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STOCK MARKET
Recorded: Sept. 17, 2025 Duration: 4:18:48Space Recording
Short Summary
In a dynamic discussion surrounding the recent FOMC meeting, key insights emerged regarding anticipated rate cuts, market trends, and growth opportunities. The conversation highlighted the potential for increased investor confidence and the evolving landscape of crypto investments, particularly in light of strategic partnerships and the Fed's adaptive policies.
Full Transcription
Music Thank you. Thank you. Good afternoon, everyone.
Happy FOMC Day.
Jerome Powell will speak to us here just shortly in about 33 minutes or so.
We are three minutes and 20 seconds away as you are hearing this from the rate decision announcement. Obviously,
most of us expecting the 25 basis point rate cut that had been priced in, and then we will go from
there. So we'll get that and see what that looks like, dot plot, all those good things. We've got
some great minds that really track this stuff joining us up here on stage. So we'll get some live thoughts and reactions after the announcement. And then we
will play Powell live right here on the space for everyone. And then beyond that, we'll have
some further discussion and reactions to everything that he says. Will there be
some type of pivotal moment in his thing that the market takes and says,
okay, we're good with that. Hey,
we don't like that. It will be very, very interesting to see what happens. Overall,
market update as we go into this. Obviously, we spoke about it all week. Basically, nine
updates in a row on the NASDAQ. Pulled back just slightly yesterday and then a little bit
continued selling. We really haven't done a whole lot.
We sold off in the morning and worked our way back up a little bit here the last half
hour.
So QQQ down 0.4%.
The S&P much stronger hanging out right at basically just under break even just a dollar
red on SPY, for example.
IWM has been fairly strong today.
A little bit of a profit taking, maybe some risk adjustment here ahead of the announcement,
but up 0.72% over there on the small caps.
VIX is up 1% today as well.
And TLT, your bonds, right, break even.
And dollar slightly green today.
So we'll see what happens.
I know several of you have shared and seen that chart with the dollar index, basically a 14-year trend line that it's sitting on right into this
big binary event. So be very interesting today. We get a couple more people up here on stage with me.
Boom, boom, boom. And like I said, we've got some great thinkers around the market around fomc around
trading all the above investing so excited for this i saw gav popping up here gava one minute
until the announcement yeah ready to go here uh i got her gavin as well uh if you want to pull
him up on stage into here uh this is going to be 25 basis points or freaking chaos across the board.
Saw some data this morning from Kobayashi, which I assume has just continued at this point.
But they had on Kalshi $85 million in trading volume on this market.
And maybe Gerga's numbers, but I believe like 80 million of it or something like that was on.
People expecting a 25 basis point cut.
So, yeah, this is a lot of money in the ecosystem on this right now.
What's up?
Gergavin Capital is predicting 25 basis point cut.
He put half his fund on it.
Uno Minuto at this point.
I see Omar in the audience, too.
Omar just shot you an invite to come up. But yeah, we're basically right here.
Yeah, I'm just doing my tweet, Gina, for 2 o'clock.
Do you have it pre-written for both cases?
No, 25 basis guaranteed.
25 basis guaranteed is what he said. I believe that it was you could earn 7% on it. Is that what you told me?
Yeah, that's insane yield for, you know.
It's because people still suspect.
Maybe there's a 25.
Maybe there's a 50.
Who knows?
All right.
There is the top of the hour rate decision is coming out.
Two points.
25 bips.
There you go.
25 basis points.
Free money right there
for those that took it. 25
basis points. Can you imagine if he did zero?
What would Trump reactions be?
He would have actually flipped
out right now.
The Fed doesn't like
to surprise the markets. That's why
this is the reason that everyone is so
confident that brought 25 bips.
Initial reaction on SPY is up.
We just popped into green on the day,
spy trading at 660.45.
So nice little pop right there.
We moved up about $2.
One thing that I see is, you know,
with the dot plot and projections,
they expect two more cuts this year of 50 bips total
3.4 percent in 2024 3.1 in 2027 and 2028 long term at three percent but that puts us at two
more back to back rate cuts this year and And you're seeing 25 basis points each?
Correct.
Or 150 bips.
But I think 25-25 is more realistic than, you know,
or 1.950 bips cut.
All right, so way too early, I guess, to fully say.
But right now, Fed decision in October per K kalshi markets is a 68 oh wow that
just moved big that just dropped from 68 to 59 chance of a 25 basis point cut it literally while
i was looking at this look at the chart i mean it just dropped they had it all the way up at almost
an 80 chance it's now under 60 and a 22 of maintains. And then any cut larger than 25 basis points just popped right here.
That percentage was 10.5% earlier today, just popped up to 14%.
The red line from the statement, obviously, they take out a few things.
So the current statement that they put out here, recent indicators suggest that growth
of economic activity moderated in the first half of the year.
They added this piece. Job gains have slowed and the employment rate, they removed the remains low and they replaced that with has edged up but remains low.
Inflation has moved up and remains somewhat elevated.
That's the main difference that I see here.
That's the main difference that I see here.
In support of its goals and in light of the shift in the balance of risk, the committee decided to lower the target range for the federal funds rate by one-quarter percentage point, 424 and one-quarter.
That's the main differences from the previous one and this one.
voting against the action, Stephen Moran,
who preferred to lower the target range by half a percentage point.
So Moran jumping in there, wanting that 50 basis point cut.
So there's your big dissenter.
He did jump in and vote.
Wow, these markets are moving right now.
That percent chance I just told you guys where it dropped to 59% chance of a 25 base points cut, that's back up to 71%. So yep, money is moving right here on what
people think is going to happen next. Gerg, I feel like your money's on a 25 basis points cut right
now, 71% chance of that happening in October. So everybody, maybe just go ahead and mark your dates
down. I don't know if anybody else does this in January. I just go through and I add all the Fed dates to my calendar. So that
next meeting is going to be October 29th. For anybody that just wanted that date, what's up,
Stock Talk? Market liked the fact that Governor Moran dissented in favor of a half point cut.
Market liked that. That put a bid in markets right there. Well, I actually think it wasn't
necessarily Moran who's a good friend, but I think it was more so the fact that the the expectation
was maybe only one additional cut in the scp median dot plot and now the fed is saying there
are going to be almost certainly two cuts this year the truth of the matter is that this is good
news for markets too late also known as jerome powell was too late yet again. And now he's finally coming around
to the idea that no, tariff-induced inflation is not real. It makes sense for the Fed to bring
rates down to some semblance of neutral. And if you believe Secretary Besant, that neutral rate
could be 100 to 150 to 175 basis points lower from here. We are looking at a full-blown rate cutting cycle and that is great news for stocks can you um just real well i guess we'll go around for a second and then i'll double back to that
what's up greg no i'm just i'm not talking i'm just unmuted you're good all right okay cool i
saw sam's hand first um i don't know gab how do you feel about this i know your crypto port let's
see let's see what crypto is doing i don't think we saw okay, how do you feel about this? I know your crypto port. Let's see. Let's see what crypto is doing. I don't think we saw.
Okay.
Okay.
Crypto is doing good.
You're going to be killing it still.
Bitcoin didn't really move too much.
I mean, it's basically where it was earlier today.
It went from 115 up to like 116.
But it's not really much of a move off of this.
The bigger move here is SPY, which powered up in a green is up to 661.6 at the moment,
which what's all time highs right now? I think we're basically here. Evan is going to 661.6 at the moment, which what's all-time highs right now?
I think we're basically here.
Evan is going to be happy.
BMNR is at 57 now.
Yeah, I mean, we came within about, I don't know,
10 cents of all-time highs on that last pump.
So if we get one more green candle up right here,
we'll smash through all-time highs.
But yeah, shout out to the BMNR folks as well.
Shout out to us. I to the BMNR folks as well. Shout out to us.
I have a BMNR position.
Not as big as you guys, but you know, it's there.
I think Evan's probably moving the stock.
Yeah, Options Mike.
What's up?
Evan is currently on a plane. He made a rookie
mistake and booked a flight during an
FOMC meeting.
Isn't that what he did for NVIDIA and Apple Links 2?
He's good at that.
Yeah.
Yo, the odds on Callagy for all cuts, it's up to 65% now, from 40% like 10 minutes ago.
You're saying for the next two meetings to be cuts?
Correct.
So if you look at the number of total cuts in 2025, it went from two to three and a half.
Wow. Yeah, that's crazy, actually. If you go back to July 31st, so...
It was a 10% chance.
Yeah, it was really, really low at that point, and it's absolutely moved to the upside.
Yeah, wow, it was 10. It was an 8.2 percent chance on august 1st and now it's a 62
chance maybe uh maybe trump's getting to him what do you think i don't think trump will still be
happy because to be honest it's been over two months since the market was pricing in 25 bips
or white cuts and even on monday trump came out and said he wants a bigger cut than they're planning to do so
To be honest, there's nothing the Fed can do to make Trump happy
Yeah, I mean I guess that's kind of general life and I don't think a cut bigger than 25 pips was required
Was the job market out there a bit weak? Yeah, but the economy is still growing.
You know, if you look at the Atlanta Fed projections, they are at 3.4% for this
quarter annualized. Like that kind of economy doesn't need Fed's help or any
kind of stimulation.
Yeah, I agree with you.
I don't think that you have to make any rash moves when the market is looking like this.
I saw someone, did anybody else have a comment there on stage?
Mike?
Yeah, I did.
I wanted to speak for it.
When Powell comes on, I'll bounce off for a bit.
I mean, I think they gave us what they wanted.
I think my big takeaway was the amount of dissent among the Fed in general and how all over the place they were.
Miriam is obviously, he's a cabinet member of Trump's, of course,
he was going to want the 0.5 rate cuts.
I don't read anything into that one.
But it's the rest of them.
There was a lot of opinions all over the place.
And that's something to watch and hear what he has to say about that in the press conference and wouldn't be surprised if
we give a lot of this move back during that i mean that's that's it right mike i mean how much of
this we hold by the close right i mean we always say it's a joke i always say the first 17 moves
are head fakes and we'll have to see how this uh you know comes out but i mean all all the
crappy stocks on my list all the uh small cap stocks are going crazy the tech stocks not so
much you know um so that's that's signal right there by the way pretty interesting little data
um so obviously i think everybody's seen by now you can bet on what powell's going to say during
his press conference there's a lot of movement happening on this market right now.
But the top two items right now are pandemic and recession.
You don't get what I like.
Bitcoin.
Bitcoin is our like 10% chance.
Or even gold is 10% chance.
On Kalashii.
Oh no, gold is 10%.
Yeah.
I was looking for to bet that Powell will open up by saying good afternoon.
I wouldn't think it's on Kalashii.
It's on some of the platforms I saw.
Got it.
I feel like that one's a lock.
Yeah, it was like 98%.
Like last time he did not say that, the dollar dropped like 800 points.
If you guys remember that.
I've got a thousand to one bet, he says, supercalifragilisticexpialidocious so we'll see if
that comes in custom market on the back end there i'll send you i'll show you some more of those
sell you it's yours take it yours how is gold reacting is anyone looking right now
uh it's screaming all-time highs.
Yeah, nice little bump.
It went down really hard and then shot back up to new all-time high here.
Nice little bump for Bitcoin and all the main cryptos as well.
Interesting, interesting.
Okay.
Also, TL2 is screaming.
James, did you have something else you were saying there too yeah i think that this idea that the fed really cares about markets on the way up is
probably misplaced i mean the fed has a statutory dual mandate which is price stability and maximum
employment the fact that let's be honest the s&p 37% of it is seven stocks known as the MAG-7.
The fact that the S&P 500 makes new all-time highs every week, it seems,
really should have no bearing on the fact that rates are too high.
You know, the last time the Federal Reserve set rates at this level,
4.5% prior to them cutting today, inflation, GAV, was 6.5%.
CPI headline, annualized since President Trump took office is 1.9%. It averaged
5.3 under President Biden's four years. And so it's not a question of, well, we should be not
cutting rates because the stock market's at all times high. Those two things have very little to
do with one another. When the Fed gets the level of rates, it has to look at inflation. It has to look at the
unemployment picture. And those two things point to lower rates and lower rates fast. The question
now is, can there be a reasonable chance of a 50 basis point cut? The baseline now is two more
cuts of the 25 basis point variety by the end of the year, one in October, one in December. That's
what the CME futures market is predicting. You've mentioned the same for Calci. The question is, can we get 75 additional,
which is to say one of those two are 50? I think we actually can. And what that would mean for
stocks, yes, they'd go higher. But truly, if that is not sitting around, we can't cut, we can't cut
by 50, we can't cut by because stocks
are at all-time highs. Stocks are at all-time highs because earnings growth in the MAG-7 is
35% year over year. Stocks are at all-time highs because the MAG-7 continues to matter.
The fact that stocks out of 500, they represent over a third of the market. And so I wish we
would think so many want to ascribe value to while stocks are up and therefore the Fed can't cut.
One, it's not part of their mandate.
Two, it's not part of the conversation.
And three, it's really got nothing to do with one or the other.
Yeah, Larry?
The S&P 500 equal weights at all-time highs.
So you can equal weight all the stocks in the S&p 500 and it's at all-time highs
yeah but so but what what so so that means that but but so the fed can't cut because the stock
market's doing well when has that ever been the case in history that the fed the mag 7 the mag 7
the mag 7 it's not just the mag 7 the s&p 500 equal weights at all-time highs correct but the
s&p yeah but the s&p 500 market weight the actual S&P is more than double the year to date return
of the equal weight. It's not a question of which are at all time highs. I guess the point I'm just
trying to make is let's not subtract so much signal from the S&P 500 continuing to make all
time highs when literally it's just seven of those stocks. I agree. Equal weight's doing very,
very well, but equal weight has also been in a really bad position for the past eight to 10
years. I guess the point is you hear a lot of these memes, a lot of these big accounts say things like,
man, the Fed should not be cutting with stocks at all time highs. It doesn't make any sense
whatsoever. The Fed has not been congressionally assigned a mandate to look at the S&P futures
price. The Fed is looking out for, supposed to look out for, whether they actually do as a
separate story, is supposed to be looking out for price stability. And the fact that President Trump has gotten inflation
not at the Fed's target, but below the Fed's target,
and I told this to the president two weeks ago,
a job well done.
He has solved the conundrum of the century.
Nearly $200 billion in tariff revenue
while also accomplishing inflation
that's below the Fed's target
is something that the textbook economists are crying over.
So NASDAq futures have
given everything back so is uh spx so is bmr yeah bmr down five percent now gld just gave back most
of that pump that it had through all-time highs back to 340 at the moment calendar is down five
percent now as well so some of your like high beta stocks are getting hit a little bit hoods down
almost two percent yeah qqq gave up more than the whole move i mean spy gave up the move but qqq is 75% now as well. So some of your high beta stocks are getting hit a little bit. Hood's down almost 2%.
Yeah, QQQ gave up more than the whole move.
I mean, Spive gave up the move, but QQQ's now low of day.
TLT's ripping.
Stock talk, what are you seeing?
Just looking at the action, yeah, looking like some reversals here
after that initial pump.
But, you know, I think the real move tends to come on
these after Powell's comments. So, um, I mean, I'm not going to make any crazy conclusions about
the price action until then. I mean, markets are still cruising to the upside. Technically. I mean,
we could, we could take some off the top here and be absolutely fine. Structurally speaking on spy.
I mean, you could come down to 650 and you know
everybody would be still singing the bull market song so i mean a little bit of pressure here into
the end of the day that's fine with me as long as it's not too much of a flush out um some of
these moves down pretty modest even like you look at this this knife down quote-unquote knife down
on uh some of your market leading names or momentum names, not really that big of a move.
And most of them are well above all their short term moving averages anyway.
So, yeah, I don't think you have to be too worried about market volatility where we are right now structurally.
You know, if things get worse over the next few weeks, then we could start talking about a potential correction.
But where we're sitting right now, nothing to worry about. We'll see how the market looks after
Powell's comments. But even a flush into the close today wouldn't concern me all that much.
Yeah. I mean, if you look at the indexes, none of them are even at their eight-day
moving average, right? That's what I use for the ultra short-term uptrend. So we could get down to
the eight, the 21. Theoretically, we could even get down to the 50 and be fine.
So I would agree with you.
I wouldn't worry yet.
Yeah, we're catching right here as well.
TLT, by the way, back to almost where it was before that April drop-off.
It's coming back.
Gold just hanging green, going red right here.
But yeah, SPY and QQQ have caught for at least a moment here on that five-minute candle.
We'll see if they go lower.
Evan, is this you here?
Playing right, Evan.
No worries.
Okay.
Might be on a plane, yeah.
No worries.
No worries.
I couldn't tell if I saw him there.
How bad is Evan for scheduling a plane flight during this?
He's the best out of the...
I just want to...
And with the earnings...
Bedwatch tool is flashing back and forth here, too.
We got a 93.7% chance...
No, 94.2% chance now of rates being at least down to 350 to 375 from 425 to 450 current. So
that is implying at least two more cuts by the end of the year, 93% probability of at least two
more cuts, potentially 1.6% chance of even another one after that. So that jumped materially even over the last 15 minutes or so post-announcement.
And I just want to flag as well that there's a new dot. It looks like Governor Moran's dot has
appeared and it has a total of 150 points of easing this year. So think about that for a
moment. Obviously, that's not happening. But just to give you a scale of how someone like Governor Moran looks at Fed policy today, he would be advocating for 150 bips of total easing. That would be five
equivalent 25 basis point cuts between now and the end of the year. So just again, something to flag,
but the low dot in the dot plot today has a total of 150 basis points of easing by December.
And that's certainly Governor Moran.
Shock dog.
I wouldn't see you with the hair of you.
You don't see me right here?
I see.
I hear you, but I can't see you for some reason.
I mean, you don't see my icon is what you mean.
Welcome to Spaces,
the least glitchy product
that Twitter's ever put out.
I haven't been to Spaces
in a while, so you know.
I'm talking from behind the curtain.
Turn around.
Is that Leo or the Jew?
Yeah, Leo's always with me.
Leo literally never leaves my side.
Yeah, you made him lazy
Where the foods at any girl Gavin did you did you bet on two cuts by the end of the year?
Did you put any bets on Kelsey or anything? Oh
I did not the thing is cause she is not in Canada. Yeah, darn it. Ontario where I live
In Canada, yeah, or in Ontario where I live
Like in Toronto, there's no Kelsey
Greg, you should just take a jet to the US, place your bet, fly back
You know what? Easy
Maybe I should
Not too bad, not too shabby
Did you take that 7%?
Gav, that's the easiest money you could have made
I know, I should have.
Like, I'm not even sure why this bet was that big when everyone knows the Fed doesn't like the surprise.
A 7% yield in 30 minutes for this bet is, like, you know, like free money.
It doesn't get better than this.
Yeah, the fees, though, are going to kill you on that.
That's the only thing.
I mean, you'll still make some money on there, i don't know man you never know but one thing i noticed
was that because i put a bet on it yesterday um exactly two cuts on robin and prediction markets
was around 67 cents yesterday and i bet no on that so i'm already up 50 on it so the thing about robinow there
for prediction markets is based on calci and they take their own fees so instead i would just use
calci directly so why would why would you want to pay fees twice to robinow than calci instead just
go on the platform directly yeah no i i i have i have a calci account but i gotta migrate some funds over but i just thought
that was really interesting that there was a 67 chance we'd only get um two rate cuts this year
and yeah like stock dot said that thing just jumped up yeah we'll see you guys think trump
had any role in this you think from God into their head
I mean, I think that there are people that are vying for the Fed chair position and to the extent that any of those people are active voters
I think those people are probably affected by that. But I mean
The tricky thing with the market vying for cuts is that you have to walk a fine line between
the market vying for cuts is that you have to walk a fine line between panic about the economy
and adding fuel to the fire. You know, I think JP Morgan's the one that put out that piece
yesterday that said, you know, when you cut within 1% of all time highs, you're higher a
year later, 100% of the time. That's because in those scenarios, there's usually not a backdrop of economic panic.
In other words, generally speaking, when we're within 1% of all time highs, the economy is all right.
Right. And it doesn't have to be great, but it's all right.
And so when the Fed starts throwing rate cut expectations, you know, a little bit more aggressively than the market is expecting,
there are constituents in the market that interpret that as the Fed seeing maybe more weakness than the data actually suggesting.
So I think maybe that's part of where, you know, some people are skeptical about that. But at the end of the day, I don't think you can jump the gun on economic predictions. Like, I don't think you can say, you know, that something is coming when it isn't already there. And that's the hard thing about economic prediction. That's why economists aren't billionaires, right? Because it's hard. It's hard to know when like a recession is coming or if a recession is coming or how impactful it'll have been others that have had dramatic impacts on market performance. So it's not even just about predicting the event. It's
about predicting the market reaction to the event as well. So it's like a fool's errand in my view.
I think the best you can do is just follow price structure and take cues from it and see what the
market feels about, you know, the net available data.
And the market will tell you that through price.
It'll tell you how it feels about what's happening at the Fed and what's happening with growth stocks.
And the market will tell you if it feels that names are overvalued or if there's froth in a sector.
It'll tell you that.
It tells you that by cooling the sector off.
It tells you that by rotating money into other sectors. Like these are signals that are given
to you through price. You don't have to guess. So yes, there is chance for something bad to happen,
but I wouldn't jump the gun on predicting when that's going to happen. Just wait for the market
to tell you. You'll have plenty of time. If you're somebody who's net long in the markets right now or has been all year, like most of you probably are, you'll have plenty of time
to get out of the way if markets do start breaking down or downtrending.
U.S. tenure just went below 4%, first time since April.
Interessante. Also, by the way, not really talked about as much, but IWM just got within about a
dollar and a half of all-time highs. 90% of stocks in the S&P 600 small caps are up today.
80% of stocks in the S&P 500 are up today. 80% of stocks in the S&P 400 are up today.
I don't know if you need more information. I have 10 positions green.
Yeah.
Yeah.
I don't know if you need more information than that
when it comes to what this means for the market.
Leading sectors in the market,
back to Stock Talk's point,
regional banks.
Guess who predicted this move first?
Regional banks.
Second leading sector?
Homebuilders.
Guess who predicted this move?
Homebuilders. Right? Airlines too. Yeah. second leading sector home builders guess who predicted this move home builders right so
airlines too yeah so i mean interest interest rate sensitive areas of the market and you could
have known before the fed was moving that the fed was moving because these areas of the market were
predicting it and so it's just i don't know if anyone really needs to overthink what the Fed
does next. I mean, I know it's fun too, but XRT, retail sector, 90 names equally weighted,
up a percent and a half today. Oh, it might not close at its highs. That's just a story for
people to sell. The market doesn't just crash from all time highs. Look at history. It never
does that. It did in 1987 is like the one instance so n
equals one so the market is extremely strong and if people want to talk about the mag 7 the mag 7
are the only things down today so yeah just just odd the mag 7 is going to mask the index on the
up days and on the down days and And conveniently, people only mention MAG7
masking the market on up days.
They don't mention it on a day like today
when 80% of stocks are up
and six out of the seven MAG7 are down.
And that's why the S&P 500 is down.
So yeah.
And if you're really bad at picking stocks,
that's even better because if breadth improves,
that means more stocks are improving.
Meaning if you're a bad stock picker,
you're gonna have better averages in general.
So just trends up.
Yeah, you hit the nail on the head.
And I think part of the reason why is because the Meg7, these names are so widely owned, right?
Like they're just such default ownership stocks.
Everyone owns Google, Apple, Microsoft, NVIDIA, et cetera.
And so people look at the performance of those stocks on a day-to-day basis and they make deductions about the broader market, you know.
But like, I mean, I was just talking to Em about this.
We were talking about it in the text earlier, but I was pounding the table on Lyft yesterday.
I was talking to you guys about Lyft on this space for like 30 minutes for those that listen to the show all the time. That stock's up 13% today, right? I mean, you don't have to
only look at the mag seven every day and say, if they're down, the market is down and the market
is in trouble. Or if they're consolidating, the market is in trouble. Or if they're lagging
performance for two or three weeks, the market is headed for a downturn. No, it doesn't necessarily
mean that. And you also don't need to be a genius to monitor structure either. Like, you know,
Larry's a very skilled technician. I don't even consider myself very skilled technician. I just
know how to read basic price, basic support, resistance, supply, demand. Like, you know,
I have moving averages and volume on my charts, nothing else. And I navigate the markets just fine with that.
You don't need a ton of data to see what's happening on the charts in front of you.
You just need to see what the price is telling you.
If stuff is consolidating or pulling back on low volume and ripping on historic highest volume ever,
I mean, you don't need to be a genius to figure out what's happening
there, you know? And if, if you have areas of the market that are being rotated to and the market
leaders, instead of breaking down or just consolidating, that's price telling you something,
you know, that's, it's not, it doesn't, you don't need to be a whiz kid or somebody with decades of
market experience to take cues from these things. It's really just straightforward logic. Like it is in so many
other areas of life and so many other industries, you just, you know, don't listen to all the noise
all the time. Uh, there's a lot of noise and, and, and sometimes the noise doesn't even just
come in the form of news or like what people are saying. Sometimes the noise comes in price too. You know, I was talking, I had a workshop with our members last
night called Zooming Out, where I was talking about looking at monthly and quarterly charts
to help you maintain conviction in individual stocks. Because, you know, markets go through
seasons every year where you might have a leadership stock that you
know doubles over the course of two quarters and then has an entire quarter where it does nothing
and consolidates you know on low volume and then rips even higher in the third and fourth quarters
like that happens all the time and in order to stay in those types of stocks if you're a position
trader or a you know a portfolio if you manage a position trader or, you know, a portfolio, if you manage a portfolio
of individual stocks like I do, to stay in those names, you have to take a higher level view and
zoom out sometimes and look at the broader structure and say, you know, yeah, the day-to-day
volatility is a little annoying on this one. Maybe this thing, you know, doesn't tend to respect or
have a lot of fidelity to its daily moving averages. But when I zoom out and look at
the bigger picture, I see, you know, HVs on the monthly and on the quarterly chart. And I see,
you know, explosive price action breaking above multi-year levels or multi-year basis.
Like that's, that's the type of action you want to look at and say, this is a market I should
still be long on. And this is stock I should still be long on. And this is the type of market that is reinforcing that type of viewpoint. So until you have a
reason to panic, I think it's silly to panic, is the simplest way to put what I think me and
Larry are both saying. Financials look great here too, up a percent and a half today almost.
Yeah, you're totally right, StockDoc. I would also tell you, believe it or not,
the best thing that could happen for you as an individual investor slash technician is the MAG-7
to underperform because then you actually have the opportunity to outperform the S&P 500 by
simply unallocating to so heavyweight MAG-7. So if we saw breadth really expand and the MAG-7
disintegrate, that basically means seven stocks are dragging down the market, which is a
concentration risk only for passive investors. So if you're an active investor, not that you
would love to see that happen, because I want to see everything go up just if you're an active investor, not that you would love to see that
happen because I want to see everything go up just in general as an optimist, but that would be a
great scenario for active managers and active participants. My colleagues and I remain squarely
focused on achieving our dual mandate goals of maximum employment and stable prices for the
benefit of the American people. While the unemployment rate remains low, it has edged up. Job gains have slowed and downside risks
to employment have risen. At the same time, inflation has risen recently and remains somewhat
elevated. In support of our goals and in light of the shift in the balance of risks, today the
Federal Open Market Committee decided to lower our policy interest rate by a quarter percentage point. We also decided to
continue to reduce our securities holdings. I'll have more to say about monetary policy
after briefly reviewing economic developments. Recent indicators suggest that growth of economic
activity has moderated. GDP growth, GDP rose at a pace of around 1.5% in the first half of the year, down from 2.5% last year.
The moderation in growth largely reflects a slowdown in consumer spending.
In contrast, business investment in equipment and intangibles has picked up from last year's pace.
Activity in the housing sector remains weak.
In our summary of economic projections, the median participant projects GDP to rise 1.6% in August, but remains little changed over the past year at a relatively low level.
Payroll job gains have slowed significantly to a pace of just 29,000 per month over the past three months.
A good part of the slowing likely reflects a decline in the growth of the labor force due to lower immigration and lower labor force participation. Even so, labor demand has softened
and the recent pace of job creation appears to be running below the break-even rate needed to
hold the unemployment rate constant. In addition, wage growth has continued to moderate while still outpacing inflation.
Overall, the marked slowing in both the supply of and demand for workers is unusual.
In this less dynamic and somewhat softer labor market, the downside risks to employment appear
to have arisen. In our SEP, the median projection for the unemployment rate is 4.5 percent at the end of this year and edges down thereafter.
Inflation has eased significantly from its highs in mid-2022, but remains somewhat elevated relative to our 2 percent longer-run goal.
Estimates based on the Consumer Price Index and other data indicate that total PCE prices
rose 2.7 percent over the 12 months ending in August, and that, excluding the volatile
food and energy categories, core PCE prices rose 2.9 percent.
These readings are higher than earlier in the year as inflation for goods has picked
In contrast, disinflation appears to be continuing for services.
Near-term measures of inflation expectations have moved up on balance over the course of
this year on news about tariffs, as reflected in both market and survey-based measures.
Beyond the next year or so, however, most measures of longer-term expectations remain
consistent with our 2 percent inflation goal.
The median projection in the SDP for total PCE inflation is 3.0 percent this year and
falls to 2.6 percent in 2026 and to 2.1 percent in 2027.
Our monetary policy actions are guided by our dual mandate to promote maximum employment
and stable prices for the American people.
At today's meeting, the committee decided to lower the target range for the federal
funds rate by a quarter percentage point to four to four and a quarter percent, and to
continue reducing the size of our balance sheet.
Changes to government policies continue to evolve and their effects on the economy remain uncertain.
Higher tariffs have begun to push up prices in some categories of goods,
but their overall effects on economic activity and inflation remain to be seen.
A reasonable base case is that the effects on inflation
will be relatively short-lived,
a one-time shift in the price level.
But it is also possible that the inflationary effects
could instead be more persistent,
and that is a risk to be assessed and managed.
Our obligation is to ensure that a one-time increase
in the price level does not become an ongoing inflation problem. In the near term, risks to inflation are tilted to
the upside and risks to employment to the downside, a challenging situation. When
our goals are in tension like this, our framework calls for us to balance both
sides of our dual mandate. With downside risks to employment having increased,
the balance of risks has shifted.
Accordingly, we judged it appropriate at this meeting
to take another step toward a more neutral policy stance.
With today's decision, we remain well positioned
to respond in a timely way
to potential economic developments.
We will continue to determine the appropriate stance
of monetary policy
based on the incoming data, the evolving outlook, and the balance of risks.
In our SEP, FOMC participants wrote down their individual assessments of an appropriate path
for the federal funds rate based on what each participant judges to be the most likely scenario
for the economy. The median participant projects that the appropriate level of the federal funds rate will be 3.6%
at the end of this year, 3.4% at the end of 2026, and 3.1% at the end of 2027.
This path is one quarter percentage point lower than projected in June.
As is always the case, these individual forecasts are subject to uncertainty,
and they're not a committee plan or decision.
Policy is not on a preset course.
The Fed has been assigned two goals for monetary policy, maximum employment and stable prices.
We remain committed to supporting maximum employment, bringing inflation sustainably
to our 2% goal,
and keeping longer-term inflation expectations well anchored.
Our success in delivering on these goals matters to all Americans.
We understand that our actions affect communities,
families, and businesses across the country.
Everything we do is in service to our public mission,
and we at the Fed will do everything we can
to achieve our maximum employment and price stability goals.
Thank you. I look forward to our discussion.
Great. Thank you. Chris Rugever at Associated Press.
As you know, Fed Governor Stephen Myron has continued, kept his position at the White House, even as he's joined the Fed board.
This is the first time I believe the Fed's board has had someone with executive branch ties in decades.
Does this compromise the Fed's independence from day-to-day politics?
And relatedly, how can you maintain the public's perception the Fed is politically independent with this dynamic?
So we did welcome a new committee member today,
as we always do, and the committee remains united in pursuing our dual mandate goals.
We're strongly committed to maintaining our independence and beyond that I really don't
have anything to share. You and other Fed officials have spoken extensively about the impact of tariffs on inflation,
although perhaps with many companies appearing to eat the tariffs,
tariffs may be impacting the labor market and other parts of the economy instead.
Do you see that as a possible outcome here, that tariffs are the reason we're seeing some slowing,
particularly in the labor market, rather than in inflation?
You know, it's certainly possible. You know, we're beginning to see, we have begun to see
goods prices showing through into higher inflation, and actually the increase in goods prices
accounts for most of the increase in inflation, or perhaps all of the increase in inflation,
over the course of this year. Those are not very large effects at this point,
and we do expect them to continue to build over the course of the rest of the year and into next year.
And, you know, it's also possible that there may be effects on employment,
but I would say if you're looking at why employment is doing what it's doing,
that's much more about the change in immigration.
So the supply of workers has obviously come way down.
There's very little growth, if any, in the supply of workers.
And at the same time, demand for workers has also come down quite sharply and to the point
where we see what I've called a curious balance.
You know, typically when we say things are in balance, that sounds good.
But in this case, the balance is because both supply and demand have come down quite sharply.
Now demand coming down a little more sharply because we now see the unemployment rate edging up.
Nick.
Nick Timoressa, The Wall Street Journal.
Chair Powell, do economic conditions and the balance of risks no longer warrant a restrictive
policy setting?
So I don't think we can say that.
What we can say is this, that over the course of this year, we've kept our policy at a restrictive
level and people have different views, but a clearly restrictive level, I would say.
And we were able to do that over the course of this year because the labor market was in very
solid condition with strong job creation and all those things. I think if you go back to April and
now look at the revised job creation numbers for May, June, July, and August, you can kind of,
I can no longer say that. So what that means is that the risks were clearly tilted toward inflation.
I would say they're moving toward equality.
Maybe they're not quite out of equality.
We don't need to know that.
But we do know that they've moved meaningfully toward greater equality,
the risks between the two goals.
And that suggests that we should be moving in the direction of neutral.
And that's what we did today. Under what circumstances would a larger than 25 basis points rate cut be warranted,
and how seriously was that option entertained at your meeting this week?
There wasn't widespread support at all for a 50 basis point cut today. You know, I think we've
done very large rate hikes and very large rate cuts
in the last five years, and you tend to do those at a time when you feel that policy is
a place and needs to move quickly to a place. That's not at all.
And see...
Well, those risks are maybe not fully balanced, but moving in the direction of balance now,
and so that warrants a change in policy.
Colby.
Colby Smith for the New York Times.
Should we be viewing today's cut as the committee taking out some insurance
against the possibility that the labor market is at risk of weakening,
or is it the committee's view that the dynamics of a downturn are already in place?
I guess I'm just trying to square the shift in the rate forecast in the SEP
towards more cuts than just three months ago
with the fact that the forecast for unemployment didn't change.
Yeah, I think you could think of this in a way as a risk management cut
because if you look at the SEP,
actually the projections for growth this year
and next actually picked up just a little bit
and inflation and unemployment didn't really move on.
So what's different now?
What's different now is that you see
a very different picture of the risks to the labor market.
You've seen, you know, we were looking at 150,000 jobs a month
at the time of the last meeting.
And now we see the revisions and we see the new numbers.
And I don't want to put too much emphasis on payroll job creation,
but it's just one of the things that suggests that the labor market is really cooling off.
And that tells you that it's time to take that into account in our policy.
So just looking at the SEP, once again,
the median participant has inflation higher than
previously expected by the end of next year, and the Fed not getting back to the 2% target until
2028. So I guess I'm just wondering how you characterize the risk to price pressures of
kicking off a series of cuts at this point. Yeah, so I would look at it this way. We
fully understand and appreciate that we need to remain fully committed to restoring
2% inflation on a sustained basis, and we will do that. At the same time, we've got to weigh the
risks to the two goals. And I would say since, really since April, to me, the risks of higher
and more persistent inflation have probably become a little less.
And that's partly because the labor market has softened, GDP growth has slowed.
And so I would just say that the risks there have been less than one might think.
And in terms of the labor market, what we're seeing is unemployment is still low, still at relatively low rate, but we're seeing downside risks.
Michael McKee from Bloomberg Radio and Television.
I'm a little confused by your explanation of the Fed cutting rates because of unemployment if you think that most of what's happening in the employment area is related to immigration, which your rate cuts wouldn't address.
How do you see that as more important than inflation, which has remained almost a full
percentage point above your target? Well, I was saying that what's happening in the labor market
has more to do with immigration than it has to do with tariffs. That was the question I was
answering. So I wouldn't say that all of what's happening in the labor market is due to tariffs.
I mean, you clearly have a slowing in due to immigration. You clearly have a slowing in demand,
which is now perhaps more than that in supply. And we know that because the unemployment rate has ticked up.
So that's what I meant by that.
Like a follow up.
Every year since 2015, the SEP has forecast
that you would hit your target two years later.
And this year, this SEP says you're going to hit your target
two years later.
2% does not seem to be in sight.
Does that suggest that the two percent target is not really achievable?
And does this present any credibility problems for you in telling people that that's what you're going to do if you can never reach it?
Well, I mean, you're right.
It does say we're going to get to two percent inflation in 2028 at the end of 28.
But that's, you know, that's literally how you put the projections together.
You're writing down a rate path, which is designed to create, over the course of the
SEP, you know, time frame, 2% inflation and maximum employment, too.
So that's all that is.
You know, we don't, no one really knows where the economy will be in three years.
the exercise is to write down policy that you believe would return to the 2% goal over the,
at least by the end of the exercise.
Thanks so much, Elizabeth Shulsey with ABC News. The latest inflation report shows that prices
are still going up across key categories
for many households, including groceries. What will the Fed do if prices pick up more?
So our expectation, and you can see this consistently through the year, has been that
inflation will move up this year, but that the effect, basically because of the effects on goods prices from tariffs,
but that those will turn out to be a one-time price increase as opposed to creating an
inflationary process. That's been our forecast. Pretty much every, all the individual forecasts
say that. We can't just assume that though, right? We have to, our job is literally to make sure that
that is what happens,
and we will do that job. Right now, the situation we're in is that we see inflation, we continue to expect it to move up, maybe not as high as we would have expected it to move up a few months ago.
The pass-through of the tariffs into inflation has been slower and smaller. The labor market has softened.
So the case for there being a persistent inflation outbreak is less. And so that's why we think it's
time for us really to acknowledge that the risks to the other mandate have grown and that we should
move in the direction of neutral. So what will we do? We'll do what we need to do,
but we have two mandates and we try to balance them. For a long time, our framework says that when our two goals are
intentioned, and this is quite an unusual situation, how do we decide what to do? Because
our tools can't do two things at once. What we do is we ask which is farther from, how far is each
from the goal and how long is it expected to get to the goal. So, and then we think about those things and we see, as I mentioned,
we have been, our policy had been really skewed toward inflation for a long time, really.
Now we see that there's downside risk clearly in the labor market.
And so we're moving in the direction of a more neutral policy.
How concerned are you about the slowdown in the jobs market for households at home,
especially younger Americans struggling to land a job?
So it's an interesting labor market.
And obviously, we think it's appropriate that we reduce our rates so that we become more
neutral, which presumably will be better for the labor market.
You see people who are sort of more at the margin. So kids coming out of college and younger people, minorities, are having a hard time finding jobs.
The overall job finding rate is very, very low.
However, the layoff rate is also very low.
So you've got a low firing, low hiring environment.
And the concern is that if you start to see layoffs, the people
who are laid off, there won't be a lot of hiring going on. So that could very quickly flow into
higher unemployment. In a healthier economy, healthier labor market, there would be jobs for
those people. But now the hiring rate is very, very low. So that's been a growing concern over
the last few months. And it's one of the reasons why we think it's appropriate that we begin to shift our policy focus toward a more balanced one.
Steve Leesman, CNBC.
Mr. Chair, in the past during rate, because you used the word recalibration, and I wonder if you pointedly did not use it this time.
And in fact, when you said policy is not on a preset course,
did you mean that it's sort of the opposite of recalibration?
Are we meeting to meeting data point by data point?
Are we in the process here of getting back to neutral?
So I think we are in a meeting by meeting situation. We're
going to be looking at the data. You know, let me say a word about the SEP really here. So we
often point this out. What the SEP is, it's an accumulation of the individual projections of 19
people showing what they believe at a particular moment in time to be the most
likely path for the economy and thus the appropriate path for monetary policy as well.
And as you know, we don't debate or try to agree on what that is.
We just write them down and accumulate them.
We do sometimes discuss them.
And so we always say we're not on a preset path, and we really mean that.
The actual decisions we make are going to be based on the incoming data, the evolving
outlook, and the balance of risks at the time the decisions are actually made. So you will have seen
that we have 10 participants out of 19 who wrote down two or more cuts for the remainder of the
year, and nine who wrote down fewer than, in fact, in a good number of cases, no more cuts. So rather than looking at this as certainty,
I would encourage people, as always, to look at the SEP through the lens of probability.
And so there are different possible outcomes and likelihoods rather than this one is certain and
this one isn't happening. So that's what I would say. Thank you for getting to my follow-up question.
Is the dispersion in the outlook
a sign of uncertainty of policy
in the meetings to come?
You know, it is such an unusual situation.
Ordinarily, when the labor market is weak, inflation is low.
And when the labor market is really strong, that's when you have to be careful about inflation.
So we have a situation where we have two-sided risk.
And that means there's no risk-free path.
And so it's quite a difficult situation for policymakers.
And it's not at all surprising to me that you have a range of views.
It's not so much about having different views for the path of the
economy, but it's partly that. But it's also partly about what's the right thing to do in light of
this, of the tension between the two goals. How do you weight them? How worry are you about one
versus the other? And so it's natural. I think it would actually be surprising if you didn't have
a pretty wide range of views based, you know,
in this kind of highly unusual situation, and we do. So, but, you know, we get together, we discuss,
we have a great discussion, and then we decide what to do and we act. But you're right there,
that it is, it's a wide dispersion of views, and I think that's understandable and natural in the current situation.
Hi, Victoria Guida with Politico. You've talked a lot about Fed independence and the importance of it over the years, but as markets have questions about what exactly President Trump's intentions
are with the Fed, what would you point to as the things they should
be watching to determine that the Fed is still making decisions based on, you know, the economic
outlook rather than political considerations? Look, it's deeply in our culture to do our work
based on the incoming data and never consider anything else. That's just everybody who was at the Fed really feels strongly about that way.
So, you know, you'll know it by the way we talk about what we're doing,
by the speeches that people give, by the decisions that we make.
You'll know that we're just still going to do that.
That's all we do.
And we don't frame these questions at all or see them in terms of political outcomes.
I think when you get to another part of Washington, everything is seen through the lens of does
it help or hurt this political party, this politician, you know, that's the framework.
And I think people find it hard to believe that that's just, that is not at all the way
we think about things at the Fed.
We're taking a longer perspective.
We're trying to, you know, serve the American people as best we can.
So I think you would be able to tell.
I don't believe we'll ever get to that place.
I would say we're doing our work exactly as we always have now.
And people are making their arguments and we're having a really great discussion around
these challenging issues.
So do you see the court case around Lisa Cook as being related to questions to fight
independence? You know, I see it as a court case that it would be inappropriate for me to comment
on. Thanks, Mr. Chairman. Edward Lawrence from Fox Business. So we saw the preliminary benchmark
revisions down 911,000. The revisions
for June were the first negative revisions we've seen since December of 2020. You know, how can the
Fed base important decisions on rates and what to do with the interest rates on data that seems to
be, as you've called it in the past, noisy? So on the QCEW, the provision that we saw was almost exactly what we expected.
It was amazing how close the expectation was.
And the reason for that is, for the last bunch of quarters, there's been almost a predictable
overcount.
And I think the Bureau of Labor Statistics really does understand this, and they're working
hard to fix it. Of course, it has something to do with low response rates, but it's also got to do with what's called the birth-death model,
because a good amount of job creation happens around new companies and how many go out of business, how many are founded.
And it's just really hard.
You can't survey for that.
You've got to have a model that predicts that.
And it's quite difficult to do, especially when the economy is undergoing big changes. And they've been working on that and are
making progress on it. But the data we get is still well good enough for us to do our work.
To the extent we have issues around data right now, it's about low response rates. That's happened
all over, really. Response rates are just lower to surveys
now, both in and out of the government. And it's no great secret. We want higher response rates,
and we need those to have less volatile data. And the way to get that is to make sure that
the agencies that collect the data have sufficient resources to drive higher response rates. It's not
a complicated problem, but that's what it
takes. It's not a mystery. That's what it takes. The other thing I'll say, Edward, is in the case
of the job creation, the response rate is quite low for the first month or lower for the first
month. By the time you get to the second or third month, you're still collecting responses for that
last month, for that prior month, and you get to the place where the data are much more reliable by the second and certainly the third month.
So it's not that we don't get the data.
It's just that we get it a little later.
Well, for the benchmarks, if that holds, it's 51 percent of the jobs that we thought were there weren't really there.
It shows a weaker job market coming into this year.
If you had had that information, would it have changed your mind
related to where the interest rates should be, should there have been a cut earlier?
You know, we have to live life looking through the windshield
rather than the rearview mirror, as you know.
And all I can tell you is we see where we are now,
and we take appropriate action, and we took that appropriate action today.
Thanks, Howard Schneider with Reuters.
So as you mentioned a minute ago,
some margins of the job market would suggest
that the slide's already happening.
Black unemployment rate in August was above 7%.
Declining work week, difficulty among college graduates
finding work, high rising youth unemployment.
Why do you think a quarter percentage point now is going to arrest that?
Well, I hadn't said that I thought a quarter point would make a huge difference to the economy,
but you've got to look at the whole path of rates, right?
And markets already has already been baking in expectations.
I mean, our market works through expectations, right?
So I think our policy path
really does matter. And I think it's important that we use our tools to support the labor market
when we do see signs like that. I did mention that, you know, you see minorities, unemployment
going up, you see younger people, people who are more vulnerable economically, more susceptible to
economic cycles. That's one of the reasons, in addition to just overall lower payroll job creation, that shows you that at the margin the labor market is weakening.
I would also point to labor force participation. Some part of the significant decline in labor
force participation over the last year has probably been cyclical in nature rather than
just the usual aging process. So we put all this together and we see that the labor market is softening and we don't need it to soften anymore, don't want it
to. So we use our tools and it starts with a 25 basis point rate cut, but the market's also
pricing in a rate path. I'm not blessing what the market's doing at all. I'm just saying it's not just one action.
As a follow-up to that, the growth mix right now seems very concentrated in investment and on the consumer spending side in the higher income groups.
Do you feel that that's an unsustainable mix for the economy moving forward?
I wouldn't say that. I mean, you're right. Those are two,
we're getting unusually large amounts of economic activity through the AI buildout and corporate
investment. I don't know how long that will go on. No one does. In terms of spending, you saw that
the consumer spending numbers were well above expectations,
and that may well be skewed toward higher earning consumers.
There's a lot of anecdotal evidence to suggest that.
Nonetheless, it's spending.
So, I mean, I think the economy is, you know, it's moving along.
Economic growth is going to be 1.5% or better this year, maybe a little better.
Forecasts have been coming up, as you can see. So labor market is, unemployment is low,
but, you know, downside risks, but it's still a low unemployment rate. So that's how we see it.
That's how we see it.
Hi, Stephanie Ruhle, MSNBC.
Treasury Secretary Scott Besson has said that the Federal Reserve suffers from mission creep and institutional bloat.
He's now calling for an independent review.
Would you support an independent review or are you open to any sort of reform in any areas of the Fed?
or are you open to any sort of reform in any areas of the Fed?
Of course, I'm not going to comment on anything the Secretary says or really any other
officer says. So in terms of reform at the Fed, we just went through a lengthy and I think very
successful process of updating our monetary policy framework. I would say there's a lot of
work going on behind the scenes around the assets we have in the Federal Reserve Bank system,
Federal Reserve System, and at the board. Are they the right size? We're actually going through a
10% head count reduction through the whole Fed, including the board and all the reserve banks.
The employment at the Fed at the end of that will be basically at the same level it was more than
10 years ago. So we will have had zero job growth for more than a decade when we're finished with
that. And I think we'll probably do more than that. So I think we're certainly open to
constructive criticism and ways to do our jobs better.
Not an independent review?
We're certainly open to, you know, to always trying to do better.
Neil.
Mr. Chairman, Neil Irwin with Axios.
There's been some debate lately on whether AI is already starting to affect the labor market in terms of lower labor demand, higher productivity by contrast. Do you buy that? And if that is true,
does that have implications for the monetary policy setting? So there's great uncertainty
around that. I think my view, which is also a bit of a guess, but widely shared, I think,
is that you are seeing some effects, but it's not the main thing driving it. And so particular focus on young people coming out of college. And yeah,
there may be something there. It may be that companies or other institutions that have been
hiring younger people right out of college are able to use AI more than they had in the past.
That may be part of the story. It's also part of the story, though,
that job creation more broadly has slowed down,
the economy has slowed down,
and so it's probably a number of things.
But, yeah, it's probably a factor,
hard to say how big it is.
Andrew.
Thanks, Mr. Chairman.
What evidence do you see of tariffs showing up in inflation?
Well, you can take goods, just sort of the broad goods category.
And last year, goods inflation was negative.
If you go back 25 years, that was the typical thing, was that goods inflation was,
goods prices generally went
down, even adjusting for quality. So that was not the case during the pandemic, of course.
Goods inflation went very high, but we essentially returned to zero or slightly negative inflation.
Now, I think goods inflation over the course of the past year is 1.2 percent, which doesn't sound
like a lot, but it's a big change. So we think, I mean, analysts have different views, but we think it's contributing,
you know, 0.3 or 0.4 or something like that to the current core PCE inflation reading,
which is 2.9 percent. So it's contributing. What seems to be happening is that, you know, the tariffs are not mostly not being paid by exporters,
mostly being paid by really the companies that sit between the exporter and the consumer.
So if you buy something and you sell it to retail or you use it to make a product,
you're probably taking a lot of those costs on and not able to pass
it fully along to the consumer yet.
That appears to be what we're seeing.
All of those companies and entities in the middle, they'll tell you that they have every
intention of passing that through in time, but they're not doing that now.
To the consumer, the pass-through has been pretty small.
It's been slower and later, slower and smaller
than we thought. But the evidence is it's very clear that there's some pass-through.
I also wanted to ask if you could share with us the conditions under which you
might consider leaving the Fed in May. I have nothing new on that for you today.
Hi, Katarina Sarrivo with Bloomberg News. I just wanted to follow up on one of your answers
just a couple minutes ago. We've often heard you talk about how you and your colleagues, you know, do not think about politics.
This does not enter the room. But one of your new colleagues does come from this world, right,
where everything is seen through this framework of politics and of what party is being helped.
And that person is still employed by the White House. How can markets and the public interpret
some of his speeches, for example, and then some of the forecast that we see today? I mean,
the median for this year was moved because of the introduction of his forecast. I'm talking
about the number of rate cuts seen this
year. What do you, you know, what do you say to markets and the public that are trying to interpret,
you know, what you guys are saying? So there's 12 voters, 19 participants of whom 12 vote,
as you know, on a rotating basis. So no one voter, you know, can really, the only way for any voter to really move things
around is to be incredibly persuasive. And the only way to do that in the context in which we
work is to make really strong arguments based on the data and one's understanding of the economy.
That's really all that matters. And that's how it's going to work. And I think that is the way the
institution, that's in the DNA of the institution. That's not going to change.
And then I wanted to ask about a Gallup poll that showed that Americans now have more confidence in
the president than the Federal Reserve when it comes to doing what's right for the economy.
Why do you think that is? And what's your response?
What's your message to the public? Our response is we're going to do everything we can to
use our tools to achieve the goals that Congress has given us. And we're not going to get distracted
by anything. So I think that's what we're going to do. We're just going to keep doing our jobs.
Claire Jones, Financial Times. Given the range of views expressed prior to the meeting and also on the flip side to just explain
Claire.
why the dot plots are really so scattered between, you know, someone even expecting rates to
end up higher by the end of the year to five cuts. I mean, what were the kind of range of views you
heard about on one side why there was so much support for a cut today and on the flip side
why there's so much divergence about what comes next?
So I think there's quite a wide assessment that the situation has changed with respect to the
labor market. Whereas we could still say, and did say in July, at the time of the July meeting,
that the labor market was in solid condition and we could point to 150,000 jobs per month
and many other things. I think that the new data that we've had, and it's not just payrolls,
it's other things as well, suggest that there really is meaningful downside risk. I said there
was downside risk then, but I think that that downside risk is now a reality, and there's clearly more downside risk.
So I think that's broadly accepted.
And so that meant different things for different people.
Some wrote down, almost everyone wrote down, supported this cut.
And some supported more cuts and some didn't, as you will see from the dot plot.
So that's just the way it is. I mean, people have, it's, you have people who take this work very seriously,
think about it all the time, do their work, discuss it with our colleagues.
You know, we endlessly discuss this in between ourselves.
And then we have a meeting where we put it all out on the table.
And this is what you get.
And you're right.
There is a, there's a range of views in the dots.
And I think that's, like I said, very unsurprising given the quite unusual, historically unusual
nature of the challenges that we face. Let's remember, though, the unemployment rate's 4.3%.
The economy's growing at 1.5. So it's not a bad economy or
anything like that. We've seen much more challenging economic times. But from a policy
standpoint, the standpoint of what we're trying to accomplish, it's challenging to know what to do.
There are, as I mentioned earlier, there are no risk-free paths now. It's not incredibly obvious what to do.
So we have to keep our eye on inflation.
At the same time, we cannot ignore and must keep our eye on maximum employment, which is those are our two equal goals.
And you will see that there are just a range of views on what to do.
Nonetheless, we came together today at the meeting and acted with a high degree of unity.
Archie.
Thank you. Archie Hall from The Economist. You mentioned earlier that job creation is running
below your guess at its breakeven rate. I'd be curious to hear a bit more about that and where
you think the breakeven rate is. You know, so there are many different ways to calculate it, and none of them is perfect,
but, you know, it's clearly come way down. You could say it's somewhere between zero and 50,000,
and you'd be right or wrong. There are just many different ways to do it.
So wherever it was, 150,000, 200,000 a few months ago, it's come down
quite significantly. And that's because a very lower amount of people are joining the labor force.
The labor force is really not growing much at this point. And that's a lot of where the
supply of labor was coming from over the last two or three years. So we're not getting that now.
We've got much lower demand. It's interesting that supply and demand have really come down
together so far, except now we do have unemployment ticking up outside, just one tick
outside of the range where it's been for a year. 4.3% is still a low level. But, you know, I think this
level of this speedy decline in both supply and demand has certainly gotten everyone's attention.
By May, you mentioned the downside risk to employment a fair amount, but it's striking
that measures of kind of activity and output for the third quarter, those that we have,
seem pretty strong. The Atlanta Fed's GDP now is very strong. You mentioned strong PCE numbers as well.
How do you square those things? Is there a chance actually it could be upside risk to the labor
market if those activity measures are right? Well, that would be great. We'd love that to happen.
So I don't know that you see a big tension there, but it's gratifying to see that economic
activity is holding in. So it's a you know, so it's a good bit from consumption.
It looks like consumption was stronger than expected.
What we got earlier this week, I guess.
And also we're getting, you know, a fairly narrow sector is producing a lot of economic activity,
which is the AI build out and, you know, business investment. and business investment. So we watch all of it,
and I would say we did move up. The median for growth for this year actually moved up
in the SEP between the June and September SEPs, and really the inflation and labor market didn't
change much. It's really the risks that we're seeing to the labor market that were the focus of today's decision.
Nicole.
Hi, Nicole. Goodkind with Barron. Thank you for taking my question.
Given the cumulative impact of high interest rates on the housing sector,
I'm wondering how concerned you are
that current rate levels are exacerbating housing affordability issues and potentially hindering
household formation and wealth accumulation for a segment of the population?
You know, housing is an interest-sensitive activity, so it's at the very center of monetary policy. When the pandemic hit and we cut rates to zero,
the housing companies were incredibly grateful and they said that was the only thing that kept
them going was that we cut so aggressively and provided credit and things like that. And they
were able to finance because we did that. The other side of that is when inflation gets high and we raise
rates. And you're right, it does burden the housing industry. And so rates have come down a bit. And
as that happens, we don't set mortgage rates, but our policy rate changes do tend to affect
mortgage rates. And that has been happening. And that'll, of course, raise demand. Lower borrowing rates for builders will help get builders, well, supply. And so some of that should happen. I think most analysts think that it would have to be pretty big changes for it to matter a lot for the big changes in rates to matter a lot for the housing sector.
big changes in rates for the matter a lot for the housing sector.
And, you know, the other thing is by, you know, by achieving maximum employment and price stability,
that's a strong economy. That's a good economy for housing.
And then the last thing I'll say is, you know, there's a deeper problem here.
There's not a cyclical problem that the Fed can address, and that just is a pretty much nationwide housing shortage.
A lot of places in the country just don't have enough housing for
people. And all of the areas around metropolitan areas like Washington, for example, are very built
up and so you're having to build farther and farther out. So that's where it is.
And just a quick follow-up. During the last SEP or the press conference following the last SEP, you seem to indicate that policymakers lacked conviction about their projections. And I'm
wondering if you still feel that way. You know, forecasting is very difficult,
even in flaccid times. And as I've mentioned before, forecasters are a humble lot with much
to be humble about. So I think right
now is a particularly challenging time, even more uncertain than usual. And so I don't know any
forecaster anywhere, really. Ask any of the forecasters whether they have great confidence
in their forecast right now. I think they'll honestly say no. Jennifer. Thank you Chair Powell. Jennifer Schoenberger with Yahoo Finance.
If you're cutting rates, why continue to reduce the size of your balance sheet than POSI unwinding?
Well, I think we're, you know, we're cutting the size of our balance sheet quite marginally now. As you know, with the balance sheet, we're still in an abundant reserves condition.
And we've said that we would stop somewhat above an ample reserves level.
That's what we are.
And we're getting closer to that.
We're monitoring it very carefully.
We don't think that that has at all significant macroeconomic effects. These are pretty small numbers moving around inside a
giant economy. The level of runoff is not very large. So I wouldn't attribute macroeconomic
consequences to that at this point. And at his recent confirmation hearing,
Stephen Myron brought up that the Fed actually has three mandates from Congress,
not just jobs in stable crisis, but also moderate long-term interest rates.
So what does Congress mean by moderate long-term interest rates? How should we understand that when we see the 10-year Treasury moving? And how do you think about this part of the mandate
when policy choices like rate cuts or balance sheet reductions affect the long end of the yield curve?
when policy choices like rate cuts or balance sheet reductions affect the long end of the yield curve?
So we always think of it as the dual mandate, maximum employment and price stability for a long time
because we think moderate long-term interest rates are something that will result from stable inflation,
low and stable inflation, and maximum employment. So we haven't thought about that for a very long
time as a third mandate that requires independent action. So that's where that is. And there's no
thought of, as far as I'm concerned, there's no thought of considering that, you know,
considering that we somehow incorporate that in as something
in a different way.
Thanks, Chair Powell.
Matt Egan from CNN.
We recently learned that average FICO credit scores are down this year by two points, the
most since 2009 during the Great Recession, and delinquencies are high for car loans, personal loans, credit cards. How concerned, if at all, are you about
the health of consumer finances, and do you expect today's cut will help? So, you know, we're aware of
that. I think default rates have been kind of ticking up, and we do watch that. They're not at a level, I don't believe
they're at a level where overall they're, you know, terribly concerning, but it is something
that we watch. You know, lower rates should support economic activity. I don't know that
one rate cut will have, you know, a visible effect on that. But over time, you know, a
strong economy with a strong labor market is what we're aiming for and stable prices. So that should help.
Just a follow-up, this rate cut is coming at a time when the stock market is at or near all-time
highs and some valuation metrics are elevated historically. Is there a risk that cutting rates
cutting rates could overheat financial markets, potentially fueling a bubble?
could overheat financial markets, potentially fueling a bubble?
You know, we're tightly focused on our goals, right?
And our goals are maximum employment and price stability.
And so we take the actions that we take with an eye on those goals.
Separately, and that's why we did what we did today.
Separately, we monitor financial stability very, very carefully.
And, you know, I would say it's a mixed picture, but households are in good shape.
Banks are in good shape.
Overall, households are still in good shape in the aggregate.
And I know that people at the lower end of the income spectrum are under pressure, obviously.
But from a financial stability perspective, we monitor that picture.
We don't have a view that there's a right or wrong level of asset prices for any particular financial asset.
But we monitor the whole picture, really looking for structural vulnerabilities.
And I would say those are not elevated right now.
Jean, what are you for the last question?
Hi, Chair Powell.
Jean Young with M&I Market News.
I wanted to ask about inflation expectations.
You've said the Fed can't take the stability of inflation expectations for granted.
You mentioned at the short run they've gone up a little bit.
I wonder if you can talk a bit about that.
And then also at the long run, I'm wondering, do you see evidence
that the debate over Fed independence
and the growing deficit
is putting pressure on inflation expectations?
So as you said,
shorter term inflation expectations
have tended to respond to near term inflation.
So if inflation goes up,
inflation expectations will predict that it takes just a little while
to get back down.
Fortunately, throughout this period, longer-term inflation expectations, both break-even in
the markets and almost all of the longer-term surveys, Michigan being a bit of an outlier
lately, have been just rock solid in terms of, you know, running at levels that are consistent with 2%
inflation over time. So we don't take that for granted. We actually assume that our actions have
a real effect on that and that, you know, we need to, you know, continually show and also mention,
discuss our commitment to 2% inflation. And so you'll hear us doing that.
But, you know, as I mentioned, it's a difficult situation
because we have risks that are both affecting the labor market and inflation.
Those are our two goals.
And so we have to balance those two.
When they're both at risk, we have to balance them,
and that's really what we're trying to do.
I don't, in turn, a lot your latter part of your question was about independence.
You know I don't I don't see market participants.
I don't see it that's something they're factoring in right now in terms of setting interest
rates.
Thanks very much.
Wow that was a hell of a finish.
A hell of a response, that last response.
He goes, yeah, you're worried that with equities at all-time highs,
interest rates could create a bubble.
He goes, I don't really care.
That's basically what he said.
He took some shots here and there, little little shots i thought that was very well handled
yeah uh the biggest thing i think i would take from this for me is that uh you know the fed is not as dovish as the market would like and that's why you saw the drop on bonds and small caps but
they went running right back towards large cap tech in the AI trade. So nothing to see here. Thoughts? Yeah, I mean, we'll see how that withers out. I mean,
like you zoom out on these things structurally, right? Like, I mean, there's so many smid caps
that look good. It's tough for me. I think, you know, Mike, I think you pay. I mean, Larry
definitely pays a lot of attention to stuff at an index level.
I know you do, too. And we have a lot of great speakers up here who do.
I love listening to you guys when you're talking about that. It gives me cues on where to focus.
But I'm like a purely micro guy, as you guys know.
Like my whole book is just individual stocks. Right.
And I buy them and I hold them for a while.
You know, I like I don't have high turnover, right?
Like, and the people who have followed me for years know that.
Like, I buy stocks that I think are thematically relevant,
that have really, really pretty monthly and weekly charts,
that have clear accumulation,
that have reasons for the public to be interested in them.
You know, they're generally tech-oriented companies,
although, you know,
I own a lot of non tech too, but that's how I operate. So for me, I'm always taking a micro
view. And honestly, to a degree, I'm grateful for that because it blocks out a lot of the
macro noise, right? There's always like a macro fear story. Always. There's always one. Even
when the economy is booming and the stock market's booming in unison, there's still
always a boogeyman that can scare you away. And so, again, for me personally, having a micro focus
has helped me just ignore the day-to-day narratives that shift and just focus on the
price action and focus on the stories and focus on, you know,
the thematics and to me, the things that matter a lot more for performance. So look, on days like
today, I think you hear comments like that from the Fed and there's going to be a lot of debate
now on were they bullet, were they dovish enough, were they, you know, were they too hawkish? Were they pricing enough cuts, not enough cuts?
You know, the bottom line is, is generally speaking, once we start going down the path,
you don't need to be genius to figure this out. You can just go look at history.
Once we start going down the other end of the tightening curve, we generally keep going until we hit neutral.
And so the markets know that
now. The markets have gotten that cue. And are there risks? Yeah, there are risks. There's a
risk in the back half of the year, inflation comes surging back, and that changes the calculus,
and that changes the math. And by the way, it'll change the charts too. But until then,
Either way, it'll change the charts, too.
But until then, the party goes on.
I mean, look at a lot of this dip buying action as soon as Powell closed his mouth.
I mean, I'm seeing a lot of big rebounds right now as we speak and a lot of individual names.
So I don't know.
I mean, look at this Tesla movie.
Just screaming to the upside.
Right here as we talk, as we speak.
But I mean, Mike, what are your thoughts?
I know you kind of are able to stay chill at all times because you're a day-to-day guy and you're seizing these opportunities as you see them.
But what are your thoughts on, you know, where we're going from here?
I think, listen, I'd be the first one that would welcome a pullback, a nice little pullback in this market to reset some of these setups.
But it's been impossible to get.
I think, you know, a year from now, we're higher one way or the other.
I remember Powell only has two meetings left before he's out.
So even if they don't get the rate cuts this year, they're going to get them next year.
Another thought I kind of had here is Trump's going to have information he's never had because his cabinet members now on the Fed.
They're going to know everything that the member said and which ones to target, which ones to go after to get new members in to make it his Fed.
Whether that's good or bad long term, it's irrelevant, but it's going to be probably a good term short thing for the markets to get the rate cuts.
So my guess here is we're going to find
a way to go higher. Maybe we get a short term dip. If we could, that would be nice, right?
Going into earnings season, maybe we can get a dip down to the 50 day, but look at the market
come running back. Mike, how many people do you think feel that way? A lot of people who are
underexposed probably feel that way, right? Yeah. Yeah. I mean, I think i think i mean i'm sure a lot of people have
i mean i i bought heavily into the lows and i've been trimming and i didn't i've been selling
anything lately because i just don't feel this market's going to give me an easy dip and i want
to keep exposure so i want to add to my exposure not lessen it at this point and um you know this
market is it's brutal you know there this market is brutal.
You know, it's always tough when you have a market that doesn't want to give a dip.
It becomes a very painful market.
And we've been in that mode for a while.
And even today, right?
It looked like we were going to break here below 655, below the 8-day in the SPY.
And here we are just off highs of the day.
The Qs just put a highs of the day. And if you want to read anything into it, gold is dumping, bonds the small caps are no longer which we're leading are not now but you know i think the market overall is fine i think
i think the messaging stays the same is that how's that sound does that make sense that makes sense
i i want to talk about i was gonna uh yeah sorry i'm go for it i was just gonna say real fast i
mean just a couple simple points here.
We came down to the 9 EMA on the daily chart on both QQQ and SPY, and buyers immediately stepped in.
And to Mike's point, I don't know that there are people necessarily bearish to this market.
I think it's, like you were saying, maybe under-allocated people that are literally just cheering for a dip, right?
Because they want to get in and buy the market somewhere.
And is a 9 EMA dip the only thing you're really going to get?
Possibly, at least in the short term.
But that's all we came down to, right?
All we came down to is daily chart 9 EMA.
The only thing I'd watch here is when you look at the SPYs
in the ascending channel, and yesterday we hit the top of it
and we failed.
So that's the sixth time we hit it since this started.
So either we're going to break through it
or we're going to get a dip here.
Does that make sense short term?
Either the market's going to say enough of this,
we're going to break even higher,
or we're going to come down.
But right now we're in an ascending channel on the SPY
and we hit the top at 661.75 yesterday.
We went right into it it just briefly broke above and
came underneath it so something's got to give here taking my bed is we oh sorry go for it
no no go ahead okay i was gonna say yeah no i think we're all kind of on the same page technically
like i mean this is uh you know there's really no debate about the charts obviously we're in a
bull market technically there's no question about it no no debate about it. But I think what a lot of people or what has been the prevailing sentiment in the last couple of months, at least after this monster run off the lows has been, you know, like we've got to get a pullback like this.
There's a monster run. And I don't blame Mike for feeling that way. I agree. There's stuff I want to add to, too, that I'd love to see a pullback for. But, you know, I wonder just
anecdotally how many people are feeling that way. And I want to bring up two data points right now,
nothing to do with the charts, just two non-chart data points I want to bring up for the audience
that I think are interesting. I'm not going to tell you to make any conclusions from these.
I don't want people to say, what do you mean by bringing these up? I'm just going to bring up two
facts. Okay. Number one, for the first time since 2021,
hedged inflows in the market have surpassed unhedged inflows. That does not happen in states
of euphoria. What that means is that people who are entering the market are hedged more than
they're unhedged for the first time since 2021. So that's the first point.
Second point is that Goldman Sachs has a tracker where they track gross versus net leverage as the
indexes move up, right? And if you look at their net leverage chart for this year, it is still way below the highs of this year before the correction.
What does that mean? That means that funds who were fully exposed prior to the April correction
did not pick up their net exposure post-correction and have essentially complacently watched the
market go from the April lows to where we are today. Those people are faced with two choices,
to either pray for a pullback, as Mike says, to get their net leverage back up to where it needs
to be for performance reasons, or to chase into the end of the year. And so I'm not telling people, I'm not crystal
balling. I don't have a crystal ball. I don't know what's going to happen. I'm not telling people
to think that I know what's going to happen. But those are two interesting data points in my view.
And I also think that those are two data points that you do not see at moments when the market
is going to crash. When the market's going to crash,
you see record levels of unhedged inflows,
and you also see record levels of net long positioning.
Neither of those things are true where we are today,
yet the markets are at all-time highs.
So I don't know.
And you bring up a good point.
You have a lot of fund managers whose bonuses aren't going to be very good this year because they did not catch this move.
And now they have.
And there's many that didn't get this move last year or the year before.
There's some that were so bruised by the action in 2022 that they just never got as aggressive as they needed to be in the last two years.
And they probably carried that sentiment over thinking, oh, I missed the run.
I mean, there's no way the indexes are going to be up again
after posting two literally historic years back to back.
You know, people were just like,
and this is the thing is markets sometimes will defy,
like, logic to such a degree that people,
a lot of times very smart people are the ones who miss out or who
are underexposed in times like this. Like, you know, and that's why for me, I consider myself
a smart guy, but for me, I don't consider myself smart in the market. And so that's why I just
generally stay long until I have a reason not to be, you know? Um, and that's, that's been my motto forever. And it's like, do I give back
gains sometimes by doing that? Absolutely. There are moments where I get caught with a deep, like
during the deep seek moment, like, you know, I post my performance charts all the time for people
that follow my account. You can see the big drop in my performance chart from deep seek. You can
see the big drops when these random sudden events happen because I'm net long.
That's going to happen, right?
But my motto is until the markets break down, I don't have a reason not to be.
And so they may break down later this year.
They may break down next year.
They may break down next week.
I don't know.
But, you know, two or three candles can change a lot of things.
But we haven't had those types of candles yet.
So I don't know.
I'll leave you with this thought. can change a lot of things but we haven't had those types of candles yet so i don't know i'll
leave you with this thought in my opinion here is what the only thing that brings this there's
there's a lot of leverage in this market right now the highest ever been but then again there's
more money in this market than there's ever been too but what if something's going to bring this
down it's going to be a black swan event you cannot predict them or try to pretend you're
going to see them so you you know you kind of just have to play that this is the mark we have.
And if you get and hold your nose and buy and buy shallow dips and stay long, stay with
I'm agreeing with you.
All right.
You cannot predict a black swan event.
You just can't.
What's up, Larry?
Yo, can you guys hear me?
Yeah, we can.
I switched my mic.
Yeah, I think you guys are making great points.
The piece I would add is if in bull markets, it's really hard to get long. One of the things I would
add to your, if you're looking, okay, how do I maybe look at a dip? There's a few ways, right?
The dips have been shallow, but what you can do is you can zoom into the chart, right? Like zoom out for longer term conviction. But if we're in a sustained up
trend, you might want to zoom in like Mike just options. Mike just kind of mentioned for those
shallow dips. And if you look at something like the cues, basically it's, we've pulled back during
this run, we've pulled back about three and a half, 4% two times, and then we've kind of grinded higher.
But if you look at something like XLK, we traded sideways for a month and a half.
So technology traded sideways for a month and a half.
So at the index level, it's been hard to get long, but there's been spots within intrasector,
so like within each sector, that you could have added exposure as like we've started
to break out. You can even look at ARK. ARK is just now breaking out of another base on the daily
chart. But something I would add is if you don't understand market structure, look at the S&P 500
percent above a 20 day moving average. We're sitting at about 40%. And typically, we'll sit around 40% in a
strong bullish uptrend. So when the market doesn't break below a 10-day moving average,
for example, or even a 20-day, 40% is where you add on percent above a 20-day moving average.
I'll post a chart later. But we've seen that happen over and over again in this uptrend is
when breadth within the market
kind of pulls back. Like I said, less than half of stocks in S&P 500 are above their 20-day moving
average, which sounds crazy. But that's where inside the market, you can then pick your spots
to get long. Like XLK just broke out. If you look at the chart of XLK on a daily basis, it just broke out. And it actually just pulled back today to the high
and is looking. So we have a breakout retest in XLK. So if you want to talk about times to get
long, I think a breakout retest is a great time to get long because you have well-defined risk
against 270. And we're what? I mean, it's a percent dip, but you have really well-defined risks there
after this bull flag kind of breakout.
And then today we had this like hammering style of candle.
It's not a hammer candle
till we have follow through tomorrow.
The other chart I would say is same thing with financials.
Financials have kind of gone sideways
for a decent amount of time.
RSI is below 60.
So there's areas within these intrasectors that
are shaping up. The problem is we're just not having the MAG7 correct while breadth corrects.
When MAG7 corrects, breadth is holding up. And when MAG7 is accelerating, breadth is not doing
anything. So you have this unanimous intrasector rotation that makes the indexes look like they're never dipping.
So that's where you can just look at the 11 S&P 500 sectors and kind of pick spots
to get long when we have that kind of price action. The other thing I would say too is
this is counterintuitive to what probably 90% of people on here are trying to do,
but in bull markets, you can do less work. You get long the market and you shut up because reality is the market, if you really think about
it from a psychological perspective and from a philosophical perspective, the market is what
does the movement. You don't do anything. You buy and sell, but the movement occurs by the market.
So the fact that we're in a bull market, that tells you that the market is going
to do the work for you. The question is, are you going to let it? And so that's kind of how you
have to view a bull market. If you look at any technical data, you can look at the fundamental
data. You can look at some of these quantitative model regimes, but it just says stay long and
that's what's paid. So I would just keep that in mind
because it is super counterintuitive, but that's what's working. And until that doesn't work,
you don't necessarily have to overthink it. Yeah. Those are just some of my thoughts about
like when you're trying to look for a pullback, it's probably not going to happen at an index
level if the mags aren't correcting. So you have to kind of look at breadth indicators to see when breadth within the market is kind of pulling back
to then allocate to say financials a little bit more or technology went sideways. When technology
was sideways, guess what ripped? Communication services. Look at the communication services
chart. That thing hasn't pulled back in a while. So yeah, you might not be adding to communication
services here, but maybe you're adding to technology because it's just now breaking back out.
So you kind of have to, if you're going to play that game, it's a hard game to play,
but that's kind of how I look at it from a sector rotation perspective.
Sam, your hand's up. We'll go over to you next and get around the panel.
I didn't even realize my hand was up. I apologize. I probably meant to put it down because everyone's
really saying pretty much everything that's on my mind. Which is great even from a technical
fundamental perspective. I mean mean i'm looking at
the charts and there's a lot of names here that barely pulled back even when the queues were down
to the uh 284 level and what are those stocks doing they're leading and i'm not really going
to attribute this to any short-term moves or anything but well there's some serious dip buyers
out there that are just getting their hands on whatever they can right now, as StockTalk was saying.
And the leaders just tend to lead in most of the scenario.
What's actually really interesting is seeing the move of some of the mega caps here toward the close.
I think everyone already knows that Meta is having an event tonight, which could be pretty interesting.
I'm a shareholder of Meta, so I am pretty interested to see that also saw the saw that video
i posted about it a couple days ago i wasn't the first one i think luxaco was the first one to do
that and thank you for that but yeah there was a leaked ad about the meta smart classes there's
i was talking to someone earlier uh regarding um how tesla needs, right? They can't be the last ones to a lot of whatever the autonomy is.
And this is coming from, this was coming from someone
who really doesn't understand the EV market and so on.
They basically have said that they were eating whatever
the news is out there, whatever the sentiment is out there,
that Tesla is very late to the game in terms of autonomy.
And then what they don't know is that they're
quickly expanding their robo-taxi across the entire country, probably not at scale as Waymo
is. But if you really think about the comeback that Tesla can have as these rates do move down,
and full disclosure, I was at a Tesla store last Saturday, and there are a lot of people putting in orders there.
And I'm not saying that that's more of a come up what's going to happen.
But as rates do come down, these housing markets, the auto buying market, and so on,
it's going to start to pick up a little bit.
It might not happen overnight, but I think the markets are looking forward strong enough
to see that actually happening versus
waiting until they get the confirmation.
And I think moreover, one of the reasons why I expected the market to pretty much be flat
today and coming in today, I didn't think I was going to rip up.
I didn't think I was going to go down.
I just thought it was pretty much going to be flat at the end of the day because really
everyone was guessing each side.
I thought it was going to be flat because did we really learn anything that was grand
spanking new during this presser conference?
I mean, obviously, the tick up or the expectation of getting two additional rate cuts by the
end of the year did jump up.
Besides that, if you really look forward, we're going to get those two cuts anyway,
whether it was this year or whether it was beginning next year and so on.
If you look at the dot plots from the previous June set,
not really much has changed to make it a shock to the market.
So that aspect, and that's been consistently happening for quite some time.
You guys were talking about a black swan event is going to be what brings the market down.
I agree.
And a black swan event, by definition, is an unexpected event.
So until we get that, until we get some new news that the market did not expect coming i don't know maybe the meltdown just continues i mean everyone
expected today to be the top is coinciding with a lot of divergence and everything and so on
and then what do we get at the end day option sellers win
i mean a lot of option buyers are winning
right now too
yeah I know but on the indices level
option sellers are pretty much winning dude
obviously stock talk is winning
it all depends on the time
you got a high and a low
Steven did jump up here
big beat and I would love to get his
take around the pal stuff
hey guys thanks for having me back on you know, I've been doing this for 35 years
and I saw this I was live on the air earlier and I watched this
I've never seen pal so nervous in his whole life because what he had to discuss today was
Five-sided I mean, it wasn't
just, okay, well, here's why we did today and we cut and this is why we cut. And he had to explain
his positions and then he's out the door. He goes. Today, he had to talk about politics,
which they never do. Today, he had to talk about why he continued to kept his thesis at 2% and job rates and all the things.
He said something very interesting today. He said he called this cut a risk management cut.
A risk management cut, meaning he wasn't even sure he wanted to even do that today.
But yet, as traders, we have been baking this 25 basis point cut in for as long as
I can remember now. And right now we know that there's probably about two more in there. We know
that there are 12 voters in the Fed and we know that nine wasn't even sure what the hell's going
on. We got one guy who still works in the White House. And all of a sudden, we don't know what
the heck's going on. This reminds me, and of course, I had to go back and look, 2008 and also the 70s. We are in a stagflationary economy right now where
the inflation is up. You don't believe me? Just go to the grocery store. You don't believe me?
Go try to buy a new iPhone right now. But yet the consumer is still hot as can be. They're out there
still trying to buy the new iPhone Pro Max. I think
goes out to October now. But he also said something else that was very interesting.
Housing shortage. He has not talked about the housing shortage ever in the last few meetings.
So all of a sudden now he is bringing in a new narrative into his thought process of where he thinks the markets are going to be.
It was also asked by Bloomberg if he thought the markets were valued correctly.
I don't think about the markets too much.
In the next question he was asked, he's like, well, the markets might be a little overvalued, in my opinion.
He was so confused.
I think he confused himself.
And so when I look at this whole,
when I look at the whole process,
and I go, okay, you've got to come out,
you've got to explain the position
of every member on the Fed.
And he had to explain it
from his point of view as chairman,
who he knows now
that he's not going to be chairman
come March, right?
And there's a possibly somebody
that's there now that's probably going to be replacing him. If not, he's not gonna be chairman to come March, right? And there's a possibly somebody that's gonna that's there now that's probably gonna be replacing and if not he's gonna get replaced even maybe even before
He had to walk a very very fine line today
And he had to weave that thread of a narrative that he has not weaved before and he had to do it in a way
That explained his position and explained the board's
position. I don't think he did a very good job there. And so because of that, this buy the dip
mentality might actually be out the door. I think we're now looking at this going, okay, well,
what is it that I can hang my hat on and go, this is why as an investor or as an institution,
hang my hat on and go, this is why as an investor or as an institution in this case, right?
What am I going to invest in and how am I going to invest in the next? Am I going to buy a mag seven
stock? Am I going to buy Apple at the highest here? Am I going to buy Nvidia when there's
literally they're having problems right now in China? That's a big question mark, right? So I
have to look at undervalued stocks. And I think in this case, if I look at the 70s and 2008, I'm looking at stocks that are still kicking off cash flow.
And I'm looking at it from the Warren Buffett eyes now.
Okay, we know what the narrative is.
And the narrative is several things now.
It's housing shortage.
It's still now jobs.
And it's still 2%.
And we saw the dot plot today.
He's saying we're not even going to get there
for another two more years.
So now the dot plot's out the door.
He says he doesn't even know what's going to happen
with some of these members that may or may not be
on the board come another year or two.
Even he said that to people.
There's 12 people here and nine votes.
I mean, it's like crazy.
He had explained the board again.
So let me say, here's what I think.
And I'm going to be on the street.com tomorrow. And I'm going to be on Schwab from the floor on Monday. And this is
kind of my thought process is what I'm going to say. Right now, the undervalued stocks right now
have to be the oil market. You look at the oil WTI right now, 6356. And if you're looking for cash,
there it is, Occidental Petroleum, right56 if you're looking for cash there it is occidental petroleum
right if you're looking at it from the forward uh guidance here you got to look at it and he's
telling you housing shortage so it's obviously got to be copper so i'm thinking newmont mining
i'm thinking freeport mcmoran fcx i'm thinking that you've got to look at some of the banks
right now that are going to be covering some of that so citibank uh maybe even goldman sachs
and then you've also got to look at it from the perspective of beaten up biotech. So like Pfizer
and BNY, Bristol Myers. So I'm not even looking at the Mag 7 anymore. I'm still, as most of you
know, I'm pretty heavily long Apple because I think there's still a little up room to the upside
based on the new sales, the new numbers now trying to buy an iPhone.
But right now, this is the most confused Fed I've ever seen in history.
Tell me I'm wrong,
but I think I'm pretty right on this one.
Thanks for having me, guys.
Yeah, I like that take.
A little interesting.
I guess the question I would have, Stephen, at the end of this,
even though it was a confused Fed, the market doesn't seem surprised. I mean,
and I think that may be the key here. Is the market going to look at this and just shrug it
off most likely and just continue its kind of expansionary track into maybe outside of the MAG
7 like you were saying, but just do you think the market kind of shrugs this off? So I say, I say this all the time.
Main street is not the economy that the markets react on, right? We do not. The, the stock market
is not the economy. The stock market is what rich people like us do to buy and make money,
right? I'm sorry, but main street isn't buying stocks because they think that this is where they're going to make all their money.
Yeah, there is.
I disagree.
I think it's changing.
I'm sure.
I think it's changing.
But the thing is here, right?
Where is the big money going?
Where is the big money moving to, right?
The big money right now is trying to figure out the bond market right now.
That's where the big money right now is trying to figure out the bond market right now. That's where the big money is.
We can play around with the New York Stock Exchange and the NASDAQ and totally together
is $28 trillion.
That doesn't count for the trillion dollars that are in the Dixie right now.
The dollar right now is falling at the fastest rate almost in history.
We're right now, the Dixie right now is at $96.95.
The weakness in the dollar is telling you right now that if you want to see money coming in, it's not zero DTE people.
It's international money moving into us because they're getting a double whammy.
They're saying, OK, I'll buy because it's cheap dollars.
My yen's worth more.
I'll buy it because my euro's moved up in price.
And I'll look for those stocks to make.
That's where the money's coming from.
It's not coming from the retail traders going, I can't wait to make money on my NVIDIA stock or Tesla because Tesla's, because Elon Musk is getting more money.
But the money for where?
What are you referring to?
You're saying that money's not coming from retail.
You're saying the money for where is not coming from retail.
Oh, yeah.
I'm sorry.
It's too small money from overseas, right?
I think it's money that's saying, hey, we're going to get a double whammy, right?
We're going to get it from our move in our euros or in our pounds, right?
So if you're an investor, an institutional investor, let's say you're HSBC over in Europe,
you're going to go, oh, you know what?
The Dixie's cheap.
I'll take my euros or my pounds and i'll buy stock in the
united states because i'm getting a double whammy right so i'm gonna look for undervalued stocks
that i still think they're undervalued and i think i mentioned a few of them here and then i also you
know look look at the look at the yen and in the end it's probably what 147 right now it hasn't been
that low in a long time i i sucks because i gotta be in i gotta be in uh i gotta be in tokyo here
in a month so it sucks but i'll also tell you that when I'm looking at from an international standpoint,
they're looking at the United States going, what the hell is going on over there?
If the Fed doesn't know what's going on, the president's yelling and screaming about tariffs.
How do you invest?
So they're in a quandary themselves.
But they're saying, look, that's where the biggest money in the world is.
And if you look at it from the perspective of the biggest asset class, the biggest asset class is not stocks.
The biggest asset class is not options. It's real estate, real estate, real estate, real estate.
This is the biggest asset class. So that's why they're concerned. That's why Powell mentioned
it twice in the, he said the housing shortage. So we know that these companies like D or Horton and Pulte group and toll
brothers are going to have to build more homes.
We know that, that rental is out of control right now.
I don't know.
I mean, I haven't rented in 30 years,
but if you think about people who are renting right now,
their rent's going up and they're getting hit when I go to the grocery
store. So you're seeing inflation going up.
So where do you, where do you find alpha?
And I think what's happening is the international markets are coming in and saying, okay, you know what?
I'll buy your stock market up for you.
Thanks, right?
Because I'm getting a double whammy here with some of these stocks.
And that's what I'm buying.
That's why you're not seeing Apple running at $400 a share.
I just disagree with that.
I think it's retail that's driving the the recoveries in this market i think the
data says that too right i mean u.s retail hold on hold on let me just make my point
u.s household ownership is at new highs five years in a row that's the first time ever
it's actually has not been a straight up trend as much as people think it has. But in the last five years, it has been.
Not only is U.S. percentage of household ownership at all-time record levels, the actual percentage of equity inflows from retail is also at record levels.
It's at 42%, right?
But what that record right now is not that the – let me just make my point.
You made my point.
You talked for a while, so let me make my point, because I strongly, strongly disagree
with what you said.
So it's just like, it's not in the data.
The idea that retail is a zero DTE organism is just not supported by the data.
What happened was, was that zero DTE trading exploded because of retail but the volume is now largely
been co-opted by institutions most of the zero DT volume today from a dollar standpoint is not
retail in the very early innings it was when it made up three to five percent of market volume
there was a lot of just garbage retail speculation and that made up a lot of it now that it's 40 to 50 percent of notional
options percentage it is mostly institution so the zrdt stuff as much as institutions like to
turn that on retail is not a retail game that is an institutional game now as it has been co-opted
by institutions and retail does move markets retail does care about markets more than they ever have
because you have record ownership.
You have record inflows.
You have record percentage of the market controlled by retail.
And on top of all of that, if you look at B of A's surveys or Goldman Sachs surveys or Morgan Stanley's surveys, the timing of retail inflows has also been superior to institutions in the prior five years.
has also been superior to institutions in the prior five years. In fact, if you look at the
inflows at the bottom in April, the retail inflows were at their highest of the year,
when institutional inflows were declining. So frankly speaking, not only has retail been
responsible for the recoveries in this market, but this might be crazy to say,
in the last five years, retail has been the smart money.
I genuinely believe that.
In the last five years, retail has been the smart money.
They've picked all the best stocks before Wall Street, way before Wall Street,
before they even had analyst coverage, right?
And there's something to be said about that.
And there's something to be said about that.
And they've lived through three major 30% peak to trough declines already and survived through it.
And not only have they survived through it, not only have their stocks survived through it, the retail favorite stocks, but the amount of dollars in their accounts are at record highs.
Like in every metric they're winning, right?
So when you say that, when you say that,
I have to look back.
They do care about the market is my point
that I would disagree with you on.
I would tell you that you're yes and no.
I will tell you the problem is margin debt.
Margin debt is at the highest level in history, right?
Banks are literally leveraged to
the hilt with people that are on retail that are borrowing money to buy stock that the highest ever
in history it's like it's like almost 1.2 trillion dollars at the height of 2008 that margin debt
peaked it for a little more than 400 billion three times the peak of dot-com if i went back to say okay how about
that's on a nominal basis right assets have gone up more than three times that since 2000
yep you can say that you can say that basis and assets are worth more so it's a meaningless
statistic it should trend up it will always hit new all-time highs look at the chart
like bringing up data that goes up every year and saying it's at all-time highs is not alpha. You know that.
Yeah. I understand what you're saying by that, but $1.2 trillion is a lot of money.
No, no. It's a meaningless statistic because it's supposed to go up. If the market goes
up, it will go up. Do you agree with that? When assets go up, it'll go up.
Like it's a meaningless – when I say it's meaningless, I mean like it's capital letters meaningless.
To say that margin is at all-time highs is to say like the S&P 500 is at all-time highs.
Like that's an – it's like, okay, assets are at all-time highs.
Of course margin leverage is at all-time highs.
It's relative to the assets.
You know this.
When I'm asked about the markets on a daily basis basis i always say what's the path of least resistance what is the path of least resistance
is it to the upside or the downside and that's where i'll leave it at but i think the path of
least resistance right now right now is to the downside not to the upside yeah i mean that has
nothing to do with what we're talking we we were talking about, but yeah, yeah, sure. Okay. That's an entirely separate conversation.
I will still say the same thing.
I will still say that these,
these,
these margins,
I will say that the,
the,
the amount of money that's on the sideline that's sticking up is not there
that,
that was to buy those dips anymore.
I will say that retail is not as excited about buying
stocks for the future right now. I think you're seeing people losing their jobs. I think that the
housing problem is still an issue and Powell's talking about it. So all of these things I'm
saying to you, the markets are not equating to a higher market in the future. So that's what I'm
saying. Maybe I'm totally wrong wrong but i've been pretty right this
last year up 84 so i think i think we've hit the top right here i think we're peaking yeah i mean
that that's that's the separate entirely separate debate if you feel that way that that's fine you
know i'm not debating that that point of it i was just debating the retail participation side
i love this debate man just keep it going i love it i mean that's what makes the market yeah no yeah
i i don't i don't mind debating you know as, as long as we got, uh, got all the
data correct. What's up, Sam? So where do you see the market in a year? Cause you said it's
probably going to be lower. Like, where do you see it in a year? Just curious.
Are you asking me, Sam? Oh, my bad. Yeah. I was asking you.
Oh yeah. Sorry. What do I see the market? I see it flat. I really do.
I don't see the markets pushing higher here. Um, I don't see the markets.
I think it's, I tell you what it is,
what it is going to be an amazing trading market.
I think this is a market that's a stock picker market.
That's going to be awesome at trading.
I don't think this is the one where you just set it and forget it.
Like a rotisserie chicken.
I think you're really going to have to keep your eyes tight and i think i have to listen to what everybody is saying
out there because i don't think that this is one that you just oh willy-nilly buy the spine cue
long did it calls i just don't i think that those that easy play is to the is gone uh this buy the
dip mentality is pretty much going to be gone right it's going to be kind of very hard for a retail
buyer an investor to be buying
stock when they don't have a job. So I honestly think that the market's going to do a little bit
sideways. It's going to be flat, but probably at the end of the year, I agree with Dan Niles on
this one that we're going down. I think Thanksgiving is going to be a rough timeframe,
but I also believe that this is still a stock picker's market. I still think that AI is in the front running of this.
I also think that we're very, very close to catching some of these to the downside.
I think you're going to see people just trying to pull some money out and put some money in the sidelines and waiting for a better entry point, I should say.
Didn't Daniel say, sorry, man, didn't Dan say that the market's going to rally until
Thanksgiving?
Yeah, that's exactly what I'm saying.
He said that Thanksgiving will be rough, but everything till then should be the upside.
But I still think, I think sideways all the way out to probably February or March of next
year.
I think we have a big sideways market here.
If I were to go back and think about it,
how the markets are right now with the economics,
we're very much like the 70s.
We're very much like 08 was.
I always tell the picture of,
if you remember the old show,
the little mountain climber going up on the price is right,
and then everybody's happy, happy, happy because it just keeps going up and then the lady can't figure out when to sell
right that's when everybody gets dumped on i don't want to see that happen to people i want to see
people making smarter moves here and not not just buy every dip and hope and hope and pray that the
markets pay themselves off right i mean the markets aren aren't time they've been paid for it I mean you know we'll
see we'll see it's paid me too until until now I don't I don't feel as comfortable as I had in the
last two years that's fair that's fair that's fair you know you're entitled to that feeling
but yeah so it's important to keep in mind, you know,
that, uh, there's a lot of different opinions up here, obviously guys. So, you know, don't,
don't feel like you have to listen to anyone specifically, but always just, you know, do
your own research and, uh, formulate your own opinions that way. But, uh, Larry, I know you
wanted to jump in. I think you had a question or comment. Yeah, I just much love Big B. I just had one question relating to,
I kind of, I'm a little bit of a nerd sometimes.
So I just wanted to talk a little bit about the nuance.
When you say markets trading sideways,
you're talking about the indexes, right?
Yeah, yes.
Okay, so I know you mentioned Goldman Sachs,
which is in financials, and you mentioned a little bit of health care.
So you're kind of talking about seeing rotation under the surface a little bit. Is that kind of how you would describe that?
Yeah, I love that answer. That's right.
You know, look, we've been hitting up the tech stocks for so long that they're out of whack. Right.
And the rotation I see now is the rotation that
needs to kick off some cash. As I said earlier, it's got to be that Warren Buffett feel, right?
Is this one protecting me a little bit? We can't just always bet on AI stocks and always bet on
the next biotech hitting a home run for us. Right now, for me, it's all about, as I'm looking at
this, right, the rotation has to be something that matches what the economy is saying, right?
And what Powell is saying, that there's a housing shortage.
Great.
There's a housing shortage.
Let's figure out the companies that are part of that.
If the world is going to be investing into us, let's say Japan or the Europe is putting money into us because we have a cheap dollar, what are they going to invest in?
Are they going to buy a Microsoft stock? No, they're going to be buying
John Deere. They're going to be buying Caterpillar and things that help us build our own. And as you
watch Trump talk about it from the perspective of manufacturing, I had to look at manufacturing
stocks too. So I had to listen to what they have to say. Yeah. I like that answer. Thanks for
asking that question. Yeah. Because I think my second rebuttal to that would be not in an argument sense,
but it almost sounds like you think the economy leads stocks versus stocks leading the economy a little bit.
The reason I say this, I'll just say this, I'm thinking through this is you mentioned homebuilders.
through this is you mentioned home builders. Home builders have rallied, what have they rallied?
30, 40% off the lows. So I think, right, if you're thinking through home builders rallying,
to me, if you kind of look at some of the data, like that sounds like if we're building-
Not the home builders, Larry, but the things that are behind the home builders.
So let's say, for example, copper, like I said, Newmont mining, things that we needed
in behind that to actually make those happen.
If you look in California alone, just the home fires there, the amount of copper that
they're needing for air conditioners and things of that nature.
No, stocks have led the economy for the last five years. But that hasn't always been the case.
And that's what the problem is,
is everybody's in this mindset that,
oh, well, I got to keep buying stock
because the stock market tells me what the economy is doing.
And you know what?
The stock market has led the economy.
And I heard it earlier saying,
someone saying that, hey, you know what?
Retail has always been right.
Retail is almost, and I always say this all the time,
retail will win a battle or two, but they will never win the war. They always, they always never win the war. They
always win. They win a battle too, and it's okay. And I love that. I'm a retail too, and I'm
institution side. I'm on both sides, right? But right now the economy is not adding up to everything
else that's going on in the stock market. There's more- So you believe the economy over the stock market?
Today I do. Yes. Right now, I do. Yes. And I think that's why the rotation is happening right now.
And I think it's why you're seeing rotation in the markets. You are seeing rotation.
So you're seeing rotation in a more risk on areas to a degree though.
That's right. That's what I'm scared about. That's what I'm scared about. I think people are putting way too much risk on
and that's why I talk about margin.
Too much risk on right now.
I think the problem is that people are seeing
the economy is going,
oh, I can't wait for more AI.
Hell, I wrote AI five years ago.
15 years ago, I was talking about AI.
I'm excited about AI.
I'm glad it's here now.
But the problem is we've gotten too excited about it. It happened to, I'll tell you, let's talk about it. If you want to talk
about the dot-com, I mean, we were all there, right? So everybody's excited about dot-com,
dot-com, dot-com. But then you know what? Out of that dot-com, Amazon wasn't there.
Meta wasn't there. The ones, the companies that came out of the dot-com, ask MCI where they're
at right now. So there's a lot of, when I said the economy was way out of
whack back then, same thing. Those stocks that led had to be rotation changing, right? And that
rotation after that happened to .com was back into the Amazons and the Googles and the Metas that we
have today. That's how it happened. So we are going to start to see a rotation. And that's what we're
seeing now. And for those of you don't know i rotated back
in january into japanese stocks asian stocks and the european stocks and a lot of german bonds
why look at look at the numbers up they're sky high i'm not going to stick around and say okay
thank you and let's go keep adding to my german bonds because that's probably going to be out of
whack time to rotate out of that too if you yeah go ahead. No, I think this is good because I think as a listener for someone that might not,
like I'm a CPA and a CMT, so I kind of understand,
but I wanted to add some of that nuance to how you're looking at it for people
because I think it just helps give a better perspective
of kind of how you're thinking through it.
The thing, yeah, So is there any,
will you do any trailing stops then, or you'll just get out and what would make you get back in?
Those are my other two questions. So. It's a great question. And I never,
ever put a position on without trailing stop. I mean, that's just.
How would you rotate out if stocks are at all time highs already? No, a trailing stop
definitely can't be hit if stocks are at all-time highs already? A trail stop definitely can't be hit if
stocks are at all-time highs. That's a great question. I'll tell you two great ways of doing
this and that is how I get into a stock and how I get out of a position. I never go what I call
full boat. I'm always adding to it. If I believe in something, I will continue to add to it. If it
drops, excellent. If it goes up, excellent. But as I'm getting out of it, I will scale out as well. I never just go full boat, sell everything, sell a full position.
I never do that. I am scaling out of positions now and I'm scaling out of a couple of things.
I'm scaling out of LatAm and I'm scaling out of tech stocks right now. I think NVIDIA and these
companies are way out of whack right now. Will they go yes do i love nvidia chipsets hell yes but i think that they're way out of whack
right now so i am i am rotating out but i'm slowly rotating but i'm doing it in a way that's
methodical and and time interested and of course larry big shout out to cmt associations you all
know i'm huge family and friends with uh tyler Yeah. And you know, Tyler and I are good friends and he's on my board.
but yeah,
but when you ask those kinds of questions,
you know,
I mean,
I'm hearing that retail is so super excited because they've been buying up.
They're going to continue to buy and they're going to buy every dip out there in the world.
It's going to be,
let's,
let's,
let's be kind to the fact that anyone intelligent when they argue,
they don't use absolutes.
So every dip and always, I think, right? Like if you take basic debate, they're probably not
saying that, but I get your point, right? We're having a conversation. I'm more just,
I think the other side of that is from my perspective a little bit, right? Is the areas
that are leading the market are extremely offensive. If you look at the best three performing sectors or closest to all time highs, it's just consumer
discretionary, consumer service, communication services and technology, industrial, right?
So you still have within the market, right?
Even if you have that rotation, you still have this risk on view, which like you're
saying, if you think, you think it's risk on view, which like you're saying,
if you think it's disconnected right now, which obviously isn't going to show up in the chart,
which is fine. I'm going to be more of a trend follower where I'll be long at the top and I'll
lose 10% once we hit a trailing stop, but I don't sell in advance of something like that.
I get your view. It doesn't mean it, right?
Not my view, but I totally,
I think just adding some context around that
helped to make sense to people, so.
I've been trading stocks and trading
and looking at technical analysis since 1991
when I had it on graph paper and pen.
And I've helped, as you all know here, wrote most of the software that you use today, right?
So when I look at the markets and technical analysis
I have to also pull back on some of the things because I don't use 50-day moving averages anymore
Because why because everybody's using 15 200 a moving averages
I have to look at the perspective of Woody's CCI.
And I got to think about it from the perspective of if you're looking at volume,
how do I put my technicals that are volume added to it and not just what everybody else is doing, right?
Whatever trading view has as their default view, right?
That's not going to make the keys.
And I also have to look at it from the perspective of news. I have to understand it. One thing that Powell said today was very interesting.
He said, well, you know, we're following it, but our data is, you know, lagging. He finally
admitted that data that the Fed uses is lagging. I want to use data that's ahead of the game.
I want to use AI that's already factoring all that in before
it happens. I don't want to be the person holding the bag at the top. I want to be in before everybody
else is in, and I want to be out before everybody else is out. That's what a good trader does,
right? They look at the markets from an outside perspective and not just listen to every tweet,
whatever everybody else is saying, and put it all together and try to figure myself
out. I want to understand the world a little closer to how everything is reacting. And a good
example with that would be, we saw that there was this big weather pattern coming on the coast of
Ivory Coast. Great. Guess what? I'm not looking at my charts to see what Cocoa is doing. I know
Cocoa prices will go
up if there's a big weather pattern coming across the Ivory Coast, and it did. So I want to know
other things outside of just my charts, outside of what other people are saying, but I want to
know everything. I want to get a bigger, clearer picture. And right now, that clearer picture is
not very clear. And it's definitely not clear to the Fed, and it's definitely not clear to the fed and it's definitely not clear to
a lot of traders right now who are actually trading this sideways and that's why i think
it's going to be trading sideways because i think you'll see both sides i think you'll see institutions
start taking some off and in the ones that are buying the dip they'll be buying the dip and guess
what that creates a sideways market and that's why i think it'll be a little bit lopsided to
the sideways so that's that's kind of my thought process. And yeah, I love this.
I love this.
It's good stuff.
Yeah, good stuff.
Yeah, I just, last thing.
So if the market continues to make all-time highs, you won't get back in.
Like something like RSP, right?
Equal weight S&P 500 is sitting right near.
It's hovering near all-time highs, right? Stocks weight S&P 500 is sitting right near. It's hovering near all-time highs.
Stock's above the 200-day in every single sector,
just about other than defensive sectors, is above 60.
So you just...
Yeah, it's just interesting.
It's not my view, but...
In 1999, I walked in
Edward D. Jones' office
and I said, jokingly,
give me the best adage.
Give me some advice. And he goes, buy low, sell high.
And he joked about it.
And I'm like, okay, I get it.
Give me something I want to learn, right?
No, buy low, sell high.
Is it high right now?
Can it go higher? Yes. But is it high right
now? Yes. That's my thought process. And I've given about every reason why I think the market's
high. And the Fed's telling you it's high. Yeah, just talking a little bit, conversating a little
bit. Doesn't that now create a wall of worry? And then now a bull market has a wall of worry to overcome
because say someone like yourself, right? Who is thinking through a lot of things is now,
hey, now we have a worry because the Fed sounded a little bit confused, right? And you haven't
really seen a breakdown in anything yet from a price perspective, nothing's broken down. If
anything, we've seen rotation into more risk on areas of the market. Yeah, the dollar devaluing is a little bit happening. Yeah,
energy looks like it's starting to bottom, so you can allocate a little bit to energy. XLE,
I think, is a good trade. But you're not seeing credit spreads widening. You're not seeing any
risk-on, risk-off metrics kind of break down. You're not seeing breadth break down. You're not seeing any risk on risk off metrics kind of break down. You're not
seeing breath breakdown. You're really not seeing any defensive rotation yet. And all of those
things like in 99, 2000, 2001, well, actually the market didn't even top really. It was really 2001
when it really started to break down, but you're not seeing any of the signs from that perspective that would say it's
a top. Why not wait for those signs and give the benefit of the doubt to the underlying trend,
which is obviously up? Because the market is not a living, breathing thing. It is a machine.
It is not something that I go, I can't wait to crawl up
the wall of worry. I'm not looking at this market and going, oh, okay, my chances of making more
money in the market by going long here. All right, I'm going to keep buying them, keep buying on the
hopes and prayers that it keeps going up because somebody else will sell to me and I'll buy what
they're selling. And I don't want to be
that person. I'll leave you at this. I always say the same thing. I want to be the ticker taker at
the game, right? At the movie theater in a lot of ways. Picture this. When you're walking in the
movie theater and the person's taking your ticket or checking your ticket, I want to be that person.
They don't know where they're going to. I already seen the movie, right? So, okay, great. I'm going
to take your stock because I know the stock's going to hire, but when they've seen the movie,
when they've seen it, I want to be the ticker ticker at the end. Cause I'm gonna say, okay,
thank you for your shares. I'm out. I already, I've already seen this movie. Now you've seen it.
Now you're not looking to it. That's kind of how I feel, right? I feel like the movie's played out
here a little bit. And I think we're too high right now that's why i'm a little concerned and i don't want to crawl this uh up this wall of worry i want to
take my money and go buy another boat right and i'm concerned that a lot of people right now
in in the in the and especially in the retail sector of this side that they're just buying
because they are hoping and praying that that keeps going up and keeps going up. I have a question for you.
I want to understand your thinking because I'm a little lost.
Are you a technical guy?
Would you describe yourself as a technical guy, a fundamental guy?
How do you pick your stocks?
Yeah, all of it.
I'm all of it.
What would you primarily describe yourself as?
When you're picking stocks, are you more of a fundamental guy or more of a technical Oh, I can tell you right.
Are you more of a fundamental guy or more of a technical guy?
I'm a thesis trader.
I've always been that way.
My thesis is based on everything.
Okay, cool.
The whole story.
That's right.
I've always talked about that.
So, yeah.
I have a couple questions.
So, is there anything about any of your individual stocks that's worrying you?
Or is your concern entirely macro related?
That's an extremely good question uh there are a couple of stocks that are bothering me right now and i'll tell you one i'm gonna ask you just a couple rapid fire questions we're just gonna do
a quick back and forth if you don't mind so okay what what what stocks are bothering you and what
about them is bothering you fundamentally ipos ipos are bothering me right now i'm not talking about like
i'm talking about the stocks you own oh okay the ones that i totally own all right are any of them
like are any of do you look at any of the stocks you own and are any of them bothering you and if
if they are what is bothering you about them either technically or fundamentally you can tell
me either or royal caribbean is a good example that i've been very
long i've been very long cruise ships because i think that the thesis behind that was very simple
that everybody was what's bothering you about it like what's bothering you about it right now
the price when i bought it was under 100 the price today okay is there anything about the
company that's bothering you like is there a debt load problem or is there like a massive drop-off
in demand they're seeing or like is there anything like that going on with the business that's bothering you?
Yes, if people are doing their jobs, they're not going on cruises.
So that's following me, right?
Did that happen, like last quarterly results?
Was that shown?
No, it did not show me the last quarterly results.
That's what I'm saying.
Let's try to avoid the speculation because I'm not –
I want to be behind the game.
I don't want to be behind the game.
I just want to understand your thinking.
okay.
So with the Royal Caribbean,
nothing is bothering you as of right now,
with the current data based on the last report,
there's nothing about the company that you're like,
Oh my God.
People can't afford to go on a cruise right now.
Cause I'm losing their job.
You're speculating,
right?
You're saying you think that people are not going to be able to go on
cruises, right? But right now, that hasn't
reflected.
That's why we're investors.
I'm not asking you for the speculation. I'm saying, is there anything
right now with
any of your holdings, any of the stocks you own?
I don't know all the stocks you own. Is there anything that's
bothering you about any of them?
That's just a simple question.
Based on what's happening right now. Uber is's happening uber is bothering me right now i'm because i think the waymo and i think that they have a lot
of uh other companies not what you think might happen right like let's avoid i know i know we're
i'm a speculator too brother i'm a speculator speculator too. I'm trying to make a point.
What I'm saying is that is there anything that's bothering you right now?
In Uber's last results, did you see
something that's bothering you?
Yes or no?
Well, I think they kept talking about
all the competition.
Okay, so Uber's remarks
about the competition, but is there anything about the business
that is bothering you?
They said the margins were not as up to where they thought it could be.
Okay, cool.
Okay, that's one.
Okay, now can you bring up another stock that you own?
Tell me a problem with it, like something that's going on.
Again, same situation, Domino's Pizza.
Okay, what's happening there?
Yeah, I think people are not going to be able to afford going to Domino's Pizza.
No, no, no.
Not what you think might happen.
What's happening there?
Did something happen in Domino's last quarter that was a red flag to you?
I don't know that it's a red flag, but I will tell you.
Give me another one.
The CEO of Domino's pieces is bothering me.
I'm just going to skip this now.
Do you see the point that I illustrated there?
Not really. You don't get it?
How many stocks do you own?
How many stocks do you own?
Hold on.
I'm trying to illustrate a point.
Let me get some traction here.
Nobody invests for the past because you're looking at the past.
I'm not looking at the past. You're not getting the point
I'm trying to make.
How many stocks do you own?
84. You own 84 stocks right and i just asked
you like in succession six times name a stock and name a problem with it and you had to search
for answers i'm not knocking you i'm not knocking you what i'm saying is no you asked you had to
search for individuals in the stocks that just you own right and what i'm trying to say to you is that
if you look at the market in a micro or a macro view in a technical or a fundamental view whether
you look at the quarterly earnings calls or the charts the amount of concern is not as much as
the speculation would imply that's what I'm trying to say.
And like I hear you on this could happen.
This might happen.
Maybe the consumer falls off a cliff after posting 0.6% month over month retail.
I don't know.
Maybe. Maybe the consumer falls off a cliff or maybe inflation rips to 6% at the end.
rips to six percent at the end like i don't know these things could happen i don't have a crystal
Like I don't know.
These things could happen.
I don't have a crystal ball, right?
ball right but what i'm saying is is that i do what i was trying to illustrate there was that
even you who you're you're you're voicing macro concerns right now with us which is fine
but even as somebody who's voicing macro concerns even you're having trouble finding those concerns
realized in the micro even you're having trouble finding like
you're having to think like i guess but i am rotating though out of 84 stocks the first thing
you thought of was uber's margins are down a little bit like that was the red flag out of 84
stocks you said you own 84 stocks right i asked you the question the first thing that came up
is like uber well their margins were down isn't that pretty good like isn't that pretty good and then that
could be the worst thing in a basket of 84 stocks the worst thing you can think of is
the margins are down a little bit to me that's well i don't that's a huge example i don't think
that they're they're somewhat going to do well i invest because i think they're going to do very
very well and when they're not doing very very well then i gotta go you know what i gotta find out for somewhere else that's what i'm trying to say i don't i think you're
when you're pinching a stock for a dollar or two that's great to trade tesla but if you're looking
for bigger moves 20 30 40 percent that i am i have to go find those stocks another way i can't just
do it through technical i got to find it for it's got to have a story behind it And I gotta have a thesis behind it and then I'll then I'll use my technicals
And then I'll use all the other things that I that I use with it, too
But you can't just say oh well, the margins are not so good
So so big beat says I should sell out my stock
It's not I'm saying I'm saying what I said earlier
It's a scale back and to rotate because people are too excited about buying stocks that aren't quite aren't quite giving you the alpha that you need anymore.
Yeah, no, I get that. I get that. And rotations are going to happen in the markets. And I'm not saying you have to be in the same stocks.
What I was just trying to illustrate with that, I wasn't trying to be facetious, was just that a lot of times, and i don't just feel this way with regard to your
commentary i feel this way a lot in markets is a lot of times people
project narrative concern about the economy and what i mean by narrative concern is things that
haven't happened yet on to the broader market and to me that you mean black swan so many times i thought i was gonna
i mean yeah that's true black swans can happen at any time and you're right maybe
maybe you've you know what maybe this is gonna be a miraculous space and you call the black swan
and i don't know you know maybe maybe you're right but like i just don't think in the like
But like, I just don't think in the like, you know, and you've been doing this a long time.
And I think for people who want to do this for their whole life, I don't think they can be in the practice of trying to guess when those things are going to be happening.
Right. I've never guessed in my entire life and I'll never guess now and I won't guess in the future.
I don't guess ever. I only think with certainty, the markets are going to crash no i didn't say that oh okay so what do
you say what i am saying is i want to be ahead of the game as i said i'll be a ticker taker i want
to be the person that's what i mean by guessing i mean like you're not all right 100 of the time
right no one is i was the last four on your show. I mean, I got the last sell-off correct back in March.
So, I mean, you gave me crap.
I mean, you called it a little prematurely, but yeah.
I mean, you know.
Look, in hindsight, we can go back and make a lot of different comments.
But I'm not discussing your record.
What I'm saying is that, you know, no one's right 100 of the time no one not you me or anyone and me
yeah from a probability standpoint what i'm saying is is that the average person cannot
predict not even the average person no one can accurately and consistently predict black swan events. No one in the history of the world ever. Right. So what's the point?
Yeah. I mean, if somebody told you, if somebody told you, Hey,
there's this thing that no one in the history of the universe has ever been
able to consistently predict, I think you're going to venture to go predict it.
I wouldn't is what I'm trying to say.
Black swan events. I just think I said, maybe you got that wrong.
I don't bet on black swan events. I don't think I said, maybe you got that wrong. I don't bet on black spot events.
I don't care about black spot events.
I'm not saying you bet on them.
I'm saying it's impossible to predict them happening.
Absolutely.
There's no one can predict that.
Absolutely.
100%.
Right.
Yeah.
So because we can't predict it, then I don't want to say why worry about it.
Yeah, you should worry about the possibility of it.
I'm not saying people should just be completely risk,
ignore risk completely.
That's not what I'm saying.
I hope so because that would be crazy.
I mean, risk is the whole game, right?
The whole game is risk management, keeping your capital.
I agree completely.
Risk management.
Okay, please say that.
Yeah, no.
I don't want people to misinterpret what I'm saying.
I agree that that's the entire point.
But what I am saying is that trying to predict when the markets are going to correct is a fool's errand.
Trying to predict when the markets are going to crash is like, the market's going to crash at the end of the year.
That's a losing game.
You know, you might be right one or two times, but you're not going to be consistently right.
And so that's why I can constantly advocate against people.
OK, so I was asked what my thought process was and what my thought was in the future.
Where is yours? Where do you think the market ends up?
And I said by Mark,
I think we're... The beauty about my process,
B, is that I don't
worry about those things. I don't worry
about...
Tell me where you think the market's going to be.
I'm a trend
rider, and for now, the trend is up.
And I've been riding the trend
for the last two and a half years up.
And for me, that's how I operate.
I don't do, hold on, let me finish.
Let me respond to your question.
I don't do S&P 500 targets at the end of the year.
I don't own the indexes.
I don't make crystal ball predictions, right?
But I have thousands and thousands of people that follow me in the markets.
Why?
Because I make micro calls.
I pick stocks. That's what I do. That's my game.
Right. Everyone has a different game. That's my game.
So for me, I get this question a lot. Where are markets going to be in six months?
Do you think the market's going to be up or down in six months?
And what I say is that's a fool's game.
Who cares? Follow the trend.
You know, be in the best stocks, in the best teams.
I said finding it.
That's my philosophy.
So for me, I don't, I never have ever needed in my life to predict where the markets are going to be in six months.
And I'm not saying you're doing this, but I think for the most part, people who do that, for the most part, not you, for the most part, people who do that do that just so they can say, I called the top.
And for me, I don't give a shit about doing that.
So I stick to the trend, I ride the trend, and I ride the stocks I know.
That's right.
That's what I do.
Agreed with that.
When I was asked about where I think the overall market is going to be, that's what I kind of said.
But I also said specifically that this is a stock picker's market.
I believe that this is going to be a stock pickers market and we got to be right in the sector because the sectors.
And I believe and I always say this all the time since the CBS here the other day that we also got to find best in class.
So whatever the best in class is, is what you need to be thinking about.
Right. If you're looking at and I think I just said cruise ships.
Right. Well, OK. I think Royals is best in class.
If you're looking at, you know, but that's what I'm talking when I talk about sectors. And I talked about Newmont money,
because that's the best sector stock, I think, in copper. But I think copper is the thesis behind
it, right? If I thought about weight loss drugs, which was my thesis two months, three months ago,
right? I was Eli Lilly, I got it right. So, you know, that's what I mean by stock pickers markets.
What I mean by thesis is what I mean by investing. But when you talk about it from the perspective of longer term investing, look, the markets only go one direction.
Your chart goes to bottom left, top right.
It's always been that way.
Don't believe me.
Go look at the charts from 1911.
Right.
So that I agree with you.
But right now, I think we're I think we're topping out here.
I really do.
I honestly believe that.
That's my thesis, and I think we're taking up on the time.
But I really enjoy this, guys.
This is good stuff.
I love it.
Yeah, no, great.
We always welcome other opinions.
It's always a little bit of a back-and-forth debate on here, but we appreciate that.
And if you're right, we'll absolutely give you your flowers.
It takes balls definitely to call the top when market structure looks like this.
Yeah.
Props.
Props for the bull.
Thanks for having me on, guys.
You all know how to get me up on Twitter.
But listen, I can tell you, I have been this a long time.
And I'll tell you, Stocks on Spaces is one of the best places for spaces on Twitter. So, guys, if you're not following them, please, for the love of God, follow them.
And Wolf is here, too, man, and give them that love and the like.
Because, you know, look, he's right.
We don't always have all the same opinions.
Nobody does.
And because of that, that's what makes a market, right?
If I'm always agreeing with everybody else here,
then there's no market.
We don't have a market.
That's what I'm saying.
What I mean when I say the market is mechanical.
It's not, there's no emotion.
If you have emotion in this market,
you're definitely getting beaten up, right?
But if you, as an investor, as a trader,
don't be a gambler.
All I'm asking you, don't be a gambler.
Be an investor investor do your homework
get with thesis and if technical trading is your thing because everybody knows here i love cmt
association tyler wood is on my board i love that technical and i've been doing technical analysis
forever but it can't be everything and news can't be everything you gotta you've gotta be a more
well-rounded investor and a well-rounded trader and you'll do you'll you'll beat the averages
that's what i love about it.
And I think that with Stocksless Bases and Wolf and the team you guys have here brings those
quality people to listen in. It's not about what does the kid who's been trading for five minutes
going to give his opinion. Some of us here have been doing this a long time, and you have really
given a voice to those people that are quality, not just talking heads on TV.
And I love that.
I mean, Jay Woods and I have been doing this for, I don't know, God, 17, 18 years now.
We started out together in money.net, right?
Now he's CNBC contributor, one of my dearest friends.
That's the quality that stocks on space.
That's the quality that Wolf brings here.
And you got to love that.
Big, big shout out to you guys.
Thanks for having me again.
I appreciate that. Yeah, man, I appreciate that yeah man appreciate it please take it easy cheers what's going on urkel
i see you jumped up here what's up buddy yeah what are you thinking about the action today
obviously we're keeping it a little more high level but you know what do you obviously have
some great technical commentary to give so what do you think about the action the indexes today
look at the end of the day, we kind of traded flat.
Bitcoin and Ethereum are stuck at resistance.
But I just got to say a few things about everything that just transpired, man, because that's the kind of stuff I tell people that want to learn not to do.
Everything the fellow before that you were just debating with was saying he is ultra biased
like in terms of bias he is so biased and trading with a bias is where you either miss out on big
moves or you sustain significant losses and he was extremely biased by calling a top and you know he
went through his examples and such but to all new, look, the market is frothy or it's getting there.
Valuations are much higher.
The risk reward is far more skewed today than it was in April.
But fighting trend is the quickest way to lose money in trading stocks or investing or whatever.
And I just, man, I just had so many
issues with what he was saying. And I had to hold back because everything he talked about
was bias. And all he did was talk about a 30-year track record and why that gave him credibility.
And with all due respect, certainly experience brings with it a certain amount of knowledge,
but it's not everything.
Just because you've done something for 30 years doesn't mean you're great at it. So
if there are any new traders listening who just listened to everything there for a guy calling
top, look, he could be right. We've had people on Twitter after the 2022 downtrend, the year-long
downtrend, who called top during the 2023 rally all the way up and missed
the entire run or shorted it and lost significant amounts of money so i just um sorry i just got off
an elliptical machine which is why i'm out of breath i'm not stressed out but i just wanted
to say for newer traders like do not trade with a bias. The market trend is up. It certainly is a stock picker's market, right?
And during the April lows, you could buy anything, hold it, and make a ton of money.
You can't do that now.
And that always happens once markets kind of start to stabilize.
So, you know, in an uptrend market, breakouts tend to follow through.
Like, every type of market has a personality. In uptrend markets, breakouts tend to follow through. Like every type of market has a personality.
In uptrend markets, breakouts tend to follow through.
Stocks tend to continue higher.
Good news tends to carry a stock higher, et cetera.
And the opposite is true in downtrends.
Breakouts often fail.
Supports break down.
You begin to zigzag down instead of zigzag up.
So in terms of, you know,
everything that transpired today, what Powell had to say, the interest rate cuts, like that was all
expected. And the market reaction, generally speaking, was pretty flat. So I'd like to see,
you know, before I pass judgment, what the markets do tomorrow and what crypto does tomorrow and
Friday, and then get a better sense of where we're
at. But I'm not personally fighting trend. I'm definitely trimming my stocks like every swing
I get into when it hits my target, I trim. That's just a virtue of my trading system. I just trim
in strong uptrends. I will trim 15-20% of my position in weakness or in more questionable times I may trim 50 percent or exit at my first target so I
Continue to do that and then when we get the pullbacks the 0.618 fibs a number of stocks have done that recently I posted several
ASTS being a great example landed at 36 last week and has rallied back up over 40
Plenty of stocks have done this over the last couple
weeks. There was a bit of a lull in the market two, three weeks going into last week. So,
you know, I'm continuing to ride the trend. And in terms of today's reaction, I need more
information. I need direction. And what I see is markets holding the 5.9 EMAs, which is like an ultra uptrend.
We're above the 20, 34, 50, every short-term trend.
And SPY does have room to its 1.618 FIB extension level, which sits just under 700.
So again, markets are super extended, but I don't think calling top or fighting trend is prudent either. Just kind of
my advice to people that haven't traded for long periods of time. Follow the trend. If the trend is
up, stocks can still pull back. Identify key pullbacks and uptrends. Those are great risk
reward opportunities to buy. Robinhood was one, Palantir just did something like that.
buy. Robinhood was one, Palantir just did something like that. Tons of stocks, crypto stocks. So
sorry, I just had to kind of jump in and provide my opinion on that. If you trade with a bias,
you will often miss a big run because you're waiting for something to happen that may or may
not happen. Or if you actually take action on your bias and fight the trend, you can lose
significant amounts of money.
So that's all I wanted to say.
Appreciate it.
Appreciate those thoughts, Erkel.
And if you have a chance,
we'll definitely see if we can come back around to you
and get some technical thoughts for sure.
Ali did get a free moment to pop up here with us.
So I would love Ali to jump in the conversation here.
And Ali, we heard from Powell.
We got the 25 basis point cut.
Just curious, in your circle, what's the first thoughts that have been coming out, the reactions?
How are people taking this?
I mean, it's obviously the market pretty neutral overall.
Overall, what are the thoughts?
What are the thoughts?
Yes, crazy day, guys.
The main takeaways that I've been hearing is that the press conference, Jerome Powell was maybe a bit more hawkish than that rate cut and policy statement might have suggested.
So, Powell, he did say that this was a risk management rate cut.
He really emphasized that the committee was going to
proceed on a meeting by meeting basis. So really kind of pouring cold water on the fact that there
was a lot of dispersion. He said that was a natural thing to see, especially given how unusual
the current market dynamics are at this point in the economic dynamics because we do have
inflation still sticky. We have some evidence of tariffs pushing goods prices higher. He did say
that he thinks tariffs will lead to a one-time price increase. And at the same time, you have
the weakening labor market. And that was something that was definitely emphasized to the press
conference or the policy statement that the risks are now tilted to the downside for the labor market. It's not as solid
as the Fed initially expected. And I think that was widely anticipated by markets considering
since that last Fed meeting, we saw significant downward revisions. We've seen minorities,
we've seen young Americans, there's been more evidence that they're having a harder time finding jobs. Jerome Powell specifically called it a low hiring, monetary policy stance. So you could also view that as a bit more hawkish
than maybe we initially thought coming into this report, coming into this meeting. So, you know,
the Fed is still taking this overall cautious, gradual approach. Interesting to see that there
was only one dissent with Stephen Myron for 50 basis points.
I thought maybe we would see three descents. So even though there was a lot of dispersion in the
dot plot and the expectations for rates over the long term, it feels like most FOMC officials were
aligned with that 25 basis point cut. And with three total cuts expected in 2025, that broadly aligns with
what markets we're expecting as well. And we've been in this series of consecutive record highs
for both the S&P, for the NASDAQ. So I'm not totally surprised to see a more muted reaction
here in equities right now with a mixed picture on Wall Street, the Dow leading the way higher,
NASDAQ, the biggest laggard, but not doing too badly considering that report that we got with
NVIDIA and the restrictions in China. Obviously, that's a big story that we're going to continue
to watch as we continue to track the AI trade. But yeah, those are my high-level points that
really the Fed is still kind of acting from a place of caution and really emphasizing the data. It's easy to get caught up in the dot plots, but even Jerome Powell himself said that this is a particular moment in time, 19 different opinions.
they're not meant to be taken as gospel. But I do think it does show that no one really knows
what the outlook could be for the economy. I think that was actually a specific quote
from Jerome Powell, how we possibly don't know how this is all going to unfold,
considering we are in such unprecedented times. So those are just sort
of my high-level takeaways from the press conference. But even though they focused on
the labor side and the unemployment rate, the labor market at large, they still didn't say that
the inflation side of the equation has been totally eradicated. We are still definitely significantly above the Fed's 2% target. The FOMC officials are still forecasting that 3.1%
core BCE by end of the year. This is similar to what we saw in June. However, in 2026,
inflation expectations did tick up a little bit. And I think that's something that you could see
being reflected in the bond market. And I'm that's something that you could see being reflected in the bond
market. And I'm going to be watching the bond market closely over the next couple of weeks
and months because that's going to really tell you where markets are seeing things. And you could
see that the 10-year treasury yield, I'm looking at it right now, up around five basis points,
trading above 4%. I believe the 30-year yield is up as well.
Yep, up around three basis points.
So yeah, just something to keep an eye on
because the bond market is really going to tell you
whether or not investors are getting a bit spooked
on the inflation or growth side of the equation.
The entire conference was very interesting.
I thought the questions were very
well posed. And of course, he didn't bodge on several of the topics like we figured he probably
wouldn't. The interesting thing, and you mentioned this a little bit, he mentioned the job gains had
slowed and that unemployment rate was edged up, but he also threw in AI. And I think you had some
commentary around this the other day, the curious case of a jobless expansion.
Does that kind of fit what he's saying?
And what are your thoughts around that piece?
What were you kind of hinting at there?
I know you had a great piece on it, but I was just curious if you wanted to share some
of those thoughts here.
Yeah, thank you.
Yeah, so the jobless expansion was something that I noticed in a lot of the Wall Street
noticed in a lot of the Wall Street commentary. And it basically is this argument that you can
commentary.
have weaker jobs and that pushes the Fed to cut interest rates and then lower rates lifts
valuations and solar wage growth fattens margins. So it's this counterintuitive notion that rising
unemployment coincides with rising stocks. Typically, that's not something that we
see. However, we have seen that in the past. Piper Sandler had some data that pointed to past cycles
in the 1950s, 1960s, and early 1990s when weak jobs did pull rates lower and that fueled this
equity rally. And across Wall Street, we've heard from several strategists that a
cooling labor market in many ways is a tailwind to corporate profits because wages are probably
the biggest line item on most companies' balance sheets. And they're decelerating because we have
this low hiring environment. AI is certainly part of that equation. When you think of entry-level jobs, I think
maybe that's why we are seeing some younger Americans struggle to get those jobs. I believe
young Americans, the unemployment rate there, 16 to 24-year-olds, that's at 10.4%, so above 10%
for the first time since the pandemic. And it goes back to this point that what hurts
workers can help lift stocks only to a certain point, though. I think eventually you want to
make sure that the economy is not weakening to the point where people are losing their jobs
and then they're not spending. And that's something that Jerome Powell alluded to a little bit.
Even though we haven't seen mass layoffs, the fact that we have seen such a slowdown in hiring makes that risk all the more pronounced.
If we do see more layoffs, if that does lead to a spike in the unemployment rate, because if people don't have beating expectations, a strong back to school season. And this is coming as sentiment data has definitely soured. So I think we're back to that point where we have the hard data holding up quite well, whereas the sentiment side, the survey data, that is starting to fall back a little bit.
the survey data, that is starting to fall back a little bit. And to the point of the resilient
consumer, GDP expectations did tick up this month versus what we saw in June for those FOMC
projections there. So the economy is still expected to grow. But again, if we do see a
surprise spike in the unemployment rate, if we do hear more
companies just mass firing employees, that's going to be a risk. The good thing there, though,
is a lot of economists that I talk to say that companies have learned from the past.
So during the COVID era, there was a lot of firing, pretty knee-jerk reactions. And then it was really difficult to hire those workers back.
So companies are really cautious before enacting mass layoffs. They would rather just, you know,
try to move money around a little bit. Again, maybe not backfill if people leave certain
positions. And I think that's definitely an anecdotal piece of evidence that you can point to, because even in my current circle, I hear a lot of companies are not backfilling positions.
But if that, you know, eventually leads to unemployment rising, then that is your biggest concern here. So that disconnect between Wall Street and Main Street. And for now, it does seem like
Wall Street is thinking we can be in this era where we have a jobless expansion and stocks
just continue to see record highs. Yeah, I love those thoughts, Ali. I'm going to go to Urkel's
hand here. And then if you've got time, we'll definitely come back around because I've got
another question or two. Urkel, comment, question? Go ahead, jump in.
Yeah, I had a quick question for Ali.
And please forgive me if I sound completely incoherent because this isn't my area of specialty.
But I thought I heard Powell suggest that the unemployment rate may have something or may be impacted by lower immigration levels, too.
And we know that we've had a lot of foreign workers recently
removed. Do you know if that may then potentially lead this to be more of a short-term temporary
issue? And what are your thoughts on that? If, again, my question even makes sense.
Yes, it does make sense. And I love this question because I've been thinking about that a lot. It's
really a supply versus demand issue, right?
So even though the unemployment rate is still pretty low at 4.3%, that could be due to the
fact that we have way less supply in the market due to those immigration restrictions.
And that is keeping the unemployment rate low and maybe not truly reflecting a lot of
the weakness that we're seeing in the
market. So that's why you need to look at not just the unemployment rate, but really the data
in totality, right? Also look at the jobless claims, continuing claims. Those are Americans
that continue to file for unemployment benefits. If we see a spike there, that could maybe give
you a little bit more of a clue as to what's going on underneath the surface.
And even the number of job gains. I spoke with an economist recently who told me that we might
be in an environment where we increasingly see job gains below 100,000. That's something that
we haven't seen in quite some time. But because of the immigration restrictions, we could still be in a healthy
economy and only be adding 50,000 jobs. How long that takes for markets to accept that,
I think is another question because there definitely is that digestion period where
we need to get used to that. But the immigration part is certainly throwing the data or at least how we analyze the data for a loop
because we haven't seen this in a while. Immigration has propped up a lot of different
industries and I think specific sectors, it's going to be interesting to track to see the
changes there with construction. One of those, for example. So yes, the supply versus demand
is a big part of why that could be keeping the unemployment
rate low and maybe not totally reflecting some of the weakness that we're seeing in
certain industries.
That was great.
Ali, I'll throw another one at you because I'm curious, just from the highest level,
is there really something to take away from this or is there maybe more confusion even after this
meeting? And what I mean by that is Powell was pretty straightforward, but I don't think there
was any earth shattering things that came out of this. And if anything, you know, with Moran's vote
being in there and kind of maybe skewing out the dot even further, is there just more uncertainty of the Fed's path or is it more solidified or is there just kind of a nothing burger?
Yeah, I think there is know, Powell talked about a lot of the risks that we've been discussing, the tension between the Fed's dual mandate.
And he really kept emphasizing how strange the current dynamic is and how unusual the economy is at this point.
And then we've been talking a lot about AI. You throw that into the equation.
And again, it's just this unprecedented moment where we have the highest
tariffs that we've seen in 100 years. And on top of that, AI is disrupting every single industry.
And we also have this immigration crackdown. There's a lot of different forces that the Fed
really can't predict what could happen. And again, that's something that Jerome Powell said. He said, you know,
there wasn't widespread support for a 50 basis point cut. And I think a part of that is because
of the strength and resiliency that we've seen in the consumer, the fact that we're not at the
point where the labor market is falling off a cliff. The question mark, though, is how close
are we to that tipping point? And will it be slow and gradual or will it be something
that maybe comes out of nowhere? And that I think is the biggest question that a lot of
economists are trying to parse through. I'm excited to kind of dig through my inbox a little
bit more and see what the takeaway is from folks. But judging from the market reaction, now a lot of
this had been priced in. It feels like a nothing burger. But I think that we didn't see any big
surprises, right? I mean, if the Fed came out and cut 50 basis points or not at all, you certainly
would see some volatility. Heading into this, there were some strategists who said this could
be a sell the news event. But we're not really seeing crazy, crazy moves in the stock market.
It feels like we are going to see those moves maybe as the data continues to come in.
And I'm talking about the jobs report, continuing to see the inflation report.
That is really where we're going to glean where the economy could be heading, how healthy the economy is at this certain stage.
The Fed seems prepared and ready to adjust policy as needed, but they're not going to be making any aggressive moves in the interim.
That was sort of the takeaway that I got from the press conference.
As you said, Jerome Powell, very straightforward.
I also thought that the questions were interesting.
And really, he seemed to stress, again, just a lot of the unknowns that are out there right now and how quickly things can change.
So there's still a lot to be determined here.
And I think the bar for a dovish surprise was high, and the Fed only met some of those expectations. That has been some other takeaways on Wall Street today as well.
Yeah, Ali, I really appreciate you coming on and joining us and sharing that.
It just, to me, it seems like maybe there's maybe some more uncertainty within the Fed
itself, but the market looking at it going, well, as long as there's no big surprises,
we're okay with where things are at.
I mean, in a simplistic view, that seems to be the main takeaway.
And then to your point about the data, just maybe this last question, when
several people have voiced and some on this show and other places that the data itself,
before we really see any full-on effects of anything with the tariffs, obviously AI is
essentially affecting the job market in ways that is starting to show up. Maybe we heard
Hal mentioned it multiple times,
but maybe it's another couple months of data
before we really see anything actually materially change.
Yeah, and that's something that we consistently were told
that this is really going to be a second half of the year story,
particularly when it comes to the tariff impact.
We saw a little bit of that in certain categories.
Goods inflation in particular edged up a bit in August. So we are starting to see some tariff
pass through. But up until really recently, a lot of businesses have been absorbing a lot of the
costs and not necessarily passing those costs on to consumers. But that can only last so long.
And we have earnings season coming up in just a few weeks.
We're going to be getting a lot more clarity on that front.
Are businesses raising prices in direct response to tariffs?
How much of that are they passing on?
How much are they absorbing?
But we always knew that this was going to take time to show up in the data.
And a lot of the data is backward looking, too.
So it's hard to really get a true sense of where we are in the current moment and how restrictive monetary policy truly is,
which is why I do love earnings season so much and listening to the calls.
What questions are executives getting? How are they responding?
Because that feels a little bit more current. And if you kind of pair that with the rest of
the incoming data that we've been seeing, I think that can, in totality, give you a better sense
of where the economy is right now. So really pay attention to this earnings season too, because
I do think we're going to hear a lot more when it comes to how tariffs have been impacting individual businesses.
Yeah, I don't have like a full transcript or anything, but just thinking back, we heard him talk about AI a couple times, heard him mention immigration.
I don't think I really heard much about tariffs this time around.
Yeah, not a lot. I think he talked about how tariffs, he expected it to be a one-time
pass-through, which that is what the textbook says, right? It should be a one-time price increase
and then things settle down. But again, we're in such unprecedented times here and the tariff
rate is so much higher than where it was at the beginning of the year, that there have been question marks when it comes to truly what that means.
Now, I will say that there was some reporting, some data out there that the U.S. effective tariff rate was currently around 9%.
And that is about half of what the projections were from Yale Budget Lab, for example, which was pegging the tariff rate at 18%.
And part of the reason for that is that companies have been doing shipments through other lesser tariff countries.
So trying to find ways to circumvent some of the higher tariffed countries.
higher tariffed countries. They've also just found different ways to absorb some of these costs.
So that's an interesting portion to me as well, especially considering all the carve-outs that
we've seen. And I think that that was another point why we don't have as high of a tariff rate
as we initially thought, because there have just been so many exceptions, so many carve outs to a lot of these higher level tariffs that when you really look underneath the surface, it's not as bad. maybe surprised some economists. But yeah, you're right. Definitely more of a focus on
the labor side of the equation and what we're seeing with the employment side of the Fed's
dual mandate in this press conference. And I think a lot of the questions were tailored to that too.
And I think there's no accident as to why, considering how we have seen those massive
revisions, those uptick in jobless claims.
And of course, the AI story,
you think that's only going to pressure
the labor market even more.
Yeah, absolutely, Allie.
I really appreciate you joining us
and sharing all those thoughts and insights
and look forward to having you back on soon
to get some updated thoughts
as everyone digests all this stuff. If you're not following Allie, definitely go in and give her a follow. And
that was a really good piece the other day, Allie. I enjoyed that read.
Oh, thank you.
Yeah.
Appreciate it. Thanks for reading.
Yeah, of course. Of course. Thanks to Allie. Gav, saw you hopped back up here with us. I don't
know if you digested anything and heard any of the commentary or the debates going on here.
But any updated thoughts as we rotate over?
I know we got Paul joining us as well.
And we're going to continue a discussion here.
Yeah, it's been an interesting day.
You know, nothing too surprising, right?
Obviously, with the basis point, 25 basis point cut, and then the rhetoric that we heard as well from Powell seems pretty straightforward from where we are right now.
You know, I closed higher on the day, which I love to see a lot of the risk on stocks that initially had that sell off right after pop back to the upside and held there.
So that's what I like to see. You know, I enjoy when things go as expected.
And I think that they were in line.
Great to see Ali up here as well as always.
Thank you for coming on.
I know it's a busy day in your world with FMC.
So I appreciate you making the time.
Yeah, thank you.
It's great joining you guys.
I love talking to everyone here.
Everyone's so smart.
And it's great to just kind of digest things a little bit after the craziness of the day.
100%. And we did just get Paul up here as well, I believe. Do we have you up here?
Yeah, I'm here. How are you guys?
I'm good. I'm good. Before we kick into things, do you want to share any thoughts on today's FOMC updates?
Yeah, I mean, I can at the risk of just boring everybody to death and just overkill.
I mean, I have a little bit of a different take always on the Federal Reserve.
The fact that so many people are paying attention to a 12-person committee, that says to me
all it has to about the power of one organization and how that drives all these markets.
And when we talk about independence, i'm a capitalist at heart i want to be able to look at things for what they are and not have to worry
about what some committee is going to decide or what they may decide in the future and how that
may may affect things i think we look at things completely um off of reality right so people are
worried about housing prices they think if the fed comes
in and lowers rates a tremendous amount well then housing is going to get more affordable no your
monthly payment will get more affordable but the valuation of the houses will stay up the problem
is not the fed or rates at this point in economy that's growing the way that our economy is growing
the problem is the valuations and the fact that we're in this mess because we were at a
zero interest rate policy for so long that valuations went through the roof and it makes
things hard for the younger generation to even contemplate taking on that kind of, you know,
loan or mortgage in a situation where, you know, how are they ever going to
be able to pay that off? And again, when you look at it, if this was a good system, if this
Federal Reserve System was a great system, when interest rates went up, valuations of houses
would go down. But that's not the way that it works because you have an army of people
that use propaganda and marketing and promoting in order to keep industries afloat.
So you're really not getting a free and fair market when you're talking about everybody keying on one thing in order to make sense of investing.
What I'd rather do is look at the actual investments themselves.
And I hope we get back to that place at some point.
But even the dual mandate alone,
and I'll finish on this, it's kind of counterproductive, right? Because if one of
your mandates is inflation and your other is employment, stable employment, but the way to
increase employment is by lowering rates and the way to increase inflation is by lowering rates,
well, then that's a problem. If those are the only tools that you have, that is a major problem.
And I think we have to start looking as a country at some of the other things that are going on,
all the massive deficits, the personal credit rates. When interest rates were at zero,
banks were still charging people APRs of 19 and 20 percent nobody said a word about that
which really really got people messed up you know when interest rates were at zero uh tuitions for
universities went through the roof and you know kids borrowed all this money and now they owe it
and they got to pay it back and they're in deep deficit so i think um elon musk said at one time and good engineers make
serious problems for themselves by solve by trying to solve the wrong problem and getting focused on
that and continuing to focus on that when they should just scrap what they're doing and fix the
real problem and if you want to ask my opinion i can't wait till we're at a point in the in the
economy and in the world where we don't have to focus on a monthly meeting by the Federal Reserve in order to make investment decisions.
I think that was very well put, to be honest.
You said it was going to be boring, but it was pretty entrancing.
So I'll make you take that back.
With that being said, you are capping off, I think, a lot of our thoughts here on FOMC for today.
We've definitely exhausted that topic.
So I would love to roll into a couple of other topics here that I know that we had planned.
And I was messaging with you the other day, and there were a few interesting topics that you had put on the radar.
And so just to kind of pull these back up and just as a reminder for the audience, been really exciting.
for the audience. Been really exciting. We've been working together with LeverageShares for a
We've been working together with LeverageShares for a little while now.
little while now. If anyone remembers, we worked together with them for the launch of UNHG, which
is Double Leverage UNH. And that has just done spectacular. So shout out to anybody that's been
in our spaces and been there throughout that initial downturn. And then obviously it's up
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bottomed out right around 1040 and it's at $20.94, a little bit over 100%.
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We've also done a number of shows together with them talking about their 2x cap accelerated
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So if anyone hasn't seen those yet, just Google 2x capped accelerated ETFs from leverage
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So, you know, Tesla drops 5%, you're only down 5%, but if it goes up 5%, you can capture
more than 5% to the upside.
That's kind of the theme there.
So you can look through Tesla, you know, over the past month.
So there's a couple of really good ones that we've been working with them on. And I think we'll continue some of those
conversations today. As always, we don't make endorsement recommendations of specific stocks,
ETFs, investments. We use these spaces as due diligence opportunities. And please
review any of the fund's prospectuses prior to investing. With that being said, I know a couple
of topics here were investment themes like AI, defense, and financials that we wanted to get into here.
So, Paul, I would love to turn it over to you to kick into those areas and start us off.
Yeah.
So, I mean, I think the last person that was on the line, I'm blanking on her name and she's not here anymore, but it might have been Allison.
You know, she talked about AI and how that's actually impacting
the labor market. And there's a reason for that. It's because, you know, we have this
unbelievable innovative technology that is doing work that a lot of human beings used to do,
doing it more efficiently, cost effectively, and quite honestly, producing, you know, in some
places, a better product, and it's only going to continue to grow and get better.
So, you know, instead of focusing on a Fed funds rate that really isn't going to impact your life too much one way or the other, if there aren't a lot of other changes, I tend to want to focus on places where I think I have a reasonable chance to make a good return in a risk-adjusted manner.
And so AI continues to be one of those places.
Everybody's very heavily invested in USAI, and I think that's a really smart thing to have a part of your portfolio in USAI.
So this is themes and leverage shares by themes.
That's who I represent.
I'm the chief revenue officer there.
And we have both leveraged, capped, accelerated, and thematic and sector-based ETFs.
And we have a fund WISE, W-I-S-E, that captures, if you're high conviction in the AI movement, this is an excellent thematic strategy at a very low fee that you can capture that.
But another place that people don't really think about, and it's very apropos for our discussion today,
especially in light of more news coming from China, that they are not going to make NVIDIA chips available in their country.
And Jensen Wang coming out and saying, hey, if we're not going to be available in a place,
then we're just going to not have to think about it or worry about it.
If they're not going to accept us, we're not going to sell there.
But that's China.
And earlier in the year, we did a lot of due diligence over the last year regarding Chinese AI, and we thought it was an excellent place for people to think about and do their due diligence, because if you're
going to isolate a market like China, the second largest economy in the world, and there's lots of
good reasons to do that, I'm not even trying to be political here that doesn't mean that china's just going to roll over and you know go crawl in a hole and die like they're they've got a lot of
talent a lot of expertise uh and some of the most talented ai engineers on the planet and so what
they've done is invested a lot of money both from the government and from uh private companies with
inside mainland china and they're building their own ecosystem and and they're building our own infrastructure
and it's doing quite well and we launched a strategy called dragon d r g n uh is the symbol
and you know this is a way to complement your USAI exposure by capturing somewhere around 48% of the entire AI market, which exists in China and in mainland Chinese companies. So they get all U.S. tax considerations and trading situations and all that stuff.
But it invests solely in Chinese mainland companies that are creating revenues and profits from AI.
And that's across software, data centers, agentic AI, robotic AI, so on and so forth. And so, again, when I look around and I, you know,
see movements being made by, you know, whether it's 25 basis points, three moves for the rest
of the year, five moves for the rest of the year, they're dot plotting, you know, what potentially
might happen. I'd rather look at what's actually happening right now. And what's happening right
now in China is they are committed to building and
continuing to build and grow their AI infrastructure, innovation, and prowess.
And there's a lot of money that's being invested in mainland China to facilitate that. And the
companies that are represented in our ETF dragon are a great way to capture that, complement your U.S. exposure, and potentially
increase your risk reward return profile. So it's a place that we really like. And again,
if this is about doing your due diligence, I would urge everybody here to start thinking about that,
looking at it, digging into it. You can find it on our website.
And it's a great way to capture it.
And to my knowledge, still, we are the only place that you can invest in an ETF, a U.S.
exchange traded ETF in Chinese mainland AI innovation.
It's super interesting.
I found this concept and I've been looking more into it and um i i actually
think i've seen uh there might be others starting to copy you paul because i've i've seen a couple
popping up in this area and it's a really smart idea because for the average and first of all i
see a ukdai as well in the audience if you want to jump up on stage, for the average investor,
you're not buying things that are on, you know, the Chinese stock market on the Shanghai or something like that. Like you just aren't going and getting exposure to these things,
right? Whether it's Foxconn or God help me how to pronounce Xiaomi, Xiaomi, something like that.
Like I've seen the company all over the place, but like people start getting exposure to these
things. And because of that, I don't think that the average u.s investor realizes
how nuclear these themes are going i mean you mentioned this etf right drgn up 40 since you
launched it in july it's been like two months right and it's just powering to the upside i
actually would really like to hear stock talks thoughts on this Stock Talk because we saw something similar, Stock Talk, when we were doing spaces with Adam from Vista
Shares, right?
And they had AIS and they had exposure to SK Hynix, right?
And it was like, wow, like that's an amazing stock that I can get exposure to.
And similar here, like I'm seeing a lot of names in here that really stand out to me
and are having an amazing year and I can't just go and buy them.
And so it makes it even like a bigger reason for me to focus in on ETF like this. And then just the overall thematic
of China. I mean, good Lord, have people looked at the Baba chart these days? Baba is just
taking the money and running to the upside here. I mean, it was even green today. It was green,
like two and a half percent today. It's up 97% on the year. So Stock Talk, I'd love to hear your
thoughts on this because,
listen, a lot of people say, hey, I don't invest in China. I don't trust it. But to be honest,
I don't think most of retail even has exposure to investing in most of the names.
Yeah, they don't. And I think if they're going to do it, they probably want to do it through a
vehicle of some sort. But yeah, I mean, I can't lie. I fall in that camp too. You know, I'm not a...
You don't trust the numbers? What is it?
Like, let's have a little back and forth here with Paul.
It's not the numbers.
It's not the numbers.
The numbers are great.
I mean, they're undervalued compared to their American counterparts in every way.
The China trade has been fantastic this year.
It was fantastic last year.
I've just never needed exposure to China in order to outperform, you know, as a stock picker for me.
So I've never bothered with
it and you know maybe i should but i'm one of those guys that's in the never china camp
um personally but all right so why should people like you know why should people come out of that
never china camp how do we convince them yeah you just have to decide whether you want to participate in high-conviction growth areas of the market.
And there's, you know, every once in a while, and it's generations sometimes.
I mean, if you ask, if you go to the 70s and the 60s, rarely do you have such a technological revolution like this.
So it's not about whether you can get it in the United States or not.
It's like, where else can I get it? It would be like saying like, you know, I'm a gold miner,
but I'm only going to mine gold like in Long Island, New York.
Well, good luck with that.
Maybe you find one gold bar there or something like that.
Or if you're really doing your job,
are you going to go find gold wherever gold is, right?
Like that's kind of what we're saying.
So this is a once in a lifetime
opportunity to be part of the technological revolution that is called AI. Like you don't
want to miss any of it. Like you want to get it wherever it is. So from my perspective, you
wouldn't just go, I wouldn't tell you to go invest in Chinese real estate right now. I wouldn't tell
you to go invest in other things in China, but this is kind of different.
This is like, you know, this is almost like the race to the moon, right?
Like when it was the U.S. and the Soviet Union, like you have to get there.
You have to do this and you have to invest money in it.
And you're never they're never going to walk away from it.
In fact, this is going to be priority number one, because there's so many other
consequences that will happen if you don't win and succeed here. So in that situation, it's really
not about China and it's not about the U S it's about AI. And if you want to capture AI, capture
it where it is, like, don't try to go somewhere else and find it and get as much of it as you can right that's
think about it this way that that's one of the wonderful things about bitcoin right you can get
it and you don't have to be in one particular place to get it right so that's why people gravitate
towards that as a store of value and all that other stuff right and again i would be on the
same boat if i had to go and invest in Chinese stock markets,
like figure out how to open up accounts there,
figure out how to do it legally,
take all the international tax consequence,
all that stuff, it would be a no game for me.
Like I'd be out, but you don't have to do that.
That's the greatest thing about the innovation of ETFs
and about firms like ours.
We're willing to go out and make that happen for investors.
So now you don't have to go and do all those fancy things
to try to get invested in Chinese AI.
All you have to do is click a button
and you're getting AI brought to you
from everywhere that it is.
And again, it's about that high conviction AI investment.
Get it wherever you can.
That's the thing that would change my mind
about making an investment in something like AI in China.
Not everything in China, but AI in China?
Yeah.
AI in India, if it starts to, yeah.
AI anywhere you get it,
as long as it's gonna be able to create the returns
that they have so far.
And so that's the way I would look at it.
Again, I am not telling anybody else what to do, and I'm not making a recommendation.
But if we're talking about due diligence and you're asking me how to think about that, don't think about where.
Think about what you're investing in and why it is so critically important for them to succeed.
And then you can make your decision.
I think what a lot of people do is they look at the volatility in China stocks.
They look at how the government acts in respect to the private companies that are there.
And obviously, there's a bias factor that most people uh if we're looking at adrs
generally are not in china like they're in the u.s right so we obviously have a massive amount
of exposure as well as capex being pumped to a lot of the companies here as well private investment
and we are the forefront center of investment like there's i forget where i read it but there
was at one point where you basically had the top companies in the US just larger than most of the markets in the entire world.
In fact, I think that still is the case.
But also for me, though, China, I have not invested in China long term.
But I think I mentioned last time we had these spaces, right?
When I brought up the DRGN, I think it was a couple of weeks back.
And I was like, hey, that looks like a sound investment right there.
Well, not like this investment, but it looks like an upside, asymmetric upside reward.
And it has been, right?
Like, I don't know percentage-wise how high DRGN is up, but I'm sure it's up a lot in
the last couple of weeks.
For me personally, I have not invested long-term in China, but just taking advantage of trades.
And I think you're right. I think that there is a race to unlocking
not agentic AI,
not the AI that we see today
in terms of chatbots and API calls
to algorithms and everything,
but more of artificial general intelligence
because artificial general intelligence
is really going to replace
pretty much everything that we do
and be able to learn at an astronomical rate
where you basically have AI and be able to learn at an astronomical rate where you
basically have AI teaching AI how to learn, how to train, and how to run inference queries
and so on.
Like that is the goal here, right?
It's not, it's Chattopity 2022 is the first step.
The next step is AGI.
It's not agentic AI.
Agentic AI is just a derivative of the existing AI we have today in terms of application.
But that is the race.
I do think that there isn't necessarily a race.
I think the U.S. is going to win it no matter what.
We've seen time and time again that the NVIDIA chips, which finds its home in the U.S., is the most powerful chips in the entire world.
There's no other company that will ever catch up to NVIDIA.
NVIDIA will always dominate the whole market.
But you see a lot of the news recently when it comes to
all the halts in production and selling in China.
I think this is more of a trade tactic than anything.
I don't think this is necessarily something that's going to prolong for the long run
because I think China does know that, look, you want to be in this race and you want to be competition.
You're going to need NVIDIA chips.
They're just you're not going to catch up.
Huawei is not going to catch up to NVIDIA chips.
Neither is Yomi, whatever it is, whoever is producing chips, even the ASIC chips that Baba is going to be producing as they announced last earnings.
They're never going to catch up to even the ASICs that we have here.
But at the same time, a lot of the companies there were very undervalued.
Alibaba was one of the largest hyperscales in the entire world.
It was trading at a pretty crazy valuation.
That's when it presented that risk.
I mean, that asymmetric upside.
But I do think that a lot of Chinese stocks are somewhat near fair value.
But the market has its way of
just swinging the opposite direction very strongly and then finding mean reversion at a later time.
I don't think that mean reversion is anytime soon. I think there is upside in China, but I do think
that asymmetric upside is, well, I mean, if you're going to be investing for long term,
it really doesn't matter. But in the short term, I think that that reward for the amount of risk you're putting on the table to get a high return, I think that's diminishing.
And for me, I've seen the alpha in U.S. stocks.
I've been able to perform very well, not as good as triple digits as StockTalk.
But at the same time, there's a lot of output to be made in the US.
But I do think that having reasonable exposure if someone wants it in ex-US stocks is always a good
way to diversify your portfolio. Yeah. And I'll just leave you with this,
and then we can move on to another topic. You don't have to beat the United States to do well.
You could take a silver medal and still crush it.
So I'm an American.
I was born here.
I bleed red, white, and blue.
And I want America to win.
I want America to win big.
That said, second place is going to do really well,
especially if they're isolated in the market the size of China.
And so we don't have to root for China to win.
We don't even have to think that they're going to win. All I'm saying is they're isolated. They have to build this thing on themselves.
NVIDIA, I agree with you, will always be better. And so will the other chips, AMD, so on and so
forth. But China's still going to have to invest a ton of money. And when you're talking about
investing in companies, if they're getting the highest portion of CapEx in China, they're probably going to do okay.
Yeah, no, there's certainly a lot of investment.
I think a lot of investment is also going to be coming from the government too.
I mean, the Chinese economy is still pretty low considering how far they've bounced from in 2021.
And the PBOC or People's Central Bank of China, People, people's bank of China, that that's basically the federal reserve for China.
Uh, they're, they're still trying to pump more liquidity into the system.
Um, I would say, I wouldn't say that we're at the same level as you were a year ago.
Um, but a year ago when David Tepper was basically pounding on a table on China.
Yeah.
That was like the point where China is about to pump so much savings
similar to the way that we did with COVID.
And even then, people thought those levels were too high.
And here we are again today.
You know, you never know.
You never know if some markets can just keep running.
All right, cool.
So, all right, let me ask you guys a question.
And remember, take into consideration when you answer that.
My colleague, Octay, is on and he is Bulgarian.
So please be nice when I ask this.
How do you feel about Europe?
I don't think he was able to come up stage.
He said he was driving.
Oh, okay.
I'm in the car too, but I'm a little bit more daring.
I'm in the car too, but I'm a little bit more daring.
So how do you guys feel about Europe?
So how do you guys feel about Europe?
So this was actually really interesting because you're seeing a lot of European stock markets
near their all-time highs.
And I would even consider some of the European markets, including Poland, as an emerging
market as well.
When you're seeing US basically pull back a lot of the spending that they've been putting
into Ukraine as well as other technology in Europe, you're seeing other companies, especially other nations, increase their budgets for a lot
of capex, for a lot of things. You're seeing defense investments from the federal, from not
the federal side, but from state government side or whatever, name the government's whatever country
in Europe, they are just, they are just printing money to be spending on defense budget. Germany,
They are just printing money to be spending in the defense budget.
Germany, I forget what the exact figure is, but they are growing the defense budget massively.
And what that's going to do is that's going to bring more jobs to the system as the spending
increases, and that's going to jumpstart a lot of the economy that's happening there.
I think Europe is a good place as well to diversify your investments in.
Right.
So if we're okay with Europe, now let me go take it to the next step. And you mentioned this already in your comments. Like, I want to be in high conviction
places where I know the investment is going. Like, that is more critically important to me
than where that happens. But here's the cool thing about it. Here's where the two things collide.
When you talk about defense spending, specifically NATO member countries, have committed to increase their spending,
their defense spending, from 2% of their GDP to 5% of their GDP over the next 10 years,
which means on a gradual scale, they will continue to increase their spend year by year
until they reach 5% of their GDP. And as long as GDP continues to grow, that means that that investment continues
to grow not only by percentage, by percentage of the overall pie, right? So that's an unbelievable
spot to think about as a place, no matter where you are. Now we have NATO and ATO, and you can
look up the return stream on that. It's over 40%. It's going to hit its one-year mark coming up in November. Well, why is that done so well?
Because it is comprised of aerospace and defense companies in the United States and in NATO member countries.
So what does that mean?
Well, Europe has to the best defense, ammunitions, aerospace,
drones, the best defense technology comes from the United States.
So they are forced to spend money in the United States.
And even with what's going on with Russia and Ukraine, we're no longer giving stuff
away.
We're saying, you commit to spending with us and we'll give you the stuff. So U.S. defense companies stand to benefit from the increased spend in both the United States and those NATO member countries.
But we also have a component of it, 40 plus percent, that's in European defense companies, Ryan Mattel and others.
Why? Because Europe knows that it can't just rely on U.S. defense companies. So they've taken the
initiative to invest in their own companies so that they can get better and get closer to the
United States. Remember, again, they don't have to win. They don't have to beat the United States
and become the best. They've just got to get better so that Europe is less reliant on the United States.
So what we're seeing is both European defense companies,
specifically in NATO countries, and the United States defense companies
doing really well individually.
Now that doesn't always go in tandem,
but the reason why you're getting a 40 plus percent return
year to date and since inception
is because they gradually go up together
and they offset each
other on the upside. That's what the experience has been since we launched this fund. And we
don't think it's going to stop because even if Russia and Ukraine come to peaceful terms tomorrow,
it's been mandated in the agreements with NATO that NATO member countries hold the line and hold the defense
for Ukraine. So they can't stop spending money in peace. If there is no peace,
that's an even better scenario. Yeah. I would also just throw in, there was a headline that
just came out a few moments ago, the Pentagon completes Golden Dome blueprint. So I feel like
that fits into this as well. And then one other thing we've
seen in a lot of these tariff negotiations where, I mean, Boeing, for example, is being talked about
and U.S. companies being talked about for these foreign investments as well. So just throw those
two caveats into this discussion. Right. So when you're thinking about, again, I'll say, you know,
where you invest is important depending upon what you're investing in.
But the most important thing is what you're investing in.
And this, even if you have concerns about China, I can understand that.
That's OK. Like everybody's got concerns about China at times. saying is, in this particular case, both locations and the actual theme work out really well together.
And it's forming a nice little union where it's, again, if you're thinking about risk-reward,
I think the reward is potentially very high and the risk very low based on all these financial commitments that are being made into these companies that reside in NATO member countries
and the US and all the things that you just talked about. So it's not going to stop. It's only going
to get more. There's commitment to more. And you could take that roadmap of additional investment
and actually map out the growth. And that's why I think it's another interesting thematic for you to
think about and do your due diligence on and look at
the return streams and say hey is this something that i want a piece of
stock talk you've uh you've dove into the defense stuff a lot i'd love to get your take around that
all right defense talks in general.
Yeah.
I mean, in general.
So we were just kind of talking about the,
like some of the European ones as well,
but just the,
the overall spend and all these NATO countries committing to continuing to
spend.
Yeah.
European defense is a great investment.
In my opinion,
cause NATO is going to have stuff to the plate.
And most of those arms are going to come from the United States.
I mean, it makes the U S mid cap defensecap defense, I think, also a great investment,
which is where most of my positioning is in that space.
I own Kratos and Huntington and Euston Mercury.
I wish I'd held it a little bit longer, but Euston Mercury as well.
Yeah, I think it's a pretty straightforward trade.
It's an obvious trade, but a pretty straightforward one.
And I think a lot of people overlooked the defense trade straightforward trade you know it's an obvious trade but a pretty straightforward one and um
i think a lot of people overlooked the defense trade for most of this year as well you know now
stocks like kratos are getting talked about everywhere but you know earlier in the year
there just wasn't enough attention on them and you know now you have mid-cap defense stocks trading
at historically high multiples and i think that expansion is just going to continue.
There's probably going to be hundreds of billions of dollars of new cycle defense spending by new cycle. I mean, not on the books, not contracted already, hundreds of billions of dollars of it
in just the next few years. You know, drones, precision munitions, autonomous flight systems,
all of this stuff. The problem is, is there's no
infrastructure in this in any of the modern militaries. I mean, you look at the most advanced
modern military is the United States. We don't even have the infrastructure for it. Right. And so,
you know, to the tune, we're going to be spending to the tune of hundreds of billions of dollars
building this infrastructure, getting these capabilities in-house.
And Europe's going to have to follow suit, right?
I mean, Europe basically operates on the American platforms for most of their defense systems.
I mean, they have a couple of unique companies like Ryan Mattel and others that have essential defense technologies, and they'll see a huge benefit from Europe spending.
But it's a great place to continue to be invested in, I think. I think it's part of why you've seen this insane monthly volume inflection on most mid-cap defense stocks in the last eight or 10 months.
And they're probably all going much higher.
I think the multiple expansion will continue there.
So, yeah, I love that sector.
I have a lot of exposure there.
there. Not to Europe, but to the US based names.
Not to Europe, but to the U.S.-based names.
I mean, while we're on the topic of international markets, I mean, my favorite international
markets are mostly concentrated in Latin America and Southeast Asia.
You know, I'm a huge fan of Malaysia.
I'm a huge fan of Indonesia.
The Latin American side, big fan of Peru and Argentina, even Brazil, even though they're
beginning to be a bigger economy now.
So, yeah, that's kind of what I like.
What do you think about that, Paul?
Yeah, I mean, I think that you're starting to see opportunities outside of the U.S.
of the U.S. I'm always a big fan of the U.S. and that's where most of my investments are. But I do
I'm always a big fan of the U.S., and that's where most of my investments are.
think it's prudent, you know, as we move into the next phase of this economy to start thinking about
other places. And so it's just really about your risk tolerance, how you can handle volatility,
because some of those emerging markets are generally volatile. And, you know, there's a lot
of things that could that can, you know, take them up or down again. I'm, I'm less of a, of a, of aware and more of a why. And when I find
the why, you know, I try to find it wherever I can. Yeah, I like that. Any additional thoughts
on Latin America? Not for me, no. Okay, no worries. I don't have any either,
to be honest. It's more of a stock talk area. Okay, before I let you go, Paul, we spent a lot
of time today talking about DRGN. I personally am a fan of at least offering people the option
to be able to get exposure to some of these Chinese companies through here. I think it's
a pretty cool idea. And there's more holdings than the ones that I mentioned people can look through. I've even seen some ETFs starting to provide
exposure to non-public companies like Anthropic or something like that, where people really want
to get exposure. So a lot that you could do with these ETFs, which I always enjoy seeing.
I just wanted to check if there were any updates on a 2x cap accelerated ETFs before you jumped off. No, there's no updates today. I mean, they're just operating the way
they're supposed to be operating. Monitoring them. We're in month two, and we kind of like the way
that the behavior has been with them, and we're learning as we go. So real interesting, I think
I spoke on the last time I was looking at the cap rate for
something like strategy. So we have MSOO, which is a two times capped accelerated fund that
gives you two times exposure to strategy on the upside with a cap and then one time downside.
And what we're seeing is an interesting inflection point for that stock
because they qualified for the S&P 500,
but they didn't actually get selected.
You know, somewhere in the back rooms of those committees,
they said, yeah, it qualifies, but we're not going to include it.
And so the stock took a little bit of a hit.
So there's been a little bit of volatility inside that.
Even though Bitcoin has done well, it really hasn't come along with it.
And so in that particular case, what you've seen is the start cap, right, at one place,
I think it was at 1532 when we started the month, somewhere around there. And that has actually
increased. And I looked at it yesterday. And the remaining cap for the rest of the month is now at 16%. So think about what that means.
Today is September 17th.
There are 30 days in the month of September.
So you have 13 days to potentially get two times the upside exposure to strategy, if
you think it's going up, up to a cap of 16, which means that if you got into MSOO today and your remaining cap was,
and it'll probably, the remaining cap will probably go up because the stock was a little
bit down today. And let's say your remaining cap is 16. Okay. If you think there's a reasonable
return expectation of five to 8% going into the end of the month on a company like
strategy, you potentially could double that within 13 days. So if it's up 5%, you'll be up 10%. If
it's up 8%, you'll be up 16 over the course of 13 days as we get closer to that strike price and so it's something that
i'm actually considering doing um i'm pre-clearing it uh tonight and i'm looking to take a portion of
money and throwing it in there because i think there could be some catch-up as we get closer to
the end of the month and now that we are only a few days away, if there's a bit of
a move up in strategy, which I think there could be, I think you're going to see, I think I might
be able to get an accelerated return, even if it's just up 5% or 3%, I get the opportunity to
double that return heading into the end of the month. So it's something that's attractive for me.
And so we're thinking about those kinds of things as we hear from investors as we get questions um and you know we're there's lots
of different ways that you can use them and uh you know we're starting to think about that now
and we're trying to educate investors on that well put this was a great one i really enjoyed
the conversation and the back and forth
uh paul any final comments before we close this one out no i don't have any final comments today
except to thank you guys and i really appreciate it i'm literally in the parking lot at city field
uh invited to a uh a uh a met game tonight so uh just so you know these things are always
important i take the time to do them from wherever i am and we really appreciate you and your audience love it uh emp i'll turn
back over to you if you want to run to run around to stock talk or sam or anything anyone else
thanks guys thanks paul mets padres tonight over there that should be a a fun game to uh to watch
appreciate paul definitely go to
leverage shares.com you can check out that entire list some of the things that were mentioned
throughout the space and then if you go the thematic real quick i saw the funniest video
you know that frank the tank guy from balls barstool yeah yeah yeah there there was a video
last week and they were like frank do you believe in believe in God? And Frank's like, of course I believe in God.
There's one God, he's holy, and he hates the Mets.
I thought that was funny.
I think he's a Dolphins fan, too, that Frank the Tank guy.
He's having all kinds of terrible times.
Full and fair disclosure, guys, I'm a Yankee fan.
I can't let people think I'm a Mets fan, but I am just here for an event.
There you go.
That's fair enough.
Honestly, I probably would have preferred Mets over the Yankees personally,
but that's fine, Paul.
Yeah, we still appreciate you either way.
I was saying real fast there on the leverage shares, go to leverage shares.com.
And if you heard, there is a lot of thematic ones.
There's a section up at the top,
you can click on thematic ETFs. You can see a bunch of those different baskets that we were
talking about, the NATO, the Dragon. There's several other ones on there, cybersecurity,
a lot of hot topics on this space that we talk about pretty much every day here. And I do want
to give Stock Talk a chance to jump in here as we close down, wind down after this FOMC day and all the kind of action or craziness, if you want to call it that.
Stock talk, I don't know if you have anything, but, you know, at the end of the day, all I see is a daily chart that touched a daily 90MA and got bought up again.
Yep, that's pretty much what I see, too.
I mean, you know, this is a relentless market and
you know i think part of what we debated about earlier with uh you know the panel earlier i think
is um at least anecdotal evidence that there are still people that doubt them this market can go
higher and i don't think it's just the anecdotal evidence that's saying that.
I think it's the hedged inflows being at a five-year record that are saying that.
And I think it's the fact that net positioning is still below where it was just earlier this year
that's also saying that. To me, that says complacency. To me, that says,
yes, people are making money in this market, of course. Yes, a lot of people are along,
Yes, people are making money in this market, of course.
Yes, a lot of people are along, of course.
But that there's still a large segment of market constituents
that are watching the market go up complacently
and, you know, hoping for a pullback.
I'm not saying we aren't going to get one.
Pullbacks happen.
You know, they happen all the time.
If you've been in the market for more than a couple of years,
you've seen plenty of them. You know the time if you've been in the market for more than a couple of years you've seen plenty of them you know even if you've just i know a lot of people on on
financial twitter just got started during covid and that's okay i mean you've still been in the
market for five years even if you just got started during covid you've seen a bunch of corrections
so expect them to happen i'm not saying markets will just go up forever endlessly you never manage
risk i don't never want people to think that that's what I mean but you also don't defy the trend that's a
that's a money losing behavior generally um and the trend has been up and is still up and that
may change one day but you cross that bridge when you come to it um for people like me who are
focused on picking individual stocks,
the game is a little bit easier because I genuinely don't worry about any of that noise.
When I see people on my feed saying that the labor market might crash, my response to that is, okay, it might. So might a million other things happen. I can't operate in a disciplined way or an effective way at all if I'm constantly worried
about that. If I'm constantly worried about the possibility the market might crash, then
my portfolio management would be horrendous. I probably wouldn't hold anything for very long at
all. I'd always be thinking, oh, this might be the top. I should probably just sell all my Nebbius
shares or all my Robinhood shares or all my Kratos shares. Had I done that, my performance wouldn't look the way that it does this year or
wouldn't have looked at a way that it did last year either. If I had just sold those stocks on
a whim when they went up 15 or 20% rather than committing, you know, to being long on those
names that I had conviction in. And if you want to be the person that nails the top and nails the bottom,
the sour truth that you'll eventually have to come to terms with is that it's impossible to
do consistently. And I think a lot of traders start their journey and not, I always say traders,
but really, I mean, traders and investors, because really everyone's a trader just
depends on your time horizon, but new traders and investors struggle with this because they want to maximize their
gains. You know, when your account is small and you're new to the markets, you like want to get
as much as possible out of everything you buy. And that psychology lends itself to, you know, being not only higher risk, that's not really the point.
It lends you to being more fickle with your positioning because you're constantly seeking that home run.
And when something doesn't work right away, you move on to the next thing that might be that home run. And all the meanwhile,
you might've bought the right stock in the first place and that you just needed to wait,
you know, maybe a month or two months or maybe a quarter for the market to figure out what you saw
in the first place. And that's where most people struggle. You know, they get into something,
starts working, it doesn't work the way that they thought.
So they cut it and they move on and move on to something else.
You know, they get into it.
They it goes up 15 or 20 percent.
It doesn't do what they thought they would do.
So they cut it and they move on to something else. And all the meanwhile, they look back in the rearview mirror and those stocks they left behind have doubled or tripled in the wake.
So that's, to me, what I struggled with when I started.
So that's to me what I struggled with when I started.
And I think based on the thousands of traders that I've talked to and that are in our community that, you know, that I engage with on a day to day basis, I think a lot of other people struggle with that, too.
So the really simple solution is to block out the noise. And that's easier said than done, because all of
us consume social media all the time and on Discord or Twitter. And even if you're not on
your social media all the time, you're talking to people, right? And they have opinions about
the economy and your aunt might think the economy is going to crash or your cousin might be telling
you to buy a crypto stock or whatever. Like you can't avoid it, right? Markets are going to be,
especially now that they're so democratized, markets everywhere right your uber drive like my i can't count the number of times uber drivers have you know talked to me
about stocks or or crypto or whatever um or people in the grocery store or like like it's just
it's everywhere now so acknowledging that what you have to,
what you have to say to yourself is that I should only value the data, right? Cause like a funnel,
you're getting all of this noise at the top end from your feed, from your discord,
from the people in your life. And the goal is, is to filter it, right?
Like I read a lot of stuff and every year I read less, you know, I don't know if that
makes sense, but I lean on less and less sources every year because there's very few, and by
sources, I don't necessarily mean like a news source or an
account. It can be, but I just mean a source of data. You know, that could also just mean a chart
or options flow or whatever, any kind of data. You should only pay attention to data if it rewards
you with alpha. That's the filter, right? Like if there's an account that you follow on Twitter and all the stocks they tweet about, like perform like shit, pretty good cue to not listen to that account.
You know, and if there's an account you follow on Twitter and all of the stocks that they talk about rip to the upside and provide you with alpha, that's probably a pretty good source to be listening to,
you know, but don't base it on who sounds smart. Everyone sounds smart.
You know, the people that get on these spaces are like, who talk about markets, they all sound smart. Even the ones who are wrong all the time. They sound very smart. They know what they're
talking about in a lot of cases, but they're wrong. They're not making money. So you have to decide,
do I care about following people that sound smart? Do I care about following people that make money? Hopefully
it's the latter. And you don't need to believe people, you know, about what they say. I personally
post my performance. I think everyone should. I think it's a good way to be transparent, but
you don't have to believe people even when they post their performance. You yourself can be the
filter of that signal, you know, based on what you are getting be the filter of that signal you know based on the based on what you are getting
from the information you know is your portfolio going down from listening to the information
probably should stop listening to it like it's that simple you know you filter by what gives you
the alpha not by what loses you money and it's somebody will hear that and be like that is
remarkably obvious no shit i'm not going to listen to people that lose money yet look at the followers
on these perma bears accounts look at the engagement right so people are listening to them
and sitting on the sidelines for the last three years and you know calling top month after month
after month after month eventually
the markets will top and eventually those people will be right but what will you have missed in
the meanwhile and larry's not up here anymore but well this is a good place to end it i guess
larry posted this great quote it's my favorite peter lynch quote and i mention this all the time
but he posted this earlier uh on the spaces when we were talking. And Peter Lynch says that more money has been lost by
investors, much more money has been lost by investors in anticipating corrections than has
ever been lost in the corrections themselves. And what that means is, is that people get so scared
scared that the markets might crash that they never get in in the first place.
that the markets might crash, that they never get in in the first place.
They never get in with size in the first place. And the money they miss out on in the five or
six years until the market does crash is far more money than they would have ever lost by
being long in the first place. So like that to me is the most concrete, straightforward and true philosophy about
markets that you could ever have. And there's a reason Peter Lynch is, and I mean, in my opinion,
he's the goat, but there's a reason he's in most people's top three investors of all time list,
because he has the experience to teach these lessons and he puts them in such a simple and
beautiful way, which is that cross the bridge when you come to it. That is like the summary of the lessons that he teaches. Cross the bridge when you come to it. Yeah, they might. Yeah, markets might break down. Yeah, the economy might get fucked. But go and cross the bridge when that happens. Don't sit around and say, maybe it'll happen. Because a lot of times it doesn't. In fact, most of the time it doesn't.
Right. Most of the time, what happens in markets, they rip.
Like 70% of the time markets are just ripping to the upside in a raging bull market, 70% of the
time. And then 20% of that time they're consolidating. And 10% of that time we're in a bull market.
Like, I mean, a bear market, sorry.
So, like, just play the probabilities, right?
You'll get the signs when they're there.
But anyway, we will see you guys next week.
Or not next week, tomorrow.
We'll see you tomorrow.
What am I talking about?
It's Wednesday.
Another day, dude.
Tomorrow.
We have football coming back tomorrow.
Sam Solid's already got his bets on. True, yeah. I'm skipping, I'm jumping the gun. We'll see you guys tomorrow, dude. We have football coming back tomorrow. Sam Solid's already got his bets on.
True, yeah. I'm skipping. I'm jumping the gun.
We'll see you guys tomorrow, yeah.
What's up, Sam?
Are you ready to make some football commentary or what?
Are you ready to jump in?
Oh, man.
Didn't he?
Sam, you finally followed the right bet.
I did.
And I followed you into it.
So you've redeemed yourself.
Yeah, that's right.
So I followed M to a bet.
I'm just kidding around, guys.
This is not even M's fault.
It's my fault because I hit the buy button.
It's 100% my fault.
I hit the buy button.
No, blame it on M.
M faded.
M faded.
The favorite.
Well, actually, were they favorite? No, they weren't the favorite most of the game wait you're telling me
M the TA guy faded the trend
he faded the intraday trend
which is what he does
I don't want to say
Kwon because I don't want to give away Alpha
but yeah he faded the Kwon
all I know is I had like
six out of eight
picks right on Sunday and both picks
Monday night right.
Have you ever seen that movie too for the money?
With Matthew
McConaughey? Oh, yeah, yeah, yeah.
With McConaughey, yeah, yeah, yeah.
Oh, dude, that's such a classic. That's what that reminded me of
because he went like 80%
three Sundays in a row in that movie. That's funny. classic. That's what that reminded me of because he went like 80% like three Sundays in a row in that movie.
That's funny.
Yeah, dude.
Pacino was in that too, wasn't he?
Yeah, Pacino was the older guy who was teaching him.
Yeah, that was a fun movie.
I mean, it's not like a great movie, but it was a fun movie.
Back in the day.
God, it's been a year since I've seen that.
I don't know how that came to mind.
I think it was just you saying I went six for eight on Sunday.
Yeah, it's fun. We have a little sports betting stuff for fun i do it all for entertainment and i know some people are some people are making no money on
these food days i i kind of just do it for entertainment now but i used to do it for more
than entertainment but now i don't know i'd rather gamble in the market yeah that's what i'm saying
like i i can make a much more strategic,
I don't even want to call it a bet,
but it's a bet, you know, on a stock
than I can on any NFL team.
So, but either way.
Stock talk, one thing,
just to clarify,
all the stuff that was talked about today,
it seems like the simplistic,
you know, just to take it down to the bottom level.
Ride the trend.
The trend has to break with some type of confirmation.
If it happens, it happens.
But until it happens, just keep riding it.
It seems to be what, I mean, I don't want to oversimplify your process, but it seems to be your process like all the way down to like the base layer is it's
a trend. Nothing's, nothing's breaking. Nothing's happened yet. The market can climb that wall of
worry for a long time. And I, you know, I don't want to drive you back into a rant or anything,
but that just seems like to simplify it all the way down that that's what it is. Right. And
something breaks, then I'll react until then more time i i should just
stay long what i'm long conviction yep that's it is that simple yeah and you know i try to provide
detail but yeah that's that's pretty much as simple as it gets if you want to distill everything
that i rant about in markets on all these spaces what m just said is what it is the trend is your friend follow the trend when the trend
breaks then you worry that's it that's it that's like like i said i don't like to oversimplify but
that's uh that's what it comes down to that's what it all boils down to so if you didn't get
too deep in the woods in any of this conversation that should be one of the biggest takeaways at
least that that i had just as a spectator here, most of the evening.
And what's up,
Sam?
I have to say like,
so I started joining you guys in these spaces a year ago and it was
literally a cold,
a cold DM to you guys,
right?
Like you guys had no idea who I was,
a few hundred followers,
whatever.
And since joining,
you know,
I've been a constant guest here,
dude,
I learned so damn
much from these spaces like i may speak on it but like my learning ability from it is just tenfold
what i'm actually saying like i feel like what one i mean there's there's things in life one you
you you're learning from your mistakes right i've made plenty of mistakes my entire life not just
with the markets but that's what makes me a better person that's what makes me a better person. That's what makes me a better person in life. That's what makes me a better investor and a better trader,
because I learned these mistakes. I reflect on it, and I go at it again, and hoping for better
odds of success, or better probability of success. And I got to be honest, you guys are really good
at this game. And also, Stock Talk, I learned so damn much from you. It's actually really funny
how you've always said that everyone is a trader it's just a matter of time rising like at first
remember we kind of argued about that for a little bit and i'm just like this we're never
arguing we're always we're always just chatting but yeah of course i'm like this mofo is right
he's right i'm just a long long term sweet trader and it's true right because like you get out when
you start to see the thesis kind of breaking.
Same thing happened with TDD or the trade desk.
You got a little bit of a warning shot after a quarter, and you got a couple more, and just like, all right, I'm out of this thing, right?
And I've been holding TDD probably not as long as a lot of folks have here, but I was
holding that for like two years, and my dumb ASS didn't bother to trim or sell when I was near the top,
when I was overvalued, when I was trading at multiple times free cashflow.
And, you know, I learned my mistake.
I'm getting more vigilant.
Never did it again.
But obviously, you know, in a bull market, you know,
things are a little bit skewed.
But this year is a pretty good year.
I'm not going to lie.
This year is a pretty good year.
It's been a great couple of years, you know, and, and yeah, I know it's,
it's funny that you bring that up. I remember when we had that debate and I always emphasize
that not, I don't even do it to be like, I know some people are like, oh, you just,
you're being an asshole about it. I only do it to make people sort of realize that like,
make people sort of realize that like, you know, when the term trader gets thrown around,
what I've noticed is that investors get offended because they're like, I'm not a trader. Like,
I'm a buy and hold guy. Like I don't day trade. Like I'm always like, Hey, you know,
slow your roll.
You don't have to be a day trader to be a trader.
What being a trader means is that you actively position yourself.
To me, that's the simplest definition.
And anyone who pays daily attention to their portfolio,
unless you're like a robot DCA which almost no one is you know unless you're like or your accounts like automated DCA which I guess maybe
some people are but most people on Twitter listen these shows and scroll
their feet are not you guys are buying stuff at a whim okay at random times
you're adding to stuff trimming stuff stuff at random times. That's
trading. That is trading. And what the reason I emphasize this is to make investors realize
that they still have an obligation when they are active to be active in the most efficient way possible.
That's why I emphasize it, because a lot of active investors or aka very long-term swing traders,
they think because they're investing that their activity should be nothing more than just I add shares sometimes.
But the time that they're allocating anyway to observing their stocks.
Leo, come inside. Leo, come on.
inside leo come on okay he doesn't want to come inside um the time that they're allocating to
exploring their stocks and watching their stocks is time that could be spent anyway
right so this idea of like and really what i'm doing here is just like addressing a lot of like
the misconceptions and the things that are said a lot, the retorts that I see and hear
a lot.
I mean, like one thing I hear in that context is, oh, well, like I have a full time job.
That's why I'm an investor.
And that's why I can't like actively manage my portfolio as much.
Right.
And it's like, OK, that's fine.
But like when you're sitting on a space for two hours, if you are doing that, and some of you might be in
your headphones doing something else or whatever, or at night when you're like looking at charts
or scrolling your Twitter feed, like that is time for active management. It doesn't take like,
it doesn't take time to like click a few buttons Like, it's not a time-exhaustive activity.
Active portfolio management is not something that you need hours a day for, right?
It's not like, oh, I need to take a segment of my day to do my active portfolio management a day.
It can literally be like two or three clicks of a button in a day.
So if you are going to be active and going to spend hours listening to our spaces or CNBC or scrolling your Twitter feed all day reading about stocks, then why the fuck wouldn't you care about knowing how to read a chart and knowing how to time your entries better and knowing how to time your dip ads better rather than dip adding at random moments like one thing I see investors do all the time is the stock they own is down three percent and they they're I'm buying the dip the fuck are you
talking about the stocks up like 250 percent in two months and you're buying a three percent dip
or like I remember rocket lab was like down like 10 percent on like an offering or something and
I saw like a million people posting like,
this is a generational dip on Rocket Lab, like get shares right now. I'm like,
two, the stock is like seven X in like a year. Like, what are we talking about? That, that minus 10% is like a generational ad opportunity. Like people aren't even looking
at charts. They have no perception of price, price right people think like markets are just a
momentum mechanism and they think if they see something red that they like they should be
buying it that's a product of ignorance like that's such a simple thing that people could
solve yet they do it repeatedly it like grinds my gears i see people with decades of market
experience like buying dips in like no man's land on a chart and i'm just like what are you doing you know not only is it a bad example to set but it's just like
people should know better it doesn't take long to learn these things at all like you know and
if you're gonna do the math if you're gonna spend the time anyway staring at your fucking portfolio for hours or staring at your X feed for hours, just take a small portion of that time, 1% of that time, and just think I pinned it at the top earlier, I pinned it here again.
But if you look at my performance chart and you look at the plateaus, like when my portfolio is consolidating, that's why my portfolio consolidates so well prior to these periods of explosion.
Because during those periods of consolidation, I am actively managing like a hawk.
During those periods of consolidation, I am actively managing like a hawk.
Right. And I know like, OK, I have a high conviction position that's having a low volume pullback into the 21 EMA.
The 21 EMA is only four and a half percent above my entry price.
That's an amazing re-add spot. Right. You're not you're not abusing your cost basis.
You're buying four and a half percent higher and you have a low
volume pullback into the 21 ema like those are the types of things i'm monitoring every day and
it doesn't take me long i flip through four or five charts in the morning i'm like okay this is
fine this is fine this is fine oh i could add more of that here or oh this is in danger i need to
watch this stock at the end of the week i need need to make sure this weekly close is okay. Like it's little things like that.
It's just quick notes.
And then I click one or two buttons and it's over.
Like sometimes when I tell people like I'm a full-time trader and investor, like my friends, my real life friends.
And then I've been doing this for over a decade.
So my friends who have known me for a long time are always like dumbfounded by it.
Like we go to dinner and stuff.
They're like, so what do you do all day?
You just like sit at the computer and like you just trade all day i was like no i'm at
my screens all day but most of it is just me doing research and going through charts and like reading
my twitter feed and being on spaces the the actual trading part of it is like i don't know
two percent of the day maybe maybe that's, right?
And again, that's a misconception.
People think like, oh, I can't actively manage my portfolio.
Like, I don't have the time.
I have a full-time job.
Like, dude, like that's a lame excuse.
Like that's a straight up lame excuse.
And again, whenever I'm talking about stuff like this,
it's obviously not financial advice do
whatever you want it's your money but that's kind of the point it's your money like what
why would you not want the extra four dollars in cost-based advantage which compounded can be huge
right you're getting more shares and if you or why would you not want your dip ad where you're increasing your position by 25 percent?
Why would you not want that to be. At an ideal price, like if you're an investor, not a trader, if you're an investor, why would you not want that to be at an ideal price?
that's what i that's what i tell my investor friends who don't know how to read charts like
That's what I that's what I tell my investor friends who don't know how to read charts like.
because i'll get texts from them like oh bro did you see the market today like you know their
favorite names on six percent they're like yeah man i added some more shares today and i'll go
look at the chart and be like why and he'd be like i don't know because it was red i'm like
why'd you add here though like you know the stock just broke the 50 day yesterday it's confirming
the breakdown now and it's probably going down to the 100 day so why'd you add here though? Like, you know, the stock just broke the 50 day yesterday. It's confirming the breakdown now, and it's probably going down to the hundred days. So
why'd you add here? You're going to be able to add $15 lower probably in a couple of weeks.
And then my friends were like, dude, you don't know, you never know what's going to happen.
And then sure enough, the stock's, you know, $15 lower in a couple of weeks. And he's like,
oh, I added more now. Well, you would have been able to get 30% more shares by just waiting to add in the first place till it went to that spot.
And as an investor, that fucking matters.
You don't want 30% more shares?
I mean, I do.
Right?
So this classification is hilarious.
And that's why I also, like when people call me a trader or a, you know, like sometimes we have panelists on our show show and I'm not knocking anyone, but people will be like, oh, you know, I think Daily Stockpick said this before.
Nothing against him.
I love him.
Great guy.
But I think he said one time, like, oh, like I'm an investor in Stock Talk.
You know, he's more of a short term trader.
Like, no, I'm not.
I'm not a short term trader.
I do short term stuff sometimes.
If I see a short term opportunity, I take it.
Right. But I'm just an active market participant. I have stocks that I own for years. I have stocks that I own for months.
I have stocks that I own for weeks. I have sometimes stocks that I own for only a couple
days. You know, it just depends on the opportunity and what my conviction level is in the opportunity
and what I see it as. If I just see it as like, oh, this is cool news and I think the stock's
going to go up, that's probably not something I'm going to own for a while.
If it's something I see as highly relevant to a market thematic that I think is going to drive investment for a decade, I'm probably going to keep that.
You know, and that's stocks like Nebius and Robinhood and Centrist Energy and Energy Fuels and these stocks that I own that I'm going to keep.
and energy fuels and these stocks that I own that I'm going to keep them because there's
more to it than just the price or just what's happening beyond a little bit of momentum
or whatever else is going on.
So you have to weave your way through a lot of noise to get to these conclusions.
But you'll be better for it by treating
markets more simply like this, in my opinion. Like, I'm a huge advocate for simplification.
Like, I used to follow a lot of people on Twitter that would post, like, really nuanced,
complicated stuff. I still follow some of them,
but I don't read their posts anymore. And what I mean by nuanced complicated stuff is like
dissertations about market history or seasonality or novels about the job market or student loans or commercial real estate risk.
Or like, I just don't read any of that stuff anymore.
To me, and this might be harsh, I think all of it's garbage.
I think the amount of alpha you find, I think if you read a thousand articles of Macrobabble, I think the amount of alpha you find will maybe be less than one percent of the words you read.
And it's just. I can't deal without that probability.
Like I can't I don't have space in my brain to store nonsense information like that.
So I just ignore it. And so many times on our spaces and Evan kind of gets frustrated with me. I love Evan, but Evan gets frustrated with me sometimes about
this because Evan will ask me about macro and my answers are always pretty simple. You know,
my answer is always like, dude, the S&P 500 is above the nine and 21 EMA. What do you want from
me? Like, that's basically my answer every time, right? like how am i going to be concerned about the markets when the markets aren't concerned right and i'll reiterate that how am i going
to be concerned about the markets when the markets themselves are not concerned if more people thought
that way less people would be on the sidelines all the time more people would would be able to
outperform the market because you're not smarter than the market,
I'm not smarter than the market, no one's fucking smarter than the market. The market is an organism. It is millions of votes being placed with dollars from constituents of all sorts,
institutional parties, retails, mom and pops, 18-year-old kids on Robin Hood. All of them are
voting with money. Some of them with more money
than others. But it is the intelligence that comes from that organism is beyond any person's
on earth ability to predict consistently. And that's why markets are hard. It's hard to generate
alpha, A. But B, that's why there's also a ton of opportunity. Because there's always the markets never price anything perfectly. Never. Because there's so much there's there's such a broad range of constituency that they never price anything perfectly. And so there is room for alpha. And that's where the money is made.
and you make it through conviction and you make it through work working and understanding what's
happening in markets and positioning yourself for it and it takes experience takes work ethic it
takes attention it takes activity also which was the original point of this wherever this rant i
don't even know how i got on this rant but that was the original conversation we were on which is
uh activity and it requires that too so So yeah, anyway, I can go on
and on, obviously. But yeah, that's my fault. I sent you down that path pretty good.
No, I mean, I just go down that path of my own. It's not your fault.
No, it's good stuff, though. And I think it's important for the audience to hear
the inside perspective as well. That's why I kind of brought it back to like the base layer and then
let you kind of build back into that right there. So I guess a good way to end it on
this FOMC Wednesday here on Stocks on Spaces. Make sure you follow, of course, all the panelists,
all the co-hosts and this host account right here. We're live Monday through Thursday, 3 p.m. Eastern
until whenever Stock Talk gets done. That's the way we're going to word that today.
All right. Perfect. Appreciate everyone. Appreciate Stock Talk. Sam hanging out with
us here at the end. Gab as well. We'll catch you guys tomorrow afternoon. Thank you.
