good morning sense of things audience

it’s Jeff and Ron here once again with

another episode of the sense of things

and on today’s show we’re going to

really focus on some Market stuff that

Ron’s been working on he’s just got a

pleer of stuff that he’s going to go

through today and I will be the usual

economics geek playing that part on TV

talking a little bit about some

economics numbers over the last couple

weeks that I believe have had some

effect on the stock market uh if you’ve

been looking at your accounts you might

have seen them down over the last

several weeks and we’ve just been in

this little downturn in the market some

of it’s just unclear what’s going on in

the economy right now and we’ll go over

that we’ll take a look at the yield

curve so hang on we’ll be right back on

in just one second

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[Applause]

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hey everybody welcome back to the show

Ron how you doing my friend good can you

believe it’s February 28th Lord I know

this year has blown

by part is I sat back and I’m like I’m

thinking yesterday the president has

just literally been an office a month

and it has just been nuts though the

amount of stuff that they’ve gotten done

done in this time period is

crazy craziness everywhere but I know

some days it feels like forever yes I I

know and look and historically I know

we’re getting a little ahead of

ourselves but historically the first

year of a presidency the first six

months are usually flat to negative yeah

you get a bump after the election maybe

a January up but I got to tell you even

with the February slide late January

February slide it’s getting into the

historical Norms of kind of flat and

choppy because people are still trying

to figure out despite everything he’s

been trying to do in the last six weeks

what does this mean for the economy so

anyway so it’s we’ll have to see where

it goes but right now I think it’s the

Playbook is going by the historical

Trends yeah which I agree I think a lot

of it is you get out of the honeymoon

phase and then what I’m hearing from

people is there’s just not enough going

on in the economy prices aren’t coming

down okay it’s just literally been a

month at this point nothing moves that

quickly and I love the big thing how he

said some somebody came on obviously

could tell which side they were on

saying he hasn’t brought down the price

of eggs that’s because of the Avon flu I

don’t think he’s going to I don’t think

he’s going to be able to bring down the

price of a lot of goods anyway I don’t

see that happening but come on you’re

using the Avon flu that he could control

give me a break you and you know me I

ride the middle I despise both sides but

you just can’t even listen to fodder

anymore it’s crazy yeah like I said I

think it’s just at least the

administration is being forthright and

out there whether you like it or not at

least they’re telling you what’s going

on I’m that I’m happy about that can

cause Havoc a in portfolios right now

and I think we’re seeing some Havoc

right now so that’s okay yep we got to P

back to go forward why we get you

kicking off with your part and then I’ll

follow up with mine okay okay so I have

a couple of good charts here for

conversation one of them I was holding

out the last couple weeks CU I thought

other things took president as I

mentioned before I know we’ve been

talking about this for almost two years

about the decline in the economic

numbers and the markets still been going

up but there’s a couple of key

economists that turned bearish thinking

that there’ll be a recession this year

and I thought this was interesting just

kind of looking at some of these numbers

if you just take a look

at where we were right back in the

depths of even though it was a

shortlived recession in during covid

about where we are three years later

we’re up

50% and I thought it was interesting

from the financial crisis they say the

recession ended June of 2009 but really

the market bottom March 9th so this was

three months before they say the

recession ended and look we were 3 years

5 years and 10 years later so I thought

it’s always interesting when people say

oh the Market’s going down whether we go

into recession or not any major

pullbacks you got to add because if you

look at your horizon line of three five

and 10 years you’re going to be higher

if you’re in high quality items what do

you even you even look at the

2001 recession there yeah it’s still

positive it wasn’t great but it was

still

positive after 10 years well we took a

50 60 % hit during that time very

similar to 2009 but also the big

difference was the 2009 was and similar

to covid was all the government money

that flowed money flowed from the

government during the the.com bust not

at the rate it did during the financial

crisis and covid and that’s why I think

the market wasn’t up as much because if

you also think about it what was 10

years after 2001 that included the

financial CR yeah

that’s yeah right there it just we were

just starting to get back on track and

then oh we got hit again and yeah if you

think about it if the financial crisis

happened 11 years after that this number

would have been triple digits so let’s

just let’s we could leave it at that

okay the next slide that I have I

thought this was interesting and topical

again I wanted to show this a few weeks

ago when we were in the heart of our

earnings season because we know we just

had Nvidia earnings this past week and

Nvidia is down again today Y is

reversion to the mean and I don’t care

when anybody says we all know trees

don’t grow to the sky and at some point

the market has to come back down to

reality and reversion to the meme and I

thought this chart was interesting

because the blue line right is the

trailing 12-month operating earnings

right this is important right earnings

is the Mother’s Milk of any company and

any stock and any market and then you

take a look at the S&P 500 you can see

any time right it has run beyond the

earnings it’s come back went up came

back look at the diversion here now

obviously this was probably about a

month and a half actually this is the

end of Q3 2024 so you can see I bet you

that come back quite a bit since 100%

100% so I think it’s important for

people to understand that between the

earnings correlated with the first 6

months of a new

Administration this is the time to keep

adding to your portfolio to your quality

positions because the second half of

this year and next year unless we have

some type of a catalyst or in a Black

Swan event whether it’s geopolitical or

an economic shock right we should be

higher by the end of this year going in

the next year we just got to get through

some of this mud here in the first six

months totally agree okay and then my

last slide and I know this is a big

slide to look at but I I thought this is

interesting because and I’ll explain it

so basically let’s just say in the

current year let’s say we were in year

2013 we were up 32% that year then it’s

looking at each year since

2013 what are the average returns since

for each year and I think it’s

interesting that if you take a look at

the two scenarios we just spoke about

which was and the financial crisis that

look coming out of there we were a

little bit slow coming out of the

financial crisis but look at how we were

each one of those years and we were in

double digits now you could say Ron Jeff

this is a bit of an anomaly go back 30

years yeah look on average the Market’s

going to be up each year right so every

few years we’ve gone through the

statistics right you get an average of 3

5% pullbacks each year you get 11%

pullback about every 11 months you get a

15 to a 20% or more pullback back about

every 16 to 20 months something like

that sometimes you get something more

but no matter what if you’re in high

quality items you’re going to be coiled

springing to the upside coming out of it

because the high quality stocks always

do better than the midcap and the small

cap coming out of any kind of a major

pullback or recession it’s a good

quality item Clark just look for those

stocks that are that are getting beat up

I think Nvidia is a great example that I

think it got ahead of its skis a little

bit but it’s interesting to watch it it

I listened to that earnings report this

week and I’m like it is just freaking

popping on every cylinder that is

possible but it’s down 10% for the year

especially it’s actually it’s yeah I

have a feeling it’s going to go below

100 but that’s we’ll see what happens

more I think it’s going to get in about

the 110 range and then get some footing

there you’re getting close my man so see

basically 10% from where it is I’m 20%

from where it is but the other part of

this too is NVIDIA has become a victim

of their own success yeah even though

they had great numbers and they have

still have great projections and of

course the CEO is still priming that

pump which how great things are going to

be because that’s what he has to do what

it comes down to is if they didn’t come

out with Beyond blowout numbers well

then yeah it’s going to come back down

to reality people are going to take

profits and everything that’s going on

and I will have to see what’s going I

think the other victim to Nvidia to is

the recent announcement of adding a

possibly another 10% tariffs to China

and China China’s buying their chips and

I know they’re going to try and limit

them too I have a feeling that some of

that political fodder is in there

affecting Nvidia so anyway yeah a lot of

that anybody so let’s start off with I

think a little jump into something that

you’re talking about we’ll just step on

to that let’s revisit our friend the

fear and greed index we usually only do

there it is the times at quarter but I

think with the movement we’ve seen and

this to me is an exciting thing because

a week ago we were in fear mode a month

ago we were neutral a year ago we were

extreme greed and we’re now at extreme

fear and going down which tells me that

we’re closer to the bottom of some kind

of a little pop up than if we were

sitting here and everybody’s at greed

mode this a contrarian yeah as it’s a

very good contrarian indicator it just

actually dropped enough while we hey

let’s keep refreshing it throughout our

podcast yeah I know I’m like I didn’t

even refresh it and it just dropped it

was 19 oh did it oh that’s funny I

didn’t know it was was hilarious I’m

like okay they just updated it again wow

I maybe they heard us talking in the

last 10 minutes and it went down

apparently they’re like hey we read

Ron’s chart and this ain’t good so

let’s look at some economic data this

just came out this morning hot off the

presses personal income so that the

range was consensus three and it came in

actually 0. n which is wonderful pce

which is the it’s really the number that

the FED looks at pce actually came in at

a negative2 point2 versus a consensus of

02 so what that’s saying now here’s the

funny part I was listening to the news

as I was coming in this morning and of

course the analysts are on there this is

down so this means that the FED is going

to drop interest rates in June okay the

FED has not even remotely said anything

about dropping interest rates and most

of the data lately has been up but okay

now they’re going to do that this week

GDP came in yesterday basically right in

line with what everybody expected at the

bottom end of the consensus range so

that’s also a good sign that kind of

inflation although it’s been showing

higher lately we’re starting to see some

numbers that are the other direction the

one that hurt most and I think this

number is going to go up

dramatically uh with the government

layoffs is jobless claims and they were

consensus at

224 came in at 242 and well above the

consensus range once again that’s not a

good thing when people are losing their

jobs and and I think there’s going to be

lots more of them coming out of the

government and not as much hiring on the

government side although I own a testing

center and we are seeing a ton of people

coming in testing to be members of the

Secret Service so there is some hiring

going on in the government right now TSA

and TSA and Secret

Service yeah and the interesting thing

is that you may see more government

losses but the government has been

booing up the numbers here for the last

three years because they’ve been taken

what half to 2third of most of the new

jobs on each month the private sector is

the one that’s been flat to negative I

know the good part will be to see how

the private sector absorbs some of that

government you know Talent that’s out

there because they’re these are not

stupid people they’re a lot of times

very intelligent educated people so how

do they get absorbed into the economy

hopefully we start to see that we’ve

seen little signs and little green

shoots out of the private sector so

hopefully we’ll start to see more of

that let’s take a look at the treasury

yield curve this has had some or

comments out there primarily in the

10year range if you remember when we

were talking a few weeks ago we were

upwards of four five 46 when it came to

the 10e which the 10e if you don’t know

is really what is driven by the market

for off so it’s not the FED has nothing

to do with this but it’s driven by the

market and the Market’s analysis of

what’s going

on the challenge with that too is if the

market is seeing things worse they start

to jack up that interest rate and that

affects mortgages it affects really a

lot of financing and all that but let’s

take a look at where it was just a month

ago at this point Boom the short end of

the curve was floating out here the one

year and twoyear had been below that

time period but there was a significant

difference between the 10year and the

2year at that time so let’s go back to

where we’re at

today you’re starting to see a movement

of the shorter the two years still less

than the 10 but we’re starting to see

the curve move like this and it’s so

funny people that don’t really

understand this I heard this the other

day oh my God it’s the treasury yield

curve is inverting and it’s where that’s

signaling a recession no it’s

not but it is interesting to see that

the short end of the curve has come up

and that longer end of the curve has

come been pulled back what’s your

thoughts Ron and that’s a fear gauge

yeah

yeah because people are putting money

into shortterm money than long-term

because it’s a but look and I’ve heard

numbers six and a half to S trillion

dollar in cash equivalents one of those

equivalents is also treasuries War

Buffett I just saw the number and I just

posted it out last week over

350 billion sitting in cash now that

could tell you a lot of things I think

that’s a pretty good indicator because

does that mean that you know him and his

cohorts don’t see anything to buy does

he think that the market is overvalued

does he see fear out there and or maybe

he just says hey you know what there’s

nothing really major to invest in so

let’s park our money risk free and and

collect I’m sure he’s somewhere between

4 and 42% on the majority of that

money and why wouldn’t if you’re sitting

there and you want to keep it relatively

liquid in that short end of the market

so that he can pounce when there is

opportunity also a lot of people don’t

understand this or don’t realize that

when it comes to taxation but actually

the treasuries are taxed Advantage

because the interest that you get from

that you’re only paying fed tax you’re

not paying state tax tax you’re not

paying income tax you’re not paying

ordinary income you’re only paying fed

tax on that money better than keeping it

in a high yield account because that’s

ordinary income so again at the day it’s

not how much you make it’s how much you

keep and I think Warren has proven his

track record God bless him he’s going to

be 95 yeah and like I said there’s

opportunities I see these as

opportunities um had’ been running for

some of my larger clients we’ve had a

big sleeve of short-term treasuries

laded out over a year and I this is

giving me an opportunity to go back in

and refresh some of those as they’re

rolling off we’re rolling off at right

about the same rates so why wouldn’t I

continue to do that for people that want

to keep some Safe Money they’re high

income it’s in taxable accounts why not

this month yeah this month through may

we have several of our six and six Monon

to oneyear treasuries maturing at over

5% for some clients that wanted cuz most

of them we were doing 3 to 6 months last

year well the last couple of years but

yeah the six and the 12 month are just

maturing now that were like 51 to 53 in

the next couple of months we’re not

going to get that again no but you can

pop in a 43 435 something like that

that’s they wanted to park it for a

while yeah it’s better than poke in the

eyes the way I look at it and in a time

where like you were saying I think the

next six months are going to be a little

bit of a whipsaw back and forth because

like I said that the market is trying to

figure out because we’ve really not done

these kind of tariffs and things like

that so the Market’s trying to figure

out how’s that going to affect

everything is it’s going to cause

massive inflation and all that we just

don’t know and you have to look at that

versus okay if you start pulling a crap

ton of some of this what I would

consider fake money that’s been thrown

around by the government you start

pulling some of that out that’s going to

pull back on some pricing and reduce

inflation where’s especially people that

have government contracts yeah where’s

that happy medium and I think some of

the fraud that’s been shown up is just

it’s outlandish to me that we don’t have

we we just don’t have any kind of like

an auditing function in the US

government which drives me absolutely

freaking crazy that agencies can be

paying businesses and I’m not even

saying some of the other crazy stuff but

some of these government contracts where

it was a 15-month contract and they’ve

been paying somebody for 15 years on it

where’s the checks and balances yeah

none at all it’s just throw money it’s

our free money to hand out to everybody

in town we need to stop that so I think

there there’s going to be a happy medium

balance between that if we stop that a

lot of that wasted spending hopefully

that offset some of the Tariff money and

stuff like that from an inflationary

standpoint and hopefully the the

Congress came up with a a plan with

taxes included early on instead of

putting it off later so hopefully them

and the Senate can get this together get

that number done and businesses can feel

more comfortable when it comes to making

Investments yeah but I what I truly

believe is some of these tariffs are

going to go into effect in the next

couple of weeks I think by May June the

latest obviously which is the end of the

first half of the Year we’re really

going to know are these policies going

to work and take hold or is it going to

put more pressure on our economy and our

market so we shall see yeah like I said

and I what I hope is the

administration is cognizant of that and

have them constantly making adjustments

as need to be but I still feel like you

I think the back half of the year is

going to be really good uh rolling in

there because if you look at history

that’s where we’re at and that’s all we

can use at this point you can’t figure

out what’s going to happen but you can

look at what’s happened in the past and

infer from there agreed agreed awesome

thanks to you for Ron for for putting

all that stuff together I love that one

chart I’ve never seen that one before

that waterfall chart we had so I can’t

take the credit for it that would have

taken me too long to put it together oh

good lord no that would make my brain

hurt trying to put together the

spreadsheet just to get to that point

great stuff folks as always subscribe to

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sure that you comment been having some

really fun conversations with folks on

YouTube so thanks a lot and we’ll be

with you the very next time