Welcome to another episode of the sense of things with Jeff and Ron. And on today’s show, Ron’s got some stuff about

debt or debt to total assets compared or on the AI stocks, excuse me, the ones that went down this summer. He’s also

got the S&P 500 index returns throughout history. So, I think that’ll be a good look as we see the markets juking and

jing around. Really good look there. and we’ll take a look at what’s going on in economics this week and have a little bit of a discussion about oil and and

interest rates. And we will see you guys back here right after the intro.

Hey everybody, welcome to the show. Ron, how are you my friend?

Good morning. We are officially in the last third of the year. I can’t believe it. We’re past Labor Day. So that means now we could focus in on all the fun stuff.

Yes, we get to focus on earnings and elections and interest rate changes and

all kinds of good stuff. So So just think when we get to the last week of October, all the Christmas stuff will be out in the supermarkets.

Gee, I think it’s already starting to get out now. It’s mostly Halloween stuff, but of course you my wife is the crafty one. So I’ve been seeing

Christmas stuff for the last two months now.

Oh, I saw the Halloween stuff in early mid August. Oh, I know. Crazy.

When it’s 101 degrees here, I just can’t get into Halloween. I’m sorry.

No. And it’s been pretty hot here in the last week. Humidity’s ticked up. But you know what? Still feels great. Still feels great.

Humidity’s kicked up from what? 0 to 0.

No, it’s never that low. It’s usually in the high, single, low, mid, double digits. Now it was ticking up to 30%, 35%. You feel it?

Oh my god, it’s horrible. I think we’re at It’s not 80 or 90, my man. I think we’re at 145% humidity here.

If that’s the case, you better hook up to an IV. There we go.

All right. This week in history, I thought this was very interesting. I always have been enamored with submarines. the f the world’s first

submarine attack American sub named turtle attached to time bomb to go after a British ship. I thought that was I

didn’t real I thought it was mid eight mid to late eight. No idea they had one.

No, it actually and it was a oneman sub and the guy’s inside of there with a little bicycle wheel thing and just he’s

doing all of it by himself and it’s just basically a big barrel. B it was like an oversized barrel is effectively what the in case he got captured. What did he

have? A slingshot I guess. So all right. Also in 1776, I did not know that Congress renames the nation.

Yep.

United States of America. We had this in a prior podcast as far as something called something different. It was interesting. Yeah.

1789, Congress founds the US Treasury, which obviously was very important. And I know I thought I brought this up on a

prior podcast a couple of years ago. Do you know who helped design the engraving on the dollar bill?

No clue.

My boy Ben Franklin. And one of the things that he discovered with a lot of other things, an amazing person, is that

a lot of the leaves, there are no two leaves exactly alike. So he helped he

helped identify that if we put these leaves on here, it’ll have a level of uniqueness to it that shouldn’t be

duplicated. But obviously we’ve had counterfeitters for a thousand years. You never know.

Yeah. No, that’s funny. I guess it makes sense. He was a printer.

Yeah. 1897, first drunk driving arrest in London, England. Gee, that’s surprising. George Smith was a cab

driver. 1897 there was a company, a cab company that were like, “Hey, this is a great idea to move people faster than horse and

carriage.” And of course, the the liquor never stopped flowing.

And there’s a pub on every corner, so I get it.

1901, President William McKinley is shot. Okay.

1942, I did not know this. Japanese bomb the US mainlandiary

bombs on a Oregon state forest. They Yeah, they put them on the target. But I didn’t know they actually bobbed our mainland.

Yeah, but they put them on balloons and they were these big rings basically. And the whole idea was they just threw them

up into the jetream and then it was hope and pray. There was no way of aiming them, but they knew that they would just

fall down eventually. And the idea was to create forest fires. I should have here’s the interesting part of that

because they kept doing that through I think 40 and the first black airborne regiment the triple nickels 555th

went through airborne school and it was a little late for them to go overseas so they actually became the first firefighters parachute firefighters.

Interesting.

Very cool. 1956, Elvis Presley makes first appearance on Ed Sullivan show. Of course, only being filmed from the waist

up because Elvis the pelvis was too powerful for the United States citizens at that time.

I know. Yes. And Ed Sullivan’s audience, it may have killed some of them.

You know, the crazy thing, I could go off on a rant. If you see video and interviews of Ed Sullivan, that guy was

just a drip. A lot of times host of these shows have are charismatic and I have no idea why his show was so

popular because he was like the worst host. I have no very powerful group around him. I have no idea.

He had the same personality as Jesus Nixon. I swear to God they were the same exact personality.

At least Nixon could hold a conversation with you. I know Nixon was a very intelligent guy and seemed like he wasn’t he was not an articulate person.

No.

Anyway, and also he probably didn’t even know half the people or half the acts or half of what was going on the show. He just appeared in a complete fog. And you

know once the show went off the air, he didn’t live very long.

No, he was I mean he was like 175 years old when he was No, he wasn’t that old. He wasn’t that old. Everybody looked older back then.

You and I would look like we’re 80 back then. I know.

1966, Star Trek premieres on TV, completely pivoting and changing the way

a lot of TV and a lot of a lot of shows were actually created. But from the mid60s on, 1974, President Ford pardons

Nixon. As much as that was vilified more by the left, it was actually the smartest thing to do because

even though he lost in 76 in the election, the nation would have that would have been daily drama to see how that thing would have

was already daily drama leading up to it. So yeah, it was Yeah. So you know, it is what it is.

1975, President Ford survives first assassination attempt. There was a total of two. One of them by squeaky from from

Charlie Manson’s group. 1977 US agrees to transfer Panama Canal to

Panama and I know that is being looked at again. I don’t think we’re going to get it back. I don’t know if we need it, but who knows?

It’s it still is the main transit.

That’s the thing. It’s like, okay, it’s still the main transit across. We don’t want to be dealing with and we certainly don’t want China to be in charge of it.

And I believe, correct me if I’m wrong, the original Panama Canal really is not in use that anymore. They had to build another one to widen it. A bigger one.

The ships got The ships got too big. Yeah. And too heavy. Yeah. Yep.

1977. I could not believe this. Last person to be executed via guillotine, of course, in Marseilles, France.

Wow.

I was astounded by this. I know they’re still doing electrocution. I believe not as much as they once did. I think they’re still do it in Texas. Of course.

Nope. We’re a lethal injection state. Nope. We’re a lethal injection state.

Okay. So, my favorite is Idaho. Still one of your options. You get to choose your execution and one of your options you

can by be death by firing squad in Idaho.

Okay, there you go. Maybe now they should bring back the guillotine and give him that option.

Apparently that. Yeah, that’s shocking to me that 77 they were still using that.

So look at this podcast audience. All the interesting useless information you learned.

I know. And you got to figure by 77 that thing was getting pretty dull. So it was not a good way to go.

Oh, they’re sharpening that bad boy, I’m sure. But it happened during our lifetime. That’s my bigger. Yeah, that’s just crazy.

All right. I thought this was interesting. I love financial fables.

They always have some good articles and some great charts. So during the summer people were like, “Oh, the AI trade may

be dead or this or no, it just took a breather.” But if you take a look at it and you and obviously this is very important to the balance sheet, right?

Because at the end of the day, it doesn’t m matter how much you make, it’s how much you keep, right? That’s what we talk about in financial planning. But

the idea at the end of the day is what are your what’s your debt to assets? So in the upper left, these are the

companies that are making money. These are the companies that have really good assets and even though they’re spending

money and they are taking on debt, the debt to their total assets is not that bad. Nothing.

We all saw what happened in the last year with Oracle when they went out on the market and they just borrowed an obscene amount of money. You could see

that they’ve been around what 50 years and they just took on a lot of people were looking like they took on way too much debt. IBM had to try to play

catchup. But I you just look at these companies here that if the economy takes a turn for the worse for a sustained

period of time and they don’t have the revenue in to sustain that debt, they got to go out on the market to borrow.

Oracle and IBM won’t have a problem borrowing. Some of these other small and midcap companies may. I don’t know what

you see here, but it’s a I love this chart because at the end of the day, like we always talk about, oh, how much is this you how much is this company

priced to sales, right, with its market cap? And we’re always saying we’ll grow into it. Yeah, that’s what you’re always

buying. But if their debt is like an anchor and an albatross around their neck, that could come back to bite some of these.

I look at Iron in there, that one just I had to blow the screen up to just see those. But iron in there, which is just above oracle, it’s a pretty small

company and it’s a Bitcoin miner and they’re trying to adjust themselves over to be like a data center company or

whatever. And I think there’s several of those Bitcoin miners like that are doing the same thing where it’s, oh, okay, now we’re a data center. You can use us for

a data center. Yeah, but that’s a lot of money borrowed over here. Here’s Cororweave here. They were a hot IPO. What? doubled, tripled

in the first couple of months, came back down, got cut by what, half, 60%. Has come back up again, regained some of its

footing. But in order for them to survive in the energy space, they have to take on debt. It is a infrastructure

debt laden type of business. So again, it looks okay now as long as the money

keeps flowing. But at some point, but I I going getting to the other point though, when you look at the ones up on top that are making good money, they’re

I look at the ones down in the bottom as kind of the second tier players at best.

The top tier players, yeah, they’ve taken on debt, but it’s really a small amount overall.

No, they’re still taking on debt, but the assets they have to be a and the revenue that they have to be able to support it is significant more than the

bottom tier. So, we’ll have to see how this pans out. Yeah.

All right. And my last chart here is just a little bit of history, loving history, and following the markets. This is since So, we’ve talked about this

many times that on average there are at least three 5% pullbacks each year.

There’s a 10% pullback about every 12 to 16 months and a 15 to a 20% pullback

about every 24 to 36 months. So when we look at last year, this was the tariff tantrum. Peaked a trough in six months

and I’m sorry, six weeks. And then obviously we ended up being up 16% for the year. This year we peaked out at 15%

up, but obviously during the the beginning of the war, we’re still in the war. The beginning of the war, we were down 5% very quickly. I thought we were

down a little bit more. But what we’re trying to display here is that even though the market goes up around seven

out of every 10 times a year, there’s always going to be a trough during the year. And we may be revisiting those

levels this month and next month because these are the two weakest months of the year. But I think this is a great chart to show people as far as hey, market

doesn’t just grow go up every single year. And we do have garden variety pullbacks every single year.

And we see usually some kind of negatives during the year and we’ve seen it already once this year. We could see it even deeper like it’s like you were

saying during these months and the current market ain’t the the oil market sure is sh is not helping. And the the

bond market is just going crazy at this point. I think with this with the expectation that oh my god the the Fed’s

going to raise rates and everything else. I know I and we’ve talked about this. The European Central Bank went up.

Japan’s probably likely to go up. Really just do not see the Fed. I think they’re going to sit stable. And the main reason

I think they’re going to sit stable is we had a really good employment report last week and the unemployment or they

the employment is 4.1 which is exactly where they want to be. So they’re very happy on that side of the equation.

They’re not happy with the other side with inflation.

I believe the futures market is showing over a 50% possibility of a rate hike. Perfectly fine. Yeah.

Yeah. I mean it’s fine. They’re saying that if they do raise it, it’ll help the long end of the curve with the bond. I don’t know. I There’s been several other

governors that have come out and I think that the rumblings are getting louder. I still think it’s a coin flip, but if

they did raise it, it shouldn’t be a surprise.

I think it would be more of a surprise if they didn’t raise it. Yeah, I think it would go the other way.

And I could see the market doing a snapback on you. Or the way the market’s been here lately is like, “Oh my god, now what are they thinking?” And they’re

going on to the next Fed meeting beyond that, which I think is what, November, because they won’t meet in October before the election.

Six weeks. Six weeks after next week’s meeting.

Okay. All right. So, that would put them right in the middle of the Now, I don’t think they meet because it puts them right in the middle of the election and they wouldn’t do they’re not going to

meet during the election. So, they I think they meet somewhere later in November.

If you remember 2024, they met the week before.

Yeah. Yeah. after they had raised 50 b or lowered 50 basis points right before the election which right still never understood that one. It still never made sense to me.

They’re trying to be apolitical. What can you do? All right. What do you got?

Yeah. All right. Let’s quickly take a look at the calendar here real quick on briefing.com which is my new toy that

I’ve been playing with here lately. Been a kind of a quiet week which we knew was going to happen because we’re coming into the Labor Day weekend early in the

week. Hopefully everybody had a great weekend there. Really the only consequential numbers this week were PPI

this morning which of course the I love the financial media because they go crazy about oh my god it was just it’s

incredible huge number. Okay here’s briefing.com’s forecast point4 what did it come in at? Here’s the consensus of

all the economists out there point. So there were no surprises. There weren’t surprises on the core PPI at all. Yes,

it went up from the previous month, but they’ve been basically revising stuff up slightly. So, it really wasn’t as

dramatic. And the prior core PPI was actually 3 versus 2. So, I look at it as

a big nothing burger that the market is going nutso over. It’s this whole thing of trying to absorb the worst era of the

Fed where they’re not really giving any indications of where they’re going. So I think the market is just in panic mode non-stop. The consequential number of

course this week is going to be CPI tomorrow morning at 8:30. Expectations once again consensus is point4 and my

best guesstimate is it’s probably going to be about point4 at that point. Let me explain. I don’t know.

Yeah. And once again, it’s like, okay, we know there’s more inflation because oil prices are up. There’s not

necessarily that much inflation throughout the rest of the economy. It’s just oil prices that are having an effect on it. And everybody keeps saying

that this is all Iran, but it’s really not. If you looked at the numbers a little bit deeper, one of the biggest

problems that we have right now is the Ukrainians have been bombing the living crap out of the the Russian oil fields

and they just knocked out a major oil terminal in the Black Sea and that’s what’s largely affecting diesel fuel

because there’s very little diesel fuel that comes out of the Persian Gulf. Most of it comes out of the Black Sea and

it’s mostly Russia. So that conflict and of course we thought we had some resolution and then of course Putin just

goes right back to bombing people the next day. So I think some big massive sanctions on Russia’s the only way

that’s going to get any notice from Putin at this point.

Yeah, I don’t see that conflict ending anytime soon. I think, I hate to say it, that’s going to just be a war of attrition between soldiers and

ordinance. And what you don’t want to see is China going in to help out Russia, although I think that’s already started to happen. Andor China going

into Iran to help them out. I think that’s already started to happen. But I think Yeah, that was what the North Koreans. Yeah, there was there

was actually a guy it was a they were doing a panel this morning on the news when I was driving in and they were talking about it and one of the generals

that now works for like a a big drone manufacturer he goes we know because they asked about China are they big and

it’s like basically China this is very much like the the Spanish civil war

where all the major powers that to be especially the Nazis went in to test

their equipment basically on the Spanish people. So, you know, it’s very likely that there’s Chinese that are in Russia

that are they’re learning from this and taking it back to their stuff. So it’s that that is a concern that I have in

the future of how is this going to affect let’s say the straits of Taiwan and everything else and especially if we let Iran get away with what they’ve gotten away with the Straits of Hormuz.

Could we see that in the Taiwan Straits as well?

Yeah, I hear you. Well, we’ll have to see what happens. We’ll go through the CPI. Tomorrow’s 911. Never forget and we will talk next week, right? 25th

anniversary tomorrow and next week we will be here and I think we’re vast approaching show number 170 of our of

our history here. So we blew through 150 and I didn’t even notice it and just happened to notice I think we’re on like 168 or 169 today.

I hear you. We’ll get to 200. We’ll have a big celebration.

There we go. All right folks. Thanks a lot for joining us once again. We’ll see you guys back here the next time. Make sure wherever you’re listening or

watching this that you subscribe to the channel so you don’t miss anything. See you here next week.