Peak Prosperity - Market Mania: Why the Upswing Might Be Deceiving

Episode Date: June 7, 2024

Trying to make sense of the world these days is certainly a full-time job. Among the many puzzling signals right now are Us and European equities powering higher and higher without any apparent regard for the risk of a war with Russia, deteriorating consumer data, or a still inverted yield curve (a historically accurate indicator of an imminent recession).Paul Kiker and I discuss some of these confusing signals and what they potentially mean for investors.

Hello everybody, Chris Martinson here, and today we're going to be talking about finance and economics as part of Finance U. Remember, anything that you see in this video and all resources available at our websites or affiliated websites are not intended as or construed as financial advice. This is for educational purposes. Remember, if you have a financial decision, please consult a financial professional. We are not attorneys. We're not CPAs. We are not financial managers. As well, we do our best to be accurate, and everything we represent is as accurate as we know it to be. Now, let's turn to our program. There's two ways to look at this rising stock market right now. One is, oh, sign of strength. Things are going well. The markets

don't lie. They have it right. The other way to look at this is the markets are sniffing something out, which is just the next devaluation cycle of the dollar. Hello, everybody, and welcome to this edition of Finance U. I'm smiling because the alternative is crying at this stage. We're recording this on, it looks like, June 5th. And the news, oh my gosh, Paul Kiker of Kiker Wealth Management, welcome back. Good to be here with you today. What are you seeing out there? How would you describe the mood from your end? So the mood is frustration, near panic, and fear really starting to build up in the populace that's out there, basically in every area. I don't get it, Paul. I'm looking at my screen. All-time new highs in the stock market. It does not get better than that. Huh? No. I guess

if you're in the halls of power, that's the one thing that, that you, that you'd gauge or look at or push to make everyone feel better. Hey, the markets wouldn't be great if things weren't concerned under the surface, but we've got all kinds of data out there. And in 26 years of doing this, I have never had so many people consistently express their fear and frustration on both sides of the aisle. So, you know, they're people are starting to realize that, that this isn't what it seems. And it seems more propaganda than it does reality. Yeah, I agree. I, you know, I, I think the markets are about as real as a New York times article at this point in time, right? I think it's a narrative machine. They push money into it, right? To read the financial news right now, Paul, it's all about when's the next Fed cut? When's the Fed cut? Is it going to be this cut? Is it going to be that much? How many cuts? How many cuts by the end of the year? It's just all cuts, cuts, cuts. As we've covered here

before, with the stock market powering to all-time new highs, with inflation still firmly entrenched, with financial conditions easy as they've been since the height of the pandemic excess that happened in in the spring of 2021 how could you even be taught like what's a cut gonna do for us like why why are they so addicted to that opium of cutting well so far i mean the hope is it meth yes well it's like a crack addict that really needs a fix, I guess, is the way that it boils down to. We said we were going to leave the president's son out of this. We did. We did.

I apologize about that. That was a little low shot there. But, you know, the sad part about this is there are several indicators that are out there that are, you know, last week I was very concerned about what I was seeing under the surface. So then we have the JOLTS job data come out, which is the Job Openings and Labor Turnover Survey. So for those of you, for the acronym of JOLTS, what that does is tell us how many job openings there are each month, how many workers were hired, how many quit their job, how many were laid off, and how many experienced other separations, including deaths. So that data missed dramatically. So we're at five months low on the hard data, right? Well, that was enough to cause rate cut

expectations to go up for 2024 and 2025. Yields are starting to come down again, and that's enough to just absolutely turn the tide right now. And there's this panic it seems to be setting in. And one of the things that I'm concerned about is when people get this scared, they make emotional bad decisions, right? If you're desperate and you feel like I'll never be able to buy a home and, hey, the government's going to bail out the market, well, I'll just pile in. So this thing may feed itself for another couple of months, you know, the McClellan oscillator, and I don't have all the statistics behind it, but basically had a rare signal as of yesterday's move. I believe it was yesterday, which gives us an

indication that there's probably another 60 days with a pretty good strong move in the markets, which, you know, papers everything over while, while our country seems to be at least burning down from the, uh, from the actions that are taking place with all of the risks that are taking place around the world. It's like whistling Dixie through the graveyard for a Southern statement that takes place right there. Um, you know, and I'm concerned that this is going to be the last little leg that just causes people to make panic decisions and out of fear and out of desperation. That's what concerns me.

We're setting the stage for major disappointment and major damage on the other side of this six, nine months out if we get this moved because the economic data is slowing. In the restaurant data, we're starting to see that people are trimming back. They're starting to cut back. And everywhere I go, people are talking about how expensive food is, taxes are, insurance is. And they're starting to make different decisions in their behavior. But the markets are telling us something different so it's really it's really messing with people right now yeah we got so much data that's i mean listen leaving aside the markets

which i believe are just goosed and juiced by the powers that be it's an election year which is never a good time to to bet against the market because magically it always finds a way to go up you know during an election year and that's not just for this the incumbent president that's for every incumbent. They just do better. So there's really no organized pushback. There's nobody in Washington that's going to say, hey, Fed, should we really be just juicing the markets? You know, because 92 and a half percent of all equities are owned by the top 10 percent of families. So it really doesn't do a lot for the bottom, you know, 90% of the families, but it feels good and they like it and it seems okay. And we do know that with rising stocks, you can paper over a lot of things. You can keep Uber going a little longer, whatever. I'm not mentioning any specific equities here, but you can run a

pretty crappy business in a hot equity environment because you can always raise more capital to paper over your mistakes. When the stock market market is falling you have the opposite situation and then people do tend to lose their jobs so so i get it it's not as simple as saying we're just rewarding equity holders but it also isn't a real economy when you're just throwing money into it is it i mean it's i've been here before that's what this is my first rodeo see the color right i've been here before. That's what, this is my first rodeo. See the color, right? I've seen this before. I've been here before, right? Chris, you don't understand.

It's eyeballs. You don't understand. They're not making land anymore, right? Right. Today, it's whatever else it's going to be today, right? Well, the problem is, is most people look at us like we're ancient relics to an extent if you're caught up in the propaganda of the market. And the reality is if you have some gray hair in this industry and you've been through 2000

and you've been through 2008, to an extent you're handicapped when the markets are irrational like this. This is the end of a cycle type move. And with much wisdom comes much sorrow, right? And you earn that wisdom through things that you have seen, experienced in your own life, and you've hopefully learned from others. And, you know, the only thing that we can do is warn people at this point in time to be very careful to pay attention to their long term picture, to make very calculated and risk aware decisions, right? How much is the upside here? Is it good to chase this market, right, here in the short run when it's akin to picking up pennies in front of a steamroller? Now, I've said a thousand times, we've got to play the game by the rule that's forced upon us. So you can play that game reasonably with one foot close to the exit. Well, let's talk about that because, remember, it's always different this time. So this is from Michael Arouet, and he said, what did he say?

He said, oh, the 1999 dot-com bubble was so cute. This is the share of the five largest companies as a share of S&P total market cap poking in there at 27%. So just five out of 500, right? 1% of companies are responsible for 27% of the total valuation of that index that is now today hitting an all-time new high. I don't even have to dig deep to understand what's going on. These five stocks, Paul, are on a tear today. Maybe I'm wrong, but I bet I'm not, right? So this is crazy. And we're supposed to just say, oh, you know, this is, I've been here before. I've been here before and it doesn't end well,

you know, and my concern is the short sightedness that's taken place in our political circles, our circles of power. And I have been concerned about, okay, how much are they going to juice these markets? What effort's going to go into the election? Because, you know, and I've thought about this a lot. So if you're the incumbent and you're looking at, okay, you know, Mr. Trump is the bad person. Like he's the worst thing that could ever happen. Well, if as bad as they are polling, right? Okay. Maybe we keep the markets up and we run the risk of seizing this engine so that we at least have that removed from what's stacked against us when it comes into the election.

And I'm not so sure that they worry if things come apart on the other side of the election because they're still in control. And if Trump does win the election, well, hey, maybe if things come apart, we'll do as close as to the election as possible, then we'll do everything that we can with our propaganda centers to blame it on him so that, hey, we get a win-win either way. That's my concern. It's the only thing that makes sense to put this much effort and propaganda into trying to keep the markets up at this point, especially with the damage that it's going to do

to the average individual. Because the reality is I was talking with a friend of mine recently back in 2014, I could have named you 15, 16 advisors that were, were trying to operate in a risk managed portfolio, which is a hard thing to do in this environment. And you have to adapt and you have to make some changes, but most of them just thrown, you know, they've all set for us. And a few others have thrown out that approach because it's like, Hey, you know, we want to be with the herd and we want to follow along. So there are very few out there who are willing to follow the indicators that they know will work when things start to turn. And that's my concern about on the other side of this is when you get that first decline. Oh, I'm a long term investor.

I'll hold on to it. That cycle of emotions. Well, then you get another decline. Oh, well, you know, I'll wait till the market bounces up to a little bit higher level and then I'll sell, you know, then, and then, oh, now I'm down 50%, you know, and that's when they panic to get out. So I'm very concerned about what's going to happen to the average investor when this cycle is over. Yeah. And we should be, because, you know, again, there's two ways to look at this rising stock market right now. One is, oh, sign of strength.

Things are going well. The markets don't lie. They have it right. The other way to look at this is the markets are sniffing something out, which is just the next devaluation cycle of the dollar. And where do you put that money? Right. And then you have to understand the global macro flows, because it could be that this is people from Europe going, well, we think that we think Europe's a bad place to be right now, because guess what? Right now they are rattling the nuclear sabers with Russia, which call me old school. I think that's a bad idea and could be bad for business. Right. So maybe that's money from Europe saying okay we're getting out of dodge we you know maybe but the signs aren't aren't good like look at this one paul this is credit card delinquencies

percent of balances going delinquent here right and we say 30 or more days delinquent this has been rising fairly sharply the only other context for a rise that sharp would be back here in the 2000 coming into 2007, 8. And then when you look at 90 days late, the percentage, again, you have to go back to like this territory back here, which was the great financial recession to find equivalent numbers. So you have that, right? And then let me just sneak down. This is auto loan repossessions at this level. Again, you have to, you know, they're sneaking up um not a sign of health right and so it turns out that these uh repossessions are actually actually getting

getting where they are and back in back in other troubled times so those aren't consistent necessarily with um everything's everything wrote everything's everything's awesome. Everything is awesome from the Lego movie. Great movie. Great song, by the way. What you mentioned about the concern of trying to get ahead of this and, hey, I'd just rather own equities if we're going to have a dollar crisis on the other side of this. You know, what happens when they cut rates again with inflation this sticky

right now? You know, that is a concern because if you start to see the market break out and take off in the midst of rate cuts and currency crisis with the economy slowing, and especially once unemployment starts to crack and rise. So, and that's a lagging indicator. So that'll be the last thing that turns as the economy, you know, it can't be hidden anymore. Let's put it that way. But you go back and look at these most recent revisions. I didn't have time before we got together to go back and gather all the data.

But basically, you know, the revisions that have come out over the past year, there's a belief, if I remember correctly, somewhere around a million jobs were overestimated in the past 12 months. So those revisions don't seem to matter to Wall Street because it's the headline number that everybody has trusted for so long. But just like what happened during the COVID pandemic, you know, there were many individuals that trusted the journals that were out there and they've learned different now, right? So they're looking over their shoulder and having to do their own research. I still think that wall street, at least the majority of wall street trust these numbers because they've been able to trust them in the past and they're not paying attention to those revisions before this cycles over.

I think they're going to realize those headline numbers can be manipulated for political benefit. And of course they are. And I covered that extensively in a lot of my writings and crash course fuzzy numbers. Listen, you show me the incentive, I'll show you the outcome. The government is obviously incentivized to overestimate jobs and underestimate inflation. And so they do, right? Everybody should just be aware of that. We shouldn't struggle with that concept too much.

But speaking of struggling on concepts, I'd just like to take a moment. I usually wear my peak prosperity hat. I'm going to take it off. I'm going to put on my peak financial investing hat because it's really important to me that everybody listening to this has a chance to speak to an advisor like Paul and his team who speaks your own language, shares your concerns, has the necessary gray hair that this isn't their first rodeo because you absolutely have to have a steady hand coming into the kind of cycle we're in. So if you're at all interested in having your portfolio managed by somebody who can run a risk managed portfolio and can talk to you in a way where, listen, they're going to be able to understand what you're saying. You deserve to be

with an advisor like that. So go to peakfinancialinvesting.com, fill out a simple form. Somebody from Paul and his team will get a hold of you and begin the process of, well, finally getting your arms around this very sticky situation we have going on here. So I just wanted to say that because, Paul, I'm getting the best possible feedback from people who are just thrilled with working with you. Thank you. I actually had a really neat conversation with a new client that came through Peak. We're at the six-month mark,

so I just reached out and said hello to them. And they were just so thrilled with the communication, with what we've been able to do for them. So that was good for us because I'm in the weeds working with people every day. But I got to tell you, I've changed our initial call just a little bit, Chris. So myself, Dylan Smith and John Alexander, you know, and I sat down and I said, Hey guys, this is one of the things that I've been doing. I had a list of questions that we asked people, but I start out now. And I mean this because this has been the most enjoyable thing to me. I'm like, okay, this is our initial consultation. Ask me any question that you have anything. You're not going to hurt my feelings. I'm Ask me any question that you have anything. You're not going to hurt my feelings. I'm not going to think that you're crazy. If you have a question, ask me

and we'll have a conversation about it. And quite frankly, you know, and I always tell them, if you think it's a stupid question, then I'm going to get nervous because every time somebody goes, well, this is a stupid question. I'm like, those are the hardest questions I get actually. So, uh, but it's been fun to do that because people are open and comfortable. They ask those and I can help talk them through. And then we move into the planning process to help say, okay, here's where you are. This is your situation. These are the resources that you've got.

Now let's develop a wise plan to build in some insurance against the great taking. Let's get this structure in here to provide all, everything that we can and then help advise them. You know, there's areas that we don't handle, but I know enough and I'm experienced them that we can pass them off in those areas. If it's not inside our area of expertise, then we know the experts that we can bring in. And most of them are through your great community of contacts that you have. So it's been really fun. I've met a lot of great people and quite frankly, it's such an honor. It really is. What is the answer to that question? What are people throwing at you to say what they're

most concerned about or what top of mind for them, I should say? Oh gosh, I have so many different ones. It's like, is real estate the answer? Or what about the great taking? I get a lot of those. And hey, I've been a buy and hold modern portfolio theory investor. How do we protect against the downside? When do you do that? So I'm trying to think of all the really hard questions. They're very similar across the board, but I've also had individuals that are like, Hey, you know, I want to see if I'm in a position to where I can set something up for my heirs. Hey, I've got this in place. So I get all kinds of questions that are out there. And I have not had one stupid question, quite frankly. I mean,

those just don't exist because the reality is when somebody asks, if there's a question, this is what I encourage people. If you have a question, ask it because that's something that matters to you. And if I don't have the answer, I'll go find it. So I'm trying to think. You just had a question came in by snail mail. What was that question? I got to pull this up.

And I won't say the name, although I'm. No, please don't. Oh, I won't. I got to pull this up and, and I won't say the name, although I'm, I'm, please don't. Oh, I won't. I won't. But it's funny because, uh, you know, Chris, I was telling you, it's been so long since I've had a snail mail paper question, you know, cause it's always email. So I actually sat down and, and looked at it. So here's one of the questions that I had. This is somebody that, that is somebody that we've got a relationship we're working with. And the question, the first question they said is, if the Chinese are dumping U.S. treasuries, shouldn't I be dumping them too? And I thought, that's a great question. That's a great question. So how would you answer that chris um so so first there's three

flavors of these things right bills notes and bonds so the notes are are from one to seven years and the bonds are are from 10 20 30 years so those are the big long ones and then the bills are these little short ones right they're under a year but when say a bill, I'm usually thinking 28 day paper, three months, you know, maybe six months, but, but that's as far as I go on, on a bill in my head. So I actually think that anybody who's holding 30 year U S government paper at around 4% is a knucklehead, right? And that's not financial advice. That's a, that's an assessment, right?? No, I think that absolutely to the extent that China and even Japan now, for other reasons, are dumping their bonds, the tens and higher. Yeah, absolutely. Follow suit on that. Do not look past go, right? I don't see any advantage to trying to hold that paper in a full percent less than you can actually hold short paper.

Hold the short because, you know, baby, we don't know what's coming, right? So I'd much rather be on the short end of that. But I don't see anything particularly wrong, Paul, with holding, you know, 28-day paper at 5.4% right now. I think that's... No, that's right. And that's a great... And thank you, because I wouldn't have thought to explain the difference between, in my thought process there they're notes, bills, and bonds. So, you know, the point being is, as a U.S. citizen, how I would answer that, as a U.S. citizen, we're in a little bit different situation than what the Chinese are, okay? So they're making strategic long-term moves.

One of the things that I'm concerned about, we won't know until it actually unfolds. But, you know, we talked about the unit and what the BRICS was trying to put together as far as a medium exchange, a trusted medium of exchange as an alternative to the U.S. dollar. In the U.S., as a U.S. citizen, the safest thing that we can own right now is the U.S. Treasury. Because FDIC is an agency of the federal government, and it carries the implied backing of the federal government along with SIPC and some of those others, but it's not a direct obligation when you get down to the technicality like treasuries. So for now, those are the safest place that you can hide to protect your capital if the markets come apart. So from an investment standpoint, treasuries are great. Now know, now if rates look like

they're going to go lower, I do see the 10 year yield going down a little bit. I'll take a strategic trade to take that position. Not saying that we're doing that right now, but that's something that we can do because you can get a little bit of a yield. But quite frankly, the way I explain that is for professionals only. That's not something that you want to buy and hold from a long-term standpoint because inflation can absolutely erode that capital. So, you know, treasuries are a tool to be used in the interim period. One thing that I want to explain to individuals and investors out there, you want to think of investments, whether it's treasuries or gold or foreign currencies or even stocks, there are tools that you can utilize to help you achieve your goals. And this, you know, one tool is not going to work for every problem that you have. And there are some tools that you may not use for five or 10 years, but when you need that tool, it's the most valuable tool in your toolbox. So if you think of investing like that, it's a, it's problem solving and that's how you fix the situation that you're in,

you know, individually that has been forced upon us. So, um, you know, as a U S investor, short-term, I like short-term, not specifically a recommendation, but like you said, why carry 30 year risk with the government, uh government pushing us to the limits of inflationary risk? And at some point, that's going to hit the 30-year treasury when you get compensated more to own 60 and 90 days out there right now, even 12 months. Well, listen, if you buy 30-day paper today, right? Somebody is because they auction them once a week. That takes you out to the year 2054 2054 i know you're just laughing like i am like yeah i'll just hold this paper for 30 years at

four percent give or take um for 30 till 2054 okay nobody's explained how we're making a past 2030 given where we actually are right now on um the story, what we're going to do with our copper shortages that seem to be looming. There's a lot of things that have to be resolved, and I know in my heart of hearts, Paul, that the Federal Reserve is going to have to print and print more. As we've discussed before, they have two choices before them, and neither of them are good. Defend the dollar or defend the bond market, the treasury market. They're going to defend the treasury market, which means government can't find buyers for all the paper it needs. It has to roll like $9 trillion a year now just on the ever cycle because it pushed itself to the short end of the curve and its infinite wisdom. And so there it is, like having to just auction nine trillion dollars some new some old

every single year that can't freeze if that freezes that breaks if that breaks the federal reserves main and only clients which are banks it's not you and me let's just get this make sure we're just clear on that their banks uh the whole financial system takes it so the feds there to protect the financial system look if the dollar loses eight nine ten percent a year what do they care right they go out they get paul krugman to come on tv and say i didn't notice anything because of course he doesn't shop for himself and he's totally insulated and has no idea what things cost right uh so so yeah he doesn't care so he'll come out and tell you you're nuts for thinking inflation's bad you know they don't don't care that your kids are starving and, you know, you got dispossessed from your house. None of that matters to these people.

They don't care about that, but they do care if the financial system freezes up. And that's what a treasury failed auction would be. If we have a treasury failure, that is, from their perspective, lights out. Worst thing that could happen, Armageddon, brimstone, frogs, blood come from the sky. Everything's terrible. Fun part is, you know, the Amish in Pennsylvania, be weeks before they even found out about it, right? Nothing would change in their day. But for the people caught in that world, it would be quite the cataclysm, you know? And so they will not let the treasury auction fail, period, full stop.

Right now, making their job difficult is a Congress. It's like, oh, cool. And now they've just entrenched two trillion plus dollar deficits as far as the eye can see. So by 2054, the United States government, if I'm doing the math right in my head, minimum another 60, yeah, be closing in on $100 trillion of debt for the U.S. Government alone. Government alone. But yet, what you talked about last week in the data you showed is our Treasury Secretary is buying longer-term maturities and refinancing them lower. You know, buying lower yielding and paying higher more to shorten that maturity.

If I'm the government, I want to be selling 100-year debt right now. And if somebody out there is foolish enough to buy it, then I want to tie that in for as long as I possibly can. If I'm an investor out there, not a recommendation, this is just for educational purposes, just to get you thinking, I don't want to own any maturity that's going to be over seven years. I don't, not with what's taken place with the printing. And I really don't want to be out seven years, quite frankly, I'm just saying, you know, this is a

period of time where, you know, historically when rates are going down, I was taught initially when I was with corporates, like, you know, sell somebody a 30 year bond because one, it pays a higher commission back then when it was in commissions. And two, just tell them they're probably, if they're lucky, they get to keep it for the 30 years, but more than likely it's going to be refinanced five years from now when it opens up. Well, that makes sense when interest rates are going down. It's good corporate management if you have $100 million of debt out there just to pick a round number that's paying 10%, and you can refinance it at five or you can refinance it at three. It's not good corporate business. If rates are at 10% and you refinance it from three and a half to 10, you're going to stretch that out for

as long as you possibly can as a business. So if we're in a long-term uprate and cycle, which I believe that we will, it's going to be fits and starts. You're going to have moves up and you're going to have moves back down. You know, if you buy one of those 30 year notes, you're probably going to be stuck with it for a long time because the treasury secretary doesn't care if you as an individual get upside down in that, like they do the banks, you know, they can, they can buy them back from the banks or refinance with them to keep the system going, but they're not so concerned about you individually. Yep. Nope. Not at all. It's just not how it is at this point. I wish it was otherwise, but boy. And, you know, you and I haven't really talked on it.

We touched on it a bit, but, you know, there's this market going up like it is. It must be focused on something very narrow and specific because it doesn't seem to have a risk premium built into it. Right. Right. Like, and you and I, at the time of talking about this here on June 5th, good chance things between Russia, Ukraine, the West could go off the rails. Right. Highest risk in my adult lifetime i think you know unless i just wasn't paying attention before but now i am um and you know what do you get out of that

oh you know just a lot more nvidia goes up and and facebook goes up and microsoft goes up right it's just like yeah you know that's that's that's what we want right there um and uh and so yeah it's just all tech technology is going to save the day. And so this is the hard part about this. Remember, it was eyeballs, then it was real estate, and now it's AI. It's the same story over and over again. This thing, this new shiny thing that you hear about endlessly on CNBC, this thing, totally people, I don't know how people didn't understand this is gonna change everything you know and then it matures a little bit and you go okay yeah nope internet was totally cool but

not as cool as we thought you know at one point real estate makes a lot of sense but maybe not always because look at office buildings right oops you know it's a little little awkward um same thing with ai we're gonna find out it's really good for some things but not everything right now it's just abstract ideas of what it could do that's always exciting i get it um but the thing that cut that catches me about the ai thing which is the underpinnings of it paul all the companies out there talking about getting harder into this like microsoft right they're just talking like well how do we get harder into ai their next conversation is hey should we maybe explore buying nuclear plants from westinghouse because we're gonna have to power these things like you have to you can't just get the data centers with the ai you have

to now source the power plants for that which could include nuclear could include coal could then let's try and green it up like oh you know, you know, we're using this. We're using hydropower. Like, well, then we're not using that for something else. So, right? But it's power. Power is going to be the Achilles heel of this thing eventually. It is. And, you know, and the date on consumption, I mean, you're exactly right.

And we're not making the investment that we need to there. So I'm concerned. One thing that came to mind is you were talking about it not being different. And I was looking for it real quick. So I want to share this. So Charter came out with this. I think it's through Sherwood News. I'll share this just to show the viewers out there that history doesn't exactly repeat itself, but it does run. I mean,

and the problem that we're dealing with right now is human nature, right? We have this hindsight bias that we tend to take the most recent past and we extrapolate that into the future. And we overestimate what that income is. And then of course, there's, there's the herd mentality, you know, most people feel good in the herd. It's the path less traveled that's a lot harder to walk. And so, you know, going back to the pandemic winters, this came out through Charter, but let me share it here real quick. Oh, screen. No, bear with me. Okay.

Can you see that there, Chris? I sure can, yeah. So here's your pandemic winners, right? In the midst of the pandemic, you had Moderna. I didn't mean to pick that one first. Cause we could talk about that for quite some time up 2,377%. What happened on the other side of it? You had zoom, which was, was through the roof. And for me personally, I didn't use Zoom that much prior to the pandemic. And I was actually hesitant to start using it, but it's now it's something that between that and Microsoft Teams that we use all the time. It's worked its way in, but look how much that price has dropped, you know, up 735%

to 13% below what it was before it started. Etsy, Peloton, DocuSign, Wayfair. This is nothing new, right? And this cycle with AI is probably going to be the same thing because in 2007, I'll never forget. And this was the attitude in 2007. I had a client come to me, was successful, set up for retirement. We had had done the plan had tons of margin for error and he sits down he says paul this son-in-law of mine is an absolute knucklehead and he's making a fortune in real estate and he's like you've you've you've told me about your concerns in the market and you know kind of how things will unfold they're not making any more land back then. It was, they're

not making any more land and housing is underbuilt, right? Like, so, you know, and I'm projecting this going on in the future. And I was, but, you know, I was, but in our area, you know, 75% of the houses are over or too expensive for 95% of the population to afford. Right. So there's a supply and demand mismatch. So long story short, I couldn't talk them out of it. They go out. Not only did they take everything that they had to go buy seven houses is what they could have bought back then, which would be two at this point, they levered that to the hilt to try to maximize it because, Hey, if,

if my son-in-law or my friend or whoever else is a knucklehead, right. That can, that can be successful at this. I, as a smart person was the thought have figured this out. This trend is going to last forever. I'm going to be in great shape. 65 years old had retired at 62, lost everything by the time 2010, 2011 came around. Absolutely upended their life.

I don't think it's any different at this point in the cycle because everybody thinks that this time is different and that they're too smart to get caught up in it and they'll find a way to get out. And this is a point where we have to take every step with fear and trembling carefully and wise. Yes. Yes. So, um, uh, keep talking while I pull this up because, because this is, this is totally relevant, but I mean, you're, you're talking about it. It's that fear of missing out FOMO, F O M O fear of missing out, um, that strikes towards the top and I can feel it. I mean, I, I, I, you know, I'm very dispassionate about the markets, but I can feel when you get that FOMO in the air because it's, it's palpable, right? Yes. You know, and, and, and you, I sort of see it in, in people I talk to personally, but also I see it on Twitter, right? You know, so it's kind of, it's one of

these things, you know, like when, when you see an asset really firing up you get the people who are just really wrapped up in that right emotionally wrapped up in whatever that asset is um and man they are just they are really fiercely good advocates for those things right oh yeah so you know what do you do when when things are really really good you ask well what could go bad and when things are really really really good? You ask, well, what could go bad? And when things are really, really bad, you ask, well, how could this go right? You know, it's never what it seems at the top or the bottom, right? Well said. Very well said. And, you know, while you're pulling that up, I'll tell you something that's absolutely so sad that my wife saw last week.

So she's in the grocery store. There's an elderly lady that goes and her credit card doesn't work to buy food. And Holly said she didn't have a substantial amount of food. And then she pulls out her debit card and the debit card won't work. And she's just sitting there. Holly said she was just sitting there stunned. You could tell she was just like absolutely overwhelmed over the fact that she did not have the funds or didn't have access to the funds to be able to buy the groceries that were in front of her. So she's trying to figure out what to remove. And Holly's a little, you know, she's a little more cautious than I, you know, opposites kind of balance each other out. And I'm like, why didn't you buy it by her dinner?

Because she's probably an elderly lady on fixed income. Social security is all that she has. And Holly's like, well, I thought about it for a second. And she said, the guy behind me said, Hey man, that's okay. I'll pick up whatever you have the difference. And Holly said, Hey, I'll split it with you. And I've talked to somebody else today and a couple of other individuals that have seen that occur multiple times over the past several weeks. So we're in this situation of where the markets are rejoicing over interest rates coming down while especially your retirees that are on a fixed budget, inflation is absolutely eating them alive. And that's the thing. That's the one thing that I can do for people when I

talk to them and run into them. And that's why we spend so much effort on the planning process. So I can stress test you against five and a half percent compounded, seven and a half percent compounded inflation. Three and a half is the minimum of what you should expect from a historical standpoint. Who knows? That it's not enough. But if you can demonstrate to people and show, look, these are the risks that you're going to face from a long-term standpoint. This is what you have to prepare for. Would you rather work an extra couple of years or would you rather give up a little bit of your income expectations and prepare for that now and be prepared for worst-case scenario so that you've got a plan to walk forward so that you don't end up in that situation because nobody in their right mind is going to end up in that situation planning for it. They're going to end up because they didn't have the courage to sit down and face reality and look at it because they were scared of what it might tell them. But that's how you plan and that's how you stand the test of time. And that's how you navigate these environments when they inevitably come about. Well, it's so hard.

It is. It's so hard. This is just ordinary human stuff. So the thing I wanted to pull up is around the South Sea stock bubble, right? So this is from December of 1718 through December of 1721. So it's just a three-year stretch, right? And people got caught up in it some of them are really smart so sir isaac newton right smart guy invents calculus uh amongst other things

way smarter than i could even imagine being uh and and and he here's what happened to him um he invested a little bit in this thing and he got out and he he like quadrupled his money he was a happy man right and then they say here newton's friends get rich but i i know what's happening he's going to parties there's other people at these parties some of them are attractive women and they're like sir i thought you were a smart man are you why are you not verily why are they not in the south sea stock right and he couldn't explain himself and so he gets all he's like oh man so he gets in with a whole lot of money here because he couldn't stand the the the looks of scorn on all those ladies faces and and uh enters with a lot and

then he ends up ends up broke right 20 000 pounds he could have bought like rhode island if it was a state back then you know like it was a big chunk of money. He exits broke. So it even happens to to Sir Isaac Newton. So don't feel bad. It's a very human thing. But there are professionals in this business, Paul, who prey on that. Oh, they they weigh on it. They know right when to apply the English on the ball.

They get on CNBC and they say now is a good time to buy. But what they're not talking about, and so I've been listening to this book by Morgan Housel on money. It's very good. It's really good. And he said, he made this great point. He said, so what is that share of NVIDIA today worth to you? Again, not recommendation advice, just picking on a name so we have something to focus on. And he said, they owe us on CNBC. They'll tell you it's now. Look at this stock price. Great price is going up. We have a sell side analyst who's telling us it's going to be $1,500 from here. Bye. He said, but it leaves aside that there are all these different types of investors and you have to know which kind you are, right? So if you are

a person with a 30-year time horizon, you look at that company, you value it one way. If you have a 10-year time horizon, you kind of value it a different way. If you have a 30-year time horizon, you look at that company, you value it one way. If you have a 10-year time horizon, you kind of value it a different way. If you have a five-month or three-month horizon, you're going to value it completely differently. But the people who are in command of that price today, they're all day traders. They are the hedge funds and the people with a 24-hour view. They don't actually care about what you think it's worth in 10 years. It's irrelevant to them. So you have to make the decision first, which of these people are you? And then you have to decide what it's worth to you today on that basis, right? And the price today

that's being driven by these other types of investors, they're legitimate. Like their price is legitimately their price, which can be legitimately your price. There is no one right price. That's what I took from that section. There isn't. Right? So there could be a company out there that says a 30 year bond makes a lot of sense to us. We have a 30 year actuarial thing and it's this. And if we set that against it, we make a premium no matter what happens. Fine. It could make sense for them. But if you're somebody who needs that money in 10 years, a 30 year bond could be the worst decision you've ever made it. So again, that's why all of this is fairly complex because it's, there is no right price. There's a correct price that might make sense for you today that might not make sense tomorrow, even right. Cause my time horizon is shorter. It's not what it was when I was in my 20s. I have a different time horizon now.

You know, it's just, that's part of it. That's right. Well, and people forget, it took, you know, in the year 2000, the market peaked. It was 14 years later before the S&P 500 got back to even with 250% declines. So if you're 35 years old and you're investing into the 401k, that's the best thing that ever happened to you because as the prices go down, you're buying more shares, your dollar cost averaging in. So you're building extra shares. So by the time it gets back to 2014, you may have tripled your shares over that period of time, even though the

market went sideways for 14 years. So when the next 10 years it takes off, that was the best thing that happened. So if you're 10 years or more from retirement, what you really want, even though it's not instant gratification, you need it, but you want it, but you don't realize you want it, is for the market to go down and sideways for that period of time and build energy for that next move. But if you're a retiree, let's say you work till you're 70, you retire on the year 2000, you're drawing 5% off your portfolio and you're too aggressively invested, then 14 years, the market goes zero return for a 14 year period of time. You know, you're at risk of running out of money if you make any emotional decisions in the interim period. So you're right. Every individual situation is

different. And one thing that I've learned, you can have the exact same portfolio as your neighbor, but if you take out money at different times than them, or you take out a little bit more, they take out a little bit less, you can have completely different outcomes 15 or 20 years down the road. So, you know, and we forget, especially with CNBC, the major media out there, the major media sources that are always putting in your face this number one winner, this it's a lottery ticket mentality, because what they're celebrating is that one investment that ended up surprising everybody to be as you know this absolute fantastic tool for those investors who bought

and chased amazon not a recommendation but as uh um teaching purposes back in the year 2000 i think it was 13 14 years before amazon got back to that level you know and if you bought it in 1997 you were relatively rewarded for two or three years. But if you went all in, you really struggled for the next 14, 15 years. And if you got into retirement or had a financial crisis or emergency that you weren't prepared for, you were forced out of that investment. And that's what I saw. Not, not with those that we were working with because we, you know, ran a risk managed strategy in sidestep 2008. We didn't pick the top. We didn't pick the bottom, but we missed the large majority

of the client is there were people that, Hey, I'm a long-term investor. I'm a long-term, uh, I'm going to hold these for the longterm. Well, when they lost their job and their notes got recalled, there were four sellers down there at the bottom. And that's what happens more often than not. That's why it's so devastating if you make an emotional mistake with the long-term management of your money. Well, and it could just be, I think everybody has to plan on, to the extent you can, there's just the random vagaries of life, right?

So medical bills happen, unexpected things happen, things happen, right? And so that's why you need those buffers in your system, right? That's why if you run a portfolio strategy and you're going to retire and you've counted on 3.5%, it all kind of works. And then you hit 5% inflation and the whole thing falls apart. That's a blunder. That was an avoidable blunder as far as I'm concerned, because you have to build the buffers in. You do. And quite frankly, you need to mentally prepare on how you're going to adapt ahead. The reason we do the stress testing with individuals, okay, what happens at five and a

half? What happens at seven and a half? If happens at seven and a half? Well, if you get seven and a half percent investment, you're probably not going to be able to keep that beach place that you inherited, you know, that's been in your family that you really want to keep. You're going to have to have percent inflation. Yeah. Seven and a half percent sustained. Inflation. Yeah. Yeah. Inflation investment. Oh, thank you for catching me on that. I was thinking two steps ahead. So inflation, if you had seven and a half percent inflation, you're probably not going to be able to continue to keep that property that you hope to hold for quite some time, or you're going to have to make some changes in your lifestyle here. So what I have found, especially walking through 2000,

2008 with individuals, the COVID crisis, if you can help people prepare, you know, spending all the time that I have working with retirees for the past 26 years, I know what they're going to face. I don't know exactly what they're going to face, but it's like an actuarial. I've walked so many people through that. I know the hurdles that they're going to overcome and the painful situations that that's going to come about and the emotional mistakes that they can make when those events happen because all of us are going to face death at some point in the future if it's not us it's our spouse you know we go first and we don't have as much pain sometimes if we go second but those are all risks that you have to face and it's if you've not had conversations with

people and help them prepare at least plant that seed subconsciously that, Hey, we're going to make adaptations. If this happens, then they end up being like deer in the headlights stuck and get run over by the freight train that's coming or the truck that's coming their way because they weren't mentally prepared and they're trying to process it in the midst of chaos. So that's why we spend so much time on the planning process, try to help people. And it's, it's important in our lives to bit because it helps us be resilient. It helps us to be adaptive. And, you know, sometimes you don't make quick emotional decisions, but if you spent time being prepared, it's kind of like where I say, we're going to play the game by the rules that are forced upon us, but I'm going to be close to the exit. If you recognize this, the decision points,

the signs that tell you, okay, now you run, right? Then you know when to run and you can do it confidently. You're not going to time it perfectly, but at least you're making quick decisions because you've thought about them when most people are trying to process what's taken place, because they haven't had the courage or taken the time to think about what it may look like if their picture of the future doesn't unfold. Now, I have a thing in my life, which is kind of weird. I recognize that I'm so skeptical of these markets, Paul. I've been overly bearish in some ways, but honestly, it's all worked out perfectly well. My portfolio has done really well because I just just a i just figure out what where where things are going to go and and then i just sort of set my my tune to that and

then i just i really tune it out you know when i first bought gold and silver 2001 i haven't i haven't i've only added to it i've never sold any except to my kids or people who i think need to hold some in their hand just so they get a sense of it, you know, but, but it's, it's meaningless amounts. Um, and that's it. Cause I'm, I'm just everything that I saw in play then I'm like, okay, until this, until those circumstances change, that's where I am. Right. I see the same things around all kinds of, uh, you know, I like land. You know me, I like my hard assets. Right. But, um, against that, uh, you know, I'm not a greedy person. I'm not sitting here thinking, oh man, you know, I'm, here's how I'm going to like, you know, become stupendously rich by doing almost nothing. But I am absolutely convinced that in this next timeframe, which I'll call the next 10 years, generational wealth will be made and lost. Absolutely. generational wealth will be made and lost absolutely i'm convinced of that now i might be

wrong but i'm pretty sure i'm not right because reasons right so we can those are all that's a lot of episodes to get there but this is a really fascinating moment in time and everybody's got their cart hitched up to this one thing we have one measuring stick everybody uses the same measuring stick and it's the dollar and oh boy once you see what's happening with the dollar under the covers behind the scenes there's some positionings that people can need to make i think to to be safe around that um or safer so i don't know you know i hate saying this this time is different, but we're at the we're at the we're at this point where, I mean, you just the $2 trillion a year in federal, but but watching the Fed's balance sheet explode and watching them behind the scenes do everything they can to shore up, you know, their bank term lending facility and the swap lines they opened up with Japan so they could help you know control this they just have their fingers in all these dike spring you know sprung leaks and uh I just think they run out of fingers at some point and that's what I'm positioned for is like what does that

world look like and how how can I position myself for that um and I'm pretty sure CNBC isn't going to give me the guidance I need on that one. Well, no, because you don't pay them advertisement to be on there, quite frankly. And that's one of the things that we've seen is these major media institutions are obviously focused by their largest contributors. You know, and they're not serving the people. They're serving the people who are paying them. And we all do that to an extent, right? But there's still integrity that goes in there. You have to serve the people with integrity. And if you do it the right way, the money will take care of itself. But you know, what I'm concerned about, Chris, kind of coming along that theme here, and I want to pull it up to look at it. So I have no doubt, you know, this, but I was talking with someone who I thought would know this today.

What I'm concerned is from, so pre 1965 silver, a thousand dollars of face ounce of face value of pre 1965 silvers, what 715 ounces and weight, right? Of that actual silver. Can you remember the purity of the silver coins pre 1965? So they're 90 in weight, right? Of that actual silver. Can you remember the purity of the silver coins pre-1965? So they're 90% silver, right? 90%. 90% silver. So that's 53 pounds if you have $1,000 in face value.

Do you know how much that's trading for today, pre-1965? So this is money that we used in our country in 1960. So Kennedy half dollars, you'd buy a thousand dollars worth of goods. Now you can take those same Kennedy half dollars and go to Walmart and you can buy something and they're only going to sell you a thousand dollars worth of goods in those pre-1965 coins. But guess of how much they're the ask price is for them today I don't know what the premium is on them these days so I'm gonna guess 22 or 23 thousand oh you're right on Chris twenty two thousand three hundred ninety dollars so from 1960 our you know silver based coins back then are worth today in purchasing power $22,390.

That tells you how much we've lost in purchasing power. I'm concerned that what took place slowly over that 45-year period of time, if I did math right, 30, 50-year period of time, is going to be that slowly and that all at once over a three to five year period. But what you've done in the right way is you, you made, you did the research, you decided where you wanted to be. You calculated those outcomes because I know, I know you, you've looked at every possible Avenue and you said, this is a, a, an investment that I'm going to make and I'm willing to overweight because I

understand the risks. And you've been patient enough to wait that out. That's where most people make mistakes. They may buy a great investment, but if it goes flat, did you doubt it, Chris, from 2012 to 2018 without looking, 17, it was 2017 or 18 that that gold prices went sideways and didn't go up did you i'm sure that was frustrating but did you doubt frustrating no i never doubted it no but you but you did the research revisit it and said okay with the information that i have i feel like i made the right decision that's the problem that most investors make. And I bought a lot of that pre-'65. It was called junk silver back in the day. It's not anymore.

I remember my first buckets were around $3,500. Mm-hmm. Yeah. Now you're saying they're $22,000. Just a little while ago when we had just a little shortage in that one asset class for silver, I saw them as high as $32,000. Were they as high as $32,000? I missed that. They had a premium on them.

People really wanted them for some reason. So it was a much higher premium. It was a 50% premium compared to anything else that was out there. So bars, other coins, silver, eagles, things like that. So I don't know why. But the point there is that the silver market is this little tiny little thing you know it's back it's back over 30 at the moment so if if all of the investment grade silver and that we know about which is about a billion ounces a billion ounces if somebody wanted to buy all of it currently allegedly that would cost him 30 billion dollars

which is like whatever the fed just lent the japanese bank for one night you know yeah you know like literally like like should i buy twitter or for 60 less should i buy all of the silver that's known to exist for investment purposes right um you know if elon musk wanted to do that so it's a tiny tiny thin market so you can get these really wild gyrations of price. I am convinced, Paul, and I have a whole thing up for my subscribers at Peak Prosperity, where I do the fundamental analysis. And this isn't me speculating who's going to, where's price going because of charts. I'm just, look, we're in our fifth year of structural shortfalls in silver, meaning mines aren't producing as much as being consumed in the world, right? That's a bad

thing in the world of commodities, but our markets quotes are so caught up in the paper games and the this and the speculators and big banks and hedge funds. It's so caught up in the financialization, Paul, that the signals, and to me as an investor, I love when I think markets are doing goofy things and I have a different view of that. Right. That's that's where I live. That's where I'm happiest. So I just fundamentally add it all up. Right. And I do crazy stuff like for NVIDIA to be worth this. I have to calculate forward earnings, all that oh it's going to be that one company will be as large as the u.s stock uh entire economy uh to justify its current valuation call me crazy i'm like so

again not not investment advice i'm not saying short it i'm not saying don't long it i'm not saying anything about that but i'm just saying fundamental analysis gives me with the way i look at it a very different price than I see in the market. And sometimes I think that's exploitable. So I actually, I actually liked it when they were hammering gold and silver all those years. I got more. Yeah, I did. I averaged subsidized time too. Yeah. I look at it. Well, and that's like the, what we used with the, um, 35 year old working towards retirement, right? You want the price to go sideways for a period of time as long as the information is still there, which it is, and the reasons for it to go higher there because it gives you a chance to accumulate and save more money and buy more shares so that once it does accelerate and take off again, you've got more shares to benefit from.

Exactly. Yeah. more shares to benefit from. So, you know, that reminded me when you were talking, the talk on wall street and some of the forums that I've been reading and some of the analysts are like, Hey, you know, we had a little bit of a pullback in the market here recently, but the VIX and traditional volatile volatility measures just aren't responding. Right. So there's, how do you, how do you hedge and balance out your portfolio? And, you know, so you've got these that are betting against the VIX that, hey, if interest rates go down, volatility is going to go down. You've got these huge bets that are taking place on what are traditionally counterbalances

to the portfolio. And you've got these huge bets that are taking place on the market going up. And we're really set up for massive destabilization when something breaks. And the thing about it is you have, it's such a complex system. Was it in your scouting report, Chris, that you were talking about the grains of sand when you pile them on top of each other? They reach the point that it's impossible to calculate where it breaks. But once it does break, it's all of a sudden everything takes place. That's my big concern for the markets right now is when, when something breaks,

you're going to have a very short period of time to head for the exits. And, um, and if not, you can get caught up in something. This, this, this environment reminds me of from study in history,

kind of leading up to that 1987 major crash in one day. I'm not saying that's going to happen. I'm just thinking about what we're seeing behind the markets because back then, oh, we've got insurance. We've taken away the downside for the market. Well, that insurance didn't quite work the way that they thought it would, and you have this massive reversion to the mean quickly. In every area, I'm seeing so much foolish behavior compared to

history and unwillingness to accept the truth, right? I mean, people are just seem to be unwilling to afraid to accept the truth because I think what's taken place is there are those who see what's going on and they're feeling the pain of it. And then there are those who are sheltered from the pain of what's taking place right now. And they see it around them, but they really like their lifestyle. And they really like the games that they're playing. And they really like the, you know, the talks that they're having around this discussion. And they're just hoping that this doesn't end. And, um, and they're speculating and playing in that game and at some

point something's going to break and i'm concerned it'll spiral out of control pretty quickly and it's going to harm a lot of people i just don't know when that's going to happen i know you're not same concern that's why we do what we do i'm just trying to help and i you know uh weird hippocratic oaths you know sort of thing which is first take no losses you know because they can be hard to recover from depending on on the time of life you're in but man so many cross currents um paul i'm gonna have to close it there today because uh my son is here and we're gonna go do some farm work and it's a beautiful day and uh yeah so we're we're uh and we have a rented excavator so oh good for you we're to fool around on that.

And I'm going to bump into some rocks and make a mess. So anyway, got to run and do that now. But thanks again for your time today. And for everybody listening, if you want to talk with Paul or his amazing team, go to peakfinancialinvesting.com. Fill out the very simple form. Somebody will be in touch with you post-haste within 48 business hours. So with that, Paul, thanks so much for your time today.

Good to see you, Chris. Enjoy that excavator. Thank you. Will do. Hello, Chris Martinson. I'm the CEO of Peak Prosperity and also Peak Financial Investing. And after watching that, you're probably wondering, well, what do I do with my money? Look, you both deserve and need somebody who can talk to you about what's really going on in this world, understand the situation as it is, not be steering you towards certain things that don't make sense for you or just keep you in a game that's already ended. Look, if you want to

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