PODCAST: The Market’s 3-Year Run: Boom or Bubble? | COT 125

Hello everyone. Welcome to another week

of the sense of things. It’s an exciting

week. The shutdown is over with. Thank

God we’re finally moving in the right

direction or I’m not exactly sure

because Congress is back and working and

has the ability to mess with our lives

even more. So, we’ll talk about that.

Ron has got some great stuff today. He’s

going to talk a little bit about

biotechs and their kind of unique runup

here. We’re going to talk a little bit

about the S&P 500 since 1950 and where

poverty is in the country. So stay

tuned. We’ll be right back on in just

one minute.

All right, everybody. Welcome to the

show. Oh, hey Ron. How you doing, ma’am?

Morning. Yeah, government shutdown is

overing. It’s funny. I’ve heard more

mudslinging on both sides since then

before the the shutdown is over. So,

we’ll have to see how they decide they

want to address the healthcare because

that was the Democrat sticking point.

And I mutually despise both sides as

something’s got to be done and

and they got to fixation for another.

Yeah. And they’ve got to fix the stupid

problem. Yeah. So, let’s let’s kick into

it here.

Any healthcare industry in Washington?

Yeah, no kidding. I think we need to ban

them from Washington and get them out of

there so that we can actually get some

work done. So, Groundhog Day, longest

government shutdown in history is over.

However, the lingering

f the FAA is still reducing flights

through tomorrow at least at 10% and

then everything will start coming back

online. But you got to figure there are

hundreds and hundreds of flights that

have been cancelled and they were even

cancelled going on towards the holiday.

You just don’t get those back online.

Everything get has to get adjusted

around all that. So, it’s going to be a

mess. plus getting people back in to

both TSA and the air traffic

controllers. One of the biggest things

that happened out of this is, and I was

listening to Shawn Duffy the other day

talk about this, you had a whole bunch

of new air traffic controllers and it

takes a year to train them. And of

course, this little government shutdown,

which accomplished basically nothing,

caused a bunch of those folks to go,

“Hell, I just gave up a job. Now I’m not

getting paid. I’m I quit. I’m not coming

back. So now they start the whole

process of trying to find more air

traffic controllers again. And our

system is still going to be a mess.

Thank you, Congress. 43 days. Now what?

Well, SNAP benefits are funded for the

next year. Thank God. So that we’re not

dragging those people through the mud

again. Travel’s still going to be slow

to get back online. Essential workers

are going to get 75% of their back pay

within 24 to 48 hours. So hopefully they

can actually buy something for their

kids for Christmas and the holidays. No

word on government contractors getting

back pay at this point. SBA loans are

back on track. And economic data

basically they’re just not going to go

back and do the missing data. They’re

just going to start from here. So we’re

going into the end of the year with

absolutely no idea what the economy is

doing.

If they hit an agenda there why they

won’t go back and provide the data.

Yeah. I think more than anything it’s

been so damn inaccurate. Anyhow, who

cares in a lot these cases?

I mean, you know what? There’s a there’s

a lot that brides on that data and good

matter.

I’m right there with you. So, what was

the economic impact of the shutdown?

What did we get out of this? 700,000

employees worked without pay for 6

weeks. So, they had to figure out ways

to feed their families. The CBO

estimates 7 to 14 billion dollars in

losses to GDP and healthcare is still a

mess. We still need to figure that out.

Hopefully, they will get working on

that. However, where do we go from here?

Congress kicked it down the road to

January 30th and then we start the whole

thing all over again. Thank God they

fixed the snap the snap issue so we’re

not starving people in this set.

The last thing, Fed meeting December.

Are they going to cut interest? Who

knows? Because they say they’re data

dependent. And if there’s no data, we’re

flying it blind at this point. The last

thing we heard from them was that it’s

likely that we’ll see another quarter

point drop or so, but we don’t know. And

we don’t know what the trickleon effect

is going to be for all of this as we as

we get back and rolling here. I actually

believe

if they don’t release the economic data,

I think the chances of them doing a

quarter point will will diminish because

I think they wanted the data to

basically prove that hey, you know what,

we could do it. But they were already

hellbent on with inflation. Things are

going up. That’s why they came out the

other day saying coffee, bananas, and

some other things is going to they’re

going to lax tariffs because of the

cost. I think with all that, I think

that the the Fed may remain unchanged.

Pull the January cut where I’m meeting.

Yeah. I don’t know. I think they may

have enough data to say, okay, we’re

pulling this back a little bit in the

coffee stuff. I I understand coffee and

bananas that was m mostly a Brazil thing

and that was more of the administration

going okay we’re going to make you hurt

a little bit so that you’ll negotiate

with us a little bit more

the fed mandate is employment and

inflation

yep we didn’t get the numbers for

September and we don’t have them for

October how can they

how have they made a decision up to this

point it’s been illogical

only like 250 to 300 PhDs in that

building. They can’t figure it out.

Yeah. The 250 to 300 PhDs that all think

the exact same way and there’s nobody to

sense in the building. Yeah. It’s going

to be interesting to see. I honestly

don’t know. I can’t read them anymore.

They say one thing and do something

totally different. And I think there’s a

few more dissenters on the board now.

You’re hopefully getting a few different

ideas into the process. The thing that

pal had always done, he’s always done

based on the vote of the majority and

the consensus. If it’s only two two

descents

to part y

then it’s not going to happen.

Yeah.

We’ll see.

All right. So, this week in history,

it’s a little bit of a lighter week. I

thought this was interesting. And the

1779 the birth in the US Marine Corps,

which I thought was interesting. This is

the year before we declared our

independence. And born in what city?

Oh, come on, dude.

I know the Naval Academyy’s of

Baltimore.

Whoa.

Philadelphia. You’re stomping ground.

Yep. US Marine Corps. I We’re at Give me

a second. I’ll pull it up.

I didn’t read the article. I just

flipped the headline.

There was a tavern in in Philadelphia

where the Marine Corps was born. I hate

it. A lot of caverns and f

Yeah, that’s true. I don’t know if it’s

still there, but there was a tavern

where the Marine Corps was founded.

You get that. I’ll keep going here. 1776

English newspaper announces Ben Franklin

joins rebellion in America.

I tell you, obviously living in the

Philadelphia area a good chunk of my

life. If you read about Ben Franklin,

besides all of his interesting sexual

exploits, Pen was a Renaissance man

before his time.

Oh god. Yes.

The things he invented and how he

literally was really one of the key

architects of how our country got

developed and he never held political

office which is even worried.

But I thought this

well guess he’s held I mean he was a

delegate to the bold bolt convention. So

the interesting thing is that he was a

true Brit. I mean he support

and he was very obviously in bed with

France too cuz he he was one of those

delegates. But my point is that

he just got to a point where he realized

Britain’s on the wrong side of history.

Yeah.

He 100% supported although his son Ben

Franklin’s son supported Britain.

Oh yeah. And to the end.

Yeah. He basically they the colonists in

New York they took him or in New Jersey

took him and you know they took him into

custody and he ended up living the rest

of his life. They never spoke again

after after his son was arrested and

taken taken into custody and then

eventually he went back to England. They

never spoke again.

I always recommend PBS has a great

two-part special on Ben Franklin.

He’s one of the coolest dudes that ever

existed.

100% worth it. Even if you’ve already

seen it, it’s worth a second watch. And

just

he’s he’s always on my list of the

people that I would want at my fantasy

dinner party. The three people, Ben

Franklin is definitely one of the ones

that I would want there because he just

fascinating. The Ton Tavern in

Philadelphia was where the Marines were

founded.

I bet you that’s probably on Second or

Front Street.

I don’t know. Yeah, I don’t know where

it was. It doesn’t exist anymore.

Still around. I had a friend of mine

bought one as a business and it was

right next to the building or right next

to the business or the store that was

the first post office in the country.

Wow.

Yeah, that’s interesting. There’s so

much history there. Okay. 1799 first

recorded meteor shower in North America.

I don’t know if that was Canada, US,

Mexico, but North America. 1903 Mary

Anderson patents the windshield wiper

I think is interesting because number

one it was a woman that did that and

back then if you remember it was full

power for a woman to drive a car just

interesting so I thought that was pretty

yes because men were driving the cars

and women were the windshield wiper

before that so they would have to reach

out of the car and the window off so

yeah she’s no we’re doing something

different here

So, I thought this was interesting. Tell

you how much I did not know. 1921,

dedication of the tomb of the unknown

soldier. Now, I do know I thought this

was after World War II because I do know

they did and they did figure out who the

unknown soldiers were. I don’t I I don’t

know if they did this. I thought it was

only three, but

I didn’t know this was after right after

the World War I, the Great War. I was

not aware of that.

Yep. Yeah. There there’s I think there’s

what four cuz there’s the World War I,

World War II, Korea, and Vietnam. I

don’t think cuz there there are no

unknown soldiers from any wars after

that because we’ve always gotten them

back and done that. But yeah, I think

there’s four total.

I Yeah, I never looked that up. I I I I

feel like I should know because I have

been there in DC and I thought I knew

it, but I guess I don’t.

Yeah, I had some really good friends

that were actually part of the old guard

there that that guarded that. It’s a

great job, but it’s a man they

That is the most stra unit in the entire

army as far as you uniforms and

everything else.

They’re not allowed to drink. They’re

not allowed to smoke. They have to have

a certain regimen in their life. It’s a

it’s a it’s an honor to to do it, but

it’s a very disciplined line.

Yep. Dropped age lower to 18 in 1942.

Okay. This is one of my favorite ones

cuz when I was a kid, I used to watch

it. 1978, the Dukes of Hazard makes

history, TV history with a car jump. And

then I was reading the article, there

were more than 300 cars, more than 300

absolutely gorgeous 1971 or no 1968

Dodge Chargers that were destroyed

through that show. So it it it pains me

to watch the show and watch all those

cars destroyed. And here’s the other

interesting little factoid with it is

that the producers they were going

through so many cars because every jump

they were bending the frame. Yeah. They

said they were scouring the country for

as many dimes charges as possible. There

was 85,000 made in 1969.

So this is almost 10 years later. They

were just dating and they used 300 in

the series.

Just destroyed.

But you got to figure there were some

other ones that were not as destroyed

but still messed up.

Absolutely. Last December we were going

through some of our picks for the year

sectors that case worst case scenario

and the sector that I picked was the

biotech biotech healthcare mainly more

biotech. So there are two. I’ll flip to

the next one and then I’ll come back.

And basically

what we’re looking at here is the IBB is

the megate and the large cap, right? The

BBH is the small cap and the midcap. And

what behind this thesis and they’re up

again today even though the market’s

down was going into 2024 if there was

going to be a change in administration.

If you take a look during the Biden

administration, and not to get

political, uh they frowned upon a lot of

M&A, especially with the giant eating

the little people. They didn’t care for

that. But the biotech has always thrived

on mega tech eating the little tech.

My part of my thesis, and this isn’t a

flag waving thing because it’s still

going on, was they were going to be more

imable to M&A. and the people of Fiser

and some other companies have just made

some big deals in the last month. I

think it’s going to continue. So, what

had happened here was I started buying

for clients in mid late 2024. It look

good until the election and then what

happened in March and a lot of people

forget about March and April with the

tariffs, right? Because at the biotech,

they’re kind of they’re not really

affected by the tariffs, but if you

remember what happened was RFK Jr. in

the health department came out being

antivaccine and a lot of other things

and the biotechs just sank. The trade

wasn’t looking very good but you can see

really from April May time frame. Now

we’re actually in a 4-year breakout.

It’s up a little bit today. I’m thinking

there may be some exhaustion and then

another bump up. So this is the small

and midcap. The IBB is the mega and the

large cap. And you could just see here

where the all-time highs were during the

early part of COVID because in the

vaccines and everything else. I think

this is going to go much higher. I’m I’m

loving this over the next couple of

years. I think it’ll continue. We’ve

been adding more even on the way up. You

always want to add in the strength.

Consider the weakness. Not sure of your

thoughts. I know we’ve talked about this

throughout the year, but I wanted to

show a weekly chart going back five

years. So, you can see the ups and the

downs and you can just see right 2022

through essentially mid 2024,

you know, 2 and a half years, there was

no M&A. There wasn’t a lot going on here

in the sector. Your thoughts?

No, I agree. You know, you figure you

had an SEC chairman who I don’t think

she ever thought that business was worth

time and you had Federal Trade

Commission, everybody else who was just

completely against any M&A. So, yeah, I

agree. I think the other big thing about

that is interest rates coming down. If

we continue to see interest rates coming

down, these deals get done much easier

in a lot of cases. Yeah, I totally

agree. And like I said, yeah, like

you’re showing there, really since co,

they’ve been dead man walking. So, it’s

time for them to get back on track. And

I think you’re going to have three

years, three to four years of the

government saying, “Hey, we’re going to

let you do what you need to do and let

some of these companies get in there and

buy up these biotechs. Throw some money

into them so that they can get off and

going.” That’s it’s not the first time

I’ve heard this week either, even. And

the way I describe is I do have some

experience understanding the basics of

the biotech especially at the small tech

level because a lot of these small techs

like they’re born out of a couple of

compounds they get enough funding to the

point where they get the proof of

concept they don’t have the funds to get

to get their approval. So that cost 75

to 100 million at the minimum they don’t

have it. So either they partner with a

large or megate tech or it’s going to

get bought out and they get funded the

rest of the way. The second part of this

is some of these smaller companies have

better compounds with better efficacy

rates than the mega and the large cap

and they come in to buy them out to take

a competitor off the market. That’s why

these M&As have been squashed in the

past but just the nature of the business

for decades. Yeah, if you look at it

from a longer term chart perspective, I

mean, it’s just getting back to its

uptrend that it had prior to getting

waffleed during the end of COVID there.

But yeah, I think it’s very interesting.

I It is something I’m going to put onto

my little list of things that I look at

and maybe

pullback, right? You’re looking at a

five to a 10% pullback. This is your

trampoline here to the next level from a

technical perspective. So

yeah, if you’re constantly dumping money

into it, it doesn’t really matter where

it is. I like to have things that are

moving in the upward direction. Yes, if

it pulls back, we’ll buy some, but we

just buy on a regular basis and take

advantage of it as it goes up.

Yeah, I agree. Okay, so Matt, I I know

I’ve showed a similar chart in the past.

I wanted to look at this again. So 74

years of history throughout this year.

Okay.

Okay. 70 only 16 times or 22% of those

years were down years. Now the reason

why it’s tough to believe that is

because of the malaise that we went

through 27 27 20079 because

we hit the peak of the market in October

of 2007

trough in March. So yeah, 2008, even

though it was down 36 and a half%.

This was a 17month pullback that people

didn’t think we were going to get out.

That obviously,

even though we troughed out on a 66%

downslide from peak in October 2007 to

March of 29,

2009, we were up almost 26%.

And then we were off to the races at

that point. If you remember in 2000 in

2018, we were actually up until the

fourth quarter.

Yeah. Yeah. Until the genius decided to

slam the interest rates up right at the

end of the year. Yeah, that was great.

Santa Claus, we were having a Santa

Claus rally until the Grinch decided to

slam interest rates up right at the end

of the year. But having client review,

having client review in surge meetings

in October, November, talking to

clients, I’m like, look,

the chances of us being up double digits

three years in a row doesn’t happen very

often. 2023 26%, last year 20 almost 25.

This year we’re up 17 18% before this

last pullback.

Yep. But it’s and if you want to look at

it right only four times did we have

three straight years of double digit

gains and three of those I’m sorry two

of those three times were in these this

fiveyear period in the do

people are like relating AI time now to

do hey straight year is not a problem

okay so that would be only five times

and now 75 years you can already see

what the chances of that happening.

Slim.

Yeah.

Slim. Now, let’s say we are up three

straight years. Look what happened after

the do. For forget about one hiccup

year. We had three straight years.

Ridiculous. Yeah.

So, I I’m just Look, I’m not trying to

be the fair weather guy here, but I’m

just saying, you know, I Yes, we have

profitable companies and everything else

as we’ve talked about before. is is 98

or 99. But three straight years of

double digit gains does not happen often

in this new age of of of ETFs even in

this new age on the 401ks which we

didn’t have prior to 1982. So there it’s

a very different scenario over the last

35 years prior to the prior 40. So

happens your thoughts.

No, I agree with you. It is. I sit back

every day. I the trading strategy that I

developed, I actually have been spending

a significant amount of time really

going through what’s our exit strategy

if we see the market have a massive

pullback. I’ve got a phase drawdown of

what we’ll do because I agree. Been

there, done that, and I will always tell

clients that tell me 2008 was horrible.

I’m like, yeah, I’m sorry. 2000 to 2002

was the worst three years of my life in

this business. Coming in every year

talking to clients and going I have no

idea. It’s getting worse every year.

It’s like until 2000.

Yeah, I hear you. But here’s the issue

that happened in 2002. One of my

favorite documentaries is Inside Job

talking about the financial crisis.

Yep.

George W. Obviously, he was in a malaise

his first year and a half in his

presidency.

And in 2002 was when they started to

pull back on credit standards and

everything else. And that’s when they

got the boom in the housing market. So,

they had to do something to stimulate

the economy. One of the things they did

was relax a lot of the credit standards

among other things. Watch Inside Job,

one of my favorite documentaries. So

even though it was terrific after that

wise, right, we had to go through this

17 buck period where we were down.

Yeah. But when you looked at it in the

long run, that 10-year period basically

created zero return if you were in the

S&P 500. And if you were invested in the

more aggressive stuff, I had clients, I

remember to this day, I had a client

that was, he was in Texas Instruments

stock. He was Texas Instruments 40-year

employee with Texas Instruments. One of

the original employees had

multi-millions of dollars in Texas

Instrument stock in his 401k. And when

we were working with him, it was like,

“Okay, you need to start to reduce this

position.” And he wouldn’t do it. He was

like, “I want when it gets to 92, that’s

where I want to get out.” and the stock

got to 9150 and then precipitously

dropped almost 80% over that next time

period and he wouldn’t get out at that

point either. So it was just I just a

stupid time for a lot of people.

Yep. And actually

along with that during this time frame

because again you can’t see it here

because this is a

yeah it doesn’t look so bad there but it

was a very bad period

near the bottom in that January,

February and that March of 2009. Yep. It

basically it wiped out the prior 10 year

gains at that low and here you think I

just keep at it. Yes. But when you’re

going through this emotionally, day by

day, week by month by month,

year by year, we’re going to wipe down.

Yeah. Emotionally, that’s what it does

to you.

Yeah. No, it’s I remember it. I remember

that very well. 2000 to 2010 was a tough

time period to be talking to clients

because it’s okay. I and most of that

time I was working for Fidelity and the

Fidelity’s belief in just stay with

everything. Don’t change don’t adjust

your portfolio and it’s yeah okay I’ve

delivered 0% return for you for the last

10 years.

All right. So one more slide talking

about losing all your money pop. There

you go. in the United States. I thought

this was interesting. I pulled out some

other slide. We’ll save some in the

future. But I thought this was

interesting cuz even though this is the

data is always lagging. This is almost 2

years old. But I just thought it was

interesting if you’re looking at like

the best and the worst stains for

poverty. Obviously the biggest states

are always going to have more poverty.

California, Texas, New York, Florida

kind of surprises me. Maybe a captain.

Arizona’s in there, but my god,

California could talk about all their

social things and whatever. Now, if you

remember, they are now the fourth

largest economy in the United States. We

did a partial show on this about two,

three months back.

Every country has their issues. If

they’re the fourth largest economy, I’m

not going to say it makes sense, but

obviously having a much higher

percentage. I’d like to see the

percentage across the United States, but

this is sad. This is just truly sad.

Yeah. Yeah. Texas, my state, everybody

talks about, you know, the economy is so

great and all that. Yeah, it is. But

there’s still a lot of people getting

left behind as a result of it. And the

crazy thing was we were having a

pre-show talk about the cost to

healthcare for single couples 15 20

grand a year. The this group of people

isn’t even making that in gross income.

Yeah. Yeah. Now they do qualify for

subsidies and stuff like that and

they’ll qualify for Medicaid but still

it’s that’s what I was saying. We’re

doing some work within our company on

health care and solutions for health

care because I was looking at the just

looking at the ACA and I’m like, okay,

for a plan, let’s say you got

subsidized, the best plan that you could

get where you didn’t have any out- of

pocket as far as monthly out of pocket,

you’re you’re out of pocket was like

$19,000 a year per year and you’re

basically you’re going to have $10,000

of spend before you have any insurance

taken into place. We you basically don’t

have insurance at that point. You can’t

continue to be healthy. So, we’ve got to

fix that problem. And like I said, we’re

coming up with some solutions for

clients, stuff that I’ve used personally

that at least you have health care, you

can go to a doctor and get taken care

of, which is good without breaking the

bank.

Yeah. And and you know what, I’ve been

hearing about healthcare for decades.

Yeah.

Yeah. that

too many lobbyists. We’ve talked about

the the problem is it’s the Ronald

Reagan. The worst thing you can ever

hear is I’m here from the government and

I’m here to help. Please stop. Just

stop. Let other people fix the problem.

Get out of the way.

Okay. So, the federal government says

got to let the states deal with it.

Yeah.

I don’t know that’s necessarily the

solution because each state has their

own healthc care situation.

Yeah. There’s got to be some kind of a

happy medium. I don’t know what it is.

All I know is even for right now a

single person and it’s just

unsustainable.

Yeah. For my wife and I, it would been

$2,500 a month for a health care plan.

I’m like for a horrible shitty health

care plan on top of it. All right. So,

one last fun thing before we get

started. I was on my little research

here with the Ton Tavern. What was it

called in the 19 or the 1740s? And to

answer your question, it’s it was at

Water Street and Ton Alley.

I think that’s part of the Delaware

River on the east side of

I believe. So I I remembered it being in

that area and it was originally called

Peggy Mullen’s Red Hot Beef Steak Club.

Love it.

Got to love the branding.

Get it. All right, folks. Thanks a lot.

Hopefully you enjoyed some of the fun

facts and our little discussion here.

We’ll be back next week. Thanks a lot

for watching. Make sure you subscribe to

the channel and give us an upvote if you

can. Thanks and we’ll see you guys back

here in the next time.