TRANSCRIPT
Jeff Kikel: Good morning, sense of things. It is Jeff and Ron here for another week of
Fun facts the markets and what’s going on in the economy. Ron. Good morning, sir.
Ron Lang: Good morning Not a big news week. Cpi came out today a little hotter three three
versus three one but you know what the political hot stove is heating up and get your popcorn
ready Keep off the social media folks or don’t read all the texts from the Far far left wing
people in your life.
Ron Lang: Live your life. Rest, relax in the
Jeff Kikel: center. And yes,
Ron Lang: yes. Do your own research. Find, reach, find your own facts that makes sense.
Don’t interpret other [00:01:00] people’s BS.
Jeff Kikel: Absolutely. Absolutely. And so I thought this morning to kick this whole
thing off, we’re kicking off political season.
Jeff Kikel: Monday is the Iowa caucus and all that. And what And what I continually
hear is how there’s all this discourse and how, it’s way worse today than it ever was.
So I thought what I would do is share a little bit of history. Cause I am a student of history,
a woman and we got to.
Jeff Kikel: So let me share here with my screen. Okay, here we go. So back in the early 1800s,
about 1825. Was that
Ron Lang: the last presidential election? Oh, I think
Jeff Kikel: Yeah, it was pretty close to the last presidential election. But this was actually
in the 18 1820s. Senator Preston Brooks from the South went into the Senate chambers and
beat the living tar out of [00:02:00] Senator Charles Sumner because they disagreed.
Jeff Kikel: Just a few things. And, one was a slavery advocate and one wasn’t. And
Ron Lang: Was it a social media post that he was upset about?
Jeff Kikel: Yeah, I think so. It was probably a social media post. They posted it on their
wall, which at that time, you just literally took a push pin and put something on there.
Jeff Kikel: On your wall. But yeah, definitely it could be worse. And of course the funniest
part about this is. The one thing about politicians that is still true. He almost beat the guy
to death. He was Sumner was unconscious for several days. Didn’t go to jail at all for
it. Didn’t even get it. Didn’t even get prosecuted for it.
Jeff Kikel: So I thought that was just absolutely hilarious. Justified
Ron Lang: homicide. I think that’s what it was, right? Burr
Jeff Kikel: Hamilton duel. So the sitting vice president of the United States murdered
in a duel, the former secretary of the treasury, the first secretary of the treasury once again,
didn’t get [00:03:00] put in jail.
Jeff Kikel: Really didn’t end his political career very much at that point, but things
could be worse.
Ron Lang: Hold on before you go to the next one. Yeah, I found this out by watching pawn
stars years ago at that time and before there were actually there was this a kit that was
sold with what was called dueling pistols.
Ron Lang: Yep, there were two pistols in there. So this way, it was an equal caliber, equal
weighted, equal type of a pistol. And that’s how they solve result disputes. Was actually
through dueling and they actually had dueling
Jeff Kikel: pistols that yeah, so you didn’t they brought them You know one of the people
brought them and it was yeah, it was exactly the same Yeah, beautiful kits of them too.
Jeff Kikel: A lot of them are beautiful weapons. Oh very you know Presidential comments about
others. Andrew Jackson said that he had two regrets that he didn’t shoot Henry Clay, who
was a senator. And he hadn’t hanged John C. Calhoun, [00:04:00] who was his vice president
for the first administration of the Jackson administration.
Jeff Kikel: He was a little testy of a guy. Theodore Roosevelt talked about William McKinley.
McKinley had no more backbone than a chocolate eclair. Henry. I
Ron Lang: used to love those when I was a kid. Yeah.
Jeff Kikel: President Henry S. Truman on Dwight D. Eisenhower. The general doesn’t know any
more about politics than a pig knows about Sunday.
Ron Lang: That sounds like a current day quote. It is.
Jeff Kikel: It’s very much then, Dwight D. Eisenhower. So next president in line on Richard
Nixon’s contributions as his vice president. If you give me a week, I think I might think
of one. I don’t
Ron Lang: remember. I’ve seen the video of that. That’s very interesting. And I think
that hurt him also.
Ron Lang: Yeah, obviously. LYndon Eisenhower was very well respected and that was, that
would have been a great endorsement.
Jeff Kikel: Yeah, exactly. Lyndon B. Johnson on Gerald Ford. This probably is, yeah, this
tells me Lyndon B. Johnson growing up in [00:05:00] Texas. Jerry Ford is so dumb. He can’t fart
and chew gum at the same
Ron Lang: time.
Ron Lang: Hey, listen, isn’t that with most politicians? Yeah,
Jeff Kikel: I think that’s, it’s pretty much a
Ron Lang: given, but the other way around. Okay.
Jeff Kikel: Yeah. Yeah. He was just stating the obvious. Now, if you’ve ever been to the
LBJ library here in Austin there is actually a photo of him sitting in the bathroom on
the toilet, talking to his cabinet at the time.
Jeff Kikel: So he was a different animal. And I think the last quote, I couldn’t fit
it on this page, but I thought it was very funny. It was Jerry Ford then saying about
pardoning Nixon that he knew he was going to be going to hell because he’s pardoning
Nixon. Although we have a lot of discourse today and we have a lot of fighting and infighting
in the parties and everything else.
Jeff Kikel: It’s not changed since the beginning of this country, and it hasn’t changed probably
since before that. Even well, if you
Ron Lang: think, if you think about it what was the mode of [00:06:00] communication prior
to 1900? For the most part, it was newspapers. Yeah. And the majority of the newspapers were
corrupt.
Ron Lang: Absolutely. They were paid off. Politicians had a slant depending on who owned
them. Hearst didn’t go on
Jeff Kikel: yellow journalism and everything else. Yeah, basically they were the cable
channels of their day. It was, there was a ton of newspapers and they were all fighting
to, get subscribers to their newspapers and everything else.
Jeff Kikel: No different from all the different cable channels today and all
Ron Lang: that. So I think it’s interesting. I love documentaries, especially bio documentaries.
And I believe there was one on Hearst that I forgot who he had discourse with all his
rhetoric that he put in through the papers created. I think it was the Spanish American
war.
Ron Lang: Probably without, I think it was either that or something else. I’m upset.
I’m not a hundred percent factual about that, but he did create a war. I think it was the
Spanish American war [00:07:00] because of the lies that he went through and people just
believed it. So the rhetoric, it grew and grew and then politicians believed it.
Jeff Kikel: He created the whole thing. I think it all related. Yeah, it all related
to the USS main incident that his newspapers were like, oh, it was blown up and all that.
Now what they’ve found throughout history and reviewing the wreck and everything else,
they realized it was just somebody probably smoking in a powder magazine or something
like that, that caused the thing to blow
Ron Lang: I, I hear you. All right. Here got old war around the world about this. I got
a good fun fact and then we got some interesting either economics or something we typically
don’t talk about very often. Let me know when you can see the screen Yep, it’s up. I saw
this. It’s not a pretty visual of the one that I saw on tv But the market cap combined
of the stocks that everybody’s aware of microsoft apple google amazon NVIDIA facebook and tesla
is greater than the stock [00:08:00] markets of the following countries combined.
Ron Lang: Seven stocks are more than Japan, Canada, and Britain, UK combined. And actually
I’m not sure, but I believe Microsoft is about to surpass Apple today. They’re neck and neck
for 2. 8 trillion or whatever, wherever the hell they are greater than three countries
combined, which is another reason we brought it up last week in our podcast, that the top
10 stocks in the S and P were responsible for 75 percent of the index has moved.
Jeff Kikel: It’s just logical because you’ve got now so many index funds and everything
else that they have to, it’s just a self perpetuating thing that’s going to be there. Yeah. Yes.
They’ll be volatile and they’ll move up and down a lot, but the underlying part of it
is.
Jeff Kikel: Until we have some kind of major pullback in the markets, they’re going to
just continue or the market, S and P again, tries to rejigger it a little bit and re,
Ron Lang: in a way they have [00:09:00] to, I logically they have to, but obviously the
fund managers don’t want them to, because they got all the inflows, they got all the
fees.
Ron Lang: It’s almost like a cannibalizing situation. Yeah. All right. We have some other
good stuff here. So just digging into the numbers, and I don’t care what administration
is in the White House, the actual number here that everybody sees, right? This is what’s
reported. Do you got to dig into those numbers?
Ron Lang: So again, these are estimates. I’m not going to go through every single one of
these, but I’ll go from the bottom up 683, 000, fewer people employed, 676, 000 people
left the labor force. So think about it for a second. That’s another 3 million people
that aren’t getting a paycheck every week or every two weeks or whatever it may be.
Ron Lang: We know about temporary jobs, right? I was surprised that they were let go in December,
usually [00:10:00] seasonally they’re let go in January. So it should be interesting
to see how this progresses over the next couple of months, because usually, January is a big
month for getting rid of seasonal workers.
Ron Lang: And when manufacturing and tech, they start to clean house. Actually, Amazon
just announced they were laying off. There was several hundred or a thousand jobs across
several divisions. So I don’t know whether that’s the snowball effect or what, but we’ll
have to
Jeff Kikel: say, I would say, just from talking to tech recruiters and things like that, what
they’re seeing is that the tech companies are getting back to their normal cycle, which
is.
Jeff Kikel: They every year, what was nor what’s normal in the tech industry is every
year they get done with the end of the year. And they look at the dot, the bottom, let’s
say 10 percent of performers in their companies and they just let them go at that point. And
so that’s somewhat normal. And then, you’ve got people then they, okay, they get laid
off from one, they bounce to another tech company and all that, and if they really suck,
they get.
Jeff Kikel: [00:11:00] Let go another year later at that point. And if
Ron Lang: they’re a growing company, right into coattails of what you said, they’ll get
rid of the bottom performers and they upgrade. They’re bringing in people that have more
potential, better experience, more capability. So that’s why a lot of the tech companies,
if they’re doing well, they’re either maintaining or growing, but they’re replacing under performers.
Jeff Kikel: And I’ll have to get the actual facts on this, but I heard a comment or on
the news the other day, talking about the same thing, the jobs report, but what she
was saying is the real glaring thing about the current, the most recent jobs reports
is. That the amount of temporary jobs that are available has been the fastest declining
thing.
Jeff Kikel: Temporary jobs are typically that foot in the door. Okay. I get in and I get
hired on. And that’s been the [00:12:00] thing that’s come off the, it’s come off the scenes
much, much faster. But don’t forget
Ron Lang: a lot of those temporary jobs, part time jobs. Those are also second and third
jobs for people who are side hustles.
Jeff Kikel: That’s exactly it.
Ron Lang: Yeah. All right. So the next thing is we follow the PMI for the folks that aren’t
familiar with PMI. This is tracking manu manufacturing in the U. S. 50. 0 is the beltline above 50
means manufacturing is doing well and expanding. Below 50 means there’s a contraction and I
think that this is interesting.
Ron Lang: Lynn Alden. I pulled this from her newsletter. It’s an excellent newsletter.
It’s free. She does it every 6 weeks. She’s like a data scientist. She really digs down
a lot of numbers. You can go. I’m pitching her. You go to our website and sign up for
a free newsletter. So she put this together and you can see there’s been contraction here
for over a year.
Ron Lang: Now, I know that there are sections, New York and Philly, and, different metro
areas have their, this is [00:13:00] aggregate for the U. S. and I think this is interesting
because typically manufacturing is to is a sign, either in the beginning stages or early
stages of a major contraction in the economy and or recession, so I have to see how this
pans out here in the 1st Yeah, federal debt held by the public.
Ron Lang: This is disgusting. We’ve talked about this several times. This is just another
chart showing our percentage of gross domestic product GDP of the debt. This is the projected
for where we’re at the end of 2023. tHe next 2 generations behind us. If they don’t understand
what’s going on, they’re going to be pissed when they become mid midlife crisis or whatever,
somebody is going to be paying.
Ron Lang: Remember, we talked about it a couple of months ago, just that what we’re paying
on our debt has surpassed our military budget. That’s how horrible and disgusting this is
and neither [00:14:00] side on the political spectrum is doing a damn thing about
Jeff Kikel: it Yeah they just it’s it seems like once again, it’s always going to be You
know the until something massive happens and you know what the massive happens is credit
crisis Yeah, credit crisis where the, the international countries around the world go,
you know what, we’re not going to deal with you anymore.
Jeff Kikel: It’s very much like what happened to Japan. Japan went through that period of
time where they were, ruling the world or were controlling a lot of things. People just
stop buying their debt.
Ron Lang: Also, I think it was early nineties, right? I think that they were, their debt
levels were two to 300 percent of GDP.
Ron Lang: Look where our numbers are. We’re creeping up there pretty darn quick. I wouldn’t
doubt if we accelerate faster than this, if it’s not under control. Yeah, and obviously
back here. This was where this was wartime, right? But we paid that off through business
expansion and not printing money. Yeah, [00:15:00] so we shall see what happens All right So
I thought this was another thing from our federal reserve at st with st Louis the percentage
of equities held by the wealthiest 10 This is the last 35 years folks this is unbelievable.
Ron Lang: Obviously you need money to make money, but you know what? That means that
the wealthiest money is their money’s in the stock market. They’re in those top seven to
10 stocks. They’re adding to it and they ain’t selling it. And they’re just riding the wave.
And
Jeff Kikel: You gotta think too. This is the period of time where interest rates have been
exceptionally low right after 2008, interest rates went to zero.
Jeff Kikel: So the only game in town was, stocks of people were having to take more
risk, put money into more stocks and less into bonds and things like that. It really
makes sense. While we’re here, you know why
Ron Lang: we’re here and we could see it, right? This was the dot com bust people got
out of equities And by the time they got they by [00:16:00] the time they got back in if
you remember The bull market started again in late 2001 and 2 so by the time the money
came back in it was late Obviously the financial crisis here, we troughed out March 9th of
2009.
Ron Lang: And this was actually late. So this was late to the table again, consistent contributions
and the wealthiest people just kept their money in and wrote it out. If you notice here,
there wasn’t mad, much of a pullback in 2020, although it was short lived, right? We had
a 30 percent decline in six weeks. We bounced right back pretty quickly.
Ron Lang: Yep. And then just to wrap up here. I thought this was interesting. Two reasons.
One, you’ve heard it over the years about CEO C suite pay. And obviously on the left
side here, we talk about stock awards, and this is also the propping up and the manipulation
of stock because, oh, by the way, we’ll issue a, you another million shares of stock.
Ron Lang: If you get it above 50, it’s a [00:17:00] 38. Now, what are you going to do between
here or there? Do a secondary manipulate other numbers, push off debt, increase dividend,
whatever it is, I buy back their
Jeff Kikel: bogies. Yeah. Buy back shares is really, you figure most of what happened
over the last.
Jeff Kikel: let’s call it seven, eight years, you had virtually zero interest rates. So
companies could go around, borrow at 0 percent interest rates or minimal interest rates,
turn around, buy back their stock and prop the stock
Ron Lang: up at that point. I think this is comical because it’s no. Oh, I’m only making,
I’m only making, sorry about this.
Ron Lang: I’m only making seven, 100, 000. Yeah. But you’re getting 10 million, in compensation,
end of year bonuses, stock awards, RSUs, restricted stock units, warrants, whatever you want to
call it. I’m only making a hundred thousand dollars. Oh, there are middle managers making
a half a million.
Ron Lang: Okay. Okay, great. I actually liked
Jeff Kikel: the chart on the [00:18:00] right though. That’s the median CEO.
Ron Lang: Yeah. And this is, that’s just crazy. And that just look I totally understand C
suites people. I’m very much into meritocracy. I know we’ve talked about this before, but
that kind of pay. Is absurd and I think it started 30 years ago.
Ron Lang: If you remember with Eisner of Disney. Yep. When he cashed out, when he left, he
had like almost a half a billion dollars. That was 30 years ago. And it was just like
people were like he was only paying a couple of million dollars. He was right in line.
Nobody really knew the back end of that.
Ron Lang: And of course, when he, through growth and stock and everything else. His
compensation overall went through the roof and he walked away with four or 500 million
or whatever the hell it was. Anyway. Okay. So that was me.
Jeff Kikel: Excellent. I think we you brought the point up.
Jeff Kikel: There was very little of anything this week when it came to [00:19:00] economic
data, but I think, the only real thing economic data wise this week is, we go to a kind of
day jobless or excuse me, not jobless claim CPI. Yeah, jobless claims basically right
on track with whereas. CPI.
Jeff Kikel: Hello. Come on. There we go. So CPI, the consensus was 0. 2 percent came in
at 3 percent out top of the range. So it was at least within the range. But we’re still
pushing on, with X food and energy year over year, we’re still pushing it 3. 9%. So when,
when the administration and everybody talks about this stuff is coming down.
Jeff Kikel: What you have to think about though, is we were piling another 4%. On top of the
already 22 percent over the last three years. So it’s not getting better. And it’s, it,
the administration and Congress and everybody can talk about [00:20:00] we’re doing stuff
to fix the problem, but it doesn’t fix the problem for the people that are out there
in the real world who are having to buy things, and pay, and I’ve
Ron Lang: heard market strategists talking about.
Ron Lang: Look for a spike in inflation in the beginning of the year. And I don’t know
if that was because. December, people were charging more for certain goods during the
holidays, food services, whatever it was. I’m not really sure, but I think it’s interesting
why, I know in the seventies inflation came down, spiked up again, but are we really going
back to 45, 50 years ago to, what happened then?
Ron Lang: To compare it to today’s economy. I don’t know if that’s realistic. Yeah.
Jeff Kikel: And it’s interesting to see that. Typically the Fed will tell you, oh, we, we’re
trying to soft landing and everything else. I think what people have come to realize is
they really don’t have much control over things at this [00:21:00] point, because you’ve got
2 things fighting against the other, you’ve got.
Jeff Kikel: The you’ve got the Fed trying to slow things down, but then you have the
federal government and this is not a one political party or the other one. They’re both as bad
as the other one. They’re just pushing as hard as they can because we need to get reelected.
So we can’t cut money back from anybody.
Jeff Kikel: We have a system where Congress, every two years, the House of Representatives
is reelected. So they’re perpetually in this cycle of getting, you’re trying to be reelected.
So they’re always trying to push things to make themselves be electable. The challenge
is we’re just, we keep pushing, it’s like pushing on a string.
Jeff Kikel: From the fed’s perspective of trying to slow this beast down and it’s just
getting worse at that point. So I don’t want to be Debbie Downer, but the reality is this
stuff ain’t slowing down and things are not getting any cheaper
Ron Lang: for people. So let’s wrap up on this. So I’m going to ask you a question [00:22:00]
to get your opinion.
Ron Lang: How does all this number one affect the market? Because we can’t time it I was
3 to 6 months behind. I thought we’d get a major pullback or a recession end of 23 like
a lot of other people did. Maybe I was 3 to 6 months behind. It’ll happen to 1st half.
But let’s say it doesn’t happen in the 1st half or the 2nd half of 24 because it is a
presidential election year.
Ron Lang: aT some point, the dam’s got to break. So how does all this impact it? Us
being portfolio managers and wealth managers and just pundants of what, what’s going on
in the U. S. and the world. How does this affect our economy and our markets? Because
ultimately our clients want to know.
Jeff Kikel: Yeah, and I look at it.
Jeff Kikel: I’ve you know, I literally I manage more on a monthly basis now than I ever have.
Before you could count on it, we’ve adapted our trading style a little bit. And I do say
trading style [00:23:00] because we do, in our company, we trade. The market a little
bit, we’ve adapted our style to say, okay, there’s this stuff can reverse very fast too.
Jeff Kikel: You think about September, October, really August, September, October it reversed
very fast, very quick, 11 percent pronounced, very pronounced. And then, what happens in
November, it flips around the other way and it goes the other direction. I’ve had to adapt
my style a little bit to say, okay, we’re going to, if things are starting to pull back
quickly, we need to be, we need to act on it more quickly.
Jeff Kikel: I can’t just. let it go and say we’re just going to see what happens at the
end of the year.
Ron Lang: Yeah. And you want to put new money to work where you do it at market highs with
everything that we know that’s going on. Do you just go into short term try? I know every
client’s different.
Ron Lang: You manage it similar to us, but at the end of the day, people are like why
am I sitting in cash? Hey, look, can’t be market timers.[00:24:00] You know what buy
on the I think this is a buy as long as nothing major crash, breaks or cracks This is a year
of buy the dip, right five or eight ten percent dip, whatever it may be Keep adding more on
the way down.
Ron Lang: I don’t think you want to add more on the way up We’re you know, we both agree.
We’re probably going to end up higher at the end of the volatility Possible government
shut down again. We’re going to deal with that bs in another what eight weeks or whatever
No, you don’t put you don’t chase. You don’t chase the market returns at this level.
Ron Lang: We got a double top formation Oh, you know the technicals, that’s one of the
worst formations to put new money to work. Yeah, and we you know, we might have a blow
off top I think we’re looking at 12 percent pullback before we go higher pending no crack
So yeah, I just think how do we?
Ron Lang: Synthesize all this information to say, what does this mean for our clients?
What do we do today?
Jeff Kikel: And you and I spend most of our lives putting the [00:25:00] shows together.
So we’re, I think we, we are a little bit more aware than most of the, the street advisors
that are out there and, I just look at it as we’ve got to be nimble when we have to
be nimble.
Jeff Kikel: And we’ve got to be willing to say, okay, I might give up a little bit on
the upside to protect the downside because the town, the downside is the one that hurts
the most. Absolutely. anD so we’ve, I’ve adapted my portfolios to where we’ve got a lot. We’ve
shifted a little bit more money out of the bond market.
Jeff Kikel: We’ve got some bonds, but we’ve shifted more money out of the bond market.
And we have a little bit more exposure on the credit side of things, senior credit.
Because, if rates go down, which they’re likely to at least that is something that’s a higher
yielding credit, right? It’s higher yielding.
Jeff Kikel: It doesn’t really matter about credit ratings. It’s all about the individual
companies that. That are, that have that debt. That’s really 1 of the shifts we’ve made to
say, okay I [00:26:00] just want, 1, I don’t want to sit here and bonds making 4 to 5 percent
for the rest of our lives.
Jeff Kikel: I want to do something that’s doing a little bit better. And it’s something
I feel is going to do better if rates start to go
Ron Lang: down. Over a hundred percent. Yeah. You could finally, we actually have another
choice other than equities to invest in right now. And I like preferred stocks, which acts
like a bond.
Ron Lang: You could double dip, right? You get a nice five and a half plus percent dividend
yield, which is only maxed at 20 percent taxes. And you’re going to make money on the capital
appreciation side. So it’s a, now it’s not just an income play. It’s also a capital appreciation
play.
Jeff Kikel: So we don’t have, yeah, if you don’t have interest rates pressing against
you where they’re going up and, rates are going up and preferred rates are stable and
those stocks were going down for a while, just for the simple fact of.
Jeff Kikel: Okay rates are going up, so I can buy bonds that, 7 and 8 percent versus
the 5 percent dividends. Now, with that stable, and potentially going down, those become [00:27:00]
extremely attractive and especially the convertible ones. Yeah, because you get a double whammy
on them.
Ron Lang: We shall see what I’ve got some more economic numbers over the next week and
earning starts. Yeah. So we should have some additional fodder for next
Jeff Kikel: step. Tomorrow. Yeah. All the big banks go through tomorrow. So that’s going
to be interesting. We’ve got PPI coming out. I don’t really expect much of a change.
Jeff Kikel: I think it’s probably going to be about where the expectations were. Just
like we saw with CPI, it’s basically on the top end of the range. I would expect the same
thing on the PPI side. So nothing. I don’t think shocking about that. I think earning
season’s always crazy. And this is the, this typically is the good earning season.
Jeff Kikel: Cause this is the one where you’re getting, the fourth quarter numbers. But it’s
going to be interesting because it can be all over the fence.
Ron Lang: Gotcha. Yep. No, I hear you. Until next episode, we’ll figure it all out between
now
Jeff Kikel: and then we’ll figure out how to fix the world between now and next.
Jeff Kikel: We only need a week. Yeah. [00:28:00] All right, guys. Thanks for joining us on
the show. We thank you for being here every week and listening to us babble on about this
stuff. And hopefully you enjoy the things we bring that are a little funny and make
sure wherever you’re watching this or listening, make sure that you hit that subscribe button,
hit that up vote, and please make sure you turn that little.
Jeff Kikel: Thing on that lets you know the reminder that lets you know these shows are
out there. We do one per week for you. So thanks a lot. And we’ll see you guys back
here the very next time.