Breakthrough Or Breakdown? Stocks Are At A Key Junction | Lance Roberts

If the market can hold above the 200-day moving average through Friday of this week and in and through Friday of next week, right? So, time is a very important factor here. If it can maintain above that 200-day moving average through Friday of next week, the correction is [Music] over.

Welcome to Thoughtful Money. I'm Money founder and your host, Adam Tagert, welcoming you here at the end of another week. I'm joined as usual by my great friend, the sexogenarian portfolio manager, Lance Roberts. Lance, how you doing?

Yeah, I don't know about the sex part, but the 60 part is right. I'm sure we've got some people in the comments who are saying, "Hey, this guy's a sexy portfolio manager," but sexy is a fancy term for somebody who just who is 60 years old, which Lance just turned a few days ago. So, Lance, happy birthday.

Well, thank you so much. I appreciate it. And I feel 90, but hey, 60 is uh is okay.

Well, you know what? As we were saying before we turned the camera on, uh you're just it's just your second time around on 30.

Exactly. Great. Great way to look at it, too. So, u Well, anyways, folks, please wish Lance uh give him happy birthday wishes in the live chat or in the comment section below. Um, we did send a nice little thoughtful money gift there for Lance. Um, so, um, it's collectively from all of us. But Lance, I want you to feel the love here from this audience. Um, very much appreciate everything you do, especially the fact that you're willing to come on for so much time every week again and again here on this channel. So, thank you.

It's my pleasure and always love being here. It's always a lot of fun. So, but I I do appreciate the gift very much and it's very well appreciated. So, thank you.

Well, look, the the gift is way too little for everything that you do, but I just want you to know that you are you are very beloved and appreciated here at Thoughtful Money.

Well, thank you.

All right. Well, look, um, there's a fair amount to get into this week. Um, real quick before we do, just one quick shameless plug. At the time we're recording, Lance, um, you might remember, uh, we had our little, um, a little competition on X, uh, in terms of, you know, followers and I ended up passing you a little bit earlier this year. Um, I am now poised. I'm at 99,400 followers right now. So, I'm like that close to 100,000 followers. Um, folks, if you don't follow me on X yet, um, please take a second and do, uh, I'll put up the handle here on the screen. It's Menlobear. Um, I'll tell you guys the story behind that at some point if you're interested. If you're interested, let me know in the comment section below. Um, the reason why you should think about following me on X is if you enjoy these videos, you like uh, you know, the material that we get into here. Um, you know, I do my best to to create as many of these videos a week. We're doing about five to six a week at this point, but there's a lot that happens in between the videos getting recorded, especially in in this year that we're in right now with so much change on it happening hour by hour, minute by minute sometimes. Um, and X is really where I track that share my thoughts, share data that I'm finding throughout the day. So, it's a way to kind of, you know, if if if these videos alone don't scratch your macro-ish um itch, uh, following on X, you you'll get the full stream. Um, you should also follow Lance too. Um, and Lance, I think you're just Lance Roberts on X, right?

Uh, Substack Lance Roberts X Lance Roberts. Tw What do you call it? Is it is it I I still here, you know, people I still call it Twitter. I I know it's hard. We should call it X, but it's it's everyone will know what you're talking about if you say Twitter.

Pretty much. If you want to follow me, LinkedIn, X, Substack, it's all at Lance Roberts. So, all right.

All right. Uh, and just to complete the trifecta, there also is an official ThoughtfulMoneyX account as well. And if you don't follow that, take a second to do that as well. That's just thoughtful money.

All right. Uh, enough of the uh the commercial there. Um, all right, Lance. So, the question I've been dying to ask you over this week is, is the sell the RIP guidance that you guys have been advising, is that now over? Is that been negated by this kind of monster rally that we've seen? because I think last week we were we were uh approaching what could have been resistance technically and I'm pretty sure but you can bring the chart up. I'm pretty sure we punched above that now pretty decisively.

Yeah. So so no the the the sell the rip part isn't over with yet. In fact, I would encourage you and again so let's let's just take a step back here for a moment. You know, I want you to remember how you felt on August the 7th. So on August it's August sorry April.

April. Yeah, I'm 60, right? I have dementia.

Um, hey, your first senior moment. Congratulations.

Right. So, on April the 7th, I want you to remember how you felt. I want you I want you to remember I want you to go look at your portfolio value, where you were on that day, and I want you to remember what you were thinking, right? And and you know, most likely you were in panic mode, worrying about, you know, how far this market's going to decline. You know, the the the bare market's back, blah, blah, blah. And I wrote on April the 6th. So if you go to our Substack or if you go to our website.com, look on April the 6th. I wrote an article. It was entitled the hope in the fear. And and Adam and I even discussed it here on the show that Friday. And the point was at that that juncture there was so much panic, so much technical destruction to the markets. We said it in that article said this is probably the low of the market and and we're going to get a rally here. And in fact, uh, two days later, we actually added some positions in our portfolio, took advantage of that of that rally. Now, the question has been up to this point, so fast forward, is this a bare market rally that's going to fail and go back down and retest lows? And we've been tracing out uh last week, Adam and I kind of went through the the whole analogy of the 2022 uh correction where we had this big initial decline, a rally back, big rally back, and then the market failed, went down, set new lows, and then we eventually bought them in October. And I said, I hate analogies for a whole variety of reasons, but most likely is that markets never track previous markets exactly the same way, right? But but I will say for the chart you showed last week, pretty spooky how close it has tracked it so far this year. More spooky this week because it's like point for point we are now back exactly to the peak of that rally that we had back in uh that first leg in 2022. So right now it's tracking the technical indicators on a weekly basis. Um the the price actions tracking exactly the same. So, if this market's going to roll over and fail here, it's it's going to do it now. But having said that, okay, so that's the bearish side. The bullish side is this is that we've broken above the 50-day moving average. We've broken above the the 100-day moving average. We've broken above the 200-day moving average and the market's holding up there. If the market can hold above the 200-day moving average through Friday of this week and in and through Friday of next week, right? So time is a very important factor here. If it can maintain above that 200-day moving average through Friday of next week, the correction is over. So that doesn't mean markets are going racing off to new highs. But any pullback you want to get, it is now a buy the dip opportunity. So what I'm saying is this is where it gets a little challenging from an investment standpoint is that we have to we have to wait here a little bit. give this market some time to declare itself. And if this market is going to roll over and if you're going to have a a a a another corrective leg of a bigger corrective cycle, it's got to happen now. If it doesn't happen now, the odds are that we're going to challenge all-time highs within the next month or so. So that's that's the challenge here.

All right. So market seems to then be at a key junction here and basically the next week will be the tell.

Right. Exactly. Okay. And and folks I should note too and Lance I'm I'm sure you're going to pull up the TA the you know the charts pretty quickly but um we are recording this a day early in the week. So this week we don't have Friday's data and folks that's on me. I have to catch a flight tomorrow Friday. So was not going to be able to record uh on Friday and so we wanted to still bring you the the recap. So, we're just recording it a day early on Thursday, right? And so, so, yeah, we are missing a couple of of key points here, but here, let me bring up a chart for you real quick. Um, are you seeing my chart?

Yep. Yep, we see it.

Um, it is doing something funky over here. Um, so what I did I I understand that as you get older, technology becomes harder to work with, Lance. So, don't worry. We'll be patient.

Wait, I'm not I'm not squinting at the screen yet. So, if if you need to put your readers on, we'll wait.

Um, so this is a chart that I posted out this morning in our daily market commentary. So again, if you either subscri if you follow me on Twitter or you follow me on Substack, also Roberts the one, every morning we post out daily market commentary. And in that we always cover every day some aspect of the market in terms of where it is, what to expect next, what's, you know, what's happening, something related to trading your portfolio. Um, so this was this morning's uh layout before before the market opened. Um, we've had this very nice retracement rally. We we retraced about 75% of that decline. In fact, markets were positive as of yesterday for the year. So if you had just gone to sleep on January the 1st and woke up today, despite all the move in interest rates, despite all the move in the stock market, they're flat for the year. So again, you wouldn't even notice that this was all going on if you just hadn't been paying attention to it so closely. Um, but I've laid out three pathways here for the markets. And we can assign some probabilities to this more than than anything else. But the first one is this this kind of first pullback to support that that horizontal support line. That's the 200-day conjunction. That's where those two moving averages are coming together. That's also the top of that initial rally uh that we had back in in kind of early March following the initial decline when we're down about 10%. We had that little rally back. Um and it's also the bottom of that sell-off that we had back in January of this year. So you got a lot of support right there that's built. So there's a about a 50% probability that markets are going to hold that support level. And if they can do that, work off a little bit of this overbought condition we've got right now, then that kind of sets the market to rally up towards around 6,000 over the next couple of months. If we fail that, then you got a whole bunch of support right there at the 50-day 20-day moving average, which is also happens to be about the 38.6% retracement level on a Fibonacci basis. Um, but that's also that bottom that we had back in mid-March. So, you've got a lot of support there. the market can hold that, that's actually a decent entry point that the market could rally from there and then kind of move back up and into better territory. Now, if we take those levels of support out, that's we're back into a bare that this was a bare market rally and we're back into correction mode and something has happened. Um, you know, trade negotiations have completely fallen apart or there's some other type of event that's going on and that's putting pressure on prices. um you know, economic data just completely disintegrates over the course of the next couple of months and we're we're kind of staring at the face of a recession type thing. That's which that would lead to a very sharp reduction in earn forward earnings estimates and that would bring down the price of the market to readjust for a valuation shift. But that's you know you break that second support level basically it's riskoff at that point. But, you know, that's that's probably a a 10 to 15% probability at best right now. You're you're above that, you know, 85% probability this correction that we had is now over. And we're just going to kind of work through and then try to rally probably sometime into um you know, kind of maybe July, have another kind of consolidation period in August, September, and then you get your year-end rally to close out the year.

Okay. So, couple questions. And first off, I think your pacemaker's chirping at you, Lance, so I don't know if you can turn that down or not.

My pacemaker, it's my people at work texting me. So, and I forgot to put my phone on silent. So, there, done.

No worries.

Um, okay. So, which one of those, and I'm maybe guessing it's the the more dire of the three, uh, if we were to follow continue to follow the script, if we if the spooky correlation were to continue, um, which which which line there would we follow? Maybe correlation with with 2022.

Yeah. Yeah. So, that would be more along the lines of of the third uh piece. Let me see if I can I I actually posted and updated that chart here real quick. Let me see if I can find it. Can't remember. It was either Tuesday or Wednesday of this. Yeah, here it is. So, this is where we were as of um Tuesday morning. So, how closely we we're tracking that 22 correction. So, basically, we're not much above where we were on Tuesday as of this morning. Um so, of Thursday. So, again, this is kind of just tracking right along way. So, if you if you get into that third leg, if we get into that 15%ish type position, you're looking at potentially a retest lows. I don't think we're going to set new lows uh in this market unless something's really going wrong. But even a downshift back to the previous lows, that's going to be, you know, market will be down again near 20% from the peak. Um, you know, you're going to have a lot of pressure on markets in a lot of places. So, you know, that would that's what that would look like, but that's a very low probability event. the higher the reason you have a higher probability event of of a pullback and then another rally is that hedge funds are still very very short. Um you've got buybacks still in full swing right now. In fact, those are accelerating at a pretty rapid pace. Um and earnings estimates right now are actually ticking back up for the MAG 7. So you're seeing the MAG 7 earnings tick back up. Um that's starting to lead to to better earnings breadth across the board. And earnings and and forward guidance in the first quarter was actually pretty good. So you had a few companies withhold guidance. Walmart did today as an example. But by and large most companies held guidance and stayed with their previous guidance. They didn't make big adjustments for concerns over tariffs or whatever that is. Doesn't mean that can't come. But just right now that those kind of underlying fundamentals still remain pretty solid.

Okay. And I know you don't like these tracking analoges and I get it because they they work right up until they don't.

Exactly. So, you know, everybody kind of bets the farm on it continuing and then all of a sudden, so so this may be the point where that those two lines begin to separate, right?

Yeah. Okay. Uh you don't necessarily have to pull it up, but but back on the chart you were showing, we were at pretty elevated levels on the the MACD and the RSI. How much does that concern you, if at all?

No, that that those those aren't concerning, but what those tell you are is that this is a good time to to maybe think. So, I started this conver and and I didn't finish and I need to go back to finish the conversation. I started out the conversation saying,"Remember how you felt on April the 7th in your portfolio." And, you know, if you were up at night and you were, you know, nashing your teeth and biting your fingernails and and you know, you know, they say that you find religion in two places, right? And one of them's in foxholes, you know, and the other's in the stock market. And you know when you start praying it's like oh dear Lord please just if you'll just let me have a bit of a rally so I can get out of the market that's your point to say you know emotionally that's where you step back and say should I be buying right because that's you know you're at max pain at that point and from a contrarian basis that's when we will start buying stocks now you're probably going man this market's back it's going up you know I I need more risk um this is where think about how you felt out on, you know, April the 7th. And this is a good time because you are overbought on a short-term basis. MACD, relative strength and momentum, you're overbought. This market's going to it's going to, you know, give you some type of of consolidation at least, if not a small pullback. So, take some profits, rebalance your risk. Things that have not been performing, time to let those go. Things that are performing well, trim those back, hold your positions. you know, Palunteer, um, one of the companies that we bought on April the 6 is up 60% since April the 6th. So, you know, some of these stocks have just, uh, Nvidia's up, you know, the most hated stock in the index, Nvidia is up 48% from the lows.

Yeah. Super Micro, I heard, is up a ton, too.

Yeah. So, you know, that that whole MAG7 is dead, you know, aspect is is over, right? Because again, you you and I have talked before is the one thing you're not going to beat in this market. You can make all these claims that you want, but who buys back the most stock? It's the MAG Seven, right? Who has the biggest weights in ETF? So, every time these people go p every time this market rallies, retail investors were piling into S&P ETFs, triple, you know, triple Q's, those type of things. Every time they pile money into those ETFs, it goes right into those stocks. So, whenever you get these rallies, those are the stocks that are going to lead the way for the most part. And that's exactly, you know, what's been the case here lately. So again, this why it's always good to have good diversification your portfolio, have the growth, have the value, have some of your defense, have have your offense, and manage that risk. But this is a good time um to go re-evaluate your portfolio and say, "Look, I'm going to take a little money from here. I'm going to add a little bit of money over here. U we're still carrying a short position our portfolio that's going to get let go here on on any pullback. Um but we've got a little bit of a hedge still. We're we're still overweight cash. So, we're looking for some type of of pullback here to, you know, increase our equity exposure, reduce our hedges, and get our portfolio back onto normal footing.

Hey, sorry to interrupt, but um a few weeks ago you told us that you had downshifted your equity exposure, right? One of those those 25% downshifts. Have you you moved that back up to 100% yet or not?

Not yet. Um again, we're overweight cash. We have a short. So, that's keeping our equity exposure under underweight. So, we're underperforming right now on this rally. So on a relative basis, we're underperforming. On an absolute basis, we're still well ahead of the markets. But y you had the slack. You were playing it safe. You explained that for us. It made sense.

Yeah. You know, short-term we're underperforming. Um but no, the weekly sell signal is still in place and that gives that keeps us a little bit underweight here right now in terms of of equity risk, but that indicator is starting to turn back up as well. So, we've had this this kind of this sell signal that doesn't occur very often, this weekly sell signal, but in bull markets, it tends not to last very long. Like like for instance, good example in 20 late 25 uh like October of 2015 through February of 2016. That was the whole Brexit exit. And you know, we had the markets were selling off. You had two backtoback near 20% declines just boom boom. And then the the euro the Euro zone came in and started doing their version of QE and the markets took off. So that weekly indicator kept you out of the the kind of the volatility mix for a bit. But then as soon as it turns positive, then you go back full equities. We're not quite there yet, but another week or two potentially of being where we are right now, we're probably going to flip that indicator back up again.

Okay. What are you going to need to see to go to to to go more aggressively long, right? To say, "Hey, it's time to start playing it as conservative we've been and this now this market's now convinced us we're we're maybe in the upper of of your three scenarios there."

So, I would what would really help is that we would get if I had my ideal dithers right now. Uh, we get a pullback to the 200-day moving average. The market would hold that, flop around for a few days, work off the overbought condition, then rally, take out the most recent high, which was on Monday. And when you do that, you've now got a confirmed breakout and retest of support. So you you've broken above resistance, turned it back into support, and then the breakout of the previous high then tells you that support is in place, and that pretty much gives you kind of an all clear sign to get more aggressive with your overall allocation.

Okay. Um, so obviously folks will be tracking this weekly with Lance going forward, and whatever happens, you know, Lance will will call the audles for us and he'll let us know, you know, what his firm decides to do otherwise. Um, okay. So, you you've already kind of expressed the sentiment, but you just released a piece, Lance, that said, uh, now is not the time to be greedy. Um, and I'm assuming it's I didn't have a chance to really read it, but I saw the headline. Is it mostly what you just said here, or there is there any other No, no. Is there more to that to talk about?

No, no. That's really the jux of that which is you know it was it's you know it's in we managed we managed right at $2 billion for 2,000 families and you know we have a group of clients that are absolutely the best contrarian indicators because when markets are selling off they're like oh my gosh get me out you know put me all in cash you know and then when markets are as soon as markets are we got why are we all in cash we got to be all back right? They're your best contrad indicators. And then this what I was saying earlier is just, you know, if if you're, you know, when markets rally, we throw all of our risk management out the window because we get greedy and it's like, oh, this market's going to keep going and and stuff like that. We we being people, not we being raa.

Okay. Yeah. We being the general investor, right? Just as human beings, it's our nature. Um and and so we tend to throw caution to the wind when markets are going up and then you know when markets go down all of a sudden we realize just how m what risk really is and and this is the big factor is risk is not about how much money you make it's about how much money you lose when things go wrong and so this is why you and I always talk about risk management position sizing taking profits you know rebalancing and and doing all those type of things it's very mundane and yes it limits your gains you know if I

Just you know, if I just put, you know, you know, Google in my portfolio or Nvidia in my portfolio and just left it alone, it would be 10% of my portfolio now because it's grown so much over that time frame. But that also means that if that stock goes down, if it's 10% of my portfolio now and it goes down 20 or 30%, it's taking two, three, 4% out of my portfolio because it's such a big weight. And that's something that's that's very hard for investors or individuals to stomach, is that loss of principle because we make all these mistakes about measuring the high water marks.

In fact, I've got an article coming out, um, I think next week. It's it's talking about, um, anchoring. And one of the biggest mistakes that we make as investors is we anchor to the high water mark. Mhm. So if you look at the port, if you look at the market this year, everybody was talking about, oh, it's a it's a 20% correction from the peak. Yes, from the peak of the market to the bottom of the trough, it was 19.2% on the decline, but that's not where the year started. And it's not where we were a year ago. And you know, so all of a sudden when you start ex and we talked about this before, but when you start expanding your time frame to look at important marks of where your capital was, where it is now, all of a sudden you can take out a lot of this emotional risk by getting the right anchor points. And and so, you know, anchoring is one of the biggest problems we have is that we mark to the high water mark and you have this decline. It's like, oh my god, I'm losing all this money. But markets were only down six percent for the year, right? Because you already had such a big rally. And you know, those are the type of things that we need to work on and and that's what risk management will help you do is just navigate that volatility.

Okay. Um, well, look, we got we got some news out this week. Um, you know, some some data which I'll get into in a minute, but I guess maybe before I do that, uh, let's go into bond yields. Um, so Lance, I'm sure you're getting the emails, but I got a few this week saying, "Hey, please discuss this with Lance." Um, bond yields have been creeping up. Um, I did talk about this a fair amount this week, both with Danielle D. Martino Booth and then with this week's interview with Bill Fleenstein. Um, but Lance, [Music] um, what is driving them back up to what four and a half percent, uh, now here? Um, and and why are they getting why are they proving so hard to tame when more certainty is coming into the market now? Right. Totally understandable that that bond holders got worried when liberation day, you know, surprised everybody, um, when folks got caught underwater in the basis trade, right? But those those basis trade players have had a chance to repair their balance sheet. We're now getting clarity, uh, not not crystal clarity but but more validating clarity on the trade deals. There's more data that's coming out. Why is that not quelling bond yields?

So, a couple things, f first of all, if you go to our YouTube channel, um, at the real investment show, um, and we post this every day. Michael Leewoods and I spent about 30 minutes this morning talking about all the reasons why bond yields move in a certain direction. So, one way or the other. So if you want a much more in-depth discussion, go to our YouTube channel and look at today's, um, YouTube show, The Real Investment Show with Lance Roberts. So we we do a lot of work on that, but the the bottom line is you have to separate out narrative versus what drives prices. And you know, so a lot of people talk about it's the debt, it's the deficit. Those are narratives. That has nothing to do with what moves bond prices from one day to the next. And what moves bond prices in the short term is just simply traders on on Wall Street. And right now there's a there's a big short position against treasuries at this moment because that's the trade that's making money. And so if if I can keep shorting enough of of bonds and you've got, you know, you got a lot of hedge funds, a lot of big players in that space that have kind of have the the tiger by the tail, so to speak, they can they've already got big short positions and they can continue to put enough pressure on the short side to drive yields higher in the short term and they can make money on that trade. That's part of that basis trade that we talked about previously that can they can do that to work in their advantage and we see that a lot right before auctions. You'll see that going into an auction like the 10 year or the 30-year, you'll see yields jump right before the auction. And that's the traders coming in driving up the yields on treasury so they can buy them cheaper at auction. Makes sense because as soon as I buy them at auction, then I've got an undervalued asset and then yields come back, I make money. Then they sell the bonds and they start the whole process over again. So from one day to one week to one month, interest rate moves don't make any difference other than what's just happening on Wall Street because it's just all what traders are doing.

Long-term, you know, this is, you know, yields are going to go lower because it's simply a function of the debts and the deficits. And you know, it's like, well, no, deficits make yields go higher. No, they don't. And and all you have to do is look at 10-year Treasury yields versus the deficit going back to 1980 and they track each other almost identically because the more debt deficit you have, the slower rate of economic growth you have, the less inflation you have, which drives yields lower. So yields are always a function of economic growth and and inflation because if I'm loaning money for 10 years or for 20 years or for 30 years, whatever I'm loaning money for, I've got to loan it out at the rate of economic growth plus inflation, so to speak. So right now that yield should be the effect if e economic growth is around 2%. Inflation's running at 2.3. Add those two together, my yield should be about 4.3. That's about where it should be. As economic growth gets to 1.6%, which is where it's headed, and you get inflation down to 2% or less, you're now be talking about mid-3s on yields. And if you get into a recession, you're talking about sub twos on yields because now you've got an economic contraction. So that's going to pull yields lower. Um, if the Fed starts cutting rates, that's going to pull yields lower as well, just because of the function of of the the unnatural buyer in the market. So there, you know, so longer term yields will decline. In the short term, they can be very volatile, which is what they've seen. And right now, as I said, you've got a lot of pressure on yields just simply from traders that are in the markets right now that that have that ability to short the treasuries, make money with it. But if they get caught on the wrong side of this trade and all of a sudden yields start to come down because all of a sudden recessionary data shows up for some reason or the other and as much if we start getting a a real bad spat of economic data where recession really looks like it's a probability, then traders are going to get caught on the wrong side of that trade, they're have to cover the short position that's going to drive yields down very quickly.

Okay. Um, just because you mentioned recession, I was going to mention this at some point today, but uh, Jamie Diamond just spoke today. He's saying, "Hey, I wouldn't take a recession off the table." You know, the the media is is all of a sudden back to everything is awesome. Um, and so you got Diamond here saying like, "Well, I'm not entirely sure." Right now, he's not necessarily calling for recession, but um, you know, important that he he thought it was meaningful enough that he should speak out and just say, "Hey folks, slow your roll on this." Which is interesting because just I'm just I'm trying to look up the date here real quick. On May 13th, JP Morgan drops US recession call after US China trade truce. Yeah, maybe that's a message to some of his own people. I don't know. Um, but but basically, it's just his way of saying, uh, as you say all the time, Lance, is don't don't just follow the headlines, right? Um, so, um, okay. Okay. So, and look, and you I've had you and Michael on so often to talk about your overall um outlook on bonds and and it it it largely is as you've said there, it is your confidence that the economy is slowing and that will bring down inflation expectations and that will bring down bond yields.

Correct. And there's also one big point of view. Remember, we're not we're not trading bonds, right? So, so bonds for us are not a trade. We don't trade bonds because we're not bond traders. We the you know you and I we talk about our 6040 allocation model which has 40% bonds in it. It'll always have bonds in it. It doesn't matter if the world ends it's going to have bonds in it because it's a 6040 allocation. Now the duration of those bonds may expand or contract and we do that all the time. We expand the duration but that model is because it has lower volatility relative to the market. So again, when you talk about, you know, that 20% correction peaked to trough, the market was down 19.2%, our portfolio was down four and a half. Um, so that's the value that bonds play in lowering that volatility and allowing people to to maintain their stability and maintain their allocations through volatile times so they can get to their financial goals. And here's another thing to remember about bonds as well. Let's say that I get if I you know if I could come to you right now Adam and say look I'm going to give you an investment that's guaranteed to grow by 45% over the next 10 years you can take it I think there's a lot of people yeah sure bet right but that's bonds at 4% yield right yeah I buy you a bond at 10% you know a 10-year bond at four and a half percent and 10 years you get all your money back plus 45% return so I mean you know we've got to remember what bonds do within a portfolio quit worrying about the price volatility. The price volatility is irrelevant. You know, it's it's you know, it's always interesting when it comes to bonds that people watch the daily price movement of bonds and they forget about the whole principal protection value of what bonds provide you. And but you ask them about their house. I go, you know, what about your house? Oh, yeah. Not worried about my house. My house is going to be worth more in 30 years. I'm not selling that for at least 10 years. Yeah. But the price of your house is going up and down every single day. it just, you know, the price for a house may be less tomorrow because of whatever's happening in the markets than it was the day before, but you don't care about it because you have no intention of selling it. And so, so very important and and it's unfortunate that we don't spend more time in the financial media talking about how bonds actually work, what drives the value of bonds, how they work within a portfolio. We spend all our time talking about stocks and values and fundamentals, but we don't talk about the value of what bonds actually bring to a portfolio. And it's unfortunate because if people understood it better, I think you'd see people have a lot more bonds in the portfolio than stocks. So let's let's remedy that. If folks here are interested, folks, if you if you'd like RAIA to do, you know, a webinar that's just dedicated to the fundamentals of bonds and their role in a portfolio and how to use them well uh in the way that Lance is talking about, let us know in the comments section below. And if so, Lance, I'm presuming you know you and or Michael would love to do that, right? Do it together. Maybe we get a maybe we get a threesome. Hey, that would be great. Um, not well, you know, keep on the comments. Get out of the gutter. I don't Yep. Yep. Yep. No, I write. Yeah, let's let's make it a trinity. That's maybe a better way to say it.

Um, okay. So, um uh and and ju just for full disclosure, um I'm I don't like to share my personal allocations. Um, just because I'm concerned that, you know, there's a lot of people that watch these videos and they might say, "Well, if Adam's doing that, I'll just copy it, right?" And what works for me very well may not be the right thing for you given your personal situation. Um, but I I will tip my cards a little bit and say, uh, for a good while now, I have had more bonds than stocks uh in my portfolio. Um, a lot of them have been very short, a lot of them have been very short duration, but I I have had more bonds than than stocks. Um, and Lance, you're right. You know, they play that role. I mentioned this just because it recently happened, but it is not a common event. You can have a year like 2022 where stocks and bonds were so positively correlated that bonds didn't provide the anchoring that they normally do, but that that's generally a very rare event. Um, so where I'm going with this, Lance, is uh, you know, okay, so you you kind of made it clear what you think and why you guys are doing what you're doing there at RAA. Now, there's a lot of people that, you know, a year year and a half ago got all whipped up part partly because of discussions we had here about TLT, right, which is a a fund that tracks the longer end of the bond curve, more I think average duration around 20 years or so, right? And I I think there's a there's an understandable question that those folks are asking now, which is like, hey, it hasn't really performed all that great. And if I'm still in it, like, am I holding on to something that is either going to turn soon and start doing better or maybe I need to reevaluate my bond exposure and not necessarily use a long duration ETF like that?

Yeah. Well, so, so look, I think you have to start with the basic question. Why did you buy it? Right. Well, I bought it because Lance said rates are going to go down. Yeah, they they are going to go down. The but when did you expect rates to go down? And and so we always talk about you know duration risk in a portfolio and you know as we're looking at our portfolio and why are we're buying something you know how long do you expect to hold it? And it's always fascinating to me, Adam, that people say, "Oh, you know, I bought this stock and I'm going to hold it for the long term. I'm going to own this stock forever. I'm going to own, you know, you know, I'm I'm going to buy TLT and I'm going to own it until yields come down." And as soon as it doesn't work, all of a sudden it's like, well, this isn't working. What do I do with it now? And all of a sudden, that that what we originally said we were going to do with the investment all of a sudden becomes a really short-term trend. We have a long-term view when we bought it. Now, we have a really short time frame because it's not working the way we want. So, you've got to evaluate why you're buying things and understand your personal emotional mentality about owning it. Say, "Look, my I don't really have a long-term view on stuff because as soon as this thing doesn't work, I'm going to want to sell it. So, I need to realize that my holding period is three days to a week or whatever it is. And if it's going up, that's great. I'm fine. But I do realize my own error in my ways is that as soon as this goes down, I start losing money. I'm going to want to sell it. So, if you bought TLT and you were expecting it to immediately start performing your portfolio and it's not, cut it loose. There's there's nothing that says and and you know, this is one of the mistakes that people make and they they get into this mentality like, well, if I sell it at a loss, then you know, I can't buy it back. Yeah, you can. You know, you can sell at a loss, wait 30 days, buy it right back, and it's fine. You know, and I know a lot of you are saying, well, as soon as I sell it, it's going to go up. Yeah, probably. That's the way things generally work because you're selling things at when you were most emotionally distressed. You were wanting to sell everything in your portfolio April the 7th. Now, you know, you can't wait to buy more and markets are overbought again. So, emotionally, we do things always backwards. We're always doing everything backwards that we can in our portfolio. That's why the average investor loses money over time. Very few very few individuals make money managing their own money because they get trapped up in all these emotional cycles. But the most important thing to understand is why do you own an asset and why, you know, what's the purpose of that asset and and and understand that there's a riskmanagement process that goes along with that. You know, three weeks ago, Adam, I took a bunch of grief on on your channel because I said gold's super overbought. It's going to pull back and it's had a very nice pullback over the last three weeks. Now, it's actually looking pretty appetizing to to buy it. It's sitting on a good moving average support. technically it looks good, but people that bought it three weeks ago, they're underwater. So again, understanding your time frame, understanding what your goals are, understanding how things work in your portfolio, and understanding how to do some basic risk management is is key to surviving volatile periods in markets. But there's no reason to own bonds if you don't understand them. Uh, Peter Lynch, one of the great investors of all time, ran the Fidelity Mellan fund. He says, "Buy what you know. If you don't understand bonds, don't buy bonds." Um, I think that's a great point. Um, although I would say to your point earlier, most people don't own bonds and for most investors it's because like bonds are kind of mathy, right? And and and pardon me. It's that math thing. Yeah, it's that math thing. But but I mean, yes, they they are mathy. And that's actually one of the advantages of bonds is you can really calculate down to several decimal points what your future return is going to be if you hold to maturity, right? Um, and the math isn't that tough. I mean, it's it's still basic pretty much basic uh multiplication and and division. Um, and so, you know, I would say if if you don't understand bonds, if you say, "Look, they feel a little too mathy to me." I wouldn't say, "Well, that's not a reason not to own them. it it's a reason not to just buy them blindly. And this is again sort of where financial adviser comes in, which is get help. You know, go talk to an expert who knows how to construct a portfolio where stocks and bonds are working together in the way that you talked about earlier, right? So, you know, I wouldn't I wouldn't use it as an easy excuse just to say like, well, I kind of don't get them, so I'm not going to invest in them. Say, well, no, they're a really important part of a diversified portfolio. Go talk to an expert and see if you can come up with a strategy that works for you.

Yeah. Well, and again, you know, one of my basic lessons that I learned the hard way over almost 40 years now of managing money is money is just money. And it is not worth sitting up at night losing sleep over a bad investment. You know, the the best thing I ever learned to do was how to sell, you know, how to sell something at a loss. And if you can if you can get comfortable with that, your life will be so much better. If you can just say that's not working for me, I can take that money and I can put it to work somewhere else that is making money for me. Your life will become so much better. And that doesn't mean just everything that goes in the red, you immediately sell it. Sometimes things go down, you know, just because they're overbought and they need to have a correction. Um, Nvidia, Google, Amazon, all these stocks have had big corrections. Earnings are still growing fundamental. You know, Google trades at a 15 times Ford PE. Nvidia trades at 1.2 peg. Those companies are are growing earnings. They're they're going to participate with the market rally. So, those are opportunities to buy. United Healthcare, you don't buy right now. That stock is down 50% from the peak. And I'm getting emails like, "Hey, should I buy the dip on United Healthcare?" No, not yet. They they've got tr, you know, fundamental problems right now that they've got to resolve first. It'll eventually be a better buy. It'll be a great buy at some point. They're not going out of business, maybe. Um, but until they resolve some of those issues, you may buy it at a higher price than is today, but it'll be in a much better position. So, you know, it's important to understand, you know, the difference between a a company that's had a decline and a broken company. And those are two very different things. And so, when you look at your portfolio, just understand it's like if some things are trading at a loss, that's okay. Maybe that's an opportunity to add to it. It just means you over you overpaid for it to start with. or B there's something fundamentally wrong with the company and you just need to sell it. You made a bad decision.

Yeah. Um, there's a lot important I think wrapped up in that one is um, Bill Fleenstein put it really well this week where he was talking about um, he he he has he's holding a lot more cash than he normally does. He's not going short. He's basically cashed some gold and uh and a couple of what he calls rifle shots. Um, but you know, he he he was talking about his minor his stock mining pos minor position where he says he's lightened up on for a lot of the reasons I think you were warning Lance, right? It was heavily overbought. And he said, "Yeah." He said, "I didn't sell all of them, but I just I just, you know, I I was thinking about it too much and so I just started selling a little bit and I kept selling until I stopped thinking about it." And I was like, you know, that is a great simple way to do it. Right. Right. To your point. Right. If you're if you're up losing sleep, it's a great sign that consciously or subconsciously your mind is saying you're too overexposed to this, right? So, just start taking you have to sell it off. Just just keep taking a little bit of action until that that pressure dissipates and then all right, you're probably in a pretty good space. No. And and that's true for any any investment. And again, like I said, you know, the the the the risk you run if you're staying up late at night, threading over it, and you know, the emotions building, eventually you're just gonna get to the breaking point, and you're just going to sell everything. It's like, I'm done. I got to get out. I just I'm I'm I can't handle this anymore. And that's generally the time you should be buying. But if you've been doing that risk reduction all along the way, you never get into that position. and and then you have cash. And now when everybody else is freaking out, you've got the ability to say, "Ah, it looks pretty cheap here. I think I'm going to add a little bit more to my portfolio or maybe I'll start a position in this." And if it doesn't work, no big deal. Um, you know, I'll just take it back off again. But, you know, that's the that's the hard part of navigating this process. You know, we wrote that article two weeks ago in our uh Bullbear report talking about investing like Dr. Spock and I'd gone back and pulled all of his quotes from Star Trek and about being unemotional and how that relates to investing. And that's a good read if you haven't read it yet. Yeah. Um, I kind of another part of this too and you know, you

Always advise: don't, don't get whipsawed by the headlines. You know, you're almost better just sort of turning the news off and getting on with your day and maybe looking at your portfolio once a month or whatever, right?

Um, uh, you know, how many people do you think sold near the depths of, of, uh, the April lows? A lot, or the May lows? Um, I've talked to a lot of people that we, we're getting a lot of phone calls from people that sold right around those lows and now they're asking how to get back in.

Right now, imagine if you got knocked on the head in March and you, you got put into a coma and then you woke up today, right? I mean, sort of a little bit of a headache. Um, you'd probably feel fine about your portfolio, right? Because the market's actually green for the year now at this point, right?

Um, and you were sort of saying earlier, everybody remember how bad you felt, you know, on, uh, the day after Liberation Day? Um, uh, you know, again, it's our, it's our emotions that often are our worst enemies here, right? We just, we feel like, oh my god, the, the world has changed. Everything's going to hell in a handbasket. I'm sitting on all these losses. It looks like it's just going to keep on going down. I got to press that sell trigger and just get out. I can't take it anymore. And then often times, you know, a few weeks later, it looks totally different. And I think this is the kind of market that we're in now.

I've been talking with, um, a lot of the folks I interviewed this week. I just recorded an interview with Peter Atwater. It hasn't come out yet. It's going to come out next week. Uh, but he's all about confidence, right? Tracking sentiment and confidence indicators. And we talked about how the market these days really doesn't have a sentiment middle ground anymore, right? It is either Armageddon is unfolding right now or tomorrow is so damn bright I got to wear shades, right?

Um, and we've just seen that whipsaw in an incredibly short period of time here, just the past couple of weeks, right? We went from literally, you know, Trump is, is breaking the world and sending the economy into recession or depression to I can't buy stocks fast enough now.

Yeah. You know, and it's, it's an interesting point you make because I, you know, as you know, I, I track a lot of, you know, sentiment indicators. You know, we have our technical gauge that runs on a weekly basis. We have our fear-greed index, which is all based about consumer sentiment positioning. Um, and we publish those every week.

And you know what is fascinating to me is that when you look at that indicator as an example, um, on the fear-greed gauge, when it gets down to below five or really just say below 10 on that--it runs the, the gauge runs from zero to 100. So, but when you get down below 10, that's super big fear, right? I mean, that's like financial crisis lows. And in fact, you know, you go back to the financial crisis, you go back to the dot-com crash where markets were down 50%, you know, that fear-greed gauge was down at six or seven on, on that gauge.

What's amazing to me is, is that really starting in 2020, all of a sudden this sentiment shift has just run crazy, that and that fear-greed gauge, like, for instance, we were down 35% during the pandemic and we went from 92 on the fear-greed gauge down to seven.

Yeah. And then in the, um, in October of 2022, you know, we had that nine-month correction, you know, from January to, to October. And in October, just after being down 20% in the market-ish, um, over that period, that sentiment indicator was down below 10 again and then rallied all the way back up in the 90s. And then to this past decline, this 19.2% decline, we got all the way back down there in December. Like, and, and you look at th, those gauges and it's like we just went through financial Armageddon. If, if I, if I stripped out all the other, you know, you know, kind of dates and other things that went on, I said just tell me what happened, you know, over this period, like, oh, there's, you know, I can, I know that that's the financial crisis, and it looks like we just had three financial crises right in a row. So, to his point, you know, Peter's point, it is absolutely fascinating how fast sentiment is shifting in the markets, and this is because we've sucked all these retail investors in now, really since 2020, that didn't exist before, and the markets are now really hot money. It's just in, out, in, out, in, out, and that's forcing these indicators just to swing all over the place, which isn't a healthy market, um, for, for the average investor because it's just, it's just peeling their emotions back to the skin.

Yeah. Yeah. And that, and that's, that's sort of what I wanted to, to focus on here, which is I, I think this is a sign of declining market health. And not, not meaning like, oh, we're going to roll over and have a massive correction tomorrow, but it's just that the market is becoming less stable. Its zone of equilibrium is getting narrower and narrower. And actually, the way I'm kind of thinking about it, tell me if this is the right analogy, is imagine like a path, like a wide path you can walk down, but it narrows the further you go down it, right? Until eventually it's kind of like a knife's edge; you're just sort of like teetering and you know very quickly going between one side. That sort of seems like, you know, as we go further and further on here, that's what it is, and you're either in crisis or you're in boom times, and you can switch between the two really quickly from, from an emotional basis.

Yes. From the market basis, no. Right. I mean, there's been nothing this year.

Um, yeah. I mean, tariffs were certainly like, we're going to have tariffs, and then you and I talked about the facts like this is thick and carrot, and these are going to go away, and you know, as soon as we get a deal with China, this market is going to take off running, which is exactly what happened.

Yep. You know, but we, we're not in crisis mode. There's, there's no crisis mode going on. We're, we're not on the verge of a recession. Everything is functioning normally. You know, the economy is doing fine. Retail sales were okay; to we had retail sales today. They were, you know, um, they surprised to the upside.

Yeah. They were up 0.1%.

Well, they were a little bit less than expected. They expected 0.2. They came in at 0.1, right?

Oh, sorry. Year-over-year they surprised to the upside.

Yeah. Yeah. Year-over-year, that, but year-over-year they continue to be strong. That's 40% of PCE, which is 70% of GDP. So, there's no recession data, you know, to speak of. But, yeah, emotionally it looks like we go from, you know, boom to, to, to crash, boom to crash, boom to crash, but the market, the economy and the markets aren't doing that. It's just emotionally we, we're doing that. We're doing it to ourselves.

Right. We're doing it to ourselves. I mean, I do think, and you would know better than I, but I mean, sentiment does affect things like capital flows and stuff like that, you know, um, in the short term, right? So, anyways, I don't, I don't necessarily know, have a lot of confidence where to project what this dynamic might yield in the future, but I think it's just worth paying attention to.

No, I, I just, I, I think that, you know, again, April the 6th, you know, we had that super negative sentiment. I think you have to just, I think you need to pay attention to sentiment. I think you need to buy. I just think you need to go when, when sentiment gets super negative, you need to be buying, and when it gets super positive, you need to sell.

Well, it's the old Buffett, right? Be fearful when others are greedy and vice versa. And it's worked great. I mean, it, it got us in the market in October 2022. Got us in the market, you know, last year, got us in the market this year. You know, it's, you know, it's been working great. Maybe someday it'll fail, but you know, so far it's working. So, stay with what works, right?

Yeah. Um, okay. Okay. Well, look, I want to, I want to move on to, um, to some of the news we got this week and, and to one point that I, I made yesterday in my live stream with Stephanie Pomboy, but I want to, I want to get your, your thoughts on it here, too. Um, and maybe since we're talking about sentiments and, and how the markets are really perking up right now, um, just some stuff that happened this week. So, retail sales surprised to the upside. As Lance said, U.S. factory production increased at its fastest year-over-year rate in 30 years.

Um, so, you know, we're beginning to see some, some signs of life in, in, uh, you know, the U.S.'s commercial production. Um, and producer prices plunged the most since CO. Um, so at least yet, we're not seeing, uh, you know, any notable inflationary, uh, you know, price increases from tariffs. Now, that still may come for sure. It could. Walmart, as you said, uh, in their earnings call, they, they warned about I think quote imminent price hikes that they're going to do, uh, based on tariffs. Um, but, uh, you know, there was a lot of, there's been a lot of hand-wringing, you know, since early April that, oh gosh, prices are going to start soaring because of tariffs. And we really haven't seen that yet. And I know Lance, you've, you've taken us down the path of history and you looked at the Trump 1.0 administration when we put tariffs on China there and it didn't really, uh, manifest in, in inflation. So, this is still a debate that folks can have, but right now the hard data, as Scott Bessant keeps reminding the media, looks pretty good. You know, yeah, the soft data not so great, but you know, he's saying, look, I'm not going to worry until it starts getting reflected in the hard data. Right now, it doesn't, doesn't quite seem to be.

Real quick, real quick, just real quick on tariffs. Barclays did a really good piece, uh, this morning. Um, so post the negotiations with China, the average tariff rate is now 14%. So, that's not too far above the 10% that the markets were expecting going into trade negotiations, and, and market was expected like, hey, if we get 10% tariffs, we're okay, everything's fine, um, because consumers, producers have to eat that. Now, interestingly enough, we saw this in the PPI report today, which was a lot weaker than, than what was expected. But what's interesting is in that PPI report is that we're, and we've talked about this before, the only people that pay tariffs are producers. Consumers don't pay tariffs. Producers do. So, the producer pays the tariff because they're the ones buying the product to make it into whatever good or service they're going to produce on the other side. Now, if they can pass on that tariff to the consumer, it results in higher prices to consumers. But what we're seeing, and this was in the PPI today, is that I run this analysis looking at the spread between PPI and CPI. And what that tells you is, is it tells you how much of the tariffs that producers are having to eat. And we're seeing them have to eat more and more of that because, right, and this is Walmart. Walmart made this point too is that we want to try to pass it on, but we're still the leader in low prices, and they're going to have to wind up eating a lot of this stuff. So, right, and sorry to interrupt, but, but I'm not crying too many tears because as we've showed many times in the past, corporate profits are at the highest percentage that they've ever been. So, it's like, look, dudes, you've been having a great time. Yeah, maybe you should eat this a little bit more.

Yeah. Yeah. No, logically, yeah, completely agree with you. Now, just from an investment standpoint, just understand that that's going to impact earnings and profit margin, which that's going to lower forward estimates, and that's going to potentially impact--that doesn't mean markets are going to crash, but, um, you know, instead of expecting a 20% return a year, you might be looking at a 5 or 6% return a year.

Okay. Well, you know, so we'll obviously be tracking that really closely from here. Hey, real quick just on tariffs. I'm not an expert here, but here's how I, a little tweak from my understanding is I believe it is the, it is the importer who pays the tariff.

Right. Well, and then, and then the importer has to charge the, the domestic company that wants to buy the goods, and then that, that, that producer or that corporation then determines how much to pass along to the consumer. But I think the actual, the actual entity that has to pay the tariff is the entity that is bringing the product into the country. So, Apple, right? Apple's going to have to pay the tariff on the phones they produce in China, which is now why they're trying to move to India, right? Which Apple probably will, but a lot of people, I believe, and folks in the comments can correct this, but I believe a lot of companies will buy from an importer.

Yeah. Yeah. Tell companies that, you know, they're import-export business. That's all they do. Um, right. And, and, and a number of these importers are actually foreign; they're U.S. versions of foreign companies. So, that, that, that company is actually paying the tariff first. The foreigner is paying the tariff first, and then they're going to pass as much of that as they can to the corporation, which will then pass as much as it can to, and most of those, but understand like if you're a big company like, so you're Apple, you're doing your own importing.

Exactly. Yeah. But, but to your point, and, and, and rightly so, you know, your small-cap, mid-cap companies and, and pretty much all your private businesses for, for the most part, kind of that mid-tier cycle, they're, they're not big enough to do the import side of the business. So, to your point, there's whole company setups like, let's say you and I want to go out and we build a widget. We're going to go to a plastics manufacturer that'll, that'll manufacture the widget for us who then imports the plastic from somewhere else, you know, so forth and so on. So, there's a whole line of people that are dealing with that tariff before it even gets to us to, to build our widget, right? And, and my point here is that if the tariff is 100, you know, the importer, you know, may only be able to pass 80 of that to the corporation who may be able to pass 40 of that to the, to the customer, right? Or, or in some cases can't pass any of it to the customer because the customer said, "Yeah, I'm just not going to buy that. I'm gonna go buy something else."

Yeah. Exactly. And this is, you know, this is what we're seeing now is we're seeing consumer choice starting to come into a lot of this. And this is why we're not seeing the big inflation push. Uh, consumers are, look, consumers are tapped out. We talked about delinquency rates are rising. Uh, student loan, student loans are now the, the student loan default rate is spiking sharply because they've now gone back to start. You now have to pay off your student loan. Now, that's that whole forgiveness thing is, is, you know, over. And so, we're seeing big jumps in student loan defaults and delinquency rates. And so, consumers are having to make a choice on what they buy and, and how much they buy of it.

I've got a, I've got a really cool, um, uh, graph of that, um, which I'll try to pull up here in just a second. Um, uh, yeah, and just, just to note too, Lance, it's, um, it's not just, it's not just, uh, student loans, um, that are seeing increases in delinquencies, um, although they are seeing a massive spike which I'm going to show right here. Folks can bear with me for just one more second. Um, do you see this chart, Lance? Lance, do you see this chart?

Okay. Yeah. So, this is, um, percent of balance 90 plus days delinquent by loan type. And you can see they're trending up for all consumer credit types, but they've just, they're doing a moonshot right now on student loans. And, and, and, and this is because, um, you know, the, the rate was almost zero for the past couple of years because of the COVID student loan moratoria. Uh, and all of a sudden, you know, now that they're suddenly getting forced to repay them, you've got a pretty substantial percentage of borrowers who are just saying, "I just can't. I just don't have the money. Can't do it. Can't, can't do it."

Um, and that is spilling over into, um, other forms of debt. Um, I've got another chart, but I, I in the interest of time, I won't try to hunt for it. Um, that, that's collectively all consumer debt delinquency rates. Um, and that is, that is now on the, on the rise. Um, and this is what, um, Anna Wong, chief economist at Bloomberg Economics, was warning about when she was last in the program about a month ago, is that she thinks that the student loan repayment, uh, could be kind of the, the match that lights the fuse here, um, on the next consumer credit--I don't want to call it crisis, but consumer credit, you know, problem.

Um, just curious, did she happen to say why? Because

Oh, yeah. Because the only reason I ask is, is that, you know, it's not, it's, it's, it's a good chunk of money, right? I'm not saying it's not, but it's not a massive amount of money like relative to the amount of credit card debt or all the loan debt. So, so here, here's a good, good question. I will tell you why, and then you can react if you, if you agree or disagree. So, um, first there are a lot of borrowers, right? Um, I, I don't remember the exact number, but I think it's something like 60 plus million borrowers. And there's about 10 to 15 million that are in kind of the red zone where, as best we can tell, those people are going to be really challenged to start paying this back, right? And so, um, what's going to happen is, is, you know, you're going to start defaulting on your student loans, but you're going to start defaulting on other loans of yours as well, right? It's, it's going to start rippling through. That's one factor. The other factor which I found really interesting and hadn't really heard before is she said, just like, just like sort of academically over the past several decades we've had this great inflation, right? A lot easier to get an A now than it used to be, right? Um, she says same thing with credit scores, so one of the things that the lending industry has been telling itself is, well, look, it's consumer credit scores are better than they were prior to the, the global financial crisis, so we've got a stronger consumer, but she's like, you know, there's been a lot of credit score inflation over that time, and when you discount it back for the, the kind of great inflation factor, she's like, they're really not that different. Um, and so essentially what she's saying is, is that the creditworthiness of the average, you know, household borrower is actually worse than the lending industry appreciates at the moment. And right now there's information asymmetry. The, the borrower knows their true state, right? They know their ability to pay pretty well, and in a lot of cases they're like, look, I'm not doing that well, so I'm going to borrow as much as I can get while they're still willing to lend it to me, but as this, you know, if indeed we have this ripple effect of student loans now causing people to start having to, you know, default or become delinquent on their debts, she thinks that the lending industry is going to start waking up to, oh my gosh, you know what, we've kind of been mispricing credit risk here, and therefore we're going to start tightening lending standards, right? And, and, and, and that's going to start contracting consumer spending even further. So, so that's the concern that she has.

No, and I, I think that's a valid concern because the one, the one thing I didn't think about--well, as you were talking, I started thinking through the, the, the, the credit collection process. You know, I can file for bankruptcy and I can get rid of my credit card debt, right? But I can't file for bankruptcy and get rid of student loan debt, right?

Um, and more importantly, the government can garnish up to 15% of my wages to pay off that student loan. So, I can't escape student loan debt, right?

Right. And that, that garnishing, I believe, has already started. I think that's what the administration announced last week.

Yeah. I, I don't quote me on this, but I think they, that has to be delinquent more than 270 days to start garnishing. It's, it's, it's a pretty long stretch, but still, they, but they basically said, "Look, these are the things we're going to do to get this money if you don't pay us."

Yeah. Yeah. So, so back to her point, which I now, I, I can see, or I can see how she's going with this, is that all of a sudden I've got this student loan debt. I'm trying to pay my credit card debt, my buy-now-pay-later debt, which is, you know, potentially on risk of, you know, going into default. And now they're gonna start taking, garnishing my wages, which gives me less money to spend. So, yeah, there's, there's, to your point, there's this cascade failure effect, but I can't get rid of that student loan debt. I get rid, I can file for bankruptcy, which is, you know, a whole another issue, right, to get out of the credit card debt, but yeah, it's that, that's that's going to tell you. So, yeah.

Right. And all, all of that depresses consumer spending, right? If I start getting delinquent, I'm, I'm spending less. Um, if I'm, if I'm start having to, well, look, if I declare bankruptcy, I'm definitely spending less. And, um, and if I go to borrow more and the borrowers say, "We're cutting you off because we've just realized you're worse credit risk than we thought, you're spending less. Now you're in bankruptcy, which means you get no credit." So, right. And I think this gonna be fascinating though because I'm still waiting for that shoe to drop on all this buy-now-pay-later stuff. So, it's coming, my friend. I, I that's one thing I, I feel comfortable giving a guarantee to you on is, is we will be, we'll see those headlines. You know, I, I'll take the under, you know, 12, 12 months or less. But, um, but I, I, I feel very confident we will be at some point I'll be pulling up headlines and we'll be saying, yep, this is exactly what we were expecting.

Yeah. I mean, this is like, you know, I'm, I'm keeping a close watch on Affirm Holdings. You know, that stock is doing okay right now. Uh, it's a public company that, a firm that does buy-now-pay-later. Did it recover because I think it got, it did get whacked at one point, right? During the, during the April decline, but it's, it's rallying over the markets now. Um, but the, what's the other one? Um, CLA, what is it? CLA, I think.

Yeah. The Scandinavian one.

Yeah. They're about to go public as well. So, it'll be interesting to see if, I, I'm not--those are two stocks I will not touch, by the way. I'm not going to invest in them. I may, maybe I'll be stupid and I'll come back in a few years and say, "You were stupid not buying Affirm. Look at it now." But yeah, I, I mean, honestly, it might--and folks, don't follow me on this, but I think they could be fun, you know, buy a, buy a long-term put and just, you know, hold it for fun. I, I think that might actually be, be the play.

I am kind of excited though. They, uh, they did add Coinbase to, um, the S&P 500. They swapped it out from Discover Financial, which just got bought by Capital One Financial. And so, they included Coinbase into the S&P. Now, that is usually a death nail. So, we'll see. Is that kind of like a Barron's Magazine cover or a John Madden NFL, you know, cover? If you remember, well, if you remember, not too long ago, uh, they, they put SCMI, the Super Microcomputer company, y into the S&P index, and then it promptly went down 60%. So, we'll, we'll, we'll see what happens with Coinbase as they get added to the S&P, but, you know, it's, it's a, you know, it's, it's an interesting, it's an interesting add for the S&P.

I like it. All right. Um, and look, it's been a long time since we've talked about Bitcoin and blockchain and crypto. Um, if there's interest in the comments here, um, Lance, maybe we'll we'll bring it back up. Um, I I I will I've had folks asking me because I mentioned at one point in time that I I I I did know, um, Brad Garlinghouse, who's the CEO of Ripple, back in my Yahoo days, uh, and asked folks if they wanted me to get him on the channel. Enough folks have wanted me to. I have reached out to him. I haven't heard back yet, folks. But just know I am still trying to follow up on that. Who? Who? Adam. Yeah. Yeah, probably. Yeah.

Um, all right. So, let me let me get to this this next point, which um again, apologies for those that watched my section with Stephanie to see me go through this again. I'll try to do it quickly. Um, I also want to preface it. So, Lance, last time, you know, we talked about kind of the the um slings and arrows we take whenever we talk about the current administration and its economic policies. um you know, people on both sides of the political spectrum um see it as as a you know, more partisan uh or see it as partisan, which is absolutely intended not to be.

Um so, real quick before I make this point, I just want to react to this comment. Um fellow commented in a recent video saying, "Hey, I've enjoyed your commentary for years. Um uh and uh really like how you are, you know, it was your candid independent voice that drew me to your channel in the first place. Um he says, "Lately, however, your commentary has increasingly leaned in to support the current administration in a way that comes across as synopantic and that's disappointing. Let the administration's wins stand on their own as realized gains. But recently, your tone feels more like proilitizing than analysis, and it doesn't feel authentic." um that individual is completely will they're welcome to their own opinion. Um I I just want to clarify none of my approach is to try to endorse um any particular you know partisan agenda here.

Um, and uh, at the core of it, as we talked last, is like I've got a choice, right? I can either say, look, whenever I talk about the administration's, whatever administration's in office, what their policies are, that's going to get interpreted as political and we're going to have a mosh pit, you know, slugfest out in the comment section and man, I just won't touch it. Right? That that's one decision I could make. The issue is is that so much of the future outlook these days like it or not is going to be it is being policydriven much more so I think than in in previous years or you know past decade for sure. So um I feel like to ignore it is to do a disservice. It's to actually um you know somewhat blind the audience here to significant material inputs that are going to infect affect what comes down the road. So anyways folks, I'm going to continue doing this. You can, you know, if you if you doubt my intentions, uh, whatever, that's up to you. But I really am trying to do this uh because it's essential to understand where the macro outlook is going. Uh, and I really do not have a dog in this fight uh, in terms of uh, political parties. My brand and just myself as an individual is very independent, very moderate.

Um, now that being said, I will do my best to call balls and strikes, right? So I'm going to say some nice things. I'm going to say some critical things. So, that being said here, Lance, here's the overall point I want to make. Um, you know, I I think that there is a number of people um that didn't like the current president when he got elected, right? And said, "Look, this is going to be a clown show, right? I I totally don't trust this guy's ability to run the country. He's going to run us off the rails." I think there's a material percentage of the the base that voted for Trump who have been uncomfortable with the level of disruption that's been unfolded so far. And even they have had their doubts, right? Especially even after liberation day. Whoa, wait a minute. This guy, I thought I was on board, but I I don't understand what he's doing here. I think he's turning the world against us. I think it's you're kind of raising your hand a little bit, right?

Um, so all I want to say is if your in if your investment philosophy is informed by uh Trump is imploding the the economy and turning the world against us, right? If that's your if that's your default plan A and your your investments are are reflective of that, right? I think at this point in time you you you have to be cognizant that there is momentum building in this administration's agenda, right? And that if your if your assumption is it's a 100% clown show, I think you ignore this momentum uh at your danger. Now, I'm not saying this momentum is going to end up in Trump being successful on everything. There is plenty of time, plenty of opportunities for this this train to go completely off the rails at some point. But let me just walk through a number of accomplishments that I know the administration is touting, right? So on trade, right, we've got the UK deal, right? Um China, for whom everybody thought was going to be the last party to engage and come to the table. Well, now we're meeting with them, right? We had the the meetings in Switzerland this past weekend and and presumably we've agreed to some high level based terms, right? And already the tariffs have come down mater.

Um, a number of agreements have come from Trump's recent visit to Saudi Arabia. Um, they're going to buy billions in US chips, a whole bunch like 160 Boeing planes or something like that. Um, there are a number of other big country deals in the wings that the administration is telling us about. You can doubt that, be skeptical, whatever, but just ask yourself this. If you are one of those other big countries and you've now seen the UK seal a deal early and that China is at the table, are you more likely to be leaning back and saying, "Nope, I'm not going to play this game." Or are you going to be more likely to say, "Look, I want in on that. I I want to get to the table now and strike a deal while the getting's good." Right? I think it's probably much more likely the latter. Um, we've got, as the administration tells us, you know, 75 plus other countries that are ringing the phones off the hook to strike trade deals as well. And what the administration has has said is is yeah, we're going to pick up the phone on on some of those. But for a lot of them, you know, the smaller countries that we're not really that economically dependent on, we're just going to give them a deal term, right? We're going to say, "Hey, look, here's the deal we're willing to take. Take it or leave it. You don't like it, don't worry. Go do whatever you want to do, but you want to do business with us, these are going to be the terms." And so, you're just seeing a lot of, you know, positive momentum, wins starting to come on the board trade-wise, right? and and everybody who were very understandably worried about uh the administration driving the rest of the world into China's arms, that does not seem to be materializing, at least as of yet.

Um we're going to get those 10% tariffs, it seems, pretty much on everybody. That's going to be the Costco fee to do business in the US consumer market. That tariff revenue is going to come in. Uh it may be used to reduce taxes. It may be used to pay down debt, but that is revenue that is coming into the country. uh and uh as these trade deals are getting struck uh there's also commitments uh of investment in the country you know uh countries that want to invo avoid tariffs by building their factories here employing US workers uh the latest count uh that I've heard is over 10 trillion in commitments so far now a lot of this is announcements we'll see how much of this really manifests over the next bunch of years but you know they're getting a lot of countries that are going on record saying yeah I'm going to put countries and and large multinational companies saying, "Yeah, I'm going to put half a trillion, a trillion or whatever into your into the US going forward."

Um, US inflation's the lowest in four years. We had a surplus in April, not a deficit. Um, the S&P is now green for the year when everybody was freaking out that, you know, Trump was sending the stock market crashing and the economy into a recession or depression post uh liberation day.

Um, we then also have a lot of things that are in the works economically. Uh the big beautiful bill um is making progress through Congress. Still could get derailed, but it is building momentum. Uh they've got deregulation, they've got the Doge cuts, uh budget reconciliations, they've been shrinking government departments. We saw the executive order reducing uh prescription drugs by 30 to 50%. Um and of course the reor reshoring manufacturing that I mentioned earlier.

Um geopolitically um we we've made substantial progress or or I don't want to oversell it but we're making progress forward progress towards a Ukraine Russia uh cease ceasefire and potential peace deal and in fact Zalinsky the day we're talking here Lance is in Istanbul meeting with Russian envoys. Um the Houthis stopped targeting US ships. Um India and Pakistan the ceasefire was negotiated by the US. Uh the last US hostage in Gaza has been released. Uh Trump was also over in the Middle East uh talking to the countries that fund Hamas trying to further get to a permanent uh ceasefire. Um and um this morning news came out that we've basically presented Iran with a nuke deal that Iran seems to at least be open to discussing. Um and uh so all of a sudden, you know, we're seeing the prospects for peace dramatically increase around the world right now with America playing a key role in that. Uh and then also uh in terms of NATO, um you know, the NATO countries have agreed to step up and pay more their fair share of of NATO costs, which is a cost reduction uh to the US. So, you know, there's a whole bunch of other things. Of course, there's the border security, you know, lowest uh amount of crossings on record now and a bunch of other things as well that I won't get into because they're not necessarily economic related, but all I want to say is that is a lot, especially in what 120 130 days. Now, not all of it's going to be successful. Like I said, a lot of this could still go off the rails here, but to my point is just like you say, Lance, you know, I if you have a a sense that economic armageddon is is is where, you know, the macro story ends at some point in time, you don't necessarily want to put all your chips on that now, right? You you you want to you want to be invested in the market in other ways in the ways that you and I have talked about in the past. I'm saying the same thing here, which is if you if your money is bet on clown show, that's fine. But I wouldn't have it be 100% that way looking in the face of of which way the momentum is is moving here. And and I'm not necessarily I'm not trying I'm not trying to convince you that the Trump administration is going to succeed here. What I think you need to ask yourself though is how much of the market is going to start getting more and more convinced that this is going to happen because that's what's going to drive asset prices. So I'll take my breath here. I'll I'll let you respond to this. We'll then talk about how this could all be screwed up so folks feel like I took a pro and a con side here, but Lance, what are your thoughts?

Well, no, I I I think it's, you know, I had this conversation this morning. So, one of the comments in my chat this morning was, you know, all the inflation data is rigged. You know, it's been rigged since 1980. Okay, it's not true. But, you know, you can think that and that's okay. You can think that the employment numbers are rigged. That's okay. And look, there's a lot of problems with the employment numbers. There's a lot of problem with inflation numbers. I will and yeah, I was going to say I I can I think we can debate whether they're rigged. I I have a less issue debating that they are not super accurate, right? No. And no, and that's that's fine, right? And this is the same thing as having a political conversation, right? And but the point is is that the markets don't care about that opinion. What the markets care about is what was the employment number, what was the inflation number, and what what's that mean? And that's what markets are going to trade off of. And you know, I get into a lot of these and again I'm not political one way or the other. Um I'm like you. I'm just I'm look at just the politics for what they are and but you know say hey look this is going on and I told you the story when I used to do political commentary back in the during the Obama administration is that you could have a reasonable conversation with somebody about this and we could debate points. Now it's you know this whole idea is orange man bad. It wouldn't matter if if Donald Trump came out tomorrow and announced the cure for cancer. No, he even said this during his address. There's just a group of people that are just going to be against it, right? He's like, "Oh, you're supporting Trump. You're a sycophant because you're supporting orange man bad." That's not a logical discussion, right? That's not a good debate point to have. And if you're if that is your viewpoint where you're ignoring all of the other data that is surrounding that viewpoint, you're on the wrong side of the trade and you need to start re-evaluating to your point, Adam, saying, "Look, this is what's going on. Like it, hate it, doesn't matter. What does it mean to your money?" Because that's all we're here for. We're just here to make money and we need to make sure that we're analyzing the data appropriately, good, bad, or indifferent. And look, like I was holding my hand up earlier. There's, you know, I was I was the first one out there saying these tra this this tariff announcement is really bad, right? You know, this is going to be bad. Um, and the market sold off and and a lot of people that hated Trump love the selloff and now that the market's rallying back, now they hate Trump because this stuff is working and and and again, may continue to work or it may not. We'll see. But having this really narrow focus on just hating a person just because you know he's in office is is not a good position to be in. And you have to ask yourself this question. If your whole view is is I hate this administration because orange man bad because that's what the media tells me. What if it was somebody else? What if it was um you know some other individual that was a conservative that was the president and it wasn't? Would you feel the same way? Or would you be more open to what was going on? If it was just an individual that was just a if it was Adam Tag, right, and he's now the president of the United States, just a normal everyday Americans is now president. Would you have a different opinion about what was going on? If he's doing exactly the same policies, would your opinion be different? Or is your whole opinion based on orange man bad because that's what the media tells you that it should be? And if that's the case, I think we need to re really evaluate, you know, where we're getting our information from. Is that information actually valid? Is it taking in all aspects of what's going on? And because that's what news used to be. News used to be fair and balanced, right? It's not anymore. It's it's very divided. You have, you know, Fox News on one side, CNN on the others, there's nothing in the middle. Um, but we have to evaluate both arguments for their validity and then try to make our decisions based on the facts, not on emotions.

Okay. Well, well put. The only tweak I would put to it is is um, yes, for orange man bad, but I would say the same applies to orange man perfect, right? You get people on both sides. Yeah. Exactly. And and to your point, Lance, I think the key thing that I'm trying to get across to folks is is what you really need to consider is, you know, assets are priced at the margin. So, what does the marginal buyer or seller think, right? And so, do you do you think they're swayed by this long list or do you not? Right? And and you got to take your personal biases out and just try to analyze the market because that, to your point, Lance, is how you're going to make money, right? So, um All right. So, let me ask you two two offshoot questions of this. Um, the first one is is so let's let's say the Trump administration is successful with all of it, right? with renegotiating these trade deals, bringing world peace, um you know, extending the the the tax cuts, adding additional tax cuts, making a lot of progress with deregulation, cutting government expenses, both in terms of bureaucracy and uh fiscal spending. Um the whole kitten kaboodleoodle, right? Um, how material do you think an impact do you think that'll have on the American economy and and when do you think we should start because it takes time for all this stuff to to ripple through. When do you think we should start to know that it's actually working? You'll probably know by next year, early next year whether So again, we don't have we don't have a a tax cut bill, right? We don't we don't have a big beautiful bill yet that's still to come. So all we have sorry when you say we should know meaning it'll be reflected in the data or the market is going to react because the market will react before right yeah market react before but markets tend to lead the economic outcome and I think what the market's starting to tell you is that the outlook is getting better estimates are starting to come up people's forecast for economic growth is starting to improve recession odds are falling pretty sharply here um and that's kind of all that bet now that's just based on tariffs right so this reduction in tariffs getting better trade deals set up you you know, the ability, which what everybody's forgetting with these tariffs and these and these and this deal is is that this will allow us to export more goods, which is about 40% of corporate revenues. So, if we can export more goods because we've now reduced tariffs in other countries or opened up better trade deals, that's good for the US. So, that's going to increase employment ultimately. That'll increase earnings, that'll increase uh profit margins, that'll increase um economic growth rates. So, you know, that's going to have more demand in the economy, more jobs, right? Which is, just to be super clear, you can boil down the administration's policy, I think, that's most reductionist is spur growth and um and contain China, right? That's pretty much And if you do that, then, you know, you're talking about growth, you know, instead of running a 2% growth rate in the economy, maybe you're running three, three and a half. And that would be great. Um, you know, we haven't seen a a steady three three and a half percent growth rate in decades. So, you know, it would be it would be good if we could get economic growth back above the population absorption rate, which is 2% growth. 2% growth, you're just absorbing population. But if we have job growth above 2% now all of a sudden that fosters higher wages, that's going to foster a better standard of living across, you know, across the aspect of the economy. There's a lot of of good benefits for that and also lead to higher stock market prices. ultimately more demand, higher earnings, etc. So there's a lot of flow through that. So if he's successful in getting done, what he's going to do, and most importantly, don't the one the one criticism I have of all this that he's doing is he's doing a lot of this by executive order, which can be immediately undone by the next administration. So we may get a lot of great deals put in place and then the next administration comes along and you know, no, we're not going to do any of that anymore because, you know, we didn't, you know, orange man bad. we're not going to do it, so we just get rid of it all. Um, you know, if this was done through legislative process, that's a much different story. And that was my one of my arguments with you earlier is that, you know, I wish that if you're going to do these tariffs, you go through Congress, you get these tariffs done through a a legislative process, which makes them permanent, right? And my response to that was listening to the administration, I don't think they felt they had the time to do that, but they do want to do it retroactively. And that's that is the risk that they they they're unable to especially if it doesn't happen by the midterms and they lose Congress in the midterms, right? And so there's lot there's a lot of risk, but if this if these things work as expected, you should see better economic growth, better employment, better wages, things should be better. Okay? So better, and I'm going to get to the negative in just a second, folks. Um I'm just asking you to guess here, Lance. No one's going to hold you to this, but like I if we do enter that world, right? Well, which we'll call Trump's what's he calling it? The golden era, the new golden era of America, golden age, whatever, right? Where do you see the stock market going?

Well, I mean, the stock market should, you know, at that point, I mean, you're going to start generating, you know, six, seven, eight% rate of return years. You'll have some years better, some years, you know, maybe not as much. I mean, but markets will be higher. they're they're going to grow at the rate of economic growth. So if economic so if if you want to know where the the markets are going to go, it's economic growth, inflation, and dividends. So if you have and and this and history goes back over time shows you this, you know, until just this last decade, we've really skewed things up because of all the monetary stimulus and stuff, but prior to 2008, from 1900 to 2008, the economy grew at about 6%, your dividends were 4%, your return in the market was 10. So there you go. Um, so going forward, if you're growing at three and your inflation rate is three, um, well, it'll be two. Let's just give the Fed credit, you know, as in in this perfect world, let's assume the Fed hits its target. So inflation's two. Well, you you can't have 3% growth and 2% inflation. You can't. No, inflation is going to track economic growth because it's supply and demand. If you have stronger demand in the economy, then corporations can charge more for their products because you have more employment, more demand, so that's going to lift inflation. Okay. All right. So, all right. Let's continue with this and I don't I don't get wrapped around the axle here. Right. Right. Okay. But so but it's just however you want to do it. So three so 3% growth 2% in inflation to you that's five add in dividends at two that's a 7% annual return. Okay. All right. Um Okay. But I mean so that that is an attract I mean I guess when you I guess when you compare it to the 20% returns we had in 23 and 24 when things were getting juiced maybe it's a little boring but you know but remember that's average right? We're talking about average returns, right? And so that means that one year you've got a 15% year, next year you got a five, next year you got 10. You know, you never get an average year. Markets don't ever return average. They're all below. Okay. But but I guess back to your point, better. Okay. So So that's that's the that that's our maximum upside. Right now, let's get to maximum. Pardon me. No, there's there's there's there's more upside. Um, you know, if AI does what we think it's going to do and where we're placing some of our bets right now, then the increase to productivity, which is not good for employment, but the increased productivity and earnings can certainly provide a very big boost for the markets. Okay.

For the markets. Okay. And we'll we'll we'll save the societal cost dark side of of AI. And that's actually cost me damn. Yeah. And that's actually if we have time for today's rant, which we might not, but it's actually about that.

Um, but real quick, so let's let's flip it. Okay, so uh China flips over the negotiating table and walks away. Uh, you know, our other countries, you know, we've we we've we've injured, we we've insulted them, they start cozing up to China. Um, the big beautiful bill doesn't pass. Um, none of the stuff passes. uh we lose or sorry the Republicans lose the um uh Congress in uh in the midterms. Um how how bad does bad look like here if if if if the Trump clown show really does materialize? Okay, so talk about a recession—probably one one and a half percent negative economic growth. You know, the market's going to have a retracement probably back towards, you know, the 2022 lows maybe. May it could be even back towards the pandemic lows at some point just to revaluate the markets for lower earnings. So, you know, you've got 20 30% maybe 40% downside over the course of time.

Okay. Okay. So, that's our that that that's the other end of our spectrum.

Yeah. Right. Okay. Those are pretty pretty I think it's somewhere in the middle probably, and that is the point I'm trying that's the whole point I'm trying to make here, right? which is, you know, determine where you are versus complete clown show versus pristine golden age of America, right? Where in that spectrum are you, and then come up with your expected value between the boundaries that Lance has laid out for us here, right? Don't just dogmatically pick one side and say, "My gut just tells me this is really going to happen," or "Ideologically I just really want this to happen."

Right. Exactly. Yeah. Okay. All right.

Um, so yeah, let's squeeze in this rant. Um, there was an article that I read. I won't I won't pull it up here in the interest of time. Um, but it's about how artificial intelligence, its impact on society and the workforce is not just coming, but it's increasingly already here. And it's a story about a software engineer who um had been working, I believe, uh, for about two decades. um he had been a software engineer during the great the global financial crisis. So, you know, we know he's been around for a good while. He lost his $150,000-a-year job to AI. Uh and he lost his job twice before. Um once during the global financial crisis uh and then once during COVID when everybody got fired at and in both times he was able to get a job within a matter of weeks programming. Right now he's been rejected from 800 jobs. Um, and he is forced to be a Door Dash driver and live in a trailer to make ends meet. And he's just basically saying, "Look, I used to think that my job was pretty bulletproof, right? I mean, the whole mantra, right? Hey, learn to code, right? Safe job, right?" Um, you know, we've all heard that AI is increasingly taking over the programming stack. And to date, it's been, okay, well, really basic fundamental stuff. Enough. Well, it's now crept up enough where he's like, "Look, I and a lot of guys that I worked with have gotten laid off. We can't find a job anymore." In fact, for the few jobs in which he has um been like called back to interview for more than one occasion, the interviewer was an AI bot. So, he wasn't even interacting at that point in in the the recruiting stage with a real person yet, right? So he's basically just saying like look you know uh the the job killing aspect of AI is here and it's not just here for you know uh uh low-skilled jobs. It's it's increasingly hitting really substantially skilled jobs like is you know fairly senior software programmer.

So you and I bring this up, Lance, because you and I have talked about both the promise and the shadow of AI, and and I've said many times and I know you've said too, but I I just the biggest issue I have about getting excited about it in the future—and there are some amazing things it's going to do for us and for our, you know, our economy, at least for our the top end of our economy—Um I I I just still can't see it as anything other than a massive jobs destroyer. And I go back to that that um theory of Keynes of technological displacement, which is if technology can replace labor and do a better job more efficiently, you should absolutely replace that labor, but you have to throttle the rate at which you displace the labor. If you displace the labor at a faster rate than you can repurpose to something else that's constructive, you create a social crisis, the cost of which is larger than the benefits you get from the technology transition. And to me, it just still feels like we are hurtling blind, you know, into this chasm of displacing too many jobs that we know how to, you know, redirect that labor to.

No, it's my son's a computer science major at A&M, and he's got a lot of he's in a couple of different organizations and you know he's you know really evaluating his his final you know year and a half of what he's studying because he's to your point he says I've got a lot of buddies that have graduated can't get a job and they're coders and like you know everybody you know everybody's like hey if you're a computer that's gonna be frightening that's gonna almost be like going to med school and coming out and they're like sorry don't need you.

Yeah. Um, you know, so, so it's it's a very fascinating situation, but you know, it's interesting. I've had this conversation, you know, on our radio show is that, you know, this is something that's happened over and over again. And and you know, we we see this happen, but we just kind of ignore it later, but there used to be a time when you called any business and there was a live person says, "Hello, thanks for calling, you know, Adam Tagert's, you know, you know, thoughtful money, right?" And by the way, I will still answer the thoughtful money phone line.

Just you go. Good. That's right. Because we're old school here.

Yeah. Exactly. But you know, how many businesses you call today? There's not a reception. It's just like dial one for English, dial two for Spanish, and then we'll, you know, dial and then you get to another mini tree with 14 different options. You're just trying to figure out how to get to where you want to go. And sorry, sorry to interrupt, but I just want to underscore this because it's a huge peeve of mine. I mean, now I mean, I'm in the business of trying to track people down to have them come on the show. I mean, increasingly websites don't have contact us. They they don't even they not only have a phone number, they don't even have an email address.

Yeah. Right. So, I mean, it's increasingly hard to to comm to to contact any company that you've got a potentially a grievance with.

Yeah. Exactly. And look, look at all the apps that we have today that, you know, if you have a problem with Door Dash, who do you call, right? I mean it's like you know it's just but this is but you know we've displayed my whole point is is we wiped out a whole job category of reception it's like oh it's just receptionist who cares but you know that's the the problem with technology is that there if you take a look at the number of people we have in the United States that are of working age you got 190 million people that are of working age you have about 100 million people that are just sitting on the sidelines somewhere doing what I don't know but they're they're out there okay yeah they're working multiple part-time jobs or no, they're going to school. There's lots of excuses and maybe those are true. Well, you've also got Nick Everest's seven plus million that are just doing nothing, right? Working age that are doing nothing.

Yeah. They've checked out.

Yeah, exactly. And well, why aren't they doing nothing? Because there's no job for them. And so my concern is, and you know, first of all, companies don't care. This is all about profits for them. And you know, you and I talked about I think week or last week or week before about, you know, AI is going to generate this massive boost of GDP per capita. Well, that's great. If you're in the the per capita part that's benefiting from AI, you have a boost in GDP. Not everybody else will. Um, but you know, the AI is going to go after not just coding. It's going to go after paralegals and you know, uh, administrative assistants and, you know, u, you know, people that work in in doctor's offices and, you know, all I mean, well, and doctors, you know, radiologists, all sorts of things.

Just just to be clear, I'm going to let you continue, but it's not going to go after them. That's the whole point of this article. It is going after them. That's the whole point. I mean, this is not going after low wage paying jobs. This is going after every job. And you know, you know, maybe if you're a plumber, you're safe. I don't think until Tesla's, you know, uh, android robots come.

Yeah. But yeah, I mean, it's it's it's it's fascinating. It's it's all inspiring, but it's scary about what the future's going to look like. And and for me, I don't care because I'm almost dead at 60, but um you know, my kids up, you know, I I worry about them and and what their future's going to look like. Yeah. And I don't have a lot of solutions on this one. I don't I didn't mean to, you know, bring people down here at the end of the the um the discussion here. And it's funny, we call this the rant, but we normally try to put a positive spin on things here. Um, you know, I I think here, look, there is a lot of benefits that's going to come on here and and while we're still processing this in real time, Lance, I guess my advice to people would be this is not something you can ignore, right? You you ignore it at your peril. So, you do need to start learning about AI and its applications and its potential. Um, and if you are an average viewer here, you know, you're probably somebody who's 50 or older, you probably have children. Um, your role here I think is not to necessarily figure out how you are going to leverage AI going forward, although you definitely should do that if you can, but it's to really be a partner with your children and say, "Okay, how can I at least help you understand what's going on here so that you can figure out how to play in this world, right? That you just don't blindly go into a field that is just going to get completely eaten by AI. You know, figure out how to either use AI to succeed in your job and be one of the people that outperforms or you know do you do you look to work in a field that is AI supportive right that as AI grows your opportunities will grow as well. I think that's and that's you know for the positive spin on this is that you know we just have and this basically just your point is that the AI is is going to be destructive to those that are not doing something with AI right so If AI can replace your job, then you're in trouble. But there's going to be a whole group of people that figure out how to to leverage AI to their benefit and they will be able to use AI to generate more wealth. And that's going to be the defining point. And again, so we're talking that's why I say the problem with GDP per capita is it's an average. It just assumes everybody's participating equally. That's not what's going to happen. So, and this is what I'm, you know, I talk to my kids about is make sure they're in, you know, they're looking ahead is saying, you know, either like to my son who's in computer engineering, I'm like, look, you have a choice. Either you go be a coder and that's going to go away because AI will do it or you and I need to figure out a product we can build using AI, right? That we can charge money for and we can make money off of AI.

So, that's why like very soon we're very very close. We're about to roll out. We have an old whole AI engine that we're adding to Simplevisor where you plug in a stock and it analyzes it using AI like Ben Graham, Phil Viser, um all these great investors, Warren Buffett, and it analyzes them as if they were actually analyzing the stock using their metrics, their analysis, all that was all AI generated. Gives you a whole narrative around it. It's really cool, but you can get a whole score based on all these different great investors over time as if they were actually sitting there talking to you about that stock you want to buy.

Oh, that's super cool. So, you could talk with Ben Graham to actually chat with Ben Graham thinking about should I buy this company? What do you think, Ben?

Yeah. You say, I want to buy Google. And then Ben Graham will say, I scored this way because of this.

That's so cool. And then you can turn to Peter Lynch and say, well, Peter, what do you think?

Right. you can see that's that's really pretty awesome.

Um, look, when that's live, we'll have you walk through folks through it here on the channel. That'll be super interesting.

Yeah. All right. Um, okay. Well, look, we'll we'll we'll we'll end it there. Um, oh, but sorry, folks. Um, we got to the rant before I asked Lance about his trades. I normally flip that around. Sorry about that, Lance. Trades. Have you guys made any trades over the past week?

Um today uh actually just before we got on air with you um we had bought uh energy stocks a few weeks ago when oil prices were extremely beaten up. Um we bought some Exxon Mobile and Diamondback Energy. We sold those today. Took some gains on those. Um and we did add some money to our OK or 10 position which is symbol. That's a natural gas pipeline. Um that's part we had we had owned that for a while made a lot of money with it. We reduced it going into the whole April selloff and we're adding back to that position now because again that's our part of our AI trade which is that power gen is going to be critical for data centers and in order to generate power I think I showed you that chart last week is that a lot of the power generation nuclear is going to be important in the future but it's not going to be as as as as important as natural gas which is the the lowest cost production of energy, right?

I think and Duneberg, I recall from my previous discussions with them, um natural gas is going to kind of be the bridge.

Yeah. Uh fuel and and probably it's probably going to be a long bridge time-wise, but um it's what we've got the most of. It's the cheapest. Um and it takes a long time to get, you know, nuclear up and running and who knows how much of a percent that's going to be in the future. Hopefully a lot, but but even if it is, it's going to take a good while to get there. So, in the interim and then also natural gas, too. I think we talked about this. it is highly likely um one of the the bigger bargaining chips that's being used in these trade deals right now which is hey look you know we'll we'll we'll shake we'll take tariffs off we'll make all these concessions but a big part of this is a you got to be on our side versus China but b you know you got to buy our planes you got to buy our natural gas that type of thing look natural gas it's abundant it's clean it's cheap you know it's it's it's great it's very efficient you know the the thing about energy production is really comes down to efficiency is how efficient is it to turn it actually into energy? You know, oil is very efficient to turn and you get a lot of energy out of a barrel of oil. You get a lot of energy out of of natural gas. You know, solar, wind, those are great, but they're not nearly as efficient or as cheap to produce as it is to get out of natural gas, oil, or even or even coal. But, um natural gas is by far the the cleanest and most efficient way to generate energy.

Yeah. uh fossil energy, but yes. Okay. Um all right. Uh so, okay. So, those are your trades. Um all right, folks. Well, look, in wrapping up here, um if uh well, let me just put it this way. Uh please show your birthday appreciation for our good friend Lance here, our our sexarian. Um by hitting the like button 60 times uh and then clicking the subscribe button below only once and only once in that little bell icon right next to it. Um, very importantly, if you know, you would like to get some uh professional help in guiding your financial portfolio for the road ahead. And, you know, Lance and I talked about all the different uh potential permutations the future may take. Um, so anyways, if you want to get some help with that, highly recommend that most of the viewers here get it from a good professional financial adviser. Importantly, one that takes into account all the issues that Lance and I have talked about here. Uh, but if you'd like to uh get some guidance from one of the professional financial advisors that Thoughtful Money endorses, maybe even Lance himself and the team there at RAA, then fill out the short form at thoughtfulmoney.com. Only takes you a couple of seconds to fill out the form and the firms will be in touch with you right after that.

Um, all right, Lance. Well, look, um, as usual, my friend, I'm going to give you the last word. Um, I saw you eating earlier, so I'm going to go eat lunch now because I'm really hungry.

All right. I did that off camera, but thanks for adding me. Um, all right, my friend. Well, look, thanks again for another great week. Everybody else, thanks so much for watching.