Okay, good morning everybody. Welcome to  the sense of things as always. Jeff and  

Ron on here. We’re having one heck of a  good day to get started here and Ron is  

going to give us a lot of good information  today which includes information on what’s  

going on in the market right now. a little  bit of information about the growth of ETFs,  

which has grown much larger than I think any  of us ever thought, and just a look at some of  

the valuations in the market. So stay tuned.  We’ll be right back on in just one second.

[Music] [Applause] [Music]  

Hey everybody, welcome to the show. Ron, how you  doing bud? Good morning. So, we are officially in  

the last third of the year. Yes. Unbelievable. I’m  not sure if you saw it, but did you see some of  

the video from the haboo that we had a week ago?  What’s a haboo? Haboo is a monsoon, a big dust  

storm. Oh, yeah. There there’s some unbelievable  video. Actually, there’s one from somebody taking  

off in a plane as it’s rolling into from South  Phoenix to North Phoenix. Yeah. And I got caught  

in the in in the front end of the storm on the way  home. My I had to get a car wash the next day. My  

my black colored car was basically all mud. Wow.  Oh, so it was a combo rainy. Yeah. Everything.  

Basically, it’s the change in the weather. It’s  the wind. It picks everything up and then it just  

swirls it and it’s like a wall. It looks like  a tidal wave of dust. I saw the I saw a photo  

and I don’t know where it was taken at the Phoenix  airport, but it was like as it was rolling in and  

there’s literally one end of the airport. There’s  planes just going, “Oh crap.” And turning and  

getting ready to take off and it was just Yeah. A  couple of the videos I saw, you hear sirens at the  

airport that basically it’s take cover. If you’re  in a car, you just pull over. There were I could  

not see the street light in front of me. That’s  how bad it was. There were people with video you  

couldn’t even see out the front of their window.  They couldn’t even see their the hood of the car.

Good on you, buddoo here in Texas. So, all I could  say is better than a tornado. That is true. Yeah,  

we do get the tornadoes here in Texas, but central  Texas is this kind of weird little bubble where we  

tend not to get a lot of them. North Texas, where  I used to live, it was like tornado alley there.  

So, I think tornado alley and the flood zones. I  don’t understand, but I know it’s terrible to say,  

but like the people on either side of the  Mississippi River, right? They get wiped out every  

what, 5 to 10 years. see them on top of their  house with a thumbs up. We’re going to rebuild.  

I’m like, why rebuild there? I I get that’s where  you live, but you’re gonna have five to 10 foot  

water every x amount of years. You can’t get away.  Yeah. Yeah. Here we go through these cycles with  

with the rainy season and then we go dry forever  and then we have rainy and we’re rolling into a  

new rainy season. We’ve seen a few of those little  blasts, but it’s Yeah, it’s interesting to say the  

least. C Yeah, Central Texas is the weather is  pretty stable most of the time, but when it gets  

ugly quick. I hear you. All right, so we’re going  to get started with what happened this week in  

history in 17. We’re going to go through these  quick. I got quite a few. I couldn’t I actually  

paired it down. 1777, the stars and stripes  flies for the first time in battle. Nice. 1789,  

Congress founds the US Treasury. Obviously, that’s  becoming a bigger thought right now. 1888, George  

Eastman patents the Kodak camera. I thought it was  in the 1900s. Quite frankly, I didn’t realize it  

was 1888. And they sold 5,000. Now, think about I  don’t know what they sold it for. I tried to look  

it up. I couldn’t find it. But whatever was  probably like a thousand or $2,000 in today’s  

money. Sure. Easily. Penicellin, for all the STD  people out there, was discovered by Sir Alexander  

Fleming in 1928, scraping some crap off of his  toast. Yep. And of course, we know what happened  

a few weeks from now. In 1929, Dow Jones index  hit a all-time high and then it took 25 years to  

recover. Not until 1954. Geez. I don’t think that  could ever happen today. That prolonged time frame  

because of ETFs, mutual funds. Unless there was  something drastic that happened in our economy,  

I don’t think it’ll I don’t think something like  this would happen in our lifetime. Yeah. Like I  

said, I think so much money has been taken out of  individual out of individual hands and used. And  

so you’ve got basically professionals and ETFs  managing things, which I know you’re going to  

cover today. So it I think it provides a little  bit more 401ks back then that were constantly  

being added to every single paycheck. Yep.  1939 Britain and France declare war on Germany  

following the invasion of Poland. I just saw  something about that the other day and Britain and  

so it was funny. It was Britain, France and New  Zealand of all things. New Zealand declared war.  

Yeah. Just saw something about that yesterday. And  then of course six years later, Japan surrenders.  

Yep. Thought that was interesting. Happened  the same week. Yeah. The same week. Obviously,  

Germany surrendered in May and Japan surrendered  after after two nuclear bombs surrendered,  

but the two bombs were dropped in mid August. Yep.  And a threat of a third one even though we didn’t  

have a third one. Yep. Now, the television became  a little bit more in the consciousness in 1947.  

The first president to make a transcontinental  broadcast was Truman in 1951. Huh. Yeah. Hard  

to believe. Yeah. Crazy. I remember in Back  to the Future when they roll out the TV. Hey,  

we can watch Jackie Cleon while we’re while  while we’re eating dinner and they’re like,  

“Oh, yeah. We in our TV. Oh, yeah. We have two.”  Nobody has two TVs in their house. All right.  

1957 Arkansas troops block Little Rock 9 entering  segregated high school. 1969 this was interesting.  

I thought it was later in the mid to late 70s  but yeah the first ATM opens for business. I  

don’t think there was a massive growth of that at  the beginning. Nope. But in 72, a lot of people  

remember 72 for what happened in Munich to the  Israeli Olympic team. but the wrestling team. But  

Mark Spitz wins his seventh gold medal. And rather  ironically, I heard him complaining a little,  

not complaining, but stating that when  Phelps won his eighth and ninth, he said,  

“I would have won an eighth and nine, too, but  we didn’t have those extra two events in 72.” So,  

that’ll tell you how many more things have been  added over the years between different sports and  

different events in those sports. Yeah, it’s like  I would have had that. Yeah, Babe Ruth would have  

had more home runs had he had more games to play  at. I Who knows? You may or may not have. I agree.  

It depends on how much he was drinking and went  to the brothel. Yeah, exactly. But then again,  

they said that made him looser to to hit all those  home runs. I Whatever you got to do to loosen up  

there. Hey. All right. I thought it was funny that  there is an index out there that’s been out there  

for I don’t know at least 50 to 70 years called  the Wilshire 5000 index. And the funny thing is  

there’s only about 33 to 3500 stocks but they  still call it the Wilshire 5000 5000. Yeah. The  

number of ETFs have finally surpassed the number  of USlisted stocks. And I don’t know about you,  

but I I’d say at least a third of the meetings  that I have with prospective new clients,  

I have to explain what an ETF is. They know  what a mutual fund is. ETFs have been around  

35 years. They’re essentially a mutual fund  that trades like a stock, but a lot of people  

are not familiar with them and what the advantages  they have over a mutual fund. Yeah. But I mean,  

what’s so funny because they still what’s always  been interesting to me on ETFs is they’re traded  

yet every time you buy one of them, they actually  it’s almost like an original issue, which is weird  

in a lot of those cases, but and we can see here,  this is the ETF line, and obviously the A growing,  

you could see the decline in the last six  years of mutual funds. Mutual funds. Yeah,  

it makes sense. I’ve always said my my LinkedIn  motto is I’m a crusader against Wall Street greed.  

People love that. And I say, “I don’t understand.  What does that mean?” I’m like, I basically peel  

back the curtain to show you how the wizard of  Wall Street screws over the average investor.  

And I try and explain to them one of the ways  is a lot of the mutual funds that are out there  

because there’s two to five hands in that pie. And  if you’re working with an adviser that’s a hybrid,  

meaning he’s an investment advisor and a broker,  he’s potentially getting a backdoor commission on  

those mutual funds they’re recommending to you.  Either he or she is and or the firm is. So yeah,  

it’s amazing. We still got to explain  that in today’s world with the vernacular,  

but it’s important. How often do you see it?  Oh, I see it all the time. I less and less now.  

I think more and more clients are I they don’t  necessarily understand the difference between  

mutual funds and ETFs, but they’re very accepting  of, oh, okay, just you tell me where we need to be  

and then we’ll go with it at that point. So, I I  don’t really see an is I don’t really see people  

complain about it as much or really not understand  it. It’s interesting clients that I’ve brought in.  

It’s rare that I even see even in let’s say  a managed account that I’m receiving in. Very  

rarely now do I see ones that have mutual funds,  even no load mutual funds. Yeah, I still see them  

especially in clients who work for nonprofits,  ones that were doing inservice distributions and  

their 401ks if they’re over 59 and a half. Yeah,  that I rarely ever see almost never see a million  

in a 401k without mutual funds. Yeah. And so many  of the mutual funds now that are inside of 401ks  

are like specialized ones that have really  super low costs. And the target date funds,  

I don’t know why people are still in them. They  never work out. No. No. And there’s been article  

after article over the last 15 years that I’ve  read that the target date funds. The only one that  

makes out is the mutual fund company. People use  them as a retirement date. And up until about six,  

seven years ago, retirement date wasn’t even  mentioned in the prospectus. Yeah. So people  

just said, “Oh, they’ll derisk.” Check out a  2020 or even a 2015 target date fund that are  

still around. Uh there’s still a decent amount  of risk in there. Can you imagine if somebody  

was retired and still had that? Yeah, I don’t get  it. All right, here we go. I thought this was an  

interesting chart. Here are three of the main  defensive sectors. Consumer staples, energies,  

healthc care, and utilities. And you could see the  amount of inflows to them are going down compared  

to just two stocks of Dvidia and Microsoft.  And I find this pretty interesting looking at  

the waitings for the S&P 500 that we’ve known  for a long time we’re just overweighted to the  

top 710 stocks. What about the other 490 493?  We’ve seen some breath across them as far as it  

going up. But still we’re still we’re too heavily  weighted. But people I know and I know why it’s  

just like the Dow why they won’t really relay or  reweight towards equal weight. It’s because maybe  

people wouldn’t invest in their funds. I don’t  know what your thoughts are. This frustrates me  

every time I see this. Yeah. And it frustrates  me because you’re sitting here and we’ve had big  

volatile. We had a lot of volatility this year.  And you would think, okay, you get volatility,  

you’d start to see money shift over into some of  these defensive areas and it just doesn’t happen.  

It’s like the market jumps over to gold and then  when when things calm down, then it’s right back  

to the top seven again, the magnificent seven. And  no matter what you say or what you do, I looked at  

Nvidia. Nvidia now and another favorite of mine  was Palunteer. And you start looking at Palunteer  

and I’m like they would literally have to sell to  the moon to be able to justify the valuation of  

the company. They would have to 10x we’re going  to go through some forward PE but Palunteer and  

I love Palunteer and I’ve been in it with clients  for a long time. They would almost have to 10x  

their earnings to come down to a reasonable PE.  Yeah. which is I thought it was interesting that  

the inflows in this is going down when utilities  have had a bang up year. Yeah, that doesn’t mean  

anything. It’s just no and here we are with some  earnings from from fact about percentage of high  

buy, hold, and sell ratings across the sectors.  Um the interesting thing is energy which has  

been a lagard and not a favorite of mine has  the most amount of of buy ratings. Meanwhile,  

they have basically languished over the last what,  six out of the last eight years, something like  

that. The funny part is, okay, and I hear this all  the time, oh yeah, buy energy because it’s this  

renaissance and all that. And I’m like, but the  problem is we’re then producing a lot more energy,  

which means that the price of energy is going  to go down, which means that earnings are not  

going to support it. Just doesn’t make sense.  Yeah. and and a lot of the and unfortunately  

a lot of the energy companies are pegged to  oil, which as you know is something I don’t  

get involved in. Not that they couldn’t be more  profitable, but if oil went up 10 bucks a barrel,  

they’re going to have a terrific order. Why do I  want to be subject to that when I can’t determine  

no control or be able to guess it? That’s the  thing. And so much of that is manipulated by by  

okay we might start producing more and then Saudi  Arabia and OPEC decide okay you’re you’re going  

to do that we’re going to cut production and then  it just causes all kinds of havoc. No I’m with you  

there. I have no interest. Thank you. No. And I  think the one thing that’s interesting about this  

is the most amount of hold and sell ratings for a  combination is in consumer staples. So, if we’re  

having such a great economy and if we have such  low unemployment, meaning people are spending,  

why aren’t consumer staples doing better? Meaning,  we’re still consuming. Yep. Is this because credit  

cards the limits are reducing and the carryover  rate debt is increasing and maybe people aren’t  

consuming as much or maybe it’s because of tariffs  and their margins have been squeezed. This steps  

out more than anything else. Or maybe it is  these aren’t near as sexy and they’re going to  

per they’re going to always underperform a little  bit. So if I’m going to keep my job as an analyst,  

I’m going to keep shoving it more towards the left  side of the chart so that I look like a hero and  

I’m in the stocks that are going up 20% versus the  ones that have the nice steady stable 8 to 10%.  

Yeah. But don’t forget analysts that just cover a  sector. They don’t care about the other sectors.  

is what do they think about that sector and they  don’t believe in consumer staples and funny thing  

is the second most is utilities and they’ve done  terrific in the last nine months or at least  

select utilities but for the most part the big  players have done the best yeah absolutely so here  

we go so forward PE a lot of people are looking at  this as okay great where we know where we are now  

but where is the price earnings growth And this is  looking at cycles looking at here we are at almost  

really what a 5year high with a forward PE. What  does this mean? Does this mean we’re going to come  

back to the medium here? Possibly. Probably. We  know that September is typically the weakest month  

of the year in performance. We’ve had what a mixed  day today, an up day yesterday, a big down day on  

Tuesday. But I thought this was interesting.  But more interesting kind of breaking it down  

by sector and I want to know your thoughts. Here  it is. If we go back two slides right to the buy,  

hold and sell ratings. Here we are with forward  PE ratios by sector and you could just see energy  

is down here again. Utilities has moved up.  Communication services which was a higher buy,  

hold, sell or buy and hold I should say is right  in the middle with forward PE. So to me that’s  

telling me that communication services which is a  lot of technology too is is overvalued overpriced.  

What are your thoughts about this? Because this  chart to me is the most compelling which is why  

I left it for last. Yeah. The problem I see with  some of this some of the traditional methods of PE  

ratios they don’t value things. I personally  believe I I grew up in the world of Benjamin  

Graham and honestly you cannot apply those rules  anymore. They just don’t work when it comes to  

growing industries, growing businesses and things  like that. So I don’t put a lot of credence into  

this. People will say, “Oh, a 20p. What’s a  20p in relation to what we’re in an information  

revolution right now? We’re in probably one of  the most interesting periods I believe in that  

we’ve seen since mid ‘9s when we saw productivity  improvements in the mid ‘9s. I heard the secretary  

of of energy this morning. He put it interesting  and he said when we saw the first revolution of PC  

PC computers and things like that, it was really  the mathemat because when I was learning this in  

school, it was the kids that benefited the most  were the kids that were in science and math and  

stuff like that. That was who benefited the most  of that generation. And when we’re talking about  

AI, it’s a different animal because it can  be used really by everybody. And it doesn’t  

have to be just somebody who’s a technological  person. It can be creatives and everything else.  

So I think we’re in a really interesting time.  Now, do I think that, and we were talking about  

this beforehand or earlier, do I think Nvidia,  Palanteer, some of those companies have gotten  

ahead of themselves? Abso freakingutely at this  point and I think the market is punishing them a  

little bit because of that. Yeah. But at least  Nvidia is showing the Nvidia and Palunteer are  

showing the earnings growth. It’s just that Nvidia  is a little bit further down in the growth curve.  

Sure. Sure. But I look at people keep comparing  or I hear people comparing this to the.com  

era and these are higher ps than the dot era and  I’m like the difference in the.com era though was  

that most of the companies that were in the dot  era didn’t even have earnings. They were just an  

idea. If they had do on the end of them barely had  revenue. Yeah. They didn’t have Yeah. They didn’t  

have revenue and they didn’t have profits at all.  This is a totally different era. These companies  

actually do have earnings. Now, have they gotten  ahead of themselves? Yes, I think so. And I think  

that I would expect a little bit of a a slow up a  little bit and not that just absolute exponential  

growth that we’ve seen in some of those. But  you start to look at I great example. I shifted  

a little bit of our portfolios. Once again, we  own this stuff, but I shifted a little bit of  

our portfolios over to Google to Alphabet this  month as we were making some shifts because I’m  

looking at it. It’s a I think a really good AI  play and it’s like an 18PE versus a 500 million  

PE that’s whatever’s on Nvidia. So, I think  there’s still really good opportunity in the  

AI space and the companies that are leveraging AI,  there’s some really good values in there. You just  

have to pick and choose. Doesn’t mean that Nvidia  still isn’t going to go through the moon, but I  

just think it’s priced for absolute perfection  at every moment. And we saw it just with this  

last earnings report. The earnings came out and  the they were phenomenal, but everybody’s Yeah.  

What did you say about the future and does the  future look as good and that they weren’t giving  

any kind of idea of what they could make in  China because they don’t understand what the  

situation in China is and everything else. Yeah,  agree. Again, if you take a look at history,  

we average at least 3 5% pullbacks a year. I think  we’ve had two. I think we had two this year. Yeah,  

at least. It wouldn’t surprise me if we had  one more. I think we’re going to have two to  

three rate cuts. That’s what I predicted in the  beginning of the year. I predicted that last year.  

Who the hell knows at this point? But more so  than anything else, there are a lot of tailwinds  

to us. But if we have these tailwinds, why do  we need to reduce rates other than refinancing  

of our national debt, which is important. I’m not  discounting that. But I’d really like to see some  

economic data. So tomorrow we’re going to get an  unemployment number that that’ll be helpful. But  

even a 25% or a 25 basis point cut isn’t going to  do anything. But it’s psychological. So we’ll have  

to see. I think the number that I’m really that I  paid attention to this week that kind of just got  

glossed over was the Jolts number. And the Jolts  number hit the lowest point it’s been in I want  

to say five years, six years. It’s like down below  7 million. Job openings were less. Yeah. Yeah. So,  

that worries me, I think, more than anything  because like I said, I think the I think the  

public right now, yes, they’re still spending.  Yes, they’re spending a lot on credit cards, but  

that jobs number scares me a little bit because  I think the economy is priced for perfection. And  

honestly, I’m waiting for I truly am waiting for  somebody in Congress to have some freaking guts  

and start to go after the credit card companies  for literally use your rates. The average credit  

card percentage is up around 28%. Which is insane  and there’s no reason for it. There was a there  

was a few either congressmen or senators that  came out a couple trickled in a couple over  

the last few years but I think it was falling on  deaf ears and uh yeah it doesn’t matter actually  

what they need to do is just stop giving out more  credit. Well, yeah, that but they’re not going to  

and they’re giving it out because they’re like,  “Okay, even if we have at 28% the average person  

charges the heck out of their card at 28% even  if we have 20 or 30% failure or write offs, we’re  

still making money at that point.” It’s it, like I  said, it’s sickening to me because it puts people  

in a really horrible position and they can’t get  themselves out of it. But here’s the interesting  

thing and we’ll never know the answer. We’ll wrap  up on this. But how much are people really putting  

on a credit card that they need? Yeah. To live on  other than the nice to have, the nicest and vices.  

And who knows? But I can tell you that out here in  Arizona, the restaurants are full the majority of  

the week, the majority of the nights. I I don’t go  out to lunch that much, but a couple of times that  

I have, pretty full. Full. Yeah. And so people are  spending and I’m only talking about restaurants.  

Yeah. And like I said, I think one of the numbers  that doesn’t get reported because I don’t think  

there’s really a way to report it and I think this  is really more of a Gen Z Gen Z millennial thing  

is a lot of the things like a firm and things  like that. Those numbers don’t get reported into  

the credit in that company. No way I would. Yep.  But yeah, that doesn’t get reported in with the  

credit. So that’s another leg of this whole thing  that I think people and those are up 30 those  

are like 30% on some of those well and the affirm  thing it’s buy now pay later for people that don’t  

know but the idea behind that is it’s basically  layaway right but you’re getting it now but my  

whole point is those are obviously for the people  that don’t have the credit you’re not getting  

someone that’s got good credit or paying off their  credit card debt using that kind of a service and  

the way the other way you could look at it is the  credit cards and essentially companies like a firm  

to keep picking on them. It’s almost like issuing  more national debt, paying interest on something  

that’s not going to anything that’s benefiting our  economy. Correct. Same thing. It’s the same thing.  

One’s on a national basis, one’s on an individual  basis. We’ll have a lot more to talk about next  

week with the unemployment number and there’s more  economic stuff and we’re going to edge closer. I  

think the the Fed decision is on the 17th or the  18th. Yeah, I think so. So, we got two weeks out.  

Two weeks. Yeah. Yeah. And you got all the stuff  going on with Lisa Cook and all that stuff, which  

is just insane. Yeah. A joke, but that’s beside  the point. Well, it’s not I don’t think it’s a  

joke if you I mean, if they have the proof, okay,  but they haven’t shown any proof yet, and that’s  

why they needed a grand jury today. Yeah. But the  problem is there’s been the cases of this on the  

other side of the coin that they basically you  can accuse somebody and they a lot of them have  

just recused themselves and said okay I’m out at  that point. Yeah, this is a this is a little bit  

different but if there look if there’s proof I got  it but we’ll deal with that. We’ll deal with we’ll  

see. Yeah, we’ll see. But yeah, it’s interesting.  All right, folks. Thanks a lot for joining us.  

We will be here every week to share this with  you and we’ll see you guys back the next time.