What Yen? Why Watching The Yen Right Now Is Smart

[0:00] Dano: It's Friday, August 7th, 2026, and we are about to go On The Markets. My name is Daniel. We're joined shortly by Daren Blonski, our managing principal, and Chris Sipes, our other managing principal from Fermata Advisors and our Sinoma Wealth private wealth arm. This week, we're asking the question, why should Japan's currency have anything to do with your U. S. Tech company investment portfolio. What if... It had everything to do with the entire market. What if one carelessly or carefully left note from Treasury Secretary Scott Besant sent the Yen Carry Trade straight to the top of the headlines this week? Let's break it all down On The Markets.

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[1:19] Dano: All right. We got Chris Sipes, our managing principal, Daren Blonski, our managing principal. Daren, you always wanted to have a morning show, so here we are. We're early on a Friday morning looking at the Yen Carry Trade.

[1:30] Daren: I'm not sure we always wanted to have a morning show, but sure. We'll take it. Yeah, we're going to talk about the Yen here this morning. There's a lot going on there. I think Besant was probably signaling the way he did that last week where he wrote on his notepad right in front of a bunch of reporters, buy Yen. And the reason that he was saying that is because for a long time, you know, two major governments or countries around the world have owned treasuries as a store of value for their own countries. And that is Japan and China and Japan being owning quite a bit of it in China as well. That puts us in kind of a predicament if we get in a spat with either of them and they sell all their. Their treasuries, that sends our rates high. If our rates go high, that puts the skids on the economy. And so we've had to, in some ways, prop up the Japanese Yen and maintain it and keep it stable. Otherwise, that forces Japan to have to sell their treasuries to cover the monetary issues and to prop up their own currency. So again, we're... As much as some people might want to be isolationists when it comes to the markets, it's pretty much impossible these days. And I'm showing on the screen USD, JPY, US dollar to Japanese Yen, FX currency chart.

[3:04] Daren: And you can see these huge moves down. And we suspect that's where the US sold euro and bought Yen. To help prop it up in those moments. Unfortunately, it's probably somewhat futile, right? Like you can only do that so long and keep the Ponzi going, I guess. So seeing some currency cracks, but where that all impacts everything is if the Japanese Yen blows up, then that really pushes rates higher. And we saw that last week happen with the rates shooting up and rates shot up because If there's more people dumping our Treasury on the market, so largely governments, you can see the Treasury going up the 30-year.

[3:51] Daren: Then there's more treasuries out there. The Treasury has to pay more interest to get people willing to buy our debt. That impacts everything in the system, including mortgages. And this week we saw some rather dire stuff on the mortgage side. Not looking good for the mortgage business, the real estate world, because rates. Are going higher, rates go higher, mortgages go higher, and that slows down the economy even more. A lot of people, they say, I think I saw the stat, something to about a third of the people who bought homes in the last couple of years are expecting rates to go down.

[4:25] Daren: They're not necessarily living in an affordable home for them, but they assumed rates would go down, which would make it affordable. So that becomes problematic if the mortgage rates continue to climb higher. On the flip side of that, on the... You know, the good news is that the market hit all-time highs this week, right? So we saw these massive candlesticks in the beginning of the week. And then we saw rates kind of roll over, or we saw it roll over, but more or less as we speak right now, it's showing kind of a bull flag type move. I would not step in front of that if you're a short person and you're thinking, or if you're shorting the market and thinking the market will go down.

[5:08] Daren: We want to see a retest here, the 7,600 area to make sure it holds before we think this is going to go extremely higher. But really... Incredible move this week. And when we saw the market close above that 20 period moving average last week, that was that hint that things actually looked fairly bullish going into next week. Even though we had all this scary news about Iran and Yen and all those kinds of things. Again, why we go back to the price action, stick with the price action. Right now, it's still showing support, still showing positive. We're well above our trading averages.

[5:43] Daren: The fact that we're so above that 20 period moving average, Wouldn't be shocking now to see something come back in or pause out, go sideways to let this red line here catch up. That's that 20 period moving trading average. Typically, when we're above that, things go higher. So until we lose that, pretty difficult to argue anything other. You can see this on the weekly. This candle looks very strong. Barring any big sell-offs later today in the market, things again going into next week, fairly positive. For the second week of August. Watching our oil markets closely, we talked about the 80 and the 100 lines as those demarcations, like things tend to heat up when it goes below 80. Just noting that we're below 80.

[6:32] Daren: And when they go above 100, there is some rumors going on in the intelligence community that the supreme leader successor to the previous supreme leader is in dire straits so that might be impacting the markets on some level but it wouldn't be shocking given the oil is going down to see things heat up again in the middle east that gives room except we're getting even closer to midterm election i think some of the stuff we're seeing wins and politically right now that it's going to be a pretty difficult midterm for the Trump administration, and which will then create, you know, very static kind of next two years, a lot of the executive orders and, fighting amongst the politicians, for good or bad, right.

[7:24] Daren: Whichever side you tend to be on, nice jump in SpaceX though, we'll just mention, popped up, here and it looks like it's finding a bottom, which is good news for the future. For, I guess, the SpaceX world, but seemed to have bottomed out. And now we broke above that 20-peri moving average. We'll see if we hold on to that today.

[7:52] Daren: Looking at our mags, because they drive a big portion of the market, you can see we still haven't broken out to all-time new highs in our mags. So watching that closely to see if this rally is going to sustain. In order for this rally to sustain, we'll need to see that breakout above. 70 here in the mags because the mags are such a big part of the market on other news gold gold is it looks like it's getting ready to run again it really bottom based out here found a bottom and it's moving higher i would not step in front of that if you're against gold at this point i think especially we're i think guys getting closer and closer to true stagflation environment we've been talking about this for a few years but the Thank you.

[8:35] Daren: The unemployment data came in today and was really weak. And so we're seeing the economy doing great, but then we're seeing jobs and whatnot not doing good. And I think things are more difficult economically for the day-to-day human versus the market. The market, I think, on some levels is easier to spoof in some ways than jobs. Jobs data, you know, it's pretty hard to get people to hire people.

[9:03] Daren: I think there's a lot of hiring slowdown that I think is already being impacted via AI on the job side. Silver also taking a bid and breaking up. So that's interesting. What's that signaling? Is it signaling risk off? Is it signaling rates higher? We did see Fed President Kevin Warsh come in yesterday and basically say he's ready, or I guess rumored to say, that he's ready to let rates move higher. But then we got this jobs data that came in. Is there going to be in a real, quite, quite a pickle. And I'm sure Chris will talk about that here in a minute when he talks about, yeah. And et cetera. NVIDIA.

[9:41] Daren: Starting to approach its all-time highs again. I mean, just this leaps and bounds. So all in all, I don't think you can step in front of the market. The market looks pretty healthy. The economy is showing some weak signs. We'll see which one's right and which one pulls through. I think that's all I got for this week, guys. It's short, it's brief, but I think we're on solid ground right now.

[10:04] Dano: All right, so the United States, just to be clear, Daren, the United States is buying Yen. Because they are holders of our debt and we therefore need it to be stronger and they're seeing weakness in the Yen. Do we have any indicator as to why the weakness is happening?

[10:20] Daren: Well, why the weakness in the Yen is happening?

[10:24] Dano: Yes.

[10:26] Daren: So the weakness in the Yen is more a function of monetary management, right? And strong dollar, weak dollar, and how strong the Yen is as far. I mean, but if you think about it, who walks around the world? Saying, oh, I'm going to use my Yen to buy things. Nobody, like, next to nobody takes Yen unless you're in Japan, right? So by default, it's going to be weaker, right, versus the dollar.

[10:52] Dano: Yeah.

[10:53] Daren: But in order for Japan to uphold their currency, right, and to keep it strong, sometimes they have to infuse cash just because their economy is just stagnated for years and years. And so they've been fighting this just kind of stagnant economy. Some say that the U. S. Is headed for that stagnant economy. I know, Chris, you have an opinion on that one.

[11:18] Daren: But in order to prop up a currency that next to no one uses, you have to do monetary actions like that. Well, if they need to take monetary action on the Yen and it gets weak, they have to sell. Their treasuries, the Japanese government, because they hold a lot of their money in U. S. Treasuries, they sell those. That all of a sudden floods treasuries onto our market, which pushes our rates higher, pushes our rates higher, slows down our economy. And so the U. S., rather than do that, says, well, we'll sell euros right now and then we'll go buy Yen, which, by the way, really made. Apparently the European Union very unhappy because they didn't tell the European Union they were doing that before they did that, which is just another kind of thumb that the Trump administration has given to the EU and our allies over there.

[12:15] Dano: And to be clear, it was Treasury Secretary Scott Besant. Reporters are covering a meeting and they had his notepad and a photo of the notepad that said buy Japanese Yen and then how much? So there's, it depends on how much 4D chess you want to get into. Some people saying he was being careless. Other people saying he's, you know, a mastermind and knew they would take a photo of that. But that has kicked off some of the uncertainty around that. Right, Chris?

[12:45] Chris: Yeah, that's correct. Most people, it's funny, you know, this little corner of the sort of soap opera-ness of the financial world. You know, only geeks like us would be paying attention to this, but it was looked at as a signal from Besant to try to, you know, signify confidence in the market because he's, it's sort of like the fact that he put JPY like a reminder of like what's the currency ticker.

[13:17] Chris: I mean, this guy was like, you know, trading currencies at like the the pro level for many many many years he's famous for breaking the bank of england so the fact that he wrote it out so like you know so clearly was very there's a lot of theater to it right like hey guys i'm gonna buy the Yen yes the Japanese yeah so that it was you.

[13:48] Dano: Buy JPY from Japan, the country that's in Asia, like just really spelling it out.

[13:55] Chris: Yes, yes, exactly. And so, you know, they're in a bit of a pickle, both the Japanese central bank, or I guess they call it the Ministry Of Finance and the U. S. Central bank, because the Japanese don't want the... The Yen to get too cheap because they have so much debt.

[14:27] Chris: Their debt to GDP is massive, and so they can't have the value of their currency drop too much because then it makes it more expensive to pay their debt back. And we can't have that happen where they have to sell their treasuries. To defend their own currency. Because if they sell their treasuries, that's going to push our interest rates up. And like Daren was saying, I think Japan is, they're either the top holder or the second to the top holder of U. S. Treasuries in the world. And so, you know, to further the whole, you know, kind of soap opera feel of this week, Besant blasted the reporter Nick Timoros from the Wall Street Journal for... Essentially reporting on the fact that they were using this mechanism that was designed for COVID and it wasn't really designed for this that allows these central banks to essentially use a line of credit on their treasuries to to get kind of quick cash rather than actually selling them to create cash and i forget what the exact name of it is but that's it really you know got upset about the fact that Tim Morose wrote about that in the, in the Wall Street Journal.

[15:46] Chris: So there's a lot of, I forget what that's called when you're trying to like, you know, like not make a big deal about something and everybody's like, wait a second, why are you not, why don't you want me to make a big deal about this? You know what I mean? So it's a lot of banking in general, and this is true everywhere is based on confidence. And you know, the classic run on the bank happens when people lose confidence in a bank. And, you know, we, we experienced that firsthand in 23 with the collapse of, first Republic and Silicon Valley where everybody's calling us going like, is my money safe? And as soon as you and your friends are like, I don't know if my money's safe, I better get my money out because I don't want to find out if it's safe or not.

[16:38] Chris: It's sort of a similar thing even in the central banking world. You have to have that confidence. And if you lose that confidence, there can be a lot of problems. And a lot of people are saying, hey, look, part of the reason why interest rates went up last week so much after the Warsh press conference is he was saying there was going to be less transparency. Well, less transparency means possibly less. Confidence in what's happening. Less confidence in what's happening means that you need to be paid more to take on that risk.

[17:13] Chris: You're taking on more risk. Similar concept to what we talked about with the whole, if there really is a Fed put under the market, if the Fed is going to step in and save the stock market, do investors really deserve to get the same risk premium? If that risk is actually not there. Is there a risk premium? I think it's a really valid question. So there's a lot kind of going on behind the scenes with the markets.

[17:45] Chris: But our meme, getting back to our meme this week, people initially started to worry about the Yen Carry Trade, but it doesn't matter when you're in a bull market. All of these things don't really matter when you're in a bull market. The market just tends to keep marching. And with all the spending that's happening, in the AI side of things, one person's or company's spending is another person's income.

[18:13] Chris: And as long as that virtuous circle is, is in place, the bull, the bull market, you know, earnings expectations are still really high and, and the bull market just continues to trudge on and just keep going straight past any of these, any of these problems. And that's, that's common for a bull market.

[18:35] Dano: Chris, you mentioned, I just want you to clarify here, because I know what you're saying, but I want to make sure everyone follows. You mentioned a Fed put. So that is essentially the idea that it is by no means a law or a fact, but there's a belief among many that the federal government will basically never allow another crash because at a certain point they'll step in and inject liquidity.

[19:00] Chris: Yes, exactly. Essentially what they did during COVID. What they did after the great financial crisis, what they've seen to have done after pretty much every blip on the radar, whether it was the Fed buying, you know, or, or saying they were going to buy corporate bonds during COVID. You know, you've, you've actually got the government participating in, in equity markets now, you know, with the government owning a part of Intel as an example and some other companies. So there is, there is a belief. I think among many that the next crisis, when it happens, the Fed is just going to come in and... Overload the system with cash again, and there's nothing not to worry.

[19:47] Chris: And so that's the put. It's the ability to step in and get a bid on your securities in a crisis. Now, like you said, that is not explicit. They have not said that they are going to do that or in any way guaranteed they're going to do it. It's just that that market believes that's what's likely to happen given. Given their pattern over the past 25 years, essentially.

[20:16] Chris: So, but a good reminder from Robert Schiller, the professor at Yale, saying, in the future, we will surely have even bigger such bubbles, each built up around its new and different new era story, and we will have to invent new names for them. And so history will just continue to repeat itself. My personal opinion is that the more the Fed and the Treasury does to synthetically back the markets, inject the markets with drugs, for lack of a better term, the more distortions happen. And it sort of works like the laws of energy, where energy can't be destroyed.

[21:02] Chris: It just gets transformed into different areas. Same thing, in my opinion, with risk, which is... Taken from Corey Hofstein, originally said that, is that risk cannot be destroyed, only transferred. And usually, the more they suppress the risk, the more they push it into different parts of the system, the larger the risk gets, more intuitively. And so, I think it's a very dangerous concept to expect that the Fed and the Treasury is going to be able to remedy every single crisis that comes up. I personally would not invest that way.

[21:44] Dano: A lot of similarities between risk in the market and geology. Tectonic plates, pressure building up in tectonic plates.

[21:53] Chris: Yep. Yep. So revisiting the IPO theme, we said this in some ways, it's always nice when you reread something from a wise investor like Warren Buffett that that sort of agrees with what you thought. Not to pat ourselves on the back, but he says an IPO, an initial public offering, is like a negotiated transaction.

[22:19] Chris: The seller chooses when to come public and it's unlikely to be a time that's favorable to you. And the you he's talking about here is the investor in the public markets. And that's basically what we were saying, is keep in mind as... SpaceX and later on Anthropic and OpenAI and these other companies that are coming public, they're doing so because it's the best time for them to do so.

[22:49] Chris: And just keep that in mind. They're not doing it altruistically. And so today is the first day, apparently, of the SpaceX, some of the SpaceX stock becoming unlocked. Because those investors were not allowed to sell, the early investors, the insiders, until after the public offering came out.

[23:15] Chris: And you would think SpaceX would be down, right, with all that stock hitting the market. Well, you'd be wrong. It's up significantly. So the market kind of seemed to bake that in previously because the price is under the IPO price. However, on the actual day it's happening, stocks rallying pretty significantly.

[23:44] Chris: The market just loves to make us all look ridiculous. And so the challenges will always come. And a couple good memes here on the war because it seems like we just keep falling for this, Dan. But it's interesting that the pullbacks seem to be much smaller than the pops that we're getting for the agreements. So I mean, I can't really blame the administration for saying like, hey, we've got a deal. It's almost there because every time they do, it seems like the stock market just takes off and much more than it does on the downside. And so we've got another deal pending earlier in the week when Besson was talking about that, the market really seemed to like it.

[24:35] Chris: And so we've got. We've got the Iran deal just continuing to provide more and more pops to the market. But again, I think it really does go back to the bull market. We're in a bull market. There's a lot of spending going on with the AI build out. Wars are expensive. So you got government spending. I heard the guy from Variant Perception yesterday on a podcast that really made sense. I'm blanking on his name.

[25:07] Chris: He was on the Excess Returns podcast and he said, look, we've got not only private spending through the hyperscalers, the metas, the Googles, the Amazons, just spending tons of money on the AI build out. But you've also got the largest governments in the world between the U. S. And China in this like existential race to.

[25:35] Chris: Build out the AI infrastructure as well. So you've got the biggest balance sheets in the private sector and the biggest balance sheets in the public sector, both dumping money into this race. And as long as you have that kind of spending going on, gosh, it's going to be really tough for the market to pull back. Now, it can at any time.

[26:04] Chris: We've got all the other signals. We've got bull market behavior from investors. We've got a ton of debt in the system. We've got valuation sky high. It absolutely has the other conditions to pull back at any time, but you've got to remember the massive cannon of money that is hitting the markets at the moment and covers up a lot of sins, Dan.

[26:35] Dano: And Chris, that was Tian Yang of Variant Perception who was on that podcast.

[26:38] Chris: Thank you. Yes, yes. So credit to him on that, which is like one of those things when you hear it, Dan, you're like, well, duh, but like that's such a good way of putting it. It's like, yeah, kind of when you think of it that way, it's like no wonder the market is just and the earnings are flooding through to these companies because one, you know, One's spending is somebody else's.

[27:04] Chris: Gains. And that dissavings, the fact that the savings rate is going down, the debt levels are going up, that typically is actually a sign of a bull market. It's when the savings rates start to go up, people start to hoard their money. They're not spending it. They're not investing it. That's typically recession signals, which we're not seeing yet. So, okay. So on the sentiment indicators. We had a drop off on the bearishness. Really, every time the war seems to tick up, we get a bearish pop above 40% here. And every time they come to some sort of understanding or start talking about an understanding, we get a pop in the bullishness.

[27:48] Chris: So the yo-yo just keeps going back and forth here. We've got CNN fear and greed. It jumped all the way up to 60 greed from a 40 fear last week. Now that is a positioning indicator based on... Seven different positioning charts in the market. And then we've got Bitcoin still largely unchanged at 25 fear, which is about the same as last week at 28 fear.

[28:20] Chris: So not much happening in the Bitcoin world. It'll be interesting to see if this rally in gold is sustained, that if we start to see... Bitcoin come back to life as well, kind of around the same theme of a limited supply, a larger supply of dollars in the system and currency in general. The more the liquidity comes into the system, typically you see that reaction from gold and Bitcoin. Although this last kind of mini cycle seemed to really affect gold a lot more than it did Bitcoin. Maybe that's because of the central banks.

[28:59] Chris: Kind of purchasing more on the gold side and they're not active in the Bitcoin market.

[29:07] Dano: Darren, any thoughts on that? It does feel like Bitcoin's sort of on the sidelines here, and which is strange to hear after a few years of it just really being on the cutting edge of the risk curve.

[29:17] Daren: Well, you know, what's interesting is this week there was actually a pretty significant issue in the Bitcoin world, which I think is important to mention. So there's something called a cold wallet and a hard wallet or a hot wallet. So if you're keeping your Bitcoin online, it's a hot wallet at one of the exchanges. And a cold wallet is this company that made a wallet called Cold Card, where you would keep your Bitcoin off of anything internet. Had some issues with how they generated their seed phrases, and someone used AI to hack them. And last I checked, it was somewhere around... 100 million dollars in bitcoins been stolen so far off these devices because they used AI to to hack and and decipher what those seed work phrases were to move the coin so let me just be clear people aren't hacking Bitcoin itself they're just hacking the passwords that were created by a third party for people who were storing Bitcoin so it's not like it's Bitcoin itself isn't safe.

[30:30] Daren: It's just what you keep Bitcoin on might or might not be safe. And so someone hacked one of those systems and stole 100 million-ish of Bitcoin last count I saw. That's obviously problematic, though, because this wallet that everyone thought was secure is not secure. And well, but given all that bad news and whatnot, Bitcoin did nothing this week. You know, it just kind of sat. There, which to me is just a sign that it is maturing as an asset class.

[31:04] Daren: People are just running around stealing it from each other now.

[31:07] Dano: Trading sideways is the new growing up. Interesting. Okay.

[31:10] Daren: Yeah. Right.

[31:11] Dano: Okay.

[31:15] Chris: So this chart from, sorry, getting a little feedback there. There we go. Okay, so this chart from Jerry and Timmer, I think, sums up a lot of what we've been talking about over the last few weeks with interest rates heading up. Now, to be clear, and you can tell on this chart, we've been in this range for quite a while on the interest rate side of things. And so as we approach that higher end of that range, it's going to be interesting to see if there's a sort of a resolution to the war, if there's...

[31:51] Chris: Some sort of steps that start to lower those interest rates because it seems like every time we get up here, various parties start to get a little worried and those rates start coming down. But let me just read what Jurian Timmer says because I think he really summarizes it very well. He says, and Jurian Timmer is with Fidelity, by the way, so long-term bond yields are on the move again with the 10-year yield well into the danger zone at 4.73%. As I've written many times, recent history suggests that nothing good happens above 4.5%. Why are yields rising?

[32:28] Chris: Is it a reverse crowding out effect where instead of excessive government borrowing crowding out the private sector, it's the insatiable AI borrowing crowding out treasuries? Is it the fear that a hawkish sounding Fed will not match its words with action? Or is it the inevitable consequences, intended or not, of a less transparent Fed. Less transparency means more uncertainty, and more uncertainty usually means higher risk premia. Either way, we have a bear steepening on our hands.

[33:04] Chris: Steepening, he's referring to the longer end of the curve rising faster than the shorter end of the curve. And that can be you bullish or bearish depending on what's happening under the surface. You know, because interest rates can go higher because businesses are borrowing more money. There's more growth. There's more demand for money because of that growth.

[33:31] Chris: It can also be going higher because the government's borrowing more money. And it needs to borrow more money usually because it's kind of offsetting things that are happening in a recession. That is not what's happening right now. The government actually is... For the first time, this has been really happening since COVID. We're running these massive deficits and running counter-cyclical monetary policy during a time of growth rather than a time of recession.

[34:02] Chris: We've shipped into a new world at this point. And so interest rates are responding. Now, before I read this, keep in mind, this is coming from Bank Of America. This isn't like your crazy uncle saying this. This is Bank Of America's reaction to the Warsh press conference. The headline is a dovish and confusing hold.

[34:32] Chris: I'll just get to the punchline. They say a steeper curve, lower equities, and a weaker dollar is the typical price action associated with credibility shocks faced by EM, which stands for emerging markets, central banks. That's going back to that confidence thing. I think that the Treasury and the central bank has a real… critical time on their hands right here where they have to handle inflation properly.

[35:03] Chris: They have to handle these interest rates properly. And the credibility of the dollar at the end of the day is at stake based on what they end up doing. But I just thought that was a really, you know, that's a pretty roast. As the kids would say, they just got roasted. Right? I think they would say.

[35:28] Chris: Right Dan just smoked a noob there you go toasted yes yes toasted so pretty pretty strong words from from Bank Of America now one of the things that has been kind of pushing or keeping the the market doing well and and inflation going higher and and prices going higher is that wage growth has been growing.

[35:56] Chris: So largely those wages have kept up really since COVID, all the stimulus and such has really continued. And this from Jeff Winneger at Wisdom Tree, he says wage growth has outpaced existing home growth prices for several years. And so whether it's homes, whether it's just consumers, it's interesting that we see the consumer confidence so low. And yet that the spending really hasn't slowed down at all.

[36:26] Chris: And that's largely because the wages have been keeping pace with that inflation and actually outpacing that inflation, interestingly enough. So even though we aren't really adding new jobs per se, the folks that do still have jobs seem to be making enough to keep up with that inflation, which is interesting. Which...

[36:49] Dano: And yet... And yet, do people have jobs and are they even working if they have one is the question?

[36:56] Chris: Yes, that's a good question. Good question. Now, ones that do have jobs, interestingly enough, and I think that this is probably likely to continue as AI continues to be adopted. I think we're very early in those stages based on what we've learned through. Various sources that most companies, it's like 3% or 4% of companies and individuals have actually started implementing AI within their business, within their home life to increase efficiencies and stuff. So we're on the front end of this. And you can see that it's probably likely to continue the trend of estimated weekly work hours per. U. S. Man.

[37:48] Chris: So this is from 1850. As the technology has increased, it's given us more time for leisure. And you can see that back in 1850, the average work week was closer to 60 hours. And now, I think we're at 23 or so, based on where this is today. And so it's...

[38:14] Chris: Increasing in technology does this over time, it increases our standard of living, at least supposedly. I'm sure there's a lot of people that might argue there's certain aspects of life 100 years ago that might have been better. But I think in general, you would say you'd rather live now than 100 years ago based on all these productivity gains.

[38:42] Dano: And I do want to point out, if you're watching our live stream this morning, one, market has not closed for the week. We are going a little bit early, so our takes on the market this week are as of the time we are recording this, which is Friday morning the 7th. And second off, as you see the show in the live stream, this is a live show. So if you have questions for us, wherever you're watching, whether it's on Facebook or X, Twitter or YouTube, drop a question and we will do our best to answer it live on the show.

[39:12] Chris: All right, so we've got incomes are higher, even though people are working less. And then you've got this from Torsten Slock at Apollo. The AI CapEx boom is building twice as fast as the housing boom. So, you know, the boom leading up to 2008. As a percentage of GDP, the residential investment you can see here in orange versus the hyperscaler CapEx, while it's not at the same levels as that residential investment, the residential investment was kind of more evenly split across those years leading up to 2008, while the CapEx boom is really ramping very, very quickly. And so it's going to be interesting to see.

[40:01] Chris: How this ends up playing out. Seems like politically it's getting more and more difficult to keep building these data centers at the level that we're building them and sourcing the energy that we need to source in order to fuel the data centers. And so does the technology advance at a pace that allows us to, you know, create these data centers in a smaller footprint?

[40:28] Chris: Use less of an energy drag on the existing system. There could be some breakthroughs there coming, hopefully soon, that might impact this. But the CapEx boom is building quickly, which has taken us away from the recession fears. This is the, it's a busy chart, a lot of colors going on here, but this is from Jeff Weniger.

[40:57] Chris: At the top, he shows the yield curve inversion. That's what we talked about where short-term interest rates get higher than long-term interest rates. Historically, that led to recessions. That was the bond market or the fixed income market saying, hey, something's not working correctly here and you can expect a recession pretty soon. Famously, this time it didn't happen officially.

[41:24] Chris: But if you see the corresponding... Red, which is when the yield curve inverted at the top. And then on the bottom, you see the sell-offs in the stock markets corresponding to those times. Jeff Weniger says stocks go down the most when the two-year Treasury yields are above the 30-year treasuries.

[41:49] Chris: But the yield curve hasn't been inverted since 2024. Yes, the long bond is at 5.26, and I don't like it any more than you, but the bond market thing that freaks stocks out is not any given yield, but the yield curve itself. The crash some are waiting for already happened in 2022, and that's kind of what we've said, too. Like, look, they didn't call it a recession officially. But if you look at the reaction to stocks, bonds.

[42:23] Chris: The contractions in GDP, I think you could argue that pretty, I think you could argue it convincingly. So where are we today? Oops, sorry, went too fast there. There we go. Here's the yield curve today. We have a spread between the three-month Treasury and the 10-year Treasury, which is the kind of famous one from the study where they initially called out.

[42:52] Chris: This as a recession indicator where it's 74 basis points. We've got a pretty nice spread there. You can see the other shaded areas here are the times where there was a recession, which typically happened kind of right after that inversion happened. And that we come out of those recessions typically when the yield curve is un-inverting. So that line is going upwards, which is where we're at today.

[43:19] Chris: So you can really imagine a shaded line there in 22, pretty, pretty easily. That would, that would make a lot of sense. And, the AI, you know, explosion that happened in late 23, really kind of pulled us out of that, in my opinion. So, and, and interest rates are reflecting that. And, so here, here's where, Darren was talking about on the jobs reports. You know, maybe people aren't losing their jobs, but we're not really hiring folks as much anymore. So, you know, speaking just anecdotally from our own experience, we've spent a lot of time in company energy, implementing AI. And I wouldn't say that it has cut down on the amount of work that we've had to do.

[44:13] Chris: If anything, I feel like it's probably allowed us to do more work than we were doing before. However, simple things like note takers is a massive impact for us because instead of having, you know, two people in a meeting to take notes, one of them taking notes and action items, that has been taken care of by AI as an example. So there's not the need to hire someone else to take that on. So I think companies as they implement this are probably going to be experiencing the same thing where maybe you're not letting people go. But you also probably have less of a need to be adding new folks than you might have in the past. And that's largely what we're seeing in the job numbers here.

[44:58] Chris: Now, where will interest rates go? I think you want to take a look at gold. Keep an eye on gold. Remember that gold is money. It's been historically looked at by humans in every stage of history as money, and it will be long after where the U. S. Is no longer a thing. You can kind of think of gold as your...

[45:27] Chris: The buoy in the storm to tell you what is happening with the money supply, what is happening with liquidity. And we saw that that was heading way up. And really, since COVID, it's been on a steady March higher. And then we saw the sell-off right around when the war started, but I think more importantly, when Warsh was appointed to the Fed. And that, to me, was the market saying, hey, Warsh is going to be a hawk. He's going to come in and tighten. He's going to really fight this inflation. He's been talking big about shrinking the balance sheet at the Fed since the last 20 years.

[46:09] Chris: And now that he is at the Fed, maybe the market's saying, maybe he's not going to be quite as hawkish as he said he was going to be. Maybe we're going to get more of the same that we were getting before. And that the response of the authorities is going to be likely what it's always been in the past, which is just, you know, when you're in a ton of debt, you have to inflate it away. That's the least painful of all the options available.

[46:39] Chris: And many government before us, many government after us has done that. So that, to me, is likely the most likely path.

[46:53] Dano: I want to give a shout out. We just dropped a new episode of our other podcast, our sister podcast, It's All Money, which is deep dives on financial topics and entrepreneurial stories. Myself and Darren talking about the RMD trap. So the idea that, you know, is it you want to pile it all in your 401k, right? Or is it a Roth? How do RMDs play into potentially down the road? A situation that you did not foresee.

[47:25] Dano: What are some of the traps that come from RMDs? So you can find that on this channel, our YouTube channel. If you're watching on YouTube, you can also find the audio on our Apple Podcasts and Spotify. And it's all linked up for you very easily at SonomaWealth. Com. Darren, any closing thoughts? Anything you want to say? Any parting market perspectives about the Yen and where the U. S. Market's headed?

[47:52] Chris: You know, just high level, I think that, like I've said many, many times on this show, is that they can't afford to not keep this thing going. And I would expect all kinds of different techniques and tactics to be implemented, right? And it does not make sense to bet against a market that has to continue going up. Otherwise, the wheels come off the bus and no politician's going to.

[48:23] Chris: Be excited for the wheels to come off the bus in their time in office. So I think you'll, you know, things can, I guess, get bad, but only so bad before, as long as we retain a sense of ability to manage the economy. And I think the last couple of weeks is a perfect example of that, where, you know, things look dire all of a sudden, and then, oh, market hits an all-time high this week.

[48:49] Chris: So I think it always bets. It generally plays out better for long-term investors to bet that the market's going to go up and to the right. I would say that's generally been true in history and might not be true in the future. But, you know, as Mark Twain says, history tends to rhyme.

[49:12] Dano: Chris, you survived this week. Both Darren and I kind of sick, so I hope you don't catch what we have. And thank you so much for checking out. You can laugh at that, Chris. Thank you so much for checking out our show. We appreciate our clients always seeking further education. We appreciate our prospective clients, new friends. If this is your first time watching On The Markets, make sure you subscribe wherever you are, whether it's on YouTube or Spotify or podcast or Apple Podcasts. You can catch for future episodes by doing that.

[49:47] Dano: Also on those channels, you can find our other podcast, It's All Money. We will see you next week On The Markets.

[49:54] Chris: You're up to date with Fermata On The Markets. Learn about how the Fermata Advisors family of brands can help your family and business in finance. Sonoma Wealth Advisors, a comprehensive, holistic finance solution offering financial planning, asset management, and tax planning. Take our free wealth analysis now at SonomaWealth. Com. Fermata 401k, business retirement solutions for small and large companies with a fiduciary commitment. Learn more at fermata401k.com. Fermata Tax, personalized tax services for yourself, your family, or your business with an emphasis on efficiency. Find out how at fermatatax.com.

[50:39] Chris: If you haven't already, like and subscribe to Fermata On The Markets on YouTube, Spotify, and Apple Podcasts. Fermata On The Markets features human hosts, editors, and voiceover talent. Music by Dr. Delight on Soundstripe, voiceover by Joan Eloway Nash. Thank you for listening to the very end. We appreciate diligent viewers and listeners. Fermata Advisors, LLC is registered as an investment advisor with the SEC and only transacts business in states where it is properly registered or is excluded or exempt from registration requirements. This content was produced by Fermata Advisors, LLC, DBA Sonoma Wealth Advisors, Thank you.

[51:21] Chris: DBA Fermata 401K, DBA Fermata Tax, the opinions expressed by Fermata Advisors LLC on this show are their own. Information presented on this program is believed to be factual and up to date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. Discussions and answers to questions do not involve the rendering of personalized investment advice, but are limited to the dissemination of general information. A professional advisor should be consulted before implementing any of the options presented.

[51:56] Chris: Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Information expressed does not take into account your specific situation or objectives. And is not intended as recommendations appropriate for any individual. Viewers and listeners are encouraged to seek advice from a qualified tax, legal, or investment advisor to determine whether any information presented may be suitable for their specific situation. Past performance is not indicative of future performance.