Knock-On Effects Could Make This Worse Than The Dot-Com Bust | David Rosenberg

My big concern is that there's going to be all sorts of knock-on effects uh that could make this actually worse than what we saw uh in the early 2000s. Um because everything outside of healthcare and consumer staples, all these other sectors are correlated with that one trade. Um so where are you going to hide? Welcome to thoughtful money. I'm thoughtful money founder and your host. Uh welcoming you for a very exciting discussion with uh one of the best um highly respected economists and awardwinning market researchers. I'm talking of course about David Rosenberg. Um, David has been really at the top of the list since his days in Meil Lynch, but that's obviously continued on uh in his uh firm Rosenberg Research that he's been running for many, many years. Um, we're going to talk with David about his overall macro and market outlook as it's been a while since he's been on the channel. Um, but then he's also going to tell us about a new fund that he is launching. Um, and I'll leave all the details of that to David. David, thanks so much for joining us today. >> Great to be back on with you, Adam. All right. So, I I asked my audience for which questions they'd like to hear you most address, and of course, I got hundreds. Um, so I'll try to sift the best of them. But if we can, let's just start. It's a question I haven't actually asked on this channel in a while. But since it's been a while since you've been on, David, and so much has changed in the first half of this year, what's your general assessment right now of the economy and the financial markets? >> Okay. Well, as far as the economy is concerned, uh I have a um completely different view than what Kevin Morsch uh dished out to us at Jackson Hole last week. >> Uh I I don't see the economy as being uh resilient or solid or healthy. uh I am seeing that we are in the midst of what I would term a growth turndown uh that you know we have moved out of a what was once a 3% growth economy uh to something closer to two uh and now I believe that once we get the third quarter numbers we're going to have a four quarter trailing trend in real GDP of 1 and a.5%. Now, uh, that's not a recession, but I could tell you that when I started in the business, uh, in the mid 1980s as a desk economist on a trading floor, when you got to a one handle on GDP growth, people would be asking me, what comes next? Are we heading into a recession? >> Um, so growth is slowing. uh I don't see the case for reaceleration especially because um a lot of the fiscal props uh behind the economy are now in the rearview mirror. Uh and when I'm taking a look at the breadth, you know, it's interesting uh that uh Kevin Worsh uh likes to talk about uh the breadth of inflation and the percent that's above 3%. But when you take a look at the growth of real GDP and you strip it out, um it's really a two-pronged source of support. Uh there's more fragility beneath the veneer uh that I think is commonly believed. Um you have the uh AI data center construction boom uh and that's providing about half the growth in the economy. And then the other half is the equity wealth effect on spending especially at the high end. Um and you can see that in the precipitous decline in the past year and the personal savings rate. Uh if uh consumer spending in real terms had actually matched what disposable income has done, uh there'd be no growth in consumer spending in the past year. Um but because of the fact that people feel wealthier and are spending money not against income but against um their 401ks uh consumer spending is growing a bit above 2%. But it would be zero if people were just compelled to spend against their incomes. Uh and I think that's worth noting because it talks to the quality uh of whatever growth we have in the economy. Bottom line is that absent the equity wealth effect on spending especially in the high end and absent this AI spending boom which is actually zapped a lot of vitality out of the rest of the economy. Uh, you know, I think that in his uh Jackson Hole, uh, Worsh um mentioned the AI boom eight times and he mentioned housing just once as if housing doesn't matter or the rest of the economy doesn't matter. But, you know, um, the other half of business spending that is not techreated is actually flat year-over-year. Uh, even as tech spending in real terms is up 16%. Um, so I just mentioned that because in my professional life, it's 40 years. I don't remember a time when I've seen so many extremes and imbalances and divergences um not just in the data uh but also uh in the markets and we've talked about that before. Uh it's still a extremely concentrated stock market. Uh there's no doubt that corporate earnings uh have been robust. Uh again I would talk to the quality of those earnings because what's coming out of AI um there's so much cross ownership and uh circular financing and uh a lot of the growth in those earnings are actually coming from uh markettomarket stock market gains from one company to the to the next. Uh even if you strip that out uh earnings growth is still double digits. I'm not going to quibble about that. Um but I think that you know the biggest headwind for the equity market is going to be what the bond market is doing. The fact that interest rates have gone up means that your discounted cash flows uh in terms of future expectations should be adjusted lower. And so while you could argue that the S&P 500 is still not far off record highs, it has started to sputter. And all the technical strategists aren't talking about good breath anymore. the breath indicators have started to uh fade away. Uh so I think the stock market's going to face um several hurdles and it's not just the elevated um oil price um but also the fact that real interest rates have taken on a big head of steam here and there is a timeworn correlation between real interest rates uh and the fair value P multiple. So yes earnings are holding in. The question for the stock market is that with this rerating of real interest rates uh how far does that compress the multiple because basis point for basis point the move in the P multiple is far more powerful for equity valuations than earnings growth. So that's going to be the big question and the real rate in the bond market ultimately hits the P multiple with a lag. Um, but that's going to be the big challenge uh for the equity market filling expectations of the S&P moving to 8,000 or higher by the end of the year. >> All right, David. Well, interview done. Uh, you answered all the questions that I had coming in. No, that was a wonderful overview. Um, and you've given me a lot to pull on here. Um, >> why don't I start with uh, you know, the current AI boom that's going on here. um you flagged two things that I think were really important. Um one, it it really does seem to be the access axis that um is is most driving what's happening in the markets right now, but also highly influential to economic growth too. And so presumably if something happens that um you know starts to basically uh either reduce confidence in um AI earnings going forward um or or or if uh just the capex spending starts slowing down. >> Those seem to be two factors that can really hit both the the financial markets and the economy at the same time. Um so first off, let me get your reaction to that. Well, you know, it's a u mug's game to sit here and uh you know, talk about um how earnings are going to disappoint in the broad AI and hyperscaler area because um all these companies have continued to uh impress and and and beat their estimates, >> right? But you talked about the the quality of those estimates may not be as good as folks think. >> That that that's 100% true. And look, the the reality is that um if you notice and you look for example at the at the Mag 7, um it's just been a roller coaster ride. They've done almost next to nothing over the past 6 months. Um so that might be starting to get priced in. Um and while credit spreads have remained tight, the dichotomy is that credit default swaps have been rising uh for many of these firms. >> Mhm. And of course, especially for Oracle, which had been the poster child for this, the one thing I would guide people to is what is the one nonte stock that has become the feeder and leading indicator because um they're selling so much of their equipment into the data construction boom has been Caterpillar. uh Caterpillar's become a surrogate uh and I would say a leading indicator and its stock is down more than 25%. Uh over the past few months uh so what's that telling us? Uh I just pose that as a question. >> Mhm. Uh my look the the reality is just as we said you know with the internet uh and they call it a you know a uh a dotcom bubble in the late 1990s but it was really a broad um technology uh and telecom bubble and it was real and it was a gamecher in all our lives in terms of future productivity growth and so on and so forth but um nobody wanted to call it a bubble back Then in the late 1990s if you called it a tech bubble you were viewed as a lite and and I lived through that. Um but now we don't mind calling it people call it a do bubble after the fact just like I wasn't allowed to call it a housing bubble um in uh when I was at Merryill back in ' 06 and 07 but I was allowed to call it a mania but you see bubble was too harsh a term but we don't now everybody talks about the housing bubble. Mhm. >> Uh in that last cycle that ultimately triggered the great recession. So once again, if you call this a bubble, um you know, you're you're viewed as a relic and you don't know what you're talking about. But the bubble is not really in the technology. This is a generative AI is a game changer. Um the bubble is in our behavior uh and the extreme emotions of fear and greed. >> Uh so that's where the bubble is. The bubble is in um how we are you know valuing um this new technology in the future. Like if you want to back out at this stage with the hundreds of billions turning into trillions of capital investment in this area. uh and you do the math, uh for you to actually generate a decent uh future return, uh revenues are going to have to balloon uh 50% a year for the next half decade. Uh which I think is going to be extremely difficult to do. Uh so there's a lot just just a lot priced in um from where I sit right now. And that's really where the bubble is. The bubble is not in the technology. That's real. the bubble is in how expectations become uh just a little too excessive. Uh I would just maybe take the little out and say too excessive, >> right? >> So you go back to that period of the internet and um a lot of these companies that had their share prices whacked 60 to 80% and you can include Cisco and >> and Microsoft, >> Amazon was down%. >> Yeah. that and that those companies had business models. They were still intact. Um uh but yet um the the markets are not the economy. I mean your first question was about you know um about GDP and the markets and uh um the S&P 500 is not is not GDP because I said before what what really moves is the market multiple and the market multiple is the degree of brilliance and enthusiasm and confidence uh that investors have uh over the over the over the future. Um, and I think that when you go back actually almost a year now on October 14th of 2025, uh, Jamie Diamond actually said for the record that we have entered into a stock market bubble. But he went on to say that um, in bubbles you can still have another 20% upside. And he's right. When you look at the historical data um, it doesn't mean the game is over. It just means that you're in extra innings. But that's important for people to know in terms of the stock market is that we're not in the third inning. We're not in the sixth inning. We're not even in the ninth inning. We're we're in extra innings, which means that we are on borrow time. And since he made that comment, which was basically almost 11 months ago, I think the S&P is up 16 17%. >> Mhm. >> Uh so so tip of the hat, but it does mean that um in this ball game of extra innings, we're we're probably getting uh even more stretched right now. That's that that's my view. I think that if I'm going to be in the stock market, which I am, I would be uh thematic idea driven, uh I'd be mindful of the beta and the sharp ratio and the degree of cyclicality. Um better safe than sorry at this stage of the cycle, especially when you have a cape multiple of around 40. Um you know, when you have a situation where the equity risk premium is negative, looking, you know, a 2 and a half% earnings yield against a 3% real yield in the long bond. When the ERP goes negative, it's the stock market's way of telling you uh that equities are no longer as an asset class uh a a risky asset class. It's now in the bucket of riskless asset classes. >> Mhm. >> Um I'm not going to throw Harry Marowitz's uh legendary work on um on modern portfolio theory into the waste paper basket just yet. Um but that's just uh you know my my big concern is really uh where expectations are you know and everybody is all in on the stock market. You're taking a look at household balance sheets from the Fed flow of funds. I mean 73% of of the household financial asset mixes in equities. >> Yeah it's believe it or not I believe I believe that's higher the older the cohort is which is crazy. >> Well yeah well you know in and say in my cohort well my cohort it's it's it's never been this high. It's over 60% and and and in my cohort, you should be de-risking, but that's not happening. No, nobody has rebalanced in this bull market. Nobody's rebalanced. Nobody's taken profits. Um, nobody has diversified. Diversification has become a dirty 15-letter word. Uh, sentiment, you look at market vein sentiment at around 78. Never been that high. You look at portfolio manager cash ratios are down to almost 1%. Never been that low. Um, and when I talk about the extremes and the imbalances, uh, we didn't even see this back in the late 1990s. And the one thing I'll just say is that, you know, when people talk about the technical analysts have been talking about the market broadening out, but that's because almost every sector of the S&P 500 uh, has become correlated with the AI trade. Uh, you know, we've talked about Caterpillar before. um who was talking about uh old economy industrials during you know the technology wave of the late 1990s late 1990s the only sectors correlated with technology were media and telecom today when you look at the S&P 500 and you look at the correlations during this AI boom say that started in the fall of 2022 um only two sectors are not correlated with this trade and it's healthcare and staples >> uh industrials are highly correlated financials are highly correlated consumer discretionary is highly correlated ated utilities are highly correlated. Um so when people talk about that the the breath is approving in the stock market I say well hold on it's really everything is converging on one trade which is generative AI. Um but it goes to show that if this thing does reverse it's going to have much broader impacts on the stock market than even what happened when we had the tech meltdown back in the early 2000s. >> Right. So, uh, we'll hop off a in a second, but I just got to imagine that this makes you nervous, right? As a guy who saw the pain that the.com bubble, uh, caused in those sectors to think about something that could be much more widespread in terms of a correction. I got to imagine kind of kind of makes you nervous. Um, but also too, you know, nothing's noble for certain about the future. But you talked about how um interest rates are going to bring down uh higher interest rates with a lag are going to bring down the general market PE ratio. But when it comes to these AI stocks, I'm just curious, we could potentially have a situation where the E starts to come down, the earnings estimates start to come down because of this quality of earnings that you were talking about, right? maybe analysts begin to realize, hey, there's a little bit of, you know, um, deception financing. >> Yeah, there's just trickery in here and we got to put some discount on that. >> Um, and and then if to your point about um, >> you know, corporate America is basically going to have to make revenues at 50% a year, uh, incrementally new revenues off of, uh, AI, 50% a year for the next half decade or so. We're not seeing that materialize yet. Maybe it'll materialize, but if it doesn't, they're going to start bringing down the the P as well. So, and your gut feeling won't hold you to this. Do you have how how worried, if at all, are you of of a um 2027 where both the E come down and the P come down? >> Yeah, both the um earnings estimates come down and the multiple compresses and uh I think there's a very good chance that's going to happen. and I would have no problem uh formulating that uh as as a base case. Uh I'm only nervous I'm I'm not nervous for myself and I'm not nervous for you, but I'm nervous for all the people out there. You know, when you consider that um over half the market now is in um is in index investing uh passive investing. Most people don't even know what they own. They own the S&P 500. They they own a uh they own the most concentrated S&P 500 of all time. Uh and that's what I mean that they're not diversified at all. They're just buying they're just buying the market. They're buying the S&P 500. Uh and um and you know and 40% more uh it's concentrated in tech stock in 10 stocks and eight of those 10 stocks are in one trade. um you know the the the the correlations in people's portfolio uh is incredible. Uh my big concern is that there's going to be all sorts of knock-on effects uh that could make this actually worse than what we saw uh in the early 2000s. Um because everything outside of healthcare and consumer staples, all these other sectors are correlated with that one trade. Um so where are you going to hide? Well, I guess you'll hide in healthcare and consumer staples. Um, you're probably getting now that you have a a real yield at the long end of the curve at 3%. Of course, nobody wants duration right now. Uh, but you have roughly 2 and a half% real yield in the 10ear. Um, uh, I'd say that's a source of comfort. B, bonds will be a place to hide. Bonds are tremendously underowned, you know, and I mentioned before that 73% of the household financial asset mix are in stocks. only 7% are in bonds and you know as well as I do that bonds are just a detested asset class right now. Uh and um not been a good place to be. Uh but then again, you know, bonds weren't a good place to be through 2023 and then all of a sudden by October, November of that year, the runup in yield stopped uh stopped at 5% on the 10-year note and then by the end of the year it was down to almost 4%. Sharpstein famously said, "If anything can't last forever, it won't." And this run up in bond yields, I think, has offered people a refuge. Um, but it takes a lot of resolve and discipline uh to part your ways with all these stocks that have worked so well the past few years. Mhm. >> Um I always advise that uh people should rebalance uh and um be mindful of the degree of risk and cyclicality of their portfolio especially because the economy is slowing down. Um that falls on deaf ears. Uh but I I don't know if that's going to continue. I mean there are places to invest money. I would suggest not buying the S&P stock. ever. >> Okay. >> Uh there's always thematics and ideas and themes you can run with. I think there's probably fewer now than there were a few years ago. Um there are fewer places to hide, but there are places to hide. Um but nobody's doing that right now. You look at the latest data, nobody's doing that. Everybody is all in all at the same time. And everybody believes that they can time the exit once it's once uh Jamie Diamond proves to be right. that is 20% um market advance that you get in the extra innings. Um everybody thinks they'll be able to time the exit. Um but nobody can ever do that >> effectively. And then you've got a situation which is another it's also going to come down to liquidity. Uh because portfolio manager cash ratios are down to almost 1%. What happens if we start getting a redemption cycle and then they're forced to sell? So, uh, I'm not going to say I mean, I'm not nervous because, uh, I'm aware of what's going on and I'm positioned for it. Uh, I'm more worried about the people that aren't and especially the the baby boomers um that are also uh out of balance in terms of what their portfolio mix should look like. >> Yeah. Meaning given the time, >> too high risk exposure right now, right? >> Well, you know, that's the pig in the python. you know, 80 million people. Um, and they're and they're all in. You're you're right. Everybody is all in across um the age spectrum. Um, and uh, that also has me worried because time is not on their side, right? >> You know, I would tell my 30-year-old son, you know, you could just buy like, >> you know, you could buy the index or you could buy the global MSCI and just close your eyes. Um, if you look at the long-term Ibisonson chart, you know, just, you know, you you know, not everybody can ride out at 20 to 30% bare market, uh, the older you get, um, time's not on your side, uh, to claw that back. Um, and then what happens, of course, people have retired early because of their stock of wealth. Uh, but what happens with that stock of wealth? Because it it moves in cycles. People think pe people think they the people because we didn't get the recession that we were supposed to get in 2022 and 2023 and the Fed's tightening inverting the yield curve and the yield curve inversion didn't work well why it's because we had a massive positive shock coming out of COVID which was this $2 trillion in stimulus checks >> that's the big >> and that was that was the Energizer Bunny that kept on giving um and that's that's in the rearview mirror right now um but People believe that because we didn't get the recession that we're supposed to get that the business cycle's been repealed. I hear that all the time. And people believe that um with a negative ERP, depending on how you measure it, uh that it makes perfect sense that equities would be um viewed as being a riskless asset class because how long has it been since we've had a real bare market? Uh well, you got to go back practically to the great financial crisis. Nobody believes that's going to happen again. So that's when I talk about the bubble. The bubble is in as it always is. It's in psychology. Uh and it's the psychology that drives the multiple. U I I do think there's another element here which we're seeing when we've seen every bubble in the past which is the excess capacity, the overinvestment and we're seeing that right now. Now the investment is so huge that it's not funded off corporate balance sheets anymore and cash flow streams. that's being funded out of leverage and being funded out of these companies going to the debt market in in longdated maturities and multiple currencies. That's one of the reasons why real rates have backed up is because now you got the corporate sector competing with the government sector for funds. Um but you see that has knock-on effects. You would say, well, you know, um, all this leverage and the borrowing is going into AI spending, which is great for the economy, but it's driving interest rates up, which is horrible for the more credit sensitive sectors of the economy. Nobody talks about housing. How is any of this good for the housing sector, and the housing sector has powerful multiplier impacts that the housing sector was what got us into that mess back in 2007, 2008, 2009. Nobody talks about the housing market. Kevin Morson talked about the housing market. But how does this bond induced runup in mortgage rates play into a sector that's already been dilapidated? But nobody talks about that. And then people say, well, it's such a tiny share of the economy. Yes, but has very powerful multiplier impacts uh throughout the economy as we saw as we saw in real time back in 08 and09. So you're asking me about what's on my worry list. Well, my not a worry list. It's just an observation that I I tend to focus on things that people ignore. And uh not only is this spending and borrowing craze related to AI sapping vitality out of the rest of the corporate sector, which again nobody talks about. You know, Kevin Marsh again didn't talk about the fact, yes, AI is in a boom, but guess what? The rest of the corporate spending is flat year-over-year. Uh I I I tell that to people. I have to show them the data to prove it. Um but uh I am and then when you look at the beige book that just came out from the Fed, the commentary in the housing market is not good. It is not good. Uh and that historically has been a leading indicator for the economy and that is an antidote to what's happening with AI. >> Uh but that's been one of the changes. You know, people talk about this back up in rates and it's we hit the 40 trillion debt and it's all about deficits and debts. But I mean, we knew about the deficit in debts back in late February, you know, when the 10-year note yield was below 4%. So, you got a lot of people that like to fit the narrative into the price action. There's a there's several reasons why nominal yields have backed up, but a lot of it is the new chapter in the AI spending craze, which is now it is being leveraged. That's when you start talking about this not just being a bubble in enthusiasm uh but also a bubble in the investment part of this. >> Mhm. >> Um but it's because it's being financed in the debt markets. That's something that's relatively new compared to where we were four or five months ago. And one of the reasons why rates have been backing up. remember rates backing up are going to have knock-on effects in other parts of the economy and we're we're seeing the early signs of that already. >> Um so many questions. Um so one of the questions I was going to ask you um was what what are the the main factors in your mind that are driving up interest rates? You've already just mentioned a couple. Um you mentioned the uh the crowding out uh of government debt by all this new AI um corporate debt. Um so uh and then you mentioned uh uh you know some of the speculation that's going on. Are there any other major factors driving up uh long-term interest rates that that we should talk about here? Yeah, >> maybe high oil prices. Anything else? >> No, it's not. No, it's not. um if it was high oil prices, you'd be seeing um the tips break evens, the market based inflation expectations driving up the nominal yields. Uh that's not that's not been a factor. Um you could argue that real rates have or our star has gone up because of uh this sudden burst of uh boring activity uh from uh the hyperscalers. But the elephant in the room is the Fed. elephant in the room is the Fed. You know that twothirds of the backup and 10-year Treasury yields in the past several months have happened on three days. I'll tell you the three days. Uh June 17th, uh July 29th, and August 28th. What do those three dates have in common? Those are the three days where Kevin Morris opened his mouth. >> Mhm. So twothirds of the backup in yields happened on three days. And I think that what has really changed since the summer is we have a new Fed chairman. Uh we had Powell uh who was neutral to say dovish and then we had um Worsh taking over and who we thought that uh was going to play ball with Trump. uh and that he was doubbish. And of course, all he talked about back then, which he doesn't talk about now, is the the Dallas Fed's trim mean PCE deflator, which is running at 2.3%. And he was not just talking about AI, he's very bullish on AI, but also the productivity benefits that are going to be an inflation crusher. Uh he doesn't talk about that aspect of it anymore. He's turned hawkish. And now you have you had three dissenters who wanted to raise rates at the July meeting. So I mean if you're going to go in the past several months and price in two rate cuts and then go price in two rate hikes. >> Mhm. >> What do you think the 10ear is going to do? Um yeah, that's worth probably about 60 basis points on the 10-year note. We're up about 80 basis points. So 3/4 of the increase has actually come from the reset of Fed expectations because um the cost of carry is probably the most influential determinant of yields out the curve. >> Mhm. >> So when we were below 4% um back in February on the 10-year note. So okay, so the debt wasn't 40 trillion, it was 39 trillion. I mean really is that the story? That's a story people like to tell. >> Mhm. >> No. Um the market was priced for Fed easing and now we're priced for Fed tightening and um and as Jackson Hole, he added more fuel to that fire. Um so most of this increase has come from uh the Fed rhetoric. Uh now we'll see what happens. Uh we'll get a non-farm payroll number. We'll get another CPI number. Although he's uh already said quite amazingly that he wasn't impressed with the last few um inflation reports which were actually pretty benign and the bond market rallied on those PC deflator and CPI numbers that were benign because they believed that the Fed was going to like those numbers and now basically Powell says well no we actually we're looking through them. Uh so that's been the big the big surprise for the bond market has been the tone the shifting tone of the Fed and not just that you have three denters but that you had the new Fed chairman um come out and deliberately sound hawkish. It doesn't mean that a a rate hike on the 17th uh is baked in the cake. Doesn't mean it's baked in the cake. Um but he had the opportunity uh to either reinforce those expectations or dampen them and he chose to reinforce them >> and that's the story behind the bond market selloff. >> So Wars has also said that he's trying to change the Fed um so that it's not so interventionary and and is distorting the market signal. he's he's trying to let the market signal purify and use that as a very important indicator to, you know, resulting Fed action. Um, which, you know, you can kind of interpret as, hey, you know, we're going to we're going to be a lot less ready to ride to the rescue when when markets start, you know, getting heartburn here. Um, A, do you think that's a good thing? And B, do you think that's also part of the disyspsia that the um the current bond market has because they just they're they're fearing they don't have their uh you know swift rescuer writing to into the fray going forward. >> Well, I I I actually don't have a problem with changing the Fed's communication. Um I I think that um too many Fed officials speak and um to me that's a distraction. But then again, I don't think that Powell has or Powell, sorry, Worsh has uh any control over what a Fed bank president is going to be doing on CNBC or doing on a panel. But I do think that the Fed overcommunicates. Uh I think the DO plots, I agree with them, have overstayed their welcome. Uh but if you're going to reduce your communications, which I'm fine with, you got to be clear. Uh that's why he bungled uh you know that uh late July meeting. He basically I mean I people thought he was soft on inflation. He just basically kept on saying we're going to get to 2% target but didn't explain how that's going to happen or how that's going to happen without the Fed raising rates. He didn't want to say anything and he didn't answer the questions from the press gallery. Um then at the last uh then at um at Jackson Hole um I found again he he talked a lot like for somebody who doesn't want to give guidance and that's what he started off talking about you know but he gave guidance >> but what sort of guidance are you giving like basically you just give a blanket statement that um that over half of the components of the PC deflator are running over 3% year-over-year. here, but he doesn't explain why that's a meaningful statistic. He just sort of says it, throws it out there, almost say, you know, this is a a hawkish statistic, but doesn't explain, he didn't tell us um why that's important. Why is it important, you know, that over half the components, does it really matter if a bag of peanuts is going up more than 3% at the same time that new and used cars are going down? uh are you going to treat all these components the same when they have different waitings? So, you know, you're a sophisticated investor and you're looking at like what's what what's he he introduces this this statistic doesn't explain what its meaning is and seems to just throw it out there as a reason to sound hawkish. Um so it's it's how what are you communicating? like basically it's I still find him very confusing and and when you're confused you're not going to be opting to buy duration. Okay. >> Um he he talks about his his preferred economic indicator is uh you know is is is is private final sales which he says in real terms is running at 3%. And he's not looking at GDP. So what's he telling us? That he's going to strip out the government sector. He's going to strip out inventory investment. And most importantly, he is going to strip out the foreign trade sector. So I'm trying to explain to you like why this makes no sense. >> Mhm. >> Because you can't have your cake and eat it too because most of the AI spending boom requires uh imports of inputs from abroad. So, how can you exclude imports part of net trade from that calculation, which is what his favorite economic indicator does? So, he's going to include AI but not include the fact that much of this is imported. Uh, and um that leaves me scratching my head like basically that does not instill confidence that he really knows what's going on with the economy. Um and uh the fact that he said that he's focused on commodity markets for inflation which has actually a very weak spillover to final consumer inflation. You don't go to the you don't go to the supermarket and buy a bag of wheat and you don't go to the home improvement store and say uh um you know where do you keep your pound of copper? It's a the elevated commodity prices which does have an impact on inflation but it's people don't realize we're a service sector economy. Uh the impact on final inflation is actually rather muted but labor costs nothing is more important than that. And he de and he said actually he doesn't believe wages are a reliable indicator of inflation. And I'm there thinking like okay he's basically taking economics 101 and turning it upside down. So, you know, you talk about communication. I I do believe the dot plots. I agree with them on the dot plots. I agree with them on the forecasts. Uh we live with that for decades before Bernanki brought them in in uh 2011. But if you're going to be curbing your communications, you got, you know, words matter. Uh you you you got to be able to say something that's cogent and coherent. Um and I'll tell you who did that. Whether you love him or you didn't love him, the maestro, the serial bubble blower, I don't care. Um I thought that actually um uh Greenspan was a very great communicator. Um and uh back in those days, you didn't have Fedspeak like you do right now. You didn't have the dot plots. I don't want going back to that era. Um but although you had to study Greenspan very hard and um you know he uh he used a lot of terminology that you need a thesaurus >> um but if you read if you go back and read the history of his testimonies and his speeches they were deep and um he didn't really you know I mean did he offer guidance? Uh the markets don't need to have their handheld. the war war seems to think that the markets need their handheld. They don't need their handheld. They need to know what you're thinking. You got to, you know, as a the head of the central bank, you got to say what it is you're thinking. Okay? Uh and you don't have to go into what we're going to do at the next meeting. And and he didn't do that. He didn't actually say this is what we're going to do at the next meeting. >> Um but he did give guidance. Uh I I I I just think that a lot of the things that he's discussing from an economic standpoint, keeping in mind that he's not an economist, didn't make any sense to me. You know, at least when when Powell came up with this, remember the we before Powell, we didn't have the Powell super core inflation measure. Remember >> super core? >> Superore. >> People still look at it. Well, why did he bring that up? He brought that up basically during that period when wages were accelerating. We were getting a wage price spiral. It was during that inflation bulge. and he wanted to gauge um what the pressures were in the labor market. He actually tied the super core to the mismatch between supply and demand in the leisure hospitality industry in cyclical services. And I always thought, well, that's a very elegant way of taking one metric out of the inflation data and mapping it out to what your concern is, which is the labor supply demand mismatch. Okay. Um I don't know. I mean you tell me what's elegant about the share of prices over half of the prices are going up more than 3%. Uh I would have rather and you know maybe if he would have said that we've done analysis on this this is a terrific indicator of future inflation. This is you know well but he didn't say that and actually um it's it's not a reliable indicator of future inflation but he throws it out there. So, my only I guess the only thing I'll say is that if you're going to be communicating and you don't want to sell the farm and give anything away, if you're going to talk about what's on your mind, have it make sense. Uh, have it make sense. Uh, I I just didn't find that a lot of what he said made economic sense. I I frankly I can't, you know, I watched Bloomberg TV. I watched CNBC and everybody just gave him a pass on this. >> Mhm. >> But as an economist, most of what he said didn't make any sense to me. And uh so I think that's one of the reasons is that we still have a very I think there's a lot of confusion. A lot of confusion. People think that he's, you know, people think actually look at what look at what Fed futures did. We went from pricing in what like 30% odds of a rate hike in in the middle of the month to like 60%. They doubled. Well, they so he's not going to give guidance Adam >> but yet whatever it is he whatever it was he said managed to double expectations of the moving rates higher >> in midepptember. Uh so now people think that he's boxed in. I'm not so sure. But you can see that if they don't raise rates and he might not be able to sway, you know, don't forget he's got to get with him with him. He's got to get seven votes, right? Uh, I don't think that even with the three denters, he's got those seven votes. Let's say they don't raise rates. People think he's bucked himself in. You see, he's gotten himself into a bit of a hot water because people think he's got to raise rates now. And he didn't say he was going to, but you see, it was his communication. It's what he chose to talk about that caused markets to price in. 60% chance that they will. Now, if he doesn't, he's going to get accused of being soft on inflation. and he he he he boxed himself in and that's going to further affect his credibility. Okay, I don't think they're going to raise rates. Um, but the fact that he what he chose to talk about caused the markets to price that in and then if he doesn't raise rates, it's going to create even more confusion. So, I think these have been actually pretty um he's getting his feet wet. Um, but I think as you know, for somebody who is so bent on communication, it his style in terms of what he chooses to talk about, I think that needs um that needs work. >> Okay. I'd so love to keep pulling on the string for you, but I'm looking at the time here. We got about 12 minutes left. Can we flip to lightning round for a few questions here? >> Yeah. >> Yeah. Okay, great. Um, so it's just sticking on bonds real quickly. So, you know, you have been favoring bonds for the past couple of years. You mentioned some of the reasons why uh maybe the bond market didn't react the way that you thought it was going to because of some of the past interventions and stuff from CO. Sounds like from what you said earlier, you're you're you know getting increasingly uh confident and correct me if that's the wrong term to use that bonds are going to start having their day in the sun and that uh interest rate interest rates and interest sorry bond yields and bond yield expectations are going to start coming down. Um what do you think the primary drivers for that will be? >> Uh a reset of Fed expectations the other way. Okay. >> I said before that most of the run up in yields has come down to the shift in Fed expectations. >> Yep, you did. >> We don't have to complicate it. Uh I don't think the Fed's going to be raising rates. Uh I think that'll lead to a bull steepener. Uh I think that I'm not going to talk so much about the Bessant uh intervention, but just remember on November the 4th, we're going to get the Treasury refunding announcement and um they're probably going to do a different form of operation twist on the issuance side uh and move more towards the front end of the curve and bills and away from the longer end of the curve. And just remember, the last time they did that was in uh the November 2023 um Treasury funding announcement where they did the exact same thing. and the next thing you know the 10-year note in a matter of three months is down to 100 basis points. So I don't think that the Bessant intervention in terms of um buybacks is the big deal. Uh I think he was trying to hope that you know just the announcement itself would show people that >> that they're on to it and that they want to cap this thing. >> No, the big deal is going to be exact. Go take a look what happened in early November of uh and it was right around the time that 10-year Treasury yields peaked at 5%. And look at what happened in the Treasury funding. That's going to be a very big deal. Nobody talks about, you know, people talk about they talk about the fact that this buyback operation ends November the 4th and everybody says, "Well, the midterms are November the 3rd, so this is all political." No. Uh we we could have and so I I'll tell you right now in the leadup to November the 4th, I'll probably be buying more bonds. Okay? because I think the treasury funding is what nobody is talking about. >> Um but that's going to I think have a very powerful impact. Okay, the Fed has a big impact when it wants to uh in terms of uh being a buyer of bonds. Um and people tend to forget that the Treasury has a very big impact because it is the issuer of bonds, >> right? >> And it can choose uh and they have the flexibility because right now the average maturity on outstanding federal debt is 60 month. Right now it's 60 months and historically it's been 71 months. >> Mhm. >> So they have the latitude uh to pull a really big surprise, positive surprise for the bond market. Nobody's talking about it. I have been in my dailies by the way. Um but I think that'll be a very important event and it's going to happen around the time I think that people will reset the Fed to not raise rates and that'll be a very big deal. I'm not going to say we're going to go back to pricing in two. So I'm not saying the 10ear goes back to where it was in February below 4%. But do I think we can get a 50 basis point rally in the 10-year note from where we are today? Absolutely. >> Okay. So, you like duration here then. >> Well, you know, um, put it this way. And in my model portfolio, we have 10-year notes and we have two-year notes. I don't have the long bond. >> Okay. >> Um, but like I said, a 3% real yield is a real comfy cushion. So, I'm thinking about it. >> Okay. All right. Um, so all right, let me get the media sandwich and then few other questions I want to squeak in. So from a portfolio allocation standpoint, um, we've talked about bonds. Um, we've talked about, uh, healthcare and consumer staples not being correlated to the AI trade. Um, as you look forward towards the end of this year and going into 2027, what do you like and what do you really want to avoid? >> Well, uh, I want to avoid I am avoiding financials. I'm avoiding consumer discretionary. Uh, I am not participating in this AI trade. Uh, I think that you want to have a um a really global footprint in your portfolio. So, in so far, and I do own equities by the way, this big bad bear. Uh I am in the equity market. Um but where in the equity market am I um so uh exposure to uh parts of Asia? I happen to like Japan quite a bit. I happen to like Europe quite a bit. I like Europe a lot because they have fiscal tailwinds. Uh now that the fiscal shenanigans are over in the United States and we're going to be getting gridlock after November 3rd. Um that's going to be a source of economic growth that is in the rearview mirror. But it's staring us in the face in Europe. um valuations are much better. Uh equity risk premium is much better. Uh and um uh they have economic tailwinds in Europe right now. Take a look at the City Group economic surprise index in Europe. It's like at a four-year high and in the US it's bordering on a six-month low and and so Europe looks very good to me. And by the way, it's a very well- diversified index. You just buy the European index. It doesn't have a lot of AI exposure. It's very well balanced. Uh, and so that's a market, that's a region that I like. I don't believe in zero. I don't believe in 100. Everything's shaded gray. There's no black and white. I am not 0% equities. I don't want people to get the wrong idea. It's where do you want to be invested globally. >> And um, I could tell you something else that's on our radar screen right now is Brazil, which is having a very good year. >> Yep. >> And and emerging markets. This is not your father's or grandfather's emerging markets. We are long emerging market equities, but we're being very mindful about not having too much exposure to Taiwan and Korea because they're part and parcel of this whole AI trade. >> AI trade. Yeah. >> Um but uh Japan looks good to us, India looks good to us, Brazil looks good to us. We like the emerging markets and in the advanced markets, we like Europe. So there you go. You can put money to work. Um but I am not long the S&P 500. But within the S&P 500, what are the things that I like? I like hard assets. So, I said before I'm a disinflationist. Uh, and I didn't mean to dismiss the commodity market comment from Kevin Morse because I'm bullish on commodities. Uh, I do think there's inflation in commodities. Uh, I get more nervous if I saw inflation in services because that's the bigger chunk of the CPI and the PC deflator, right? >> So, I'm a disinflationist in services, but I'm a bull on commodities. So uh you you know we have oil, we have uh um pipelines, we have energy infrastructure, we have rare earth, space metals and this is all in the Rosie model portfolio which is on our website. Um so a good chunk of this portfolio in in terms of equity exposure is in uh the commodity sector. And you'll say well you know you're telling us to mine the cyclicality. No, this is actually this is not this is in so far as there's anything buy and hold. Uh it is the uh the basic material space. This is not a trade. This is not a trade. And uh you know uh we don't have consumer staples cuz we think that they will be hit by the fact that food prices are going up globally, but we do have a lot of exposure to healthcare. >> Okay. >> So, uh but you go on the website, check out the Rosie model portfolio and you'll see what I'm talking about. Um, and I'd say that whatever you're doing as I'm doing mine, have be be mindful of the beta and my portfolio is a uh point4 beta to the S&P 7 to the 6040 and a 1.1 sharp ratio. >> So, I like how it's positioned. Uh, now if and I have hedges in there if things go bad in the stock market, there's enough because I have fixed income in there as well. And I don't expect that if we get a big draw down in um in the US or a big draw down in the AI trade that it's necessarily going to have a a huge impact on healthcare which has no correlation. I think the base metals trade or the I should say the the commodity trade is going to be with us for several years to come. When you look at the future supply demand curves, we're going to be in deficit in the basic material sector broadly speaking for some time to come. Now that should actually be bullish for Canada as well. The problem with Canada, if you're buying the Canadian market, is that there's as much a concentration in financials as there is in technology in the US. >> All right. Well, that was fantastic. Um, wonderful level of specificity. You've given the audience a lot of places to go uh consider and do their research in. Um, so uh one of the questions that readers are asking me to ask you is when was the last time you were bullish, Dave? Um, sounds like you're quite bullish on commodities, fixed income, uh, you know, some of these markets outside of the US. Um, so, you know, you're not you're not a total bear. You know, you you've got some some bullish horns and a few. >> It's very interesting because, you know, when you focus on things that other people don't focus on, like you focus on tail risks, you try in your career to keep people out of trouble and to be responsible in investing and not to do it blindly. you're viewed as a as a bear, you know. No. Uh I'm actually an ideas guy and uh in the Rosie model portfolio at Rosenberg Research, we put our ideas and themes from our research. Uh and we express it in a in a u in our portfolio, which is a bunch of ETFs. Um right now, actually, when you look at it, it's 55% equities. But I guess because it's not in the S&P 500, which is all people focus on, then you must be viewed as a bear. Um, no. Uh, I choose to express whatever bullishness I have in the stock market in other parts of the world. I'm a global I have a global hat. Our our I have 2,300 clients in 40 countries and our research our research mirrors that >> diversity and so does our investment philosophy. So, yes. Yes, you're right. with a negative ERP um and a massively concentrated stock market. I am not really heavily involved in the United States. I'm I should I apologize for that? But to call me a bear, when was the last time I was I was bullish? I' I've had this portfolio for three and a half years and it's up 60%. I haven't owned one AI stock and it's a low to medium risk portfolio. It's up 60%. And it's not correlated with GDP and it's not correlated with the S&P 500. It's 100% correlated with our our our themes and ideas and the research coming out of me and my firm. So, I push back gently against that. When was the last time you were bullish? Because um I go back three and a half years when I started this portfolio. I had I I had to be bullish on something because how else were you up 60%. >> Um I was bullish on Asia. I was bullish on aerospace defense. I was bullish on gold and silver and the miners. Um, I was bullish on healthcare. I don't know. Does that make me bearish because I wasn't involved in the speculative AI trade? Really? Because I didn't own Bitcoin. I must be a bear. I mean, come on. >> All right. Well, look, uh, this great transition to the last question, which is you have a new publicly traded fund coming out. What can you tell folks about that? >> Well, what I can say is that um I've teamed up with a uh ETF provider. They are the portfolio manager on the fund, Corton Capital. Uh, Co R. You can go to their website. Uh and um the Rosie model portfolio was was not a fund. It was a Rosie model portfolio with a single unit holder called David Rosenberg. >> Mhm. >> Um but I showcased it on the website so that people could see that this radical perma bear can actually make you money. Um and so uh what's happened is that uh I've teamed up with Corton Capital. Uh the it it's it's really it's it's their fund, although the ticker is ROSY. >> Um and they'll be managing the fund. They're the portfolio manager. Keep in mind, all this time I was doing this myself. Now I get to team up with portfolio managers. It's going to add a so much more heft. >> Uh and uh what they're going to be doing is uh they're going to be taking my research and expressing it in this new ETF. And there's going to be a Canadian dollar version, a US dollar version. It's going to be listed on September the 9th. The ticker is going to be ROSY and it will be listed uh initially on the TSX. Um and uh so taking this whole philosophy of David Rosenberg putting his money where his mouth is uh to a new and higher level. This actually I I I never entertained the notion that I would ever be doing something like this, >> but my own clients were telling me, you know, why don't just get your Rosie model portfolio and uh and list it. But I'm not a portfolio manager. Uh I'm not registered. Um, but I found a restaurant that I've teamed up with and uh my econom research and ideas are going to be the principal formation as to how they're going to be constructing uh this new ETF. >> Okay. Well, I think the ticker is uh spot on and um it's going to launch September 9th. If people want to learn more about it in the inner room, is there a place they can go? >> Um, yeah. I think if if they if they want to go to the Rosenberg Research um website, uh, there will be a landing page that will then direct you to Corton Capital. Um, or you can just Google Corton Capital. They're in Toronto. Uh, these are really smart guys. I've gotten to know them in the past year. I mean, I interviewed dozens of ETF providers. Um but basically you know um they are going to rent the brain of me and my team. Uh they really think that the research and they've been following me for years. My my research is investable. They love the Rosie model portfolio. Uh and what I get from them is I get their platform. Uh they're the ones that will be responsible for the client service uh the compliance. They because they are registered they are portfolio managers. So, I get to basically be connected to their platform and they get to be connected in a very special way to my brain trust. It'll be a great symbiotic relationship. Um, there'll be a landing page on our on our website uh that will take you them because they're going to be doing the client service, okay? Because it's really their fund. Uh, and you could just say that uh the fund is really predicated uh on on our re on our research and they're going to have access to me that nobody else does. Um, but they're going to be the ones handling the client service aspect of it. So, you can either go on their website uh and uh they have uh client service people there and portfolio managers. They'll be the ones that you want to talk to uh in terms of um setting anything up. Uh and um and we'll have a on our website, we'll have a way that will redirect people to to their website because that's really how it's going to go. Okay, great. Um, so sounds like folks, you know, either go to Dave's website and get redirected there or just go to, uh, Corton Capital's website. And, you know, I'll do folks, is I'll have links in the description below this video so you can you can just get there with one click. Um, David, uh, fantastic discussion as always. Again, thank you for being so generous as to, um, but how your sort of general portfolio allocation is breaking down right now. Um, I have a ton of questions we didn't get a chance to get to. So, we'll just have to get to them the next time you come on the channel. Let's make it a lot sooner. >> Sounds good to me. >> All right. Well, now's the time in the channel where we bring in the lead partners from New Harbor Financial, one of the endorsed financial advisory firms by Thoughtful Money. As usual, I'm joined by senior partners Mike Preston and John Lodra. Gentlemen, thank you for joining us this week. And I'm sure you have a lot to say about what uh what uh David Rosenberg just said there. I'm I'm guessing there's going to be a fair amount of commonalities between his approach and yours. Um but what see? Let's start with you, John. Um what were some of your key takeaways? >> Hi, Adam. Great to be with you and always always great to hear Ros's comments. Uh he's one of the fairly few voices that uh Mike and I have listened to throughout our careers. He's been around for a long time and he's had had a you know, illustrious career, I think any objective observer would say. So, we really appreciate his his viewpoints. I I'm very glad he was given the opportunity to to make the the very valid point that he uh I think unfairly has been labeled a perma bear because seems like anytime anybody takes a realist view of of markets and where we are in the cycle of things they get labeled a perma bear and I'm very glad that he was able to not only talk about that but demonstrate you know very u very pointedly that um he's not out of the markets he's selective in and in in certain area of the markets that isn't all just about AI I so uh really glad to hear that. Um you know we're we're we here at New Harbor are not macroeconomists. So that's why we we value the the the points of folks like Rosie. You know we're obviously investment tech technicians and tacticians on behalf of our clients who are re real people who have saved a lot of money and need that money to be there for them. They don't get a doover. Um so so we don't dive too deep in in you know we don't have a particular um kind of body of research of our own that's on the macroeconomic but I want to call out a couple things that that Rosie talked about certainly as it relates obviously we've made the point as you have many times Adam that the markets and the economy are not one and the same they're two different beasts um you know you can have a great economy and a bad market and vice versa so we we're very much uh keenly aware of that in the work we do for our clients um you know he described the market being in extra innings. Uh we absolutely agree with that. You know, we are by any measure of valuations or sentiment or participation, we are in late innings if history is any guide. And like Rosie pointed out, that doesn't mean things stop here. Um in fact, we're we're nearly about as invested as he is. He's talked he's he mentioned he's about 55% in equities right now. We're about 50. and we'll get into our portfolio and our take on markets a bit later, but uh you know we we have a lot of common overlap with with what he he he is in you know we've been heavily invested relatively speaking you know certainly we're not s you know S&P 500 investors we're we're global investors as well and we've had a very notable allocation to non- US equities including emerging markets many of the ones he talked about we've had a heavy focus on on real assets which he has as well we we will talk about commodities and precious metals a bit later. Uh point being, there's been plenty of areas that have been very proper places to be without being heavily in the AI trade or the S&P 500. Talked about the bond market. Um you know, uh I think that's one area that look, we're not we have we have not been bond bulls. are still not bond bulls, but there is a degree of a detestment in in uh in the bond market that we have rarely if ever seen in our careers anyways. And um you know uh that that is notable and Rosie talked about that. You know the the bonds aren't aren't a place to be absolutely avoided. Obviously be careful about bonds right here and now. Uh right now our we have about 32% of our portfolio in what you might call fixed income. Um but um to be clear, we're very shortdated. Um the average duration, and excuse the technical term of duration. It's a more useful term than maturity when you're talking about uh fixed income investments. The average duration of our fixed income portfolio right now is is 5 years. We're we're shorter duration than even the you know aggregate bond index. Um even though we do have about a 7 12% position in longerterm treasuries, the overall allocation which is very heavily weighted towards treasury bills and short end of the curve including some non US uh non-doll denominated foreign bonds is again about five five years. So we're we're by no means bond bulls, but we don't think it deserves nearly the aversion that we're seeing every day in the conversations we're having with clients. And you know, it's it's amazing how how negative the sentiment is towards bonds at a time when the sentiment towards the stock market almost has never been more rosy. Um, and um, let me see what else I want to talk about here. >> I like that. Was that was that a deliberate play on words? >> Yeah, exactly. I was just kind of a comment about that, you know, but might as well throw Rosie another bone in there, but too bad he couldn't get his ticker symbol to have what, five letters there to to his full full name. But um you know, he talked about the Fed messaging being really confusing. Yeah, we agree. It's it's crazy. Just today, I think um one of the Fed governors, Waller, came out and said that that he'd be in favor of sitting tight on rates. It's like, you know, it's it's a circus show. I think I think, you know, Wars tried to come in here and and say a new sheriff in town, we're going to do away with, you know, messaging uh forward guidance. We're going to let the market tell us. And then what happens? Um the Treasury Secretary comes out and and you know, basically says, "We don't we don't want the market to give a signal. we're going to go and do treasury buybacks. So, it's it's it's it's a it's a charade that, you know, obviously we got to cut through. The market ultimately will kind of tell us what uh what to do there, but obviously there's been pressure in yields, I think, in large part because of that. But, um those are some big big big picture things. Obviously, we can dive much deeper, but those are some big picture things I want to call out. >> All right, great. Mike, I'm going to toss over to you. Anything you would add to John's list there of some of the key insights you took away from that discussion with David? I think you covered you guys covered almost everything that's on my list here. You know there was this just I know you guys touched on this but you know Rosen David Rosenberg said that the bubble really is an emotions fear and greed and expectations have become really excessive and there's a the cape PE ratio the cyclally adjusted PE ratio is indeed up at 40. Now what's surprising to all of us and and to David too I think is how long it can stay up there. It's really been there for almost 15 years. Not the whole time up there, but every time it's come off a little bit in valuations, the market has been rescued right back. And that's caused the biggest inflation in assets I think that we've seen in our lives, you know. And so he he mentioned a couple names or a couple numbers that I thought were surprising. 73% of household assets are in stocks. I don't know, but that's probably an all-time high. That strikes me as a lot. 3/4 of all household assets are in stocks. Um, sentiment is skyhigh no matter which way you look at it. Cash balances of mutual fund managers are are at all-time lows. But all of these things have been this way for years. That's the problem. People like David get labeled a perma bear. Maybe even people like us. Um, but so we're all we're all playing this game the best we can. The best way we know how to play the game is to have a reduced equity allocation. Know where we are in the game. we're in the late innings as as you guys were talking about and know how we're going to react if we get some downside surprises. We have levels that tell us that we're wrong. We have levels that will actually have us reducing stock exposure versus saying never never sell or even worse buy the dip this time. So, we know where we are in the story and we think that David does too. The way that the way that he's talking. >> Hey Mike, can I can I put you on the spot here for a sec? >> Sure. >> So, I'm going to share this chart. Hopefully, you can see it. Um, I know you've seen this chart before. Um, but this goes to your kind of late innings and um, you know, Rosenberg's uh, bubbles are really bubbles in emotions, right? So, where would you put us uh, on this chart right here? >> Oh, this is a hard one because I I thought years ago uh, leading up into CO that we were in the greed part and and what I what I found out is we could have a little pullback like we did during CO. Not that that was a little pullback. It was a 32% or so pullback in the S&P in the span of 17 days. But you can have you can have multiple iterations of this. I believe and there's no way to prove this mathematically, but I just I believe based on my experience, our experience that we're in the very very late part of this somewhere between greed and delusion. Personally, I think I think that we have full-blown greed going on right now. That's why households are at such a high level. 73%. Money mutual fund managers are at all-time lows. The cape is at 40. And that's with margins skyhigh. Margins have been higher in the last 15 years than ever before. Long-term uh uh margins, profit margins on the S&P are like 8% maybe, but we've been trending around or sitting around 11 or 12% for the last decade plus because of all of this deficit spending by the government. So, what happens if margins revert back to 8% or god forbid 6%. So, I think we're probably in that greed spot. If I had to guess, and we always do have to guess, not that we're trading from this perspective too much, but I think that we're still going to get a blowoff top somewhere above 8,500 in a short period of time on the S&P, which would bring us straight into delusion and maybe even new paradigm. Now, I wouldn't tell people to trade or or try to trade that because it's going to be dangerous. It's dangerous even now, but this bubble is so big that I'm believing that we have to have that. I'm believing we have to have an even more vertical move out of here to get into that those last two stages. And the last point is those last two stages could last a month. You know, we're not talking about years. >> When things change, they can change quickly. >> All right. Um I appreciate you uh color commenting that without knowing that it was coming. Um All right. I might have interrupted you. Do you have any more uh of your your points you wanted to add here? >> I don't think so. I think we could uh stop there and you I'm sure we'll want to talk about some updates we made in the portfolio and our take on markets and metals. >> Yeah, absolutely. So, um John, maybe I'll kick it back to you real quick. Um right before we turn the camera on here, you were telling me about a a step that you guys just made. Um do you want to share that with the audience? >> Yeah, sure. Um, Adam Rosie talked about uh technical analysts and we use technical work in in a big part of what we do as well and technical work to to get through the jargon. It's just, you know, it's not fundamentally based. It's looking at price action, momentum, things like that that, you know, the market is telling us what is, not what should be, right? That's a simple take on what technical analysis is. And we have a pretty broad multiaceted technical dashboard that we look at. And Rosie talked about even technical analysts now are talking about some erosion in breath. Uh much of the last couple months, Adam, we were talking with you about our indicators, you know, very strongly, in fact, you know, stronger than we've seen in recent years uh in concert showing a widening of breath, you know, widening across market capitalizations. You know, small caps were starting to pick up uh momentum after many years of of not um you know, kind of broadening out across sectors. you know certain sectors that have been lagards for a long time started to participate things like financials and healthcare Rosie talked about healthcare that's that's one sector that has been quite relative strength uh you know positive in in the last handful of months and we we've got exposure there as well um so we seen this broadening out and that that was very in in a vacuum very healthy despite this backdrop of crazy valuations and you know over over bullish sentiment um but we have seen a notable redu you know uh weakening in that in those battery vindicators. Nothing that screams like fire alarm, but enough that we felt that it was prudent to and and so much so subtle that we didn't want to reduce our equity exposure. We're still 50% in total. We'll talk a little bit about the sectors we have, but we did add some hedges, some some um insurance protection, if you will, uh via what are called put options. We we bought some put options on the S&P 500 index. you know, our again, our equity allocation right now in our core tactical model is 50%. We bought put options that um that if the S&P drops below 7200, and I'll pull up a chart here just to kind of give you a picture of that. Um let me pull that up. So, this is a chart of the S&P 500, the daily chart. You can see we're right around 7,700. Um uh this dotted line is at 7200. If the S&P dropped be drops below 7200, those put options will kick in and take effectively about 20% equity exposure off the table. Uh equity as measured by the uh S&P 500. So a modest but notable um adding of some defense here. Um they that insurance protection, it's all relative depending on where you set this this strike price so to speak and how far you go out. The ones we put on go out through uh October, mid-occtober. And at the portfolio level, it cost our clients at the time we established this position two days ago we did this, it was about 12 basis points of cost at the portfolio level. So really almost negligible um from a cost standpoint at a portfolio level. And one reason for the cheapness, relative cheapness of of those hedges is that the volatility index, you know, one VIX is one way to measure this um is at very low levels. You know, if I zoom out here and look at a long-term, you know, we're down around 15. You know, this is a you all else being equal, one of the biggest um indicators or or drivers of the cost of option protection is the implied volatility of the market. and and with it being in relatively low levels, that kind of insurance is kind of cheap, if you will. Um, now we'll be just as prone to take those hedges off if we see a reversal in some of our indicators, but for now, we're we're, you know, very comfortable with having some of these hedges in place. Um, I'll just pause there, Adam, see if that invites questions. >> Yeah. So, um, not so much questions, but I just want to reiterate for folks, um, one, one of the things that, uh, thoughtful money advises investors is to always be focused on risk management, right? And, um, you know, it's it's very important part about building and protecting your wealth over time. And it's something that a lot of just sort of regular investors aren't really well educated in. And this is one of the reasons why we have these these uh financial adviserss come on the channel here um to kind of show you what they do. And um especially when there's a change in their outlook, you know, how they're sort of hedging that change. Um at New Harbor, you guys are extremely well experienced in in using a lot of tools this way, but certainly options. Um, so one I just want to underscore folks, um, you know, if if risk management hasn't been at the forefront of your mind in your portfolio of late, you really should bump it up there. Um, but John, you said something else, too, which is that right now, uh, the ability to purchase downside hedges is really, really affordable. Um, so, you know, again, I always think people should always have some sort of protection on in their portfolios, um, at pretty much all times. Um, but given kind of the extremes that we're at that first David talked about, then Mike talked about with the the chart there, um, it seems almost criminally neg negligent to me uh, to not have some sort of measures that you're taking uh, to protect against downside risk because it's at the extremes where you the risk levels become their highest. So, you're not nodding as I'm saying all this, John, but I just want to again note for folks here, I it's a very good time to put on downside hedges. And of course, you have to know how to do them well. Um, but you know, one, because of the the stretch nature of things, but two, as you said, you know, the one that you just put on, it almost cost your clients nothing. >> Yeah. And I mean you know this this you know I think Rosie shared some genuine concern for folks that are you know he he talked about the the uh pervasiveness of index based investing. That's nothing new. We all know that's been a trend that has has increased over the years. But we likewise have concerns for folks. You know we get we get the privilege of seeing a lot of folks uh investment positioning that aren't clients of ours. and and um you know some common things we see is a very overweighted um you know just passive allocation which in hindsight has done great right even sitting through things like the COVID selloff and whatnot and as Rosie points out we'll point out we really haven't had a real bare market since 089 that's that's that's the truth I mean uh and we have little doubt there'll be another one uh and and they always come by surprise because people get deluded into thinking they're not going to come but we share a concern and and Um, you know, a lot of folks we see don't have any allocations outside the US. You know, uh, we have, as as we've mentioned and Rosie mentioned, we have an allocation, pretty notable allocation to non- US stocks, which technically are very, uh, much, in fact, they're in the top technical spot in our kind of rate ranking system relative to even US stocks. Um, but fundamentally, they're much better valuations. And, you know, Rosie talked about some of the demographics and fiscal tailwinds in Europe and things like that. I mean, there's a lot of reasons we can get into, but I share we share a similar concern of folks that have gotten complacent and are passively invested and, you know, have are all in, you know, uh, highest level of household balance sheets in the stock market right now. There will be a a time where that won't feel so good. And we think we're we're in very late extended innings like like Rosie has said and you we don't think it history is pretty pretty uh pretty emphatic about the the markers are in place for that to that to be the case. doesn't mean it's today or tomorrow. It could be months or whatever. Um but uh I just caution folks that are, you know, have done very well just sitting and setting and forget it. You know, just just give yourself a reality check because the worst thing here is is to not have the proper expectation as to what likely comes from here. And history can give you plenty of insight there if you just study it. >> Great. And I will um make a quick pitch here. You know, if this is something you're listening to and saying, "Sounds good. I just don't really know how to do this. Um, then talk to your financial adviser. Um, they should be able to help you through this. And if if you don't if they don't if they for some reason they can't, uh, or you don't have a financial adviser right now, just reach out and talk to one of the ones that helpful Money Endorses. I'll tell you how to do that later on. Um, but it only takes you a couple seconds to set up a consultation with them and then you can just sit down with them and tell them what your personal situation is and what type of risk you'd like to protect against and they can come up with a proposal for you. Um, all right Mike heading back to you. Um, two questions I guess. one, anything notable about the markets that you guys are wa watching particularly closely right now and yes, give us an update on what's happening with the precious metals because they've they've had kind of a bumpy ride over the past two weeks. >> Yeah, David talked about the uh the market broadening out a couple months ago and then maybe kind of fading or fizzling out a little bit >> or the S&P sputtering. It's a little bit of that going on. And John talked about our own technical indicators weakening, not to a large extent, but they certainly rolled over a little bit. And so that that had us put on the S&P put that he just talked about just in case we get that downside crash. Essentially, we're we're worried about the tail risk. David talked about tail risk and and having to manage that his whole career. It's been tough to do that because tail risk hasn't mattered. It just hasn't really reared its ugly head. But it's something that we're watching. But at the same time, we we only had a 3% pullback on the S&P. And looking at the uh the market right now, it's up about 40 points, quite strong, and we're only maybe one or two% off the all-time highs right now. So, it's hard to get too concerned. And in fact, if we go through those all-time highs, we'll probably squeeze even higher. So, um that's why the puts make a lot of sense because they didn't cost very much. And if we if we squeeze higher from here, we're not going to lose much by putting that insurance on. And so the breath is starting to to fade a little bit, but it's still there to some extent. Small midcaps have been weak this week, but um but but healthcare remains strong. Uh technology is still a little bit of a lagger, but it's still hovering right around its 50-day moving average on the NASDAQ. So, it's kind of a mixed market, almost a little bit of a boring market. And may maybe that's because we're in the final week uh before Labor Day. Normally this this week is really slow and volumes dry up. So I don't know. It's I hate to say I don't know, but I don't know what's going to happen next week or the week after. Again, if I had to guess, I think we squeeze higher and we break out of this range. And so you here we are saying that we we likely squeeze higher even though our indicators are slightly negative. and we put on this insurance and spent the money because we're almost hoping that's insurance that we don't need and that we squeeze higher and we can make some more gains uh in our portfolio for our clients. So mixed bag, let's talk next week. My bet is we probably go higher in terms of gold and silver. Can we talk can we turn to that now, Adam? >> Yeah, absolutely. >> Let's bring up uh a number of different things. Silver first like usual. There's a number of good things happening in gold and silver land and in the uh the miners themselves. So, here's silver, which has been a brutal pullback from the January 30th or January 29th high. And we've been watching this purple line all along for a move through there. And it hasn't. It didn't back in February. Back in May, we had this fake out and then there was this brutal third leg down. And as we've talked about here, three legs down is usually all you get in a counter trend move. And we broke out of this downtrend back in the beginning of August. And look what happened with SLV. This is ETF SLV, by the way. And I'm putting it up here because spot silver isn't available on my charting platform. But this is about $6 under spot. So right now with SLV at 60, spot is right around 66. I think the next level of resistance is up here at 67 maybe on on SLV which is around 73 spot. A little surprised about this big reversal when when uh on the Jackson Hole announcement where the expectations of a rate a rate hike went from something like 30% to 60%. As David Rosenberg just talked about, that's a pretty big pullback. We went from 64 to 57. That's a $7 pullback almost in spot in 3 days. But still, I think that pullback's likely over. We bounced off the 50-day moving average and and I believe we're going higher. Gold looks similar. I think that level of resistance here is is up at right around this blue line. We we did touch it and we came back to the 50-day moving average. I believe gold and silver are are are basically tracing out these big bases that are going to ultimately resolve to new highs. I think it shows even better on the miners. A number of miners came right back to new highs and they're are building cup with handle uh formations. So take a look at for instance Elorado Gold. Elor Dorado went from 50 to 25 again a brutal pullback 50%. And look at this cup formation and then this is what I would say is a handle. Now watch for El Dorado to break through 50 and that'll be a cup and handle breakout. I could put up any number of mining stocks here. Wheat and precious metals, giant base handle. Um, what else can I show you? Pneumont the only miner in the S&P 500 actually did make a new high the other day and pulled back and created a handle. So again, all these cup and handle found formations for Franco Nevada, same thing. GDX, the index itself, same thing. Big cup handle. The handle's a little lower here. watch for a breakthrough of 106 or so on GDX and uh that would mean the cup and handle um breakout would be complete. That would be the trigger. And just a 5-second disclaimer, we do need to say that none of these particular tickers are recommendations. Talk to us about your specific situation. I'm just showing them to give you an idea of of what we're looking at and and how to track these things. the silver majors. SIL looks similar. A little bit of a flatter cup and handle Silj the juniors similar. But just take a look at any of the big majors. They're all going to look like what I just showed you. Going back to AEM, this cup handle, watch for this handle to be broken out to the upside going back to GDX. That's the trigger point in my opinion. 106 or so on GDX. So I'll I'll pause there. Well, well, no, you're giving a lot of heart to um precious metals investors here that maybe the beatings here in in in the correction that we've experienced since the the blowoff spike earlier this year, maybe the beatings might be ending here. Yeah, it's never easy. You don't get to make big money in a bull market easily. You never can sit comfortably. This big pullback was painful for a lot of people, but if we break out of these cup and handle formations, the target prices would be much higher. uh maybe even double recent highs on on the on the on the minors. So again, not a guarantee. Be careful. Take your own risk tolerance into heart. Talk to us for some specific advice if you'd like, but I don't think the move is over in gold and silver and the miners. I think we just saw a brutal pullback in the context of a big bull move that probably will double from here. >> All right. Um well, thanks so much for that, Mike. We got to start wrapping it up now. Um just last point um Mike you were talking about how you know the week before Labor Day is really kind of uh a seasonal doldrum for the markets and it's because probably the maximum number of people until say like Christmas um are are off you know they're off on vacation. Um so you know a lot of our people watching this channel are the same. they're they're, you know, trying to squeeze the last of summer in and uh en enjoy what time they can with their family. Uh I just want to note, and you guys can piggyback on this any way you like, that the end of the year always moves faster than you think it's going to, right? you you come back from summer where you've kind got gotten to decompress and whatnot and then Labor Day happens and you you know have big barbecue, play a little whiffle ball and then all of a sudden things just come fast and furious after that and before you know it the end of the year is here and um for people who kind of get caught by surprise by this you know there's always kind of an end ofear scramble and you know comes with some regret too of steps I wished I had take taken earlier in the year uh to position myself for what what was I thought was most likely to happen going into the end of the year. So, what I'm saying folks is is, you know, actually these kind of slow times um are great for kind of doing your your prepping and your wargaming for the rest of the year. Um repositioning your portfolio, rebalancing, taking some profits where you've got really big gains. Um, but if you have been listening to what David Rosenberg was saying and and echoed in large part by the New Harbor guys here, you know, there's there's definitely some valid concerns out there that the end of this year could at a minimum be rocky. Um, and and at more than a minimum, you know, could be uh, you know, there could be some sort of, you know, material correction possible and all this. I'm not calling for it. I'm just saying that the risk factors are there. So if your portfolio is still pretty much just um uh allocated right now for the status quo continuing, you know, AI keep trying continuing to drive everything and volatility staying low as John was showing and stuff like that. Now really is a good time to either yourself if you're a do you do it yourself investor or sit down with your um financial advisors and I I guarantee they'd much rather work with you now than in December when you're in a panic and there's a lot less they can do towards the end of the year. Um just sit down and and say, "Hey, look, these are some of the concerns I have. Should I be making any changes to my portfolio right now in in response to those?" um you you it's the kind of thing you'll definitely thank yourself for doing at the end of the year um versus sitting down and uh versus not doing it now and then again kind of getting caught by how fast time moves afterwards. Guys, anything you want to say about that before we wrap up? >> Yeah, I think it's totally on point, Adam. Uh I'll I'll add in the the whole tax element, too. I mean uh fortunately we got the we all have this reality of of tax planning that that is bestowed upon us by the uh by the authorities and uh you know likewise there's a lot of forethought that that can and should be done uh between now and the end of the year things like Roth conversions uh folks that are charitably inclined and they've got required distributions from their IAS. One of the best ways to give to charities is using your uh at least in part your RMD uh because you can give to that charity and and not report it as income that you would otherwise have to report as income if you take it yourself. There's a whole multitude of things. Uh you want to be mindful about all the there's there's countless other, you know, kind of mindfields you want to look for. things like Irma, which I won't I won't get into it, but understand that there's a Medicare um sir charge that shows up two years later if you don't plan properly and it's not the end of the world, but just being mindful about it is is is is part of the equation. So, yeah, really important stuff. Uh not just from a portfolio market risk, but also just uh tax tax planning and things like that. >> Okay, so like I said, if you are a DIY investor, just sharpen your pencil and and do some work on it. Now, um if you're not, um talk to your financial advisor. If you've got a good one who is wellversed in all the things that John just mentioned, great. You know, don't mess with success. But if you don't have one or you'd like a second opinion from one that meets all thoughtful money's qualifications for a good professional financial adviser, uh consider talking to one of those firms you see with me on this channel week in and week out. Perhaps you'd like to talk to John and Mike and their team over at New Harbor. Uh, so to do all that, just fill out the very short form at thoughtfulmoney.com. Only takes you a couple seconds to fill out the form. These consultations are totally free. There's no commitments involved. It's just a service these firms offer to help as many investors like you as possible. Um, if you enjoyed having David Rosenberg on here and would like to see him come back on the channel soon, let us know that by hitting the like button and then clicking on the subscribe button below as well as that little bell icon right next to it. And last parting point, um we are still offering our lowest early bird price discount for the upcoming thoughtful money fall online conference. The faculty is amazing and it keeps getting better almost every day, but we've we've just about flushed out the full crew of faculty. Um so that that conference is going to take place on Saturday, October 17th. Don't worry if you can't watch live that day because everybody who registers is going to be sent replay videos of the event immediately afterwards. I'm talking the same night. You know, a lot of events like this take take weeks to send you the um replay videos. We try to get it to you in just a matter of hours. Um let's see what else. So, to sign up for the conference um and learn more about it, just go to thoughtfulmoney.com/conference. All the details are there. And a quick reminder that if you are a premium subscriber to the Falfful Money newsletter, which is our Substack, um you'll get a you've been sent a code or will be sent a code if you sign up now, um that instructs you on how to get an additional $50 off of that lower uh that lowest early bird price that I was talking about earlier. Um so if you don't already subscribe to the newsletter, just go to thoughtfulmoney.com/newsletter. Um, I think it only costs 19 bucks a month and to save 50 bucks if you want to just sign up for a month and pocket the difference, right? Um, 50 minus 19, you've got 31 bucks of profit right there. I'm totally happy if you do that. Um, so John and Mike, great week, great commentary, guys. Uh, I kind of had the sense that things are going to start getting kind of interesting um once we get through Labor Day when everybody's back and we have the looming date of the midyear elections in front of us. I think it could get pretty spicy between now and then. >> I do too. It's good to talk with you this uh this week, Adam. We look forward to next week. >> Thanks as always, Adam. Always fun. It's always interesting in our line of work. Uh just uh degrees of interesting and certainly is right now. >> All right. Well, great guys. Well, thanks for soldiering through me with today today's interview, too. Um, might have given a nod to it earlier, but uh we're recording this pretty early, East Coast time, which is pretty darn early, my time out here in Pacific Coast, and uh I'm in the process of moving uh this week, uh which is always a joy, said through gritted teeth. Um, so anyways, if I look a little extra disheveled today, that's the reason why. But gentlemen, I hope you guys have a great weekend. I'm gonna go off and move a bunch of boxes. >> Yeah, hopefully you prioritize moving your uh your your set there, Adam. That's probably first and foremost on your list. >> Yeah, it's um one of the great things about the set is it is built to be mobile. So, um hopefully viewers shouldn't notice any change, even though next week I'll be in a different location. >> Great. >> All right. Well, gentlemen, thanks so much for for joining us and everything, and we'll see you next week. >> See you soon. >> See you, Adam. Thanks. >> All right. and everybody else. Thanks so much for watching.