9-14-26 Is This Time Different for Stocks

0:00And now for something completely different. Forget everything you've been told by others before. What do you guys look at every morning to guide your day's decisions? Get ready for the real deal. I don't. The full story, the whole Ancielata. The magic eight-month. It's money, news, and information you can use. I've really thought you were taking that question so literal. You're going to talk about what you have for breakfast. The girl, financially healthy, wealthy, and wise. I don't eat breakfast in the mornings. I'm sick of it. I'm sick of it. I fast from 6am to 12am. Now, welcome in the real deal. This is a comment for the women out there listening shows this morning. You're always wondering what we're thinking. We don't think anything. We're like dogs. The real investment show with Lance Roberts. Women think that we have all this stuff going on up here. Oh, yeah. And we're mostly just thinking about how the Romans made the Roman Empire. That's pretty much it. Yeah. That some guys might be civil war stuff, but you get the point. I'm excited by RIA advisors.

1:01Hey, good morning. Welcome to the show. It is, of course, Monday. As we launch into the last half of the month, it's also FOMC meeting week. Will the Fed hike rates this week? Won't they hike rates? That's going to be the whole question all week long, heading into Wednesday. And of course, markets are going to trade off of that accordingly. Of course, also over the weekend, the heads of open AI and throttpick and SpaceX. All kind of joined together and said, we need to maybe put a little bit of a slowdown on the development of AI. Probably not a bad idea, but that's going to certainly weigh on stocks this morning because, again, it's been this whole race for AI. China though, very interesting. It's come out and said, no, we shouldn't put a stop on this. We should keep going the way that we're going. It is interesting, right? Because again, there is risk to AI and what it can do. And of course, we've all been raised on the more dystopian outcomes of artificial intelligence

2:01and robotics ever since Terminator was launched back in the 80s. So there's certainly some concerns there. But again, this kind of announcement of the weekend is going to weigh on technology stocks today. So the market's going to be down this morning. But it is 90% technology stocks under pressure this morning. Software is doing okay because again, a slowdown in AI would be good for the software stocks. But the rest of the market's actually doing okay. Health care is up, finances up, energy is up, of course, because oil prices are up. In fact, if we take a look at oil prices here just real quick, West Texas intermediate crudes up to $102 this morning. So it had a bit of a correction on Friday, bit of a pullback. Again, we're still kind of hovering right around $102 here. The deviation from the long-term moving averages is getting pretty extreme. And we've had these deviations before you typically wind up getting a decent correction, oil prices. And from a momentum basis, we're very overbought from relative strength basis. We're very overbought here.

3:03So very likely we're going to see some type of pullback in crude oil prices here in the next week, next two weeks for whatever reason. There'll be some headline that comes out. And we see a bit of a pullback here. But again, this is certainly putting pressure on the inflation. And that is also feeding into the FMC meeting this week, which is Willough Fet hike rates based on the recent CPI reports. About 90% of Wall Street expects that to be the case. They're expecting a 25 basis point hike at the next meeting. I'm still on the camp that they're not going to hike given the recent weakness in the employment reports and an understanding that a lot of the spike in inflation that we've seen in recent reports is solely due to oil prices. And we don't, but again, I have no idea for sure. I'm just my guess. It's just, we'll see what happens this week. But if the Fed does hike rates this week, certainly we'll probably put pressure on the markets. So again, this could be a bit of a tumultuous week, which is, as we've been talking

4:03about for a while, welcome to September, right? This is, everything is happening so far this month. It's really kind of playing out exactly to what typical September's look like. You have a lack of buybacks. You have no earnings really to speak of. Most of your kind of major traders are kind of out of the markets right now. And you're seeing a bit of weakness here. But good news is on Friday, the markets did bounce off to 50 day moving average. We're still trapped below the 20 day right now. So let's talk about what you need to know before the bell this morning. From a standpoint of portfolio management, this has been a tough month, right? So far, I mean, the markets are under pressure. But as much pressure as there seems to be in the markets, we're just really still stuck in this range. We haven't gone anywhere now for about the past month and a half. And it's very frustrating, right? This is, you know, you look at your portfolio. It's not going anywhere right now. Someday, you know, you got some stocks under pressure in your portfolio. Other stocks are doing okay.

5:04And that's just kind of the market that we're in right now. And that's, and again, this has been a pretty typical September with a lot of weakness here. We're going to open back close to the 50 day moving average this morning. We'll see where we finished the end of the day. There has been a good bit of buying by hedge funds coming into stocks, but retail traders have pretty much been sitting this out. They have been nibbling at the dips for sure. We are seeing that on the retail data side. Retail traders have been sitting back here to a decent degree. Again, the big pressure this morning is going to come from the NASDAQ side in particular because of this announcement over the weekend by the leaders of the AI development space. That's going to weigh on the NASDAQ, in particular, NASDAQ's down about 400 points right now. So we're going to see a bit of a pull back here in the NASDAQ. And that's going to push the NASDAQ really below these kind of moving averages. We're going to see a more technical break this morning on the NASDAQ. What will be important is to see how we finish up the day. Because again, if you take a look at the Dow Jones, which doesn't have a lot of that exposure

6:08as much, it's actually been bouncing up here a bit. It's been under pressure here over the last week or so, more so than the S&P in the NASDAQ because that technology was pushing those markets higher, which again, that's a little bit of what the Dow lacks at the moment, just the same quantity of exposure. We're going to see a little bit of reversal today. The Dow is going to be a bit flat because of all the technological pressure. So it's going to hold up better today than both the NASDAQ and the S&P 500. Across the board, the S&P's down about 38 points right now. Again, we're seeing a good bit of strength in the other areas of the markets. Finance, staples, discretionary, and energy in particular. Those areas are going to support the markets this morning. So again, while the S&P isn't moving a whole lot, you are going to see a good bit of pressure on that technology side. Now, whether that lasts through the day or not, I don't know whether it lasts through this week or not. I don't know. We'll see what happens. Again, this was just one announcement.

7:09This is kind of an early knee-jerk reaction to that announcement. Again, this was just a recommendation by the leaders of AI to slow things down. That doesn't mean anything's going to slow down. We'll see what happens here. Then we'll just trade off of this. Again, don't over-react to today's NASMAS. A lot of tweets over the weekend is like, oh my gosh, you've got to get out of everything. Come Monday morning. This is the thing. Maybe it is. I don't know. Don't make any big knee-jerk reactions today. Let's see how the day ends. We can very well see the market open down and the seabires come into the market, push markets back up. We'll see what happens. We'll just kind of, and again, because of the pressure of the FOMC meeting this week, don't take a whole lot in today's action either because it's all could just be pre-positioning as much as anything else for that FOMC announcement on Wednesday. Again, there you go. That's what you need to know before the bell this morning. We'll come back. We'll talk a little bit about the newsletter this weekend and some of the recent narratives.

8:11I'm lacking the ability to share charts with you this morning, so we'll just have a conversation and we'll do that. We'll come back from the break. Don't go away. Get daily investment news you can use. Deliver to the speed of the internet at realinvestmentadvice.com. What if your money runs out before you do? Join Richard Rosso and Jonathan McCarty for our next RIA Retirement Income Workshop. Saturday, September 19th at the Embassy Suites, Hilton. Discover why the traditional 4% rule may fail you, the costly retirement income mistakes you need to avoid, and strategies designed to create a paycheck you can't outlive. Your retirement deserves more than guesswork. Register today at realinvestmentadvice.com for this exclusive in-person retirement income workshop. Realinvestmentadvice.com. You're listening to The Real Investment Show.

9:14All right, good morning. Welcome to the show. I have about 1500 computers in the studio and the one that I need is not working this morning. So as I said, I won't be able to share it. For charts, we'll just have a little bit of a conversation on a few different things. First of all, I would really like to share this one chart with you this morning because I posted over the weekend a chart about bond flows. And it's a very interesting dynamic about what's going on with bond flows right now in particular because if you take a look at the flows into equities as well as into fixed income across all structures. So when you're looking at government bonds, corporate bonds, high yield debt, et cetera,

10:18and then equities, the flow into equities has actually been quite small this year on a relative basis. There's been a massive increase in the flows into particularly high grade corporates and high grade treasuries. For a lot of people, this is surprising because they're going, well, you know, bonds aren't really performing this year because interest rates are going up and stocks are doing okay. So I don't want to own bonds. I want to own stocks because bonds suck. They're not performing well this year. But to a large degree, this misses, and we've talked about this on the show before, but it misses the value of bonds in particular because people are figuring this out. And then you also have to compare this with where markets are. So while you may not like, and again, you're one of the big misnomers about owning debt, is that everybody immediately assumes we're talking 30 year durations.

11:20Corporate bonds, treasury bonds, everything comes in a whole wide variety of flavors of duration. So if your view for owning bonds is, you know, I can only buy 10 year and 20 year bonds, that's ridiculous because you don't want to buy a 20 year bond if your window to needing your money is five years from now, right? You buy five year bond, something maturers and gives you all your money back at face value. And what's important is when you start looking at the financial markets and where they are. So if you take a look at the long term trend of the markets going back to 1900, we are trading above the top of that long term exponential trend growth kind of channel, which the only other times we've done that have been at the peaks of major secular bull markets. 2000, of course, we didn't break, break back above that previous price peak until 2013,

12:22back in the 1960s, back in the 19, back in 1929. So whenever the markets have been extremely deviated from long term means, you eventually have that price version. Now, the problem with that with saying that is that doesn't mean tomorrow. It could be six months from now, it could be a year from now, it could be five years from now, because you're looking at long term monthly data. And that's going to move very slowly. But it tells you that forward returns, I thought this was really interesting. So I posted this chart this weekend talking about, you know, kind of this, you know, why so much money is flowing into bonds right now. And they were like, well, it's, you know, why would anybody buy a bond at 5% when I get 10% out of equities. The problem with that view is valuations. Valuations tell us that over the next 10 to 20 years returns on equities are going to be between zero and 2% over that long term horizon. And of course, one of the comments was like, that's ridiculous.

13:24That's a ridiculous assumption. I know it's not an assumption. This is what it's what secular markets tell you. It's what valuations tell you. That's what we know going back to 1900 that secular bull markets are always followed by secular bear markets have very low returns. We just know that, right? That's the data. Is this time difference? Sure. Anything is possible. But secular markets do win for whatever reason. The problem is always understanding the timing, but the point of, but so, so if that's the case, then why is everybody flowing into bonds, right? Why is there so much activity of people buying bonds, particularly institutions? Pension funds, hedge funds, everybody else, buying long term debt or buying longer term debt, I should say. And the reason is for the first time in 15 years, they're getting paid for it. Right? Back in 2009, when we pushed interest rates to zero, the, the sole intention of doing QE and providing zero interest rates and suppressing interest rates and bonds in particular

14:27was to force capital into the equity markets. We call this the Tina trade for a long time. There is no alternative. You can't buy bonds. You can't hold money in money markets because money markets paid zero. There was no alternative to owning equities. And this was, this was an intent. This was intentional to push money into the financial markets to help the economy recover from the financial crisis. Make the wealth effect, get consumers back on their feet, all those type of things. This was an intentional move by the, by the Federal Reserve to, to force liquidity out of cash back into the money markets. Sorry, out of money markets, back into the markets. Because otherwise, everybody would just hit out. If, if money markets think about this, right, coming out 2009, you know, after the financial crisis, people are devastated, right? If money markets were paying 5%, back then, how many people would have jumped back into

15:27equities? Right? So, you know, psychology was severely damaged. So for 15 years, we had this whole Tina trade going on. Now all of a sudden, we no longer have the fed suppressing interest rates. We no longer have QE going on. In fact, we have the opposite, right? We're trying to tighten the balance sheet. So that's extracting liquidity from equities. But for the first time, we're actually seeing investors go, you know what? If I'm looking at valuations and what I'm paying right now, to own equities. And I know what my forward returns are likely going to be, I can pick up fixed income, set my duration properly, and get paid to wait. Again, if forward returns on equities are two, and I'm getting five on a, on a tenure treasury, I don't have a lot of work to do. Mathematically speaking, right? Because I know that if I buy that treasury that in 10 years, I'm going to get all my money back plus all my interest.

16:29So I'm going to make 5% a year for the next 10 years. That's not hard math. And if I can get 5% of the next 10 years, and equity markets actually do produce subpar returns below the risk of bonds, then why wouldn't I make that change? So the flow into into fixed income across the board is not really surprising. Because again, for the first time, if I'm a pension fund, and I've got a large number of constituents in my pension fund that are due to retire, which they are, and I've got to make these guaranteed payments out of my pension fund over the next 10, 15, 20 years until, until all those pensionees eventually die off. And I get 5% of my money. A lot of my work for securing those future payments is done just by buying fixed income. Same thing for insurance companies that have guaranteed payouts, so forth and so on. And so again, the flow into bonds is certainly not surprising at all.

17:34It's really only surprising to people that don't understand the value of debt and how to use it within a portfolio properly. And again, they focus, you know, typically our focus on the wrong thing. We focus on the price. Oh, bonds are down today. You have to understand that the primary function of bonds in the portfolio, which is always the same thing, right? Safety. I can buy safety in my portfolio. Yes, the value will move up and down on a daily basis. So if I want to liquidate my bond at any time between now and maturity, I'm going to pay market price, whatever that is, might be positive, maybe negative, depending on where I bought it. But the value of the bonds are is that when I buy a bond and put it in my portfolio, what I can do with a bond versus equities is this one thing that someone said that's the most important thing. The very moment that I buy a bond, I can calculate to the one hundredths of a dollar, right?

18:34Calculate to the penny. Exactly what my return will be at maturity. No ifs, or buts. Now do that with inequity. Don't worry, I'll wait. Pick any equity you want and then calculate to the penny what your return will be in ten years. I said it, but there's no guessing with a bond. That's the value you buy. And you have to kind of get your head around that because see, we've been so attuned by the media and everybody else is like, oh, you have to look at your portfolio on a minute by minute basis. And if something's not working, you need to sell it because you know, that's, you know, that's your underperforming index, whatever it is. But we forget about the whole reason that we own bonds. And then when we pull this back to the whole conversation that we're talking about and this kind of goes to the news that are this weekend, I was writing a bit about, if you take a look at both earnings right now and you take a look at the market on a price basis, we're trading above 90 year trend lines, which only happens at the end of secular

19:44markets, not the beginning of them. So if I start thinking about the outcome of that, now again, none of this means that tomorrow the markets are going to have this major mean reversion. Not saying that at all. I don't want you to walk away from this conversation this morning going, oh, well, I said that there's going to be this massive mean reversion. Now I'm saying what I am saying is the forward returns are likely going to be very low. And this is where we have to start thinking about, particularly if you're moving into retirement, how we're going to secure that retirement income. I'm actually writing an article. I actually just wrote it over the weekend. I've got to do some work on it, but I'll get it published here in the next couple of weeks. Talking about sequence of return risk. And we also just finished up chapter five of our investing, our misof investing for

20:44the long term article. It's on the website this morning. So if you haven't been by the website yet, I encourage you to go by there. The article is there. And then the other four chapters, if you haven't read them or linked at the top of the article. So you can just go right to them. But this final chapter in particular goes through kind of the great investors of our time and talks about why they, why were they the great investors? What did they do versus what you've been taught in the markets? And kind of the rules to follow in terms of managing your own money, write some things to think about in terms of managing your own money. And what this whole series covered was kind of the inevitable reality that we have this idea of this long term view, right? We're talking a couple things. We'll just buy and hold the markets because markets always go up over time. It's true. Over the last 126 years, take a look at the market on a logarithmic basis. It's just kind of slopes up into the right.

21:46No big deal. Problem is you don't have 126 years unless you've contracted vampirism. And personally, I don't know anybody that has. So your timeframe for your investing is only between now and ultimately when you either need your money or you retire or die, one of the two. So understanding market dynamics is very important. And again, you can have two. And this is one of the parts of this, this article that I posted this morning, two people, completely identical. One retire. One retire at 25 times valuation. One retire at 15 times valuation. Between those retirement dates and their natural exploration, and I used, you know, current

22:48life expectancy tables to make the calculation. One retire is broke. The other one does just fine. Which one do you think retired broke? The one that invested at 15 times valuation, the ones that invested in 25 times valuation. That's history. If you just think about it, it makes perfect sense. If you buy something above valuation, you're going to have a problem selling it for either higher valuation down the road, most likely. If you buy it a lower valuation, you tend to do better. It's just kind of kind of logical in our brain, but we don't really, you know, we understand that, right? You know, what I'm telling you is nothing that you don't already understand. You know this in your guide, but we ignored anyway because markets are going up. And we're told that we have to beat the market every single day, right? I've got to look at the red and the green lights, right? Every day, what's up? What's down? Right? And we forget about longer term trends. We forget about valuations. We forget about these things that matter over the course of time.

23:54And so when we start thinking about allocations, right? And rates have returned and things that we need, that all kind of gets lost in the mist of this narrative by the media to chase markets every day. It's understandable. I mean, it's the psychological pool. In fact, that was, you know, one, we spent a whole one of our five articles on investing in long term is all about psychology. And we repeat the same psychological mistakes over and over and over again because we get swept up into either the median narrative of the moment, whatever that is or greed. And those two lead to very poor outcomes over the long term. And we've done this math several times on the show here, which is that when you really sit down to it and you start thinking about, okay, I'm 55, I'm 65, whatever your age

24:58is right now, going into retirement. If you're young, if you're in your 20s to early 30s, you can forget everything I'm saying. Just go dollar cost average into the markets and you'll be fine. The reason is is because if I'm 25 years old and I go through a 20 year secular bear market, which is kind of historically normal, 18 to 20, when I come out, I'm going to be dollar cost averaging in a week market for that 20 year period. And then when I come out on the other side, I'm in my 40s and I am prime for that growth into my retirement age. If you're in your 40s and you're at the peak of the peak of a secular cycle moving into a bear cycle, it's a very different game on the outcome. This was the problem back in 2000. There's a lot of people were 55 going into 2000.

26:00They were 50, 55. And 13 years went by of zero returns. I was 13 years of their growth on an inflation adjusted basis that they didn't get. So there are $100,000 that they were depending on being a quarter million or 300,000 by the time they retired or whatever the number was was still 100,000 13 years later on an inflation adjusted basis. But now they're no longer 55, they're 68. Now fortunately, there's been a ripping bull market over the last over the last 10 years in particular, which is help heal up some of the issues, but it certainly didn't cure all of the issues. Why? Because every year when you sit down and do the math on your portfolio, you say I need 6% a year to get to my goal, whatever that is.

27:05For 13 years, there were 6% compounding for 13 years that they didn't get. So yeah, the last decade has certainly helped them recover a chunk of that money, but it didn't get them to where they were supposed to be for retirement. And that's why there's always this gap, right? If you take a look at a lot of these charts that go around and they'll say, oh, if you just invest in the markets, you get 10% a year, you're $50,000 today, it'll be worth $2.5 million by the time you retire. You're going to be fine. Kind of a lot of fallacies with that. You know, I love Dave Ramsey on the fact that he's great on debt counseling, terrible investments just by, you know, by my mutual funds, you get 12% a year, $50,000 at 12% a year by time you retire, you're going to be a multi-millionaire, it's going to be fine. Problem with this is a couple of things. First of all, a million dollars in 1980 is not the same as a million dollars in 2000.

28:08A million dollars in 2000 is not the same thing as a million dollars in 2020, right? Because of inflation. The other problem is that markets don't grow that way. Markets don't give you 12% every single year. And that's why if you go look at a long term chart between, you know, a 7% compounded rate of return and a 7% actual rate of return, there's a big gap on the outcomes. This markets don't compound. They grow, but they don't compound. And interest means that you never have a down year. Compound interest means that every year you're getting 10% every single year without fail. Showing you the math before here on the show, but if I have a, if I have three years in a row where I'm making 10% quick math from a chat here, if I've got, if I have a 10% return for, for three years in a row, what's my average average rate of return?

29:1110% that's not hard. Let's assume that in year four, I have a 10% decline. What's my average rate of return now for four years? It's 5%. What? Yeah. It's 5%. You cut your average rate of return by half by having one down year. That's not compounding. So protection of capital. This is why the protection of capital is the most important thing. Now, I'm not talking about volatility, right? If you're going to invest in the markets, markets are going to go up and down every single year. You're going to have 5% corrections. You have 10% corrections. That's, that's the price of investing in the markets. If you're worried about a short-term market decline, you shouldn't be investing. What we're talking about is the permanent impairment of capital. We're talking about 40% declines, 50% declines, those types of declines that permanently

30:14impair your ability to recover and meet your retirement goals on time. That's a very different case. But this is what kind of gets lost in the narrative. And so when we start looking at things on a really short-term basis, we're going, you know, oh my gosh, I don't want to bonds. Interest rates are going up. I'm pricing is going down. I want to own them. You're missing the point. I buy, I need my money in five years. I buy a five-year treasury right now. I get four and a half percent ish for the next five years. And I get all my money back. I'm sure to, I don't have to worry about principal. Principles fine. Sure. Interest rates may go up. Interest rates may be 5% in five years on, on a five-year treasury or 6% on a five-year treasury and five years. Who knows? Might be lower. Right? Interest rates may be back to 2.5% in the next five years because we're in an economic recession and a secular downturn.

31:18I don't care. This is the point I want you to get your head and get your head around. Don't care. On that particular instrument, I don't care. Because at maturity, I'm going to get all my money back. And I can do whatever I want at that point. If interest rates are higher, I roll into a higher coupon. Interest rates to lower. I do something different. But what I have to worry about for five years, I have to worry about my principal going away. I don't have to worry about that permanent impairment of capital. Do I have to worry about permanent impairment of capital from stocks? Absolutely. With bonds, I don't have to. Again, we've done this math, like I said before on the show here, if you just break a portfolio in half and again, just using 5% treasury rates right now. If I need a 6% rate of return, but 50% of my portfolio in treasuries, I'm not recommending you do this as just an example. But I can lock up 2.5% of six just in treasury bonds.

32:23That means on January 1st, when I start looking at the outcome for 2027, I need 6% next year on my money. I can lock up 2.5% of that right now. That only leaves me 3.5% on the other 50% of the portfolio that's got a return. So I put 50% of my money in equities that are providing a dividend yield and say my average dividend yield on my equities is 2%. So that's another 1% just in dividend yield. So now between interesting come and dividend yield, I've got 3.5% of six, which means I only need the markets to go up 5% next year to get to my 6% goal. That's not unreasonable. I didn't have to work really, really hard to make my portfolio generate that 6% rate of return. And it certainly limits my downside risk if the market comes on buckle for some reason. Bonds are going to go up in value and while stocks are declining, I'm going to have a

33:25buffer set up in my portfolio. So the point about all this is that, you know, don't mistake the value of that. And look, I'm reading some of your comments and chat, you know, bonds need to go to 10% for debatement. And that's not true at all. There's 3.4, course 2.4. There is no such thing as debatement in terms of valuation, right? What when somebody says something's being debased, it's a function of inflation. That's it because there's nothing backing the currency. It's called, that's when we have fiat currency. Now the Romans debased their currency because they made silver coins and they took the silver out of the coin. That's the basement. That's true honest debatement. That's a very different thing versus inflation. If you take a look at a chart of the dollar and this one floats around all the time, it's

34:29like, this is the debatement of the dollar. It's going down. You create that same chart using inflation. It's the exact same chart because that's all it is. It's just inflation. It's what the dollar buys today versus what the dollar buys tomorrow. That's simply a function of inflation. Inflation grows at 2% historically throughout history. Yes, you have some periods where inflation spikes, those spikes are temporary because ultimately it's economic growth and wage growth that drives inflation and those are not growing. Those are declining. So yes, we have a tick up inflation right now because of what oil prices? No, bonds don't have to be at a 10% yield to offset the basement. That's ridiculous. It's stupid. You should know better. But the point is that yes, we do have to offset that risk of inflation. So let's go back to our portfolio for a second. 50% of my portfolios in treasury is yielding five.

35:32They have 50% in equities. Why do I own equities? So I need to make sure to your point that my money is adjusting for inflation, aka debatement over time through my retirement. That's what the equities are for. Not head. Don't my dad just always call people not head. Not go ahead. See the other one. That's what the equities are for. 50% of my portfolios in bonds, 50% in equities over the next year. Inflation's gone up by 2.5%. So now my bonds are about 48% of my portfolio and stocks are 52. Still getting my 5% on bonds. Inflation rates running at 3.4. Reduce my equities back to 50. Increase my bond exposure by 2% back up to 50. Now adjusted my income from my bonds for inflation.

36:34That's how bonds adjust for inflation over time. They won't do it on their own, right? You can't buy a bond and say it's going to adjust for inflation over time. Bonds won't because they pay that coupon every single year. This is why you need don't equities. Being 100% bonds is not a good idea for a whole variety of reasons. But that's the biggest one most certain. A lot of people come and say, I'm super conservative. I don't want to lose any money. I'm going to be 100% bonds. Not a good idea. You need to have about 30% equities in your portfolio regardless of how conservative you are because you need that equity growth to adjust your income, your bonds for inflation. Seeing if you don't understand basic portfolio risk management, you're missing the whole point of the conversation. You've been sucked into this narrative that's on the media and primarily by gold bugs

37:36who don't know better and by the other idiots running around that don't understand monetary plumbing. You've been sucked into that narrative and you're missing the whole value of investing and how a portfolio works. A portfolio is an engine. That's all it is. And when you build it, if you build it correctly, that engine will run indefinitely. You build it incorrectly. It won't. But if I build an engine, does it run indefinitely without maintenance? Of course not. You have to manage and maintenance your portfolio over time, just like everything else. The problem with most of these narratives, like the one we just got in chat, and this is the actual article that's posted on the website, this posted on Friday on the website, is a crisis without a calendar.

38:38Don't want the article on Friday talks about the US debt crisis, right? We hear about this constantly. It's like, oh, everybody's one bankrupt, all the bonds are going bankrupt. They don't want one bonds. They're missing the point, man. These narratives are great. I was listening to a guy on a podcast the other day and he's like, oh, well, I'm guarantee you that this debt crisis is coming and it's going to wipe everybody out and the government's going to come in and just reset everything. They're just going to wake up one morning and reset everything. It's pretty scary. And so the interview asked him, it's like, oh, he wins. It's going to happen. Oh, I don't know when it's going to happen. It could be a year from now, it could be 20 years from now. This is a problem with all these narratives, right? They sound great. They sound logical. It's certainly scary, but there's no calendar on it, which makes it an absolutely useless

39:40prediction for managing your portfolio risk. I mean, the only thing we can adjust for in account for is what we know right now. Here's inflation going to be a year from now. Right? It could be higher. It could be a lot lower. One thing we know about high oil prices is that high oil prices are temporary and what we know about spikes and inflation is those tend to be temporary. We know that history tells us that even the spike in the 70s tells us that today's economy is very different than the 70s. We're service dependent, not manufacturing dependent. We're no longer dependent on imports. We are now an exporter for oil. Very different backdrops. But even with those backdrops and similarity, those spikes and inflation were temporary. And then the trend of inflation resumes to along the lines of employment, economic growth

40:40and wages. Wage growth is weakening, saving rates extremely low. You don't have the supply demand imbalance that you need to create lasting inflation. So the odds are that in the next year or two or three or however long it is that Kevin Worsh is right, inflation will return to 2%, which means interest rates will be lower. Combine that with high valuations in the markets and you've got other issues to be concerned about. So the point of the conversation is this. And again, I encourage you to go the website and read the part five of the series on investing for the long term. I encourage you to read the Friday article on US debt crisis. Right. And the point of the conversation this morning is simply, this is your takeaway to sum the whole thing up. We are at the tail end of a secular bull market.

41:41But again, this is a crisis without a calendar. Secular bull markets last a lot longer than you think, but we're very long into this current secular bear markets deviations are well above long term trends. Earnings growth is well above long term trends. Those mean revert in time. If all the major institutions which have PhDs, economists, you name it on their board directors. If they are buying bonds at a much faster rate than their buying equities, you just have to ask you this one one question, right? Why are they doing that? What do they know that I don't know? Am I smarter than them? What's the market trying to tell me that the guy on YouTube that I'm following may be

42:45misleading me down the wrong path? That's the decision you make for yourself. Whether you agree with me or not, I'm just some guy on YouTube, right? Whether you agree with me or not is fine, right? All I'm doing here is just showing you data. I wish I could have had lots of tables in charts this morning. I would have shared with you, but Brent screwed everything up as usual this morning. Just can't get good help these days. That's just goes to prove you that AI does not solve everything, by the way. But all I'm showing you is data, right? All I'm telling you about is data. I'm just telling you how things work. That's it. I'm telling you is new. Nothing I'm telling you is revolutionary by any search of the imagination. This is the way money's been managed for 130 years. So what you do with that information is solely up to you, right? That's it. I mean, that's all I'm trying to.

43:46I'm just trying to tell you what the facts are and give you the data to work with and what you do with it from here and solely up to you. If you choose to believe that the world's going to end and it's all over and we all need to be in bunkers, then you better invest heavily in lead and beans. It's not going to matter how much gold you have. There's a really good movie. I just saw this recently. It's called Homestead. It's about Angel Studios. Have you seen it? Yes. So yeah. But it's interesting, right? That's the Christian-based movie. So you just have to take the movie in with that. But the point is simply that you can prepare all you want for the end of the world. But if you're not prepared for the one thing to protect your family and to protect what you have, then the rest of it ain't going to matter because people are going to come take it from you. So just something to think about. Anyway, however you, whatever view you choose to use, I prefer optimism.

44:51I'm writing an article right now for you guys. I prefer optimism. Optimism has two beneficial factors. And this is proven through studies. Optimism has two beneficial factors of being optimistic versus pessimistic. So if you're in my chat right now and you're super pessimistic, A, you're shortening your lifespan by 10%. Optimists live 10% longer than pessimist. The biggest thing is, optimist outperform pessimist by a massive margin over time because markets return positive returns 73% of the time. So you're hurting yourself financially and you're hurting yourself health wise by being a pessimist. That's why I choose optimism. All right. Let's wrap up the show for the day. We'll be back tomorrow with two dads on money. John Penelbee here. I have no idea what we'll talk about, but we'll have something for you in the morning. And hopefully we'll have some technology to work with us and cooperate and share some

45:53charts with you as well. Maybe we can do a couple of revisit to some day stuff. We'll see. Anyway, you'll have a great day. Thank you all so much. I appreciate you being here. I apologize for the technical difficulties. Be sure and like and subscribe to the channel. It means a lot to me. It means a lot to us. Keeps us here doing this. What we do for you guys every morning with you. You agree with me or not, right? Even if you disagree with me, give me a thumbs up. I do appreciate it very much. All right. See you all back here tomorrow. Have a great day.