Peak Prosperity - Navigating the Market Storm: A Day of Volatility and Big Questions

Episode Date: April 11, 2025

Chris and Paul discuss market volatility due to Trump’s tariff pause, bond market reactions, gold’s resilience, and potential economic impacts.Click Here for Peak Financial Investing

Nothing in this program should be considered investment advice. It is for educational purposes only Please hit pause and read this disclaimer in full Did he back off because of the stresses and the underlying credit market and the liquidity that this was causing and maybe just trying to buy some time to help the underlying components of the market The following is the audio version of a video released at peakprosperity.com.

Visit peakprosperity.com to watch the video and to find other insightful content, such as articles, discussion forums, and exclusive subscriber only content. Hello everyone and welcome to this episode of Finance U. By the way, we've got a really big show today. Trump just announced a pause on some of the tariffs, not all of them. We'll go through all of that, creates lots of volatility in the stock markets, which we define as up or down.

Obviously, that puts us in something of a minority where volatility only is supposed to mean when stuff goes down. As well, we're gonna have to talk about gold a little bit. We gotta talk about what's happening in the bond market and a little bit about oil maybe. We'll see if we get to that. So Paul Kiker of Kiker Wealth Management.

Good to see you, Paul. Good to see you as well, Chris. Happy bipolar day. Thank you for happy bipolar day. Last time I saw you, you were wearing big, big waders. And so was I. Yes. Oh, what a wonderful trip that was. You know, so I was really worried having everybody in because we had tons of rain the day before. But I decided it's worth it. It'll either be a great day or it'll be a terrible day, but I think we'll catch some fish and it ended up being a great day.

So it was, it was fun time. It was a, it was a great day. Let's turn now to this. You know, are the tariffs war or the tariff wars over markets seem to have exploded higher? Paul, this is the news. So this came out at 12 18 Eastern and April 9th. That's today at the time of this recording, he said, based on the lack of respect China has shown, this is Trump's words, China has shown to

the world's markets, I am here by raising the tariff charge to China by the United States to 125% effective immediately. I thought that should have tanked the markets, but the markets were more excited apparently by the next part in yellow, which says conversely and based on the fact that more than 75 countries have called representatives of the U S including departments, commerce, treasury, and USTR to negotiate a solution. I have authorized a 90 day pause and substantially lowered all reciprocal tariffs during this period of 10% also effective immediately. So those 75 countries get a pat, well, they get a 10% tariff.

China goes up to 125%. This is what happened at the time I took the snapshot. And I'm sure it's even further than this now, seven and a half percent on the SB 376. It was up 400 points at one point that I looked I saw over 24 closing in on 2500 points on the Dow Nasdaq 14 on 5th just call that 1500 points Russell though up nearly 10% You know by the time I looked at it recently amazing It is it truly is amazing and typically you only see these kind of moves in In bear markets like I mean and the ones that I've been through in 2000 and 2003 and 2008,

you get these rip your face off rallies that occur. And they're really tough on individual investors because, you know, especially if they bought the dip, which I mean, there was a lot of people that I had more calls about buying the dip than anything. And this just further solidifies, hey, Trump's not gonna let this unfold. The question is, is this a temporary reprieve? Is the damage done? Are we gonna end up in a recession?

Or is this just a controlled dissent? And another question I have that you might wanna talk about, did he back off because of the stresses in the underlying credit market and the liquidity that this was causing and maybe just trying to buy some time to help the underlying

Components of the market. Yeah. Well stocks are for show bonds are for dough We get we get to the bonds because because that's where the real story is. I thought Paul that this was actually probably This was this was this got a little sketchy. So remember he said I'm not watching the stock market This was, this was, this got a little sketchy. So remember he said, oh, I'm not watching the stock market. 15 minutes before that tweet came out, Paul that announced the pause in tariffs, Donald Trump tweeted out, this is a great time to buy three exclamation points.

Oh my gosh. Um, um, you know, the only ones that have the ability to move that quick and this was, you said 15 minutes before the announcement, correct? Yep. So if he's for labor at the expense of capital, like he seems to be and tells us that he is, the only ones that have the ability to move on moves that faster the big algorithms of the big capital firms. The average investor didn't get a chance to take advantage and move on that. I mean that that makes me quite angry actually.

That's that's a real sour note in this whole thing. That's that no bueno. So how do we interpret that, that he can't resist being the big man and showing he has some inside information? Is it, is it he knows this big exciting thing as company and he can't help front running that a little bit? Are we supposed to now troll his, his truth social feed for stock tips. And, and, you know, I don't, I don't know how to interpret this, but I got a sour, sour taste off that one. Those are a lot of really good questions.

And, and I don't know the answer to that, but it does bother me because, yeah, you go back to 2017, there was a lot of things, 16, there was a lot of things that Trump said that he was going to do. And then as soon as he gets in there, it's all about the markets. Let's, you know, push the markets, push the markets. Every time the markets started to go down, it was a tweet that things are going to be great. And it just started this feeding frenzy that lasted for a period of time.

And what concerns me is these are still ridiculously overvalued markets. If you're going to be wise in this, this isn't a game that you want to be playing right now. And especially if you're for labor and not necessarily supporting capital. So why that doesn't make sense to me, unless it's just a pride thing. I don't know. There's a lot of things about Trump that's a wild card. You just don't know if he's actually going to do what he says he's going to do. I hope he does. But, you know, this gets him back equal opportunity basher of both sides. Absolutely, absolutely. I'll call a skunk when I smell a skunk, wherever the skunking happens.

So I think this is the best take I saw on it so far. Turns out George of Behize Tweet said, "'The 75 countries that reached out to President Trump to negotiate just got rewarded big time. The others that thought they could puff their chest out will now suffer with China. Good luck. Um, that's kind of how this played out and, uh, Fox news had a decent graphic, so I grabbed it and it turns out there's a bunch that are trying to negotiate, some that offered

concessions. All of those got, uh, the 10% pass, but retaliated. We're on full retaliation. Well, there's China. Canada, when you find yourself lumped all alone with China, maybe you should be, it's time for a little self-introspection. Just gonna say. Very good point.

I've heard from a lot of my friends in Canada that Canada's big mad with us right now, but I gotta say Canada has a lot of self-inflicted wounds, and I really think they should be big mad at themselves first, and then if there's any anger left over, look outside, because this was self-imposed. You know, and I don't know this, but this thought come to mind, so I'm willing to look like a fool, but isn't part of the Canadian housing unaffordability crisis due to a lot of Chinese money coming into the Canadian housing unaffordability crisis due to a lot of Chinese money coming into the Canadian markets?

So that plus the fact that they have the most restrictive, like they got a lot of land up there. It's only 37 million people and more about as much acreage as the US. They have a lot of land. I know they live to the south, but they they make it very hard to build on new land, very hard. So it's a little bit their own self-regulations and they have green belts and laws

and a developer friend of mine said that he can't really work in Canada because if you wanna do something like just rehab a building, an apartment building, there's like six major studies you have to do. You have to do a traffic study, a wind study, an environmental impact study. There's all this, it you know regulatory tape and fees and

That's how they like it. That's fine. But then if you get all mad because your housing is super expensive at me Maybe they want you sure Yeah, maybe they want some more of that Chinese capital flight to come in and further exacerbate their housing problem. I don't know. Yeah Yeah, so I thought this was interesting, you know, okay flight to come in and further exacerbate their housing problem. I don't know. Yeah. Yeah. So I thought this was interesting, you know, okay, so tariffs are driving things to some extent, but you and I, and I'll get to, I got, I brought up all the slides we've looked

at before, Paul, about how expensive the market was due for correction anyway. But I just want to point out here too that, so this is, I mean, look how bright that green is. You can barely see it. Super bright. But if you notice the pattern, notice over here, Paul, to the upper right, let me get my laser pointer out. See here, these are bonds, 30-year and 10-year bonds.

They're still selling off, and the dollar is not really rallying. So all this stuff that just rallied oil and metals and grains and stocks somehow led to a sell-off and more an additional sell-off in bonds and no bump in the dollar. So that that's kind of a weird pattern there. That doesn't did not all is not super good. No, correct. Story. Correct. And that's not apparently what it is that they're desiring to take place. They want to get yields down, but if you're going to support housing, you're

going to have to get longer into the curve down. And still, you know, my question is, is what's changed? What would make me feel comfortable going out 20 years or 30 years on the yield curve outside of a short-term trade when all of the policies could potentially be inflationary over time.

We're just going to have to have some time to where the bond market's confident that the Trump administration isn't going to come out and be as fiscally irresponsible as the prior administration and then bully the Fed and to bring in, re-, reaccelerating the inflationary undercurrent. Well, and good luck too, right? You gotta be super nimble because who knows, Trump might decide to undo the tweet later or make the 90 day period a nine day period. Like it's just, it's very chaotic.

I don't have a real sense of a firm direction here that I can count on. So these seem like negotiating tactics, you know? Apply a lot of leverage and then, you know, let go of the rope every so often tactics, you know, apply a lot of leverage and then, you know, let go of the rope every so often. And you know, so he's clearly got something in mind. And I think to understand really like without getting caught in the noise ball, we have to begin to try and pretend we can divine into the mind of the Trump team to figure

out what they're actually after. And on that front, I think you sent me this one. This is Scott Bessent, quick little thing, just a very short piece on the Tucker Carlson show, and he says this. What I do know, that the old system wasn't working. I think that's right. And if you look at a system that's not working, you gotta be brave to change it. So what wasn't working. I think that's right. And if you look at a system that's not working,

you've got to be brave to change it. So what wasn't working? Would it have been really fun for me to come in and just keep issuing a lot of debt? And it's almost like a bodybuilder is taking steroids. Outside looks great. You're muscular. Inside, you're killing your vital organs, that's what was

going on here. But it would have been easy to keep pumping up the economy, borrowing a lot of money, creating a lot of government jobs. There was no controversy when we're doing all that. But you were going to end up in a calamity. So I mean, you just basically look, we were on a terrible path the whole system wasn't working It was just fictitious as fictitious as a bodybuilder taking steroids. It wasn't good for the the economic body and so

The larger plan was look we're trying to fix something that was clearly broken inside the United States And then he goes on to say and by the way, it was broken on the outside too. So to me, this is as big as Bretton Woods, the neoliberal birth, this is one of those big moments that comes along every so often where a crew of people come in and says, we gotta really change something here. And we have an idea.

So to me, the tariffs are just a tool in that larger frame, which says, we're going to completely redo global trade. And that includes the US dollar is the reserve currency, which has pros and cons. They're now noticing the cons saying we got to do something about those. The pros have been fun, but there's some cons too. So I actually think it's starting to feel like they have a really big ambitious plan. Let's see if they can pull it off.

Yes. Well, and I hope that they can pull it off because what was fascinating, I think that's a must listen to interview with Tucker Carlson and Treasury Secretary Besant because one, he understands the mechanics of the markets. He was in the hedge fund industry. So, you know, and I know there's a lot of people, passive side, that are all the hedge fund

guys, you know, they don't outperform the market. Different hedge funds have their roles of their responsibility to do. But these guys are incredibly smart. You know, some more aggressive than the others, but he understands the mechanics of the markets. And he's clearly coming out and saying, you know, this system has only worked for the 10% at the expense of everyone else. And we have to change this. And to change this, we're going to have to redo the kind of global order of relationships and negotiation.

And if he can pull off what there's the solution to the problem that he's highlighting, it's going to be really good for the large majority of Americans from a long-term standpoint. History should judge them very well in spite of the short-term pain that we go through. But you know, this reflexivity where there's this panic buying of certain stocks just because they've benefited from the past 10 years, you know, people aren't thinking because they don't think they really understand the communication that the SAMH is trying to put out there. That is game changing and it's going to change the rules of investing as time goes along, or basically change what is going to benefit more so than what has

benefited from the prior regime that we've been in. And those aren't going to be as, should not be as good a performing investments going forward if they're serious and they're pulling this off. And if this relenting of Trump here is saying, hey, we're wanting to negotiate, this is one part of the deal. And maybe number two, just trying to back off a little bit. Some of the stresses that are starting to show up under the system. So we don't get something to break so catastrophically that we crash instead a controlled descent into the fall, maybe.

Well, this is going to be really hard to analyze because it's a giant, the winds are shifting, you can feel it, right? And so whatever we've been doing for decades, they're saying, can't do that anymore, and that's fine. Because we couldn't, and I agree, I agree with the idea of doing it on, changing this on our own terms, rather than nature's terms later,

like some accident we have to adjust. That makes sense to me. But it's so audacious, right? We're going to reconfigure both internally and externally with all our trade partners, everything. That's a big deal. It's hard to analyze. That is. And I would think it's just going to take some time because what is there was it you had mentioned that 75 trade partners and then there's a hundred and eighty is it that you had mentioned Chris at some point? A hundred and eighty. We had a hundred almost a hundred eighty countries in the world. So we trade with all of them. Yeah. A hundred and eighty countries that you'd have to negotiate. I mean, that's 180 days if you

could sit down day by day and and complete the negotiations in one day, which is these countries aren't going to be able to do it that quickly because they have their own administrative hurdles that they're going to have to overcome within. So it's not like you've got 180 business owners that can sit down and and and hammer this out. They've got 180 business owners that can sit down and hammer this out. They've got 180 voters that they've got to deal with, except for your dictators, they can pretty much do what they want to do.

Well, I'm also, I think we, you know, we'll see how it plays out. I guess the markets right now are thinking that, oh, you know, we just, Trump capitulated on 75. He'll have to squeeze China a little more and then it'll capitulate there too is the idea. China's different beast in this story to me, A, because they're as large as those other 75 countries combined.

B, they have a mind of their own, right? So that's not like Barbados in Vietnam caving on some stuff, right? China's got different interests, different power, different leverage, all of that. But what's interesting was this just came out, I just came across this this morning. I'm not totally positive where it came off. Dow at 37,000, this must be two days old then, looking at the ticker at the bottom.

Ray, I think it's unfortunate that the Chinese actually don't want to come and negotiate because they are the worst offenders in the international trading system. They have the most imbalanced economy in the history of the modern world. And I can tell you that this escalation is a loser for them, that they have some very smart economists, the academicians, technocrats within their bureaucracy, and they would be telling the leadership that we do not have the edge here. They are the surplus country that their exports to the US are five times our exports to China.

So they can raise their tariffs, but so what? I guess he's saying we have the leverage, you know, because in dollar terms, they export five times as much to us as we do to them. And the part that I think is missing from that, Paul, is the idea that, yeah, but China also exports a lot of stuff to us that we don't get from anywhere else, right? We don't have secondary suppliers and we don't make it ourselves. So it's not just about the dollars. It also depends on the strategic, if not vital importance of some of the things

That gets shipped in you can say all you want. Oh, yeah, no China. We'll just we'll hem We'll hammer your chip industry your oh, well, let me make it simple people your iPhone industry. That's it We're not buying your iPhones from you anymore. Well Where are you gonna get them from then? anymore. Well, where are you going to get them from then? Right, right. And that's, that's a strategic blunder that, that our prior decisions have allowed us to be in at this point that we shouldn't be in and there's no easy way to fix it. Hello, everyone. I just wanted to take a quick break to tell you

about peak financial investing. Look, my whole goal in life is to help you be prepared to help you be resilient to have you have the freedom you need in order to live in life is to help you be prepared, to help you be resilient, to have you have the freedom you need in order to live your life in the way you wanna live it. And top of that list is financial freedom. Making sure that the money you have saved accumulates appropriately and isn't lost to some random process of market downturn

or something like that. Peak Financial Investing is a place where we will connect you with our endorsed financial advisors who understand the world the way we do. You deserve to talk to somebody who is not going to look at you like a dog listening to white noise when you say, hey, should I invest in gold? Hey, is the dollar going to be okay? Hey, are there any big risks here?

Are there any bubbles we need to be aware of at this time? Great questions. So, when you ask those, you deserve to speak with somebody who's got good answers, thoughtful answers, and knows, most importantly, how they're going to respond nimbly as the world around them changes. Now, this is one of the periods of the most extraordinary changes we're going to see in market structure. China's coming up and rising. Geopolitical tensions are afoot, we have all sorts of realignments happening, the federal government is deficit spending like nobody's business, you know the Federal Reserve wants to get back to printing like crazy.

We understand that gold is popping to all time new highs, the story has changed. Your investment philosophy needs to be nimble and responsive to that. So at Peak Financial Investing we'll connect you with people who see the world that way, who understand how to run what's called a risk-managed portfolio to account for all the changes that are coming. Because if the Hippocratic oath is first do no harm, our oath is first take no punishing, irrecoverable losses. It's time to manage risk, it's time to understand how the world has changed, and it's time to make sure your portfolio of savings and wealth are there for you and can meet your needs all the way through your retirement.

Now, back to our program. Paul, I wanted to just take people through sort of the model again, because we've talked about it, but I just wanted, and you and I, for the subscribers at Peak Prosperity went through this on Monday of this week, but it was just a piece of that. I wanted to just make explicit for everybody else. And it's what happens when expensive, we've talked about these expensive markets.

What happens? How does that get to become a systemic crisis? So, so there's a path there. Um, and this is an old chart because I took it this morning before the big explosion upward But leaving that aside that the Dow was I mean the SP was off 19% I've heard people I saw some headlines worse than the 1929 crash. I'm like not even close I'm sorry to laugh, but you've not been in markets very long. Do you think it was worse than the 29 crash? It's just a little correction and it's half over already and it took us back to where we were a year ago

So if that's a crisis to you, you're investing wrong Is how I put that but it starts like this Paul we start with overpriced stocks They always are looking for a reason to tumble. It's just how it is, right and we can go over the date again But they weren't just sort of expensive record expensive. Yes. Which is a tough place to be. Everything has to be priced for perfection, and obviously it's not a perfect world, so things happen. But then sometimes, you know, things start to sell off and it creates a liquidity crisis,

which is what happens when you have leveraged players who suddenly they had a hundred million in play, they borrowed 10x. Now they have a billion in play, and they suddenly have to sell a lot of stuff. And it doesn't matter if they love this stuff or hate this stuff, they're selling the stuff when they got it, when they got a margin call and, and, and, or they have to pay a loan back. Right. If that goes on long enough, the liquidity crisis causes one or more significant players to enter into a solvency crisis and they go belly up. So

remember when we had Silicon Valley Bank, for instance, we had overpriced bonds, which was the overpriced asset in this case. And then all of a sudden they got into a liquidity crisis because they had these bonds that were bought for too high, that were worth less now. And even though they still had the same bonds, they couldn't wait the 10 years for those to be paid back. So they had a liquidity crisis, couldn't meet the liquidity crisis, and it dumped them straight into a solvency crisis, and they became insolvent. Now that's fine if you lose a regional bank out of the west, but if you suddenly lose a big major bank, and then a second one and the whole system

freezes up, that takes you to the last part of the story, which is the systemic crisis. And that's the arc that the Fed is trying to sort of prevent at all times. That's what they really care about. They don't care about prices or full employment. They care about this. And this is what would trigger the great taking, that last thing in bright red down there. So this is just something you have to be on alert for when you're in a liquidity crisis, and that's where we've been for a little while.

You can tell because everything gets sold. And prices don't seem to matter. Just everything gets sold. No buyers, all sellers. That's a liquidity crisis. So just wanted to talk about that arc a little bit, because that is the path. Well, and going back, I was very surprised, especially with the action as severe as the sell-off's been since Liberation Day.

I was expecting to hear of a Bear Stearns like 2008. Bear Stearns went down, if I remember correctly, around February of 2008. Of course, the Fed stepped in, intervened, they backstopped them. You had a nice rally that occurred and then kind of flatlined into the summer. And then you had Lehman Brothers, which was more of a systemic event, you know, later in that fall. So I was really surprised that we didn't get some headlines out that somebody went down

over this period of time. And maybe, maybe it was very close. And that's the reason why this news relented, or maybe it is just part of the negotiation process. We're not going to know at this point, at least for some time. I think, I think we got close in that. Maybe because Zero Hedge tweeted out this morning, which is April 9th, he's quote, if recent disruption in the U S treasury market continues, we see no other option for the fed, but to step in with emergency purchases of us treasuries to stabilize the bond market emergency QE that's Deutsche bank. These guys are always getting in trouble first.

That's, that's, that's Deutsche Bank running the flag up the pole. Like, hey guys, we'll help over here if you could get some emergency QE, that'd be great. We're on the wrong side of this bond trade. A little help. The amazing thing is, is Basin's hedge fund background, if he's seeing those stresses in there, it could have very easily, and this is just pure speculation for the audience, said, hey, unless you want somebody to go down and really set this, this sell off into fire, you better back off just a little

bit. Maybe that's the case. I'm not so sure. But what violent rip your face off rally we've had, I mean, some massive moves that historically you don't see except during bear markets when that brief moment of hope comes along and especially on the front side of it, you get these just massive rallies. The good thing is, is they give people with a long-term perspective that want to lower their risk a little bit to take advantage and sell into strength when you choose to sell instead of being forced to sell. Right. Right.

No, with that discipline, these are actually gifts, these big face ripping rallies. Yes, they are. Yes, they are. They're actually gifts. I just wanted to, Paul, cover up because we had some questions and maybe you had some questions too, which is just how do these tariffs work just to make sure we're clear about this. It turns out the importer pays the tariffs. So people, some people had said China pays or the consumer pays. Ultimately, somebody pays and it will be the consumer you can guess as a full pass through once you get to the end of the story. But Spencer Hakeemian was asking, you know, how does this work? You know, if a small business

orders a hundred grand a week from their Chinese factory on auto refill, do they get a hundred that 4,000 invoice or now I guess $125,000 invoice, you know, from us customs to release their inventory gets dumped in these river what, how's this work? And he had somebody Knox Harrington answered him and said, if we don't pay whatever custom says is owed when it's owed, the consequences are close-up shop severe. We're meeting with our bank this week to request a line increase with the liquidity to cover us until large price increases kick in. Get to that in a second. Many businesses will sink.

Their monthly duty payments, he said, prior to Trump's first terms, were around $30, $50K a month just to pay customs duties, currently around $250 to $400K a month, likely to jump over $600,000 a month by summer. And that is with them already having moved 75% of their sourcing away from China to India and Thailand in recent years. And said, so Spencer asked, so you're doomed? And Knox said, cashflow concerns are major. We will raise prices as needed.

But in this, I thought this is important part, but the major retail customer we work with will require 60 to 90 day wait times before price increases are implemented. And of course, even if everyone else is doing it, any price adjustment comes with the risk of losing the account. So that's interesting to me, Paul, because he's saying, look, you know, a major retailer, let's pick Target, Walmart, somebody, they don't just raise prices because their import duties went up they got marketing to work on and competitor analysis and inventory to work through and then advertising campaigns and like you don't just sort of you can't I understand that so they probably have contractually with

their suppliers yeah you can't hit a 60, 90 days for a price increase. So that window, these guys in the middle, the middle import gut, they're eating it. They sure are. You know, and that what comes to mind is most businesses fail not because of lack of profitability, but because of lack of cashflow. Right.

So you've got to cashflow that. And then we go back to COVID and what did we, we learned a lot through COVID. But one of the things we did learn is we're on this global just-in-time inventory. And most businesses don't necessarily, because they're running lean and trying to maximize profitability, and because of the competitive nature that's out there with this easy money, there are competitors in businesses that shouldn't be in there. So profits aren't as high as they should be unless you're the mag seven. So that's a lot of cashflow for these companies

to endure in the interim period. And if we're in a tight liquidity environment, that is gonna take down some companies, I would assume, that are already maxed out on their credit or don't have the ability to gain access to capital like most of Wall Street does. Well remember you know once you get it somewhere between liquidity and solvency even before you get to systemic the banks all reel in their tentacles they all stop making loans. That was what the whole TARP and now the whole TARP fund was about is about to get banks lending again so we gave them three quarters of a trillion dollars

and they gave themselves big bonuses and didn't lend anyway. It's just how banks are nothing personal. It's just a thing. But that's ultimately when we think about that dynamic, Paul, so you know, when we were down there, we were hearing from a local guy who owns and operates the river where we're fishing, and he talked to us about the chicken business and just distressing, right? The chicken business down there, I assume it's the same everywhere, but it just sounds predatory, right? There are these financial pencil sharpeners who just like know exactly how far they can

squeeze you before you run out of complete oxygen and they just keep their boot on you the whole time so that you don't get one penny more than your due out of that situation so they can have more for the rest of the value chain. That's how I see this whole banking thing it's just it is a extractive industry using pens and pencils. Yes and by the time it works it down to the local farmer, because being in the North Georgia area, especially in the 80s, there were a lot of chicken farming operations that small individuals went in, sold proprietors to start, because it was relatively profitable. And when they first started in the 80s, you could borrow a lot of money.

The profits were good enough, the banks were willing to invest into it because we needed it. And then all of a sudden, somewhere around late 90s, early 2000, the big corporate models started coming in. And then they're forcing these mandates. So as soon as these farmers would get out of debt and finally get some cash flow, well, if you want to keep your contract with one of these big firms, you have to do this $250,000 per house upgrade.

And if you didn't, they cut your payouts. And then, and then finally, instead of giving you credit for birds that die, they took those away. And the large majority of the farmers are just closing the operations down because it's been so rapacious to them that they're essentially

modern day slaves for these big corporations. And I'm concerned that we're seeing that everywhere. Because by the time it makes it down to the local farmer, you know it's ingrained in every other aspect of the business cycle. Well, I think that's ultimately what Scott Pescent has been talking about on one level is that we have what's called a financialized economy, right? And it becomes all about the finances and it becomes all about the money and making money with money rather than making things with money.

And because of that, you know, that's also called Dutch disease. It's what happens when you just are the world's reserve currency and it becomes about the money, right? And then we forget that it's not all about the money. If you treat your farmers well, you'll have a lifetime like happy clientele there. You want them to be robust and happy and resilient and have some financial cushion so they can keep making a superior product

so you can beat, nope, it's all about just squeeze everybody because it's about the money, not the people, not the people, not the chickens, not the earth, not all kinds of things. And so that I think is at least, maybe I'm interpreting too much, but I do hope we can definancialize our economy because it's rapacious, as you said.

It is, and I hope so because, you know, look, I've spent my life trying to help people navigate a cesspool of greed and wall street That's really what it is and I tell clients because I have seen individuals Take companies public in the past and they make the comment the worst thing that can happen to the culture of a business is to go public Because you have people that are investing into this these businesses like you know Working down to the farmer because they see profit for extraction.

It's not about the product that they're producing. It's not about, it's about making the product good enough that people have to buy it or create a monopoly if you can to come in and control the environment. So you can extract every cent out of there for your own benefit at the expense of the people, your, you and your shareholders. At some point that has to change or we're a lopsided economy which is where we are now. You know the top 10% on 85% of the stocks and that has crowded out the small business because nobody talks about monopolies anymore. Nobody, you. Globalization has benefited your major firms at the expense of your average individual.

What I would love to see is let's reduce the barriers to small local banks so that you have a local bank that knows the individuals that they're lending to, that can take that risk, they've got boots on the ground. Instead of a major bank that's in St. Louis making decisions for somebody in Texas, and it's more global strategic, national strategic instead of what's in the best interest of that local community. That's one of the things that I still harbor frustration with

about the Obama administration because after the banking collapse in 2008, they used that to raise the barrier of entry. I can't remember what it went to from the low side to the high side, but making it nearly impossible for small communities to reestablish these banks that were able to be established

in the 60s, 70s and early 80s, and even the 90s. You know, my grandfather, his father, his father were all bankers. And, you know, when my grandfather died, the local church was, you know, full. The whole community was, he was like Jimmy Stewart, and it's a wonderful life. He just knew everybody. And he didn't lend money to businesses.

He was investing in the people he knew, and he didn't lend money to businesses. He was investing in the people he knew and, you know, providing capital. But when he was, when he was thinking about going into the business, it was like in the late thirties and his father tried hard to talk him out. He's like, son, this is a terrible business. Banking is a terrible business, low margins, high risk, long hours. You know, they were probably collectively banking was about 4% of all like sort of profits, which kind of makes sense to hours, you know, they were probably, collectively banking was about 4% of all like sort of profits, which kind of makes sense to me, you know, 4% overhead to run a business to make sure you got capital.

Okay, makes sense. Well now it's 40% of all profits are financialized, you know, and it's just dominated everything and it's become all about the money. So that's something maybe we can see how to fix that. But but I hope we can get our economy away from making money with money because it's heartless at the end of the day. It's not connected to anything. It is heartless. You know, and I'll share this I remember and

it was Oh, I left and went independent January 1 of 2004. And I needed a little bit of capital for the initial cash flow and marketing campaign and remodel of the building that I'd purchased. And I go into the local banker and I lay out my plan. And he looked at me on a handshake and says, we'll fund you, got a little paperwork we need to do. But it was all based on the reputation that I had built before. I'd earned the right to be able to walk in there and ask for that.

It wasn't, okay, how much collateral can you put up? I mean, yeah, there was a little bit of collateral on the building, but as far as the business loan was a handshake. And that's not something that can take place in today's environment anymore. And that's sad that our banking system has gotten to that level, because that's what we need on the local level. You've got to be able to make the decision that, hey, there are people that we'll invest into because they're doing the right things, and there's people who will not,

because they're not doing the right things. We've got a banking environment now for the average American in small business that says you've got to sign away absolutely everything that you have and really will only give you the money if you don't need it or you've got more than enough assets to cover it up. And that limits the creativity of small businesses being created in this country. You know, they've set it up to where you have to go

through Wall Street or you have to meet certain criteria. And if it affects, you know, the monopoly of some business that's their bigger customer, then they have a vested interest in not allowing you to have that loan. And that's not the environment that we need in. That's what I don't like about these big, you know, national banks and regionalized banks. You know, what I'm seeing at, who was it?

There was a Democratic donor that went to the white house and said that, that the administration prior administration before the election wanted a few companies that were easy to control. I think they moved in that direction and in the banking system too. And we need to break that up and get back to where we were, where you've got a lot of small local lending, which will help out these businesses in the interim period because they're close to them, they have a vested interest in their local communities and their regional areas.

Yeah, I think that must've been the Mark and Dreeson. That's it, Mark and Dreeson, that's who it was. Yeah, yeah, yeah, that must've been. Hey, so can we talk about this whole, this is crazy, this is gonna sound wonkish, it's gonna sound a little geeky, but it's actually kind of important, because something's happening in bonds. And as I said before for anybody listening, stocks are for show, bonds are for dough. Not my saying, that's a Wall Street saying, right?

Because the bonds, the bond market's really, you have to pay attention to it. And this caught me, I remember I put this in a comment under one of our subscriber threads at peak prosperity back in the day. So see that starts on 4-4, April 4th, and then you have the fifth, sixth, which is the weekend and then you have the seventh, right, which is Monday. And then you got Tuesday, the eighth, and then the ninth. And what you'll notice, Paul, is that the 10-year Treasury yield bottomed out at 3.90 on 4.4 right before, like several hours before market close has been going up ever since.

So what's happening? Because during that period of time, we had a big old crack on Friday, we had a big old crack on Monday, you know, before we went out fishing, you and I were looking at like 2,000 points off the Dow, et cetera. In bonds, the yield is moving up. That was a very odd note to me because that's not how this works. When people are selling out of stock, excuse me, they're piling into bonds, so the bond price should go up, yields should go down.

We saw the opposite. But the way I've drawn that arrow, Paul Paul kind of looks like it's kind of got a trend it's on that's kind of independent of any gyrations in the stock market. It sure does. That's unusual to me. That's highly unusual. And you know what that reminds me of is the starting of basically stocks down 20%, bonds down 20% and 2022, because you had rates that were going up. Now granted, the Fed was raising rates in the midst of that, so you can understand that a little bit more, but the most nightmarish environment would be

a lack of trust on the long end of the curve, either for default risk or the loss of purchasing power from inflation. And you have yields going up, which means bonds are going down and stocks going down again. That would be a major shock to the system for the rest of the year if that continued at this point. And more than likely is you're probably getting ready to talk about blow up the basis trade, which, which would be, and I would assume would bring bring in an amazing amount of lack of liquidity to a market that already has very little liquidity.

Indeed, it would. And Jim Bianco noted that this is from a tweet from just about, well, was it last night yesterday? It's about pretty much about midnight. The guy doesn't sleep. He said, something is broken tonight in the bond market. We're seeing disorderly liquidation. If I had to guess, the basis trade is in full unwind. We'll talk about that in a second. It's important, it's geeky, but important. Since Friday's close to now, the 30-year yield is up 56 basis points in three trading days. The last time yield rose this much in three days, close to close, was January 7th, 1982,

when the yield was 14%. So that puts it in context, doesn't it? I mean, he said this kind of historic move is caused by a forced liquidation, not human managers making decisions about the outlooks for rates at midnight Eastern time. So something's happening in the overnight market, 30 year bus, a historic move. And I think we have to understand that to me, Paul, this is sending a signal, right? Sending a signal, which could, which could cause somebody to call somebody else up and

say, Hey, why don't you back off on tariffs real quick? Because we need some cover here, big guy. You don't know. You don't know. All right. Federal Reserve has been on notice from Zero Hedge for years. They've been calling them out on this saying, hey, Federal Reserve, this is what the collapse of the $2 trillion basis trade you encouraged

for so many years looks like the 10-year yield blowing out there. So what the heck is a basis trade? This is a geeky thing. So here's how Grok helped explain it does a great job to set up. So it says here basis trade, we're in bonds. You got two related instruments. Let's say a cash treasury bond, which you could buy right now, and a treasury futures contract to say, deliver a 10-year bond to you in a month or two months

in the future. The futures contract is an agreement to buy or sell that bond at a set price on a future date. Ideally, their prices should align, but they don't always. The basis is the difference between the cash bonds price and the futures price. Adjusted for factors like delivery, cost, and interest rates.

So there's a little, little, little difference, little tiny difference between the future price and today's price. So the trade is if the basis is positive, so the cash bond price today is higher than the futures implied price, well, easy. You sell the cash bond short, you buy the futures contract. Yay.

If the basis is negative, well, then you buy the cash bond and you sell the futures contract short. Either way, you're not betting on the direction of interest rates or prices. You're betting on this tiny misalignment in price fixing itself. And as the contract, futures contract nears expiration, it says here the price should theoretically converge. They should become the same thing. And then you've picked up whatever that spread was.

A basis point for anybody listening is one one hundredth of a percent. So there's a hundred basis points in a single percent. So the basis trade is you're picking up hundreds of a percent of difference between two things. That doesn't sound super exciting, does it? Tiny, which brings us to point four, leverage. The price differences are usually tiny. So traders use a lot of borrowed money to amplify returns often done through the repo market where you borrow cash or bonds with minimal collateral. So they so

Paul these things are levered up 20x typically Right. Yeah, you blow the whole thing up if it if it goes wrong and you make a misstep and you miss yeah It's going Exactly. So example imagine a treasury bond trading at a hundred bucks, but its futures contract implies a price of 9950 So the 50 cents so for 50, you short the bond at $100, you buy the futures contract at $99.50, and in the future, you net 50 cents. So oops, that's why we're gonna take a lot of leverage because nobody's getting out of bed for 50 cents, right?

But then things can cause that basis to widen, not converge. And it could be force selling. It could be volatility in the market that you didn't quite understand. It could be that somebody else is forced to sell. There's a lot of reasons it can blow up. Now Paul, if we'd just gotten ourselves in this mess and it was about to blow up, I'd be like, okay, you know, sometimes you have to learn about stuff. This trade blew up in 1998 with long-term capital management.

This trade blew up again in 2002. It's blowing up tons. It blows up all the time. It actually, it's like it happens all the time, but they can't resist. You're picking up pennies in front of a steamroller, as they say, you know. And this is one of those times I think it blew up. And that's why you saw a historic move in the 30 year in the middle of the night. It makes sense. It really does. And remember we were told, I think Daniel D. Martino Booth

said just keep your eye on the move index. I haven't watched it in a while, but that is the treasury volatility index and it is busting out. It's really high right now, as you might expect. So lots of volatility in bonds right now. And again, that just speaks to somebody getting forced liquidated because something's not right in that market. And that's why we saw Treasury yields just climbing steadily. And it didn't matter if stocks were violently lurching up, down, sideways. Didn't matter. It was just on its own little path.

The issues in that part of the market were controlling the outcome, not this normal rebalancing that takes place between stocks and bonds. And that's another birth pain. You know, we've had a couple of birth pains. So the in-carry trades operated with massive amounts of leverage. And we had one birth pain that occurred back in August of last year, the first week of August. But what do we notice right now? There's a lot of little tremors that are taking place. And if you want to call them birth pains,

they're getting a lot closer and closer together. And they're much more severe in the overall market reaction and being sustained. Indeed. This is a funny story. I'll share this and that because it kind of goes in line. So when Holly was, we were having our first child, you know, the doc's telling me to help her breathe

and all the classes that we go through and she would have these, you know, contractions. And in the midst of the contractions, she looked at me and cussed me for the first time ever, you know, like, like, shut your f**king mouth or something like that. I can't remember what it was after the contraction was over, I would go sit down over there like I've never seen my wife that angry. And then she'd lean over and she'd go, I love you. And then she'd come back. What's the

market doing right now? It's like this major contraction with a lot of pain, and then you get a little bit of relief in that birth pain and you get this massive rally in the market and investors are thinking, hey, we're off to the races. My concern is we're going to continue to see these birth pains and you're going to see lower lows in the market before we get back to normal valuations. More normal valuations. Yeah. So, so let's, let's talk about that for a second.

First, I just wanted to point out that I go to the Federal Reserve website, Fred, and ask the question. And it turns out, so this is the Fed's balance sheet zoomed in. So we're just looking at the past year or so. They haven't started expanding their balance sheet, Paul. But this is recent as of April 4th, so that's a week ago. They don't update until later today, Wednesday. So we'll find out tomorrow.

But I don't think there are officially I don't think the Fed's doing anything unofficially, who knows, because we can't audit them. Find out why Luxembourg bought so many bonds to quiet the bond market down yesterday or whatever the story is. Yes. Yeah. And I'm assuming they're still five billion a month and and quantitative tightening right now. I have not heard that they have uh have stopped have gone to zero at this point. Yes but that'll be flattening out because this was that sort of a 25 billion dollar a month glide path and five is a lot less than that. So it'll flatten out a bit as we go forward from there.

So but to your earlier point you just made like, you know, Paul, if there only there'd been some way to see this coming, I know we've talked about these before, but as a quick reminder, the NASDAQ on a price to sale ratio never saw anything like this before. And so obviously, your sales have to have something to do with your price over time. But a fair price, we might say, might be between one and two, you know, and we're at six plus. When we looked at the Buffett indicator, which is a total value of the Wilshire 5000 total US stock market cap value of 60 trillion trillion at the time of the snapshot with an annual GDP of $29 trillion.

Divide one to the other and you get a 208% reading, which on a chart means you're not just a little bit expensive. You're up at this red line. We're not even close to that in 2000 or in 2007, which wasn't really a stock bubble. It was more of a housing bubble. But even still, like this, this was super uncharted territory, right? This is looking at the U.S. market cap of U.S. stocks relative to the M2 money supply. Didn't get quite as high as in 2000, but that's its only competitor in this data series.

Or when we looked at price to book, the book value of US stocks compared to their equity valuation, again, only one parallel, which was in 2000, but we exceeded that, right? Which led us to observe well, punk. Do you feel lucky, you know, do you? I like that.

But yeah, dialing in on the price to book value, you can see like it really took off here. This is that rescue in the fall of 2023 that everybody got used to. We looked at the euphoriometer, which is an overall measure of bullishness, which is a forward PE, which is a projected view of things, the VIX itself, bullish sentiment. Woohoo! We were in uncharted territory. But for workers, the S&P was the most expensive ever when divided by median hourly wage.

So how is the 50% supposed to get in on this story? Technically challenged. The dreaded megaphone pattern, you would know more about that than me, but you know, that's a, that could be awkward. But mostly, when you have forward PE ratios, the expected 10 subsequent 10-year returns are zero, right? That's what this says, because we're right at this level right here, we'd be at the zero.

That's the annualized total return over the next 10 years. You should expect from stocks that were as expensive as what we were talking about is nothing. It should be pretty much a zero. And that's just off of forward P.E. Once you put all the rest of that in there, I would think an x-p- so that's Paul, if I'm getting zero, I'm not going to take a lot of risk. I don't want any risk for my zero.

The problem is, is passive investing has been sold to the point and modern portfolio theory to the point that that's, that's basically all that's out there. That's all that individuals have exposure to is, you know, they, they don't have signals out there that help them know when to reduce risk or know when to expand that risk and to embrace it. And the large majority of people, and especially a lot of the advisors that are out there today, just don't know market history because they've not had to learn it. You know, it's been like Bissent said, it would be easy to print money to keep things going.

But what we're seeing is it's at the expense of the large majority of the population. And if Trump's gonna do what he says that he's gonna do, then they're gonna have to work this out where it's beneficial for the large majority and not the top 10% only. And there's gonna be a lot of pain for the top 10% that refuse to see the shift in the underlying change.

And I think even if, you know, I really believe that we're in the fourth turning and if Trump, you know, throws in the towel and lets his pride take over, then it's still going to happen. It's just going to happen in a much more painful manner than if we at least try to make the best decisions and foresee the danger ahead and make prudent decisions to control this dissent some so that it doesn't just Absolutely wipe out large majority of institutions when the shift is forced upon us instead of chosen Instead of a chosen strategy to be implemented to help mitigate the damage for for the American people in the global population

Is this fourth turning unfolds? So that's a great point. Let's let me tell you my observation on this which is that It appears that the Trump administration is trying to do something different and on that basis alone I'm intrigued because nothing different has ever happened in my adult life right from Bush to Obama Because nothing different has ever happened in my adult life, right? From Bush to Obama, nothing changed, right? It was the same story over and over again. Here's the story. The Fed has steps in, creates a condition of bubbles, blows things up, right? And then it has to rescue things, because, oh, no, systemic crisis, right?

So it blew things up in 94, gave us the stock bubble of the internet internet craze blew up the long-term capital management thing in 98 Rescued that stock market breaks in 2000. So they rescue that whole situation. Then they have to us housing bubble They have to rescue that The story is Paul every single time that took the Fed balance sheet and doubled it roughly You know could be a threefold three, but but, it's, it's, it's an expansion of the fed balance sheet. So this, everything we're talking about, if all this blows up, I expect the fed to double or triple its balance sheet.

So it's going to go to 15 to maybe $20 trillion. Every single time Paul, we've had one of those printing things, the fed has been willing to take another chunk of the population and throw them under the wheels of the bus. At first it's just the poor people, but they get stimmy checks with the government. They don't complain too much anyway, whatever. And then it eats into the middle class, right? And then it eats into the upper middle class.

And now, you know, what was it just in San Francisco a couple of years ago, they designated at the official policy level in the city of san francisco that if you are earning as a family a hundred eight thousand or less you're in poverty you know well it takes a hundred eight thousand to be in poverty in san francisco yet courtesy of the fed in their x money magic expansion machine so here's my prediction when the fed has to double its balance sheet again because there's an emergency, Deutsche Bank is about to go under whatever the emergency

is, Paul, they're going to now eat into it where basically if you're not earning 300,000 or more, you're going to be in trouble. They're going to just take a whole nother chunk and throw them under the bus wheels. But at some point, Paul, we got to the point where the 99% notices that it's only the 1% that's still doing okay, and everybody else has been like chucked. And that makes a very unstable society and it's bad. And that's what I think the Trump administration clumsily or hopefully elegantly has said, we can't, we can't keep on this path. That path ends in a cultural disaster.

It just, it breaks. Correct. And, and if we, if they can do this the right way and they're pulling this off and maybe this is just something to release the stress that we're starting to show under the surface of the market, there are two things that allows investors to do that are really paying attention to the sea change compared to what we've seen really for the past 30 years. One, you can lower your risk a little bit into these rallies.

If you're too aggressive and that concerns you a little bit and you've got a shorter period of time and you don't have an emergency fund built up, so what if we go to all-time highs, right? We don't know how this is going to unfold. And if he's serious and this is just a relenting in the interim period to get us to the end goal, it's a completely different change. If we're focusing, if they are focusing on benefiting labor

at the expense of capital, you would have to assume that profit margins are gonna be squeezed. At a minimum, some deglobalization is gonna take place, which means that should squeeze the profits or the cash flow of a lot of these corporations, which ultimately will reduce buybacks from those corporations, which is going to be one of the drivers that has been fueling the markets going higher. So I believe that this is an opportunity for those people that got a big wake-up call on

the most recent decline. Here's your opportunity when you can to be able to raise some capital, reduce your risk a little bit, and get yourself in a better position if we actually do have a recession. I mean, some of the indicators based on just what the market's priced in at this point gives us about a 63% probability of a recession. Now is it going to be a technical recession or is it going to be a real recession? If it's a real recession, the average declines around 33.6% historically. But look guys, this is not a historical place on average to start a recession from.

This is equivalent to the year 2000, which a real recession led to a 47% decline in the S&P. 2008 was a liquidity crisis, but if we have a normal recession from this level, I would assume that the decline from top to bottom is going to be closer to 50% because we're so overvalued. I mean, I think we, you know, we've talked about this before and I'll show the chart again just to put it in perspective is, you know, just to get back to what has been considered, historically considered an overvalued market. Let me get this up here so we can talk about it. So the chart here, the black lines is the S&P 500 going back to 1926 on a monthly basis. The red line dotted line is price earnings ratio of 20, which is considered overvalued. You're

talking about 4,000 on the S&P right now. So we're at 5,400 today. Yes. So you're talking about 4,000. If we go back to a fair-valued market from a historical perspective, which we've really not seen that since about 1994, you're talking about 3,000 on the S&P. And if we go to an undervalued market, like we did back in 1974, actually dropped below that, you're talking about 2002 on the S&P. Now notice these things tend to cycle historically. So, you know, coming out of the great depression, we had, you know, lean towards overvaluation from what 1956 until 1973. And then you had that correction.

Now the difference is, as we started to sell off in 2000, the Fed intervened dramatically. 2008, they intervened dramatically, and they've intervened and intervened and intervened and intervened and forced investors to be speculators. And just to get back to normal, 4000, I mean, if these people, you know, if investors are freaking out over this most recent decline, and I'm not making light of it because it's been serious, and it's been serious. And there's been serious technical damage that has taken place under the surface of the market.

But the overvalued is substantially below where we are right now. And if we do have a recession, it's hard for me to believe that we're not going to meet that level and have lower prices on the other side of this. The question is, do we have a recession? And I think it's highly likely. prices on the other side of this. The question is, do we have a recession? And, you know,

I think it's highly likely. The magnitude and duration, I don't know. Our tools are telling us that that's a pretty major risk right now. So it's time to focus on protecting your capital more so than risking your capital. Well, you know, to be fair, Paul, the history is that the Fed has always stepped in and ridden to the rescue. Yes. And they, I mean, for 15, 20 years, it's just, it's just who they are and what they do. Look what they felt they needed to come out to and say 36 minutes ago, at the time of

this recording, which is about four o'clock here, you can see four, seven on the ninth, Fed officials signal they are not planning to ride to the rescue with rate cuts Well to the rescue of what? So that just came out after a few yeah Yeah, yeah, I mean the article came out 36 minutes ago I don't know how long ago they announced that but it couldn't have been much more than a couple hours ago They get that stuff out pretty quick. That's just that's fascinating.

I just don't know why the markets are so ebullient about this because because it says here as well Trump's shock pushes us and China toward a decoupling cliff edge. Maybe it's just gamesmanship and nobody believes it's going to happen. But our relationship with China is far more important than almost any other trading partner out there by far. It sure is. I'm not sure how you, though I guess you'd say, well, we don't believe that that's going to amount to anything. But wow. Yeah, look at these 474 on the S&P. That's a historic day. 2900 on the Dow, 1800 on the Nasdaq, 169 on the Rusty, gold

back over 3100 here, up 117 on the day, oil, which had cratered all the way down to 57, back up to 62, which is helpful because we can't afford to have the oil industry take a dive on us, which it will at these prices, by the way. This would be no good for it. Well, and I'll tell you what's fascinating. And if you want to, I can take a look what I'm seeing here at the end of the day. And this is the hard part about where we are right now. So let's just take a look at, at, so this is the NASDAQ or the QQQ. Okay.

To represent the NASDAQ. So we closed up on the day at 9.6%. We broke down from this consolidation that occurred in March, early April, and then we came right back below the 20-day moving average and stopped right there. Now, historically, when technical analysis matters, this is a gift to have the opportunity because typically you'll break support and then you'll have a major rally to backtest that support before you fail on the other side. Now we still should have some back-and-filling the markets after a big day like today there might be some

profit-taking. We did not close on the highs, we closed a little bit off the highs as you can tell right there, but pretty much the same thing on the S&P 500. So this is my ultra short-term chart on the S&P 500. I got all kinds of stuff drawn on this guy. So these red lines are resistance areas, green lines are support areas, but notice we broke down through here and came just about exactly technically in a similar manner right below that 20-day moving average and that prior level of support. So I'm curious to see and only time will tell if we blow through this tomorrow, then maybe

that's an even better gift. But this could very well be a back test of that prior resistance before we go lower. I'm not making a prediction, I'm just saying that I, you know, from assumption, I'm assuming that the next major moves from here after this rally is over is that we're gonna, at a minimum, retest these bottoms, and I think we're gonna go lower from here, ultimately.

The question's when, I don't know if that's three months from now, three weeks from now, three days from now. Well, it seems to me, you know, a recession is kind of in the cards at this point in time. Just because I don't know how you have this much drama without something going off the rails. And in particular, if the federal government ever does get its act together to begin to figure out how to cut expenditures, that's recessionary. It just is. I mean, from an official standpoint, how that affects corporate profits, you know, remains to be seen. But we would have an official recession at that point if, if we could ever get the government to cut expenditures. No

luck on that so far. Yeah, no luck on that so far. So appropriations has to be trimmed and we had a continuing resolution so we don't even have a chance. I think we have to go six months out to have a chance at getting a set of budgets passed that would have expenditure cuts in them. And there are a couple of things that would change my stance on the overall market right now is if the Fed was to capitulate and start cutting rates and printing money again. One thing that might add some softening to the potential downside was if we get an extension of the Trump tax cuts and some more tax cuts on top of that, or if Trump just completely throws in the towel on the tariffs.

Either way, I still think there's been enough damage and uncertainty that's caused in the underlying structure of the market to make the next six months very challenging and still increase the probability that we do have a recession. The question is how is it going to be a technical recession or is it going to be a severe recession? Now we do have earnings that are going to kick off next Monday and Tuesday with JP Morgan and Wells Fargo if I remember correctly. So earnings will start next week. I'm not so interested in what the earnings are because we're looking in the review mirror coming off the first quarter where things were relatively good. But I'm curious to see what the, if we're going to get profit warnings if if these companies are going to take this opportunity in this environment to jump on this negative train to try to lower their profit expectations so that it's easier to beat those hurdles.

You know, we might get the kitchen sink thrown in as far as warnings from these corporations, which will cause a little bit more angst in the market. So I'm really curious to see how earnings season unfolds over the next couple of weeks. Then after that, you know, there's still a lot of corporate buybacks that are in place that are planned to be announced that may provide some extra liquidity underneath the markets for an intermediate term period of time. And I'm going to continue to focus here on bonds. This is a 10-year bond. So this is the future. So when the price is going up, yield is going down. But you know, you can see here, Paul, it hit this level.

That's 4.5% on the dot. And somebody somehow decided we've got to bounce it there, came down, bounce. But this right here is the total response to that huge stockplosion we've just been talking about. That's almost, that's nothing of a response. Like little palpitation there. That's it. That, that lack of response is very indicative of somehow there's a decoupling between bonds and stocks at this point. That I'm going to suspect there's something wrong in the bond market at this stage.

Particularly when Deutsche Bank comes out and says, it would be nice if the Fed could do some buying of bonds here. It would be. I'll show you. Wouldn't that be nice? This doesn't reflect today, but this does do a good job and looking at all of the different yields across the board here, Chris, of showing, you know, so the black here is the 30-year, the gray is the 20-year, the brown is the 10-year.

Look at the magnitude of that move. That was yesterday, so this is in the day, so this won't be updated on my charts for another hour. It's about 415 right now. And but you're right. I mean, you started to see this path of least resistance down and then all across the board, you just saw this massive move to the top side.

Yeah. That's unusual with the market selling off like they have been. This was yesterday before today's market rally. And so that's just another way to show that picture of the stresses and the mon market screaming something's Something's taking place under the surface. Yep, you can't see yet So Paul is it is it fair to say that with all of this volatility or the average portfolio that you manage is seen less

Volatility. Oh, yes. Yes So, you know, I tried to figure out what I could say and what I couldn't say because I'm not, you know, I can't cherry pick certain times and periods. The one thing that I will say are there are periods of time like 2022 where our strategy outperformed dramatically. And then we underperformed in 2023 in the general portfolio, the overall market. But in that two year period of time, we did get to new highs. So we've been in this environment right now

where I've had a lot of emails that have said, hey, considering this volatility, I'm really excited because we've held up well. We've had some downside because there's been some areas of the market that are really attractive that have been hit, but it's been minimal compared to the overall market. So I've not had that many nervous Nellies, really haven't had any

at all, because we were prepared and had a high cash position coming into this and short-term treasuries because we had a lot of tools that were saying this was a potential and it's actually unfolded. So, and we have more information right now that gets me a lot more concerned about later in the year. It doesn't mean that we're not going to have opportunities that we're going to move on. But we've got to be patient right now, let this unfold and get better prices. I'm really pleased at how well our portfolios have held up during this sell off. It's good to hear that. That's the importance of this risk manage side and managing things that way.

And by the way, I think there's going to be a lot of volatility as things sort out. I mean, look at us, Paul, you know, a couple of market like long time observers. I'm reading wildly and everybody's got an opinion, but honestly, nobody quite knows what's happening. You know, so you just have to be nimble, observant, try and figure it out as best you can. But there's something happening under the surface that reminds me of 08 or nine again. You know, Paul, I remember I told people I sent out an alert two weeks before the stock market really cratered 08. And I was telling people, go to the bank and get some cash out just in case, right?

And the reason I was doing that, I was watching certain sectors of the financial sector really start to, their stocks were hemorrhaging, right? And I didn't know what I was looking at because I don't know what's happening behind the scenes. And then a couple years later, I read this memoir by, it was in the Wall Street Journal, this big article about this guy who was CEO of one of the banks, going to a 2 a.m. meeting through the lobby

of his own bank building in Manhattan, 2 AM. And the article is great. It noted that he paused and he stopped and he took cash out of the ATM because he didn't know he was going to be able to get access to cash later. He's like, maybe a CEO of a major bank. He's like, I might need cash. Right. And that was the same time I was sending

my alerts. I didn't know that he was having that 2am meeting or how serious it was, but I could see the pattern in the markets that like, oh, something broke, right. Later, you get to sort of figure out what happened. But in the midst of it, it's just you got to read the smoke signals as best you can pivot. Right now, I think that to me, Paul, the several things are sending big signals, but none of them right now bigger than gold. Yes. Yes.

Gold's been sending the signal for a while. I wanted to pull up gold here and look at it as well. Well, I mean, it gets hammered. It gets hammered all the time. It's supposed to get hammered. Right. And, you know, today in today's market, you know, it was rising again all during the night Asia's just buying it, you know, but then here's our eight o'clock slam in the U.S.

market right on cue, but it kept rising. And then this was when the stock explosion happened. Somebody sold it hard. Look at that huge volume spike right there. Somebody just stepped in and said, yeah, Now's a good time to sell gold and then Pops right back up again So it just keeps sending that signal and by the way if we look at it on a daily basis You can see it even more plainly as it rises like that and on a weekly basis. It couldn't be more obvious

What's going on? Something big is happening in gold and it's been happening You know for quite a while, but it really took off March of last year, one year ago. Well, and what's telling me, and we spent a lot of time talking about how major the breakout was a year ago when we finally broke out of that range. Of course, we didn't know what it was telling us,

but now we can see that big institutions, well, big investors, whether they're institutions or not, these are not weak hands. I would assume somebody got forced out with that big volume trade that took place during the day, not so much the trying to break the spirits of the investors coming in. But notice this, gold's held up ridiculously well during the sell-off. You had minimal pullback in comparison to the overall market. But look at the surge that took place today. Normally I would anticipate that gold is going to drop on the news that, hey, we got an extension

and the stock market's taken off. But gold had a great day today on that breakout. That tells me that under the surface, I don't know what it's telling me, but it's telling me that there are convicted investors that didn't wanna wait for more of a pullback to go ahead and put some funds to work right now. Indeed, indeed. We covered the $11 billion one day purchase

a couple episodes ago that happened off at the CME. We've covered that London's probably got some dusty vault. They're getting down to the bottom of whatever barrels they can scrape over there. So the West is basically running out of product and the East has been vacuuming it up. And that all makes sense. So my prediction is, is that sometime, Paul, in the next few years, you know, we do have, you know, my price target for gold is much higher than now. You know, it's just, I just, I could see it going a lot higher.

But I do think that we end up with some sort of a dislocation where gold and silver are no longer available. As my friend Mike Maloney says, they become unaffordium for gold and unobtainium for silver because you want it and the price is something you can afford, but you can't find any. So unobtainable. So I do think that's coming because, you know, the way I interpret that golden signal is there's a lot of printing coming. They're going to have to sacrifice the dollar on that.

And they don't care if they have to sacrifice people up to, you know, up the social curve to 300,000. That's what's coming. That's what gold I think is telling us. The dollar is really going to be, you know, be the sacrificial lamb in this story. And that, that, okay, fine. But you're going to have to understand that way in advance if you want to prepare for it.

Well, and it's going to be painful for everyone, but for the investors that are eyes wide open, understand the reason why it may be appropriate to have some exposure to those sectors and have a plan in place where they can move one or two steps quicker than the average individual, then they're going to weather the storm far better and be in a position because of those long-term decisions and really looking at the big picture and from historic history to make a big difference for their communities and their families. Family first, community second.

And so, yeah, I mean, but the average retail person is not calling wanting to buy silver on the pullback or buy gold right now. You know, all I'm hearing and I talked to some friends of mine that are kind of buying hold, I just called and said, hey, what's the trend out there? Oh man, this is a buying opportunity of a lifetime. And one of them made the comment, he's like, I asked a client to take their emergency fund

and buy the dip here in the short run. I'm like, so for a trade? They're like, no, from a long-term investment, we'll never see these prices again. So there's still not any fear out there in the major firms that I know of outside of some of the clients that are a little bit nervous. So I don't think this is the entire, the environment where you have a major bottom. We haven't had the Fed come in and intervene at this point. Yes, there's a relenting in the short run, but it doesn't say we're giving up on tariffs across the board. And there's still this issue with China, which is a major factor. And they

reduced the peg and allowed the offshore wine to decline in relation to the dollar, and they reduced the peg against the dollar. Now, if they do it right, they can export some deflation to the US. And also, if they cut it enough, then they can make it more expensive for Chinese citizens. So they buy locally instead of buy from the US or international. And that further exacerbates the trade deficit. So this is far from over as far as I can tell. You and me will both be checking our futures at 230 this morning and tomorrow morning. Just how it is.

Got to know what Asia is up to. But but that's it. It really is. There's a big East versus West story, both for gold, for for equities, obviously for flows, all that. I think it's Paul largely we could subsume some of this under moving from a unipolar to a multipolar world. And guess what?

There's going to be a lot of power vacuums and changes and things like that. So we're just gonna have to stay vigilant, see where it goes. I think there's plenty of opportunities coming. I think there's going to be some losses people aren't prepared for. You know, and as you and I have discussed completely off topic is, is just, there's so many disruptors out there. Trump being one one AI being another whole other topic, right?

Energy, energy costs being a third resources, you know, et cetera. So there's, this is a, not a time I think for complacency and sort of just ride the passive trade because we're going to have to not only skate to where the puck is, but we're going to have to figure out where the puck's going to reappear somewhere in the arena. You know, it's just like, there's some surprises coming. I guess that's what I'm saying. No, I believe so too. And that's why I want to encourage, look, if you want to stay as a passive investor and not worry about the downside risk, that's the choice that we all have to make. Right. So, but I would encourage you make sure that you've got, especially if you're in retirement,

shore up some of that income for the next two, three, four, five years. Yeah, it might be at risk of inflation, but if we don't get the inflation in the interim period that these end up being deflationary, AI is deflationary, right? What if we get the first white collar recession that we've seen in a long time

and these companies replace a lot of these jobs after the layoffs with artificial intelligence, then just make sure you've got yourself with a resilient foundation financially, and that's a minimum 12 months worth of an emergency fund. Ideally, I'd like to see a 24 months right now. If you're in retirement, ladder out some treasuries for the next five years, one, two, three, four, maybe shorten them up a little bit, go out to two years, but get you five years worth of income

that you've peeled off of those portfolios right now, because yes, I mean, well, with today's rally, we're up, but even with the decline, what we went back to the 2023 levels, so there's still a lot of profits in those portfolios if you've been passive, pull those aside. You know, so what if you miss a little bit of opportunity in the short run, your retirement doesn't get wiped out for a little bit of missed opportunity. Your retirement gets wiped out because it's not different this time and the market goes down 50 or 60 percent. And that great picture you had of retirement or retiring two years from now is unachievable because you refuse to pay

attention to the warning signs that are out there. History teaches us lessons that we must learn from. And that's one thing that bothers me when you have a concerted effort from government leaders to remove history and the lessons that are taught there because it makes for a weak populace and an uninformed populace They can't learn from the mistakes of the past So it's far better to learn from the mistakes of others than it is to learn them ourselves the first time And I can tell you 26 years of doing this. I have seen people's lives

Upended in retirement or right before retirement Because they refuse to pay attention to to the warnings that were out there. And they weren't clients of mine, but there are people that I met and I even tried to get to reduce, to reduce their exposure, but they felt it was different this time. And it's always different in one way or another. That's what makes it so challenging. Nobody's gonna be able to completely pick the markets at all time, but there are all kinds of warning signs, there's all kinds of birth pains that we've seen, so you can't say that you're not warned if you've been listening.

Indeed, indeed. If you want to listen to Paul Andorra's team, get a free consult with them, please come to peakfinancialinvesting.com, fill out a very simple form. Somebody from Paul's team will be in touch with you to schedule an appointment to have a conversation within 48 business hours and you can go through a portfolio review. Paul, everybody who goes through it says it's an amazing process. They love it. And I know many of them have decided to sign on with you and have come into the to the KWM family. And I use that word carefully because you seem to treat people like actual humans you

care about. Oh, thank you. And I take people through the process because I know that it's impactful for them. It's the harder way to do it because there's a lot of times I could just say, hey, come on as a client and here's our portfolio and how it works. But, but that's great. But the real value that we're bringing is helping people understand the reality of where they are so that they can make wise and prudent decisions. And what I have found is once you know what exposure you have to have, what your

risks are, it takes away that unknown and that, and it, and it gives a calm to clients that, that they don't have otherwise. way that unknown and that and it and it gives a calm to clients that that they don't have otherwise. That's the that's one thing that's so important about that, whether they that's why I tell people, you go through the process, whether you work with us or not, we've given you information that's going to make you a better investor, it's going to better prepare you for the future. And, and that those little bits of wisdom that we

garner throughout our lives, you know, at our ages, you look back and say, hey, I wish I'd have had some of this wisdom. I'm able to share. I have seen in 26 years, because I know I've walked so many people through retirement, I know what potholes are around the corner. I don't know exactly what's gonna impact them,

because it's all unique to the individual. But I know those challenges that are coming that can make the difference between success and failure. And there's no do-overs in retirement, right? You know, if you lose your kid's college fund because of poor investments, they can work their way through college, they can borrow money, they have multiple ways.

But nobody's gonna loan you money because you made a mistake in retirement to be able to make your ends meet. There's no easy way outside of upending your life. So I encourage people to understand your situation, understand your risks. And if you can't get that elsewhere, that's something that we can do for people

and are honored and yes, we love our clients, they are family. You build these unbelievable relationships. And, you know, for me, what's so great, Chris, is, is I had clients share so many neat little things from multiple families about raising kids and what they did right and what they did wrong and what they'd have to do differently, which was wisdom that allowed me to help raise my kids in certain manner. So, you know, within that family, I learned bits and pieces from everybody that helps the all. And, and I love it. It's, it's, it's an honor to serve people. Fantastic. Well, well said, Paul, until next time, probably I'll call you tomorrow. We'll have to talk about more of this.

But for everybody else, this has been Finance University. We'll see you next week for sure. I hope you enjoyed this. Leave the comments down below. And again, if you want to talk with Paul, go to peakfinancialinvesting.com, fill out the form, and we'd love to be able to help you. With that, Paul, until next time time and everybody else, bye for now.