TRANSCRIPT
good morning sense of things audience
it’s Jeff and Ron here once again for
another episode of the sense of things
podcast and on today’s show we’re g to
really focus on a lot of what’s been
going on with the economy here and the
stock market over the last few days
really we had three really bad down days
and we’ve had a bit of a recovery so
what we’re going to do is over the next
couple of we’re going to be breaking
down bits and pieces of what some of the
causes of this were and and what we see
moving forward so stay tuned to the
sense of
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things all right folks welcome to the
sets of things Ron how you doing today
good morning doing well getting into the
uh the heart of August I can’t believe
it uh the kids already the school buses
are out they already started school here
wow okay we’re we’re next week so yeah
so they’ve got one more week of
enjoyment although uh we went from our
nice Placid summer to 100 degree plus
days here for this next week or so yeah
your humidity forgot it I can’t handle
yeah it was yeah I walked outside this
morning and I needed to take a shower
just walk into the mailbox
you could keep that I’ll visit you in
November there we go yeah it’ll it’ll be
down to the 90s by then so you’ll be
good I know you’ve got some stuff for
this episode so why don’t you walk
through that a little bit yeah all right
so for those of you that know me that I
am a big movie guy I could tell you the
year movies were made who was in it
lines from the movie like I know a lot
of other movie Geeks are too and I
thought was interesting because I’m
starting to feel like age I just flipped
another uh trip around the Sun last
Monday
and God you know we’re going to explore
84 and then when we do our two-part
series on recession indicators we’re
going to go to 94 so these were the top
movies in
1984 and I think people are gonna be a
little amazed about how many great
movies were
1984 and any of these
movies you could turn on no matter where
it is and know what’s going on know the
line and watch it for 15 20 minutes and
that’s when you know it’s a good not
just a good movie but a classic movie
great um all the and I have some
honorable mentions but I’m just curious
Whi which one or two stands out the most
to
you oh I would say out of I really the
probably the last three are my favorite
movies of that year I love Romancing the
Stone I just think it’s hilarious and a
very classic movie with those guy and a
lot of the bit part cast with Danny
DeVito and all those guys I think was
just exceptional I still want to have a
little Mule the Bronco that was in there
or the yeah I think it that was El
Guapo’s Jeep elapo yes El Guapo’s Bronco
the little mule I still want to have a
little mule Beverly Hills Cop I just
think is an absolute classic and one of
the few
that the Remake was actually as good as
the second one the third one kind of
sucked but by the way the fourth one
just came out on Netflix I haven’t
watched it
yet Edd’s trying to relive his past
because I think he did another Coming to
America I just can’t I can’t do it I’m
sorry I love the original too much to
have them ruin it with another one and
then of course yeah Terminator that’s
what started the franchise and I pretty
much every Arnold Schwarzenegger movie
until he started doing the or whatever
the the movie is the rejects or the
hasbin or what whatever that movie is
now with Salone and him and all that
I’ve loved every Schwarzenegger movie
ever even the bad ones I got I got a
good segue there for you so I heard an
interview with judge reinold on The Rich
Eisen show I don’t know how long ago it
was that he was cast for Beverly Hills
cup the Beverly Hills cup was supposed
to be for Sylvester Stalone to Star it
because he was the biggest star in the
early mid 80s and this was supposed to
be an action movie and as they were
going through it and Stallone was signed
up for it basically they felt that they
convinced alone that maybe this isn’t a
good vehicle for you because if there’s
not a lot of action and ended up doing
Cobra which was a pretty bad movie which
was a horrible movie yeah yeah and then
they brought in Eddie Murphy and then
Eddie Murphy not just did an
unbelievable job but they also rewrote
the script to add all the humor cuz the
original Beverly Hills was not like fun
dark humor it was just supposed to be
all action yeah I thought that was a
great little which it would have years
later you find this out it would have
just been cobra in Chicago instead
of and then here are some honorable
mentions
Splash Poli Academy can I tell you oh my
God that again about three four months
ago holy crap I totally forgot about how
hysterical Purple Rain even though it
wasn’t a great movie the soundtrack is
classic the yeah the the movie was
terrible the soundtrack absolutely
amazing I think Prince at the top of
his that was probably the Pinnacle for
me of Prince absolutely movie awful
besides the little part where he’s has
the little puppet that I think is just
absolutely hilarious um in the whole
movie but all these were 1984 1984 wow
yeah I thought Splash actually was a lot
earlier than that I thought that was
early no and actually you know what it’s
a good movie not a great movie it’s a
good movie nope it’s a feel-good movie
and it’s also got John Candy who’s my
all-time favorite star of that
generation I just think the world of it
he was just such a funny dude and and so
many amazing movies just in a
row absolutely all right let’s get some
business here so we always show the the
CNN business indexes and this is as of
August second so this is as a Friday
before the big drop and we were already
at extreme fear levels with with the vix
and I just thought this was interesting
because the top chart is the timeline
but we show that we’re basically at the
extreme fear level and look where we
were a year ago we were in extreme GED
yeah and if you remember a year ago we
were already about three weeks into a
10% slide down to the end of August so
Market momentum showing fear but here’s
the interesting thing the NYSC stock
strain 52 High weeks and lows is showing
extreme
green so you get this
bifurcation of what’s going on as far as
overall sentiment and then we get the
safe haven trade I thought this this was
interesting I love this is probably my
favorite out of all of them junk B junk
bond demand is up because people want
the yield because they know interest
rates are going to go down down Y and
the safe haven trade is an extreme fear
and the bond market is always ahead of
the stock market and well ahead of the
economy what are your thoughts oh
absolutely yeah I’m not falling for this
little trick the Market’s pulling this
last couple days theoretically I I come
from the investor Business Daily where I
was trained on a lot of the stuff and we
leading into tomorrow could be what’s
called a follow-through day which is a
day where you have when the market gets
pummeled down then you have a positive
day and a finally a positive day and
that can indicate a new return or new
trend up I I honestly think well most
likely be and this is Tuesday the 7th or
Wednesday the 7th uh of
August I think we’re probably going to
see a down day again tomorrow and then
that’ll break that follow through and
then we’re just going to keep muddling
around here because we’ve got some
pretty some things that you and I have
been talking about especially on the
hiring side of things and the the
employment side that’s been the thing
really booing the market and we saw some
really ugly numbers last Friday on that
um I know you’re gonna cover that next
podcast yeah unbelievably ugly that’s
that last little piece of the
pie I thought this was a chart I grabbed
it off of Yahoo finance this the AI is
basically the market over the last 12
months plus or whatever and while pretty
much everything else has basically been
flat or off a couple of points
definitely low mid single digits and you
could just see like this could be
turning not because AI isn’t going to be
a thing not because there aren’t Quality
Companies in AI there was just a
tremendous amount of air in that balloon
and certainly coming back down to
reality and you need a flush out before
you could go back up yeah and we’ll have
a little bit of a conversation in the
next episode about the end carry trade
and I personally think that when we talk
about that I think there was some of
that in some of these infrastructure
stocks the net infrastructure stocks and
things like that and the Magnificent
Seven where the carry trade typically is
you buy you sell or you borrow Yen and
you buy currency I think some of that
was people plowing money into some of
these Magnificent Seven stocks and then
as that Unwound we just pulled those
things down quick and I don’t think
that’s over yet I don’t think so either
I thought this was interesting there’s a
lot of people say oh the market always
does better under Democrats or it always
does better under Republicans in the end
I thought this was a great chart because
you always talk about with people
consistent contributions reinvestment of
dividends over a long period of time
yeah there are some presidencies where
it’s up it’s down or whatever but here
you go this this will debunking for the
last 63 or 62 years right just stay
invested that’s it yeah stay invested
you’ll do okay don’t pull your money out
or reduce anything just or the other
don’t make the assumption that all of a
sudden we have a democrat in oh my God
the they’re gonna just regulate and
they’re going to do all this stuff
businesses will figure it out they
always do they’re GNA figure out ways to
make money sometimes it’s a little
easier sometimes it’s harder if we have
less regulation it tends to be a little
easier but that doesn’t mean that
companies won’t do stupid things during
that time period either definely not
there’s always abs and flows yeah I
always understood it was the
Republicans
basically reduce regulation reduce taxes
basically light a fire under the rocket
ship and then it burns out at the end of
their Administration the Democrats
basically clean it up right more money
flows in and the market flies above
where the Republicans were and if you
take a look at the ABS and flows over
the last 50 or 60 years that I’ve seen
it that’s what’s obviously 0809 you saw
what happened Co you saw what happened a
little bit with the
Doom right but then it things faltered
in the 0809 so I thought this was
interesting and one of my last charts
here I thought was pretty interesting do
stocks outperform treasuries and the
answer is no okay why obviously During
certain times and we’ve had an unusual
circumstance here in the last two years
where obviously treasuries did not
perform Stacks but treasuries were a
great place to hang out when you were
earning four to four and a half to five
and a half percent yeah it’s interesting
I’ve got I’ve got some clients that we
were doing we actually had been doing
that all right let’s be in money markets
and things like that and what I ended up
doing with some of these folks okay we
started buying what you and i’ had been
talking about we started taking some of
that money market money and putting it
into the into you know like short-term
treasuries in a ladder and thank God we
did that and actually we got a small
window of opportunity here in the next
30 45 days that if you got pre-retirees
or retirees they could lock in for six
months or so a little bit over a 5% rate
on the treasuries yeah because once they
start lowering rates those one to six
month tea bells are come down that’s
gonna come unglued yeah that’s I can
share real quick uh when we’re done with
your stuff I can share the yield curve
just to show people where it’s at again
yeah that’s a good idea all right so I
got this from my friends at First Trust
and their recent monthly
newsletter and I love this because I’m
an amateur Market historian I love going
back I love seeing psychology EVs and
flows and cycles and here it is I I love
this about with different
administrations whether they have all
three branches two one whatever it may
be and I just thought this was
incredibly interesting of performance
we’re not going to have a chance to go
through all this obviously but what it
comes down to and I’ve heard this a long
time ago when we have a split Congress
the market does better because nothing
gets done yeah as sad as it is to admit
that it’s the truth yeah right because
if you have all if one a party has all
three they feel like they could probably
railroad things through and just overrun
and then you know what sometimes a lot
of their things are for the bad and
people realize that and then the midterm
elections happen and things
flip I don’t know in my not in my
lifetime I don’t think there’s ever been
a time over a
foure period where one administration
had all three brand all three parts for
all four years yeah
typically but I something always flips
the midterm for whatever reason yeah and
the Senate has basically been split
right down the middle for God it’s long
back now as I can remember the house has
flipped around but the Senate okay yes
it’s gone from Democrat to Republican
but it’s like by one seat or two seats
or something like that so it’s not
anything massive when it comes to the
Senate the house has moved around quite
a bit over time and I think the house
has I think a little bit more effect on
the things that are the the things that
affect the economy more the house tends
to have a little bit more effect on I
think Senate typically is more of your
it’s more of your appointments and who’s
getting appointed to different roles and
things along those lines so they have
some effect but they don’t have as much
of an effect I believe as the house does
because they’re generally the ones that
start kicking things off but I just
thought I’d point out three very quick
things here in the chart so this is on
the bottom half here it’s talking about
how well the market does the first year
of the presidency now only 2001 which
was just a complete flush out of the
dotom that nothing did well in September
11th too September 11 yeah but that was
at the end of the year you’re right
because that was yeah but I thought this
was interesting look at how well
consumer discretionary did consistently
across the last 30 years yeah also
Information Technology other than 20012
5 you were you were getting better than
a 20 25% growth first year of all the
presidencies yeah those are two things
to look at when we’re troughing out here
before the election where to put money
over the next 18
months yeah and I think it’s coming into
this a little bit different this time
because we’ve ambled our way through
four years of a lot of inflation
everything else and does that now have
when when are we really seeing the
cracks like I said last Friday we had
unemploy or we had employment that was
just meager at best and if if you dig
into it it was a lot of government
employment things like that so it’s not
a really good sign for the average
worker in this country and literally in
the last six months unemployment rates
have gone from 3.5 to 4.3 so that’s a
big move and although historically it is
very low
that’s a big move from where we’ve been
at and still a high percentage of the
hiring is government yeah which I don’t
even look at that that’s just bunk yeah
it is and there now it’s just okay it
didn’t really make as big of a deal when
we had like 300,000 jobs being created
okay 50,000 of those were government
employment okay great now when it’s down
to 114 and 50,000 jobs of that our
government that’s not a good sign for
what’s going on and those are jobs that
really don’t produce anything in our
economy they’re jobs that are there and
sometimes needed but they don’t actually
produce anything it’s not part of our
productivity no yep absolutely not so my
last slide you know what I think I’m
gonna probably show this once a quarter
I think the last time I showed this was
January showing the year end somewhere
in that time frame what I’ve done here
and I’ve always looked at
you look at the bottom four performing
sectors of the year before and then you
can see how well they’ve done the
following year and I’m a big Health Care
person and this is where money will
start flowing before the election it
already has this but also the healthc
care is also a political football we got
to reduce drug prices things sick we got
to reduce this it’s a political football
but I think going into next year
Healthcare should really take off as one
of the top sectors but I just thought
this was interesting people could fre
freeze the podcast and really check this
out because I think what you’re going to
find is there’s going to be some real
opportunities here no matter who’s
elected to be invested through the end
of the year and into next year pending
no geopolitical event yeah you figure
you’re going to see probably real estate
go up just from the borrowing cost
perspective utilities will typically go
up in this time period when rates are
going down there’s a whole bunch of that
let me quickly before we jump off of
this I just wanted to yeah yeah show
your y you’ve shared this before and I
want you guys to see this a little bit
that’s a great that’s a great a great
service I love that yeah you US Treasury
yield curb.com is one of my favorites
because you can see how it is over time
and this is as of today um actually it’s
interesting treasuries are hanging up
there if you look at money market yields
now they were up in this 5.4 range for
quite a while and money market yield
rates are now like down around
4.9 and stuff like that so they’ve come
down while the treasuries have held up
there but what Ron was talking about
before and and what yall need to
understand is this ain’t
normal this is not the way this usually
works and we’ll go
back to what would be normal so we’ll go
back if few years and it should be here
shoot that was even worse yeah we’ve
been in a un inverted yield curve for so
long it’s you can’t go back far enough
to show what a normal yield C this is
what a normal yield curve looks like
rates are really low on the short end B
at the end so you gota go
back that’s all right uh but this is the
way they normally look up you know going
out three years 5 years 10 years and out
to 30 years now this is weird where 20
was higher than 30 but you look at today
and it’s a whole different animal it’s
exactly
reversed and stayed that way for quite
some time yeah it’s stayed this way
Forever at this point and what’s going
to happen and I think what a lot of
people don’t realize is we’ve got these
abnormally High short-term rates that’s
going to change fast this top end of it
is going to come down quickly as they
lower interest rates and a lot of this
is not set by the Fed it’s set by the
market and the market will just start
pulling those rates back you’re be the
most important out of all of them but
yeah you’re going to see this whole
short end of the market out to a year
really come down fast and you probably
aren’t going to see a major change in
the long-term rates they’re going to
just hang in there and stay where
they’re at with that 20 year of just
staying where it’s at there um so you
know th those are the things you need to
be thinking about as you prepare for
what’s going on the short-term rates the
rates are going to come down fast the
prices aren’t necessarily going to come
up that quick because the durations are
just so short you better be prepared for
that if you’ve had a lot of your
portfolio sitting in that shorter end of
the yeld curve maybe you maybe you make
sure that you lock in some of these
rates by buying treasuries it you know
lad treasuries or something like that so
you can keep the keep it those rates as
long as you possibly can absolutely
absolutely there’s a window of
opportunity here no doubt about it yeah
for people to to lock it in and conserve
some money here while geopolitical
temperature is heating up everything
else so we’re gonna cover more of this
than I know of my of our podcast coming
up absolutely so folks thanks a lot
we’re trying to keep these as short as
we possibly can and deliver more of them
to you in these shorter format so
hopefully you’re enjoying this uh let us
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