October 14, 2025 • 22 mins
In this episode of Lead-Lag Live, I sit down with Ross Atefi, Founder and Wealth Advisor at Yatra Wealth Design, to break down why he believes the market is more fragile than headlines suggest.
From AI mania to the quiet collapse in housing and jobs data, Ross explains how extreme concentration and stretched valuations have set up an environment that echoes the late ’90s bubble — and what investors need to watch next.
In this episode:
– Why the S&P 500’s “diversification” is a dangerous illusion
– How AI spending is draining the cash that used to reward shareholders
– The warning signals in housing and employment data
– Why money supply matters more than Fed rhetoric when it comes to inflation
– The $500K–$600K tax trap created by the “one big, beautiful bill” and how to avoid it
Lead-Lag Live brings you inside conversations with the financial thinkers who shape markets. Subscribe for interviews that go deeper than the noise.
#LeadLagLive #Markets #Investing #AI #TaxPlanning #HousingMarket #JobsData
Start your adventure with TableTalk Friday: A D&D Podcast at the link below or wherever you get your podcasts!
Youtube: https://youtube.com/playlist?list=PLgB6B-mAeWlPM9KzGJ2O4cU0-m5lO0lkr&si=W_-jLsiREjyAIgEs
Spotify: https://open.spotify.com/show/75YJ921WGQqUtwxRT71UQB?si=4R6kaAYOTtO2V
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
SPEAKER_00 (00:00):
The one big beautiful bill, which is the new
tax law that just got passed,that's directly and immediately
impacting your taxes for 2025.
If you're a high income earner,so if you make above$500,000 a
year, you could be impacted bythis tax trap.
SPEAKER_01 (00:29):
I'm your host, Melanie Schaefer.
Welcome to Lead Leg Live.
Now, markets are at all-timehighs, even as the US government
remains in a partial shutdown.
Even as equities are flyinghigher, gold is pushing past
4,000 for the first time ever asinvestors hedge against
uncertainty.
At the same time, AI optimism iscolliding with stretched
(00:52):
valuations, leaving manywondering if the foundation is
as solid as the headlinessuggest.
My guest today is Ross Atefi,founder and wealth advisor at
Yattra Wealth Design.
Ross is known for hismacro-driven perspective,
blending insights on marketconcentration, housing, and jobs
data.
And he's been shining aspotlight on what he calls the
(01:15):
500K to 600K tax trap, aconsequence of Trump's so-called
one big beautiful bill and acritical issue for many
investors that often goesoverlooked.
Ross, welcome.
SPEAKER_00 (01:29):
Good to see you, Nelly.
Thank you.
SPEAKER_01 (01:32):
So uh let's start with market concentration and
valuations.
You've called it anuncomfortable and even fragile
combination.
Why do you think the currentsetup is so risky for investors?
SPEAKER_00 (01:44):
Yeah, frankly, uh, we're in a setup that's really
historically very fragile.
Uh, you've got extreme marketconcentration that's layered on
top of extreme valuations,right?
So right now, the top 10companies in the S P 500 make up
about 40% of the index.
So 40% of the market cap of theindex.
(02:07):
And that's the highest levelever of all times, right?
So uh people may think thatthey're diversified when they
own the S P 500, right?
Because it's 500 stocks.
But the truth of the matter isright now, their returns are
essentially being driven by 10companies, right?
10 giant mega cap stocks.
(02:28):
And if just one or two of thosefall or stumble, or there's some
something that comes up thatpeople didn't anticipate,
causing the price to crash, thewhole market can lurch.
And frankly, we've seen thismovie before.
So the last time the market wasthis concentrated was during the
early uh late 90s, early 2000stech bubble, right?
(02:49):
And um, you know, we know whathappened then.
The market crashed from 2000 to2002, went down about 50%.
And even tech companies wentdown about 85% during that
crash.
Um, and what's interesting is ifyou look back, uh, only one
company from from back then, um,again, the late 90s, early 2000s
(03:10):
bubble, only one company fromthat that period of time um is
still in the top 10, which isMicrosoft.
And uh most of the othercompanies from or that that top
10 list, at least half of them,like Cisco, Intel, Nokia,
General Electric, and Citigroup,those companies all went on to
(03:31):
drastically underperform for thenext foreseeable future.
And that's really a powerfulreminder that today's winners,
or at least the you know, thatthat the market perceives as you
know, can't miss, can't losewinners, are oftentimes not
tomorrow's winners.
And market leadership, it oftenlooks permanent until it
(03:54):
changes.
Um that's that's the concern Ihave around that.
And then if you layer on top,just how high market valuations
are overall.
So we're talking uh price toearnings ratios, we're talking
price to sales ratios, we'retalking cyclically adjusted
price to earnings uh ratios,which you know average out the
(04:15):
last 10 years.
Those are all in either all-timehigh levels or you know, one of
the all-time high levels.
So very extreme.
And that combination of marketconcentration along with high
valuations is a very dangerouscombination.
It really just means the marketis fragile and uh and
(04:36):
vulnerable, frankly.
So with that in mind, I thinkit's it's a really good idea to
think about um ways ofdiversifying.
SPEAKER_01 (04:45):
Yeah, and speaking of the concentration, I mean, A
AI has captured the market'simagination, but enterprise
adoption takes time.
How do you see the tensionbetween AI euphoria and business
reality shaping investoroutcomes?
SPEAKER_00 (05:00):
Right.
So there's no question in mymind, I think most people's
minds, that uh artificialintelligence is truly a game
changer, right?
I mean, I use it all the time uhfor research and and creating
content and many other things.
And and I know it, you know,it's it's gonna help drive a
productivity boom.
Um, and and and it's you know,it's it's incredible.
(05:21):
With that said, uh what we'reseeing is what we've seen in the
past with any new technologythat comes along is that it
takes time to figure out how tointegrate it into systems and
corporations um to really drivethat productivity boom.
We saw that with the internet inthe late 90s, and and really
every significant technologythat comes along, um, there's an
(05:44):
adoption period, right?
And and recent studies have haveshown that as powerful as AI is,
um, not only, you know, only asmall fraction of the AI
projects that are beingimplemented are actually driving
meaningful progress.
And about 90 to 95% of them areactually not really doing
(06:04):
anything and have kind of beenended up being a big time and
money waster.
And so um, you know, thiseuphoria about AI in the
markets, I think is a littleahead of where the technology
and the implementation actuallyis.
SPEAKER_01 (06:19):
You've pointed out that the AI build out is eating
up the very cash that paysinvestors.
Can you explain exactly what youmean by that dynamic?
SPEAKER_00 (06:28):
Yeah, absolutely.
So these these large megacap uhtech companies, um, you know,
you can think Microsoft, Google,Amazon, uh, these companies are
all spending tens of billions ofdollars to build out
infrastructure for this AI boom,right?
Uh a lot of it going into video,of course, but many other
places.
(06:49):
And, you know, they're having tobuild data centers, they're
having to buy chips, they'rehaving to access power, uh,
water rights, so many things toenable this build-out of
infrastructure.
And um, you know, the reality isthat cash is being spent.
And so the money is being spenton these infrastructure projects
(07:11):
and this build-out.
And that cash historically wouldhave would have been the free
cash flow that these companieswould have used to return that
money to shareholders, right?
So they would have used thatfree cash flow historically for
buying back shares.
They would have used it for uhyou know, for dividend payouts,
(07:31):
right?
Um, and so right now their freecash flow, which again is is
basically cash left over afterspending on everything they need
to spend on, is quite low.
It's actually declining.
So even though these mega captech companies, their earnings
look really strong, earningsdoesn't take into consideration
(07:51):
their capex, you know, theircapital expenditures, right?
And so the money that's goingout for this capex spending is
not reflected in the growingearnings.
So if you actually look at theirfree cash flow, which is
actually declining, and youmeasure that against the rising
stock prices, the valuations areeven more extreme.
(08:12):
And again, I think this is areal cause for concern.
SPEAKER_01 (08:15):
Russ, I want to pivot for uh for a moment.
Talk about, you know, thehousing data is rolling over and
jobs numbers are being revisedsharply lower.
Why do you see those asimportant warning signals for
the broader market?
SPEAKER_00 (08:29):
Absolutely, Melanie.
So housing and uh employment areoftentimes very indicative of
the health of the economy today,as well as where the economy is
headed.
And what we're seeing in thehousing market, for example, is
really all major aspects of thehousing market are rolling over
and in decline.
(08:49):
So we're seeing um everythingfrom uh essentially all-time low
transaction volume, meaning verylittle buying and selling is
happening.
Um, we're seeing even pricedeclines in the housing market.
Uh, we're seeing uh a reductionin building of homes.
And so, you know, if you if youlook at basically all the major
(09:10):
metrics, you're seeing a declinein the housing market, right?
And when you have a decline inthe housing market or a slowdown
at a minimum, that has uhtendrils that that affect a lot
of other areas.
So you have you know lesstransactions happening, less
homes being bought and sold.
That means that people arespending less on furniture,
(09:30):
they're they're they're they'renot moving as much.
Um, you know, the newconstruction is going down.
That means that uh theconstruction industry is being
impacted.
And um, you know, there's realrealtors that are that are
making less.
There's mortgage companies thatare making less, right?
So there's a lot of different umyou know impacts along the way.
And of course, that um reductioneventually that leads to
(09:54):
reduction in employment in theconstruction industry and the
real estate industry overall.
And then that feeds through intoa larger and larger piece of the
economy.
Um, and and eventually leads towhat we're seeing right now,
which is weakness in the labormarket.
Uh, and and that's another areaof the economy that we're seeing
(10:14):
kind of roll over and reallyweaken right now.
Um and so you know, you have thehousing market declining, that's
that's impacting the you know,the rest of the economy over
over time.
And then we're seeing employmenteven um rolling over, which you
know, employment is even more ofan indicator of what's actually
happening today.
So oftentimes housing is aleading indicator.
(10:37):
If if it's going down, it meansthe economy is you know
eventually gonna decline, youknow, broader sloth because it
kind of leads the charge.
Um, but employment is alreadydeclining.
And and we've seen uh with therecent employment revisions, um,
so there was a very largerevision from March of 2024 to
March of 25, where the BLS orthe Bureau of Labor Statistics
(11:01):
basically said, oh, you know, weactually got it wrong and we had
to take away almost a millionjobs over that period, right?
So that those a million jobs,they didn't, they actually don't
exist, right?
And then um in the most recentuh two non-farm payroll reports,
which is uh the monthly reportthat the BLS puts out, they also
did a massive revision of, Ithink, over 200,000 jobs.
(11:24):
Um and then in the most recentADP report, uh jobs report, it
was actually showing uh anegative month-over-month change
in jobs.
And so, you know, we're seeingthese consistent negative, large
revisions in employment.
And then we're also seeingactually negative employment
across a variety of um, youknow, data as well currently.
(11:48):
So what that tells me is, youknow, the economy is a lot
weaker than people realize, andand certainly what the stock
market is pricing in.
Um and I think that weaknesswill continue and eventually uh
feed through into asset markets.
SPEAKER_01 (12:04):
For us, inflation has remained as stubbornly above
target for years now.
How do you think about inflationrisk today?
And what's your playbook forinvestors who need to navigate
that uncertainty?
SPEAKER_00 (12:16):
Yeah, so the key to understanding inflation is to
look at what actually drives it,right?
And that starts with the moneysupply, not just interest rates
or supply chains.
One quick example.
So we saw massive and stickyinflation after the pandemic in
2020 through 2022.
And that's because the moneysupply, so the money supply is
(12:37):
simply this the number ofdollars that exists in the
system, that exploded by morethan 40% in just those two
years.
So again, you had a certainamount of money that was in the
system in 2020, and then in2022, that was up by 40%.
And when that much money entersthe system, the value of each
(12:59):
dollar is diluted.
And so it's not that goods orservices suddenly became more
valuable or so difficult to comeby, it's just that the
purchasing power of the moneyfell.
Uh, and so you have way moremoney chasing after the same
amount of goods and services,right?
Um, and you know, for in fact,research has shown that there's
(13:20):
never been a significantinflation anywhere in the world
without a preceding significantincrease in the money supply.
So, really, the two movetogether uh over time.
And so over the last year, theuh inflation rate has moderated.
So, again, the inflation ratemeans the increase in prices.
(13:42):
Um and so the inflation rate hasmoderated and slowed.
And that's because the moneysupply has pretty much been
stable for the last coupleyears.
So, you know, prices inaggregate are still really high
compared to a few years agobecause the money supply went up
so much from 2020 to 2022.
So this the stock of money isstill a lot higher than it was,
(14:04):
you know, five years ago.
But the rate of change has gonedown.
And so the rate of inflation,the rate of increasing prices is
relatively stable in that 2 to3% range.
And we think it'll stay therefor the foreseeable future until
we see some sort of big changein the money supply.
Uh, and I think this isimportant for consumers, but
(14:26):
also uh for our investmentprocess, because you know, where
inflation is and where it'sheaded, um, you know, different
asset classes do better inhigher inflation environments
and worse in low inflationenvironments, and vice versa.
So we're always tracking bothinflation uh and and the money
supply, as well as liquidity,which is a little bit different,
(14:49):
um, but we track both of thosebecause those um directly impact
uh, you know, our assetselection.
SPEAKER_01 (14:56):
Roger, I want to ask you something for that will be
of big interest to the higherearning households uh that are
watching us right now.
And that's the 500k to 600k taxtrap.
Can you explain what it is, whoit affects, and what steps
investors should be thinkingabout now in order to avoid it?
SPEAKER_00 (15:13):
Yeah, so the one big beautiful bill, which is the new
tax law that just got passed,um, that's directly and
immediately impacting your taxesfor 2025.
And uh if you're a high incomeearner, so if you make above
$500,000 a year, you could beimpacted by this tax trap.
And essentially what it is is umthe new the one big beautiful
(15:36):
bill caused the state and localtax deduction to go from 10,000
to 40,000.
But if you earn above 500,000 ofincome, you start to get phased
out of that state and local taxdeduction.
So if you're in a high taxstate, especially like
California, New York,Connecticut, New Jersey, et
cetera, um, you you could besignificantly impacted in a
(15:59):
negative way by losing thatstate and local tax deduction or
at least getting phased out backdown to from from 40,000 down to
10,000.
And the impact of that couldmean tens of thousands of
dollars of unnecessary taxes,right?
Uh and so we suggest that doingsome proactive planning right
(16:20):
now, so during 2025 tax year,while you you can make a bigger
impact is uh is a criticalstrategy and something that we
help our clients with.
SPEAKER_01 (16:29):
Yeah, and and sort of getting to the into the end
of things, but I want to ask youabout your investment process,
which is macro driven.
You you track liquidity andeconomic cycles as part of your
approach.
Can you break down in plainEnglish what that means and how
it guides your playbook in thisenvironment?
SPEAKER_00 (16:46):
Sure, Melanie.
So at Yatra, uh, we use a macroinvesting framework that's
really designed to help usnavigate the natural cycles in
the markets and the economy.
And one of the key things thatwe track is global liquidity,
because global liquidity tendsto lead global asset crises.
And you can think of liquidityas fuel or sort of oxygen for
(17:09):
the financial system.
So when it's abundant, money'sflowing easily, markets tend to
rise, and the economy tends toexpand as economic activity
activity grows.
Uh, when that liquiditytightens, that flow or that
spigot slows down, and it's uhoften sets the stage for
(17:29):
downturns, right?
Um and so as liquidity marketsand the economy move through the
different phases.
So let's say, just to keep itsimple, expansion, slowdown,
contraction, and then recovery,uh different types of assets
tend to outperform orunderperform depending on where
we are in that in that cycle.
(17:51):
Uh and so you know, by trackingthose shifts and the changes in
liquidity and the cycle, we'reable to adjust our portfolios to
over-allocate or underallocatein the different asset classes
that should outperform uhdepending on where we're at in
the cycle.
So for example, you know, whenliquidity is rising, you'll
(18:13):
often see growth and tech leadbecause uh credit's easy and
investors are willing to payhigher prices for future
earnings, which is what we'vebeen seeing for the you know, re
in the recent past.
Um and when liquidity tightens,uh real assets tend to do pretty
well because investors start tolook for real assets could be in
(18:36):
you know real estate, it couldbe in infrastructure, things
that are producing meaningfulcash flows today.
So as liquidity's liquiditystarts to tighten a little bit,
investors are saying, okay, I'mnot just looking for cash flows
five, 10 years from now.
I want cash flows today, right?
Um, and then as liquidity reallytightens and starts to contract,
(18:56):
that's when um asset marketscould start to fall and the
economy could start to contract.
And that's where you start towant to overallocate into more
conservative investments likecash and bonds and gold as well.
Uh and so, you know, across allof that, we keep a strong
valuation tilt, meaning, youknow, we want to also consider
(19:19):
how expensive or cheap aredifferent asset classes relative
to their fundamentals, becausethat's one of the most critical
determinants of long-termreturns.
And we also always staydiversified.
So, you know, stocks, bonds,real estate, real assets, gold,
commodities, et cetera, uh, wealways stay diversified across a
(19:40):
range of asset classes.
But again, this tracking of thecycles and liquidity helps us to
determine how much to put intothe different asset classes.
And, you know, we find that thatdoing this can help us to see a
higher return and lower risk forour clients.
SPEAKER_01 (19:56):
Torres, for anyone who wants to follow your work
and learn more about yourapproach at Yatra Wealth Design,
where's the best place for themto go to connect with you?
SPEAKER_00 (20:04):
Yeah, so go ahead and check out our website.
It's Yatra Y-A-T-R-A WealthDesign D-E-S-I-G-N.com.
And you can learn more aboutwhat we do and how we help our
clients.
If you'd like to reach out to medirectly, you can email me at
Ross at YatraWealth Design.com.
SPEAKER_01 (20:23):
Perfect.
So especially for our highearning viewers, make sure to
head over to Ross's website.
And Ross, thanks so much againfor joining me.
And thanks to everyone forwatching.
Be sure to like, share, andsubscribe for more episodes of
Lead Leg Live.
See you next time.
The one big beautiful bill, which is the new
tax law that just got passed,that's directly and immediately
impacting your taxes for 2025.
If you're a high income earner,so if you make above$500,000 a
year, you could be impacted bythis tax trap.
SPEAKER_01 (00:29):
I'm your host, Melanie Schaefer.
Welcome to Lead Leg Live.
Now, markets are at all-timehighs, even as the US government
remains in a partial shutdown.
Even as equities are flyinghigher, gold is pushing past
4,000 for the first time ever asinvestors hedge against
uncertainty.
At the same time, AI optimism iscolliding with stretched
(00:52):
valuations, leaving manywondering if the foundation is
as solid as the headlinessuggest.
My guest today is Ross Atefi,founder and wealth advisor at
Yattra Wealth Design.
Ross is known for hismacro-driven perspective,
blending insights on marketconcentration, housing, and jobs
data.
And he's been shining aspotlight on what he calls the
(01:15):
500K to 600K tax trap, aconsequence of Trump's so-called
one big beautiful bill and acritical issue for many
investors that often goesoverlooked.
Ross, welcome.
SPEAKER_00 (01:29):
Good to see you, Nelly.
Thank you.
SPEAKER_01 (01:32):
So uh let's start with market concentration and
valuations.
You've called it anuncomfortable and even fragile
combination.
Why do you think the currentsetup is so risky for investors?
SPEAKER_00 (01:44):
Yeah, frankly, uh, we're in a setup that's really
historically very fragile.
Uh, you've got extreme marketconcentration that's layered on
top of extreme valuations,right?
So right now, the top 10companies in the S P 500 make up
about 40% of the index.
So 40% of the market cap of theindex.
(02:07):
And that's the highest levelever of all times, right?
So uh people may think thatthey're diversified when they
own the S P 500, right?
Because it's 500 stocks.
But the truth of the matter isright now, their returns are
essentially being driven by 10companies, right?
10 giant mega cap stocks.
(02:28):
And if just one or two of thosefall or stumble, or there's some
something that comes up thatpeople didn't anticipate,
causing the price to crash, thewhole market can lurch.
And frankly, we've seen thismovie before.
So the last time the market wasthis concentrated was during the
early uh late 90s, early 2000stech bubble, right?
(02:49):
And um, you know, we know whathappened then.
The market crashed from 2000 to2002, went down about 50%.
And even tech companies wentdown about 85% during that
crash.
Um, and what's interesting is ifyou look back, uh, only one
company from from back then, um,again, the late 90s, early 2000s
(03:10):
bubble, only one company fromthat that period of time um is
still in the top 10, which isMicrosoft.
And uh most of the othercompanies from or that that top
10 list, at least half of them,like Cisco, Intel, Nokia,
General Electric, and Citigroup,those companies all went on to
(03:31):
drastically underperform for thenext foreseeable future.
And that's really a powerfulreminder that today's winners,
or at least the you know, thatthat the market perceives as you
know, can't miss, can't losewinners, are oftentimes not
tomorrow's winners.
And market leadership, it oftenlooks permanent until it
(03:54):
changes.
Um that's that's the concern Ihave around that.
And then if you layer on top,just how high market valuations
are overall.
So we're talking uh price toearnings ratios, we're talking
price to sales ratios, we'retalking cyclically adjusted
price to earnings uh ratios,which you know average out the
(04:15):
last 10 years.
Those are all in either all-timehigh levels or you know, one of
the all-time high levels.
So very extreme.
And that combination of marketconcentration along with high
valuations is a very dangerouscombination.
It really just means the marketis fragile and uh and
(04:36):
vulnerable, frankly.
So with that in mind, I thinkit's it's a really good idea to
think about um ways ofdiversifying.
SPEAKER_01 (04:45):
Yeah, and speaking of the concentration, I mean, A
AI has captured the market'simagination, but enterprise
adoption takes time.
How do you see the tensionbetween AI euphoria and business
reality shaping investoroutcomes?
SPEAKER_00 (05:00):
Right.
So there's no question in mymind, I think most people's
minds, that uh artificialintelligence is truly a game
changer, right?
I mean, I use it all the time uhfor research and and creating
content and many other things.
And and I know it, you know,it's it's gonna help drive a
productivity boom.
Um, and and and it's you know,it's it's incredible.
(05:21):
With that said, uh what we'reseeing is what we've seen in the
past with any new technologythat comes along is that it
takes time to figure out how tointegrate it into systems and
corporations um to really drivethat productivity boom.
We saw that with the internet inthe late 90s, and and really
every significant technologythat comes along, um, there's an
(05:44):
adoption period, right?
And and recent studies have haveshown that as powerful as AI is,
um, not only, you know, only asmall fraction of the AI
projects that are beingimplemented are actually driving
meaningful progress.
And about 90 to 95% of them areactually not really doing
(06:04):
anything and have kind of beenended up being a big time and
money waster.
And so um, you know, thiseuphoria about AI in the
markets, I think is a littleahead of where the technology
and the implementation actuallyis.
SPEAKER_01 (06:19):
You've pointed out that the AI build out is eating
up the very cash that paysinvestors.
Can you explain exactly what youmean by that dynamic?
SPEAKER_00 (06:28):
Yeah, absolutely.
So these these large megacap uhtech companies, um, you know,
you can think Microsoft, Google,Amazon, uh, these companies are
all spending tens of billions ofdollars to build out
infrastructure for this AI boom,right?
Uh a lot of it going into video,of course, but many other
places.
(06:49):
And, you know, they're having tobuild data centers, they're
having to buy chips, they'rehaving to access power, uh,
water rights, so many things toenable this build-out of
infrastructure.
And um, you know, the reality isthat cash is being spent.
And so the money is being spenton these infrastructure projects
(07:11):
and this build-out.
And that cash historically wouldhave would have been the free
cash flow that these companieswould have used to return that
money to shareholders, right?
So they would have used thatfree cash flow historically for
buying back shares.
They would have used it for uhyou know, for dividend payouts,
(07:31):
right?
Um, and so right now their freecash flow, which again is is
basically cash left over afterspending on everything they need
to spend on, is quite low.
It's actually declining.
So even though these mega captech companies, their earnings
look really strong, earningsdoesn't take into consideration
(07:51):
their capex, you know, theircapital expenditures, right?
And so the money that's goingout for this capex spending is
not reflected in the growingearnings.
So if you actually look at theirfree cash flow, which is
actually declining, and youmeasure that against the rising
stock prices, the valuations areeven more extreme.
(08:12):
And again, I think this is areal cause for concern.
SPEAKER_01 (08:15):
Russ, I want to pivot for uh for a moment.
Talk about, you know, thehousing data is rolling over and
jobs numbers are being revisedsharply lower.
Why do you see those asimportant warning signals for
the broader market?
SPEAKER_00 (08:29):
Absolutely, Melanie.
So housing and uh employment areoftentimes very indicative of
the health of the economy today,as well as where the economy is
headed.
And what we're seeing in thehousing market, for example, is
really all major aspects of thehousing market are rolling over
and in decline.
(08:49):
So we're seeing um everythingfrom uh essentially all-time low
transaction volume, meaning verylittle buying and selling is
happening.
Um, we're seeing even pricedeclines in the housing market.
Uh, we're seeing uh a reductionin building of homes.
And so, you know, if you if youlook at basically all the major
(09:10):
metrics, you're seeing a declinein the housing market, right?
And when you have a decline inthe housing market or a slowdown
at a minimum, that has uhtendrils that that affect a lot
of other areas.
So you have you know lesstransactions happening, less
homes being bought and sold.
That means that people arespending less on furniture,
(09:30):
they're they're they're they'renot moving as much.
Um, you know, the newconstruction is going down.
That means that uh theconstruction industry is being
impacted.
And um, you know, there's realrealtors that are that are
making less.
There's mortgage companies thatare making less, right?
So there's a lot of different umyou know impacts along the way.
And of course, that um reductioneventually that leads to
(09:54):
reduction in employment in theconstruction industry and the
real estate industry overall.
And then that feeds through intoa larger and larger piece of the
economy.
Um, and and eventually leads towhat we're seeing right now,
which is weakness in the labormarket.
Uh, and and that's another areaof the economy that we're seeing
(10:14):
kind of roll over and reallyweaken right now.
Um and so you know, you have thehousing market declining, that's
that's impacting the you know,the rest of the economy over
over time.
And then we're seeing employmenteven um rolling over, which you
know, employment is even more ofan indicator of what's actually
happening today.
So oftentimes housing is aleading indicator.
(10:37):
If if it's going down, it meansthe economy is you know
eventually gonna decline, youknow, broader sloth because it
kind of leads the charge.
Um, but employment is alreadydeclining.
And and we've seen uh with therecent employment revisions, um,
so there was a very largerevision from March of 2024 to
March of 25, where the BLS orthe Bureau of Labor Statistics
(11:01):
basically said, oh, you know, weactually got it wrong and we had
to take away almost a millionjobs over that period, right?
So that those a million jobs,they didn't, they actually don't
exist, right?
And then um in the most recentuh two non-farm payroll reports,
which is uh the monthly reportthat the BLS puts out, they also
did a massive revision of, Ithink, over 200,000 jobs.
(11:24):
Um and then in the most recentADP report, uh jobs report, it
was actually showing uh anegative month-over-month change
in jobs.
And so, you know, we're seeingthese consistent negative, large
revisions in employment.
And then we're also seeingactually negative employment
across a variety of um, youknow, data as well currently.
(11:48):
So what that tells me is, youknow, the economy is a lot
weaker than people realize, andand certainly what the stock
market is pricing in.
Um and I think that weaknesswill continue and eventually uh
feed through into asset markets.
SPEAKER_01 (12:04):
For us, inflation has remained as stubbornly above
target for years now.
How do you think about inflationrisk today?
And what's your playbook forinvestors who need to navigate
that uncertainty?
SPEAKER_00 (12:16):
Yeah, so the key to understanding inflation is to
look at what actually drives it,right?
And that starts with the moneysupply, not just interest rates
or supply chains.
One quick example.
So we saw massive and stickyinflation after the pandemic in
2020 through 2022.
And that's because the moneysupply, so the money supply is
(12:37):
simply this the number ofdollars that exists in the
system, that exploded by morethan 40% in just those two
years.
So again, you had a certainamount of money that was in the
system in 2020, and then in2022, that was up by 40%.
And when that much money entersthe system, the value of each
(12:59):
dollar is diluted.
And so it's not that goods orservices suddenly became more
valuable or so difficult to comeby, it's just that the
purchasing power of the moneyfell.
Uh, and so you have way moremoney chasing after the same
amount of goods and services,right?
Um, and you know, for in fact,research has shown that there's
(13:20):
never been a significantinflation anywhere in the world
without a preceding significantincrease in the money supply.
So, really, the two movetogether uh over time.
And so over the last year, theuh inflation rate has moderated.
So, again, the inflation ratemeans the increase in prices.
(13:42):
Um and so the inflation rate hasmoderated and slowed.
And that's because the moneysupply has pretty much been
stable for the last coupleyears.
So, you know, prices inaggregate are still really high
compared to a few years agobecause the money supply went up
so much from 2020 to 2022.
So this the stock of money isstill a lot higher than it was,
(14:04):
you know, five years ago.
But the rate of change has gonedown.
And so the rate of inflation,the rate of increasing prices is
relatively stable in that 2 to3% range.
And we think it'll stay therefor the foreseeable future until
we see some sort of big changein the money supply.
Uh, and I think this isimportant for consumers, but
(14:26):
also uh for our investmentprocess, because you know, where
inflation is and where it'sheaded, um, you know, different
asset classes do better inhigher inflation environments
and worse in low inflationenvironments, and vice versa.
So we're always tracking bothinflation uh and and the money
supply, as well as liquidity,which is a little bit different,
(14:49):
um, but we track both of thosebecause those um directly impact
uh, you know, our assetselection.
SPEAKER_01 (14:56):
Roger, I want to ask you something for that will be
of big interest to the higherearning households uh that are
watching us right now.
And that's the 500k to 600k taxtrap.
Can you explain what it is, whoit affects, and what steps
investors should be thinkingabout now in order to avoid it?
SPEAKER_00 (15:13):
Yeah, so the one big beautiful bill, which is the new
tax law that just got passed,um, that's directly and
immediately impacting your taxesfor 2025.
And uh if you're a high incomeearner, so if you make above
$500,000 a year, you could beimpacted by this tax trap.
And essentially what it is is umthe new the one big beautiful
(15:36):
bill caused the state and localtax deduction to go from 10,000
to 40,000.
But if you earn above 500,000 ofincome, you start to get phased
out of that state and local taxdeduction.
So if you're in a high taxstate, especially like
California, New York,Connecticut, New Jersey, et
cetera, um, you you could besignificantly impacted in a
(15:59):
negative way by losing thatstate and local tax deduction or
at least getting phased out backdown to from from 40,000 down to
10,000.
And the impact of that couldmean tens of thousands of
dollars of unnecessary taxes,right?
Uh and so we suggest that doingsome proactive planning right
(16:20):
now, so during 2025 tax year,while you you can make a bigger
impact is uh is a criticalstrategy and something that we
help our clients with.
SPEAKER_01 (16:29):
Yeah, and and sort of getting to the into the end
of things, but I want to ask youabout your investment process,
which is macro driven.
You you track liquidity andeconomic cycles as part of your
approach.
Can you break down in plainEnglish what that means and how
it guides your playbook in thisenvironment?
SPEAKER_00 (16:46):
Sure, Melanie.
So at Yatra, uh, we use a macroinvesting framework that's
really designed to help usnavigate the natural cycles in
the markets and the economy.
And one of the key things thatwe track is global liquidity,
because global liquidity tendsto lead global asset crises.
And you can think of liquidityas fuel or sort of oxygen for
(17:09):
the financial system.
So when it's abundant, money'sflowing easily, markets tend to
rise, and the economy tends toexpand as economic activity
activity grows.
Uh, when that liquiditytightens, that flow or that
spigot slows down, and it's uhoften sets the stage for
(17:29):
downturns, right?
Um and so as liquidity marketsand the economy move through the
different phases.
So let's say, just to keep itsimple, expansion, slowdown,
contraction, and then recovery,uh different types of assets
tend to outperform orunderperform depending on where
we are in that in that cycle.
(17:51):
Uh and so you know, by trackingthose shifts and the changes in
liquidity and the cycle, we'reable to adjust our portfolios to
over-allocate or underallocatein the different asset classes
that should outperform uhdepending on where we're at in
the cycle.
So for example, you know, whenliquidity is rising, you'll
(18:13):
often see growth and tech leadbecause uh credit's easy and
investors are willing to payhigher prices for future
earnings, which is what we'vebeen seeing for the you know, re
in the recent past.
Um and when liquidity tightens,uh real assets tend to do pretty
well because investors start tolook for real assets could be in
(18:36):
you know real estate, it couldbe in infrastructure, things
that are producing meaningfulcash flows today.
So as liquidity's liquiditystarts to tighten a little bit,
investors are saying, okay, I'mnot just looking for cash flows
five, 10 years from now.
I want cash flows today, right?
Um, and then as liquidity reallytightens and starts to contract,
(18:56):
that's when um asset marketscould start to fall and the
economy could start to contract.
And that's where you start towant to overallocate into more
conservative investments likecash and bonds and gold as well.
Uh and so, you know, across allof that, we keep a strong
valuation tilt, meaning, youknow, we want to also consider
(19:19):
how expensive or cheap aredifferent asset classes relative
to their fundamentals, becausethat's one of the most critical
determinants of long-termreturns.
And we also always staydiversified.
So, you know, stocks, bonds,real estate, real assets, gold,
commodities, et cetera, uh, wealways stay diversified across a
(19:40):
range of asset classes.
But again, this tracking of thecycles and liquidity helps us to
determine how much to put intothe different asset classes.
And, you know, we find that thatdoing this can help us to see a
higher return and lower risk forour clients.
SPEAKER_01 (19:56):
Torres, for anyone who wants to follow your work
and learn more about yourapproach at Yatra Wealth Design,
where's the best place for themto go to connect with you?
SPEAKER_00 (20:04):
Yeah, so go ahead and check out our website.
It's Yatra Y-A-T-R-A WealthDesign D-E-S-I-G-N.com.
And you can learn more aboutwhat we do and how we help our
clients.
If you'd like to reach out to medirectly, you can email me at
Ross at YatraWealth Design.com.
SPEAKER_01 (20:23):
Perfect.
So especially for our highearning viewers, make sure to
head over to Ross's website.
And Ross, thanks so much againfor joining me.
And thanks to everyone forwatching.
Be sure to like, share, andsubscribe for more episodes of
Lead Leg Live.
See you next time.
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
Ruthie's Table 4
For more than 30 years The River Cafe in London, has been the home-from-home of artists, architects, designers, actors, collectors, writers, activists, and politicians. Michael Caine, Glenn Close, JJ Abrams, Steve McQueen, Victoria and David Beckham, and Lily Allen, are just some of the people who love to call The River Cafe home. On River Cafe Table 4, Rogers sits down with her customers—who have become friends—to talk about food memories. Table 4 explores how food impacts every aspect of our lives. “Foods is politics, food is cultural, food is how you express love, food is about your heritage, it defines who you and who you want to be,” says Rogers. Each week, Rogers invites her guest to reminisce about family suppers and first dates, what they cook, how they eat when performing, the restaurants they choose, and what food they seek when they need comfort. And to punctuate each episode of Table 4, guests such as Ralph Fiennes, Emily Blunt, and Alfonso Cuarón, read their favourite recipe from one of the best-selling River Cafe cookbooks. Table 4 itself, is situated near The River Cafe’s open kitchen, close to the bright pink wood-fired oven and next to the glossy yellow pass, where Ruthie oversees the restaurant. You are invited to take a seat at this intimate table and join the conversation. For more information, recipes, and ingredients, go to https://shoptherivercafe.co.uk/ Web: https://rivercafe.co.uk/ Instagram: www.instagram.com/therivercafelondon/ Facebook: https://en-gb.facebook.com/therivercafelondon/ For more podcasts from iHeartRadio, visit the iheartradio app, apple podcasts, or wherever you listen to your favorite shows. Learn more about your ad-choices at https://www.iheartpodcastnetwork.com
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com