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.