TRANSCRIPT
Hey everybody, welcome to the sense of things. And this will be an interesting week because
we’re actually going to have two separate shows. So make sure that you watch this one, but then you
turn around and watch the next one because we’ve got a lot of good stuff. Ron’s going to run this
show today and we’re really going to focus on a lot of the kind of investor aspects of the market,
understanding about whether you should time the market, be in the market, whether if you invest
at the tops of the market, it’s good or bad. We’re going to get a lot of that today and Ron’s
got some really good research that he’s done on there. The second show, you need to show up for
that second show. So, make sure you look for that because I’m going to cover some stuff on the One
Big Beautiful Bill Act for businesses. So, hang tight. We’ll be right back on with you in just one
second. Hey everybody, welcome to the show. Ron, how you doing bud? Good morning. As we always say,
never a dull moment. Plenty of stuff to do. You got a good show, a second show coming up on the
one big beautiful bill. And we could probably do about three or four days worth on that. And I know
that there are still people trying to get it out there. Just digging through. Today we’re going I’m
going to cover some earnings information, average returns, and what happens if all you only invested
at all-time highs. Just digging right in. It was interesting on we talked about this in the last
show. The first half of this year, was it two different chapters, four different chapters? We
started out the year pretty hot. We had the tariff tantrum and everybody thought the world was going
to kapooie and then all of a sudden we had this Vshape. We’re at all-time highs. It’s just crazy.
But despite the market and despite revenues, it’s earnings that people want to know. And the old
expression is earnings is the mother’s milk of of of the stocks because you could grow the top line
for a long time, but then eventually investors are going to want to know, are you making money? Yeah.
These two charts I thought were pretty interesting from Faxet who do a great job on earnings
analysis. And if you just take a look on the left chart, going back to the S&P earnings growth, end
of quarter estimate versus actual, I don’t know if these analysts are sandbagging. Yeah. Or what, but
it just seems like they’re consistently beating it. Even if you take a look at three bad quarters
in a row, Q422 to Q2 2023, two of those three, the earnings were better than expected. Yeah, I don’t
know what’s going on. And then in Q3 2023, where we really just vaulted upward, they were expecting
negative earning growth and they blew that away by almost 5.25%. That’s that’s crazy. I don’t know
your thoughts on this. either analyst and market strategist for you know I don’t know if it is
that the analysts are really as bad as we think they are or that companies sandbag the hell of
it I think it’s a combination of both I hear it’s just I it makes me laugh at some of these analysts
because what was it Tuesday that we got CPI this week and oh my god look CPI is up 0.1% above what
it was expected to be although If you look at some of the estimates, it was right on track with of,
oh my god, see this is where the tariffs and all this stuff is all coming in and we’re seeing the
effects of it and then a day later PPI comes out flat and it’s okay, we can’t really say that now
because that’s, you know, CPI is the effect of, okay, several months after production has
started and we’re here. PPI is what we’re paying what these guys are paying today and it ain’t any
higher than what it was. So the tariffs that are happening and all this. So it it’s just so funny.
I just like I said I love that. I what I haven’t heard in a long time though that used to make me
laugh is when they couldn’t figure out what was causing the market to drop it was profit taking.
No kidding. Because more people were selling than buying. Thank you. And taxes. Yeah. Thank
you idiots. Yeah, I I really don’t know. I I know there are good analysts out there, but I honestly
Here’s the whole thing, Jeff. Yeah, of course that this the CEOs and to the CFOs to a certain
extent are always going to spin their yarn, right? They’re always going to spin. But if you got good
analysts that have been following this company for a while and know how they and and don’t forget,
they’re not just going by what they’re tell the CEOs and CFOs are telling you. They’re digging
into the numbers. They want to listen. They want to know their growth, but they should still be
coming out there with it, but then they got to at the end of the day, they got to save their jobs,
too. Yeah. Hey, oh, they beat I think it’s worse obviously if they think it’s going to be higher
and it comes in lower versus if it’s lower and it comes in higher. Analysts keep their job to say,
hey, obviously there was something they didn’t tell us on the good side. It’s the reverse that
gets them into trouble. The chart on the right obviously is a bit skewed coming out of COVID,
but I always thought earnings was like five to six% on average annual growth and this is showing
over 9%. I don’t know, but if you just take a look Q2 2025, we’ll see where we end up. They’re
looking at about 4.6%. Which is again, which I thought was where the average was if you look at
the last 30 40 plus years. But yeah, but this is earning surprises. So it’s okay. It’s basically
just an extension of the chart to the left. The surprises. Yeah, like I said, I think part of it
is the analysts aren’t as good as they or they, like you said, they sandbag it down a little bit.
So, they always look like, hey, I we said it was going to be this and it even came in more, but
they didn’t tell us about all this. And I think it’s a little sandbagging from the companies. How
many times have we seen them, you know, have a phenomenal quarter and then they’re like,
but we’re not sure what the next one’s going to look like, but remember in Q2 they did away with
guidance with the tariffs. Many of them did or we don’t know or here’s the range and that you could
drive a semi-truck through. So, yeah. So now you could be seeing you could see earning surprises go
through the freaking roof going forward because there’s really they have they’re not even given
any kind of guidance towards what’s affecting them at this point. But I will say the following. Look,
we’re all happy that markets at all-time highs. There’s some really good positions. I got clients
that are at all-time highs and just flying. But I’m very leerary of this point because the steeper
we’re going up, I think it’ll be like the V-shaped pullback, which will scare the crap out of people.
Yeah. But that will create opportunities, too. I don’t know if that’s going to happen this summer.
Maybe in August when Wall Street goes on vacation and trading is thin. I don’t know. But all right,
moving on here. Earnings and total returns. Obviously, information technology is just
blowing everybody away. Yeah, it’s funny because with communication services, if you dig in,
there’s a lot of technology and the communication services, but but it’s more of the cell phone
companies and stuff like that versus the the high-tech firms. But it’s the total return I’m
looking at. Healthcare, which is my pick for this year and next year, is struggling. But I
got to tell you, I’ve been watching it the last two weeks going parabolic for the most part with
the price action with a couple of hiccups. We’ll see where that is. And of course, energy. We keep
talking about this. This is going to continue to drag along, especially if we continue to drill
and if we decide to export liquid natural gas, why would you be in energy? I’ve been telling
clients this for about six or seven years. You want dividend, great. You want growth, it’s not
the place to be. Yeah. I think the interesting one if I look at that whole chart I think the
interesting one for me this year is industrials because that’s typically more of a value play
as we go through if you guys watch the next show which I’d encourage you to do when I go through
some of the one big beautiful bill act stuff for business you’ll see why industrials are doing so
well and why I think they’re going to continue to do extraordinarily well under this because there’s
just so many fantastic tax benefits for industrial in this market and the chart on the right just to
give people you know it’s very busy. Yeah. This is 2008. Okay. This is 2022 just to give people
a sense. All this is doing based on the maximum decline that year. Where did we end up? Yeah. So
what we’re trying to show is we had that n I thought it was 21 but it was 19% decline from
midFebruary to April 8th or so. Now we’re already up 5% for the year. So this is just showing based
on the trough of that year where did we end up and I think it’s pretty interesting because at some
point if you look at it most years we had we were in the negative for the year. Obviously, there
were some years in here the market just flew right out of the gate from January 2nd on and we never
went negative. But I think it’s pretty interesting when people kind of hold their head, oh my god,
we’re down. Wait a minute. Let’s look at history here. For the last 45 years, typically we usually
don’t end at the trough. Yeah. Almost never do we end at the trough. No. Yeah. And that’s why I love
this chart. I’m going to keep this chart to show I absolutely love it and workshops and I think this
is probably one of the most meaningful charts other than returns and everything else. This is
just showing quite frankly, lack of a better way of saying it, volatility in the market. It doesn’t
go in a straight line, folks. It’s part of the game and you’ve got to figure out as a client,
you’ve got to figure out what where your stomach is at. But I will save this chart as well because
it’s a perfect example. In our business, we try and eliminate max draw down as much as possible,
which we did during this time period. And we’re we’re playing with the market, but you know,
I had a lot of clients that were calling me, which they almost never do, but it was like this massive
move very quickly in a period of just a month or so, and people were really scared. You’ve got to
understand that there’s going to be these years where you have a big max draw down like that.
More times than not, it’s going to not be the end all of the year. Yep. I got you. And my last chart
is we are at all-time highs. Is this where you want to really put new money? Even if you did,
and god forbid, we get a yank back. Probably going to surpass this all-time high. You’ll be made even
at some point in the future and go from there. And the chart that we showed last week, the average
amount of days that we hit new highs during the year. And obviously the worst period was
from 1929. We didn’t hit a new high until 1954. That was the worst. But if you take a look at
the last 40 years, there’s only been a handful of years that we were negative for the year. Even if
you’re adding money at all-time highs, especially to quality positions, even if we get an immediate
whipsaw snapback, you’ll still be good in the long term, especially if you’re in good quality items.
So, I’m not going to review everything on the charts here, but this is basically just showing
you during that year if you had invested at those all-time highs, you know, what happened. We got
a snapback. What happened? We got a snapback. And then of course just overall returns from going in
at all-time highs. What did you end up with six months, a year, two, three, five down the road.
So it’s called keep investing. And also I’m just a US kind of guy. I really don’t get involved in
the rest of the world. That’s great that Europe is having an all-time high. They were in a malaise
the last five to eight years. Keep investing in the US. Japan went through a 20-year period where
their market basically did absolutely nothing. So yeah, I I just believe in the American economy. I
believe in the American companies, and I’m the same way. I just don’t unless there’s a very
specific company that I’m investing in overseas that might have an ADR or something like that,
I really just don’t have an interest. Yeah. I’m not there and I don’t have the time and all that.
Plus, you start to get into currency changes and everything else, and it’s just I for me,
my my pea brain, it takes too much work. So, I got you. All right. So, that that that’s what
I got for today. Let’s let’s start the second show with your stuff. Perfect. Folks, we will
be right back with you with another show. So, make sure that you subscribe to the channel because we
will do weeks like this where we do a couple shows during the week because there’s just so
much information out there. So, we’ll see you back here the very next time, which is really quick.