Peak Prosperity - Can Our Leaders Get Things Right In Time To Prevent A Market Rout?

Episode Date: July 20, 2024

Things are just getting weirder and weirder on the financial and economic landscape. Can they hold it all together until the elections? If so, how much longer after that?

Nothing in this program should be considered investment advice. It is for educational purposes only. Please hit pause and read this disclaimer in full. At what point as a country are we going to say, hey, we're headed in the wrong direction, and we're going to repent of our actions, and we're going to turn from our ways. Then all of a sudden, mathematics come back.

Welcome to this edition of Finance U. We have a lot to talk about this week because this is the first one recording in the aftermath of the near assassination of Donald Trump and, of course, the tragic murder of the ex-fire chief comparator and other injured people. So, Paul, welcome to the program. Good to see you today. It's an honor to be here, Chris. It's an honor. So you and I were just talking before I hit the record button about a number of things related to this. Obviously, there's going to be some market reactions to all of this, and we could talk about those. But before we go there, obviously, I feel like a lot has changed in the overall landscape about everything at this point in time. And I feel like some of it's actually really for the best. I'm very excited that people seem to be waking up to the

idea that we don't have like a little problem. Boy, we have a really big problem. D.C., how it's been operating unquestioned, you know, just unfettered for decades. A lot of people now are empowered to begin asking what I consider to be honest questions about that. And I think that's going to have a lot of impacts, not just in markets, but in the rest of our lives. So what's transpired for you in this, in the, what is this, five days? I've forgotten. I haven't slept a lot. Yeah, five days. And one, I want to thank you for all the work that you're putting out. It's just unbelievable. I've been right on listening and all the research that you're doing.

So thank you for everything that you've been doing for those of us that are so busy and in other areas. It's nice to have you to rely on. So gosh, you know, just the emotions, the conversations. I really feel like this has pushed a dividing line across because around the edges, I think people have whispered they're going to try to take him out if they can't get him in every other way. And then it's solidified individuals across the board. You know, I think Elon Musk has come out, you know, and is choosing a side. More than anything, one of the things that I've seen that I shared before is, you know, we moved my daughter and son-in-law into a department for medical school. My wife

stayed down there. I came on home. She stopped and visited her parents and was watching television with my father-in-law. And they started having conversations where they kind of made fun of me a little bit around the edges where I'd been telling them for the six or seven years, you cannot trust the mainstream media, you know, and to the point that, that when I would get down there, if I'd walk in and it was Fox news on all the time, I would just politely go out on the back porch, no matter how cold or how hot it was, you know, just to be respectful. And, uh, you know, so my father-in-law has a conversation with my wife's like, okay, you know, what can I trust? I clearly cannot trust the mainstream media.

He's like, I know enough about, you know, my background in hunting and everything else that's been out there that you, you know, this was edges for whatever reason, at least for a large majority of the individuals around. That was the final straw with all this fiasco and misinformation that's been coming out to lose trust in the mainstream media. Next, it's going to be in the financial market media and the financial markets, but I don't think that we're quite there yet. But I believe this is a turning point for an awakening within the country that, what is it you say about once it becomes common knowledge, you know, we're tilting, you know, slowly and then all at once. I personally believe at least in different sections of people that I've talked to with clients over the past couple of days that this is starting to become all at once. We're accelerating to that all at once point.

Well, this is kind of how these things go. So let's be clear. We've put up with a lot of stuff for a long time as a country. Okay. You know, starting back with NAFTA or whenever it was, we hollowed out our own high paying jobs and sent them overseas. And this was supposed to be good for all of us, but it wasn't right. Somehow cheap stuff at Walmart was supposed to make up for the loss of a, of a manufacturing job, but that's not how it works. That's not even remotely how it works. So we were hemorrhaging and we had this really wide wealth gap because the federal reserve was failing us all by, you know, unless you were part of the 0.1%.

I meant the 99.9% got failed because they just made this super wide wealth gap, right? So they were picking winners and losers at a socioeconomic level, at a generational level, right? So we can't have household formation. We know, Paul, that my insurance bills for medical insurance are a racket designed to fleece me and squeeze this turnip as much as possible my phone bill's a racket first time i went over to hong kong somebody showed me their at&t phone bill same service it was one page and it was 30 bucks and it was you know all everything full data right unlimited right and they had speeds that i could only like sort of marvel at you know and all of that my my

my at&t bill is like 12 pages thick and it's like ridiculous it's not 30 bucks a month trust me right so so so we're tired of just this whole overall racket so dc has failed us they've they've they are serving their own narrow interests somehow they get rich while everybody else is getting poor they make decisions that have nothing to do with what people want. Right. And so that's been the racket for a long time. And I think people are waking up to that. And it's good. That's a good thing. We should, it'll be tough, but it's necessary. Yeah. And, you know, and Strauss and how, and the fourth turning, you know, really illustrated, we're in a period of time where weak men are ruled by their emotions and their greed. And, and that's

all they know. And there's not the courage to just, just blatantly tell the truth or blatantly, you know, clearly tell the truth and clearly admit that you're wrong. They let, they let their ego and their pride rule the day. And, and unfortunately I think we had talked about it. I felt like a while ago, there's no line that weak men are willing to cross to get the things that they want. No line they're not willing to cross, you mean? Yes. Not willing to cross. No line they're not willing to cross. Correct. Thank you. So, you know, I believe we're to a period of time where there are strong individuals out there that have had enough. They care enough about the future of their families and their children and

the in the future of this country and and what allowed us to have the wealth that we've had here that they're willing to take risks to stand up and voice their opinions and and out of love try to communicate but but move forward and trying to make a difference so hopefully we're at the point where hopefully this is peak weak people. Now that I don't believe that this is peak pain, Chris, because the, the pain that, that weak people bring to us once the average individual understands, or they can't continue to manipulate the markets and, and paper everything over with these lies. Once the truth is demanded, then I think that's when the, when the bandaid ripping comes off I think that's when the when the bandaid ripping comes off.

But that's when the healing begins. Well, if we could, then, you know, around I was I was surprised to see that the markets, which I put double quotes around because they're very manipulated now. They're part of a narrative machine. So so you have the Trump near assassination and all that that happens on the weekend. And so Sunday night, I'm like, where are we opening? Oh, we opened up like 10 points on the SBA. Like nothing happens to the futures. But of course, as you and I have been discussing, the stock markets have no appreciation for risk anymore. It doesn't matter what's happening in the Middle East.

It doesn't matter if there's thermonuclear wars on the horizon. It doesn't matter if you have a near assassination of a presidential candidate. None of that seems to matter, right? So they've been kind of divorced from reality for a while. But if we could, from a fractal standpoint, I think there's one one piece I want to talk about with this, because I think the little can sometimes explain the whole. And I'm going to go talk to my favorite thing here, which is silver. So this is silver just in the past couple of days here right and it's going up and then somehow somebody has to sell a whole lot of it all at once here let me get my little my little laser pointer like they have to sell a lot of it all at once and then oh it starts

to climb back up that's 11 o'clock 10 11 o'clock and then at 10 o'clock on the nose that hourly candle's a big bloodbath with a with a little thing uh 10 o'clock again in fact we can go back further it's paul it's been 11 10 10 11 9 10 right so so they've they've just been here just smashing on the silver um because somebody's decided that's what you do or they need to but that's fiction to me there's not a market in the world that trades to the downside because it's 10 o'clock right that's just not a thing right but we're exposed to like we're supposed to accept that like oh 20 year olds just climb on roofs you know surrounded by by ostensible security it's just how it works you know it's it's obviously that's not how these things work. So I think

that somebody is working very hard to paper over silver right now, but I have other markets that are similar. I'm using that as a smaller explanation that because this looks so fantastically fictional that I think we're in a land of fiction right now. It does look fictional. So here's the question that I would have. There could be another side to that to use the deceit that's taken in the past. So, you know, we know clearly for years it's been proven with court settlements. You can probably I know you can recall those quicker than I can. But certain companies that have have had settlements in court where they have manipulated precious metals prices. Okay. So let's say you get to this point now and you're another entity and you're wanting to accumulate. So you jump on that bandwagon while you're trying to keep it from taking off and try to accumulate a lot more. So either way, if it's somebody that's papering it over to keep it low because they don't want the real inflationary numbers and those that are

participating in it to benefit or other entities that are trying to carry that on a little bit longer to keep it down so they can accumulate a lot more because there's a lot of precious metals, Chris, leaving the West and headed East. And I don't believe that we're going to be able to afford to buy those precious metals back from the East once we realize we need to. Listen, you say we're not going to be able to buy the metal back so there's two sides of the markets i want people to understand here which is there's the physical market which by the way i tap in at costco all the time now and get my little my little you know big brown truck of happiness showing up because you can buy silver at costco online and use the costco card and get it delivered anyway it's been it's

you know it's been fun. That's physical. Physical market is one thing. Then there's this other thing called the paper market, the futures market. So when I show the price of silver getting smashed down, it's not because somebody rolled up with a wheelbarrow full of physical and said, who wants it? This is because they press what are called paper futures contracts, which aren't even paper anymore.

It's just electronic junk. So this I love. So it turns out that there was a cable that went, came out on WikiLeaks and this is back in 1974. Okay. And they're talking about, because 1973, U.S. citizens had been allowed to buy gold again. And so that was an issue for them because it turned out a lot of people were buying gold again and they didn't like that because it was disrupting their little plans officially so this is a cable comes from london it's going to the u.s so you can see here again let me get my little laser pointer out it's coming from london right and it says here to the dealers this is the major gold dealers these are

the big boys and girls right um to the's expectations will be the formation of a sizable gold futures market. Each of the dealers expressed the belief that the futures market would be of significant proportion and physical trading would be minuscule by comparison. Also expressed was the expectation that large volume futures dealing would create a highly volatile market in turn the volatile price movements would diminish the initial demand for physical holding and most likely negate long-term holding by u.s citizens it's in black and white paul they told us flat up 1974 and they've only gotten better at this stuff right like think of a 1974 telephone versus a smartphone right that's that's sophistication difference because they got software running

these programs their idea was that if they could swamp the physical market and create volatility which would you know look like that choppy market i showed you where like oh silver just keeps getting smashed i guess i don't want to hold that you know they're using it as a psychological tool to manipulate people so they won't buy physical. So my advice to people is turn off Fox News, turn off MSNBC, turn them all off, because they're part of a manipulation scheme. Decide for yourself what's important, what's valuable, how you're going to manage risk. You got to start thinking for yourself in this story, because these other people do not have your best interests at heart. No, they don't. And that's actually I can share some other statistics just about how investor behavior. But Chris, you know, one of the things

when I when I talk to individuals and listeners out there, this is not blanket advice across the board. This is something that I do individually one-on-one, but typically I do recommend that people hold 10% of their liquid assets and physical metals. The reason that I started developing the analogy about, Hey, let's, you know, you're going to, you're going to buy that. You're going to store it in a safe place where you can get your hands on it. I don't want to know where it is, but this is long-term. So like fire insurance on your home. So you pay fire insurance in your home for 10 years. So if the home burns down, you're not, you know, you don't want it to burn down, but you're not upset that it didn't burn down because you spent that money. My whole purpose in explaining

it to people that way is to set the expectation so that they'll set it out of mind and on a shelf and hold it for the next 10 years and not get shaken out by these price movements. And that's helped so many investors since 2004 that we work with to benefit in those rises that have taken place in the precious metals over that period of time. Because unfortunately, you look at the average holding period for a mutual fund or an ETF that's out there, historically, it used to be three to five years. It's a lot shorter than that now, because you constantly got social media algorithms that are working and they know you now more than, than, you know, yourself to an extent. And, you know, we know that they listen. So imagine your

brother-in-law's bragging about how much money he made on the speculation that, that, you know, turned out in his favor. Now, all of a sudden you're getting inundated with chasing this performance, chasing that, chasing this, and people are trying to chase return more so than they are looking at an investment from a long-term standpoint. And then when you have this type of manipulation for so long a period of time that started documented. That's incredible. Back in 1974, people don't have the patience to stay in there from a long-term standpoint, but that's where you have to know where you're going. You have to know the math. And it amazes me too, where we are right now, just how many people are refusing to buy gold

because it's at an all-time high and they're like, gosh, it can't go higher. And I'm like, yeah, but, you know, based on money supply where it's up a little bit and they're getting a little impatient, you know, we're starting to shake some weak hands out here now. And when it starts that next leg, wherever it is, whenever that takes off, those people are going to be too scared to chase it, and they're going to miss out on the protection that it can give them from inflation and from other events from a long-term standpoint.

There's a lot on this screen, and I apologize, but this will give you an indication of the monthly. So this is gold going back to 1995. Now, the red and the green are periods where, where we're on defense versus offense versus gold, you know? So anyway, that's what you're talking about. That, that long-term cup and handle right there. That's, that's a huge consolidation, Chris, that's taken place since 2012. That's a huge consolidation. Look at that back in 1995. See that you got a cup and a handle back there too. You got that one, that first one. That's where I started buying after that got that one that first one that's where i i started

buying after that after that cup form that's where i started buying right there yeah yeah yeah and at the time it was like oh this is a multi-decade high it's terrible i had my my at the time merrill lynch advisor trying to talk me out of it this is a bad idea and gold was 301 dollars and 50 cents i know it intimately because that was the first day i went in and i remember it you know like a child was born you know it's one of those things you remember the first time going into gold right and okay now cast forward we have the same formation that cup and handle just happened and i get it it's an all-time high i get it yeah yeah and people hesitate here and and they get impatient because it's not taken off. But I mean, these patterns do matter.

And their behavior patterns is what they are. They're not, you know, you can't predict exactly how it's going to move out. But this is psychological patterns of behavior that you capture in price action of investors. And that gives us a great indication that you're going to see it go substantially higher. Of course, I've got a logarithmic chart there. And then, of course, this shows us you've got a tremendous amount of buyers that entered in this level, more so than at any other price level down through there. So, I mean, there's a foundation.

Yeah. Hey, if the markets come apart, gold prices may sell off. When people sell anything that they can potentially sell to pay off their debts or raise capital to meet their margin calls or anything that's out there, but that's going to be a buying opportunity if it happens and something that, that I plan to aggressively continue to allocate on. Yeah. Well, I got to tell you there's creaking and popping noises. This is a thing I like to talk about a bit. Um, me rewind here just a tiny bit. So it's never official until they deny it, right? That's right. That is true.

And you should never really sell the stock market until the first rate cut, which they do ostensibly to defend the markets. But by then it's too late and it's already like getting ready to tankeroo. The fact that Japan has had to intervene so aggressively and so often in their yen market is a really big popping creaking sound. I don't know all the details of what's happening in the background there, but you can see here, here's their first intervention on the 11th of July, right? And that's 12 p.m. my time. So this is middle of the night their time. So the Japanese officials burning the midnight oil, waking up at 12 a.m. their time, you know, or one or whatever time that was to step in and just crush like this is this

right here. This is not normal market behavior. So they had to step in here. crush like this is this right here this is not normal market behavior so they had to step in here and of course they're setting a tone here which is the central bank is going to defend the yen and then they did it again and again and then it carried along and they're doing it again so they are just in there and this is this this isn't this isn't just me like oh you know maybe um it it's openly talked about now yeah um where we have here uh bloomberg saying japan likely stepped into the currency market for a second straight day on friday here they are doing it again on wednesday so so the fact paul that they are so aggressively like in in in in tells me they're actually really worried. Some people take comfort from that and go, oh, look, they're in trying to calm the markets.

And I'm over here going, something's really broken. I don't know what it is, but they don't intervene that much, you know, unless something's really off the rails. So keep your eye on Japan. Something's broke. I'm watching that closely. There are several other things that are that are kind of taking place. I mean, economic numbers and the economic surprise index is continuing to deteriorate. So we're in a situation here to where all the narrative is soft landing, soft landing, or, hey, we're going to get Goldilocks where

the consumer is holding up really well. And quite frankly, it is surprising how well the consumer has held up. But, you know, you've also got cash levels that in some of the surveys that are reducing themselves down towards euphoria. You've got some institutions that are coming out and saying that the consumer is has reached, you know, all of their excess savings are gone. They're the weakest that they've been in a long time. It's hard to know exactly what the truth is, especially with the markets running the way they are. But what I can say is in conversations that I'm having with people around the country, one common theme is, is things are slowing down. Yeah, I've heard that a lot. And if that, you know, if the Fed comes out and cuts

aggressively, the question is, is it going to be like Pavlov's dog where, you know, investors kind of pile in or retail pile in and that's the last move where institutions can unload their shares on them? I don't know. Market tops are a very, very tough thing. They're hard to navigate because there's excess bullishness in the market. There's excess optimism. You know, and the time to aggressively buy is like Nathan Rothschild said, you want to buy aggressively when there's blood in the streets. Well, you know, the problem is, is people buy when it's easy and they sell when it's easy. And it's easy to be really aggressive

right now because you can build a narrative that, Hey, the Fed's going to save the day, but this is an expensive market. This is a dangerous market. I don't know when it tops. I believe we're in a topping process. I've been on top watch a little bit. And then we kind of cleared that hurdle. And I anticipated, you know, kind of made the comment, my best guess is we're going to see the market rally into July. So far, that has occurred. Maybe it carries into August 15. I don't know. But I still believe that we're in a topping process and that that at best this thing holds up into the election, if not, if not before. And I'm still curious to see if the market turns on that first rate cut. Historically, it has. Maybe it's three or four months later.

But this this this is an environment that can hurt a lot of people. And unfortunately, there's going to be a lot of investors that are hurt and their retirements are going to be absolutely destroyed. Yeah, yeah. No, this is my concern is that the purpose of MSNBC and Wall Street and all the private equity and all the marketing is to lure people in so they don't hold the bag themselves as insiders. So their job is to get other people to hold the bag, right?

They call it the dumb money i don't like that term as much these are just people who are trusting and they believe what they're being told which i think you should have some trust in a society but i've learned you can't trust these people they're always speaking out of the other side of their mouth you know they are not to be trusted and speaking of that um uh small cap thing you did you see this zero hedge just put this up this has never happened before this so this goes back many many decades this so-called volatility and the small caps where suddenly the small caps are just like oh here's where the

action is come on over people water is safe uh and they've just crammed small caps through the roof but uh in fact it's a trap don't fall for it yeah that's what it looks like to me well that's my concern and and and it's to be determined so um you know to pull that chart up for the listeners so this is the iwm which is the russell 2000 this is going back to august and it's been consolidating here for a period and then all of a sudden you have this explosive breakout, which according to the tweet that you just showed with that was that zero hedge and Bloomberg put out, this is the single largest overbought move. And down here is your relative strength. So you move up in that direction. We've never seen a move of this magnitude before. Well, what's

interesting as we were talking about a little bit earlier, what's interesting to me is there's been this narrative out there, hey, if we get this Goldilocks economy, if we get the soft landing scenario, what's going to happen is these overbought technology leaders, you're going to see a rebalancing out of that, and it's going to go into the small caps and the mid caps, you know, and then all of a sudden, boom, you get this move. And I'll tell you, you know, we got to see if this is going to hold and hopefully there's some back testing in there. And I can't rule out the possibility that this isn't a real breakout. But but that narrative behind it that's been leading up for two to three weeks concerns me because I've got, you know, several friends in the industry, they're not risk managers. And they're like, hey, man, look at that market's going to rocket into the end of the year. This is just the rebalances occurring. And you know, this is Goldilocks and this is great, man. I'm going to gather so many assets for the end of the year. You know, it, it charges the investment world to go out and just pound on individual investors, chase, chase, chase, chase, chase, And, uh, and Hey, maybe it's real,

but it's one of these things that we've got to take some time to observe it, be patient. We're long-term investors. Make sure this is real. Now we own and all, in all fairness, we own in our portfolios, the IWM. So we have exposure to it. So I'm, I'm, I'm happy for our investors that this broke out, but it's still, you know, very interesting. Yeah. Yeah, well, let's look at this real quick again. So this is from Zero Hedge saying, hey, this might be a problem. Noting here on July 15th that institutions have never been longer equity futures.

So here they are, institutions, never longer. So they're super, super long, all the equity futures, and they've never been shorter volatility. So VIX futures, so volatility, when it goes down, stocks go up. So this is called, Paul, they're on one side of the boat. They're all on one side of the boat. I'm going to be short volatility and long stocks. If you were hedged, you would be the opposite to those two things, right? They're not hedged.

No. They are just 100% certain that markets go up into the right and volatility compresses. That's exactly the setup we had in 2008. People got killed because of the same thing. If you just made a bank coming into 08, just sell volatility. That's all you had to do. Just sell it. It goes down. It's a one-way trip. It's an elevator. It goes down. You're right. And I'll tell you, my rules don't allow me to do it. And I wouldn't do it for clients. But personally, you know, especially in that big, I'm like, every day I'm like, I'm like, okay, I'm not going to break my rules. But I would love to go along the VIX right now,

because you know, one day, it's going to wake up and be up to me not a recommendation, guys, this is something I'm not doing. I'm talking about temptation. Because when investors are this unbalanced, like we've said before, the market can stay irrational longer than you can say solvent. So you don't want to try to pick the top. You can't short this. The VIX is a very dangerous thing, but it is going to break and it's going to unzip a lot of positions that are out there. And my biggest concern, Chris, on where we are, and this is where we're talking in the investment community, we're being diligent, diligent, diligent. We don't hesitate if you get a sell signal on anything. So what if the market gives us a false breakdown and runs a little bit higher? When the market's this unbalanced, this is the type of environment where you get a little bit of a warning and then you get a big drop. So, you know, if we don't get

the Goldilocks and we don't get the soft landing narrative, or if God forbid something out of the blue happens, this is when the market can absolutely unzip because like a bipolar individual, those emotions can swing dramatically from one way to the other. So investors are all giddy, giddy, giddy. They're excited because they know they're gambling. They're playing with fire. And then all of a sudden, you know, the information realizes they're the bag holders. And then my concern is, is we've had tons of passive investing. So who's going to buy if passive investors decide to start selling?

And, you know, and I don't think they're going to be trying to sell at the top. But at some point in the future, there's going to be some substantial downdrafts in the market, I believe, when when. Reality is seen for the truth that's under the surface. Well, have you seen any signs yet that suggest so, you know, post this assassination attempt, obviously, and post that disastrous debate with Biden or at least his wife insisting that they stay in the race? Have you seen any signs yet that the market's starting to price in what that means? So it's hard to determine. So the only thing that was open when the assassination attempt occurred was Bitcoin.

And I did not go back and look at the chart, but I read someone that I trust and their response. And they're like, hey, the first thing that I look for is markets. Markets were closed, duh, you know. And then Bitcoin. Oh, Bitcoin's open. So apparently Bitcoin sold off relatively dramatically at first. the markets markets were closed duh you know and then bitcoin oh bitcoin's open so apparently bitcoin sold off relatively dramatically at first and then once once there was the realization that trump survived it then it was off to the races again so there's a lot of talk in the analysts

that we follow and they're saying hey the market is pricing in a trump victory at this point so it's it's front running basically all of the anticipation because when he won in 2016, the markets just shot off, you know, and that was not the narrative that most people were being told. So the markets took off that, you know, I mean, really just launched and ran for the next 12 months. So, so there there's discussion on the street and nobody really knows, but they're tracking it to the few, you know, election futures. And, you know, however, was it predicted? I think it is that you can bet on the futures of who wins. So they're talking about tracking them back and forth. And there's there's discussion that the markets are already pricing in, you know, a Trump victory.

So if that doesn't occur, there's going to be some rebalancing in the market just from that standpoint. So I was, I was actually shocked at that risk that the market did not react negatively, but from what I saw in the markets, it was like, oh, they didn't get him good. Just move on. You know, this is, this is another thing. The market seems to be ignoring any potential risks that's's that's out there right now because those risks haven't mattered in the past yeah what are you saying are you seeing anything well i i don't know no i'm i'm surprised because um so there was a leaked phone call which bobby kennedy uh apologized for because his son filmed Trump calling him. And from the reading between the lines, Trump was offering RFK some kind of a position in his administration if he wins.

And I don't think you have to be a rocket scientist to realize he probably isn't picking up Department of Education. No. I hope that that's the actual reality of that call. So I turn my eyes over. I'm like, you know, if that's true and you've you got to process that what's happening in the pharma space because you know bobby's gonna rip them a new one rightly so in many cases so yes uh i nope seeing the exact opposite i so i'm just i'm not seeing i can't see any legit tracks that i can figure out right now nothing in the bond markets

i don't know it's a little weird to me but i thought there would be a substantial difference but i just i don't know the markets are behaving in really weird ways right they're doing whatever they want to do you know i guess they are i mean they're basically kind of kind of sold on the the soft landing goldilocks goldilocks potential and that's what i'm seeing across the markets now i don't really see a tremendous amount of weakness under because but don't get me wrong we've had weakness all the way up to here because the breadth has been terrible. The breadth being how many stocks are up, it's basically been led by the Magnificent Seven on the technology side. Everything else has struggled. But with the breakout of the IWM and then the equal weight index with the S&P 500, there's the S&P 500 cap weighted

index, which is basically ruled by your larger stocks. And then there's the equal weight where each of the 500 companies in the S&P 500 have an equal vote. So, you know, if the 500th company goes up, you know, and just as much as the number one, whether it's NVIDIA or Apple, you're better diversified. So the breakout on that does lead to that narrative that we could potentially have the soft landing, you know, Goldilocks. Now, I don't know that that's going to happen. I'm just saying that's what's taking place underneath the surface of the market. So that tells me the market is just ignoring all of this and the potential that there will be another attempt between now and the election that does not seem to be a concern with the with the markets at all. Yeah. So so, I mean, listen, this is real time.

You and I are recording this on the 17th. It's you know, markets are closed. So so we don't have a lot of motion from here to tomorrow. But this is what the heat map looks like for today's market, right? So obviously, Nvidia, Apple, Google, Meta down pretty hard, Tesla, Amazon. A lot of red up in this section, but you got this sector rotation back to consumer defensive. I'm a little confused because I consider P&G and PEP and things like that and Philip Morris and things like that uh and philip morris and things like that to be those are kind of pricey things i think people are struggling a little so i don't understand why that doesn't feel too defensive to me obviously exxon and chevron and stuff down here fine oils up on the

day i don't get this again we were talking about you know lily might be down because it may be an ozempic thing but um you know looking at, J&J really spiking here of late. Gilead, I don't get this. Something doesn't feel quite right to me about that. Not sure. So I don't know. I can't really see much in that. This is like a Rorschach test.

I can't make sense of it yet. No, it's hard to tell. And we're going to need some more information before we get there. Hey, I will say one thing. For whatever reason, I get asked this question in the past, but I have people that are asking, hey, you know, what about performance? What's historical performance? That's one of the worst questions that I tell, you know, when I talk to investors that you

can ask from a standpoint of investing. And I get it. But the problem is, is when people are focused on, you know, they don't know what to ask. And in 26 years, I get asked that question a lot. Now, we haven't paid to track historical performance. I don't believe in publishing historical performance because, one, if it's really, really good, then people are buying your performance. If it's okay or kind of mum, then they're not really paying attention to the strengths and weaknesses of the strategy. So what I tell people when they're asking that question,

I know what they're trying to get to. They just want to try to have some way to gauge, you know, can you get me through the future? Okay. So the question that people should be asking is what are the strengths and weaknesses of your strategy? So mutual funds, ETFs, everything publishes the, their performance out there. So when I look at a, an investment strategy, something that we're looking for, one of the first things I do is I go back and look at 2008. If it was around in 2008, how did it perform in 2008? Then I'll look at something like 2021. Well, how did it perform in 2021? If it's tracking the market exactly, as far as I'm concerned, it's a closet S&P 500 index and you're not getting the diversification

that you need. So from a diversification standpoint, what are the strengths of a strategy and what are the weaknesses of a strategy? So I want to share something pretty interesting because it goes along with this narrative. So there's tons of studies out there, and I want to share this presentation if I can get to the right page here. Okay, can you see that, Chris? I see a behavior gap. Behavior gap. So for the life of me, I just lost his lane, but behavior gap does great work. I purchased this

from him years ago. You have investment return and you have investor return. So consistently throughout industry history, all the studies, whether they're investors in Warren Buffett's Berkshire Hathaway, I'm going to highlight Peter Lynch here in just a minute. Investors don't get the investment return of the actual investment that they're owning because of their behavior that occurs in there. You know, in our industry to sell products is like, hey, you know, beating some index, beating some index. But what investors really need to do is focus on reaching their goals, not about beating some index, because that index is arbitrary and it's got, you know, strengths and weaknesses that may or may not help you in your investing process. So

I hope I hit the right button and don't hang up on it. So what I want to come back to is Peter Lynch. I'm on the guys for those of you listening out there. I'm absolutely terrified because when I share it's right beside the leave button, I'm scared death and we'll hit leave right in the middle of it. But let me share my other screen with you here because this is interesting and it's important for investors to take into consideration, especially during this period of time. So Roth and Company wrote a great article talking about fighting the last war. And what I want to get down to is it talks about an investor's easy to fall prey to recency bias. So the tendency to base investment decisions on recent market

performance rather than taking a broader and more forward-looking perspective. So fighting the last war, it says, is a natural human tendency that results from our innate desire to find patterns and make sense of the world around us. The investment world, CNBC, publications, investments that are doing good, they know this, and they're going to try to make hay while the sun's shining, and they're going to advertise that performance in every place that they can when they have pretty good returns. So here's an interesting aspect of that. So a study conducted by Fidelity Investments on their flagship Magellan fund during Peter Lynch's famed tenure from 1977 to 1990, his average annual return during this period was 29% as compared to the 14.47% of the S&P 500 during that period of time. Now, this was remarkable, okay, and it made him one of the best investors ever during that period of time. So, it was clear that investors were aware

of the fund's stellar performance as inflows made it one of the largest mutual funds of its time. Now, given that amazing performance, you would expect that Magellan Fund investors got really rich during Peter Lynch's tenure. However, shockingly, and this was shocking to me when I found this information about 20 years ago, a study by Fidelity Investments found otherwise the average investor lost money under Peter Lynch's leadership. So Chris, can you believe that during that period when he did 29% a year and the index did 14.47? Wow. Does that make sense to you? No, no, that's, oh, how do you, oh, that's, wow. So, yeah, there's a gap. There's a gap there. Yeah.

So the question is, how did the average investor lose out on Magellan's success? Now, they say it very eloquently here. So markets swing up and down. When the market went up, the Magellan fund rose even higher. This excited and enticed investors who rushed to invest. But when the market and the fund declined, investors immediately sold. So this is something that we've seen time and time again. And I want to highlight one very important thing where we are right now. Even if you're a non-risk managed

portfolio and you're adequately invested, you've underperformed the S&P 500 this year because it's basically been seven stocks. If you're adequately diversified, then you've got some international exposure. You've got a few other things in there that have not performed as well. This is max temptation for people to start chasing performance. So I want to go back and show one last thing. All right. What do you got? And I want to talk about Warren Buffett. So Chris, would you say that the average person

believes that Warren Buffett's a legend in the investing process, that he's wise, he's good at what he does? He's the number one legend of our times. He's the number one legend of our time. Now, he did have the wind at his sails, but he's still an absolute legend. So what I want to highlight right here is let's go back to May the 1st of 1996 to January the 1st. It's actually January the 3rd, I think, or December the 31st of 2000. So this top line, the one that's green and blue, is Berkshire Hathaway B. And the green line is the S&P 500. Okay, so this is the late 1990s, kind of peak euphoria.

So if I go in here, and let me annotate this so I can maneuver it around. I just want to make it a little bit easier. So if we go in here and we look at Berkshire Hathaway during that period of time, I know it's hard for you all to see, but that's 57% that he was up from May the 1st of 1996 to the end of the year 2000. Now, on the other hand, the S&P 500 was up over that window of time, approximately 180%. Okay, so here's what happens during that period of time. Investors are told, you know, Hey, Buffett's one of the best investors out there, you know, but then they hear Kramer on CNBC or somewhere else saying, Hey, Buffett doesn't understand the new economy. He needs to leave.

Here's the thing about Buffett. He's got a defined strategy that has certain strengths and weaknesses. That's why I'm pointing this out. They need to know, people should be asking, what are the types of environments you can thrive in and what are the types of environments that you will struggle in? Because the unique strengths to Berkshire Hathaway during that period of time kept it from chasing all of the technology. And in hindsight, what we know is investors were selling the good things and buying the things that were popular at the time. Now, if we go back to a different window of time

and we look at Berkshire Hathaway versus S&P 500 from 1-1-2000 to 12-31 of 2003, during that period of time, the S&P 500 and the NASDAQ cratered dramatically. So if you go back and look at Buffett, he was up approximately 64%. So when the market went down, he was up 64% over that period of time. So a good investment strategy helped him navigate and take advantage of what everybody else struggled with. Now, during that same window, the S&P 500 was down 25%. And from top to bottom on the S&P 500, it was down right at 47% during that window. So the one thing that I want to encourage people, uh, when they're talking to someone out there is, Hey, you know, not don't, don't be chasing performance. And I, I mean, I could spend the next 45 minutes showing you other examples,

but start asking people, okay, what types of environment were your strategy struggle in? And what types of environments were your strategy thrive in. And, and then ask them a question. If you want something that's risk managed, what is, what environment or what signals will cause you to take me from a hundred percent invested to 0% invested. Okay. So if you want to risk manage strategy, whoever you're working with is going to have to be able to demonstrate and it doesn't matter as an example they're going to have to define for you that we will go to zero percent equities and yes your goal may be a hundred percent equities aggressive growth and and that's where you want to be but we run a risk management strategy if a certain thing happens then maybe we're a 100% T-bills because we're adaptive.

Or maybe if another thing happens, we're going to overweight commodities or we're going to overweight international. We're in a period of time where you're going to have to be fluid. You're going to have to adapt. And for those who are concerned about downside risk, you need to understand the risks of the strategy. And if you work with someone and all you're asking about is performance, then you're not going to know whether that performance is going to be good if the market goes down 50% or 60%. What's important is if you understand the strengths and weaknesses of a strategy and they can define for you, whoever you're talking to,

how they'll go to 0% equity exposure, then now you understand what to expect. And if they'll go to 0% equity exposure. Then now you understand what to expect. And if they'll go to 0% equity exposure, you're also going to have a weakness that during a period of time where the market is irrational and it's way outside of historical boundaries that you're probably going to underperform a little bit. But it's the long term that we're looking for. If it's not different this time my greatest concern Chris it breaks my heart because people just don't know and the complacency in the market has caused investors to be complacent it's caused advisors to not look for other alternatives everybody is wanting to be with the herd right now and the herd is

typically really wrong at the extremes so my concern is is, is there's going to be a lot of baby boomers out there that are just trying to live their lives, hoping the best for our country. They're solid Americans. They've been taken advantage of by the emotional intelligence of Wall Street for Wall Street's own benefit. And their retirement is going to be wiped out if it's not different this time because they're more aggressively invested than what they realize they are. So anyway, that's my rant for the day. Hopefully somebody will learn from that. You know, don't worry so much about performance. I get why you're asking. What you need to be asking is what are the strengths,

what are the weaknesses, what are the types of environments that your strategy will do good in? What are the types of environments your strategy will do bad in? And will you go to zero percent equity exposure? And if so, why? Show me how. So my concern, Paul, is that that recency bias you talked about. Now, everybody knows that everybody knows that this is how the Fed's going to bail the market out because they always have. They always have. Right. So first question is, what if they don't? Right. And I just showed you that heat map, which we saw that NVIDIA is down and maybe the blush is off the arrows too early to say. But if or when in my entire adult life, the Fed, Paul, has been a serial bubble blower. Just the cure for a bursting prior bubble is a bigger one, right? And that's just what they do.

I think it's ill-advised. I think it creates all kinds of things. I think all it really gives you at the end of the day is a wealth gap and no durable, like, lasting prosperity. I think it's cheap thrills. It's heroin for the junkie kind of stuff. So I'm not a big fan of that, right? But hey, maybe I'm behind the times.

I don't know. But my concern is that recency bias you talked about, that everybody knows that the Fed's going to bail all this out. The place to be is in those meme stocks, the momentum stocks. Just chase that stuff, right? If you weren't in the big seven this year, you really are lagging badly, right? So what happens, Paul, if the Fed doesn't have the capability or the desire, for whatever reason, to bail it out one more time? Well, then we revert to the mean, and you have to go to the mathematics, and the mathematics that John Hussman has done such a great job of pointing out and demonstrating that we're going to see somewhere between a 50% to a 70 market decline unless unless there's some unusual event that bells us out. And and that's my concern. Right. Because now mathematics don't matter in this environment. If all if all it is is the Fed, then everybody's going to figure out what the signal is.

And then all of a sudden it's not going to work. That's one thing in Wall Street that we learn is, you know, everybody says, hey, sell in May and go away. Now that worked because at some point everybody looked back and realized, hey, let's sell in May and go away. Well, good statisticians like sentiment trader and Dorsey Wright and associates and some of these people that we utilize for research point out, it's like, well, that's not true. You probably need to sell closer to June 15th. And now it's closer to July the 15th. And now it's closer to August the 1st. So the market adapts because if everybody's working on one signal, then no one person has an advantage over another. So my concern is, is they either lose control or they decide to throw in the towel. You know, at what point as a country are we going to say,

hey, we're headed in the wrong direction and we're going to repent of our actions, we're going to turn from our ways. Then all of a sudden mathematics come back. And that may happen because it's forced upon the market or it may happen because it's nationally we decide that we don't want to head down this path anymore. Either way, for the complacent investor

that puts way too much faith in the narrative and the recency bias of what's happened lately, that's game over for retirement for most people. And here's the thing. If you have 40 or 50 years, you can invest and it's going to work out. The market's going to end up higher. But if you're 65 or you're 70 and your life expectancy is 90, well, you've got 20 to 25 years that if this market comes apart, then your retirement is toast. So if you were 70 years old and you retired in the year 2000, the stock market went sideways. The S&P 500 went sideways with two 50% declines until 2014. And if you're having to take distributions off of that portfolio, huh, you're in trouble. And especially if you're taking too large of a distribution, because

I mean, I, I ran into, I remember an advisor and by God's grace, I met, you know, an older, wiser, cynical guy. I remember, I remember looking at the cynical guys and I was like, man, that guy's a jerk. And I found out those are guys I need to hang around with because they've been there, done that, right? But, you know, there were advisors out there that were like, hey, S&P's done 19% a year for, you know, for the past 10 years. So you can draw 10% a year in retirement. Well, those people were toast, you know, when, when toast in their lifestyle or toast in their resources, if they didn't adapt. So that's why I'm so concerned about where we are right now, because at a minimum, you know,

John Husband does a great job of showing the math for those of you that want to read what he's got out there, that this market should go sideways to have negative returns over the next 10 to 12 years. Well, if you've not prepared for that or have an investment strategy that can adapt to that type environment, then you're in trouble. And that recency bias and the faith in the Federal Reserve is going to fail you, right? And as people are determining, they had unbelievable amounts of faith in the medical system. And that's what we've seen, that that's let them down over the past. Now I'm seeing doctors that are awakening to the faith that they put into their medical journals was unwarranted.

And, you know, you know, just like my father and all other individuals, the faith that they put into the mainstream media is unwarranted. The last leg, I guess, before the building really starts to crumble is that I believe that investors are going to say the faith that they put into the Federal Reserve and the financial media and the markets has been undeserved. That's why it's so important. Don't focus on return. Don't focus on performance in the most recent, no matter how good it is. Focus on the strategy and how it can help you in your situation and know what the individual risks are to your situation in your retirement. Because I can tell you, they're different than their brother-in-laws. They're different than your neighbors. They're different than anybody else that you meet out there, because even if you're in the same investment, you're not retiring at the same time. You don't

have the same resources. You're not taking the same distribution amounts. All of those are variables that can impact an individual's retirement. So you've got to examine it. That's why I put so much emphasis on the planning and retirement planning in the in the first part, because once I can show people where they are and get a plan, then I can demonstrate, hey, look, I can show you clearly this is what would have taken you out. So how do you want to deal with it? Do you want to work longer? Do you want to cut your income? You want to increase your risk? And it's not we're not showing people what they want. We're showing them what they need you know what i want to see next time paul can we do some case studies you know i've been thinking about that chris i

actually have you know take you know take the names off all that you know anonymize it um to or or or even you know hype hype hypothec. You know, but I, you never get tongue twisted. That makes me feel better. You never get tongue twisted. I'm pretty sure I just made a word up. So anyway, yes, I will. So I can say, yeah, I think a case study would be really helpful there. And, and, and to your point though, I think that this loss of faith in the federal reserve is deserved. And, and I've, you know, once you study, it's one of these things, Paul, every time I dig into something, you study it enough and it's about the government. You just end up losing faith because you realize you've been lied to or it's been incomplete or it's been self-dealing, but they've been trying to tell you that it's actually for your own benefit. The problem is, is we have a faith-based currency.

Yes. You've got to have faith in it. It's a fiat faith-based currency. Let's be completely honest about that. It has no actual value. It's tied to nothing. You know, at the end of the day, what can I turn my Federal Reserve note in for? Another one.

You know, big deal, right? Nothing. So I do think people need to understand the actual risks we face. That's why I think working with you is such a good thing because people can talk to somebody who will actually hear their actual concerns and not try to talk them down, minimize it, pat them on the head, tell them not to worry about the petrodollar. You know, why would you think about gold? People deserve to have access to a real conversation about this because let's be clear, these are highly uncertain times and it's not clear that the they in this story know what they're doing right you know every time i hear janet yelling speak i'm

just like oh how did we dodge that bullet when she was the fed chair you know um she's she's just i'm just like peter principal like wow you failed obviously, or you're or you're a really good actress and you're hiding a 140 IQ from the world. Yeah, one of these things. Right. But I don't think so. So at any rate, I do think that it's important that everybody understand the real risks we're in and start making some plans. And yeah, just have to.

That's just where we're at. So, you know, I mean, a little bit of a rant, but it's something just kind of to help people because I'm always asking what common themes are we getting? And I've already been thinking about some case studies. That's something I can do. I won't use any one person's situation, but I can build some of the things that I've seen and use some examples for people to take a look at. And, yeah, I'll work on that so let's do that because I'm intrigued because you know even when the stock market's cratering by 55 60 percent and you see that Warren Buffett's strategy was up 65 percent it doesn't like we can't we

don't have to think of ourselves and I know MSNBC and Wall Street work very hard to think that we are the index right you can't just push everybody into a passive just buy anything we throw into it kind of mentality. But you don't have to be there. You can decide for yourself what looks good and all that. And I think we're going to get back. So mark my words, Paul, we are going to get back to the time when forget about momentum, forget about memes, forget about stories. People are going to be good old-fashioned fundamentals.

Is this a good company and does it earn money? Yes. And what's the return on equity? Okay, great. We'll get back to some real basics in all of this. And, you know, yay. Yeah. Looking forward to that.

And that's going to be, you know, I'm looking forward to that in my career from the standpoint that fundamentals actually matter. And you can, you know, and I can look at people and say, Hey, this is a great stock. I know it's not gone anywhere for six months. Just be patient, you know, hang in there. I want to get back to those conversations, you know, or Hey, stocks down 20%, stocks have volatility. Don't worry about it. It's going to be good. You know, uh, because we we've been in these environments where it's been this momentum, it's the mean chasing it's the, meme chasing, nobody's concerned about the volatility. But on the other side of this, there's going to be people that are.

And you've got to go back to so many people that I meet now that their parents or grandparents built incredible amounts of wealth without being in the stock market. But the Great Depression event was so scarring that that entire generation refused to borrow money hey debt caused the problem nobody's worried about borrowing money today and most of them unfortunately refused to buy stocks because they just didn't understand the fundamental investing behind it but um you know there there were those families that did and they built incredible amounts of wealth on the other side behind it. But, you know, there were those families that did and they built incredible amounts of wealth on the other side of it. So what I care about is helping get people through these periods of time. And hey, look, we don't know when this thing peaks. We don't know exactly how it's going to come out. But here's what you've got to do to be successful. And the people that I take through that, they don't worry about beating the index anymore. The reason people are worried about beating the index is they don't know what they need to do to be successful. And the people that I take through that, they don't worry about beating the index anymore. The reason people are worried about beating the index is they don't know what

they need to do to be successful. And they don't know exactly where they are. And those are hard conversations sometimes when I tell, when I have to shatter somebody's bubble, but they're, but people are grateful after the shock and the frustration wears off. You know, I'm here, I'm having that conversation. There's no judgment. I'm not embarrassed. It's just, hey, what would you rather do? Would you rather take a little less income? Would you rather work a little longer? Would you rather save a little? What sacrifice do you want to make to achieve those goals? We're in a society right now where the markets and financial media are telling you, hey, you don't need to make any sacrifices.

Go live foolishly and the Fed's going to bail you out. And that's not going to pan out well for a whole generation of individuals that just don't know. Well, good. All right, Paul, we're going to have to call it there. But two things I want to leave people with here. First, if you want to talk with Paul as an incredible team, go to peakfinancialinvesting.com, fill out a simple form, somebody will get a hold of you but more importantly if you want to meet Paul in person you're gonna want to come to the peak prosperity summit this year that's September 13 14 15 in New Hampshire leaf season so a lot of reasons to go up there bring your significant other and and we're gonna

have a really good time this is gonna be such an important one Paul I mean as long as there's a world we're gonna have this thing really good time. This is going to be such an important one, Paul. I mean, as long as there's a world, we're going to have this thing, right? As long as something more dramatic hasn't happened. But it's so important that we meet each other, we talk with each other, because there's lots of information out there. This isn't, yeah, we'll share some information. It's about meeting the people who are going to be there. Because something magic happens when you can be around other folks who see the world this way, who you can bounce ideas off of. It's really important.

So looking forward to that. And I know you'll be there and meeting with people in person. So if you want to meet myself or Paul and a bunch of other folks in person, yeah, the summit's going to be your cup of tea. I hope people show up. I'm excited about it. I'm looking forward to it. That's going to be a great time. Me too. All right. With that, thanks for listening, everybody. We'll be back next week and hope you enjoyed this edition of Finance University. Bye, Paul.

See you, Chris. you