Investor Called Chips Crash, Now Warns ‘We’re Nearing The End’ Of Stock Rally | Jim Welsh

this is a retracement rally with gold. Uh that this isn't a the beginning of the move above 6,000. It's a retracement move, but I think we're setting up for a pullback. There's a decent probability we're going to see SMH roll over again and take out the recent low at 503. The S&P is making these new highs, but some of these averages aren't agreeing. >> Jim Welsh is back. He's a founder and author of Macro Tides. He's been on the show before. Check out his last interview with me. link in the description down below. And he's correctly called the semiconductor sector crash of July. In fact, he positioned himself for a short back in June. Now, that crash is starting to reverse. In fact, it's rebounded dramatically since the beginning of August. Is this rebound that has led the NASDAQ to reach new all-time highs? By the way, are we in a new bull trend? Or is this just the beginning of a dead cap bounce and we can revert back to new lows maybe even as soon as next week? Jim's going to tell us the answer. And uh right now on Koshi, a prediction market in the US, there is a trade for how high the S&P will get this year. Most traders are bullish. There is a 76% chance that the S&P will get above 7,800 points by the end of the year. For reference, it's currently at 7,700 points. Uh there is a 62.6% chance that it'll go above 8,000. Jim's going to give us his forecast. If you're in the camp that it's going to go even higher than 8,200 points, well, if you put $50 down on this trade, your payout could be $161 if you turn out to be correct. This video is sponsored by Koshi. It's the largest prediction market in the United States. Unlike a sports book, you're trading peer-to-peer on real world events from economic data to political outcomes. And the price moves based on public opinion, not a house. Go to the link in the description down below or scan the QR code here to get started. And remember, new users who use my code lin can get up to $500 if you trade $25. This is CFTC approved and available in all 50 states, including California and Texas. Again, link down below or scan the QR code here and use my code lin. Jim, welcome back. Good to see you. >> Hey, great to be joining you, David. Uh, yeah, very interesting time as you just kind of recounted. uh the pattern of the S&P 500 uh what I've been writing about really for a number of weeks uh after peaking at 7620 I think on June 2nd David was chopping sideways you know down up down up down and my point has been that as long as the S&P held above 7294 that looked like a triangle pattern and triangles typically show up in wave four so from the March 30 bottom You can kind of look at the S&P and see a 1 123 up to the 7620. This choppiness was a wave for a triangle. And what typically happens then after a triangle, you get a very strong thrust to the upside. And part of it is dictated is the triangle is created by opposing forces. Some good news, some bad news, back and forth, back and forth. And finally, you get some resolution. And what we've seen over the last 2 3 weeks, earnings have been coming in very good. The Fed didn't hike. There was about a 1/3 chance that they would. I didn't think that was likely, but again, markets were looking at that. Uh, and oil prices have come down. So, you've gotten some clarity on some things that caused that chop. You got stops above 7620. So my anticipation was we were going to see a very sharp thrust out of this triangle that would carry the S&P to 7700 to 7800 and I think so far the high was 7793. So the the chart analysis aspect you know suggested we were going to get this kind of a move David and the fundamentals kind of provided uh you know the ignition point. This actually broadly lines up with how traders on cow sheets. It's a prediction market are seeing how markets will unravel by the end of the year. So prediction markets have been pretty accurate in calling for any event that they're predicting the closer they get to the actual event date. So this would be end of the year. Right now there's an 82% chance that um the S&P will end up above 7,800 and a 64% chance it'll end up above 8,000. Um, in the rare case that it goes to above 8,200, what would need to happen? That's a 27% chance only. >> Yeah. Yeah. Yeah. Um, I would think you'd need to have the straight of horm open and oil prices have to drop. Uh, better inflation news so the Fed isn't doesn't consider raising the funds rate. Uh, you know, the economy I think is on firm footing. So, you know, in other words, a continuation of the economy growing well and these other factors chiming in and that's how you get above. What I will point out though is that pattern I just described that this is wave five. What that implies, David, is we might have a little bit more strength, but I think we're setting up for a pullback of 4 to 7% in coming weeks. In other words, you got five up, you're going to see a retracement rally or a retracement pullback of that rally. Beyond that, I think there's going to be another leg higher. I just think we've gotten a lot of good news in the last few weeks. Uh earnings are behind us, and I think attention is going to focus on the Fed. And if you look at the 2-year Treasury yield, historically going back decades, that has typically moved before the Fed changes the funds rate. Well, this morning I think the 2-year was at about 416. The funds rate at 363. That implies more than one hike. So, the Fed is waiting for more data. They're going to get at least one more I think maybe two more uh uh CPI reports, another jobs report. So, I I just think the probability of a rate hike, I I think it's pretty high unless the data really comes in. And I think today's jobs report was a little bit of a head fake. >> Let's talk about that. Uh you said the economy is on solid footing. Those are your words. I'm going to speak on behalf of some of my audience members because I see this comment all the time. And anytime anyone on my show says exactly the same kind of comment that you just made, the economy is on solid footing or it's growing. Uh some people will disagree with that and say, "Well, I don't know what you're looking at because everywhere I look, I see recession. People are spending less. I don't see the economy growing." What assumptions do you think people who disagree with that statement are making and what observations do you think do you think that they're making to arrive at that conclusion that they know the economy is not growing and not on solid footing? >> Well, the bottom third of wage earners, David, are under the gun in terms of the cost of living increases that we've seen over the last 5 years. Wages haven't totally kept up with the cost of increase uh in living. So, that's what they're relating to. And so a hike in gas prices, you know, kind of hurts the K-shap economy. The thing I point out as uh, you know, that I think needs to be considered. The top 10% of wage earners represent 50% almost 50% of consumer spending. And so what you have is this bifurcated economy. But you're not going to see a material slowdown in GDP as long as that top 10% is spending. And they are. you look at the uh the TSA checkpoint, you're like at 2.6 million, 2.7 million every single weekend. So those are areas of strength that says, okay, not just are the top 10 percentage spending, but a lot of the middle class people are still happy to go on trips. So I think those folks are focusing for good reason on the the smaller percentage of people who represent uh a much smaller part of consumer spending. And that's where you get why those people feel that way. I'm not discounting or saying hey you're wrong. I'm just saying if you look at the composition of GDP plus we're running a 6% of GDP deficit. uh AI spending is almost 2% of GDP. The tax cut bill is adding about 6 to 7. So with those dynamics in place and you have an unemployment rate very low historically, I just don't see a recession coming anytime soon unless we see some material changes. >> Okay. Uh Jim, on the jobs market, so here on uh Friday early morning, we got a pretty dismal jobs report. unexpectedly lost 23,000 jobs in July and uh markets are up. Like I said, we talked about the economy being on solid footing. Isn't this evidence that it's not? >> Well, I can I appreciate how looking at the headline, David, you would say, "Hey, wow, this looks like trouble in River City, right?" However, like with most of these government reports, you kind of have to look under the surface. And so uh the the government uh lost 50,000 jobs and those job losses were concentrated in the education sector and as we know schools reopen in August there's seasonal adjustment factors that happened. So to me David that loss of 50,000 government jobs looks a little suspicious. In addition leisure and hospitality lost about 30 to 40,000 jobs. So my point is when I look at that um I think the minus 23 overstates the degree of weakness. Challenger and gray this week came out a report layoffs are the lowest they've been uh in 2 years. The uh unemployment claims are under 200,000. So when you look at a broader set of data to me it casts doubt on whether that loss of 23,000 is really reflective of what's happening in the labor market. Do you think that the Fed will not ignore but slightly discount away this particular report because of the reasons you stated and not use this as a reason to not hike rates because again they have dual mandate and if they have reason to believe that the labor market is really really struggling let's say potentially into recessionary territories they may actually use that as a reason to not hike rates and >> certainly it would be considered. Not because of a recession scare or anything like that, David, it's just they're not going to react to one n one month's number. What we saw when the CPI came in remarkably weaker for the month of June. A majority of FOMC members gave speeches, hey, I'm not going to be sued by one number. Um, they're looking at trends and I think they'll react the same way with this report. What we've seen from speeches and interviews is the majority of FOMC members are more focused on inflation. Remember the June set showed nine FOMC out of 18 who provided the data. We're looking to hike. So I don't think this number is going to dissuade those people like oh now I don't have to worry about inflation. They're going to have a big debate. There's more data to come in. Um I I think you know I lean toward them hiking because at some point in time you can talk tough about inflation as Wars has done but you need to act and I think the markets would actually respond favorably specifically the Treasury market to a hike. So you know that's my take. They're not going to ignore a jobs report. That's just not in their mandate. >> So you think rate hikes are baked in? You agree with the market? I think that a one hike is coming. Whether it's September or the next meeting in October, I don't know, but I I I think the table is set for them to hike. The date is going to dictate things. We're going to see the CPI come in next week and it's going to tick higher. Oh my god, is the Fed going to overreact to that? No, I don't think so. You know, we're at an interesting time. There's a lot of opposing forces. productivity is improving, but at the same time, core inflation doesn't look like it's really uh softening as much as some of these folks want. I mean, there's been a number of speeches where they said, "Unless I see a true softening in inflation, I'm inclined to raise." I don't know that we're going to get that data convincingly over the next 2 3 months that they don't need to worry about inflation anymore. Do you think the bond market will continue to revolt regardless of whether or not the Fed raises rates? In other words, we saw what happened last time with the FOMC didn't raise rates. Uh the 10 year and the 30-year spiked, will this continue to be a problem for the bond markets even if the Fed eventually decides to raise rates? >> Well, think back a little over two almost two years ago when they started cutting rates. Remember, they did a 50 basis point in September of 24, then two additional quarter points. What happened? the 10-year yield went up 80 basis points. All right. And they were cutting. So my take has been I believe we're in a long-term uh trend higher for Treasury yields. And I believe we'll see the 10-year above 5%. That was the high in October of 23. I'll point out that the 30-year bond peak peak back in October of 23 at 515. David, it's traded up to about 526 528. So the 30-year has already broken out above that prior high. I think the 10-year will eventually do it. In addition, we're in a global environment. Bond yields all over the world are trending higher and some of them are reaching highs, you know, like going back 20, 30 years. So it isn't just what's going on in the US. This is a global global situation. >> The global situation is one of volatility. And I want to pull up a uh comment on one of my more recent videos that kind of sum up some of the confusion that I've been having as well. So I I just posted a video about uh the Japan uh yen intervention that the US made last week and um the the situation. I think some people are concerned that if the Japanese carry trade unwinds that could cause a massive selloff in US assets, especially treasuries. Here's a top comment. war in Ukraine, war in Iran, inflation, higher interest rates, crazy oil prices, Japan carry trade, and it seems like nothing stops this market. That's a good point. If I told you there would be a year when we've got we got two simultaneous wars, 20% of the oil's throughput is choked off, uh inflation expectations are higher, interest rates are going higher, and the Japan carry trade might unwind. And I'm telling you, the the S&P is grinding to new all times. I I'd say no. Impossible. >> Yeah. Well, the the narrative that I think the institutional mindset is, you know, clued to is corporate earnings have been really really good. Now, a lot of that is coming from the small sector related to AI, but those folks live and breathe based on corporate earnings. And so, they then can justify uh higher stock prices because earnings in their mind justify it. And I think that has overridden all the concerns, legitimate concerns that you just raised. And as long as the economy looks like it's in decent shape, they're going to cling to that, David. These are long only biased investors. Think about financial planners. They're telling their clients all the time, buy and hold. Buy and hold. You're you in order to change that, you need something really fundamentally strong to dissuade them. And the most important fundamental factor is the economy and earnings. And so to me, that's what why the market has fed off of that more than the other factors. Yeah, we those other factors have caused obviously short-term selling waves, but they have not uh you know caused a break in the trend. >> Why do you think higher oil prices, inflation expectations, weakest consumer sentiment in history according to the University of Michigan consumer sentiment index. Why do you think these factors haven't contributed to a lower earning season or a weaker earning season? >> The University Michigan survey is crap. Okay, everybody quotes it and looks at it, but it is incredibly biased based on political bias. I've written about this. The data supports it. So, you know, there's a lot of people that hate Trump. I get it at the same time. So, there's negative news out of consumer sentiment. Well, the reality is, as I said it earlier, unemployment's near multi-deade lows. Wages are still growing at a decent clip. Um, you know, the markets are doing well. There's no reason for that negativity. So, that's one aspect. Um, again, I'll just go back to the economy is in decent shape, earnings are growing strongly, and that is the bedrock for most institutional investors. you actually on a post on X that was uh published earlier a couple of days ago um you outline some of your calls in the last month in in June you expected the uh semiconductor ETF SMH to drop that was correct July 27th SMH looks like it wants to take the lower declining blue trend near 515 uh that turned out to be correct more or less >> and now in August You're calling for a move up to 590. It's already reached 578 on August 4th. That was 3 days ago. >> Yeah, >> I'm going to look up what it is now today. >> Uh but let's go back to June. >> Yes. >> And July turned out to be the worst month for Korea stock market index which was dominated by chip stock. So just to illustrate the point that this was more or less a correct call. What made you bearish in late June? >> Uh the price pattern. Uh for one thing it looked like it was completing the rally uh going back you know many months. Uh sentiment was wildly bullish at that point in time and then technically the relative strength index on the se semiconductor index had had two successive new price highs with the RSI hitting lower levels. So that suggested momentum was changing. Um, and you know, the 527 target that I had was just nothing more than looking at the chart and saying, you know, there's a low over there at 527. As the decline unfolded, I thought we could dip uh lower. Um, but I thought that the RSI had gotten down to near 30, so it was oversold. Sentiment had swung very dramatically from being extremely bullish in June to where we saw it in the last couple weeks. Uh, I thought we were set up for a retracement rally and one of the targets was 592 which equates to I can't remember if it was the 382 retracement or the 50% retracement and that's why I thought we would see that move. In addition, I thought the MAG 7 were set to rally uh as well kind of for many of the same reasons. And I thought those with those things that have been weak rallying that that would pro provide the juice for the S&P to get above 7620 and that's the way it has unfolded. >> Why do you think the uh semiconductors haven't recovered to their previous all-time high whereas the S&P and the NASDAQ have both reached new all-time highs? >> Yeah, well the NASDAQ 100 has not uh which is important. um the semiconductors haven't uh and uh the MAG 7 hasn't. So I think this is a retracement rally. I think that once this rally expends itself, David, there's a decent probability we're going to see SMH roll over again and take out the recent low at 503. So um that's my take is that the S&P is making these new highs, but some of these averages aren't agreeing. And then the other thing is I analyze market breath. And so when you come off of a bottom, one way to measure, if you will, the thrust is doing ratios of advances versus decliners. Coming off the March 30th low, David, the breath expanded tremendously. >> Is this the chart you're referring to? >> Yeah. Yeah. Yeah. Terrific. Thank you. So you can see back in March, look at that oscillator was pretty oversold which was in indicative of a trading low but look at the thrust compared to gee the S&P prices made a huge rally but the thrust has been really relatively weak. And then this chart also shows the pattern you and I discussed at the very beginning 1 2 3 up to that June high at 7620 ABCDE for a triangle and then you get a thrust which we've gotten. So, the weakness of the breath on this thrust makes me believe that this pattern is correct and that suggests that we're nearing the end of the rally from the March 30th. I'm not looking for the sky to fall or anything like that. I just think the probability of a 4 to 7% pullback in the overall market is developing. Um, you know, to confirm it, you're going to need price reversals. And I know it's tough to see maybe, but there's a red moving average and a green moving average on that chart. David, those are five and 13 exponential moving averages. Trends get defined when the red crosses above or below. Look at back in March. As we came off that low, the red line crossed above the green line and stayed positive all the way into June. So, you know, the setup is for a 4 to 7% correction. We're going to need obviously things to roll over to confirm that this analysis is on target, but to me the data suggests uh the probability is higher than what most people think. As you noted at the very beginning, people are talking 8,000 8,200. So, we've seen a big increase in bullish sentiment just in the last week or so. And that to me is a a warning sign coupled with the price pattern and the weakness of this thrust from the recent low. For those of us who aren't technical traders or technicians, what does weak thrust mean relative to strong thrust? >> Okay, think about it. If you throw a ball up at 50 miles an hour, it it will continue to go up for a period of time, but then the rate of increase slows. >> Yeah. >> As opposed to you throw it at 100 miles an hour, it's going to gain a lot more altitude and it's going to persist for longer. So, it's just like measuring energy to the upside. In one case, off the March low, tremendous burst of energy. This time, h it's not all that great. Now, maybe in the next handful of days, we'll see a big improvement in market breath and this will improve, but based on what we what I know and what I'm looking at right now, this is my conclusion is that we're likely to see a near-term high in in the next handful of days. >> Uh, okay. Just to clarify a bit further, Jim, when you say that uh March the March low had a strong thrust upwards, what are you using to measure that with? Because right now I'm looking at what happened in the last week and it looks like the market's momentum moved up in a vertical line. In fact, it moved up even higher in a short amount of time >> than what happened in the March low. >> Okay. This is measuring not price because what you're talking about, David, is 100% on target in terms of price, >> right? But this is measuring how many stocks went up versus down each day as a percent of total advances and decliners. All right? And and so it's measuring the internal strength. What you're talking about is the external price. And again, that price got gooseed in part because the AI related stocks, semiconductor, max 7, they popped really strong and they have a greater waiting in the S&P than the average stock. I mean the equal weight S&P 500 you know each stock has a 02 waiting and I think uh Nvidia is at like 8% one stock. So by looking at not just price but looking at okay what kind of a thrust this is saying market breath is is is okay but it's not reflective of the kind of price move that we've seen as you just noted >> Jim what about the fundamentals here uh anything fundamentally changed at the beginning of the month or late July that would have uh p or necessitated a huge reversal in the downtrend of July lie. >> Um well, again, you have to go and this is why combining technical analysis with fundamental for me is is imperative and has helped me tremendously. So, when I looked at the semiconductors in June, it said, "Hey, they're going to they're going to have a decent sized pullback here, 20%." And they have a big waiting in the S&P. Well, that's going to make it tough for the S&P to make upside progress. When they got so oversold a couple weeks ago, I'm like, they're getting set up for a rally here. And if they rally along with the overall market doing okay, we're going to new highs. So, nothing really materially changed other than sentiment got really negative. Earnings came out and they're like, "Oh, reminder, these companies are still doing okay." Uh, and it was it just that setup in combination laid the groundwork for this move up. And as I said, once you get above going sideways, there's stops that build up. People are short. And once you take out those highs, you trigger stops. So you also have that component that adds fire if you will to the the price movement and that's what we've seen. >> Well, if you want to talk about gold just before we finish here that >> Yeah. No, absolutely. The uh the the thrust on gold, you know, that's good segue. Uh yeah, >> you know, this is something that's interesting because you don't have a collection of stocks within the gold price uh to see which ones how many have moved up and how many have moved down, which is how you're measuring thrust with the broad index here. How would you decide whether or not this momentum is overdone or the beginning of a renewed bull rally? Because from 4,000 to 4,400 in a relatively short amount of time is significant for gold. >> Impressive. Yep. Yep. Okay. So, you know, when I look at gold, I I think one has to incorporate technical analysis uh heavily. And so, in January when gold was spiking, it was a parabolic. So, I I think we're declining. I think you and I had a conversation in March. I was and I said, I think we're going to 4100 on this longer term. Um because this is kind of important, you know, like this is where technical analysis sometimes can provide a framework. So off the low in December 2015, gold bottom at,046, rallied to70 and then it took 39 months for it to pull back to 1616. So that was wave 2, huge thrust to the high in January. In my view, that's wave three. We're in wave four. And since wave two lasted 39 months, uh wave two, four isn't going to last 6 months and be done. So what my conclusion here David to answer the question is I think this is a retracement rally with gold uh that this isn't the beginning of the move above 6,000. It's a retracement move within wave 4, you know. So let's see just some quick numbers. 382 retracement of the $1650 decline in gold gets you to like $4575. The 50% is like$8.25 from 39.40. 45 is what? 4750. So, we're talking a very significant move. If I'm right that this is nothing more than a retracement, it'll be choppy. So, we'll have a big up thrust, which we've seen. And my initial target was 4350 to 4,400. I think it the cash hit 4371 today. So, I think we're getting close to a near-term high in gold. We'll see a pullback and then I think we're going to see another thrust that takes us up to the higher targets. But the longer term pattern suggests that you had a a wave A for wave 4 from 5595 to the 3945. This is a Bwave and then there'll be a Cwave that takes gold below 3945. Then once that's done, we're going I think to new all-time highs. I just think, you know, we're in wave four. Wave four are choppy and, you know, this is part of that equation. So, I turned bullish. I in late June I recommended buying gold under 3960. And, you know, I I think so far it's knock on wood is following the script. >> Okay. Jim, are you more bullish on stocks now or gold >> or something else that we haven't talked about yet? Now, gold stocks. Uh, so the GDX dropped from 117 to under 70. And over the last month, I've been writing about that this last part of the decline looked like a falling wedge, which kind of happens near the end of moves. In addition, when GDX dropped below 70, its RSI made a higher high by a lot. I mean, in other words, 30 versus like 35, which is a huge positive divergence. So I recommended GDX at 7280. Expectation that we'd get to 88 to 91. I think today GDX hit 9080. Uh I think there's a potential of GDX making it to 102 and even potentially to a new all-time high above 117. If gold reaches those targets I'm talking about 45 to 4700, I think GDX can make it up there. But, you know, near-term go GDX has made, you know, a big move. Um, so I I think we're nearing a short-term high in GDX in part. Also, I think the dollar index may have completed its correction today. So, you know what that implies to me, David, is we're close to seeing a rebound rally in the dollar index and that will, I think, just take give people a reason to take some money off the table in both gold and gold stocks. But I think after any pullback, we're going to see higher prices for both. One of the reasons uh that gold that may have caused gold to rise so dramatically in the last week is that the US 10year has actually fallen a bit since it rose uh right at the onset of the FOMC meeting late July. And uh gold and the long end of the curve at least for the better half of this year these two variables have been tracking each other with a pretty close inverse correlation. As you can see here gold started moving up. gold is a blue line as soon as the tangar started falling. Um so I I don't know if you think that uh this means anything maybe correlation doesn't mean causation but certainly if you assume this correlation to hold this relationship to hold are we expecting the 10 year to continue falling then Jim are you b are you bullish on bonds I think we talked about bonds earlier no >> yeah yeah I think treasury yields are headed higher so um and you know this this kind of correlation David I think there's times where it works well and then there's times where gee whiz what's going on here right Um, I think the correlation between gold and the dollar is much stronger. Gold bottomed in September 22 at 1660, which is exactly when the dollar topped at 11477 in September of 22. Uh, uh, so that correlation ties together and I can go through other dates and times just for the sake of time I won't, but that correlation matters more. A decline in Treasury yields is helpful. It's a small tailwind for gold. So, I'm not just saying, "Oh, that that means nothing." But I think other technical factors um with the price chart and the price action um you know, I think matter more. uh and you know I was looking for a rally in gold and gold stocks based on the chart pattern uh and the technicals behind those as opposed to trying to find other reasons for it and sometimes that helps a lot without saying well it'll happen if this happens no this my I was I had a high degree of conviction that we were on the doorstep of a good move up in both gold and gold stocks >> well comment below what you think is going to happen to stocks and gold. And Jim, I'll finish off on uh the straight of form moves issue. You said that in order for the stock market to really rip higher above, let's say 8,200 points in the S&P later this year, you'll need to see the straight of form moves reopen. How confident are you that this situation will not escalate and in fact deescalate towards the end of the year, perhaps even by the midterm election, we'll have peace. How confident are you that it's going to happen? >> I have low confidence. Uh in this week's weekly technical review, I wrote about Muhammad Ali in 1974, he was fighting uh boxing George Foreman and he employed rope a dope. Basically what he did, David, is lay against the ropes and let Foreman punch him and punch him and punch him and by the sixth round Foreman was tired and Ali knocked him out and it was called rope a dope. All right. And so to me, I think the Iranians in terms of the way they negotiate is rope a dope. They take punches. They take punches, but they don't they don't they don't get knocked out. And so I and I certainly don't believe that they're, you know, you have the hardliners in Iran that I don't think are going to agree to anything less than them controlling the strait. Um therefore seeing a peaceful resolution I think is unlikely. So so that's why I have a low confidence in that gee everything's going to work out beautifully and that may be one of the reasons why we see a pullback in the equity market if we see a reescalation in the next couple two 3 weeks. Okay, that that I guess that was the answer to my next question is how likely would a reculcation impact markets? And the reason I asked that is that the higher price of oil this year didn't seem to slow down uh earnings growth uh like we discussed earlier, especially since tech companies don't rely on oil for the most part as part of the fixed cost. So, it doesn't really matter ultimately as long as consumers are still spending money, the K-shaped recovery we talked about. And so do you think we're going to enter an environment where the markets are just going to price this in? In other words, consider that the straightfor and then and then everything else prices around that constant. >> Markets have to deal with that. >> Yeah. >> I mean, it's just you're not going to ignore that. And and so I believe that this is crucial enough that um in terms of US power projected globally, uh if that's the outcome, it doesn't project well on the US, you know, that gee, you weren't able to uh get the straight open. And you know, I I just think that people will look at that around the world and say, "Wow, uh they ain't what they used to be." And so the stakes are really, I think, pretty high, David, that um how this gets resolved will reflect either quite negatively on the US's reach and power or that, okay, they still got it. And you know um the jury is out I think on that score. So >> how significant are financial market prices to central bankers when they make their decisions? >> This is a great question because it leads into what Wars has been talking about >> forward guidance and reducing forward guidance and you know there's been a very strong reaction. The financial times has run a series of articles very critical of worse for doing this. in my August uh macro tides and if anybody wants to receive a copy Jim Welsh macro atgmail I go through the history of forward guidance I mean in 1994 transcripts David were released with 5-year delays so there's been this huge uh increase in handholding and what Wars is saying is we'll hold your hand during periods of crisis and he cited what happened right after the financial crisis in 2008 how the Fed really upped forward guidance and he thought it was very prudent. What he doesn't want is ongoing non-stop forward guidance. His point is we need to see how markets interpret economic data and we'll learn from them and and so to me that is uh one of the cre key components that he is trying to convey is rather than markets reacting to data and then thinking how's the Fed going to take that number and that justifying if you will them changing their outlook as opposed to here's the raw data. What do we think of the raw data and the Fed being an observe that reaction function? And the other thing I've pointed out for years, because I've been against forward guidance for years, is the Fed's forward guidance has been wrong more often than not. So David Rosenberg went back to 2007 looking at the summary of economic projections, David. And what he found is the projections for GDP, unemployment, inflation, and the Fed funds rate. The Fed was right less than 40% of the time. I've written about in December of 2021. Inflation was already above 5%. The Fed had their meeting. They provided their projections for 2022. They said, "We're only going to raise the funds rate three times for a total of 75 basis points in 2022." What was the reality? Seven increases, 425 basis points. How did the markets react to that? They weren't expecting that. So, my point is forward guidance by the Fed. And I don't hear anybody talking about this. This I find remarkable. If you if the Fed's forward guidance was so good, then yeah, okay, it's valuable. But the reality is the Fed's forward guidance is like a coin toss. It's wrong as often as it's right. Well, how's that reliable? Doesn't that create volatility? So, I just think you have a generation or almost two generations of people in the investment business, David, that have become addicted to the Fed holding their hand. I don't know what to think on my own, you know, and what the Fed is saying, you know what? It's time for you to grow up. react to economic data based on your critical thinking. And you know what? We'll watch what how and observe what you're doing. >> Kevin Walsh is loyal to Trump. Trump doesn't want to raise rates. I think it's possible. This is just my theory. And the fact that Kevin Walsh brought this up at the FOMC is quite telling. A reporter asked him, "Why didn't you raise rates?" Now, this was like last week and a week and a half ago. >> And remember, there were three descents, >> right? Three of the governors wanted a rate hike that day, but it didn't happen. >> So the reporter asked, "Why didn't you guys raise rates today?" War said, "Well, if you look at the rates, >> they've been up." He was talking about the bond market. Yeah. So, he completely dodged that question by talking about the bond market. And the reporter was asking about the Fed funds rate. I think it's possible that if the Fed sees that the bond market continues to basically quote unquote do their job for them, in other words, the the long end of the curve keeps going up like you said of what maybe he'll say, "Hey, we don't need to raise rates anymore." >> I mean, that's a good point, David. Um, and I wrote about this in the August macro tides is that's why I think it's put up or shut up time as being one of the reasons. Okay, you're going to talk tough, but sometimes you got to walk the walk. And um those dissents, again, as I noted earlier, nine people in June supported hiking the funds rate at least once. He's only one vote out of the 12. And so there is a group of people who really lean toward hiking. And again, if you look at market, you know, if he's saying truthfully and honestly that, you know, we're going to take market input, well, the 2-year Treasury yield is telling them, uh, you should hike. And and so I I I think, um, that's why I lean in favor of them hiking in September. Uh but if the data, you know, let's say the next employment report comes out and it's legitimately weak. To me, this last one for the month of July was not legitimately weak. Um inflation data comes in better and so forth, that will have more bearing, I think, in terms of what happens at the September meeting. Um so if he wants to retain credibility, uh you know, if the data comes in continued okay on the economy and everything else, I agree. he needs to put up or shut up. And you've got the other people on the board that are willing to hike. And I I think for credibility sake, again, that's a a vote in favor of them hiking at least once. >> Okay, Jim, be damned. You know, I mean, again, you know, he talked about independence of the Fed, Wars has, and credibility is really important. And what we've known historically going back many decades, new Fed chairs do get tested. Guess what? The point you just ra that reporter raised in the the press conference, this is the test. And okay, I I think if he wants to pass it, he's going to have to favor Ray Hikes because if he did that, David, it would dismiss all this, well, he's just a lackey for Trump. He needs to get that albatross off his his head. >> Well, let's see if he does. Uh Jim, let's follow up. We'll we'll follow up for sure before the end of the uh before the um uh the midterm elections. will follow up maybe before the FOMC meeting in September. So let's let's let's let's see what markets do and let's see what your thesis is. So bottom line, final question right now, what would you be doing? You called the semiconductor selloff. It's it's starting to recover. You said this was a uh short-term bounce, retracement bounce. What would you be doing right now? >> I'd be selling into the semiconductors. Uh, I'd be buying gold and silver on and gold stocks, pardon me, on any pullback that we see over the next 1 to two weeks because I think ultimately they're going higher. And I would lighten up in terms of the S&P because I think we're on the doorstep of a 4 to 7% correction. >> Well, Jim, uh, you've been right the last couple months. So, congratulations. Everybody should check out Jim's um, work. I'll put the link down to Macro Tides below as well as his ex where he's posted a summary of some of his calls. So pleased to uh have Jim back on the show. We'll speak again soon. Jim, thank you so much. >> Thanks, David. Have a great rest of your summer. >> And thanks for watching. Don't forget to like and subscribe. And please do use my code lin l i n when you sign up to koshi. Remember, new users who use my code can get up to $500 when you trade $25. Link down below or scan the QR code here.