The Fagan Financial Report

August 13th, 2023

Episode Transcript

(00:00):
Good morning, and welcome to theFagan Financial Report. This is Aaron Fagin
sitting here in the office with myfather, Dennis. Dad, you are
where are you? I know you'rea good camping somewhere, but whereabouts?
We are at Green Lake, GreenLake in happy anniversary, by the way,
forty years You know. I calledyou this morning immediately talking about the

(00:25):
show, but more importantly it's yourfortieth anniversary. Yes, it is yesterday.
Mom and I were married August TraversDays. As your great uncle ed,
we'll never let us forget. Wewere married on Travers Day in nineteen
eighty three, rainy day, rainymorning, and it turned out to be
a beautiful day, as has ourmarriage been in my opinion. I can't

(00:46):
speak for a Carolin but your mother, but it's been a great run,
and hopefully half of it half wegot another half to go. You know,
I would I would love that,to be honest, that would be
great. So Glass Lake, it'sthe only lake in the United States.
Day, Green Lake, Green Lake. I'm sorry? And what is Green
Lake again? It's a lake outby Syracuse and it is not mixed.

(01:10):
The water does not mix up,so it looks like the Caribbean. Yeah,
it's it's a beautiful lake and we'rewe're camping tonight and be back in
to work on Tuesday, taking tomorrowoff and uh and enjoy the free time.
Yeah, yeah, that's great.And you know, congratulations to both
of you, and you know we'dlove you guys so much and uh,
you know, thanks for everything,but you know, thank you. Let's

(01:32):
get into the show. Well,pretty pretty busy week. You know,
we had CPI data. We cantalk about CPI data, PPI data.
You know we have you know,China coming in weaker than expected, you
know, which was I guess surpriseto to to to to a lot of
people. People are waiting for Chinese, Chinese economy to to to you know,

(01:53):
kind of pick up a little bit, you know, something a little
bit different that I think we couldtalk about maybe Apple, Apple kind if
not in talks to buy Disney,but a little I guess scuttle butt about
about Apple purchasing Disney for you know, their content. I just thought it
might be interesting that me and youcould talk about, you know, why
Americans plan to take Social Security earlierand even leave retirement money behind. And

(02:16):
then you know, a little bitstocks close today, stocks closed mixed as
wholesale inflation surprises, and you knowthe average monthly return of the stock market
by month from nineteen eighty to twentyeighteen, so kind of take a look
at that, and you know,I'm seeing ten greens and two reds,
and you know, unfortunately we're inthe midst of the two reds. But

(02:36):
you know that's something kind of wecan talk about and you know, kind
of see what we can you know, as as investors, we can plan
to do, you know, kindof to get ready for the for the
you know, last quarter of theyear. But you know, I think
we should start off with, youknow, maybe maybe the numbers. You
know, we had a you know, up and down week. I think,
you know, whatever the day CPIdata came out, I think it

(02:59):
was Thursday. You know, Ithink the market was up about four fifty
at one point, then only closedup fifty the Dow. So, you
know, it seems like it's ait's a little bit of a you know,
sell on the news things, can'tyou know, In my opinion,
the market's a little bit afraid ofthe Fed still, and I don't think
it want of gets ahead of itself. But you know to start. The
Dow Jones Industrial Average is up twofifteen to close at thirty five thousand,

(03:22):
two eighty one forty up point sixtwo percent for the week, up six
point four four percent for the yeartrailing twelve month of four point five per
cent. SMP down thirteen ninety eightto close at forty four thousand, four
sixty four h five, down pointthree one percent for the week, up
sixteen point two seven percent for theyear trailing twelve month, up four point

(03:43):
three percent. NAZDAC down two sixtyfour thirty thirty nine, the worst indocy
performance, to close at thirteen thousandand six forty four, down one point
nine percent for the week, upthirty point three seven percent for the year
trailing twelve month, up four pointfive eight percent. US Total Market down
two thirty four twenty two to closeat forty four thousand, six h six,
down point five two percent for theweek, up fifteen point eight percent

(04:06):
for the year trailing twelve month,up three point two three percent. Russell
two thousand, down thirty two thirtyfive to close at one thousand, nine
twenty five, down one point sixfive percent for the week, up nine
point three five three zero percent forthe year trailing twelve months, still down
four point five four percent, Soyou know, we're kind of seeing a
continued weakness in their Russell two thousandcan't get ahead of itself a little bit.

(04:30):
Dow Jones. The utilities, we'reup seven ninety nine to close at
eight ninety four oh six, uppoint nine percent for the week, down
seven point five eight percent for theyear trailing twelve month, down fourteen point
one six percent. Transports down oneo nine ninety four to close at sixteen
thousand two oh nine, down pointsix seven for the week, up twenty
one point zero four percent for theyear trailing twelve month, up seven percent.
So you know, we had,you know, a mostly down week,

(04:53):
especially in the more you know,NASDAC, Dow Jones was up a
little bit for the week. Inmy opinion, it was on the back
of you know, energy. Ithink Energy had a good week relatively to
everything else. To XLI in generalwas up, the XCEL, the ETF

(05:14):
was I would say it was probablyyeah, up three point three one percent,
So you know, it was agood week for energy. Saw these
kind of continue to cut supply,and you know that that that is pretty
good news, especially on the backof China having some you know, not
concerning, but you know, somestumbles reopening their economy. So, you

(05:34):
know, I don't know what whatyou what what do you think of?
You know, I guess just thenumbers overall. Well, I think a
couple of things. One is Ithink this as as we look at this
month in general, the month ofaug is compared to two other months.
You had alluded to it earlier.There are two down months out of twelve,

(05:57):
and they literally follow one tunnel theother. August, the average since
nineteen eighty was down point one fivepercent, September down point seven percent.
Other than that, all the othermonths are up. The June's just barely
up point zero two percent. Sowe are we have entered the worst two
months of the year as far asmarket performance goes over the past forty years,

(06:23):
forty plus years, and there's noreason to believe that won't be,
you know, stay the same thistime. I think if you take a
look at you know why that mightbe the case. You know, some
of it has to do with thefact that there's a lot of professional investors
that are taking vacations, as area lot of you know, retail investors.

(06:46):
You know, they're they're taking vacations, they're getting their kids ready back
for school, they're doing whatever thecase may be, but they're not paying
particular attention to their portfolio. Soit's kind of like the summer a duldrums,
all wrapped up in those couple ofmonths, and then and then September
people are kind of wrapped in,wrapped up into going back to school.
You know. In addition to that, specifically to this month, you know,

(07:09):
I think we've seen technology, youknow, technology, communication services,
and consumer discretionary, which, bythe way, used to be pretty much
consumer discretionary was you know, ledby you know, your retailers at one
point. Now it's the night byAmazon. Yeah, so if I were

(07:30):
to say, you know, whatis Amazon, you know, I would
say Amazon is a a technology company, not not a retail company. So
we've been led by technology, andnow I think, uh, they're due
for a break and they're and they'retaking one, and you know, I
think what you just said kind ofhit the nail the head with Amazon being
a technology company, and you know, I'm gonna I you know, I

(07:53):
printed it out, but I donot have it in front of me.
But yeah, I'm the cover ofCNBC today and it was written yesterday.
It says, how am how awsis designing its own ship to help catch
Microsoft and Google and genitive AI race. So you know it's basically yeah stories,
you know, so it's kind oftalking about you know how you know
Open ai had a thirteen billion dollarinvestment from from Microsoft, you know that

(08:18):
same week or month Google launch,you know, barred and you know now
Amazon, Yeah, and Nance's ownfamily of long large language models called Titan
it's not a good name though,along with that ship, but along with
a service called Bedrock to help developersenhanced software using generative AI. So you
know, I think that's kind offollowing the whole you know, you know

(08:41):
path that we think in uh,you know, semiconductors are cyclical, as
we've seen this year in video Ithink almost two it was up two hundred
percent at one point. But youknow what we think going forward is,
you know, we do think thatthis is going to be a you know,
a long term bull cycle for chipsin that you know, everything has

(09:05):
a chip in it now, andyou know, I think they're going to
be the new picks and shovels ofof the economy. And you know,
we even saw that with the ChipsAct. Global foundries Intel building billions of
dollars worth of of uh you know, not headquarters, a warehouses, you
know, plants to to to toyou know, build these chips, the

(09:26):
fabrication plants. We have fifty communitycolleges in the United States right now that
have a uh an associate's degree focusedon chip manufacturing. So you know,
I think it's going to be greatfor America. And you know what we're
seeing is these larger companies kind ofyou know, being versatile enough to I
guess, get into their own chipproduction. You know, you still have

(09:48):
AI, AMD and and Video designingtheir own chips. So I think that
that'll continue to be well. Butyou know, I still think that you
know, Intel, even Global Founderiesto a certain extent, but definitely Intel,
we'll probably you know, continue tobenefit from bringing chip manufacturing back home
as well as you know, Iguess a growing PC market as I don't

(10:09):
think you can get much worse thanit is now. Yeah, you know,
and I think there was a ChristinaParson Elis, who was a CNBC
reporter, did a piece this weekon on that whole issue of bringing chip
production back to the United States,and it's been hasn't been funded yet,

(10:30):
and that'll take some time companies.And she was at a wolf Speed fab
plant that was that was being constructed, and the CEO was saying, they're
having a very difficult time finding workersa and finding you know, B competent
workers. So you can't find workers, let alone competent people. And I'm

(10:50):
not saying incompetent, just not reallyknowledgeable. You'd mentioned fifty community colleges having
degrees associates degrees in this type offield. But it's going to take some
time. And I think as welost pre eminence not in design of chips
but in you know, manufacturing ofthem over the past forty years, certainly're

(11:13):
not going to take forty years,but it is going to take some time
for for the US to get upand running. So even you see Taiwan
Semiconductor trying to you know, relocateworkers from Taiwan to come to the United
States as as almost the last lastditch effort because because they can't find workers

(11:35):
even to to you know, toemploy in their plans in Arizona. So
you know, yeah, you know, I talked with someone who works for
Global foundaries, and she she workswith global founderies as well as the government,
almost like a bridge, and shesays, that's the kind of the
main issue right now. You wewill get to where we want to go.

(11:56):
But you know, I think sheactually used the phrase, you know,
lying flying a ship while building itat the same time. So I
think they're kind of in that stageof of development and that stage of of
the act. But you know,I think they will it will work,
and I you know, I thinkit's I think it's going to be great
for for this country. We've talkedabout it a lot on the show because
it's almost the first, uh thefirst you know, major thing I can

(12:22):
remember politically that you know, isgoing to you know, the middle class
has been an issue since I've beenworking here in about in twenty eleven.
So you know, I'm pretty I'mpretty excited about the prospects of this becoming
you know, the new uh youknow, hopefully the rebuilding up of the
middle class in America. Yeah,and I think that as well, you

(12:45):
know, but I think that youknow, just for like the h this
past week and this past if youlook at year to date, they've done
so well, you know, totake a breather here, and I don't
think it's I think it's a breathermore than anything else. Technology, communication
services and consumer discretionary, which hadbeen by far the leaders thus far this

(13:07):
year. Through Friday, according tomy records, you had communication services up
thirty nine percent, technology of thirtyfour and consumer discretionary thirty one. I
mentioned of those that the three largestcompanies within that sector was in within those
three sectors respectively, and I'm lookingat the S and P five hundred select

(13:30):
sector spiders. It took an Apple, Amazon, and Meta Platforms, and
you call them all technology companies.You wouldn't call them consumer discretionary communication services,
especially as you were alluded mentioning earlierAWS for Amazon Web services. So
it's good that they took a breedat what I why would I say a
breeder rather than the beginning of somethingthis look, the market may go down
six seven, eight nine percent.We certainly have some issues, seasonal issues

(13:56):
affecting the market. But I likethe fact that if I look at the
year today performance of those of thosesectors. Three weeks ago, three of
the eleven sectors were in the negatives. Now there's only two weeks. Last
week three we're still in the negative. Now I'm looking at two of the
eleven sectors and the negatives. Sowe're just getting in my opinion of broadening

(14:18):
out of the market. But that'ssaid, and so why was the S
and P five down the S andP five hunded down if it's a broadening
out? And why would I considerpositive a because more of the laggards are
participating a little bit, and beyou really have difficult for the S and

(14:43):
P five hundred to make headway withforty seven or forty eight percent of that
index comprised of those three sectors thatI just mentioned, information technology, consumer
discretionary and communication services. So youknow, to let you know industrials join
in the fund, so to speak, or healthcare or financials is good.

(15:03):
I would think I really wouldn't messaround too much with real estate utilities just
because they're so interest rate sensitive.But some of those other sectors I think
look pretty attractive and through here anduh, and we're overweighted in energy I
think just on a on a stockspecific basis, you know, looking at
you know, our holdings, juststock specific not including you know, we're
almost double weight and energy relative tothe S and P five hundred at eight

(15:26):
percent of common stocks in energy ascompared to the S and P five point
at which is about four or five. So you know, we've chosen to
overweight in that area and we havemarket weights and maybe a little bit more
in those three leaders, namely consumerdiscretionary, communication services, and technology.
So a little bit of a breatherhere is not a bad thing, seasonal

(15:48):
and nothing to really be concerned about. Yes, so you know, just
yeah, I guess for the listenersa little bit. We are we you
know, Apple, Microsoft, youknow are some of our larger holding large
kaptech. But you know, Ithink some ways to you know, I
guess counter act those in general.As you know, we buy DGT that's
the Dow Jones Global ETF and that'sfifty fifteen percent in industrials and you know,

(16:11):
eight percent in energy, which Ithink is a good way to uh,
you know, I guess to balanceout your tech if you're a tech,
if you have a you know,if you still like tech over the
long haul, but you know,you think it's kind of run away a
little bit. Also, RSP isit also about you know, it's an
equal weight at spy. That's alsoabout fifteen percent in industrials. That's another
one of our larger ets that weused to you know, balance out,

(16:33):
you know, our portfolio when wethink, you know, especially when we
think you know, tech has tohas to take a little bit of a
breather, right, you know,go up for sure now, you know,
so, I think you know,we have about what tennis minutes left,
eight minutes left, and I thinkyou know, the listeners would kind
of want to hear about, youknow what we think. CPI and PPI
data came out this week. Wholesalelevel PPI came out a little bit higher

(16:56):
than expected, point three percent asas expected against a consensus estimates of point
two percent CPI, which you knowis a measure of you know, ninety
percent of you know, ninety percentof what's it's a kind yeah, economic
activity rose that point four percent thatit was point one six percent once month

(17:19):
over month, though shelter costs werea little bit high, but points one
six percent month over month. Ifew times that by twelve is one point
nine percent, and that's kind ofvon paced for that two percent target.
That the that the FED is aimingfor. So you know, there's some
good news in the data and someI guess concerning news as we would see

(17:41):
with shelter costs, you know,remained remained a little bit elevated as well
as services well ye have, yeah, I think. And the thing about
it is too, is that CPIinflation at the retail level, you look
at perhaps you know, margins beingsqueezed a little bit if if it stays

(18:03):
stubbornly high. You know, sheltercosts in the lake, I think at
the producer price in actually had producedthe wholesale costs up three tents of a
percent. Consensus was two. AndI think the big question is, you
know, have we really gotten thebest out of inflation data? Are we
ware? Are we going to stayin around two and a half or three
percent? So DPI, as youmentioned, up three point two percent year

(18:26):
over year. We had two onepercent numbers roll off last year or excuse
me last month during the month ofJune and July. Excuse me yet June
and July, so that this maybe as good as it gets on the
retail level and also on the wholesalelevel. So that's I think that's why

(18:47):
the market sold off a bit inaddition to seasonal factors as it did why
it did on Friday. You knowthat that would be my opinion. I
think, hey, is this asgood as it gets? Has the drop
in inflation bottomed, is that they'regoing to have difficulty moving forward if you
know the good market prices in thenine inflation. You know, if I

(19:11):
had to come on one side orthe other, fall on one side or
the other. I think the biggestissue, not the biggest issue, certainly
getting the supply chain intact. We'vedone that. It would come down to
getting workers back. And there wasa big article on the workforce just being
more dynamic now and also those andyou you could probably touch on this yourself.

(19:37):
People don't mind working eight hours,but they want to break that up
a little bit now so that theycan take care of their families like they
did during COVID. So maybe theytake three to six off and work from
seven to ten, as long asthey're working from home, you know what
I mean. And you know,I'm seeing them to have dinner in the
leg. I'm seeing actually a lotof that. You know. Two of
my better friends, one's an engineer, one works for Regenera on and they

(20:00):
kind of say the same thing.You know. One of them goes into
work sometimes at like four thirty justbecause he can get more work done.
And it's project based. So Ithink you're going to see that a lot.
You're gonna see a lot of youknow, project based workers as well
as like even account wants, youknow, just get your job done.

(20:21):
Workers that don't need much collaboration.You know, engineers don't need that much
collaboration. It's based on maths,So you know, I think we're going
to see a lot of that isyou know, hey, get your work
done. You know, if youget your work And I think employers and
employees are kind of both in thesame camp a little bit. I think
employers want their want want their employeesback to work a little bit more.

(20:42):
But you know, I think employeesright now, we're just like, hey,
I'm getting my work done. Whatelse do you want from me?
And I you know, I thinkyou're going to kind of continue to see
that, you know, especially whenyou know the labor market is so strong
right now with a three point fivepercent unemployment rate. You know, there's
a lot of jobs in the economyso you know, we're we are still
in a you know, I guessan employee first economy right now, and

(21:04):
I think we will be for thefirst foreseeable future. Yeah, I agree.
You know. The other thing tojust with with in regard to inflation,
I think that China has a lotto do with it as well.
Too much public data shift away fromChina is the main supplier to the world's
developed developed economies, aging populations,overbuilding of the real estate market, and

(21:26):
missteps during and after COVID. Ithink it all led to China's economic malaise
and and and the US kind ofshifting supply we sell with Apple to India
a little bit, or the theintent to shift supply there. Yeah,
you know, I think as thelargest consumer plant as the world, I
think, you know, that's goingto have some probably global implications. Yeah,

(21:47):
and you know, I think we'rein a little bit of a you
know, I do think it hasto do with where we are in summer.
August September continue to be the weakestmonths historically. But also I think
we're gonna wait in ce mode now, Like there's a lot of like what's
going on with China right now?What's going on with the FED even you
know, I think we're seeing that, you know, interest rate hike,
interest rate, interest rate hike,and you know, the economy is still

(22:07):
rolling around. It's like, youknow, if if the FED really wants
to, you know, really bringthat unemployment data up or unemployment rate up,
you know, we're kind of inwhat's next. So when you don't
know what's next, I think that'swhen uh, you know, workers tend
to I think that's when the markettends to pull back because they, you
know, they you know, themarket is scared of the unknownst and I
think that's kind of what's going onright now. And you know, we're

(22:30):
just kind of in a wait andsee mode and a lot of different parts
of the economy. So I thinkwe're kind of you know, taking some
profits where the market has ran upquite a lot. We saw the triple
queues. That's the Nasdaq one hundredup over I think forty percent at one
point. So you know, Ithink this is all a lot. These
are all logical, rational steps thatare going on in the market right now,

(22:52):
which makes me not too concerned aboutthe market as a whole. But
that doesn't say, you know thatthat that that that's kind of saying,
hey, you know, I couldsee probably you know, another five percent
pullback or so, and I thinkthat'll be you know, good for the
market overall, Abby two, youknow, adding bricks to that wall of
worry, you know. And youalso you also have treasury notes and builds
notes and bonds yielding over over fourpercent, some over five to twelve month

(23:15):
builds five thirty six, state taxfree, the ten years now solidly above
four at four point one six,and the thirty years four point two seven.
And you've got because of debt attwenty five or twenty seven trillion dollars,
whatever the case may be, publicdebt. You also have issuance new
issuance coming to the marketing. Ifyou look at additional supply constant demand,

(23:37):
you have that that equal equals risinginterest rates. One thing I think that
the listeners who want to hear toothat that article they had touched on it
was a USA today are then itwould be part of the show Social security
More Americans planned at tap soliscurity benefitsearlier rather than later. And it comes
down to this is an article inthe USA TA and more comes down to
confidence that social security will be adown or it won't be adjusted, rather

(24:03):
than in combination with them needing itnow. And I really wouldn't worry about
that for some of the older workers, you know, where people I wouldn't
take it at sixty two rather thansixty seven or seventy because I fear soul
security not being around. If youtake it at if you retire at sixty
two, your maximum benefits twenty fiveseventy two. At seventy your maximum benefits

(24:26):
forty five fifty five. So whywould you take it now? In my
opinion, it's being able to useit during the active part of your retirement
is more important than you know,potentially, you know, crossing that line
between it being profitable to wait duringthe passive stage of your retirement. Okay,
yeah, and you know, maybewe'll talk about it next week.

(24:47):
But that about closes the first halfof the fake In Financial Report. Now
for the news and weather on wg Y Take care, Dad, Good
morning, Welcome back to the secondhalf five of the Capitol District's Money and
Investment program. You're listening to theFagin Financial Report from Dennis Fagin sitting here
with my son Aaron, as wedo every Sunday, and this second half

(25:08):
we're going to talk about the Wallof Worry. We're going to talk about
posts from Ben Carlson. Everyone hastheir own money trauma. Bespoke Investment Group
had some good stats. We'll we'lltalk a little bit about that, and
also housing affordability, uh, youknow down again as mortgages just reach seven

(25:30):
percent. But I think one ofthe main things I want to talk about,
Aaron is is something you had saidduring the course of the week,
and I thought it was was veryappropriate really for what we're dealing with right
now, and that is is thatinvestors expect the environment that they're dealing in

(25:51):
to be either like a green orred leader stop right, and you said,
we you know that it can beyellow. It's okay to cross the
street, but kind of look bothways. And that a soft landing does
not necessarily mean it's not going tobe maybe bumpy along the way, you
know, it doesn't doesn't mean that, it doesn't mean that it won't include

(26:15):
turbulence on the way down. Uh, And don't confuse a soft landing with
smooth sailing. So all of thosethings, I think maybe that's the environment
we're we're we're we're currently residing inYeah, I think so, you know,
I think there's a lot of youknow, conflicting economic data that you
know, keeps on coming out,but it's it's also conflicting data that's necessary

(26:37):
for a for a soft landing,you know, just thinking, I guess
off the top of my head.You know, for a soft landing,
we'll need interest, we'll need unemploymentto go up a little bit, maybe
to the around to around you know, the four percent mark at least,
but we'll still need a strong economy, which we currently have. We'll still
need a strong consumer from you know, if you take a step back,

(27:02):
you know you can have you canhave unemployment and a strong consumer. So
you know the thing, it's almostconflicting data that needs to happen, you
know. And well we also needGDP growth, So you know, there's
a lot of conflicting things that needto happen for soft landings. But that
doesn't mean it can't happen. Ithink that's I guess the most important part.
And you know, right now itkind of looks in my opinion like

(27:23):
we are on track for a softlanding. You know, we saw CPI
and you saw CPI a little bitweaker. PPI was up about a tenth
of a percent more than expected.But you know, these are things I
guess that are going to have tohappen if we do achieve a soft landing.
So although you know, you sometimeshave economic data coming out that's not
as you know, exactly what youwould like, it's still some of it

(27:45):
needs to happen for us, rightfor the Fed to achieve their goal.
You're still making headway, you know, for those of people that exercise or
jog or whatever. You know,when you feel yourself running out of steam,
you can't you can't go out ofpace. And I know you were
talking about running this path this week, are and you were saying, you
know, rather than stop, Ijust kind of slowed down a little bit
when I got tired. And Ithink that's kind of the period that we're

(28:07):
in for the economy, is thatwhen you feel yourself tiring and the economy
is being provided with headwinds from risinginterest rates, that it's you know,
it's you slow down rather than stop. And that's what the FED is trying
to do, you know, toslow the economy down rather than stop.

(28:30):
I think we are priced for thatright now, in my opinion, we
are priced for that. We're notpriced for a hard landing, and we're
not priced for a re acceleration.I think we saw today or excuse me,
the day with the release of thePPI PPI drove the just the fact
that it was three tenths of apercent rather than two tenths of a percent
for the month of July. Andthat's the prices at the whole sale level,
you know, initially drove the marketdown a little bit because we're not

(28:55):
priced for an economy that's that shouldn'tslow down a little bit. You know,
streets need to stabilize in through here, maybe drift a little bit downward
and and I or or rise alittle bit. And I think that's kind
of you know, what we're dealingwith right now. I question on that
topic though, Microsoft and Apple bothdown about twelve percent since you know,

(29:19):
their most recent highs. You know, what do you make of that?
What do you make it about?What do you make of technology relative to
the overall market? You know,the Russell two thousand took it on the
chin this past week. MidCap MidCapmidcaps, that's all we've been hearing and
they're really not pulling their own weight. So what do you what do you
make of the weakness really in theBig seven, the Magnificent eight, whatever

(29:41):
you want to call it. Wegot to where we are, let's say,
the QQQ up thirty with probably thirtyfive percent this year on I guess
he at the back of this,you know, I think an undervaluation,
which I think is true. Youknow, at the beginning of this year,
these companies were undervaluable. But alsoyou know when chet she PC came
out with Microsoft, these you know, expectations of of you know, this

(30:03):
new wave of you know, thisnew technological revolution in artificial intelligence, and
yeah, that might be the case, but you know, I think what
we saw as with last quarter,Google still had I guess the lion's share
of search and ad revenue. Soyou know, I think what's happening is
people are going to need to see, you know, the monetization of artificial

(30:23):
intelligence. And I think you know, this past quarter, we you know,
you didn't hear AI and earnings reportas much. There wasn't really nearly
any monetization from you know, thebigger companies with artificial intelligence. And I
think that's kind of the reason thatthat they pulled back is, yeah,
these they're going to need to showthat these new technologies are actually can can

(30:47):
can have some revenue for these companies. And I think that's what we're seeing
now is maybe we're you know,three, four or five quarters away from
that. So that's what I think, and I think I think it's justified.
I think these companies are pretty fairlyvalued in here. So we're looking
for some alternatives to these companies,not only in different sectors, but companies
that have been beaten up over thepast few weeks that we think, you

(31:11):
know, maybe you know, maybeyou're going out of Apple into you know,
maybe another tech stock, but youknow, we think something else says
maybe a little bit more ways torun then let's say an Apple, Google,
or an Amazon. Not to saythat we don't like them, we
have plenty of them in our portfolios. It's just I think sometimes you have
to take you know, trim sometake them off the off the top when
it becomes overallocated. And that's justI think, you know, prudent,

(31:33):
I guess, like investing. Yeah, And I think also you know,
if you have no Apple, youhave no Microsoft, you have no alphabet.
You buy it on weakness. Ifyou're overweighted, you look to trim
it perhaps, you know, youknow, on on a little bit of
strength. But but either way thenyou know their activity really they're rebound from

(31:53):
last year's malaise. Really, youknow, would necessitate that they take a
breather now. And I think they, I think that this is the beginning
of a process. I wouldn't besurprised if the market chops around in through
here, maybe a little bit lower, you know, I said it,
you know, and it was partof our snapshot last week, you know,

(32:15):
which we sent out weekly to ourclients. We're hoping, you know,
if the market climbs a wall ofworry, you know, we're hoping
that we can add some bricks tothat wall over the next couple of months.
You know, six, seven,eight, nine, ten percent correction
in the market would raise the levelof anxiety, you know, right now.
The American Association of Individual Investors cameout with their sentiment survey and it

(32:38):
still remains pretty strong, as fortyfour point seven percent of investors are bullish,
twenty nine point eight percent bearish,with the balance around twenty five and
change percent still being in the neutralcamp, and it's still higher than it
had been in quite some time.You know, I'm just that market sentiment,

(33:00):
Yeah, investor sentiment, so itremains high, which would then imply
as a contrary or an indicator thathey, you know, investors should still
you know, maybe maybe we canyou know, pull back a little bit.
Generally speaking, Uh, investor sentimentis a contrarian indicator. We had

(33:21):
consumer confidence also in July, strongerthan expect to see. If consumer confidence
high, investor confidence high, andgenerally speaking, that's a recipe for a
pullback rather than added gains. Oneof the things too, airs you know,
as as we transition to you know, uh, you know, not
another topic, but and yeah,another topic, housing affordability down in June.

(33:45):
Interest rates now, according to toUH National Realtors Association National Association Realtors
now up over seven percent on thethirty year. I think Freddie Mack is
also interest rates on the thirty andfifteen year approaching that same level. Housing
market remains tight as inventory remains relativelyyou know thin, we have no you

(34:08):
know, two or three month inventory, which is again keeping housing prices high.
Uh. It's also keeping shelter qustshigh. We saw that yesterday with
the CPI shelter qusts. As wementioned in the first half hour, four
tenths of a percent shelter qusts stillseven point seven percent year over year shelter
qust one third really of the CPI. Yeah, you're you're thirty three,

(34:31):
you you have you know, congratulationsto uh Chris A. Lund. Oh
yeah he was engaged. Yeah,good friend of mine is engaged. We've
known their family your whole life.He was best man in my wedding,
so you know, I was exciting, Yes, But anyways, that wasn't
the reason for that. But alot of a lot of uh, your

(34:52):
friends in the like some hone houses, some don't. Is there any talk
about like what what do you hearfrom anymore? Not anymore? But there
you know, last year, youknow, interest rate rates was yeah,
I guess like a popular topic amongeveryone, just with the and the cost
of a house. But you know, I eat just seeing in front of

(35:12):
me, you know, ninety twopercent of people have interest rates below six
percent, eighty two below five percent, and sixty two below four percent.
You know, I think I reada stet that only like three hundred thousand
people in the entire United States couldrefinance at a lower rate. Oh yes,
so yeah, so no, there'snot as much talk about all my

(35:35):
friends I think own I don't knowmany renters, you know, but yeah,
I don't. I don't know muchabout I guess the local market.
Well, the thing I would sayis is the thing that I'm we own
Lows for clients and I like.I like Lows on one hand that I
like the I like the I guessthe remodel market, remodel stocks because of
the fact that people aren't gonna move. All right, you're not gonna move.

(36:00):
They're not gonna move. But havethey already spent have they already done
that work? You know, They'vehad almost three years since the start of
COVID to do this work, youknow. So that's the only thing I'm
a little bit nervous about, isthat entire sector slowing down because people who
wanted to do something have done it. Well, I said, I still
do like Lows, just from youknow what you said. I think Lows

(36:21):
a pretty good value in here.I think it's a very very well run
business. They do have like anew business segment where they do kind of
go out and find contractors for youwhile you purchase the things there. So
and I still we still really likelows here. It's just yeah, are
things slowing down a little bit onthe remodeling front? Pays a decent dividend,
there's good dividend growth. Are thingsslowing down on the remodel front?

(36:45):
But I also think if you lookat and the other reason why they may
be slowing down is, let's sayyou're you're, you're, you want to
do a decent size remodel. Areyou going to borrow money? Let's say
you have a two percent mortgage andyou want to put fifty thousand dollars into
a new kitchen. Are you gonnaborrow with a home equity at six percent
in order to do that? Youmight say, well, no, I'm
gonna wait till I save up whatever. So that also, in my opinion,

(37:08):
would be a headwind really to economicgrowth housing affordability. The other headwinds
economic growth would be China. Yeah, China, really weak numbers this week.
Important export numbers, import export numbers. Deflation in China, but the
import export numbers, I think we'repretty steep. Exports fell, you know,

(37:30):
quite percipious. Yeah, by fourteenpercent, exports down fourteen percent,
imports down twelve point four percent.There's still the question remains. Is it
the US shifting to alternate supplier supplyyou know, suppliers so to speak,
or companies or countries to do theirmanufacturing, including on shoring, or is

(37:52):
it you know, weak really demandfrom from the from the globe orders still
from you know, twenty twenty oneand twenty twenty two. Also, I
think it's a culmination of all ofall of the things a little bit,
but actually deflation. I think thattheir consumer prices and producer prices actually dropped.

(38:15):
It's hard to art to envision rampantglobal inflation with deflation concentrated with no
relatively large economy of China by youknow, GDP and also one point four

(38:35):
billion people, so put something towatch from an inflationary front, you know,
how that filters into the US,and also what that means, what
all these numbers are meaning for China. China's China's having a heck of a
time getting out of the COVID lockdownand then the further lockdown, you know,
the globe had a lockdown, andthen China kind of kept theirs going

(39:00):
they're having a difficult time getting outof it. And then the geopolitical ramifications.
Nothing is more dangerous than a woundedanimal. President Biden alluded to that
yesterday or Thursday, excuse me,in a speech, So you know,
you kin you kind of think aboutthat as well. Maybe that's a brick

(39:22):
in the wall of where we thatwill enable the market to go to go
a little bit higher. Looking atthe the BET spoke UH stat sheet that
they put out, you know,a few days back, if you look
at the economy domestically, you lookat the corporate demand for corporate credit,

(39:46):
consumer demand for credit decline between Februaryand June. All right, interest rates
on on a credit cards are attheir highest level ever, consumer credit one
trillion dollars. I don't think that'sthat that much of an issue, given

(40:07):
the fact that you know, thethe US population continues to grow, and
you know, and we have thatkind of dealing with some of some of
the you know, continued headwinds fromI think the other thing too, we
see Ara is we we we kindof moved out of the Strategic Petroleum Reserve.

(40:30):
We we kind of took assets,so to speak, or barrels of
oil, millions and millions of barrelsof oil from the Strategic Petroleum Reserve and
now now we've got to put thatback. So replenishing the SPR is also
something, uh that the consumer isdealing with, you know what. They're

(40:51):
still you know, close to atrillion dollars of excess cash floating around from
COVID relief as you know, comparedto prior to that. So where do
you see the economy really on balanceright now? You know, do you
see it as a pretty pretty prettystable economy. Yeah, I think it's
pretty stable. You know, it'son the back of the strong consumer.

(41:12):
I think still and again that isa worry is can the can the worker
and the consumer become any stronger?You know, I think yeah, you
saw it a little bit more let'ssay, last year, but that was
because of COVID money. You know, unemployment numbers at you, let's what
three point three percent. It can'tget much better than that, And I

(41:35):
think that could be an issue goingforward, just with the credit market.
You know, if if I thinkit was a study done, someone's on
CNBC and said, you know,maybe we're actually not going to run out
of you know, COVID money slashsavings till mid September twenty twenty four.
But when that happens, when whenyou know, people do start to lose
their jobs, you know, thatcould have you know a significant impact on

(41:57):
you know, growth of our economyg DPA in general. Yeah, you
know, And I sit here thinkingabout that as someone we managed you know,
six hundred and forty million up billionthat we should be a million dollars
and think you're self okay, youknow, yeah, people aren't worried,
you know, And I think that'sthat's the only thing that will slow down
this economy is people losing jobs.Because let's face it, you know,

(42:21):
Powell can continue to raise rates,raise rates, raise rates, But how
does that affect you? How doesthat affect me? It doesn't. I
own my own home. Ninety percentof people you know have a that have
a mortgage, have it under haveit under six percent. No one's gonna
move. So you know, something'sgonna have to happen to really I think,
you know, yeah, get CPIdown to the two percent mark and

(42:43):
slow this economy down. Well,the true or false the FEDS dual mandate
you know, inflation at two percentand real GDP at two percent. You
know, do they really want that, you know? Or does does the
Fed say the two percent inflation rateor the target? Yeah, you know,
a soft target? Is it asoft target? Now? Yeah?

(43:04):
You know, you know, Ithink, you know, a pause in
rates around here would be a goodidea. But again, you know,
rates only have so much effect onon the consumer. So you know,
something's gonna have to happen for youknow, our economy to really really stumble,
you know, seventy percent service basedeconomy and interest rates at three points
or excuse me, the unemployment rateat three point five or three point six

(43:28):
percent. Even if the unemployment wentfrom three point five or three point six
to four point two four points,even then, what happens? You know.
So I'm not saying, you know, the economy is in good shape,
but you know, a lot ofthere's a lot of signals for a
strong stock market on the back ofthe consumer. That's not the saying when
things come crashing down. They won'tcome crashing down. But you know,
maybe then people's tap into their homeequity for a little bit, you know,

(43:50):
and then then they tap into theirhome equity. So it could be
a while before the consumer starts tobecome in trouble, you know. And
I think the market last year pricedit in the SMP down twenty five percent
from peak to truff in two thousandand twenty two. It's rebounded the majority
of that, they've they've recovered themajority of that, maybe down nine or
ten percent from its all time high. Sitting through here, you could get

(44:12):
a nine or ten percent correction inthrough here, but unless we have a
hard landing with the economy, andthe longer we go without a hard landing,
the more the more, you knowwhat I mean. It's almost like
rain. The longer the longer itrains modestly, and the longer that the
ground has the ability to kind ofabsorb that rain, the less chance there
is a flooding. And I thinkthat's kind of where we are now.

(44:36):
The Fed has raised rates now formore than a year. The first increase
was on March seventeenth to twenty andtwenty two, Sat Patty's Day. So
we're sitting now fifteen or sixteen monthsaway from there, you know, seventeen
months away from there and thinking,okay, we the economy has absorbed this.
On one hand, the consumers stayedstrong. Unemploymentist stayed relatively low,

(44:57):
interest rates have gone up, thehousing market has stayed relatively strong. So
now you have to, as theFED, you have to now target areas
a little more that you want todeal with and either restrain growth or promote
growth rather than kind of doing theblunt broad brush of raising rates. You
know, one of the things Italked about the other day when we were

(45:17):
out with a couple people from JPMorgan was, you know, you have
a mortgage rate of two and ahalf. Let's say you want it to
sell your house. Can there bea government program that would kind of allow
you to continue the two and ahalf percent mortgage And let's say you bought
a house with another one hundred thousandto kind of a commingle the loans rather
than rather than banks, they willknow if you need a new mortgage,

(45:39):
it's the new rate. And sothere's things like that that that can be
targeted moving forward to correct some ofthe inequities in the housing market and keep
the housing market, you know,relatively strong. You know. So anyway,
so let's move on to let mesee we got another anything now,
But like you know, and it'snot a good representation of the economy as

(46:01):
a whole. But it also there'salso in this bespoke thing. You know,
Taylor Swift's tour one hundred and seventeenconcerts worldwide, up to five billion
dollars to global to the global economy. But it says the Swifties tailor's just
fans cousins. One of them,Sarah Sara, is really a big tailor
shift. The Shifty surveys that theyspend in average of thirteen hundred dollars per

(46:22):
show a whopping seven hundred twenty dollarsmore than they than their intended budget.
That's amazing. I'm not saying that'sa good, you know, representation of
the economy, but it's not abad one. I mean, it does
matter that the you know, tailorshift is going on. Torent. People
are still spending this much money ona night out essentially, and people have

(46:43):
the money. You know, ninepeople said they do it again. I
mean booking holdings came out with theirownings. The ownings were fine. People
are traveling. Uh you know,I heard somebody say that they're done with
the national parks and now Americans arenow traveling overseas. Yeah, you know
they're moving more internationally so so soso so we'll we'll see about that.

(47:05):
What else we got one I guessone last topic we talked about, you
know, money, and we talkedabout money last week on the show.
Someone was fifty seven thinking about retiringand this and that, and we got
a couple of I guess emails duringthe course of the weeks and hey,
I appreciate that what you spoke about, and you really what we talked about

(47:29):
is and we just I just gotan email from a client this morning whose
husband is very sick. You know, it's difficult. You you know,
you want your money to last therest of your life in this environment that
we're dealing with, and there's differentsimulations that you can do that give probabilities
of that. The most popular onesthat money Carlos simulation. You know,

(47:49):
will my money last the rest ofmy life? And yet if you look
at the quality of your life asyou get older, I'm not, you
know, and I'm sixty one.I don't think my quality has declined as
much as what I what I thinkquality is. But a lot of people,
you know, God been big onthe fun verse enjoyment exactly. And
I mean, it's true. Youknow, yeah, you know you maybe

(48:10):
have less fun. Deal did youget? But there's more? Right,
Joe, what was it? Youhave more enjoyment in your been fun?
Yeah? You know, although Idid have fun watching Jude the other day
with mom. You know, it'sa good time. He's fun. He's
all over the place now, he'sall over place. But I guess my
my point is that we save money. You save money to save money for

(48:32):
your care. Really when you getto be you know, not able to
care for yourself. But then ifyou you sacrifice all along the way for
that care, and then if youdon't need it, you know, let's
say Medicare covers what you need oryou don't need nursing home care. It's
it's a hard, really position tostraddle. Like I see a lot of

(48:55):
clients now at sixty two or sixtythree, even if the market goes to
never ending battle, I can figurethinking of how much they can spend.
It's a mental battle, and it'smental and you know, and you know
there's not enough time. Only yeah, we don't have enough time to go
into it. But you know,you have that four percent distribution rate.
But the longer that works the more. Maybe you can take out six percent

(49:15):
and work that principle down a littlebit and enjoy your life. But you
know, I guess that's something totalk about for Well. The other thing
too is that. The other thingtoo is that I think when you talk
about you know, interest rates pickingup, that makes it easier. Anyways,
that's it for the show. Giveus call during the week one eight
hundred two seven three six though twosix, check us on that webitfaginasset dot

(49:37):
com, Like us on Facebook,and have a great Sunday.