Very Overbought Stock Market Ripe For A Pullback | Lance Roberts

I still believe, uh, because momentum is very overbought here, because relative strength is very overbought here, that we could see a bit of a pullback. You know, back toward this deviation to the 20-day moving average is very large. The deviation to the 100 and the 50-day is, is very, very large. This is a very big gap over the 50-day moving average. So you're eventually going to get a correction back to this level.

Welcome to Thoughtful Money. I'm Thoughtful Money founder and your host, Adam Tagert, welcoming you here at the end of the week for another weekly market recap featuring my good friend, the Peckish portfolio manager, Lance Roberts. Lance, how you doing?

>> Peckish is a good word for this week.

>> Or maybe I should have said hangry.

>> Hangry. Hangry would be a better word for this week. Yes.

>> Let me just, let me just say one thing. I, I, you know, we can, I saw your tweet and we can talk about this later in the show, but I saw your tweet about getting cut in your 50s. I'm 61 in May. And let me just tell you this, cauliflower rice sucks ass.

And just a reminder to folks who didn't watch last week, your wife has basically instituted that you, as a couple, uh, are, are in the process of doing a, a weight drop because you're going to be going to the beaches of Italy in a little bit.

>> Exactly. And, and to our point of our discussion later, trying to get cut at 60 is a real challenge. So, used to be so easy when I was young, you know, it was like I could eat hamburgers and get cut.

>> Oh, jeez. Not the case anymore. Anyway, we'll talk about that later.

>> We'll talk about it later. Yeah, it was never that easy for me, but, um, but yes, the older you get, man, the harder and harder it gets. Um, but doesn't mean it can't happen. And again, we will talk about this at the end, hopefully in an inspirational way for folks.

>> By the way, by the way, if you agree with me in chat about cauliflower rice, put one in the chat right now. I'm, I, I, I don't think we're going to have too many people who are going to be champions of cauliflower rice, but I could be wrong.

Um, all right. Well, look, uh, lots to talk about. Lots still going on in the world. Um, I guess here since we're at the first of the month, this was Mayday, May 1st. Uh, rabbit, rabbit. If, uh, any of you follow that old tradition of saying rabbit, rabbit at the beginning of the month for good luck.

Um, so looking back, Lance, stocks put in their best month since 2020.

>> Yep.

>> Whatever. So, a phenomenally good, uh, month for stocks, which in many ways, I think flumxes people because that was during this whole Iran war with the oil price shock and a lot of uncertainty about where things are going. But markets sure don't care.

>> No, they don't. And, and it was interesting because in, in March, right towards the end of March, I wrote the daily market commentary that the month of April tends to be a really good month historically speaking, um, because a whole kind of a lot of factors line up. You have tax refunds, those type of things, but also you had two really kind of sloppy months ahead of that, which are normally better months. So February and March tend to be, you know, okay months. They're not fantastic, but they were pretty sloppy. March was tough. And then of course, we had that 10% drawdown. And so that kind of really set the markets up and that was where you and I had that conversation a few weeks ago and I said, you know, don't be surprised if we get a 10 to 15% rally on any type of good news.

>> Right.

>> Because the market.

>> Screaming higher, I think was your.

>> Right, right. And, and that's just because the markets were set up for it. A lot of negativity, a lot of offside positioning and then you just had the seasonally strong period, you know, coming in right on top of you. Earnings, you know, getting kicked off, buybacks going to start next week. So there's, you know, there's been some good tailwind support. Um, but now May as a good example though tends to be one of the weaker months of the year. Doesn't mean it will be, but on average May runs about a two, a 2 to 3% average rate of return. June and July tend to be better. Uh, July tends to run closer to about 8/10 of 1% to 1% annual. And so when you talk about sell and May go away, you know, you're going to hear this a lot starting today. You'll hear a lot of analysis about sell and May go away.

>> Um, that's really driven that seasonally weak period of the market. And that's real, by the way. It is real. There is an old adage that says sell and May go away. And if you only invest during the seasonally strong period of the year, which is basically November through May, you outperform the market entirely by a very large percentage by avoiding the summer months. However, that doesn't mean that summer months are always negative. But the majority of that, that weak return that comes in the summer is in August and September.

Um, and a lot of things typically happen in August and September. Don't ask me why they occur in August and September, but whenever you have a bare market or a crisis, it tends to occur, you know, Lehman Brothers, September the 18th, right? So, you know, it just tends to happen there. But, but, you know, the next couple of months, uh, we've had a great run here. We'll talk about this some more. We get the technicals. Great run here. Markets are overbought. Upside's going to be a little bit limited here. So, expect a little bit more volatility and, and the need for a little bit more risk management.

Let me ask you this, Lance. Um, I'm surprised I haven't asked you this in the years, all the years we've done this. So, you're a capital manager, right? And your job is just to be dispassionate, right? Just try to find the safest route to the best return for your customers.

>> Right?

>> If indeed there is a seasonal skew, right, November through April, right, as you said,

>> Do you take that into account in your portfolio allocation? Do you guys intentionally derisk heading into the summer just because of that correlation?

>> No. What we do.

>> Why don't you then?

>> Well, no. No. This is. So, let me answer the question. So, so yeah. No, we don't immediately say May the 1st, cut exposure to the portfolio. We don't do that. But we do become much more aware of the potential for risk. And particularly when you've had an exceptionally strong month like we had in April, our our attention to risk right now is dramatically higher than it would have been if April was a 1% return month versus 10. So we are very aware of what happens in the summer. You and I have talked about the fact that markets tend to have problems going into the midterm elections, but that tends to occur around August, September. So, we're so you know, as we talked, we I've used this analogy before about driving a car.

>> We're in the car, we're speed down the freeway, there's no traffic, right? We got all five lanes of I-10 open to ourselves. So, we're doing 100 miles an hour at the moment, fully allocated to equities. But if we start to see some, you know, tail lights ahead or some flashing yellow lights, whatever it is, we're going to slow down. We just don't. But right now, the market isn't giving you any signal that momentum is breaking down and that trends are currently changing from where they were. But there's well, as we'll talk about today, I just updated our analysis. Um, you'll remember back in March, I did that kind of three-phase analysis on high oil prices and that it stayed >> elevated, um, that it has an impact to the market. Well, I updated that in today's daily market commentary. So, I actually updated that graphic and, and that kind of analysis for where the market is now. So, high oil prices sustain. If we don't get the Iran crisis resolved here soon, um, that's going to be problematic potentially. Um, the midterm election cycle is going to be problematic potentially for the markets. Just an uncertainty about what, you know, who will control House, who will control Senate post the election and what does that mean for policy, right? Do we get continued deregulation? Do we get continued infrastructure spending? You know, whatever it is, all that could change. So markets are likely going to derisk a bit going into that midterm election just from a risk management standpoint. So when we start seeing those tail lights, you know, on the freeway, um, we'll certainly start putting on the brake a little bit, but that's not today.

>> All right. So let me ask this again then because I believe anytime when you see tail lights on the highway, you slow down. So, I, I guess what I'm just trying to get a sense for here is, is, is does technicals trump the seasonality in terms of how you guys work at at at RAI? Because you, I know you like, if you see a statistical proclivity, you're going to rely on it because you're a data guy.

>> Right, right. Um, I have done that in the. So, so first of all, understand that a lot of the stuff that we, that you and I discuss here on the show is not new information, right? I've been, I've been investing capital for over 35 years now. Um, I've made every potential mistake in the books over time. I've done the sell and May go away thing and got my ass handed to me. I have done the debt is an issue and it's going to cause the market to blow up trade and has have had my ass handed to me. All these types of narratives that we hear in the overall market are are fine. There's nothing wrong with narratives, right? They're great talking points. They're interesting. They provide a lot of stuff. Trying to trade off of those and not paying attention to what the market's telling you will cause you to lose more money than not over time. And, and so a lot of stuff you and I talk about is that I'm, I'm not, you know, the narrative is real, right? Selling May go away. That's a real factor.

>> And if you can just, if you can be very strategic, sell on the 1st of May, buy on the 1st of November, and not worry about what happens in between, you'll probably do fine over the course of years, right? But since we are all now trained to measure our portfolio from one day to the next, from December 31st to January the 1st, how did we do last year? We got to make all our changes because we underperformed. You know, last year we weren't in the right asset class last year. So, we've got to change everything. You know, that's not going to work for you. You're, you're going to wind up losing a ton of money over time by making all the wrong decisions.

>> Okay. So, just to clarify a couple things, make sure I totally get it. I want, I just want to clarify the difference between narratives and statistics because I totally agree with you about narratives. We talk about that all the time, right? The sell May go away thing, though you were saying it's real. It is a statistical thing, but it's, it's, it's a statistic based up based on a whole bunch of years. So there's the average element that comes into play. On average, it's good, but you can still have a, you can still be in one of the bad years. And so you need to be aware of that, especially given sort of how you're talking about the capital management industry is because of just the way it's evolved, people are measuring you on a year-by-year basis. And, uh, you got to be able to say, "Hey, look, I didn't get caught flat-footed in this year because it happened to be a bad year."

>> Right, right. No. And, and look, you know, like last year selling May worked great, right? I mean, you, you, you sold, you know, in April. We had the whole big. Sorry, let me back that up.

>> Yeah. In March would have been great last year.

>> Yeah. Two years ago, um, you know, we had that 10% drawdown during the middle of summer, two or three years ago, right? So that year worked well. Last year it didn't work well at all. And yes, as a capital manager myself, my clients are judging me on my performance every year. Why? Because we have trained everybody to do that. And, and, and to your to your point, it's not just me. We've trained everybody. Everybody watching your show right now and listening to this that manage their DIY investors. They're doing their own investing. They're doing their own, you know, analysis, everything else. You know, they're measuring their performance day to day, week to week, month to month, annually. And then they're making those decisions based on that performance. Well, this worked and that didn't work. We no longer buy and invest long-term. You know, the average holding period for stocks is down to four months, down from six years back in the 80s.

>> So, so my point about, you know, the analysis is that the, the market has changed. And so these addages, let's call them addages rather than narratives because I think that's a better, better term. These addages like sell and May go away, um, Santa Claus rallies, those type of things. It's changed a lot in the years. They used to mean a lot because my holding period was a very long time. So, if I had a good summer and I wasn't invested, that's fine because the next summer would probably be terrible and it would kind of average to your point, it would average out over time and I would miss those big drawdowns that for some reason always happen in August and September. Um, and, and so, so that's that case. But, you know, we're not looking at our portfolios looking back going, "Okay, over the last six years, I've done fantastic. I don't have to worry about anything. So I can reduce the risk of summer. Go lay on the beach. No big deal. I'll come back in November." And if we could, if we could be honest with ourselves and actually manage money that way and not worry about, oh, the market had a huge run this summer and I missed out on the whole thing, right? Uh, so now I can't get in. It's November, the seasonally strong period of the year. Can't get in now because the markets are overvalued. You know, pick your poison of what your, what your, you know, kind of your excuse is. But because we can't manage ourselves that way, our returns just come out to be terrible over time. And that's why I say that's why yes, as a function of us, we're aware of the seasonality of of summer. We're very aware of it this year because of what's happened so far. And we're very aware of it this year because of high oil prices, because of the Strait of Iran, Strait of Hormuz, because of the midterm elections. There's a lot of, there's a lot of risk for this summer that could potentially lead to a 10 to a 15% correction sometime this summer would not be out of the question whatsoever. But until we start to see those technical breakdowns, I'm not going to raise a whole bunch of cash right now because this mark, we're, we're just in the finishing up the tail end of earnings. Corporate buybacks are going to come back and we've got two or three months here of historically, you know, not fantastic months, but May, June, and July are not often negative months.

>> And we may somewhere in there have an end to this war, which.

>> Could change everything.

>> Could lead to a bump in the markets. Although, you know, you've said they these geopolitical events generally don't, and it certainly hasn't mattered to markets the past two months. So, yeah, maybe maybe nothing will happen there.

All right. Well, let's, let's, let's do, let's get to what people want to see,

>> which is pull up the, the S&P and let's, let's look at the technicals right now just to see what the roadway is telling you in terms of flashing lights or clear roads ahead.

Um, while you're doing that, let me just ask this question. Um, there comes a point in your life where I think the, the annual returns really do matter. And I'm thinking that's probably like when you're retired, right? And, um, you want to make sure that, uh, you know, your portfolio isn't taking, uh, a bigger beating than you can afford to take, right, during your retirement years. But I, I'm guessing from what you've said, Lance, and just from talking with you over the years, your advice, like if somebody was 20 listening to this, um, or for the 20-year-olds that are listening to this, I would think you would say, "Hey, look, you know, sit down with a good advisor who's got a good career history and, and craft a long-term investment strategy, right? Um, and maybe it takes advantage of somebody's addages or who knows, but just say, look, this is a good diversified portfolio. This is the, we're going to manage it with with these things in mind. We're going to position size and rebalance occasionally and whatever you want to put in there for kind of the time-honored best practices and then basically say, don't look at this thing for the next 25 years. Your job is not to worry about the numbers here. The market and the average returns and everything will will take care of you over time if you just don't get freaked out along the way and make, you know, ad hoc changes that that work against you. And your job is just to focus on maximizing your earning potential and then how much of those earnings you put into your investment portfolio."

>> No, absolutely right. No, if I, you know, this is one of those things where, you know, if I could go back in time, what would I do different, right?

>> And.

>> But we have kids. We have a chance to do that if, if they're just damn smart enough to listen to us, which they generally don't. And, and I'm sending, you know, I'm sending TikToks and, and, you know, posts and, and, you know, Instagram posts, whatever they are to my kids or whatever form of media that they'll pay attention to. I'm sending them that data, right? Saying, "Look, if you just contribute to an S&P 500 index, you don't have to get fancy. Just buy an S&P 500 index and you're going to grow a lot of wealth over time because the economy is growing, markets are growing, etc. Don't worry about a down year in the market. When the markets are down, go scrape up every penny you can find. Go sell, you know, go sell the cat, go sell the dog, whatever you can get and get that money invested into the market. So, you should welcome drawdown years to put capital to work."

>> Now, let's flip that over though to what you said, which was people that are in their older years now going into the markets or or invested in the markets should be much more aware of annual returns. I disagree with that also from only from this standpoint. I, I don't entirely disagree with you, but just we spend too much of our time focused on what happened last year, right? Just what were my year-over-year returns last year? What was my quarter-over-quarter returns? We spend too much time doing that. And because of that, when we have a 10% drawdown in the market like we just went through, the initial panic is is, "Oh my god, I've, I'm losing money." And the reason that fear comes in is because I've now benchmarked my portfolio to the high water mark. Last year the port markets did great. My portfolio was $100,000 and now it's $90,000 because the market, you know, has has had a 10% correction. So now I need to, I'm losing all my money. I need to get out of the market. But if we would look back for three years and realize that that $100,000 portfolio came off a $50,000 investment, just making up numbers.

>> Yeah. And I look back and said, "Look, I'm, I'm at 90,000, but I was at 50,000 three years ago. I'm okay. Let's go find some more capital to invest in the market. Let's take advantage of this downturn and put some capital to work." And, and, and this is the one thing I find most confusing about my clients in general is that when markets are going up, they say, "Well, Lance, let me know when the market corrects because I've got some capital over here I want to put to work, but when the market corrects, they're calling me up going, "Man, we got to get out of the market. This market's going to crash." I'm like, "Wait, you just told me you had capital to invest. Now's the time to do it." You know, and so it's these emotional things that we drag ourselves into by looking on too short of a time frame, even in retirement years. And look, I'm 61, so I don't, you know, if the market's if I lose 50% of my portfolio today, I don't have time to make it back up. I'm well aware of that risk. But I also recognize where I was three years ago, where I was four years ago, and I'm, and I'm, and I'm looking at that as a structural, where is my, where is my wealth going? Am I trending higher over time? And if that answer is yes, I'm doing a really good job.

>> Yeah, I, I don't disagree with you at all on that point. My point was more to that 20-year-old that we said, "Look, here's your allocation. Don't think about it for 25, 30 years, just put money in."

>> Yep.

>> You have to think about that allocation by the time you start retiring because you, it's not appropriate for you to have that much risk exposure later on, right?

>> Right. So to your point about the market going through a 10% correction,

>> Let's say the market goes through a 10% correction, you're retired, you shouldn't go down 10%. You should be going down some fraction of 10% because you were not fully exposed. That's more what I was t So if you're looking at your, your, your portfolio and you're like, my portfolio went down as much or more than the market, something's wrong with my portfolio allocation here, right?

>> Absolutely agree with that. You know that I've talked with you before is that kind of our, our analysis is we run an 80/20 rule, uh, on our portfolios, which is we want 20% of the drawdown. We want 80% of the advance. That means I'm not ever going to beat the market on the upside. And that's not my goal. My goal is to grow money when markets are rising. Um, but protect that capital when markets decline. And that's our primary focus because if I can do that, if I can measure that 80/20 rule fairly closely, I'm going to outperform the index over a 10-year period,

>> right?

>> Because I don't have to make up the drawdowns. And so, you know, every, this is, this is but this goes right back to my other point about our focus, our, our time frame that we focus on. We're so concerned. Did we beat the market last year? Why, why do you care? Because first of all, you don't need to beat the market. The, the markets this random, you know, risk measure out there of 100% equity. And to your point, Adam, you're, you're absolutely correct. You're 65 years old. You should have some more conservative investments in your portfolio, which immediately when you do that, you're going to underperform the S&P index. So, you've got to make sure that you, A, you're looking at an appropriate measure of return. This is why we use what's called a hurdle rate. What's the, what's the rate of return you need to get to your retirement goals over time? If that's 4%, 5%, 6%, that's your benchmark and your portfolio should reflect that return rate and that's what you should measure against. Quit worrying about the markets and you'll do a lot better.

>> Yeah. And, and the reason why I'm just harping on this is the data shows that retirees have a higher equity exposure now than they've ever had before. In fact, I think they might even have a higher equity exposure than younger cohorts. They do.

>> Um, which is bananas, right? I mean, that's just a, that is just a problem waiting to happen. Um,

>> And it will happen.

>> Yeah.

>> Yeah, it will happen.

>> Okay, so let's, uh, enough about the diatribe there. Let's pull up the, uh, the technicals here and let's see if anything is worrying you in them. Um, last time we talked, I'm doing this from memory. Um,

>> You, we had rocketed off of that V bottom and you, uh, you know, weren't seeing a lot of signs of worry. I think the market was kind of kind of flat, flat flattening out a little bit after having made a jump, but now it's actually voling even higher.

>> Yeah. So, you know, so let's, let's, let me draw a little box here just for where we are. So, um, let's see. I guess it was about a week or so ago you and I were talking about, I was like, you know, just be aware that after we've had such a big advance, we're going to have a corrective action at some point. And we did for about a week and a half. The market just went sideways. That's kind of.

>> It wasn't really even corrective. It just, it just, yeah, it traded sideways, man. The RSI here, it's, I don't want to get ahead of you, but this is starting to look pretty overbought to me.

>> It, no, it is. So, we're, we're going to get to all that. So, so two things. First of all, um, we, we'll go to RSI first. We had during this, this kind of advance in the market leading up to February, we had what's called a negative divergence in relative strength. And so, we had relative strength declining despite the fact that the market was rallying. That was one of the key warning signs that, you know, got me and Mike to start reducing our equity risk and starting to raise a little bit more cash in portfolios. We saw the same thing with, oops. We saw the same thing with momentum as well. Momentum was declining even as the market was rallying. We've now broken those downtrends. So, that's bullish, right? That means that that we've got some activity really coming back into the market. Markets are now back to very overbought conditions. And so that's certainly from that standpoint, yes, we certainly want to be cognizant of the risk. And again, this is why despite the fact that this market's rallied over the last couple of days and that's pretty much a function of these Mag seven earnings that have come in, Apple, Amazon, Microsoft, Google, um, who did I miss? I missed one more. F, Amazon, Meta, Meta, thank you. Um, all their earnings were great. Um, the stock response wasn't necessarily in line with the revenues, but revenue growth was strong, profit growth was strong, outlook was strong, and so the markets responded off that, particularly with Google, uh, yesterday that stock was up about 10%. Um, underneath the surface, other companies did really well also. One of our core holdings, Eli Lilly, had just a blowout report on GLP-1s. It's towards the top of the stack in terms of the the largest market cap weighted companies in the index. So it was up 8 and a half percent yesterday as well, and so that helped pull that whole index. So yesterday the market had a really, really strong advance. So the market was up about 1.13%. So we had a nice strong advance that broke out of that consolidation range that was bullish and so we're getting a little bit of follow through on Friday at least so far. Now again, this is early Friday. We're having this conversation. This market could turn lower by the end of the day. Uh, just profit taking if nothing else going into the weekend. So, little bit of grain of salt with where we're talking about on Friday's levels. But right now, the markets are looking pretty decent, pretty healthy. Note though that volume is declining rather sharply here. So this advance that we've had over the last couple days, while good, has been on much lighter volume than we've seen at previous price levels. So, that's just something to be a little bit more cognizant of. And I still suspect that within the next week or or so, once we get past earnings, so earnings, we're primarily done with earnings this week. It's been a fantastic earnings period. Um, we've got like an 85% beat rate last check, profit growth is at records. Earnings growth is at records. Estimates are being revised up across the board because of that. So, we've got a very strong earnings outlook coming out of Q1, but going into Q2, hey, it's a different story. We've got high oil prices, we've got concerns about the economy, a whole variety of things, you know, just pay attention to the data. They could certainly reverse some of that outlook. So I, I, I still believe, uh, because momentum is very overbought here, because relative strength is very overbought here, that we could see a bit of a pullback, you know, back toward this deviation to the 20-day moving average is very large. The deviation to the 100 and the 50-day is, is very, very large. This is a very big gap over the 50-day moving average. So you're eventually going to get a correction back to this level. Uh, what causes it? Um, you know, who knows? Um, we'll, you know, we'll get a headline one day, the market will be down, we'll start a corrective process, but I do think at some point you do get this corrective process at least back to these moving averages, uh, maybe the breakout of the previous highs, this 20-day moving average, the 5000 somewhere in here, you get this pullback to where this, this primary key support was, and then markets can kind of rebase, work off some of this oversold, overbought condition and provide a better entry point to add more equity exposure.

>> Okay, so last week, you guys bought a lot, um, at, uh, in your portfolios there at RA.

>> Uh, are you, what are these short-term concerns about an overbought market, um, doing for you for trades? We'll get to your exact trades, uh, in a bit, but are, are you taking anything off the table because of these concerns? Are you just not buying, or are you still buying into this?

>> Well, so, so we got to kind of back up a little bit because we've had a lot of activity since April the 7th.

>> Um, we had reduced equity exposure from 65% equity exposure down to about 50% equity exposure. So, we had a pretty big equity reduction in portfolios. So, coming on April the 7th, we started adding exposure. We added about 5%. We, you know, we bought Microsoft and Google and some of these Nvidia and some other these other kind of Mag seven companies coming out of that that sell-off in the markets because they were the most beaten up sector. And, you know, this is why that we talk a lot about rotational analysis and we talk a lot about these market rotations where these things can kind of get really, really out of whack. And, and, and back when you and I were talking in February, back up in this upper right hand corner, it was energy, it was transportation, it was all these kind of inframes.

>> And on this bottom left corner was technology. Everybody hated tech and now technology is in the upper right hand corner and everything else is decently oversold. So, so that's why we focus on these rotations to, uh, look for opportunities to put capital to work and the reason that we were buying the big cap tech names back in April was because of that rotational analysis. Then over the course of the last couple of weeks, we've been doing rebalancing in the portfolio. So yes, we've been adding stuff to the portfolio, but we've also been selling stuff at the same time. And so while we've moving from one side of the boat to the other.

>> Correct. So, we're up to 60% target weight. So, we're, we're basically at our target allocation weight for a 60/40 allocation model. If it's 80/20, it's 80%. If it's 70/30, you, you know, that, you know the numbers.

>> Yep.

>> So, it's in a 60/40 model, we're at target allocation. We're not overweight equities, but we're not underweight either. But we have shifted our allocation from technology. Now we've added in more value-oriented stuff. We bought Proctor and Gamble. We bought, um, a BDC recently to add both dividend yield and stability to the portfolio. Um, we sold Berkshire Hathaway, um, as a good example because that position, you know, with 350 billion in cash, it's a, it's a, it's a great company. Love the company, but that cash pool is providing a huge drag on performance. And Greg Abel's got a lot to prove ahead of himself. So we've taken that position off the table for the time being. We've owned Berkshire Hathaway for a long time, but we took that position off and rebalanced our financial structure within the portfolio. So most of the changes we've made have just been adjusting the weighting and allocation of the portfolio, not really buying a lot of stuff, if that makes sense.

>> Okay. All right. Um, although if I did take note, good notes last time, you did create new positions in the data center space.

>> Yes, we did. We, uh, applied technologies, inverted,

>> Right? But we sold Meta, right? So we sold Meta and because we were worried about their earnings, which that really paid off well. Stock was down like 10% on the earnings announcement. Um, but, and then we flipped around and we took that position and we bought Verdive and, uh, and Applied, which have done decently well for us. So that's been that was a good trade within the portfolio.

>> Okay. Hey, just in general too, how, how is, um, how have you guys been performing so far this year? I know you did pretty well last year.

>> Um, right now the portfolio's up, we're at record highs in the portfolio for this year. Um, you know, the S&P is up like 5% I think for the year right now, maybe six. Let me just check this real fast. Um, but we're, we're up about about 4% for the year right now. Okay. All right. Um, and obviously that's in a 60/40 portfolio. You're measuring that versus the S&P, which is 100% equity.

>> Correct. Yeah.

>> Um, Okay. Um, so couple things to ask you about, but, um, just because you mentioned it, uh, Eli Lilly, you know, had big blowout, uh, earnings because of the GLP-1s. Um, it's funny. Um, GLP-1s are now being so adopted by the general consumer that, uh, I just pulled this data. Um, they're seeing a, a 6 to 8% drop in grocery spending because of it. Uh, and I guess kind of the high calorie processed snack category is getting absolutely clobbered, which honestly I'm not shedding any tears for on that part. But it's pretty amazing to see that, uh, you know, getting close to a 10% decline in grocery spending just because people aren't overeating as much because of these things. Um, I do worry about, um, what we don't know about GLP-1s and, you know, maybe there's a whole raft of, uh, class action lawsuits in the future if we find they do something terrible to your health long term. But, um, you know, just kind of on the surface with the short-term data, I, I, I guess you got to be kind of cheering the fact that one of the heaviest countries is maybe lightening up a little bit.

>> Well, and, and two, what they're discovering about GLP-1s is that there's a whole lot more benefits.

>> To, to taking a GLP-1. Look, first of all, just losing weight's good for you, right? Just getting the weight off of you and curbing your appetite to eat >> is better. What it doesn't do, it doesn't get you to eat better. It just gets you to eat less. So, you know, if your diet consists of McDonald's and Taco Bell, you're just eating less McDonald's and Taco Bell. They're not changing your eating,

>> which is a good first step, but you're not, you're not, you're addressing the symptoms, not the cause.

>> Yeah.

>> Correct. So, we, we do need to work on, you know, creating, you know, better eating habits with people. So, you know, the, the, the initial benefit of this was to treat diabetes, right? Get, get the weight off people. And, um, as, as, uh, uh, Wilford Brimley say, the diabetes, um, you know, we could cure the diabetes, uh, we could help, you know, the diabetes issue, you know, by getting weight off of people. So that certainly made sense. But now they're starting to find out that there's actually there's an anti-inflammatory, um, effect of GLP-1s within the body. And they're now finding out that that treats potentially all kinds of other issues from Parkinson's to Alzheimer's to a whole variety of other, uh, issues related to the brain where inflammation in the brain causes these other, these other bad outcomes. So they're starting to discover that GLP-1s have a much broader use base than just weight loss. And this was one of the reasons that we've been big, big advocates of of Eli Lilly in particular for a long time now. Um, when they first came out with the drug, everybody was just focusing on the weight loss drug. It's like, "Oh, everybody's going to get on this weight loss drug. It'll be great." But now they're starting to figure out that this has a lot of other benefits that the drug can be used for as well. So it's going to become prescribed more to treat other benefits other than just weight loss. And that's great for the revenues and that's why they just boosted their profit margins by a huge amount in the, their earnings report this past week.

>> All right. Well, that's really interesting and, and so I don't know all that much about the GLP-1 folks. Um, and if there's interest in understanding, kind of what their potential future applications are like Lance has been saying here, um, if there's enough interest, folks, let me know in the comment section below. I can bring on an expert, uh, to tell us just sort of about the, the, the health benefits and potential health risks, uh, of GLP-1s so we can all get better information about that. One of the things I think I, I also, um, have heard about the GLP-1, Lance, is, uh, on on consumption, right? It's a, it's a, it's a satiety agent, I guess, right? Like you just, you just don't feel hungry. It removes that, that sense of like, all right, I got to eat. I, I, I got to have this. And for many people, food is an addiction, right? Um, and they're finding that that, that sort of satiety effect or that, that blockage of, you know, I need more of the thing I usually crave is also applying to things like alcohol consumption and drug use and things like that. So, you know, it, it, it is helping people kind of break these long-term, uh, unhealthy patterns that they've had or at least moderate them, uh, a fair amount. So, um, that's potentially of interest as well, you know, to, to other potential markets for it. And I know to a certain extent, um, you know, there are, there, there's therapists out there that are, you know, encouraging these things for patients that have long-term substance abuse issues,

>> right?

>> Yeah.

>> Well, and again, you know, the, just, you know, my wife has taken a GLP-1. I take a low dosage of a GLP-1 now. And I don't.

>> Is this, is this for the bathing suit for Italy? Or?

>> No, I'm kidding.

>> No, not at all. But I've been on a, what's called a maintenance dose now for about two years altogether. It's a very low dose of a GLP-1 for the anti-inflammatory effect. My family has a history of Alzheimer's and dementia.

>> Okay.

>> And inflammation is just, it's sort of the silent killer. It just degrades all sorts of things metabolically.

>> Yeah.

>> It does. Um, but inflammation of the brain is, is directly tied potentially to Alzheimer's and dementia. So, I've been on a low dose of GLP-1s for a long time and my body's used to it now. I don't have any side effects anymore, but initially when you first start taking it, the reason you don't want to eat is because you, you're nauseated. The thought of the smell of food turns your stomach.

>> Interesting.

>> It, um, you, you have no, when you, when you try to eat, you just don't want to eat. You, you'll eat a little bit and then you'll be full.

>> Um, but yeah, it's, you know, but after a while you'll get used to that effect. And so this is why you can't stay on a heavy dose of GLP-1s for a long time, long period because it'll have other issues. But there's been several studies out about low dose maintenance of Alzheimer's. And of course, I work with my doctor very closely. I take blood, I just had my blood test last week. My wife got bad news. I'm going to be stuck around with her for a few more years anyway.

>> So.

>> Yeah. Um, but, you know, you know, you have to take it very seriously and you have to stay on top of it. But you, you know, we measure and monitor all my hormone levels, testosterone levels, um, you know, vitamin levels, etc. within the body, my amino acids, everything to make sure everything's functioning properly. Um, because there are risks to any type of drug that you're taking. But, you know, it's the, the fear of Alzheimer's is top of my list because seeing what it does to my family. And it's not necessarily that, you know, I'm going to have Alzheimer's, but because it runs in the family, there's a risk of that. And so I want to take whatever precautions I can to prevent that by staying mentally active, staying physically active, eating healthy, choking down cauliflower, rice, taking a GLP-1, you know, um, whatever it is, whatever I've got to do to combat that situation, then that's what I'm willing to do.

>> Yeah. All right. Well, look, I mean, I think everybody should be doing what they can to avoid, you know, really unfortunate conditions like Alzheimer's, etc. But, yeah, if it runs in your family, then totally understandable. So, I'm curious since you've got personal experience with this, um, uh, did you notice any other behavior changes besides just not wanting to eat when you first got on it?

>> No. Um, like I said, my wife was taking a much bigger dose of it because she was actually into a weight loss program and she was working with her doctor and she wanted to lose, you know, a decent amount of weight at the time. When I say decent amount of weight, for her it's like 20 pounds.

>> Well, I was going to say, I mean, I've met your wife. She doesn't have 20 pounds to lose. I mean, she's.

>> Yeah. So, but she was on it for, you know, she was on a, a kind of, let's call it a regular dose for a while. And so she had much more of the effects. I mean, you know, she would be nauseated. She would not want to eat at all. And like she would actually have to force herself to eat.

>> But again, your body gets used to it after a while. So you have to come off of it. And then you can cycle back onto it again. But the problem is when you come off of them,

>> if you haven't changed your diet, your eating pattern, all the weight comes right back.

>> Right back. And I was going to ask you, have you cycled off at all even though you're doing low dosage?

>> No. My do I, I take 10 to 20 milligrams. A very, very small dose. Um, and so no, I just stay on it once a week. I take 10, 10 to 20 milligrams a week and that, that's I just do that every week.

>> Okay. I mean, you're kind of taking it like the way that I don't know if they still do it, but people would take baby aspirin just because heart.

>> And people your age should be on a baby aspirin program, Adam.

>> Yes. Okay. Well.

>> It reduces your inflammation in your joints. So, when you're in the gym working out, lifting heavy weight, you're not, you know, causing other problems with your with your joints. So, yes, you should be taking baby aspirin once a day.

>> All right, folks. We're going to get back to the markets, but, um, it is funny, Lance. I've had these things happen recently that are just really reminding me I'm getting old. So, one of them is, you know, these readers that folks have seen me starting to use. Um, and folks, you people keep asking about why they.

Keep changing, and it's because I keep losing them, right? Just I'm not used to having them yet. I don't have the routine down yet, so I keep leaving them places to go buy new ones.

Um, but uh, in addition to this, and this was just the past like three, four months, I'd always had great near-term vision. Um, but it just totally just sank to the bottom of the ocean over the past couple of months. Now I totally need them.

Um, but also, you know, I I went from taking zero supplements in my life to, you know, a year or so ago, I'll start taking creatine because that's good for working out. Now, to your point, Lance, I've got like five or six things. I'm tell it just it keeps growing. Got the concier doctor and he was like, "All right, you need vitamin D. You're low in vitamin B." Like that. Okay. So, we added that in and now it just >> it seems every couple months there's no reason to take something new. Yeah. >> I can't I I cannot stress to you enough. Go get yourself a really good omega-3 supplement and take it. It will save your joints.

>> Okay. All right. Well, all right, folks. Uh leaving health back to the markets. Um so uh that you said the hyperscalers you know had great earnings and actually um this is probably a different topic. I don't know if I want to get into it too deep with you here right now but um you know the the the US economy continues to remain I think surprisingly resilient to a lot of people.

Y >> um and a huge part of that is the capex spending by the hyperscalers and Lance I I I believe I read yesterday that uh 75% of Q1 GDP uh Q1 GDP growth um was responsible or or or was driven by the hyperscaler capex. I mean, it's becoming just such a massive amount of our GDP. And for there are a number of reasons, and I I'm trying to remember who I talked about this with on this channel earlier this week, but there's a number of reasons why I would caution people who are have been really freaked out either coming into this year just about, you know, their worries about the economy and then probably had those fears inflamed by the Iran war and the spike in the price of oil. who are have said, "Oh my gosh, surely we're going to have an economic slowdown, if not a recession, as a result of all this." And have then started, you know, investing for that. Um, obviously that hasn't worked out well for you so far. And I would caution people from making big bets if that's what you think is going to happen until we start seeing some reflection of that in the data. And as long as the hyperscalers keep spending as much as they are, Lance, it's going to be really hard for the economy to have experienced a material slowdown. Plus, there are other tailwinds that are hitting the economy as well. Um, but you know, I I think a lot of people just don't comprehend how big of a positive economic force that capex spending is. And we can debate all day long whether we're going to see the incremental growth boost to revenues, corporate revenues that we're expecting from all this in the future. That's totally open for debate, but as long as these these gobb these gobs of money are being spent quarterly by these hyperscalers, it's going to be really hard for the economy to roll over.

Yeah, I look this is such an important point that, you know, it's great. I'm glad you brought it up because I actually posted a couple of charts on this earlier this week because there's a lot of stuff on, you know, X and other places like, oh, the market's going to crash because of this and and the market's going to do this because of that. And >> and by the way, I'm talking about the economy right now, not markets. But >> well, the markets come part of the economy. And the reasons behind that are is that, you know, the economy is terrible. You know, in reality, everything else is going on. It's very important to remember that 80% of the economy is services. Services have called have a what's called a multiplier effect. So when you go buy Door Dash as an example, that's a service. That multiplier effect in the economy is about one to one. So you spend a dollar on Door Dash, it creates about a dollar's worth of economic growth because that that transaction has very little impact on the economy. It's it's a very closed loop. manufacturing has about a four to5 multiplier on the economy. So think about >> punches way above its weight. Yeah. >> Yeah. Yeah. And the reason is is let's say I'm going to build a data center. Just keeping this in context. I've got to go buy the land. I've got to go, you know, build the building, run the wires, build the, you know, build the roads, build the bridges, whatever I have to do to get there. all the other businesses that come up around that data center to support that data center that's all multip that one dollar getting invested in that that data center that pays somebody's salary pays the engineer salary the architect's salary the construction worker salary etc that's getting multiplied out through the economy so manufacturing this has always been my thing about debt is that non-productive debt which is what we use for social security medic has a very low multiplier in the economy if we would do more productive investments with our with our debt. We would be much better off if we did more Hoover Dams and more Tennessee River Valley authorities, those type of things.

>> Right. >> Which we are starting to do. There there is a >> Right. Right. And so that's a good thing, by the way. But here's a couple of charts for you just to kind of show you the magnitude of what's going on right now, why this is so important. If your thesis is like like Adam said is that, you know, the economy is about to be in a recession, etc. Be careful with that. This is US core capital goods. This is non-defense orders, X aircraft month over month. We just had one of the the these past two months have been very very strong and have been ticking up very strong. This is business investment primarily. This is that's what this is. And if we take a look at this, this is nominal versus real. So if you take a look this acceleration that started really about mid 2025 when all these data centers first really started breaking ground etc has been accelerating very sharply and so when we when we start looking at this and looking at and and to your point Adam when you look at GDP this recent report we came in at 2% the Atlanta Fed was expecting 1.3 that differential was primarily to your point business investment personal consumption is usually the big driver of month-to-month gain gains in GDP. It was business investment over the last quarter. And that also comes into importance about what's called, you know, we have a lot of people going, "Oh, the economyy's printing money." No, we're not. We loan money into existence. We don't print, nobody's out there with a crank, you know, printing up dollars. We loan money into existence because of this economic pickup. Look at the growth rate of bank lending to businesses, which has had a very, very sharp increase. So that's creating more money supply in the economy that's now creating economic activity because I loan money to I loan I'm the bank. I loan money to Adam. Adam says, "Okay, great. I'm gonna go build a data center. I've got to go hire all these people. I got to pay their salaries or payrolls. I've got to buy commodities. I've got to buy this. I've got to buy that. I've got to do all this other stuff." That that money creation because I'm I'm doing fractional reserve banking. I take my deposit of $100 from a client. I can loan out, you know, $1,000 to Adam and Adam goes puts that $1,000 to work. That's how money is created within the economy. And as we said, money is always lent into creation. But that that increase in money supply is filtering directly back into economic activity, which is going to keep the economy from going into a recession anytime soon. And that's also why profit margins are surging to new records.

Um, is it easy for you to go back to the first chart you had there real quick? >> Okay. Um, so great charts, Lance, and and totally Thank you. totally supporting the point I was making. Um, this first one you had. Yeah, right there. Um, so we're seeing capital goods orders um I mean explode higher. I think that's fair to say. >> Um, this is non-defense. Um, I got to imagine that defense spending, defense orders are also pretty robust right now. Um, given the huge increase in the military budget, the war, etc. So, you know, there's another barrel to the shotgun that's going on here along with the private industry here. Correct. That also has a multiplier effect. That that is correct because again when I'm paying you know the defense budget goes to Rathon and Loheed Martin and General Dynamics they're hiring employees putting them to work you know buying the materials to make you know the weapons the planes etc. So absolutely the reason we strip that out in this particular case Adam is so we can look at what's happening in the actual economy. Defense is defense is defense and that's a lot of government spending. So, we strip that out to look at the actual economic activity, which is much stronger than what headlines would currently suggest.

>> Yeah. And all I'm saying is is um >> we we've got strength on both sides uh here, the government side and the uh private side, which look, you know, you might not like the deficit spending, folks. You might not like the the the deficits, and I sure don't, but you got to understand that deficit spending tends to be stimulative to the economy in the near term. Uh and again, you know, not saying that we can't enter a recession here or economic slowdown and certainly the longer that oil prices remain higher, uh those odds do rise and obviously the war could could metastasize into something much more terrible that could have real even larger economic impacts. But until and unless that happens, just don't discount what is happening here in real time. And again, Lance's job and my job here is not to tell you what we think should happen or what we really wish were happening. It's to try to tell you what is happening so that you're making informed decisions.

>> That's right. >> Okay. So, um another sector that had really good earnings um this quarter, no huge surprise, um was the the oil and gas sector, right? So, um, Exxon and Chevron shares, uh, they had really big Q1s. Their share prices have responded nicely to that. Um, >> what was interesting in reading that is they had some pretty big writedowns in Q1 as well. Um, so they they they managed to to still do um, well, you still beat earnings despite that. And those write downs are actually going to help profitability going forward from here. So, they seem to really actually in the near term have a lot of wind at their backs, right? They've got high oil prices. They've got record production. They've now got some of these accounting things they've just done that are going to help profits look even better going forward. So, that sector still seems to be doing real well. Um, let me ask you this, Lance. So, none of that's a surprise in the near term. Um, but is this the time to jump into these companies uh and ride this or do we need to say, well, wait a second. Um presumably hopefully the conflict in Iran ends soonish and you know the administration saying hey the minute that happens oil prices are going to drop like a rock. You don't necessarily have to believe the administration but if you look at the oil's futures market as we've been saying you don't go out that many months before oil prices futures are are you know substantially lower than the current futures price right now. Um so you know the the the market is not expecting these prices to last uh super high. We're also having um more output coming. So you know we're increasing our output. Every other net oil exporter or exporting nation's increasing their output and we've even seen things and and I'd love to get your thoughts on this. Um, we've seen things that I don't think people saw coming. Like we saw a member of OPEC, Bolt, right? The UAE just announced that they're leaving OPEC. Um, and they're going to be ramping up production higher than what OPEC wants, um, quotas to be right now. Um, so there's a lot of supply that's going to be coming on. And to the extent that there is any demand destruction growing from these high oil prices, well gosh, if the war does end, we could have kind of a perfect storm of flows resuming outside the straight of Hormuz as this new supply everybody else is putting on really starts hitting the market. Um, a as the same time people are starting to consume a little bit less because of the demand destruction. That could all lead to a lot lower oil prices, you know, maybe later this year, early next year. Um, so my question to you, Lance, is given all that, does it make sense to still jump into the sector or might this be the wrong time? You're jumping in right at its height, right before, you know, things start to roll over in terms of price.

>> So yeah, you know, the the move in energy is really behind us more than anything else. And you know, as a good example, you know, it's that, you know, I was talking to an So, I live in Houston, so we have I've talked to a lot of oil and gas drillers at the moment, and they're not you don't you don't want to drill you. It's it's counterintuitive, but you should be thinking like, right now, we should be drilling wells like crazy, right? At $100 a barrel, I should be out there just popping a well every 20 minutes and getting that getting that oil out of the ground. The problem with that is it takes time to drill a well, right? I've got to go secure the lease. I've got to move the well out there. Got to get it drilled and then get the oil out of the ground and get it transported. And the reality is is that oil and gas drillers realize that $100 barrel oil is not going to last for very long.

>> And so they're not wanting to drill at this level. In fact, that just shows up in the data.

>> Um this is the Baker Hughes oil rig count, which this this is as of April 10th, so it's a little bit dated, but you know, you're at 411 rigs, right? you there's you're not seeing a big ramp up in in rig counts because of high oil prices. And that's because they know that if I drill here, it's not profitable because oil I can I I am I am better off today taking my existing production and selling it to the markets today at $100 a barrel or at least hedging it at $100 a barrel for the next several months because in the next several months the expectation from the futures market is that we're going to be back down potentially into the you know 607 $70 range as all this supply comes back online. So, you know, that's going to have an impact to energy stocks. We'll see a probably a fairly decent reversion in the energy index. It's it only makes up about three and a half percent of the S&P 500. So, it's not going to have a big impact on the market, but you know, if if you're long a lot of energy stocks, you want to be careful there. I would be more inclined to own the pipelines versus the producers and and the refiners because >> folks that make money on volume, not price. Yeah. >> Sorry. >> Folks that make money on volume, not price. >> That's correct. Yeah. And yeah, you're paying a toll to move it through. So they're less impacted by by high prices. So if you need to have energy exposure, you know, the pipelines are a little bit safer way to play it.

>> All right. Can I ask a naive question here? So um we are seeing record high production in America right now. We have um Yep. >> definitely responded. >> Record exports right now. >> Yeah. So, if we're not putting out new drills per se, is it because we're just sort of turning up the output of all the existing wells um >> and delivering >> as fast as I can? Yeah. And delivering as fast as I can to market?

>> Okay. So, again, sort of naive question. I mean, I watch Land Man. You would think I know everything about the oil industry, but um does that mean that we we we run our pumps at like, and I'm making this up, you know, uh 70% capacity so that if we do want to respond to market forces, we can dial it up a bit. Like, is that where that incremental exporting is coming from right now? Is it's just we're making the existing wells work harder?

>> Well, and again, you know, I'm delivering and I'm also delivering faster, right? So, I'm incented at $100 a barrel to deliver as much oil as I can to the markets.

>> Okay, let me let me let me try to help. Well, make sure I understand that and other people do. So, if I'm pumping as a oil producer, >> I can either sell that immediately or I can put it in storage and are you saying that we are kind of like both pumping harder and pulling from storage just to try to get everything into the market now?

>> Yeah. So, so if I'm an oil producer, so I'm I'm I'm land man, right? >> Yeah. So, normally what I do is I pop my oil out of the ground. I have my contracts to sell whoever I'm selling it to. And so, you know, maybe I'm producing, you know, a thousand barrels, you know, a day and I've got contracts, got contracted commitments for that oil that's 600 barrels a day. I'm just making up numbers. >> Yeah. >> So, so I'm delivering 600 barrels a day and I'm storing 400, right? So, whatever it is. But in an environment where I know that I'm getting a premium price that isn't going to last, I'm incented to sell that market as much as I sell that oil as fast as I can at $100 a barrel >> and get it out and get that revenue today because I can go out and I can hedge my delivery for the future, right? I can go in the futures market. This is what what causes oil prices to move up and down, which is the buying and selling of futures contracts. Um, I can go out in the market and I can hedge for future delivery at $100 a barrel. So, I can produce it now and deliver it later. But I'm also just as incentive right now if there's since there's an increased demand for exports, I can I can sell it through exports, >> which just we just hit a record of exporting oil now uh to other countries.

>> Right. Right. Um, okay. So, I was listening to the CEO of Chevron speak today and um you know, one of the risks that's out there um you know, he he's not he's not sounding a fire alarm fire about this, but one of the risks that's out there given the you know, large amount of oil that is not coming through the Gulf, right? So, the world is scrambling for supply and that's why we're exporting record amounts all that stuff. >> Um one of the one of One of the things that has kept the oil price from going even higher than it is right now is there there are inventories, right? So just in the example you mentioned, you know, these producers, they they do have a fair amount in storage they keep in storage um for moments like this, right? So they're draining down their storage reserves. Um they're also just in the in the distribution system of tankers and everything. There's excess storage. um you've got just oil that's had been sitting in tankers that just wasn't needed immediately. Again, all that stuff is getting taken out of the system right now. And so if the Iran situation, if it if the Gulf remains closed for long enough, that excess capacity gets used up, right? And eventually the the storage tankers, the storage tanks of the producers are are used up as well. And that's where you start getting into um I think you said the difference between supply constrained and supply outages. Um and uh that could so so while the futures market still believes that you know later this year oil prices are going to be back down to the 60 to 70 range as you were saying. Um it doesn't mean that oil prices couldn't go a lot higher in the interim due to some of these things. We just don't know what's going to happen yet. But I I I while I'm I've got my eye on the risk of of investing in oil companies right now given where how low prices could get again by the end of the year. I'm not saying that don't be, you know, I'm not saying that it's going to be a straight line from today's prices down to to 70 at the end of the year. It could get pretty crazy. And obviously if things get kinetic with Iran and Iran starts blowing up additional energy structures around the Gulf or whatever, that can still make things way worse, too.

>> Yeah, absolutely. In fact, I just wrote about this in our daily market commentary as well. And if anybody is interested, I just wrote an article, I think two Mondays ago, um, talking about why the markets are ignoring the straight of hormone.

>> So, that was my next question for you is this this article. Yeah. Why is the market ignoring it right now?

>> But for all the reasons that we just said, um, you know, one of the charts that I had in here in particular was this chart from the, uh, energy uh, the EIA, and China went into this with about 1.4 4 billion barrels of oil. The US had about 413 million barrels. >> So, China is, I think, is more than the rest of the world combined in terms of they came into this with just a huge they they were they've gotten very smart over the last, you know, several years and they're getting themselves into a position where they're not dependent on things like the straighter moose buckling their economy. They've already got they've got a huge problem economically speaking because of that massive you you remember back in 2005 67 they were building replica cities of the United States >> just this massive you know residential boom they were hoarding commodities like crazy all that's blown up now um and they're dealing with that financial issue in their economy and so what they don't need is something else to come along and really undermine that. So, because they're still dealing with that problem. Um, and so they've gotten themselves into a position to where they're they're pretty insulated right now. This isn't going to last forever, though. This is the important thing is that this won't last forever. This will eventually change. But this is why for right now that the market continues to drive to to basically kind of look past a lot of this issue because the market recognizes that in the next several months, we are going to find a resolution of the straight moose hopefully. And when that does, that oil didn't go away. It's sitting there and it's going to come on. It's going to come back online in terms of in in con in conjunction with the already and improved production that we're already doing. So, you're going to have a supply glut that comes out of this is going to drop oil prices. And that's what the market's looking through saying, okay, this is a temporary issue.

>> You know, look at the economy, look at earnings, look at the other stuff that's going on. We're okay for right now because and particularly in the US, we have very little dependency on what happens in the straight arm moves as opposed to China which is much more dependent. If China runs out of oil reserves before Iran is resolved, they're going to have a bigger problem on their hands.

>> Yeah. And China, just FYI, is um it is releasing from that its strategic petroleum reserve not not just for its own purposes um but it's selling that to other players in uh the Indopacific region. Um which is which is another factor that is keeping oil prices from going even higher than they are right now. Um, and you know, to your point, Lance, uh, if this closes, uh, if the closing of the Gulf lasts for for too much longer, they may have to stop doing that. Yeah. >> Right. Yeah. And so we'll >> and that and that is the inherent risk. And again, that was kind of my, you know, conversation in our daily market commentary today, which is that, you know, we're, you know, running that clock right now. And I I I updated that chart from so so here just so so we can kind of back up. So here's the futures for oil prices just so you know what what Adam's talking about here. This is the crude oil. This is Brent crude spot history versus forward curve. So this is where we were. This is yesterday that I wrote this. So at 110 and by December we're at 7950. So, this is what this is why producers aren't willing to go out and drill a bunch of wells here because if I drill here, I'm going to lose money in in the next few months. So, that's why they're not doing that. And we got to remember, you know, >> although 80 bucks in oil is is still attractive, but >> No, it look 60 70 $75 a barrel. That's a sweet spot for drilling. I I can I can drill offshore, I can drill onshore, I can do exploratory wells and it's profitable. You have to also remember, and this is the same thing with gold mining and everything else. Everybody goes, "Well, gold price is here, so these miners should be super profitable because of where the gold price is." Yes, they're going to see some profitability increase, but you have to remember that everything else goes up in cost, too. You know, the cost of extraction, the cost of labor, the cost of all your inputs to get it out of the ground, all that goes up in price, too. So, that affects your profitability. Same thing for oil prices. When oil prices go up, every other cost goes up with it. It's not, you know, cost doesn't stay flat and price just goes up and you have this huge windfall profit and that just it doesn't work that way. But, but yeah, at that 60 to 70 to 80, the economy works well. People can buy gas. It's not it's not stripping them off at the and the wallet at the pump and companies can go out and drill, explore, do all the other things. It's great. Get below 50, it starts to reverse in the other direction. um and and really above 80 it becomes you know becomes more problematic to to sustain oil at those levels because high prices are a cure for high prices. You get demand destruction and everything else. So that's so that's what the the the issue is right now and again so I updated this analysis for where we are. So I did this about back in March the 14th and and if we don't get this thing resolved you know in the next you know 2 3 months and we keep on this stalemate now that's probably about a 50% probability right now but you know that's oil prices staying between 90 and 115 and that's going to put pressure on the S&P. see your 6,800 to 7150. If we stay above that for longer and really start and potentially reescalate, go into, you know, start rebombing Iran, start, you know, really pushing prices, I think that's a low probability event. It's not impossible, but it's a lower probability event. That's going to be a much bigger pressure on the markets. And again, that gets us back in that 10 to 15% correction sometime this summer, if that occurs.

>> So, I don't think you can ignore the risk at all. I think >> No, I I I don't think you can either. Um, and I want to pull that thread in just a sec real quick. Um, just on the, um, on the topic of oil, you were talking about the miners. This is actually why personally, uh, not professional personal financial advice folks, um, but this is why I'm I'm kind of attracted to the gold miners right now. Um, because they've they've sold off from their highs earlier in the year when gold was going bananas, right? And um as I've talked about with a number of experts of late, there's a real inverse correlation between the price of oil and the price of the precious metals right now. And I think that's because um I mean it's multiffactorial, but I I think it's because oil prices have risen so much that countries are having to sell assets to afford that oil that they need. And precious metals had been on fire, so they're selling the precious metals, right? So, um, if there hopefully is resolution here, Lance, and the price of oil comes down, that's going to take that price pressure off the price of gold >> while at the same time reducing some of the cost increases that the miners have been seeing. So, they're going to get basically kind of a double tailwind of a rising price of what they mine and a lowering of of expenses.

>> Yeah. Yeah. Because because energy is a huge input into the extraction of gold from the ground.

>> Yeah. Yeah. So, this this may be a good time to be kind of, you know, dollar cost averaging your way into some minors that you you you might have missed, you felt like you missed the first time around.

>> Make sure you're buying, look, gold miners historically some of the worst allocators of capital. >> So, make sure you're buying good quality, fundamentally strong gold miners. Not all gold miners are created equal.

>> Completely agree. Completely agree. You know, look for more like the Agniko Eagles and whatnot or or or even better the um the royalty companies here. Um, okay. So, um, the US's strategy right now versus Iran is, um, let's try to economically choke these guys out, right? That's the whole idea around the blockade. Um, and in addition to the blockade, the physical blockade, um, you know, they call what the the operation, the military operation over there, we call it epic fury. The US military calls epic fury. Um we have kind of part paired that with um a a operation what is it called operation economic epic fury where Bessant at the treasury is is using all sorts of levers that we can on the money side on the financing side uh to try to compound the economic uh pain that that Iran is feeling right now. Um, and this is, you know, doing things like going after their assets, uh, tracking down where the regime, uh, guys had been, you know, storing their personal fortunes that they've been stealing from the Iranian the Iranian, uh, uh, economy. Um, so there's there's, you know, there's this twin operation here to try to I keep using the analogy of an economic chokeold, right? just to try to reduce the economic oxygen that Iran is getting so that they eventually have to tap out the same way that a wrestler or US UFC fighter has to when they're in a chokeold. Um, now the big question is is it working? You know, I keep seeing this term stalemate and you had that in your uh your your thing there. Um, the question in a in a stalemate like this is who does time favor, right? Who can last longer? And um obviously the US is betting it can last a lot longer just parking you know a couple carrier groups there in in the the Arabian Sea putting this pressure on Iran um that time is on its side and you know Iran is saying the exact opposite or whatnot. So anyways we've we got some recent statistics coming out of Iran I just want to share here that that shows that maybe time indeed is not on Iran's side here. Um right now their inflation which has been terrible for the past bunch of years uh is now getting even worse. Uh it's right now at annualized rate of 67%. Uh over the past couple months the country has seen mass layoffs, shortages. It's starting food and fuel rationing at this point in time. Um it also has a massive water crisis that's going on in parallel here. But you know economically things are are getting even more dire inside the country here. Um, so far they tally that the infrastructure that's been bombed by the US and Israel is getting close to 300 billion. That's nearly a full year of Iran's GDP. Um, meaning it's going to be very expensive and probably take them a long time to rebuild even if another missile doesn't fall on the country.

Um, let me just read this, Lance, and then I'll give you a chance to respond.

>> Um, uh, these these measures are widely viewed as temporary. These is referencing some things that the Iranian regime is trying to do. It says, yet these measures are widely viewed as temporary holding operations rather than solutions. Virginia Tech economist uh gosh, some name I'm going to murder if I try to read it. Uh told the journal that Iranian leaders recognize ending the war is merely the prelude to an even harder challenge, managing a disillusioned and impoverished population without the rapid return of oil income. Middle East Institute fellow Alex Vatanka points out that while the regime can still portray endurance as a badge of national pride, prolonged revenue collapse increases the risk of renewed street mobilization. Viennabased economist Mi Gi uh offered a stark assessment. Quote, "Living is not affordable anymore. Iran is at its weakest point." So, there have been a lot of people who've been saying, "Look, Iran's dealt with sanctions before. They know how to deal with hardship. These guys can just weather through this. they they've you know they've got through periods where they weren't getting oil out of the Gulf just fine. The data that we're getting which is imperfect folks um seems to think that this time actually really may be quite different for them where things are are harder to an unsustainable point for them. And of course with the regime in Iran it's not just about fighting the external threat of of the US and Israel it's also fighting the in internal threat of its people actually rising up against it. Right? So, um I guess I'm just sharing all this to say, uh whether you like the war or not, if the objective here of of the US is to get Iran to a maximum pain point where it's got to come to the the table and and agree to some concessions here, whatever concessions the US is is willing to stand down with. If that economic pain continues at this rate, may maybe we will see a negotiated end of this war pretty soon.

>> Yeah. No, I think that's very likely. You know, one one of the points you didn't bring up was is they're also running out of room for storage of oil.

>> I I should have mentioned that, but that's incredibly important here, right? Yeah. >> And so they're they're about to run into another problem on the oil front as well. And they're like they're trying to retrofit old, you know, rusted out tankers, anything else they can find, you know, to store oil in. Um, but no, >> sorry to interrupt, but let's let's let folks understand why that's really important. And it's because when you when you have no no longer have any space to store the oil that you're producing, you have to start shutting down your wells. And shutting down your wells, it's a it's a it's a complicated process and it is very hard, sometimes impossible to return those wells to their prior production levels. You lose pressure, you lose other sorts of key elements of the the well where, you know, you really risk permanently injuring your your energy production. And I think that's one of the things Iran really doesn't want to get to.

>> Exactly. Well, it's it's such a big part of their economy and where their revenue comes from. And you know, so so yeah, you know, it's you know, you know, the thing is is that they can withstand this pain for a lot longer than I think people expect them to because they don't really give a crap about their citizens, right? You know, it's the Iranian government, the the IRGC, etc. They really don't care about the civil the, you know, the citizens that much. I mean this is this is the history of the country. So I think they can withstand this for a while. But to your point, I think at some point, you know, the citizens are going to start to try to take action and put enough pressure on the on on the government that they do have to come to the table. We'll see. Um do I think it's going to happen next week? You know, I don't know. This thing could drag out for another couple of months before we get to that point. And I think that from a market standpoint, from an investing standpoint, we've got to be aware that that risk is there and, you know, kind of keep a watch on portfolios because of that potential impact.

>> Yeah. Yeah. Um All right. Well, folks, again, um who knows what's going to happen from here, but let's all hope for the best. One last point just to mention here, Lance, that maybe you and I can talk more about in the future if you want to is had a really good discussion with Brent Johnson yesterday. Um, and you know, we we we were doing um, you know, this is prognosticating folks. Neither of us are professional geopolitical analysts by any stretch, but you know, a lot of times people say, "Look, the the Iran war really isn't about Iran, right? It's it's it's a it's a bigger game. It's it's about China, and this is a piece of the puzzle." And it is kind of interesting that if you look at what we've done recently with um you know kind of reclaiming control of the Panama Canal, at least getting China's influence, reducing China's influence there, getting Maduro uh in Venezuela, um influencing where Venezuela's oil goes and also preventing China from, you know, gaining too big of a toll hold in in South America. Um now with um what we're doing in the Gulf, you know, we we are we are handicapping China's ability uh to to source oil, right? Um and we've got the big meeting between Trump and Xi next month. And you know, when you kind of string the whole liberation day, you know, tariffs on everybody that we went through last year, which you and I talked about, you know, could very well have been a poker move, you know, kind of making your flex at the poker table to get everybody more on your side than China's. And then you follow up with what they were doing in the physical world on energy supplies right now.

>> Um, when Trump and she meet, >> that's a lot of bargaining power that the US has on on economics and energy. And of course, China has bargaining power against us too, right? That they've been flexing rare earths, key medications, stuff like that. But you you can make an argument looking retroactively at all this that this was all intentional leading up to this meeting where we're trying both sides are trying to get their maximum bargaining power against each other to then make whatever grand compromise they plan to make.

>> That absolutely agree. So no that look um you know one thing about Trump is is he does know how to negotiate and you can't negotiate from a position of weakness. Now I don't know if all these moves that you just laid out you know Venezuela everything else is all part of a grand master 40 chess plan. I'm not on the inside so I have no idea.

>> And to be clear I'm not either but you can just make the argument. Yeah. >> Yeah. Yeah. And and so there's nothing wrong with making the argument. I just want to say that, you know, neither one of us have inside information, but the the there there is more of a connection, and this is this we've talked about this before as well. There is a pretty decent connection between all these different events and the potential for repositioning America structurally within the global economy and putting us back into to much stronger footing than we were previously. And it'll be interesting. Look, it it'll be really interesting to see how this all plays out um over the next few months and you know, we may be very surprised by the outcome.

>> Yeah, maybe not. >> Maybe not. Sorry. Go ahead. >> And maybe not. Maybe we won't be surprised by So, >> well, we we'll see. But it's funny. I'm just going to connect one more dot and then we'll move on. Um uh Peter Chur, who I've interviewed a couple of times, probably head back on relatively soon. um his investing framework um has been um what he calls the prosec um and so he's basically looking at the the twin related uh trends of you know we're reshoring a lot of uh sectors for national security and so there's going to be a lot of investment going into those giving tailwinds to those sectors um and national security is becoming a lot more important in this less delobalized world, right? Um and not not just in the US, but in lots of other countries. Um and so he's looking you he's basically saying if you invest in sectors that are going to benefit from those two trends, you're probably going to do pretty well. Um I think there's something to that. And you know, of course, we've been talking a lot more about geopolitics on this channel than I ever did in the past. But it's because it's becoming so much more important to the economy, right, and the markets. So >> no, no, it is.

>> All right. So, um I want to switch gears here. I'm trying to make my way to a a article that you just released, Lanced, um about what you're calling the robot economy.

>> Yeah. >> Um and it's funny you mentioned that because I've been using a similar term lately um and not so much here on this channel, but in a lot of my private conversations, and I'm calling it the smart robot economy, right? It's kind of the marriage of robotics and AI.

>> Um but before we get there, I just wanted to note um this headline I I read this morning. Um the headline is AI hype meets meets hardware crunch as US power equipment market eyes $65 billion boom. Um and the key thing is is hey we all know we need to build out um our grids to provide all the electricity for the data centers and everything that we want in this new future. Um and we're finding that there we're encountering these these really painful shortages of domestic components particularly things like transformers. Um we we we just don't have nearly enough uh right now to to build all the the grid elements that we want to and a lot of the transformers that are available for purchase are not domestically manufactured. In fact, a lot of them are made in China, right? Um so um it's I think both an investment opportunity, but it also is a potential challenge to this AI spend that we're talking about here, right? Um so it is something that's got to be addressed pretty quickly. And I guess, um, the thing I just wanted to get your thoughts on, Lance, is, you know, the investment opportunities that this unlocks. Um, I don't know this space very well, but I mean, I guess component manufacturers, either domestic or from friendly countries, those are probably going to be seeing an awful lot of demand. Um and then on the um on the energy side of things um you know, because we might not be able to rely so much on our public grids for the data center buildouts then all these like behind the meter solutions um you know whether they're gas powered whether it's it's small micronuclear reactors and whatever um it seems like that that those areas are going to see a lot of investment as well. So you know what do you think are ways to play this?

Well, no, I think you just lined them all out. I mean, know you know, personally and and also just professionally through our through our business. We're investing in a lot of those stories, right? So, you know, we're we're buying companies that are investing into companies that are generating power, providing power. Uh the behind the meter solution is something we've been talking about for the last year and a half is that, you know, and and I I see this firsthand with my wife's company.

>> I was going to say your wife is actually involved in >> Yeah, she just got she

Just flew out to Reno. She was actually out, uh, in your neighborhood last week.

She was in Reno.

She was in Reno, and you didn't tell me.

I, I meant to, and I forgot. She out on the cor— She got— She was so excited they got to fly out on the corporate private jet, you know. So, it was, it was a big day for her, but they just flew out and flew right back.

But they, but they're, you know, providing LG, um, as the feeder for power to a data center that's getting built. They're, they're building data centers all over Reno. I mean, they're just like, that's seems to be fertile ground for—

Yeah. Know, it's, it's amazing. There's, there's a region and I'm blanking on the name of it, but it's kind of northeast of Reno. Um, I've not been there yet, but there's like a, there's a little mountain pass that blocks it, so I can't see it, but if you drive through it, apparently that's where like Tesla's got its Gigafactory and Nvidia's got a whole bunch of places. I mean, that's where there's just tons of land and they're just apparently building it out into mega techopouloolis.

Yeah.

Yeah. Yeah. Absolutely. And so, anyway, but so, kind of two phases. Is one, if I'm building a data center, I need power for it. But if there's not a pipeline available, I've got to wait for that pipeline to get built.

Yeah.

To tap into the pipeline to get power so I can use liquefied natural gas and generators, uh, near-term while I'm waiting for that pipeline to get built so I can attach to the pipeline. So, it's kind of a three-step solution to get to power. And so, we're seeing a lot of that activity is current right now. That's been a big theme over the last year.

But then also looking at the cooling of data centers, the connections for the data centers, all that is also very important and a lot of great companies playing in that space. But particularly on the, the generator side, you know, this is why we like companies like Gnova, um, as well. Caterpillar also provides generators. The Caterpillar's been doing fantastic lately. Just had a great earnings report yesterday. So, there's a lot of ways to play that space. You're a little bit behind. If you're just trying to play that space now, you're a little bit behind the curve. This is something that's going to have about a two-year time horizon start to finish because once the data centers are built, they're built.

Um, so maybe it's two, three years, something like that. Then we're going to switch over to the revenue generation side of who's going to actually generate the revenues that come out of these data centers. But just be careful with your valuations, be careful with your technicals, pick your entry points wisely, but there's still probably room in that chase. We're still right in the heart of this whole infrastructure buildout phase.

But one thing we'll see is though is there's going to be a lot of opportunities that come up. You know, there's, there's a lot of bad mouthing about the US economy, particularly from the younger people and, you know, like capitalism sucks, it's not fair, I, you know, there's no opportunities. There are some fantastic opportunities available. If you're young, go, you know, and I'm too old to go start another business. But if I was younger, to your point, Adam, we need transformers. Go figure out how to build transformers. Start building them because there is a lack of supply of transformers, which means it'll be easy to get customers. If you build a decent product, this is going to be easy to find customers because of the lack of access. So, there's going to be a lot of people that are going to make a lot of money over the next few years providing all the components to that that fiscal construction of those data centers, then ultimately the maintenance of those data centers as we continue to go forward.

Yeah.

Yeah. And, um, uh, there's, I'm kind of referring to this as like the, the, the midstream, uh, ecosystem for this whole data center trend. Uh, and even, even nuclear energy, I think, is going to have its own sort of midstream, um, set of different providers as well. Um, and so, you know, an interesting thing will be identifying those companies. Um, like, you know, you said, once the data centers are built, there's going to be companies that are going to be running all these behind the meter solutions and whatever, you know, these companies have put in place to power them. Those people are probably going to make a fair amount of money for the, a long, you know, there's going to be a long tail of revenues from there. It's not going to be the, the quick gold rush it is right now, right in the construction.

And look, and Adam, I think there's a real downside risk to these data centers in the future. Now, this is down the road, this is 10 years from now.

But like, for instance, if I was a, I, I personally would not invest in the data center, right? So, you buy the land, they're going to build the building on, it's a, you know, it's a size of two football fields, and they're going to pay you rent for the next 30 years. I would be a little bit more cautious about that because, you know, as we know with technology right now, we need a, we need a building the size of a football field to build a data center. In five years, that may be the size of a closet.

Right?

That same data center, right? And so all of a sudden, you've got these potentially empty. I'm, I'm not, look, I'm not saying this is the case. I just, we have to, when we're making long-term investments, and particularly if you're doing it through private equity or private credit, something like that, where you've got a long lockup period with with very little liquidity, I think we have to be attentive to the fact that we're rapidly aggressing, uh, progressing on technology, how it operates, how efficient it is, and how small it is. And, you know, when we start getting into quantum computing and a lot of this other stuff, we could rapidly see the reduction of size of these data centers. Just the requirement. Again, this is all speculation. I could be entirely wrong.

Right.

But just thinking, trying to think down the road where I want to be invested, you know, I think the shrinkage of these data centers is going to be more of an issue down the road. And so I want to be sure also invest in the technology that is going to be helping shrink that technology as well.

Sure. Uh, yeah, that's a really interesting point. Um, okay, so I want to move on to your your article real quick. Before I do, just, just to your point about massive opportunity. This isn't data center, but it's AI related. Um, I just, just read a story about a kid who, um, he, he noticed a service provider in his area didn't have a website. I can't remember what company this was, but let's just say it was some small manufacturing company or something like that or service company. I don't know. Um, it didn't have a website. So, what this kid did is, um, he got some of their sales brochures or something like that, and he fed it into Claude or Chat GPT or something like that and basically said, "Okay, this is what we know about the company. Make a website for this company and, you know, give it functionality like you can place an order and all that type of stuff, right?" And, you know, within a couple of minutes, you know, the AI built the website. Then the kid sent it to the CEO of the, the owner of the company and said, "Hey, I noticed you didn't have a website. I just built one for you." And the guy was like, "That is fantastic. I've been meaning to do this and I just hadn't been getting around to it, but this is a great website." Right? Uh, how much, how much is it worth for you just to give me this website you just built for me? And I don't know, a couple grand or something like that. Right? So the kid for 45 minutes of work makes a couple grand, right?

Mhm.

So then he starts calling on other, well, then he starts using Chat GPT to say, what other companies in my area don't have websites? And then he starts making websites for them. And then now he's written scripts to basically say, okay, forget about my local area, you know, what are the best targets for this strategy around the country? And so basically, you know, this kid is making, I don't know, tens of thousands of dollars now by providing a service that's actually real value add. These companies are really thrilled to have it, right? He's doing them a big favor. And the intelligence is going out there and just, it's got a very clear script that says, look for these types of companies that don't have this. Now, you know, how to build the website they want. Just do it. Then contact them and say, look, I built you a website. Here's the price. Do you want it or not? Right? And that's just a fantastic example of some of the opportunities that are getting created here.

Now, what I worry about getting into your article, Lance, is like, that's great for the entrepreneurial-minded, the folks that can kind of see the opportunity that no one else is seeing and and going after it. But that's a one-person company, right? So, yes, there's going to be fantastic opportunity for motivated individuals, but in terms of like employing the population, I really worry that I worry much more about the displacement of of the masses of workers. So, let's get to your article here.

Right. So, that and that's a really great point because so, I, so the reason I wrote this article is, A, you know, Adam, you and I have talked about, you know, the potential ramifications of AI unemployment in the future. And, you know, one thing I've said before is like, you know, look back in the 1800s, agriculture made up 80% of employment in the economy. Today, it's 2%. And we now have, you know, jobs that never existed before, like social media influencers, right? They're making money hand over fist being social media influencers. But those those jobs came out of technology that, you know, techn— it was said that technology is going to kill all the jobs. We won't need the jobs, but then we create all these new jobs from it. So, yes, there are jobs going to get lost, and there are jobs that are going to be made. Just as the example you just laid out, that's a job being created through the use of AI. Yes, it's only one person, but it is creating a job.

But I read this fascinating article, um, about Figure, which is a company making robots, and they are kind of on the cutting edge of robot technology and how it's going to function in the future. And they are moving to the point to where when they give an instruction to one robot, every other robot connected to it learns that skill. So, if, if a robot learns a skill about how to stack cups, as an example, every other robot connected to the system now knows how to stack cups.

Yeah.

You know, or vacuum floors or whatever it is. So, it's, it's, it's phenomenal, uh, what they're doing. And, and the article is just riveting. I, I read this article twice while I was on the airplane, and I was just like, this is just crazy what's going on with this. But the point is on this article is that, and I, I'll show you, I'll just share with you a couple of graphics here that I built for the article. Um, but we talk about employment and, you know, there was this whole big thing that we went through, uh, previously about minimum wage, right? We need to pay $15 an hour. We need a fair living standard. Those type of things. You know, you and I have had these conversations, and this is, this is one of the challenges that is going to be for the economy coming from robots, which is, and this was, this was data put together by Figure itself.

So, um, so this was, this was a, some data from Figure. A robot can operate for 67 consecutive autonomous hours. That's one Figure robot. And in that 67 hours, it made one error.

Right.

It can do that for a daily lease cost of $10 an hour. Uh, sorry, $10 a day for a robot.

Okay. And these are, these are today's existing stats, right?

Exactly. This was, this was in the article.

So, these are only going to get better.

Exactly. And that cost is going to come down. So, $10 a day becomes $5 a day at some point in the future, and 67 hours becomes, you know, 120 hours a week, right?

So, but you think about that is, is, if I've got a robot that can do, you know, clean dishes and do, you know, flip burgers and all that type of stuff, do it for 60 hours, 67 hours straight with one error, and pay $10 a day for that. Why do I need to pay $20 an hour for a living wage? Right? So, this is, this, and so this is to your and my point that we made before.

Which is, this is certainly a concern for the economic prosperity in the United States. And, and so, as we think about these things in the future, this is going to be much more important. So, this was, this is the daily cost of humanoid robots versus US minimum wage, minimum wage worker, right? So, the Figure robot, $10 per day, 24 hours of operation, $300 a month to lease it, no benefits, no turnover, 24/7 operation, 50 times cheaper than minimum wage.

Right? Versus—

Shows up on time, doesn't get sick.

Doesn't threaten to sue the company.

Correct. No benefits, no healthcare, no payroll taxes, no workman's comp, no breaks, no turnover costs. And, and again, you know, when you think about a minimum wage worker, um, you know, this is also a lot of things that people don't understand is that they, they get a job and let's say they're paid $50,000 a year for this job. What they don't realize is that the cost to the employer is closer to $75,000 a year for that job because I've got to provide the space for you to work in, the tools for you to use, your, your benefits, your healthcare, all, you know, all workers comp.

Exactly. So, the cost of of employing workers is more than just the simple salary cost. You, we look at, you know, we look at hourly wage charts, we look at total worker compensation. You know, that's just the cost of what we're paying it, right? That doesn't include all the other ancillary costs on top of that. And this is something that Figure is going to have a real replacement on in the future. And this is, this is the productivity gap. So, this is productivity versus median compensation. And we, you know, we continue to see net productivity is continuing to rise. Median compensation isn't keeping up with that. And, and that's that, that's where this K-shaped economy, uh, I've got an article coming up on this as well, because you and I have talked about this a lot, but, you know, this K-shaped economy continues to be K-shaped because the people that own the assets have the income because they own the assets, and the people that don't own the assets are struggling to make ends meet because they're solely dependent upon the income coming in. And that income is not growing at a fast enough pace to keep up with economic growth rates that we have in the economy. So, that's why we keep getting this K-shaped gap that's very frustrating for people. But this is why it's very important that as individuals, we are paying attention to, A, what are we learning? Right? What, what degrees are we getting? Are those going to be useful degrees? Are we going to be easily replaced by AI? Because when Figure starts releasing these robots, there's going to be a lot of people that are going to lose jobs because very repetitive, low-skilled work is going to get replaced by a robot for the financial reasons that we just talked about.

Uh, so, yes.

And this, and this is that K-shaped wealth divide I was just talking about. So, here's the top 1%. They own 31.9%. 36.5 is the, is in the top next 9%. So, stick those two together, you know, that's, you, you know, 78% of the economy is owned by 10%.

Right.

Bottom 50 at two and a half.

Has its own issues, um, in and of itself. But, yeah, so, so you're right, you know, uh, whatever you said, low-skilled, you know, work is going to get displaced. Um, but we know with AI, um, it is, you know, generally technological innovations have hit the lower-skilled workers hardest. Um, AI is a bit different because, yes, it'll do the same, but it's also working its way up the skill stack at a frightening speed, too. So, you know, kind of technically, no one's safe in the long run. Um, but, you know, think about, think about the skill demands of the average worker. Um, I, I don't have numbers, folks, so I'm making some grandiose assump— some big assumptions here, but like, you know, some of the most popular skills don't have a ton of, um, pre-existing requirements, right? So, you don't need a lot of skills to get hired as a barista. You don't need a lot of skills, um, you know, to be hired as, um, uh, I mean, think about the big ones. You probably have them here, but like, you know, realtor, even even a truck driver, which takes some skills, I mean, that that can be automated. We're already seeing—

Robot trucks.

Yeah.

Yeah. Exactly. So, I'm, I'm really worried about. I've mentioned this many times before, but it's, it's Keynes's theory of, or, or warning of technological displacement where he says, "Look, if, if, if a machine can do the job better, you know, higher quality, lower cost, um, than a human, you should replace the human with the machine." But you got to be careful at the pace at which you do that. If you displace the labor faster than you're finding another constructive use for it, you end up creating this social problem, this social crisis, the cost of which might be actually even higher than the benefits the technology is giving you. And I just see, to me, it just seems obvious, unless I'm missing something crazy, that we're going to be displacing tens of millions of workers over the next decade to 15 years. You know, I, if indeed the robot army, you know, comes, comes out of the volumes that they're expecting and that AI continues to evolve at the way that's going to. And the question is just, what are all these people going to do? And the solutions that they talk about just don't make a lot of sense to me, which is,

Oh, well, we'll give everybody universal basic income, and you won't have to work, but you'll be able to buy all the stuff you want. Well, we know, we just did an experiment with this. Like, when you give people free money, what happens? The price of everything goes up by the amount of free money you injected into the system. And so the next time people go to cash their checks, they don't buy nearly as much because you've, you've hyperinflated the prices.

Um.

Yeah. In fact, in fact, just let me stop you real quick. So, this article, this, this is a little bit of a long article. So, if you want to read the article, it's on the website realinvestmentadvice.com. It's also on Substack, Lance Roberts, but it's, it's, it's basically talking about this whole issue. But yeah, to your point, you know, policy response is going to be very important. And we know that UBI doesn't work. Um, extended unemployment doesn't really work. It helps kind of soothe the the transition to learn new skills, but it's, it's not really that beneficial economically. And then, you know, active adaptation is where we've really got to focus on this. So, you know, employer-based retraining incentives, apprenticeship and trade programs, wage insurance and duration transition, these type of things, you know, really provide a lot more benefit. Because look, you know, to, to the point, we're worried about all these people losing their jobs, which is absolutely a true statement. I just showed you the chart. I mean, everybody from accounting and and retail services, you know, all the way up through through a whole variety of other jobs have a very high potential of being replaced. And once you can put AI inside of a Figure robot, you can start replacing, you know, pipe fitters and construction workers and skilled trades. I mean, they can do that, too, once they have all the trainings and the abilities. So, there's no job that's safe. And so, other jobs that were going to come out of this, again, you know, we didn't have social media influencers back in 2000. This is a new innovation in in the economy. So, new jobs will come out. But the trick is for us as individuals is look, people watching your channel, these are people that are actively investing in the markets. They're they're focused on building wealth. They're they're trying to, you know, improve their financial situation, which is fantastic, and that's what we should be doing. And we shouldn't be scared of this robotic transmission unless we're just going to sit in our hands and just let it wash all of us. You know, I'm not going to get any training. I'm not going to change my skill set. I'm just going to stay where I am. You're going to lose. That's going to be a problem. But if you're adaptive and understand the risk that's coming, start retraining, start learning new skills, start learn, start being adaptive, investing in the the markets where the benefits of this are going to come from. In fact, I go through a whole list. Again, this is a fairly long article, but this is in there. This is, this is not a recommendation list. I'm not recommending you go buy any of these stocks, but these are the companies that are going to be involved in this robot economy. So, if, if I don't, if I, I want to protect myself from what's coming, learn to invest in the structure because the difference between the top 10% of the economy and the bottom 50. So, I, I showed you that wealth gap chart, right? So, the top 10% of the economy, they own 78% of of the assets. The bottom 50% own two and a half. So, it's imperative if we're going to survive this, that we need to be in the top 10% of those income earners. Well, what do those top 10 of 10% of income earners own? They own the robots that are doing the work. They own the capital structure that's putting, they own the companies. They, they're the ones employing individuals. We need to be giving ourselves, saving and investing and finding opportunities to invest and grow our capital. We don't have to be the, we don't have to be the corporate owner, but we can invest in the companies that are the owner of those capitals, of those robots, of those type of things, and make sure we protect our wealth in the future and grow it. So, I agree a thousand percent, and I think this article you wrote is a really great asset for folks that are, you know, I think beginning to wake up to this. And, A, it helps them understand the the landscape better, but also gives them specific things that they can do, which is what I think has been missing from the conversation so far. So, I think it's a great thing that you just did here, and I agree with you.

I want to parse this into two things. One is, there is tremendous opportunity for the people that learn how to ride this wave, right? Who, who, who skill up, educate themselves, invest in in the trends that are likely going to be carrying the future forward here. Um, and as much as I, you know, point to the wealth gap as being something that I think is is generally pretty, um, unhealthy and corrosive for society, I fear it's going to get a lot worse, right? I feel, I feel like it's going to be the top maybe 5% who are doing fantastic, and the bottom 95% who might get left behind by this. So, to your point, Lance, yeah, the clarion call here for now for the people who can see this coming is do everything you can to be in that 5%. Um, one, to protect yourselves, you know, not not just to be a capitalist jerk, uh, but to protect yourselves and your family and be in a position to be of help to society, right? Um, now, I do, and I don't want to reiterate it all, but I, I do have a lot of concerns about what's going to happen with that, that bottom, what I believe to be majority cohort of society in this world. And one, one question, Lance, is, um, uh, you know, UBI is not going to work for the reasons that I mentioned that we've talked about in the past. But I also think people say, well, you know, one thing we'll do is we'll, we'll, we'll tax these companies that are making all these ferocious profits on AI, right? And I'm sure that will, that will come to pass. But I think one thing that people are not taking into full consideration is what happens with techn— technological, um, revolutions like this is you have this new technology that unlocks a lot of incremental value, and companies make a ferocious amount of money during that period of time. But then what happens? Competition starts competing away, um, the, the, the extreme profits, right? So, when people are saying, "Well, we're going to tax all this stuff," there might be a lot less profit in the future to tax than people are expecting here. Now, now maybe the future's great where everybody gets a free robot, and so therefore a lot of your creature essentials are taken care of by your free government-issued robot, but you just might not have a lot of upward mobility if you're just a regular person who's gotten left behind by this trend.

No, that's right. But that's why profit tax never works, right? Because, you know, you have a boom cycle, and you know, every time, every time oil goes through a boom cycle, there's somebody up in Congress goes, "We need a windfall profit tax on Exxon Mobil," and then oil prices crash, right? So, their profit goes away. Um, but, you know, look, we had, look, we built a country of railroads, and the railroad tycoons were fabulously wealthy. And today, railroads, not so much, right? You know, and to your point, because competition sets in, the the environment changes, the e— the economy changes, all these type of things.

And railroads have much bigger barriers to entry than AI.

Exactly. And, and so, you know, this is going to be, again, I, I don't want to be, the goal of the article is not to be super bearish at all, um, more just looking at, you know, here's the risk. Um, here's the investable opportunity for us to protect ourselves going forward. And that, and that, and that's really all we can do. You know, it's, it's, you know, it's fine to run around and wave your arms and, and, you know, scream at the top of your lungs that, you know, AI is going to destroy the world and everybody's going to lose their jobs. You have no control over that whatsoever. Um, what you do have control over is making sure that financially and structurally you're in a position to protect yourself, right? And hopefully, you're teaching your kids and your progeny how to position themselves well.

Exactly. And, and again, to your point, Adam, no, you don't need to be in the top 10% of income earners, but it's not that hard to get in the top 50%. You know, if you, you know, if you go out and you're saving some money, investing on a regular basis, doing these type of things, cutting your debt, getting yourself in good financial position to increase your cash flow, getting yourself into that upper 50% bracket of the economy is not that far of a stretch. And, you know, even getting in, look, to get to the top 10, you need like a million and a half dollars worth of investable assets. That's, that's not a huge barrier. It's tough to get there, but once you're there, it's, it's not that, it's not that hard. It's not that difficult if you really set your mind to it.

But again, getting yourself in that position requires work. It requires effort. It requires sacrifice. Sitting around and complaining about it and blaming others and pointing fingers and spending all your time reading about politics on X and getting yourself all wound up over who's doing what in Congress and who's who's doing this or that. That's not helping you grow yourself. You know, focus your efforts and your attention on improving your current situation. Instead of spending your time on social media, read some books, learn some new skills, you know, get on AI. For most of the AIs, you can use for free. You know, say, "Look, give me a 10-step plan to start improving my financial situation. Give me a 10-step plan for improving my, you know, functional economic understanding of the world." You know, whatever. But start spending your time rather than getting yourself all wrapped up in politics that you can't do anything about, have no control over, getting yourself wrapped up in social media events that you have no control over, that don't matter anyway, and spend more time focusing on your own outcome. You're going to be a lot better off regardless of what happens with AI.

Well, I agree. And I think with this AI trend, playing defense also helps you play offense. So, to your point about like, okay, so what are the companies that are going to benefit from this? Well, as you get smart about those companies and what they do,

A, you can invest in them, and if they indeed do well, where you're going to get pulled up as part of that. As you learn about those companies, you're going to understand the potential for AI and robotics. And then you might all of a sudden start thinking of offensive ways to get involved, like that kid that I mentioned, right? Oh, hey, you know, maybe I could actually use AI or a smart robot to do this thing that no one's thought about yet, and then very quickly you could get from not being in the top 50% to being in the top five, right?

Exactly.

Yeah. So, okay. Um, all right. Well, um, folks, go read Lance's report there on realinvestmentadvice.com. Um, all right. Trades, Lance, what trades, if any, did you make over the past week?

No trades this week. Um, we, we've had just, we've been inundated by requests lately for an international portfolio thematic. So, uh, starting, uh, Monday, uh, there will be a thematic international-only portfolio, uh, available on Simple, through Simple.

Can you walk us through it next week?

Yeah. Yeah. Absolutely. Great. But, but we just had so many people asking like, I want some international exposure. You know, it's, you know, it's, so we built one. You know, again, if you want something and there's enough demand for it, we'll build it and put it together. So, we did that. But, yeah, no trades this week. We may do some trades next week. I'm, I'm, I am kind of getting a little bit itchy to maybe take some profits and rebalance some risk here. So, maybe next week.

Okay. All right. Um, yeah, not surprising given what we talked about with the technicals there.

Um, all right. Well, that you're looking at, you're a capitalist in action, right? The market is asking you for something, you're providing it, right? That's the way it's all supposed to work.

All right. So, quick, super quick rant here at the end. Um, again, this is supposed to be, um, positive, even though Lance might be grumbling because he's in the midst of it himself. Um, was it last year or the year before, Lance? There was that that popular summer anthem, Hot Girl Summer.

Yep.

Um,

Summer.

Pardon me.

Yes, Hot Girl Summer. That was—

Hot Girl Summer. Right. So, I'm, I'm declaring this Fit You Summer. Uh, so my, my, uh, so personally, um, I, you know, folks who follow me on X probably and here, you know, know that I've been, um, working on strength training over the past year and a half or so. Um, you've probably seen some of my deadlift videos that I put out there, but I've been working on trying to, um, you know, intentionally increase my strength capacity. Now that I'm going to turn 55 this summer, um, I want to try to, um, just get to a point where I, I, I both feel strong, uh, feel fit, and look fit. Uh, and so now I'm going to be entering the trimming part of the phase, uh, for the next three months. And as Lance knows, that's the less fun part. Um, it's, it's more about the things you can't eat or the things that you're going to forcing yourself to eat.

Nutrition plays a huge part in it. But also, I'm shifting what I'll be doing with my body. I'll be, I'll be focusing much more on intensity and duration of workouts versus just, uh, the strength component of it. Um, so anyways, folks, if things go well, um, you know, I should be, uh, in three months from now, um, you know, hitting some of those goals, and I will, if I do, uh, I will post the before and after photos then so you can see. I'm not going to post the before photos sooner because if I don't, uh, hit those goals, I'm going to feel terrible. Uh, uh, but, uh, I, I do want to just let folks know that I'm going to be doing that. And the research is clear that to be successful in hitting, uh, an exercise or fitness goal or a weight loss goal or whatever, um, the number one correlated factor is a supportive community. Is people that are both encouraging you and keeping you on track. So, um, you know, part of this is me to get my community rallied around me to say, "Hey, Adam, you, we believe you can do it." But more importantly, um, if, if you want to do this, I would love to have you be part of this community. And as I always say, misery loves company. And, uh, since Lance and I are both going through this together now, we'd love to have some more people here. And I would love to cheer you on. Uh, so if you want to be a part of this, just follow me on X. I'll be posting my progress there on a weekly basis, good or bad. Um, and anybody that wants to do the same so we can encourage each other, um, please do that. Um, and look, if, if fitness is not your, your main driver here, um, just pick anything that's good for your health. It could be eating healthier. It could be getting better sleep. It could be developing more social connections. Whatever you think is an investment you can make, uh, to, to try to get to midsummer, just feeling like, um, you know, you're taking a little bit better care of yourself and your long-term needs. Any goal is fine. So, anyways, um, Lance, I'll, I'll let you comment here because I know you're in the throes of this right now, which is why, uh, we described you as peckish at the beginning of this.

Exactly. Well, no. What I'm going to do is now every week that we have our, our, our talk, right? When you get on, I'm going to say, "Adam, did you put on some weight last week?"

I know.

Because that is nothing more motivating than that. It's like—

Or the other for a week.

Yeah. I, I've done these challenges before. I thought you were going to say this. I, I had a guy in CrossFit where we would, we would do these, these cut challenges, and we were very neck and neck with each other. So, like, you know, the last week I'd have like a pizza delivered to his house.

Oh, that's wrong. That's funny.

So, I thought you were going to do some sabotaging of me.

No, I won't. No, I definitely won't sabotage you because I don't want you doing that to me.

I, I was going to say I can picture when you're back from your Italy trip because I'll still be doing this when you're back, you know, getting on here and just having a big meatball sandwich and eating it while we have this conversation.

Yeah, but probably I will probably do that for you. But yeah, no,

I might need to raid your GOP ones then.

You know. But no, you know, having, you know, look, and like I said earlier, you know, I'm 61, and you know, so as we get older, it just gets so much harder to, you know, do, you know, just maintain muscle mass, maintain strength, you know, those type of things. And

Yeah.

And, and, and besides the vanity part of this, which is all you and I are really talking about.

Yeah, it totally. This is totally vanity right now.

Yeah. Yeah. Um, because I basically, I want my wife to find me attractive. So, oh, I got to share this chart with you. I posted, I'm gonna come back to my comment here in just a second, but, but I posted this chart last week, and, uh, I was talking about this on the radio, and my wife was actually listening to the show, and, hold on. I've got to find this real quick. This was, this, this cracked me up because I had no idea that women were this way. Come on, come on, come on. Oh, yeah, here it is. Um, so this was a survey that was put out by OkCupid. I don't know if you actually saw this. The—

No, it's like a dating site, right?

It's a dating site,

Like a Match.com.

Yeah. So, this is how men rate women, and it is a fairly normal distributional bell curve. So, the most attractive 6% women think, you know, men are the most attractive, you know, 6% least attractive. Most women think men are okay attractive, you know, maybe not great attractive, but a pretty even bell curve. When it comes to women, how women rate men, u, sorry, I said that backwards. This is how men rate women. Uh, we're, we're, you know, men are pretty equally balanced on how we—

Yeah, we'll find anything attractive enough for—

Yeah, pretty much. But women, man, they're critical. They don't find anybody attractive. So, I, so I was talking about this on the radio.

Wow. That's 0% at most attractive.

Most attractive 0% 2% 5% 12, and, and most basically, they think all men are ugly. So—

I hate to say this as a man. I don't know if they're all that wrong.

Probably not. But anyway, so I was talking about on the radio is that this is why I've got to spend so much time in the gym and eating right and everything else so my wife will continue to find me attractive and not divorce me because I don't want to lose half my stuff. Um, so I, I am financially motivated in this in this endeavor.

Totally get it.

But, you know, the, the, but to my, to my broader point is that, you know, as we get older, you know, my goal is is not to spend my retirement years in a wheelchair, you know, in rehab trying to work out some problem.

Right. Right. And it's on the other end, it's not to have abs. It's just to be functional. Right.

Exactly. Exactly. Yeah. It's at some point, having a six-pack is going to go away, but, you know, for now, it's, you know, it's, it's doable. It's maintainable, but at some point, I just want to be able to to walk and enjoy and go on vacation and go swim in the ocean, you know, whatever it is. Go scuba diving with my kids. Go still go ski. Go still go do the things that we enjoy doing. I want to be able to do that. I don't want to be the guy that's, you know, becomes a, a human coat rack for the kids. You're just holding all their stuff while they're going out to do. I want to, I want to be out there with them. And, and it doesn't take a lot. You know, again, you know, I work out pretty hard every day. I know you work out hard every day. You don't have to do that, but, you know, for gosh sakes, go out and get six to 10,000 steps in a day at least. You know, learn to do some push-ups, learn to do some sit-ups, and just incorporate that into your daily lifestyle. And the, the amount of improvement that you will see if you combine that with just eating healthier. Um, I had a great nutrition coach for a long time, and he had a very simple motto. He said, just make better bad choices. So, if you're going to go eat a burger, go eat a burger, but take the mayo and the cheese off, right? Just make small incremental changes that you can get because you'll get used to things over time and you'll be surprised. It's like, okay, I've been eating a burger now with no mayonnaise and no cheese for like six months, and you go and eat one with mayo and cheese, and you're like, "Oh, this is terrible." Right?

Because your body gets used to eating better. And so, give your body some time to adapt. Make small changes. Make better bad choices up front. Add a little bit of exercise to your, to your daily life, you know, because we're so sedentary these days. You know, I spend a lot of time sitting in this chair all day, you know, doing interviews or working on reports or, you know, managing portfolios. So, it's, it's imperative to get up and get moving. And, and what I have to do, and I don't know how you do it, but the way I have to do it is I have a blocked out time on my calendar, and that is sacred. Nobody is allowed to call me. Nobody's allowed to schedule over that time. If you schedule a meeting and it's during my workout, I will not show up to your meeting.

Yeah.

Because it had, if I don't dedicate that time, I won't do it. I'll find another reason not to go work out. I know my nature.

Yeah. Life will give you a thousand reasons to push it off.

Yeah.

Exactly. And you just have to commit to doing it. But if you can learn to do it and make it a habit. Takes 21 days. 21 days of misery to build a habit. But once you build that habit, it's really hard to go back and, and, and break that.

All right. Um, great advice. Agree a thousand percent. I've got more I'd add, but we're running up on two hours here, so I got to close it now. Um, anyway,

So, Lance, this was, this was fantastic. Folks, if you think the best way to start your journey of making fewer bad choices is to continue listening to Lance Roberts on this channel week in and week out, let him know that by hitting the like button and then clicking on the subscribe button below, as well as that little bell icon right next to it. As a reminder, folks, um, we have passed 175,000 subscribers on this channel, which we couldn't have done literally without you. Um, we are gunning to get to 200,000 quickly, uh, because that helps YouTube give this channel more love. So, if you haven't yet subscribed to this channel, please do, uh, hit that subscribe button. Um, and if you would like to get some help from a professional financial advisor in positioning for some of the near-term potential opportunities that Lance and I have talked about or setting yourself up for long-term success, highly recommend if you don't already have a good one, uh, considering, uh, talking to one of the ones that Thoughtful Money endorses. These are the firms you see with me on this channel week in and week out, to talk with those firms, just fill out the very short form at thoughtfulmoney.com, and the firms will be in touch with you right away. All right, Lance, another great week. I'll give you the last word as usual.

That's it. I'm going to go and guess I'm going to go enjoy my cauliflower rice and—

Sounds delicious.

I, I cannot wait. My, my, my jowls are drooling just, you know.

Are you able to eat an unlimited amount or is it also a restrained amount and flavor?

Yes. So, so it's no carbs and no sugar. So, but I still have to run a calorie deficit at the same time. So, it's no carbs, no sugar, and a calorie deficit, which is why I am just angry all the time.

All the time. And your workouts have got to be a lot less fun.

Yes, they are.

You've just got less gas, right?

Exactly.

Yeah. All right. Well, um, Lance, I wish you well. We'll get an update on all that next week. Um, everybody else, thanks so much for watching.