Good morning folks. Welcome to another

episode of the sense of things with Jeff

and Ron and welcome to another week,

another Groundhog Day week. We are back

at war with with Iran for the next five

minutes and then it’ll change. So that

said, market was down for a couple days.

Now the market’s up today. So who knows?

It’s another April situation or who

knows what. So we’re going to cover that

today. Ron’s got some great stuff where

he’s going to cover what happened in

history and he’s got some fantastic

analysis stuff. I will come in behind

him on this show talking a little bit

about an analysis of the FOMC minutes

and some things that we can glean from

the reports out of that. So stay tuned.

We’ll be right back on in just one

second.

Hey everybody, welcome to the show. Ron,

how are you my friend?

Good morning. Last time we did this, it

was the first half of the year. Now

we’re in the second half of the year.

We’re almost already midway through

July. It just

it’s it’s crazy. It’s been a decent

summer, though. I think we’re going to I

think we’re going to be flat here for

about another 30 to 45 days and then I

don’t know. Obviously, then the midterms

pick up and everything else. But it’s

hard to believe we would be higher by

the end of the year. I I think where

we’re at right now is where we people

expected us to be. But we shall see.

It’s been an interesting year. So far

it has it’s been a crazy year so far

with the minations of the market ups and

downs and everything. So we’ll see where

we’re at. I agree with you. I think

we’re going to be flat at least for the

next 60 to 70 or 60 to 90 days quite

frankly. I could see us pulling into the

end of the year. Just depends on I think

oil prices at this point of where we end

up the year really.

All right. So what’s going on in

history?

All right. So, we got a brought together

two weeks worth since we didn’t do

anything last week. Couple of

interesting things. Basically, the 1785

Continental Congress sets the dollar as

the official US currency.

Okay.

1804,

Aaron Burr slays Alexander Hammond

attended D. Can you imagine if dueling

was still legal today?

Oh, I could see it. Bernie Sanders and

you know

Yeah. Right on right on the floor of the

Congress. All right. Look, I didn’t like

what you just said. So, here we go. You

take a pistol. 20 backto back 20 paces

and turn.

No, I think my favorite back then was uh

Andy Jackson, who the one guy that tried

to shoot him and he took a stick and

just beat the living crap out of the

guy. That’s the way it should be.

There we go. 1884, France gives the

Statue of Liberty to the United States.

I got to tell you, there’s two things.

New York, right? If you’ve never seen

documentaries about the Statue of

Liberty coming over, how it was built on

that island and also the Brooklyn

Bridge. I mean, you go go back, it was

about the same time. It was the late

1800s.

And think about they didn’t have

hydraulics and and the It is amazing how

they built both of these structures that

are still standing today without the

modernday equipment. PBS has great

documentaries. I’m sure people could

find stuff on YouTube.

Yeah, if you have if you have Fox, the

Fox Nation app, too. Steu Vney did some

really good He They’re a little older

now. They’re probably about four or five

years old, but he did some things of

like how it was built in America or

something. And I remember he did one on

each of those that was just really super

interesting. Brooklyn Bridge, I think,

is the most interesting one because it

was built relatively fast back in a time

when there was no technology at all. And

it was just literally

Well, if they were to build the Empire

State Building today, it would take a

decade. Back then, it took three years

or whatever the hell, four years.

Took almost what 16 years to rebuild the

World Trade Center.

There was a lot of politics there.

Five years to think about it and then

another 10 to actually build the dang

thing.

Yeah. 1905, Einstein publishes his

groundbreaking theory of relativity,

even though he said the rule of 72 was

one of the greatest discoveries.

Yes.

1933,

Major League Baseball’s first All-Star

game is held.

1936, Gone with the Wind is published.

And frankly, my dear, I really don’t

give a damn. I didn’t care for the

movie. I just thought I’d throw that in

there.

6. Thank God.

Yes. The French designer designed the

bikini is introduced to the world.

Yes.

And forever women were getting ticketed

for showing their belly button.

That’s okay. I’m okay with it.

1953, the first Chevy Corvette rolls off

the assembly line and then obviously

influences Ford to obviously come up

with the Mustang and they really the

American

first the Thunderbird. So the

Thunderbird was the

Thunderbird. And

but the Mustang was a cooler car than

the Thunderbird.

Oh yeah. No, the Thunderbird. The first

Thunderbirds were awesome and then they

completely ruined it by the early 60s.

So

they screwed up the Mustang in the late

70s and 80s. It just looked like a box

car. But I got to tell you, the Chevy

Corvette has definitely evolved over the

years from the original to the Stingray,

but today it looks like the Batmobile.

It is really cool looking.

Oh, it’s beautiful. Yeah. There’s a guy,

we have a what is it? Toll Brothers

that’s right next to us here in in our

office complex. And there’s a guy that

has a brand new Corvette that’s painted

to look like a Navy Blue Angel plane. It

is awesome.

Ah, nice.

I’ll take a picture and show you

sometime,

please. Okay. 1957, John Lennin and Paul

McCartney meet for the first time in a

church auditorium and the rest is

history.

Yeah. 1962

US patent issues the threepoint seat

belt to the Swedish engineer Niels Bolan

I think his name is pronounced read the

article it was pretty interesting think

about it they didn’t really even put in

seat belts standard into the car until

the mid to late 50s and the se there

were so many but it took forever to do

it and you know what it’s not like these

things cost the cars a lot of money it’s

just the car manufacturers wanted to

basically say It’s safe to drive without

seat belts. It’s okay.

Don’t worry if your kids get launched

through the front window. It’ll be okay.

1965, first American astronaut walks in

space. Edward White II.

Yep.

19.

And what service was Ed White part of?

What do you mean what service? Military

service.

Yes.

Most of them were from the Air Force, so

I don’t know.

Yep. Ed White, US Army, buddy.

All right. There you go.

1967

Sergeant Pepper’s Lonely Hearts Club

Band is released. I got to tell you

Maniac. It was a good album. It wasn’t

my favorite album, but it was but they

said that changed everything from the

50s and 60s leading us into today’s

music. I think there’s a lot of truth to

that. But Abby Road is definitely my

favorite album from them.

Totally.

Revolver and Rubber Soul, too. But I

Abby Road is my favorite.

Yep. Yellow Submarine, though. You got

to say,

I think that was their worst album.

All right. 1974, Dr. Heimlick

first publishes his technique for

rescuing choking victims. And I don’t

think people know that the Heimlick

maneuver was actually from a doctor. I

kind of figured that, but obviously I

didn’t know it until I really read this

article.

Neither it was a doctor, but yeah, I

didn’t know. I actually thought it was

earlier than that, but okay.

Yeah.

1994 Amazon is founded by Jeff Bezos.

One of my I actually have a picture of

it on my wall of Jeff and his garage.

There’s some great old interviews with

him in his old office.

Yeah.

In his old office with the old Amazon

signs hanging on the wall and

It’s funny.

It was awesome.

Forest Gump opens in theaters.

Life is like a box of chocolates.

All right. Together like peas and

carrots. You and me, buddy. All right.

So this was interesting. This was from

fact set and it goes into guidance that

it was provided by companies. These are

just some sick numbers. We all saw what

happened with a lot of the semis last

quarter. Why all of a sudden last

quarter they all blew up with all these

unbelievable revenue and earnings

numbers, I don’t know. But you could

just see here compare this is they have

earnings guidance. If you add up all the

other sectors combined times three, it’s

just ins it’s insane. And the problem is

setting expectations for clients. If

you’re not in the top 20 stocks, which

are mainly all tech, like you’re not

really getting

that alpha outperformance. Yeah, the

market is broadening out, but not these

kind of earnings. I don’t know what your

thoughts are there.

No, I agree. And I’ll cover something

just an article I just happened to come

across on Yak Finance about the Mag 7.

And it’s interesting that it’s like the

Mag 7 has been wildly underperforming

the rest of the market, which has been

the exact opposite of what it’s been.

But I think some of that the spend

that’s dragging on the mag 7 is being

dumped into these semi stocks, the

memory, the microns of the world and

things like that because once again it’s

the data center story that money is

being dumped into those because they

need they they need that memory. They

need those chips to to build out the

data centers that they want

at this point. So, it was it’s

intriguing to me to see too that I think

Meta was the first of these I think some

of the other ones of some of these big

hyperscalers that are actually talking

about selling some of their excess

capacity or renting out their excess

capacity because they’ve built so much

at this point.

Yeah. And then on the right side it goes

through what industries had the most

amount of negative guidance. I mean the

industrials I know some of them have

been doing pretty good. Consumer

discretionary has just been flat to

negative for over a year. But

information technology only five

companies had negative guidance. I it’s

just crazy. And then you just take a

look at the rest and then on the bottom

it’s going through over a five-year

period of time and you could see the

negative guidance is going down as far

as overall companies are concerned

despite all the other headwinds and

everything else going on. So yeah, the

next one I I wasn’t sure if I was going

to put in this chart, but it kind of

segus into what you were saying and

what’s been out there about the mag I

can’t I don’t like calling it the mag

seven, you know that though the top

seven stocks that there’s been a

rotation away, but if you look at it,

they’ve been outperforming. So yeah,

money’s been shifting. That that’s

really what it comes down to is money

has just been shifting. It’s not that

they’re making any more or less money.

and then maybe the valuations are coming

into a better area. So, this is where we

are towards the end of June, but I I

think it’ll be very interesting to see

what happens by the end of this year and

what happens in the midterms going into

2027. What are your thoughts?

Yeah, totally agree. And like I said,

I’ll back that up in a minute with with

the thing that I found on Yahoo Finance.

It’s another situation where you’re just

like I Yes, they’re still making a ton

of money. they’re spending a ton of

money and I think that’s what’s causing

the top seven to really underperform is

the market’s just trying to get a read

on okay how much is enough and are they

going to get a return out of it now

personally I think you’re seeing that

they are getting a return out of it

because so much of their businesses

they’re implementing AI into that I

think they’re getting that productivity

gain but the market just doesn’t want to

admit it at this point but they’re still

making a ton of money and they’re just

print. Yeah, they’re printing money

literally with a lot of this.

Yeah. Very quickly, so through June

30th, asset performance through the

first six months, and I thought it was

interesting. I didn’t realize emerging

markets were were leading the pack. I

knew small cap was because that’s part

of my strategy with clients, but fixed

income obviously has been flat. It’s not

really going anywhere.

Dead.

Yeah. I have no desire to invest in

emerging markets. It’s been a lagard for

14 15 years now and okay great they’re

having a good 18 months but moving

forward

US is always the place where you want to

put it and that’s what you’re looking at

the average here for the last 15 years

is the S&P will still outper

yeah we’ve had a we’ve had a the

momentum indicator that I use or part of

our portfolios we’ve had small caps on

for probably four to five months now

consistently and that’s something that

rotates back and forward but but Yeah,

that one stayed as a consistent player,

the Russell 2000, because it’s about

time. And I think they’ve been

underperforming for so long that the

market is spreading out into the small

caps a little bit. I’m there with you

too on the emerging markets. I just have

no interest in those. Honestly, I don’t

have much interest in investing outside

the US anyhow.

I just I’ve got some international

stocks in the portfolio, but mainly

because I do business here in the United

States mostly.

Yep. And then finally, I thought this

this chart bared repeating. I’ve seen a

few of these different charts.

Everybody’s talking about, oh, AI is

going to kill jobs or whatever. But if

you take a look

at each one of these things, for the

most part, it did kill jobs in certain

sectors,

but then created jobs.

Yeah. And it and it typically creates

more jobs on the back end, more and

better paying jobs on the back end for

people. We’re becoming more knowledge

workers and less, you know, less manual

laborers. That’s where I think we’re

moving.

Yeah. And like I said, will AI kill

certain jobs? Absolutely. But it’s going

to create when the television came out,

it wasn’t hot. Oh my god, it’s going to

kill the radio. It reduced radio’s

position

as a way of getting information and

whatever and entertainment, but it

created jobs for crying out loud. We

could go through each one. not going to

do that. But

I mean, much is the same of cable

companies. Cable companies dominated

everything and then now streaming is

dominating. And I’m still not convinced

on that piece because it seems like

everybody now wants to have their own

streaming channel and it cost you more

than if you just had cable. But the

problem is now they don’t even want to

release stuff. Even if you have cable,

they don’t want to release stuff onto

that. They want to release it only onto

their unique and individual platform.

and I I don’t want to subscribe to all

of them.

I hear you. What do you got?

All right. So, let me start us off. I’ll

follow right in with what you were

talking about,

which was if I can find the correct

screen here.

Yeah. Here we go.

So, what you were talking about there

with the MAG 7 or top seven as you put

it, this is an interesting thing.

Actually came off a bar chart that

included this in here. So this was this

is based on a study by Morgan Stanley

and once again the headline that caught

my eye was Magnificent Seven stocks are

trading at the cheapest valuation in

more than a decade which I’m like okay I

didn’t think they were necessarily cheap

but in comparison their analysis looked

at the price to earnings multiple

premium for the MAG 7 relative to the

other 493 companies in the S&P 500 and

that premium has been for the 2020s in

30% range. It’s always been about 30%

higher than the general market. It’s now

closer to 10%. So, you can see that kind

of trend just moving forward, which is

funny because you always constantly hear

from the market and the pundits, oh,

these are so expensive.

It’s intriguing to me, but I personally

think it’s still a big challenge uh for

these the mag 7 right now. I think it’s

a huge challenge because they’re all

hyperscalers. They’re all putting money

like crazy into AI, which honestly I

think is going to improve productivity.

It’s going to improve profits. But I

it’s just one of those things where the

market is just so scared that the next

quarter they might report that, oh crap,

we’re not we’re losing money on the AI

thing. And I it’s just it’s one of those

things. I think we’re just going to keep

climbing a wall of worry with a whole

lot of volatility. What’s your thoughts?

Look,

the top 10 stocks, forget about seven,

are roughly 40%

of the S&P 500 movement in the market

because it’s market cap weighted, which

is another reason why I don’t use it as

a benchmark. So what they’re saying is

because people the average investor

doesn’t know the market like you and I

and

they know headlines rule. So I’m this is

all a preamble to the following. Morgan,

Stanley, all the big investment banks

know that if the top seven to 10 stocks

are flat to negative, people may pull

their money out. People may sell. even

if other sectors and other parts of the

market are moving and growing that they

just may feel that people will pull

their money if the top 10 stocks aren’t

moving the market. Now

psychologically that’s probably true

but overall if the earnings are there

the market will move up but maybe not at

a precipitous level. So to me, this is

all psychology

BS media crap.

That’s it.

Just make your point, bud. You’re just

kind

I’ll tell you how I really feel in a

second.

Yeah. Okay. So, last thing I just I had

my my AI go in and kind of do a little

bit of a an overview of the FOMC minutes

because quite frankly, I didn’t feel

like reading them. And so here’s some

things that I think we gleaned that I

gleaned from what I saw. So first off,

the Fed held rates at 3 12 to 375, it

was a unanimous 12 to 0, but

the pivot, the interesting thing was

when you started to hear what they call

the dot plot is they’re about 5050 on do

we cut. They pivoted from when do we cut

to do we need to hike at this point and

that was a unique thing where the market

went whoop hold on the committee split

roughly 5050. So nine out of the 18

officials were saying that. Now the

interesting thing is on the dot plot

yeah it was 50/50 but was

that 5050 the voting members or was it

the non- voting members at that point?

because we don’t really have a we don’t

get a a clear picture on that. Their

belief is inflation is the driver. It’s

they’ve jacked up their forecast from

3.6% or up to 3.6%

on the on the up from 2.7%.

Yeah. Which is their single biggest

revision that they’ve had ever in

history. I think as long as energy is

up,

we’re going to be facing that. And I was

just looking at oil prices. We’re with

all this going on today. We’re up to 72

on oil futures. Once again, yeah, it’s

up. It’s not elevated. Yeah.

A lot.

You know, as much as you would think

with active stuff going on there. I

think one of the things came out of the

meeting and it’s interesting the

of course new chairman Kevin Mors in

there he stripped out the future

guidance thing he just basically gave a

130word statement and said we’re not

giving future guidance

they’re also they’re going to do away

with the dot plot too that’s what they

were saying

yeah the dot plot everything the

interesting thing though is that it was

100% of all the the voting members that

agreed to do do that. So, it wasn’t just

Kevin Worsh coming in and saying, “I

want to do this.” They all agreed,

“Yeah, we don’t really need to be doing

that.” And I think the twist to it is it

was after we didn’t do a show last week,

but last Friday the jobs report came in

really light, 57,000 versus the 115,000

expected. Even though the Fed’s worried

about inflation, their other mandate is

they’ve got to keep full employment. And

if that trend continues, I think they’re

I think they sit on their hands, quite

frankly, even though the market’s

betting on a an interest rate raise. I

think they sit on their hands for now.

Yeah, we’ll have to we’ll have to see.

This is definitely going to be a

conversation for later in the summer,

especially when they do Jackson Hole. I

think they’re going to lower rates. I

don’t think they’re going to keep rates

where they are. I don’t think they’re

going to increase rates. I think

definitely before the midterms, there’s

going to be one or two rate cuts. Yeah,

but then you start getting into

then the Fed is especially if they do it

in September and the elections are in

November, you get everybody squealing

that, oh, he lowered rates because he’s

he’s Trump’s guy and all that. So, I I

honestly don’t think they do anything

until the December meeting at this

point.

All right, we shall see.

I don’t think I don’t think it goes up

or down. I think it just stays where it

is for now. And quite honestly, I’d like

them to do that. let things calm down a

little bit and then see because it this

is not a the market is overheated or the

economy is overheated. It’s because of

the inflation rates or because of

because of energy and the war that’s

inflating this right now.

Yeah, I hear you.

We’ll see.

Yep. We’ll see. We’ll be talking about

it every week. Anyhow, all right, folks.

Thank you for joining us. We’re doing a

special show this week. So, we’re going

to record that right after this and

we’ll launch them this week. That second

one is our update on where everybody is

as far as guess on their their market

guesses and things like that Ron has. So

stay tuned for that special episode and

we’ll see you guys back here the next

time.