Time To Start Getting REALLY Bullish? | Tom McClellan

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1:00So I'm not bullish today, but I am looking for the moment. It's probably within the next week to turn bullish and then I'm going to be bullish as I'll get out. Welcome to Thoughtful Money. I'm Thoughtful Money Founder in your host Adam Taggart. Welcome you here for a discussion on the latest in market technical analysis with one of the best TA guys out there. Of course we're talking about Tom McClell and of McClell and Osloiter. Tom, how you doing? Doing great, Adam. Great to see you again. Great to see you as well. So we are talking just so the audience knows we're recording this within an hour. So of the latest Federal Reserve news. And folks, I'll be deconstructing that. In fact, by the time you've seen this video with Tom, you've probably seen my livestream with Axel Merck kind of doing a play by play deconstruction of everything that the Fed released today. But Tom, these are interesting times.

2:02And there are a few people I know who are able to sort of tease out the wise and the house of how times are interesting than you. You have all sorts of wonderful charts. We're going to go through a bunch of them. But the correlations that you come up with always just kind of blow my mind. So anyways, we'll get to the charts quickly. But first, can you just give a sense for the character and the tenor of this market compared to previous market times and cycles you've seen across your long career? This is a strong market. We are in the first two years of a presidential term, which are supposed to be sideways. And the market is doing a very, very upward version of sideways. And so if you want an explanation for why that is, I would say that we are not taxing Americans to the hill. And we're leaving more money in the economy as opposed to in the government's coffers. That creates problems for the government, but it creates great conditions for the economy because we're not eating our seed corn.

3:04And if you leave that money, more money in the hands of people, they go out and spend it and build factories and do things with it other than pay the government. As I said before, it creates problems for the government, but it's great for the stock market. And I see continued great things for the stock market ahead. If you want to jump right into the charts, I brought. We can talk about why. Well, yeah, far bit for me to stand in between now and then. So yeah, when do you pull up your charts and elucidate all for us? I call this my Rapunzel chart. And it's basically the way that we construct the presidential cycle pattern. That's the name that technical analysis used for talking about how the stock market has regular repeating four year patterns of behavior. And so the way you find that out is you chop the market up into four year chunks of time. You reset them all to the same initial value and then you average them together. So this is what they all look like independently and it looks like a mess. But when you, when you average them together, it looks like this.

4:07I do it a little bit differently than other people do where I start at November 1st, that's when election time is. And so you can see that for the first couple of years, the market is generally sideways. And then year three is great. And year four is also upward, although a little bit if year because we're heading into election. So we're about to head into year three, which is a wonderful time for the stock market. In fact, it's nearly always up a couple of times it didn't work that way. One was 1931 when we were in the middle of the Great Depression. Another was 1939 and when the vermouth was marching through Poland and he didn't get up here. So absent conditions like that, you can count on the third year being an up year. Here is what the current stock market is doing compared to that. The scales do not match up. And I have the two plots offsets so that we can see the correlation and see that it's not just the overall slope from beginning to end. There's correlation of the dance steps along the way.

5:09But we're generally speaking, we're doing a whole lot more upward of a version of sideways than we have done in other years. But we still have this bottoming process in the presidential cycle to get through. And we are in the zone for doing that. And then we get to climb the big wall of upwardness in the stock market going into the third year of the presidential term. Okay. Hey, a couple of questions on that. So it looks like that bottom is generally coincided with the midterm elections. And so is it safe to say in the next couple of weeks you expect some volatility and some market softness? We're in the squishy bottoming period right now. And actually it bottoms before the midterm election, which is in November, which is interesting. You would think that the market would wait for the results of the midterm election before deciding what to do. But no, the stock market tends to bottom in late September to early October because that's

6:10when investors feel like they have figured out what they think is going to happen in the election. And so they're not so worried about it anymore. And in fact, the stock market right now, the S&P 500 right now is running about a week ahead of the normal schedule. That's why all these alignment lines that I'm that I've drawn in here are pointed are tilted a little bit because the stock market is making those turns a little bit early. So we had the top we're supposed to have. It was higher instead of lower, but we're still making the same dance tips. So we're in this bottoming multiple bottom formation structure right here. And somewhere between now and about a week from now, we should get the last of these bottoms. And then we start really climbing. And so along the way as we as we muddle through this, what you want to look for as you want to look for a day with a high put call ratio, you want to see a nice high vix. If you know if I could ask for everything I want, you want to see breath divergences starting in especially breath momentum divergences. So we look for a higher low and the McLell oscillator to say, okay, we're getting the conditions.

7:13It's time to get on board to climb this. But you don't want to be too late in waiting for the last of these bottoming conditions because we're going to be starting higher and there's been nice correlation of the dance tips, not generally of the overall slope, but of the dance tips where there's been a disruption of the overall slope is where you have these anomalies like going to where with a ran or having the straight or her moves open and everything's fine. Those were not part of the normal program. And so you cause brief anomalies that change the slope. The dance steps are still there, which is fascinating that it works that way. Okay, so it sounds like what we'll give you a chance to give as much nuance in the rest of the discussion as you want to give. But it sounds like you're actually generally pretty optimistic about the direction of the market starting pretty soon. Can you go back to the previous slide for a second? I just have two questions for you. One is this presidential cycle pattern, you know, says, hey, as the midterm elections get resolved, the market tends to have a really strong following year.

8:14And of course, the debate leading up to the midterm elections is, well, is the party that's in favor? Are they going to lose the midterms and is Congress going to go away from the administration? That's all taken to account historically in this cycle, right? So I'm assuming in your mind, it doesn't really matter so much what happens in the midterm elections just as long as they're over and there's certainty delivered to the market. Is that true? That's exactly right. The actual outcome, the election matters way far less than the certainty of knowing that we have an outcome. People don't care. The investors don't care where the outcome is. They just want to know that we have one. And so once they feel like they know that we're going to have an outcome that is going to be certain to them, that then they start buying. And that's why the bottom is about a month before the election, which is fascinating. You'd think that it would be after the election, but it doesn't work that way. Okay. And then second question is, right now you said we're following the dance steps you would

9:17expect to see, although there have been some variations. And obviously the exogenous stuff like the wars. Yeah. That's just stuff coming out of the blue, surprising the markets. When you say that we're stronger than normal right now, does that in any way make you think that the following year may not be as strong as the historical pattern average, just because we're maybe pulling some of that value into today? That's an excellent question. You get a figure that since the presidential cycle pattern is an average pattern of all the four year terms, half of the time we're going to be better, half of the time we're going to be worse. And so it's not, it's really hard to characterize it because we don't have a sample size of 50 or 60 iterations. It really, we've only got a handful since the thirties when we changed the 20th Amendment and changed the political calendar. And so if you try to squeeze too many nuance insights out of it, you start running into

10:22trouble. But generally speaking, strengths tend to continue. We don't have signs of weakness showing up. We just have signs of the normal seasonality like we're supposed to have. Okay. All right. So at very, very high level, at least looking through this TA type of lens, it sort of seems like markets have a green light. But I know you have a lot of other data here. So let me let me let you run. Yeah. Now, if you want to, since since we're talking about average patterns, the four year presidential cycle pattern is one of those, the 10 year decennial pattern is another one that's been talked about since the thirties and it's still working. You basically average the market together in 10 year chunks of time. And in this case, I'm using the Dow instead of the S&P 500. And the correlations been pretty good except for when we had the Iran war that disrupted the correlation. But once people feel felt like, okay, we've got that figured out it got went back to, to following the normal dance steps. This again, is a more upward version of sideways than the average.

11:23But this shows a bottom in early October. We're in this bottoming process that is very, that fits very well with what the Dow is actually doing the fits with that pattern. And then we get to the year seven effect, which is a bullish effect except for 1987. Year sevens can have had some problems in the last century or so. But that's usually later in the year. But the first part of years ending in seven are very bullish and that actually starts in October. So I'm not bullish today, but I am looking for the moment probably within the next week to turn bullish and then I'm going to be bullish as I'll get out. When you need to build up your team to handle the growing chaos at work, use Indeed Sponsor Jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. The partners of this show will get a $75 Sponsor Job Credit at Indeed.com slash podcast.

12:24That's Indeed.com slash podcast, terms and conditions apply. Need a hiring hero? This is a job for Indeed Sponsor Jobs. This episode is brought to you by Palm Olive. Family time isn't just the big moments. It's weeknight dinners, sitting around the table, everyone talking all at once. So when the plates are empty and the sink is full, use Palm Olive Ultra. Palm Olive's most powerful formula removes up to 99.9% of Greece, leaving your dishes sparkling clean and the new convenient pump makes cleaning even easier so you can spend less time tackling dishes and more time together. Shop now at Palm Olive.com. Okay, bullish is all get out. Okay, I like that. So let's see where to go from here. Let me just ask you this question because it might strike people the way it kind of strikes me. When you say years that end in seven tend to be pretty bullish, I think that's what you said. Yeah. Talk to the person who says like, come on, Tom, that sounds like astrology.

13:26Right. I agree. Totally agree. That's a scurry idea that it should matter. And so since the hypothesis that I was operating under is that it's a scurry idea, it shouldn't matter. I gathered the data just to make sure. And I refuted the hypothesis. It's not such a bad idea because there is reliable similarity that we see from decade to decade in terms of the similarity, how they show up. Part of it is owes to the four year cycle pattern because years at end in six like we're in right now half the time. That's the second year of a presidential term, which is sideways period. And so you're seeing that effect counted twice in the two different versions of it. It shouldn't matter, but it does. We are creatures of habit and the seasonal factors of an annual cycle versus a decade and versus four, they all do seem to matter. They shouldn't, but they do. Okay. And folks, this is somewhat about what it was prone to at the start where Tom has, he teases

14:26out in his charts. All these amazing kind of correlations that just do not seem intuitive, but you can't argue with the data that they exist. And so Tom, I'm sure you've got some more of those hidden in here. And I don't know if you're going to talk at all about your oil and gold, you know, correlation starts with the markets, but that's the last. But I want to talk somewhere about the stock market. But one of the things that we have going on right now, we have the advanced decline line has been fairly strong. We have no divergence between the advanced decline line and stock prices. The advanced decline line was making tops when stock prices were making tops. That's a bullish condition. When you have a strong advanced decline line, it says that there's enough liquidity around that even the lowly stocks, which all get the same vote in the advanced decline statistics, that even the lowly stocks can get some of that liquidity. When you have a new all time high or even a new three year high in the advanced decline line, that is a very positive factor. In fact, I think I brought a chart. Yeah, this is a study I started years ago and I've kept it up.

15:26It asks the question, suppose you have a three year high and then in the New York Stock Exchange's advanced decline line, what's the worst case drawdown over the next two years? The next three months going forward from that moment. How bad can it be? The answer typically is about 10% as the worst you see. That's where the dash line is. I've drawn it at 10%. That's about as bad as it gets after one of these conditions where you have a new three year high in the advanced decline line. The big exceptions are, of course, COVID. COVID broke a lot of things, broke a lot of charts. Also when the Fed suddenly ended QE1, we got a big dip. If the Fed is going to do something sudden and drastic or if we're going to have a pandemic, then yeah, the 10% level can be broken. But generally speaking, the worst case you get after one of these new AD line highs is about a 10% decline. That's a nice thing to know. Yeah, and start interjects, but that 10%, that's not an average. That's like a maximum.

16:28It seems like the average is 4% or something like that. That's what these bars reflect. Yeah. So the worst case is about 10% is the worst it's going to be except for these. Best barring of Black Swan more or less. Yes. Those are true Black Swan events. Yes. We don't, I don't think we have that coming. And so we configure that we're not going to see too bad of a drawdown. Okay. All right. So, um, Where are we? I mean, I'm going to ask you this question at the end after you've gone through all this stuff. But when you said in an immediate term, you're looking for a reason, you know, to turn, to flip bullish, right, that we've, we've fully bottomed out and that we're starting the beginning of the next, you know, 12 month upcycle. But then you said you're going to, you're going to be as bullish as all get out. And so I'm just preparing you. I'm going to ask you to expound on the all get out part of it. Like, What is the story your charts are telling you to make you want to be like really bullish? I will promise to get to that. Great. But first, first I got to, I got to do a little bit of caviarting thing that we're not uniform in terms of.

17:30A strong breath everywhere where the breath numbers are weak and where I'm concerned is in the corporate high yield bond market. I, I keep a daily, a domestic line line for those data as well. And they are very useful because these corporate high yield bonds, they trade much more like stocks than they'll do like T bonds. And they draw from the same liquidity pool as the stock market does. When you see a divergence between this advanced decline line and prices, it's a sign of trouble. We've been operating under a divergence between the two of them for all of 2026. And, and I keep waiting for that to matter and it just doesn't. The past ones that I've shown in this chart, they've mattered in a decent way. 2022 was a, was it, when it mattered a whole lot. And so this is not a good news, but this can get better. If corporate high yield bonds suddenly start doing better, then we can rehabilitate this divergence and start doing well.

18:30One thing I notice is that you see how steep the recent dip is. And that's a very vertical acceleration. We look at acceleration and investor client statistics using the tools that my parents developed the McClellan oscillator and the summation index. And so I keep a McClellan oscillator on this advanced decline line, where we're seeing the same divergence zoomed in. This is the McClellan oscillator for that corporate high yield bond, advanced decline line. And it's way the heck down there. It's saying we are ringing out the probably the worst of it. You usually get the bottom, the lowest point in an advance of the lowest price low. You did that here in March, you get the lowest point in advance of the price low a little bit later. So we're having the worst point now. So that's why I'm thinking that the final price low is probably within a week or so from us. And then we start going higher. Okay, so you think this will be relatively short lived in terms of its, its potential to influence stocks.

19:32Do me a favor real quick. Just go back to the first chart you showed with the divergences. Right there. If I remember crack life, I've taken good notes from my previous Tom McClellan interviews. You are always looking for negative divergences, right? And that's what you would call this, right? A negative divergence. This is a, I'd call us a bearish divergence. I'm looking at if you're in an uptrend, which we are, except for a small seasonal pullback that we're doing right now. This is, this is generally speaking is a is a lower left upper right kind of short. Anytime you're in an uptrend, you look for reasons why is the uptrend going to end? And if you've got no divergence, then that's a good thing. If you have a divergence, that's a reason that the uptrend could end. And this is a one of a big concern and it's been bothering me all year. But we're reaching the point where the bearish seasonality time window is ending. And so if it's, this is going to get me thing done. We've got about a week left to get whatever done. It's going to get done. And then we run out of time and we're transitioning into a new bullish time window.

20:35Okay. So, um, forgive me if these are any of questions for the ones that come to mind. Because this is the high yield bond corporate high yield bond line. I imagine that that asset class gets pretty impacted by rising interest, rising bond yields. Right, especially when a lot of these companies are finally having to start, you know, rolling over their debt at these higher interest rates. So is there an argument to be made for as long as bond yields keep rising? There's going to be downward pressure here or do you look at your oscillator and say now that looks like this thing's pretty much played out. More like the second one of your choices. I would think that these would be interest rate sensitive, but they're way more sensitive to the stock market liquidity than they are to what other interest rates are doing. That's just one of those hypotheses that you got to check. These are horrible investments, corporate high yield bonds, their jump bonds, they're horrible investments.

21:35They don't deserve your money. And that's why they have to pay such a high yield in order to attract some money. They only do well when there's so much money sloshing around that everything can get a little bit of it. When the liquidity starts to dry up, these horrible investments are often the ones that show that pain first. And they've been showing that pain all during 2026 saying liquidity is having a problem. I think that liquidity is going to get better and is going to start doing well. It hasn't been really affecting the stock market that much. The pain has been confined here in the corporate high yield bond market. I think it's going to start getting better. And so this will be one of the confirming signs. I'll be looking forward as we get into October November is looking for jump bonds to start doing better, which will say, hey, there's gobs of money even the even the crappiest investments can do well. Okay, so you think liquidity is going to win out. All right, sorry. I think that's a side quest, but just use it. So let me, let me jump to something else that's really important right now that has been getting a lot of attention.

22:39This is margin debt or more appropriately the debit balances and margin accounts as tracked by finra. They published this data every month and it's been out since 1997. And it's way the heck up there. Whole lot of margin debt, which has been a problem in the past when when too much borrowing to fuel stock purchases is getting out of control that people start to get worried. There because this is just going parabolic and I've shown it intentionally on an arithmetic scale just to make it look more alarming. It looks worse than it maybe is. And so if we if we normalize it by comparing it to a GDP, then it doesn't look quite so scary, but it still looks pretty scary. That's still pretty scary. I mean, that's the same. The status that this is that same margin debt just divided by a GDP. So it's not quite so parabolic, but it's higher than it's ever been at least since 1997. And whenever you get a big peak like this, you it coincides with important stock market tops.

23:45Uh-huh. In fact, the peak has to occur before the stock market top. And that's really important, but there's something else I want people to do. I want everyone who's looking at this to look mentally do a little bit of math in your head and look at the period between these peaks in this margin debt versus GDP. It's about seven years. There's a very reliable. Seven year cycle that in market tops that goes back a long ways more than just the data that Finra has in this data back to 1997. And so counting forward from the last peak out of the series in August of 2021. Uh-counting forward about seven years. That gets us to about 2028. And we're in 2026. So even though this is really high and concerning because it's high, we're not yet at the seven year cycle point for this to be topping out. So I think we have a little bit more room. Alright, so our astrology tells us we still got a year and a half until we really have to worry about this.

24:50And I'm sorry to be talking cheek about astrology, but it's these tight correlations that even Earth. Well, and if it was astrology, then you could point to some planet with a seven year orbital period, but there isn't a good one to point to. We can dismiss the planetary aspect. I don't know why seven years matters except that people get frenzied at tops and then they get discouraged and it takes them a while to decide to get frenzied again and humans tend to operate on a cycle of about seven years. That's the best explanation I have. Wow. Okay. But this same cycle, there's other data. This is data that Fred, the St. Louis Fed has. And this is not as good a data because it's only quarterly instead of monthly that Fender has, but this one goes back to 1945 and you say that see this same seven year cycle going back showing up in these data and in prices going all the way back to the early 70s. So it's a pretty regular thing. It's not precisely seven point zero years. It's seven ish. And so I can't tell you exactly when the top is going to come just based on this because it's not precise enough, but I can tell you that five is not seven and we are five years from from the peak last of these peaks and so somewhere out in 2028 is when we should expect the seven year top to to arrive.

26:07Okay. So it sounds like this is going to be a bullish is all get out interview. But you're marking that at some point you may come back on in a year. So I can deliver the bearish is all get out one. I promise I will. If we start seeing the bearish signs again, but there's a lot of bullish to get through. There's one concern though. So and the one way that this could get screwed up is involving the Fed and quantitative easing. Maybe some of your viewers hopefully know that we are in a period of quantitative easing right now and by my count we're in QE five. The first one was in bio the back in 2009 and every time we've had them, they've been in in variably bullish. But when worse took over without saying anything, the slope has changed. And a much steeper slope before a worse took over in terms of the total the increases in the total treasuries and mortgage back securities. They're selling off some of the mortgage back securities now, but they're bought they're more than making up for that by buying treasuries except that without saying anything.

27:10He didn't announce anything about QE, but it just as it's noticeable that the slope has changed and now it's changed even more with the latest data. And so if we get into full blown quantitative tightening, which they didn't talk about in the most recent FOMC announcement. I don't remember hearing anything about quantitative tightening. I think they're just doing this very quietly. If they start yanking money out of the banking system, that could it would be a fly in the I'm not, but we haven't heard anything for sure. OK, although I do want to say that Worsh in his during his consideration is about chair and then I think early afterwards has said, look, I don't really plan to be munking around with the balance sheet. In fact, I think it should be lowered over time. I'm going to really focus on using interest rates as my main policy measure. So maybe this is a consistent sign with what somebody with that mindset, you know, might want to might be doing. We're just going to slow the acceleration that eventually will start tightening, but who knows. Without talking about it. Yeah. So this is one of the reasons you got to not just watch the press conference. You got to look at the data.

28:15That's and that's what I do. Where one place where QE is bad is the bond market. You would think that having the Fed decided to step in and buy more bonds. That would create more demand for bonds and it would be bullish for bond prices. The exact opposite occurs every time you have QE like we had back in 2009, the bond market tanks. And we had QE 2 in 2011, the bond market tank. We had QE 3 in 2012 and 13, the bond market tanks. We had QE 4 after COVID, the bond market tanks. When they stopped doing QE, we hit a low in the bond market and bond prices started going sideways until we started QE 5 again and the bond market has been tanking. So bonds have been doing poorly during this period of QE. It's been a very gentle QE around this time compared to some other ones, but it's not been bullish for bonds. And so I'm bearish on bonds right now for a lot of reasons and I can talk about that a little bit more later.

29:18But this if we do end QE 5 and transition to even quantitative tightening, that would be a other than bearish factor for the bond market. When you need to build up your team to handle the growing chaos at work, use Indeed Sponsored Jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a $75 sponsor job credit at andd.com slash podcast. That's andd.com slash podcast, terms and conditions apply. Need a hiring hero? This is a job for Indeed Sponsored Jobs. This episode is brought to you by Palm Olive. Family time isn't just the big moments. It's weeknight dinners. Sitting around the table, everyone talking all at once. So when the plates are empty and the sink is full, use Palm Olive Ultra. Palm Olive's most powerful formula removes up to 99.9% of grease, leaving your dishes sparkling clean.

30:20And the new convenient pump makes cleaning even easier so you can spend less time tackling dishes and more time together. Shop now at Palm Olive.com. Okay, all right. And just to be super clear, if we resort to QT4 that would turn you into a bear bowl or a bond bowl, correct? Not necessarily because there's other factors that I think are more important, but that could mitigate those bearish factors quite a bit. Why this works this way? This is very counterintuitive. It shouldn't work this way. But we've got we've got a lot of data that says it does work this way. And so at some point you got to stop arguing with how it should work and realize how it does work. Got it. Okay. All right. All right. So what else is in the grab bag here? I see oil oil. Oil oil interest rates. They are joined at the hip right now. And this is not news. I am not breaking news right now. But it's worth seeing it on a chart to realize how much of an effect it is the 10 years been zooming up.

31:21Crude oil prices have been zooming up. This is data current through Tuesday. The 15th. So it may not reflect anything that might have happened on Wednesday with crude oil price. Price had down a little bit, but you can see that there is this relationship. And it's interesting though as crude oil prices are not yet up to a higher high than they were in in the peak in March, but interest rates are. I explain this by saying, well, when we were making this peak in crude oil prices, that was ridiculous. Nobody thought that was going to last and it's all going to come back down. But now people are taking this renewed spike up much more seriously than they took that initial one. And they're thinking that this matters a whole lot more. How this comes into play for me is in a predictive way is that gold prices give us about a 20 month leading indication for what interest rates are going to do. So this the upper plot is gold prices and I've shifted that plot forward by 20 and a half months in the chart to reveal that all the dense steps in gold get echoed in bond yields about 20 and a half months later.

32:30It's not always exactly 20 and a half months. Sometimes the lines are slanted to get the alignment of the dense steps, but we have this sideways period that interest rates are supposed to be in. And then we laid at the for the end of this year, we get the really steep advance in interest rates to match the steep advance and gold prices 20 months before. So folks that remember how violently gold moved at the end of last year and in the beginning of this year, you're basically saying we should expect a violent run up like that in treasury yields, you know, in the next. 14 months. Yes. And now what I am not saying what I am not saying from this equivalent point where we are right now in gold's plot gold went on to double. I am not saying that that means interest rates are going to numerically double. That doesn't work that way, but the direction of travel and the timing of the turns does match up. And so. I don't really care how far interest rates rise in the long term. I just want to know what direction they're going to go because that tells me how to position myself.

33:38Okay, I'm going to ask you a macro question here. First off, though, this treasury yield index. Is that the 30 year. That's the current yield maturity on the most recently issued a series of 30 year treasury bonds. Okay, got it. All right. So we you've said it's the direction of travel. It's not the magnitude. But let's just estimate here for a moment, you know, let's say the 30 year cracks 6% along along following gold's path here. So in the 10 years, I don't know, 5.5% or something like that. I know you're much more of a charts guy. But do you have a sense of whether you think the economy can handle bond yields that high. I first of all, I don't dispute those numbers. Those sound reasonable to get there from here. And second of all, anybody wanting to buy a house is going to be in the most misery based on those because that's where the long term rates affect things way more than in business and in corporate expansion and in cat X and those kinds of things.

34:43Those are much more tied to shorter term interest rates. It's the it's in the mortgage market that the 10 year and the 30 year matter. And so that's where you're going to see the most pain. And I'm sorry to be the bear of tidings to all the real estate agents out there and all the new young first time home buyers. I bought my first house at 13% so I know what you're going through and so it's not going to be fun. Well, Tom, I'm going to do you a favor here and I'm going to tell you exactly when the Max Payne moment's going to be for yields, which is going to be next summer. So summer of 2027 and I know that with absolute certainty because I, you may have heard, have just become a first time homeowner first time in my long 55 year life. And the house is being built. And so we don't actually assume the mortgage until the house has handed over to us, which is going to be summer of 2027. So I'm going to get the instruction now that is going to be the Max Payne moment. Yeah, that makes sense. Yeah. It really does. But this same 20 month leading indication for for interest rates.

35:43It also works in gold prices with oil prices. This is the same time offset practice that I was doing before. This one uses a 19.8 month offset just because with oil prices, that's worked better historically. And this is a really long chart. This goes back all the way to 2014 to see that all the dance steps you get in gold. Do you get those same dance steps in crude oil prices and that this up move that we're seeing now is right on schedule coming out of this little consolidation in gold prices. So oil prices, according to gold, still have a lot further to go. Now you can have things like COVID come along that bend the curve a little bit or the Russia Ukraine war came along and bent it higher. Are there a ran war got gains a little bit pulled forward, but then we gave them back. So you're going to have events like that that will disrupt it, but the general trend. Sorry to say if you're a win a big owner, the general trend is going to be toward higher crude oil prices. We can get used to that. It sucks. It's awful, but we've gotten used to higher oil prices before we'll just have to learn to drive smaller cars or drive less or not get door dash deliveries or bundle up with with grocery deliveries.

36:52Because those are all using expensive diesel fuel. It won't be fun, but that's what the messages from gold prices. All right, well, you're just array of sunshine today and a number of issues. So, you know, if you're not enjoying what's happening to go oil prices, you're saying, sorry, folks, the foreseeable future, the beatings are going to continue. Let me ask you this about gold and gold is an asset that a lot of people who watch this video are pretty invested in literally a lot of them are gold owners. For oil to retreat back. And perhaps for the market to correct according to some of the previous correlations you showed, does that mean that gold has to correct in advance first or can gold. Go sideways. Well, oil prices and interest rates are going to follow the path of what gold was doing 20 months before. So, whatever gold does today, that'll matter for oil prices, but not until 20 months from now.

37:54There is a little bit of feedback in that in that relationship where what oil does matters to gold today. So, it's a little bit of that feedback, but it's the longer term feedback is much more important than the short term feedback. And so I'm expecting gold, as you may recall, topped in January of 2026. So, if you count forward 20 months from that, you get about August of 2028. So, the peak for interest rates and peak for oil prices. Oil prices. Okay. When you're going to get your mortgage on your on your house done is August 2028. No, no, no, I won't take that long. Yeah, no, no, it's 2027. So, at least I can refinance, you know, after that peak. Okay. And so the spirit on my question, which I think you kind of answered, but is, yes, so we know we have a pretty sharp decline in gold that's now working its way through the following 20 months. To then get reflected in oil and in how you'll interest rates.

38:57When I look at something like oil that, you know, kind of historically hangs out in the 60 to 70% dollar a barrel average. Yeah. My question is, is this more of a direction of change rather than a magnitude? In other words, over the next decade, let's say, can oil kind of, you know, be volatile, but still deliver an average. Price of 60 to 70 a barrel. While gold may still continue increasing up to 5,000, 6,000, 7,000 an ounce. Perhaps. And the one question I have is that that big rise in gold prices was done. Not so much by normal investors who are the gold market, but by central banks deciding that they needed to weigh in on especially China. And so does that diminish the message? That's a, that's a question that keeps me up at night. And I wish I had a perfect answer. What I can say is that the players who are in the oil market.

39:58Are expecting higher oil prices for longer. And one way I know that is I look at the commitment of traders report data. This is the net position of the commercial traders and in crude oil futures. And right now they are net short, just like they have been continuously net short since 2009. The important thing to understand is who, who, who, and what is a commercial? A commercial trader and futures is one who produces or who uses the subject commodity in their trader business. So a lot of the commercials, especially in crude oil, are oil producers. Some guy owns the oil well and he wants to lock in the pricing on his production going months out. So he will use the futures market to do that. And when you see them get up to a really high net short position. That tells you you're at a topping condition for prices when they get to a low net short position. You're at a bottoming condition. They're saying, no, I don't want to lock in at this price, but I want to lock in this price. And that's what the numbers are saying.

41:01When we had the initial spike on the Iran war, they got up to a really high net short position. They're saying, I want to lock in these prices. And of course, prices backed off and they backed off in their position and got back to a nice low net short position. So what's happening now is we're seeing oil prices back above 100 and these guys are a little bit more timid. They don't want to get short yet. They don't want to lock in these prices. They were willing to lock in those prices back here and had a high net short position. Now they don't want to do it, which says these experts know something. I'm going to sit on my hands and wait for even higher prices before I start locking in. So that's another confirmation that oil prices have higher to go. So Tom, give me a number that wouldn't surprise you to where oil could go in the next couple of months. I hate thinking in price level terms because there's other factors that come along and do that.

42:04I wouldn't be surprised though. If we start changing the units because if we're having trouble charging the right price for for diesel fuel because the pumps won't go higher than 999. Well, then we just need to change the pumps to reflect courts or leaders and then that'll solve that problem. So any number I give you may be subject to change to the re-vigtering of the units. OK, and I don't want to put you on the spot here, but I was just trying to get a sense. And that is a prediction, but just as a sense of like given how much room to run, there still may be here. I mean, obviously if you look at the gold chart. It looks like there's an awful lot more to run given what golds 20 and a half month example has shown us. Are we talking 10 or 20 bucks barrel or are we talking $100 a barrel that could be tacked on? There's longer to run, which may or may not be the same thing as more to run in terms of price distance.

43:05So the uptrend is due to last until 2028, if we're going to perfectly echo gold prices. But you in even with an uptrend you overshoot and pull back and overshoot and pull back. And so if I try to give you a number and a date, it would be a full zaron to try to do that. OK, no worries, but what I am taking away from what you're saying, both for oil prices and for interest rates is it looks like higher for longer is the bet to make. Sadly, yes. And I say that is a F-150 driver. OK, OK. Moving on a little bit, that's the last to what I got. If anybody wants to find out more about these charts, which feature regularly in our newsletter and our daily edition, you can go to our website. You can sign up for free for a weekly chart and focus or you can pay to get the good stuff. But I can go back over any of these charts that you have any other questions. Tom, if we got a little bit of time left. We do. And folks, highly recommend you check out MC oscillator.

44:05I don't need to give you the song and dance. You've just seen a lot of the goods that Tom delivers regularly to his audience there. And I love that you anticipate a number of questions I'm going to ask, Tommy, make my job really easy. So thank you for that. And the only thing I'll say about this that Tom hasn't said yet this video, but we've gotten to it in more depth than ones in the past, is this is something that not just Tom, but his family has been involved in this type of analysis for basically two two full careers at this point in time. So this is a technical approach that has been honed over many decades. So when you're looking for something that's really stood the test of time well. I can't give enough recommendations to check out Tom's work here. I'm glad you mentioned that. I want to mention that my father Sherman McClellan is 92 years old, still driving, still working with me every day, contributing to the newsletter and enjoying it because this is what he's wanted to do all his life.

45:08He did other things in other careers, but he really wanted to talk about analysis. He's he and my mom developed the McClellan oscillator back in 1969 with no computers. They did all their computations on ledgers. And I'm I still remember it was about three or four years after that. My dad got his first calculator, electronic calculator that ran on four C sale batteries, which was great. You could add subtract multiply and divide. And that made the process of tabulating all the numbers and plotting them on graph paper whole lot easier. So we've come a long way, but my dad is still turned on by analyzing the stock market, still doing great things and still I get the benefit of learning from him. Little tidbits that he's picked up over the years. He'll he'll try it out every once in a while patterns that he sees that I missed. And so I'm very privileged in that in that regard. That is just amazing. Well, please give your dad a huge kudos and thanks and high from the self- money audience and your mother. That story about the calculator that got powered by four C batteries, which is amazing. I mean, they're powered now by like these just teeny tiny little little disc shaped batteries.

46:17But I mean, your mother was very accomplished, but she basically kind of daily did the hand calculations and then chart creations based off your father's work. And then that was what the news report showed in the business hour. Correct. That's that's true. My mother was a math major. And so she was a wizard doing calculations just in her head. She could just do it and make the computations easier. And this was really my dad's joy, but it took both of them to to pull it off because my dad was the business and econ guy. My mom was the math was and without those two tenants combined in a couple willing to work on it. You couldn't have done this in 1969 without computers. Now it's easy. And you get chart server. You can pull up stock charts.com and get it headed to you in three seconds that we we are spoiled. They had to do it all in pencils and ledgers and graph paper if they wanted to see it. So that's amazing. But they're the generation that you know all the moonshot, you know, calculations were we came from as well. So that's just amazing to still be leveraging that and to still have one of the participants be active in the business with your dad here at 92.

47:27Tom, I'm just curious. Do you have, you know, is there a next generation of McClellan's coming up to pass the torch to here? I have two kids and one grandchild, both my kids are doing great in other types of careers. So I don't know who is going to pick up the baton, but I have had thousands of subscribers and even more than that on Twitter, people who see my work. So the work will go on in other ways by by successive generations of people. And so that's kind of gratifying to know that something I noticed and something I built could could get picked up and be liked by people. And so that's kind of fun. Well, that's amazing. And look, Tom, hopefully you've still got, you know, 40 years left in the end, just like your dad. But if you ever get to a point where I know you have your audience of subscribers who, you know, are your most passionate followers. But if you ever get to the point for the open casting call where you want somebody whose life passion would be stepping into that role, you know, let us know and we'll announce it here on Thalphamany. But hopefully that's not for many decades from now.

48:28I'll think about that one. Okay. All right. We'll look in the in our last couple of minutes here. Let me get back to that question I teased earlier. So I understand the reasons why you are. And anticipatory bull here, right? In the very short term, you're looking for the market signals over the next week or two. That may tell you that this bottoming process is over and it's kind of game on for the next 12 months. I get the bullish part. Why bullish as all get out. When you need to build up your team to handle the growing chaos at work, use indeed sponsor jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a $75 sponsor job credit at and D.com slash podcast. That's indeed.com slash podcast. Terms and conditions apply.

49:29Need a hiring hero? This is a job for indeed sponsor jobs. This episode is brought to you by Paul Molliv. Family time isn't just the big moments. It's weeknight dinners sitting around the table. Everyone talking all at once. So when the plates are empty and the sink is full, use Paul Molliv ultra. Paul Molliv's most powerful formula removes up to 99.9% of grease, leaving your dishes sparkling clean. And the new convenient pump makes cleaning even easier so you can spend less time tackling dishes and more time together shop now at Paul Molliv.com. Because the negatives that are counter arguments to the bullish argument start falling by the wayside. Seasonality. The divergence that you were showing us earlier the oscillator shows it's almost played out and that type of thing. The high yield bond is the one thorn in the in the argument. Those there's still weakness there. That could get resolved. And then you then you stop having that argument. Seasonality is weak right now for another for another week and a half at most.

50:37So it goes by the wayside and we transition to bullish seasonality. We already have strong breath in the advanced decline numbers. We have low taxation in terms of percentage GDP that the federal government is taking that's bullish. We have the bullish third year effect we had the Fed not getting too stupid yet. We do have problems from oil and from bonds. Those are those are negative. But the third year effect in the presidential cycle is is a super bullish time to be. In the stock market when you have something that always works. It's really hard to argue about that. I argue against it. And so you if you think that now it's going to be different this time. Well, you're you're betting against a lot of history with in thinking that 30 year of a presidential year. A term in office is going to be a bad time. Yeah, thinking about your a puzzle chart. There were very few years that were actually negative. Right. It's you know it's 1939 in World War II is since the 20th Amendment changed the political calendar. That's the only time.

51:41And so it's unless we're going to have a condition like that which seems like we're trying to have a condition like that in the whole person golf and the whole Middle East. There's a lot of there's a lot of there's a lot of stew and but hopefully smarter heads will keep us from getting into the whole world blowing up and. If if that does happen then we'll be spending even more money which and deficit spending as a bullish factor. If the if Congress ever decides to rain in its spending and have a balanced budget. That would be a big bearish factor. I don't see that happening anytime soon. It needs to happen. I wish it would happen. But I don't see it happening. And bearish mostly because it would be removing liquidity. It would yeah it would be taken money out that is doing things to lift stock prices. You know spending on a credit card makes for a great party. That's when you have to pay it back. That's not so good. And that's what Congress keeps doing. It's just listening today about the tremendous number of regular Americans that are now starting to put more and more of their part their everyday purchases on by now pay later.

52:49So maybe the government still has one more phase of forgetting about issuing treasury bills. They just put it on a by now pay later plan. And that's part of the margin debt party that I was talking about which you know keeps increasing until it reaches a breaking point. But that breaking point is not due until 2028. And so we have we have simultaneously we have 2028 is when the seven year cycle for the stock market and for margin debt shows up. We have 2028 is as when crude oil prices and interest rates are due to top out it's going to be very interesting. I hate to be whoever gets elected president in 2028 because you're going to be suffering from the downside of the margin debt collapse. And your first year in office in 2029 that's going to be bummer for whoever that guy years or whoever that gal is. And it won't be their fault. It'll just be the market cycles that they're going up against. Okay, super interesting. What Tom thank you so much for coming on here. I've already earmarked to get you on again and our regular cadence of having you appear in this channel. But let me let me ask you's idea every time as well.

53:57It sounds like you know you've got a pretty feel like you feel like you have a pretty solid sense of what's going to happen in the near term if your charts forgot to be right. But if anything happens that you think impacts those correlations in might change them in some sort of black swanish way right maybe it's the war maybe it's something else. You've got an open invitation to come back on here and tell this audience obviously after you've told your your paying subscribers first. Roger that I'll be happy to do that. All right, thanks so much Tom again, fantastic delivery. You always leave it on the playing field. I really appreciate that look forward to having you back on again soon. Good luck with the new house and the advice I would give you is advice I got from my uncle when I was getting married. I said, you know you've been married 28 years uncle and you seem happy with it. What's your secret and he said, well when my wife and I got married, we agreed on one thing that she would handle the small decisions and that she would turn to me to handle the big decisions.

54:59And he says, and that's worked out pretty well. And so I asked him, well, who decides what is a big decision? And he said, well, she does. And I said, well, what's an example of a big decision. He says, I'll let you know when we have one. So trust just your wife, she's going to know what you want in your house better than you're going to want it. And it'll turn out better if you say, yes, dear, let's do it that way. Thank you very much appreciate that. And I will just for the audience is sake, I have largely followed that path so far. There have been one or two parts of the house where I've said, hey, look, this is where I really have strong opinions and basically like my recording studio, you know, the office that we're going to use for me to record the studio. But everything else I've just basically deferred to her and said, look, you're going to care much more about this and probably know how much, you know, how to know how to use the space much better than I so. I'm just here to tell you what we can afford and what we can't and other than that, you just tell us what we're doing. I think you'll probably pick colors that go well together. I can't do that to save my life. I can see colors, but if you want me to match wallpaper and a carpet, I can't do that.

56:03So my wife, my wife is in charge of all color decisions. I'm in charge of spiders and light bulbs. And to be honest, that's that's pretty much my purview now too. I will say with these new homes, they, you know, some of the rooms are pretty tall and the light bulb thing has become, you know, a lot more existential, you know, you get a really good up there on a tall ladder to replace some of these light bulbs now. It's not as easy it was back in our parents day. Hopefully you get the kind that lasts forever, at least according to the label. Hopefully, and hopefully my wife doesn't do the math and realizes with the life insurance payout might be and just want to be there to keep the ladder out from under me. So we'll see. But thanks a bunch, Tom, and again, really, we're forward to having you on soon. It's a pleasure, Adam. Tom, that was great. Thank you. Couldn't have asked for any better. All right. Good. And we hit the time mark. Yeah, so we'll let you get off to do your stuff and then I'll bang out here with the guys in your harbor and then I'll go on to the live stream. But again, this is going to go out tomorrow, Tom. So I send the link when it does perfect.

57:08All right. Tom, you want to tell Tom how smart he was before you know, soft. Hey, there, Tom. Yeah, thank you. Tom was great. We always enjoy your charts. We're engineers by academic training. So we data's data is kind of a sweet spot for us. We'd love to see it and love to dive into it. I was aerospace engineering at West Point and engineers definitely different think differently. Yes, sometimes sometimes it's a blessing. Sometimes it's a curse. Well, and I usually explain it. Well, you know what the optimist pessimist glass half full glass F empty thing tells you about optimists and pessimists. The engineer would say that the vessel is adequate to contain the available fluid with the safety factor 2.0. The probability of X. Yeah. Of course, the philosopher would say well, the glass is always full. It's just sometimes full of air. I was great. I had the opportunity to attend a West Point graduation. My wife's cousin graduated from there quite a number of years ago now, but it was a wonderful experience.

58:10West Point in May is a beautiful place. And in October, that's a beautiful place. It is not a beautiful place in February. Don't want to go there in February. I went to Cornell. He knows all about New York and the way. Lucky weather in New York. Probably know this, but do you guys know who was the original surveyor of West Point. Make who actually surveyed the land for them to build West Point on it? Can't say. He had his winter encampment of 1777 there. So he kind of knew a little bit about it. About it. Yeah. And the US Army Corps of Engineers and its infinite wisdom decided to put the sewage treatment plant for the whole post on the site of his victory in camp. Having no, no insight about history. Really. They said they just ruined all the archaeological value it might have had. I don't know. I was an archaeology major. So that that that hurts my heart. Yeah. All right, Tom. Well, look, thank you so much, my friend. Love you guys. Good day. All right. I'll say good.

59:15Great job. All right, Jen. You ready to start off? Yeah. Yes, sure. Memory, sir. I went first last time. Mike, you ready? Yeah, just one point of confusion. I have the corporate, the corporate advanced decline line. He was talking about his corporate credits, I think. And that was diversion versus something for all of 2026. And that would port end a big decline. But it hasn't happened. I can't remember the details. I might just strike that point. I don't think it was that big of a deal. Do you guys remember basically it's the thing he's most worried about except that when you look at kind of the momentum oscillators, which is basically what his, you know, hope family came up with, it is showing that that trend is just about played out. Me, okay. I forgot to write down that part. That gets a little wonky. Yeah, you don't have to mention it, but that's that's the explanation. That corporate advanced decline line was just a corporate credit, right? It was for corporate high yield credit.

1:00:16Right. High yield credit. Just about played out. All right. All right. Ready to go. Yep. All right. All right. Three, two, one. All right. Well, now's the time in the channel. We were bringing the lead partners from New Harbor financial, one of the indoor financial advisory firms by thoughtful money. I think it's a good thing to be joining this week as usual by lead partners, John Lodra and Mike Preston gentleman. Thanks so much for joining us. Mike, when do we start with you? Any key takeaways you feel worth commenting on from the conversation there with Tom? Sure. Hi, Adam. That was a good talk with Tom McLean. We've been following his newsletter on and off for a lot of years. We're not a current subscriber, but we know of his work. We've got clients that mentioned his work and he's been around in his parents have been around doing this work for so long. We've got a lot of respect for him. And he said, bullish is all get out.

1:01:17I think that in general encapsulates what he talked about, not just in stocks, but in other things that we'll talk about like oil, but bullish is all get out. And why? The government's been running a huge deficit and it's really been doing it since the great financial crisis. In fact, we've said on here and a lot of your guests have said on here that there isn't no real plan B. This is all about stimulus one way or another and it doesn't really seem like they can ever take their foot off the gas. So the government's been running a budget deficit for a long time. I think you'd have to go back to the Clinton area to see a budget surplus, but it really got worse a lot worse after the GFC. And while this is awesome for markets, it's great for consumers. It's really bad long term for the country. We're 40 trillion in debt and going up by about close to three trillion. And that's before we've had a recession because we haven't seen a recession. I don't think you can count the little blip in 2020 really as a recession. We haven't had one since the great financial crisis. So we'll see what happens. But he talked about a lot of charts.

1:02:18I'm going to try to encapsulate them as fast as I can. I may not hit them all. I'll tell you the ones that we agree with. Maybe tell you if there's ones that we don't agree with. But the third year. And look for you. I just want to contrast this and correct this anyway. You like. At New Harbor, you guys use technical analysis. A fair amount. You walk us through it every week. But you map that with your macro analysis and bringing to things like. The debt or. What's happening the economy? Tom is much more of a classic TA guy of. You know, I'm just looking at the charts and I'm looking at the patterns of the charts and what the charts tell me. And those two things aren't always compatible. Right. So some of the differences are going to be. You might actually see the TA in a similar way, but your macro outlook maybe. Causing me to have a different position. I just want to let the audience sort of know there's somewhat of a difference of methodologies here between Tom's. Pure just the just the charts analysis versus how you guys look at things.

1:03:21Absolutely. Tom really gets into the weeds more of an engineering viewpoint. You know, he mentioned us. That he was an engineering major at West Point, I believe he said. And so I mean, John and I also are engineering majors. And I think that's probably why we have some commonality and how we look at things. The actual methodology that he uses is different. I think he leans heavily or more heavily into seasonality than we do. A number of things. A number of these charts were about seasonality. For instance, the the presidential election cycle. We're really close to entering the third year. And I think he said that that actually starts somewhere around October, November. Because he starts from November first. So yeah, it starts in November. We're really close to that turning higher. And it's a if you remember his chart. It was it's a big up move. He's predicting a big up move based on that seasonality. Third year presidential cycle. And in fact, he said about one to two weeks away. He thinks we could be from that from that line to start climbing.

1:04:21I also talked about the midterm elections. A lot of our clients have been concerned about the election saying. If it's a democratic sweep, we think that'll crash the marketer. That's kind of the conventional wisdom. Tom is on here saying it doesn't matter what happens. Doesn't matter. It just matters that there's a decision that the market knows is a decision. And we agree with that. At New Harbor, we don't really put much weight into into whatever happens. We really don't think it matters. We think whatever matters is predetermined based on the cycles of the charts. Years ending in seven are bullish. I'm not so sure about that one, but you know, I wrote that down. And next year is 2027. But that goes to the correlation of, you know, Tom. And again, I'm not, you know, I'm not evangelizing one approach to the other. Although I think there's a lot of merit to both. But Tom's approach is sort of like, look, if seven and a half times out of 10, this happens. You should probably expect it to happen on average, right? So that's where he comes up with this. First, you know, as he says, when I pushed him on, he said, look, there's some reason I can, you know, see your seven.

1:05:26Sometimes you're your halfway. You know, enjoying some of the the booms of these midterm elections. That's about 50% of the time the other half is like, I don't know. But all I know is that the data shows that this is much more likely to happen than not looking in the past. So when you need to build up your team to handle the growing chaos at work, use indeed sponsor jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications, and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a $75 sponsor job credit at indeed.com slash podcast. That's indeed.com slash podcast terms and conditions apply. Need a hiring hero? This is a job for indeed sponsor jobs. This episode is brought to you by Paul Molliv. Family time isn't just the big moments. It's weeknight dinners sitting around the table, everyone talking all at once. So when the plates are empty and the sink is full, use Paul Molliv ultra.

1:06:26Paul Molliv's most powerful formula removes up to 99.9% of Greece, leaving your dishes sparkling clean. And the new convenient pump makes cleaning even easier so you can spend less time tackling dishes and more time together. Shop now at PaulMolliv.com. Yeah, absolutely. Absolutely. A couple more quick points and then I'll just wrap up with what I thought were a couple assets he was really bullish about. Number one corporate. These two things, these two last data points are concerning to him and I'll just quantify or qualify them a little bit more. The corporate advanced decline line for high yield credit has been diversion for all of 2026 and generally that's a bad thing. He actually looked that he drilled in right there. You might have asked him to, but he drilled in on the next chart, taking a look at the momentum oscillator for that for the corporate high yields. And we're actually showing signs of turning. So maybe that warning sign is not going to be warning sign for much longer.

1:07:28Yeah, or just to be clear, signs of nearing a turn, you know, bottoming out, they didn't, hadn't reversed yet, but it looked like it was close to an exhaustion point. Absolutely. And then margin debt, margin debt is way way up. I'm not really sure that he offered a counterpoint for that. That margin debt is a concern. We think we're in a late stage cycle that might even blow off to the upside. So we could see this market squeeze. We could even see margin debt have one more impulse up and then everything comes down hard. So, you know, that is a negative signpost that we should be aware of. Sorry, interject. He did actually address that. That's where his, there was another seven year cycle where margin debt tends to peak every seven years. So doing the math from the last peak, it would be at least 2028. So he's saying, you know, even though it's at a new all time high, it could easily get even higher for the next year, year and a half before it reaches its next peak based upon that seven year average cycle. Well, thank you. I forgot that Adam and, but, and so that would make sense and that would, that would fit in line with our idea of some kind of blow off top.

1:08:35We're not predicting a blow off top. We're not trading by that viewpoint. You got to be careful. But I know you personally think that's more likely, right? We do think it's more likely, but you know, bear in mind folks, we're 50% stocks here. We're not 100% we're not in margin, but we do think that's probably likely given how big this whole cycle has been. We probably need some kind of fireworks show to finally end this whole thing. So lastly, he's really bullish on crude oil. Yeah, the charts are up and I don't know crude oil has been hugely volatile. I'm surprised we went from about 100 on crude 105 down to 60 then right back to 105. That's a surprise, but he thinks we're going to go even higher for longer. We'll see we do have energy stocks in our portfolio because we just follow the strongest sectors and energy stocks. Specifically, oil service stocks have been moving higher and then given us no reason to sell them. Bonds, he's bearish. That's probably somewhere we disagree. We're actually bullish fundamentally on where bonds are here.

1:09:36The sentiment is really washed out all the way. A lot of folks are really negative bonds are it's path dependent. We can see a point where the stock market tops out. Drops hard. The Fed comes in starts printing money. QE spigot goes on and I know you showed something about QE is generally bad for bonds, but in my, in our view, this is far from a technical viewpoint. This is a macro viewpoint or even some of a bit of a gut feel based on experience. We think the rates will likely come back down in a flight to safety trade. We're actually bullish on high quality U.S. bonds. We don't have a lot, seven and a half percent in our model, but we'll see who's right. I think we're probably pretty squarely in opposite camps on high quality U.S. bonds. I just two things on that and again, I'm doing my best to speak for Tom. So it might be imperfect here. Obviously his bond outlook is driven by the 20 and a half month shift between golds action and then interest rates action.

1:10:39And so I don't think Tom would disagree that in between now and then you could actually have a big rally in bonds. But it would be more of a cyclical rally versus a secular one right and then that could reverse and then the trend of bonds over the next two years or so could still be, bun yolks could still be up, even though there could be some violent rallies in between now and then. And I don't know if you would necessarily completely disagree with that or not. Not at all. You know, if you just as an example, if you take a look at TLT, which is the 20 plus year U.S. government bond, it's trading at 81. It's down year to date and it's been really weak. I could see that going to 120. These are not predictions. Just guesses based on the charts. If we have a stock market drop that falls hard rates come back down to 10 year comes back down to three and a half four, even three percent, which I think it might. We could see TLT go even higher and that would be a 50% gain. You could see all of that happened and then afterwards stock market drops yields come back down.

1:11:41The market figures out that inflation is going to be a problem and then so between now and two years from now, there could be a good trade. It's something like TLT, i.e. long term U.S. government bonds. But after that, there could be a headwind for the following 10 years. So a lot of people that are negative bonds are thinking that we want that we're recommending buying them and holding them for 10 years. And we're not. We're talking about the next couple of years. Yeah. And just a point underscore there. We talk a lot about as market uncertainty grows. It gets more and more dangerous to identify a long term trend and just say, I'm just going to put all my chips on this and then I'll look at it, you know, in a couple of years. Because you could actually be right on the destination. But given your positioning, you could get killed six ways to Sunday, you know, several times along the path between here and there, depending upon how volatile that path is. Right. You're not as I'm saying all this. Yeah. So last question for you and the general bring you in.

1:12:43So Mike, let's assume for a minute that Tom's correlations prove correct. And that the markets. You know, get a nice jolt to the upside in the next week or two. And then it's game on for the rest of the year into next year. Where that to happen. How is New Harbor position for this? How might you start changing your allocation? If you began to have a lot of confidence that hey, Tom's forecast is starting to play out. Yeah, this is where the art comes in, you know, I think. The definition of art I read recently is skill. Combined with interpretation. And so we've got skill and we've got experience. And we're going to see what the market's going to do. We're going to see what the market does. And then we're going to interpret that and then combine it with the skill that we have of the past. And so if we get a parabolic vertical move up and I'm talking about.

1:13:438500 on the S and P 9000 plus that goes straight up. There's a number of things that we might do. We might literally reduce equity into that parabola. Right. And we'll probably be early, but we might do that because we know where we are in the story versus just pass it by and hold people. We might even buy long term puts to try to defray downside and or make money on a downside break. That's different. A parabolic vertical move up in the space of a few weeks or a month is different than a move higher over the next six months. A move higher over the next six months that steady 45 degree angle. We're probably more likely to stay close to where we are with 50% ish equity. I don't see us going much higher and I don't see us dropping equity in that in that scenario. And so we'll probably just ride the trend as much as we can under that scenario, but it depends upon the shape and the speed of it. Really from a from a tradeability standpoint, a parabola might be easy to trade in terms of timing the turn,

1:14:45which in nobody's going to be perfect with that and trying to reduce the deductible or the give back on the turn. So that's that's how I see it depends upon how it looks and feels what it happens. Okay, so obviously folks will have a new Harvard team on you know weekly going forward here. So as they start as their interpretation becomes clear to the point where they're starting to make portfolio adjustments. They'll be sharing that with us here in real time long away. All right, John, I'm feel free to add anything to what Mike said and I also want to give you a big question too, which is. You know, not long before we hopped on the Tom, we just found out that Fed did the first rate hike in several years. Love to hear your reaction about that terms of the decision and the implications you think it might have. Yeah, thank you Adam and thanks for having us join always fascinating to listen to Tom's comments. We really appreciate that the data he brings to the table. That's where we are brains like to go sometimes a lot of the times.

1:15:48You know, I guess I'd like to and I wish we can have a texture conversation with Tom right here now because I think he would agree with what I'm about to point out as much as his. A lot of his charts focused on averages and cycles. I think he would if we're here to talk with us right now. He would agree that there's some signal that's lost when you average things out. You know, he used the I think he first showed up a chart there where it was like a different presidential cycles. It was kind of a speedy bowl of charts and he averaged them out and came out with this nice, you know, kind of profile on average the third years, you know, higher and this and that. Look, we manage money for real people. So we've got to kind of concern ourselves not with the average, but the outliers because the outliers aren't random events when markets go through their inevitable cyclical challenge points. Our very strong take is that it's not a random event. In fact, usually when markets are have prolonged negative periods of returns and things like that.

1:16:52There are a number of coincident factors that you call conditional probabilities, if you want to get technical that are almost always present things like extra high valuations. These are not accidents. They happen not to the precision of days or calendar months or whatever like this, but they happen with with very strong reliability and when you zoom out from from broader standpoint. I want to make this point, I want to give you a chart here that was put together this actually is dated that was just put together by a data service that we subscribe to called NASDAQ Dorsey rates, a fill it, you know, division of NASDAQ. And this looks at a little bit of you I'm going to cut right to the chase. So it looks at average real return inflation adjusted return by over different time horizons. Now key here's average. So this is like the essentially the equivalent of the average charts that that Tom shared. So look at a 60 40 stock bond portfolio and look at a 10 year period. So an average a 60 40 portfolio has returned 87% real return cumulative over over a 10 year period. That's the average. Now that sounds great. Right.

1:18:01The reality though is that it's not always so nice. In fact, if you look at the worst real return by period for 60 40 for 10 year period, you lost 32% in in real purchasing power of your portfolio over period of 10 years. And there was a drawdown in that in that in sense of nearly 41%. And you can see these these length of times by drawdowns 12 years essentially for for 60 40 portfolio. And a heart comes back to a chart that I've shared many times and I'll keep sharing it. This is chart that GMO put together looking at so called lost decades. And this is for a 60 40 portfolio real returns just like the chart I just showed you. And you see all these great periods here are periods where you know in a good scenario you went nowhere, but in some series who lost money on a real inflation adjusted basis. So for example, the decade falling the tech cycle. That's that's the thing that I think is lost and when we talk about average analysis and we we have to be worried about those kinds of things not just for the sake of hey it might happen, but there are signposts and data conditions that are very, very reliably indicative of an increased probability of those kinds of things happening and we're kind of right squared and one of those phases right now doesn't mean we we top up today or we crash tomorrow or whatever.

1:19:19But in the vicinity of histories any guide we think the next decade is likely to be very subpar compared to average and maybe even negative on a real return basis. That's one real important thing on bring back to the practicality of what we do for for every day people in their retirement scenarios. This episode is brought to you by Google Chrome you think you know a browser but Gemini and Chrome that's new it can help you with practically anything on the web like restoring a vintage motorcycle from a 50 page restoration block or finally break down that long article you've had open for weeks Gemini and Chrome is here for it ready to make anything online makes sense there's no place like Chrome check responses set up required compatibility and availability very 18 plus. Brussels clean up nicely at sweet green maple glazed roasted and edges perfectly caramelized sweet greens fall harvest is back on the menu and the seasons most overlooked little green vegetable is dressed to be devoured you know what to do order on the sweet green app.

1:20:22Okay great and just one thing I want to know it in world talking for Tom which is you know take with a big grain of salt folks because we're not Tom but I think Tom would say hey look you know I shared kind of why I'm bullish in the here and now. But he said look you know there are periods I can see certainly once we get close to 2028 where I could be making the exact opposite argument and being very bearish but a lot of these things so. In no way do I think Tom is his current bullishness is excluding the type of risk that you're talking about John exactly so let's talk about the fed yet today the fed raised the so called federal funds rate probably the least uncertain fed meeting in his current kind I think we went in today today with 93 or something like that present percent market implied probability the fed would raise yet there were still people I think Colin bluff and saying no worse won't won't raise he's the he's the guy that Trump brought into cut rates so so there was a 25.

1:21:2325% raise in the short term federal funds rate. One maybe one of the surprises that came out of today's meeting is that it was unanimous 12 to zero vote in favor of that recent meetings the big news has been the lack of unanimity today was unanimous and unanimous for a rate increase. And the messaging also I think said very probably we'll have at least one more rate increase this year okay so that was the first rate increase since July of 2023 I'll just show you a short here chart here to show you know kind of the profile this is the chart the federal funds effective rate so last rate increase was back here in July of 2023 there was a long period of pause and then there was a rate cut campaign pause rate cut. And then pause for the last several months and then again today that was raised a quarter percent if we look at the federal funds.

1:22:24Fed watch on the see me this is a way to mark we can read the market market probability for a future rate action I'm looking at the December of 26 meeting here the meeting to meetings out from now the end of this year and you can see the probability the market assign zero probability of any cuts from the market. Any cuts from here and an 88% probability of further hikes and you can see there's a hike of another quarter basis point 25 basis points 48% probability of that and almost 40% probability of a full additional to quarter percent hikes okay so quite a different story if we rerun the tapes to where we were back a year ago it was almost the exact opposite story here so there's been a dramatic change in the expectations by the market and even the actions by the Fed so this is this is pretty pretty big stuff the initial market reaction is always confusing today we saw quite a bit of volatility if I just pull up a couple charts here you can see I'll pull up an hourly chart so we can just

1:23:34just do a little bit or a minute by minute chart let's pull up an hourly just do a little bit or a little minute why not so this is today's action if we look at the S&P 500 you know just you know jar not seeing it oh sorry this is a minute by minute chart of the SP let me go to each F here this dark black window is the market hours between 9.30 and 4 you can see right around when the Fed announced at 2 o'clock there was initial spike higher but then when war started giving the press conference you know we saw pretty notable decline in the markets closed down about not quite yet half a percent if we look at TLT which is long term Treasury bonds similar kind of thing we saw spike but then a sell off I will note that was one of the few areas of green on today's screen if you look at a broad spot the assets long term bonds actually did end up on the day slightly higher you know precious metals commodity sold off pretty hard so pretty pretty pretty ugly day in the sense of the reaction I wanted to pull up a chart of longer term chart of 10 year Treasury yields this is a monthly chart and you can see for the last three plus years we've been trading in a range here on the 10 year yield between about 3.2 and let's call it five okay today the market the yield top down at just a little bit over five this is off

1:25:00by decimal place so 5.016 is where it topped out today close down a little bit below there you know slightly below but we're at the upper end of the range the Mike's point about you know being quote unquote bullish bonds I would I would kind of you know caveat that and Mike did so I think as well that we're not pounded table bullish there's really fundamental reasons why the bond market has been as challenged as it has it's not the buy of the central we wouldn't pound the table here and say sell everything load up on long term bonds you're going to be perfect as not what we're saying but the the degree of negative sentiment and distaste for bonds we think has gotten really overdone so we have about a 32% allocation to fixed income right now the average duration of our fixed income sleeve is about five years again one piece of it about 7.5% of our portfolios in long term treasuries will probably look for opportunities if we see technical improvements to extend out on on the maturity spectrum there and length in the

1:26:00maturity of our bond holdings I'll pause there and I do want to give a quick update I mean we have seen a material degradation in our broad stock market indicators so we're increasingly you know poising to be on defense here we can start I hate to do this John I'm going to have to your mark that for next week we're about two minutes from me having to hop on the livestream with Axel Mark Axel Mark about today's fed announcement so my apologies for having to cut this a bit short but I think it's a great point actually to expand on in some detail when we have you guys on in just a couple of days next week that sounds great Adam and watch for you you know Axel coming on momentarily all right thanks so folks just wrapping up here if you enjoyed having Tom on the channel would like to come on again as soon as his schedule or as developments allow please let us know that by hitting the like button and then clicking on the subscribe button below as well as a little bell icon right next to it if you'd like to get some help from a professional financial advisor about anything the trends that Tom and I talked about it that the new harbor gentleman and I've talked about here if you don't have a good professional financial advisor already advising you on such matters and when he takes into account all the issues that we talked about in this channel

1:27:13then consider scheduling a free consultation with one of the ones that Talfa Money does endorse like the team there at new harbor if you want to talk to John and Mike and their team there you can definitely do that so to get one of these free consultations just felt the very short form at thoughtful money dot com totally free no strings attached it's just a service these firms do to be as helpful as many people as possible and a quick reminder that the Talfa Money fall online conference is still available for registration only two weeks left at the lowest early bird price so if you haven't registered yet go to thoughtful money dot com and get your ticket sorry at the Femini dot com slash conference and get your ticket now John Mike thanks so much hate that I'm having a hop off earlier for you guys but like I said we'll do a deep dive next week into what you were just talking about their John sounds good and thanks so much and that we'll see you soon thank you I'm seeing all right everybody else thanks so much for watching you

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