the stock market stay at all-time highs while at the same time you have high interest rates and when you don't have people that are when people are not when governments are not foreign governments and investors are not willing to buy treasuries when there's less buyers right when there's less buyers that means rates go up and that is generally not good that is generally not good for a thriving booming stock market. So that's one that we really want to keep our eyes on.
Again, there's different ways to wage war. Yes, you can just drop bombs on people. That's one way of waging war. There's all now, but most of the wars being waged today are economic wars. They're trade wars. There's economic policy wars. and and um there are there is people that are adversarial to our interests of America. Um absolutely understand that that we are vulnerable when it comes to our debt and interest rates. So we're watching that very closely.
Uh a couple things Rammy that are happening in the chat. If you already are a client of Fortress Financial, you have nothing to do or worry about. This is for informational purposes only. We're already doing this in the accounts. It's already happening. You've already benefited. You've already your accounts are probably already up from things that we're talking about here. Okay? So, if you're already a client, this is just this is just you feeling better about the work you're having Ramy and the team do for you.
If you're not a client of Fortress Financial yet, um, and you are you're kind of wondering why not. Yeah, that's a great question to be asking yourself, you can go to kingdomwealthformula.com. We'll be dropping this at the end, but you can go to kingdomwealthformula.com. Request a free portfolio review. No cost, no obligation. sit down with either Ramy or someone on Ramy's team to get a completely free portfolio review to see how you are exposed to downside risk. How much do you stand to lose if the market drops and also how much do you stand to miss out on if this highly concentrated uh sector of companies rips to the upside which is just as likely. That's why this is not a doom and gloom message. This is uh we're in the eye of the storm. The storm is either going to rip down, but it could rip to the upside. We want to make sure that you guys are prepared.
Um if you are a member of the Kingdom Wealth Club, that's amazing. The Kingdom Wealth Club is awesome. You guys are learning how to trade and do things. And yet that doesn't mean that your portfolio is actually being managed well by you or whoever it is. So this is this really here is about having you um understand the value of having an active risk manager. Somebody who's actively managing your portfolio. This is not normal. This is not what most financial advisory firms do. Um they're very much passive. Set it and forget it. They maybe allocate you once a year. So that's the big punchline here.
So the chat's going crazy. People like what do I do to do? So >> I saw I saw some of that. Someone someone said, "Dedro, when you said what to do, they said, you could have just led with that in the beginning. How do we what what do we do?" Well, that's how you do it, guys. >> That's how you do it. kayanalthformula.com. Request a free portfolio review and let us kind of show you exactly what's happening in your portfolio. And you can hear about the ways that Rammy and our team are helping thousands of people uh make sure that they do not get clobbered to the downside and are perfectly positioned to capture massive movement to the upside. Rammy, take it away.
So a few more things before we I I wrap up everyone. The big point, the big takeaway is yes, there are very real indicators signaling concern for the market and we are going to have to watch very closely whether those indicators trigger and tell us it's time to derisk and get out of the way of a potential train wreck. That is what our system does in how we manage assets so that no one is lost. these factors that we've just talked about, the concentration in the market, the buffet indicator, the PE ratio telling us the market is way too expensive currently, um, all of these different things, the fact that we're in a midterm year that historically leads to a correction, right? And a new Fed chair that's taken over and inheriting a big problem and they're going to have to do something about it. Do we save the economy and the middle class and and come into the rescue and start to create some um some solutions or are we still going to try to fight the inflation fight? Because if you look at inflation here 2026 the CPI was at 3.8%. Fruits and vegetables because you know tariffs are up at 6.1%. the average cost to the household, right, in terms of tariffs and and how people t and how tariffs works. And this isn't a political statement. I know some people don't understand this and you know, this is not this not a political statement, guys. It's just the fact of the matter is inflation is elevated. Again, um uh I I have it on good um good reason to believe that although I don't drink, a Bellini is 100% more expensive, if you ask Mr. Pedro Dale, than what he would have spent a year ago. So, it's being felt even in Vegas. Okay, inflation is a real thing, right?
So, the last major risk and just a couple things to end with here. Obviously, today this there's some news that hit and there's a very specific reason why the news hit, but if you look at Iran, the Strait of Hormuz and Taiwan, guys, most people don't understand the risk in Taiwan as well. These are layered tail risks. Disruption in the Strait of Hormuz has affected 20% of the global oil flow during the peak of the escalation. And even if we hear tomorrow that there's been a deal made, that does not just immediately fix that problem. It is going to take months. It is going to be a ripple effect. Oil impacts every single sector of the market and the economy. That doesn't just turn. That's a ship that doesn't just write because the Strait opens tomorrow. Okay? It's it's it's it's going to be something that we're going to keep an eye on. And the whole idea of China's reunification readiness timeline on taking over Taiwan creates a whole another geopolitical risk, right? Why did President Trump get on a plane with like 20 CEOs, the top CEOs in the world to go to China? Well, there's reasons for that. something very important about Taiwan that's equally as important that's as important if not more than the Strait up Hormuz right and we've seen weakness in the in the labor market unemployment is at about 4.3% and trending higher right undermployment up at 8.2%. We talked about labor labor force participation and the average monthly gains. This is a low higher but low fire regime because of this loop that we've referenced.
So here is everything in a nutshell. Okay. When you look at today versus 2020, Pedro, with COVID, when you look at the great financial crisis in 2007, and when you look at the 1999.com boom and busts, this is the only time that from the election headwinds to tariff and inflation to geopolitics to the fiscal stress in terms of debt to leadership at the Fed, we've seen more dissent amongst the Fed governors than ever before. It's been less unanimous decisions on voting across the board of all the federal the governors of the Fed on what they should do. Complacency in the market, concentration in the market, and the valuation of the market. This is the first time they're all high at the same time. So something has to give. And what happens after periods of extreme valuation? This is where the Paul Tudor Jones, the Ray Dalios, the Warren Buffets who have been make have on interviews. Okay, this is the actual subsequent drawdown anytime the market has gotten too overvalued. 49% in 1999, 57% loss in 2007. Well, the we're up at 41.6 in 2026. Will we see a drawdown? How bad will it be? Okay, not a prediction. Every prior cap peak in this range was followed by a major drawdown within 24 months, guys. Every single one. Every single one.
So, if that's the risk to the downside, what could turn this around? What could turn this around? Well, if Chairman Powell comes out and somehow they are able to lean on what I think they might try to lean on, which is that AI is actually deflationary and could actually help drive down inflation and the tools we're using to gauge inflation are outdated. We need modern tools. If if that is the narrative and the stock market hears Jerome Powell's message as uh dovish meaning higher probability of cuts that is going to be a bullish catalyst for the market. If the investment in AI starts to translate into earnings for the companies that have been investing in AI that is going to be a big bullish catalyst for markets to to rise right tariff deescalation. If we actually see a roll back completely on tariffs, that would be bullish for the market. Not a political statement, but if there's a Republican sweep in the midterm, just naturally based on what we're seeing right now, that would also be a be a positive indication. And then if we see obviously geopolitical deescalation.
So we're cautious about the price, we're not bearish on the US long term. My job as a risk manager is to be an aggressive chicken. I joke about that, but that is actually the task. Your job is to be an aggressive chicken. You have to think like ants. You have to think about winter all summer for your clients. Help them maximize the growth when the market is there to give it. But have a plan for the fact that this market, let me tell you what this market is like. This market is like everyone at the casino with their eyes on the exit door. Everyone's here, but no one wants to be the last guy out the door. And that is what we do.
So, what's the summary of next steps in closing? Pedro, I'll let you finish off with this because one thing I want to mention about AI PE uh for everyone is I'm going to actually be doing a deep dive on how to actually benefit from what's happening in AI. As a matter of fact, let me just kind of come over here, Pete. I'm going to share my screen. I want you guys to see something and I'll turn it over to you to kind of go back through that last slide. If I look at our Fortress Shield risk management portfolio and I look at the names we've been in through this whole cycle, names like Vanguard, okay, names like Cisco, like Qualcomm, names like Microsoft, names like Caterpillar in the industrial sector, part of the AI buildout, okay? names like Dell prior to the announcement of Dell and the US and Trump coming out and kind of basically endorsing Dell. Okay, you could look at when we actually were allocated to these names, NEM, materials and gold and energy and the and the actual rare earths needed to build the the chips and the manufacturing. This is why our clients have been able to do so well is because we are actually invested in the names that are actually leading what we've seen over the last two and a half years. But we have the right safety nets in place, Google, AVGO, but we have the safety nets in place to say, hey, if it is time to de-risk portfolios, we know how to do that.
So in closing, let's come back here. What are the next steps and the summary? Multiple risk gauges simultaneously at historic levels, right? We have a mix of unprecedented catalysts. Um, but we actually have a plan. We know how to actually kind of jokingly be aggressive chickens. Um, so Pedro, that is everything. We're about four minutes over, but I'm going to turn it back to you and um, we'll go from there. >> Yeah. Awesome, guys. Hey, give it up for Ramy and my friends. If you were if you appreciate this uh kind of deep dive analysis of what's happening, this should hopefully give you context. Hopefully, this should allow you to um when you're hearing things on the news and on YouTube or whatever, you you now have real context of what's happening. And um and so yes, um this is a time where this is not the time this is not the time to be not paying attention. This is not the time to making any assumptions about what's happening with your portfolio. This is not the time to just have blind faith and trust in your financial advisor or the companies you work with. You really do uh at this time should know. You should know what exactly your money is in. How are you exposed to one half of the storm which is this downward momentum? There is lots of indicators friends. If we all woke up in 3 to four to 5 months from now and the stock market was down 20, 30, 40%. None of us could say, "Wow, we didn't see that coming." No, we just went through a series of indicators. There's like over eight to nine indicators that all have been historically accurately predicted major downturns. So there is a very real chance that 3 to four to 5 6 months from now we're we could be very well down 20 30 40%. And none of us would say oh wow what a surprise. No at the same time it's also equally likely that maybe not the overall market is up 20 30 40%. But there are at least a handful of companies specifically those that benefit from this AI ecosystem. And it's an ecosystem. Okay. So, how many of you guys are understanding that like how many you guys are hearing that we need data centers and that's a big deal data centers, right? How many of you guys have caught on? You've heard that that combination about data and energy. Well, guess what? Why is Caterpillar doing so well? Well, you need big ass tractors to build big ass data centers, right? So there's this whole ecosystem and Rammy has literally been working tirelessly for weeks now putting on a complete breakdown of the entire AI ecosystem. This will be a talk we're going to give um in the coming weeks in June to our Fortress clients only so you understand the entire AI ecosystem. So when you start to see the allocations that are being made in your fortress portfolios, you know why those allocations are being made. So while the overall market may be down 10, 20, 30, 40%. That doesn't mean that there might not be a handful of companies in that ecosystem that may be up 10 20 30 40% while the broader market is down. And the only way for us to help you know exactly how you're positioned is to offer you a free no obligation portfolio review. So if you're not a client of Fortress, then you go to kingdomwealthformula.com. Okay, that's king. Romy, move your slide forward, please. Kingdomalthformula.com is where you go for a free portfolio review. That's not to become a client. We want to make sure that you're a good fit for us. We want to make sure that we actually know what you currently have. So there's no obligation, okay? We want to show you what's happening and let you decide at that time. You'll find out how it all works. Um, so if you have any interest in becoming a client, but more importantly want at least a free financial review, kingdomwealthformula.com.
Okay. Now, if you're already a Fortress client, um, Ramy, if you're there, can you please move your slide forward? That'd be great. Um, if you're already a Fortress client, then you do not have to refill out that form again. You don't need to do that. Okay? You don't need to do that. You simply can just uh email over, just go ahead and you can just email over um to customersupport@fortressfg.com. If you are an existing Fortress client, maybe you don't have all of your assets with Ramy and the team, maybe you want to move some other stuff over, um, then you you don't have to fill out that form all over again. You can simply just go you can just simply email Megan at customersupport@fortressfg.com for current clients. But if you would like to learn more about what it looks like to work with Fortress, get your portfolio reviewed, get the information you need to make sure that you don't participate in a massive market loss, or miss out on a major market gain, then your next step is kingdomformula.com. You can come full screen to me. Now, my friends, thanks so much for coming to our special presentation of the Eye of the Storm. Hopefully, this was um very informative for you. Hopefully you got some great context. Again, um we will be sending out a replay. I know many of you are like, "Hey, I want to watch this again." Yeah, I would. I would. Uh you're not wrong. We will get out. That's why I wanted to keep it very tight about close to an hour as possible. That way those of you that want to watch it again, you can do that. And um and so we will be look keep an eye out for a replay. It takes a couple hours for Zoom to like save and repackage the file, but a replay will be coming out. Again, kingdomwealthformula.com to claim your free no obligation portfolio review. Those spots do fill up very quickly. Um, we had over 8 we had over 900 people on uh during most of this uh uh call today. Um, and so I would if you are uh if this has opened your eyes to uh what's available and what's possible, I would um grab a slot quickly so you can be seen in the next few days. Uh not in the next few weeks uh because none of us know what are what the markets hold today, tomorrow, next week. So we love you guys. God bless you guys. Of course to all of our Fortress clients that are here. Um, we appreciate you continuing to stay informed. Uh, joining these calls is a great way to stay up on everything. Of course, you guys know Rammy uh does his coffee with Rammy's. I think he just had an amazing coffee with Rammy just last week. Um, and so, but uh to all of our Fortress clients, uh thank you for being a client. We value and honor you and your, uh, the confidence you place in us and Ramy and the team. And uh for those of you that are here considering um working with us, same as all. Great to meet you guys. Take full advantage of this opportunity for a free portfolio review. We love you guys. God bless you. We will see you next time. This concludes the eye of the storm. We'll see you guys next time. Kingdom Formula.com for your free portfolio review. God bless and take care. Oh. Oh. Oh. Oh, uh-oh. Oh. Oh. Oh. Oh. Oh. I feel ooh. Ooh. Uh-oh. Uh-oh. Oh, oh, hey.