Review Your Cash

DANO WEIR: It's Friday, September 26th, 2025, and you are about to go On The Markets. Today, we're asking the question, is it time to review your cash? If you're sitting on cash, you've had cash in a money market, you've had cash in short-term treasuries, you've had cash that's been making pretty good interest rates.

DANO WEIR: Let's just leave it. It's cruising. It's 3%, 4%, 5%. It's easy. It's easy. Or is it changing? Is it time to review it? That and more after this.

CHRIS SIPES CFP®: The stock market. The economy.

CHRIS SIPES CFP®: Your money. What's the latest and what could be next?

CHRIS SIPES CFP®: Find out now with Fermata On The Markets. Straightforward financial market updates for the brands of Fermata Advisors. Sonoma Wealth Advisors. Fermata 401k. Fermata Tax and Fermata Insurance. On The Markets starts now.

DANO WEIR: He is my co-host today, Chris Sipes, CFP, Managing Principal of Cinema Wealth Advisors and the Fermata family of brands. And Chris, I made a sweeping statement there at the beginning. Maybe not everybody's sitting on cash. I should say, if you're fortunate enough as an investor to be sitting on cash, it's been a pretty good time to have cash, hasn't it?

CHRIS SIPES CFP®: Yeah, you know, it has. And it's been... Abnormal because going back to really coming out of the great financial crisis in 2009, when the Fed lowered the short-term interest rates essentially to zero, and they were there for over a decade, people got really used to earning next to nothing in cash.

CHRIS SIPES CFP®: Then we got the inflation spike in 2021 and going into 22, the Fed responded by raising rates dramatically, very quickly and And, and suddenly people could get decent, returns, on things like money markets, which as you remember, Dan caused all the problems in the banks.

CHRIS SIPES CFP®: Remember when we had a couple of banks blow UP because everybody was just taking money out and, and putting them into money markets and such. And, and that caused all kinds of problems, but anyway, fast forward to where we're at today, where the Fed is likely starting a new easing cycle.

CHRIS SIPES CFP®: At least that's what the market expectation is. And so the Fed has a lot of influence over the short end of the curve, as we call it, which means the short term interest rates, which is what flows into the things like money markets, CDs, you know, your kind of traditional cash, cash alternatives, things that people use for safety, not necessarily growth.

CHRIS SIPES CFP®: And so. Today, we're talking about reviewing that strategy, given that the Fed is starting to lower those short-term rates.

DANO WEIR: So to be clear, when we talk about cash, it's cash in your checking account, which some people have. There are those instruments like a money market or like a short-term treasury where, or depending on, you know, the various custodians will have what's equivalent of a mutual fund, basically, but they call it a money market.

DANO WEIR: With a seven day yield, we consider we're kind of considering those cash things that are very liquid and recently have been paying you a good interest rate can never truly know, can never truly know.

DANO WEIR: But a lot of things are indicating that that interest rate environment is shifting, a decreasing environment. And so asking the question, should you be reviewing it right now, at least to look and say, what do I want to do? Correct?

CHRIS SIPES CFP®: Correct. And if you're getting ready to turn the video off and you're saying to yourself, well, gosh, should I? Well, you know, if you've got a targeted thing that you're saving for, you probably need to just leave it, right? So if you're going to be purchasing a home in the next year, year and a half, and you say, I need X amount for my down payment.

CHRIS SIPES CFP®: I can't take any risk with it. I need to just, you know, get the best rate that I can on safe money, but I don't want to risk principle. Okay. Look, there's not much you can do to get around that. And same thing with things like emergency funds. You know, you don't want to be taking you don't want to be taking risk with emergency funds.

CHRIS SIPES CFP®: And so, you know, the money that you've got there for a cushion also might be subject to this. But if you're someone that is sitting on excess cash going, I don't really want to take any risk with it because, you know, a couple of years ago they were earning. You know, 5% annually. And they say, I'm good with 5%.

CHRIS SIPES CFP®: Well, now those rates are creeping down currently under four and probably heading south of that. And so that's what we're talking about is kind of that excess cash that people were saying, I don't really want to take any risk because I'm okay with. Call it 5% in the past or whatever it might have been. That's what's changing.

DANO WEIR: Chris, our other podcast, It's All Money, you were on one of our early episodes. I think it was our fourth episode. And the headline was, should I put everything in a 5% money market? That was one of our most viewed episodes because that concept sounds really good to a lot of people.

DANO WEIR: Why wouldn't you? Especially, like you're sitting there in your online account, if you have an online bank and you're like, If I leave it in this account, it makes zero. And if I put it in this account, it makes money. Golly, I wonder which one I'm going to put it in. So that's kind of what we're talking about today.

DANO WEIR: It is myself, Dano. We're the marketing director, the host, and Chris is joining me today. Daren Blonski on assignment will return next week. So let's start off in meme land. I love this one because I love the show. It's always sunny in Philadelphia. Very funny.

CHRIS SIPES CFP®: Classic memes. There's probably the top 10 memes of this generation, and this one is in it for sure. It's been used so many times, but we're using it this week because there was the announcement from NVIDIA that they were going to be putting $100 billion into OpenAI.

CHRIS SIPES CFP®: I guess the thought there is that OpenAI can buy more chips from NVIDIA.

CHRIS SIPES CFP®: It's kind of interesting. And then you've got Oracle also investing in OpenAI. Now, listen, as far as I know, OpenAI has got around like $13 billion in revenue. So obviously people are expecting a massive, massive jump in growth when this thing monetizes someday. But, you know, if I'm going to sell you a coffee shop, Dano. And that coffee shop makes 13 billion and I want you to invest 400 billion in it.

CHRIS SIPES CFP®: You're probably not down for that. You shouldn't be.

CHRIS SIPES CFP®: You shouldn't be. So there's an expected return here. And I think that we're getting to the part of the story, the narrative where things are shifting in AI where it's like it's no longer just these companies are coming UP with their own advances and they're largely paying for that out of cashflow.

CHRIS SIPES CFP®: We're going to talk about that this week, where now they're starting to borrow money. They're starting to borrow money and that money is starting to be invested in one another. So it's sort of like, hey, I'm going to invest a hundred billion into your coffee shop so that you turn around and buy a bunch of coffee from me. Right. So it's, I don't know.

DANO WEIR: And that's not called a bribe. That's not called a bribe, right? That's an investment. Okay, gotcha.

CHRIS SIPES CFP®: Yeah. So our investing quote of the week comes from Jim Simons at the Millennium Fund or Medallion. Sorry, I think it was Medallion or Millennium. I don't know why the planets orbit the sun. That doesn't mean I can't predict them. And he was famous for his hedge fund. Did so well, quantitative only, you know, they, they only, it wasn't like they were looking at fundamentals on accounts.

CHRIS SIPES CFP®: They were, high frequency trading and he was a mathematician, became trader. And, they, they got so successful that they literally won't even take your money. They gave, gave money back to people, and they wouldn't accept new money because they were like, nope, we're full, no more.

CHRIS SIPES CFP®: Also something to consider, you know, for investors. So, sometimes when, when people come to me and they say, Hey, I've got this private investment, it sounds amazing. And they just came to me with it.

CHRIS SIPES CFP®: And I sometimes ask, okay, well ask yourself, you know, are you the first person to see this or has it already been, or, you know, other have others already seen it? Because the thing is about super successful investors like Jim Simons. A lot of times they won't even take your money. So buyer beware.

DANO WEIR: It was the Medallion fund, by the way.

CHRIS SIPES CFP®: Medallion. Yes. Thank you. Sorry. Late, late on Fridays. I, sometimes the old brain is in fire in the way she used to.

DANO WEIR: I might've had a Wikipedia assist there.

CHRIS SIPES CFP®: So maybe, maybe. Yeah. Yeah. So, but I think that quote, you know, sums things UP well when you, when nobody can know exactly what's going to happen and nobody. Knows exactly why things do happen, but you can sort of predict where, where things are going, you know, loosely.

CHRIS SIPES CFP®: And that's what we try to do here is, is try to understand what the current conditions are, what that's likely to lead to in the, in the coming conditions. And one of the things that we look at is the investor sentiment. This week we've got the AA. I sentiment bullish about exactly the same as it was last week. The bearishness has dropped down a bit. So we're at 41.7 bullishness and 39.2 bearish.

CHRIS SIPES CFP®: So the CNN fear and greed index at 52, which is neutral down a week ago from 62, which was greed and Bitcoin experiencing a little bit of a sell-off this week is now at 28 fear so we're getting we're getting into the Not quite into the, I think they call it extreme fear on that gauge where you might go, okay, here we go.

DANO WEIR: 109 for Bitcoin.

CHRIS SIPES CFP®: Yeah, we've got a little sell-off in Bitcoin. So we're at fear versus neutral at 53 last week. Again, Bitcoin tends to be the front end of the risk curve. And so that's why we track it to know sometimes it moves ahead of other risk assets, especially. Large cap tech. So it'll be interesting to see if we get a follow on there.

DANO WEIR: So revisiting the slide on a second Bitcoin, Bitcoin down 5% this past week, and Daren is out for this episode. Coincidence, you know, I mean, did I think he he didn't want to hear the music, you know, he's too many victory laps, taking a break from his victory laps.

CHRIS SIPES CFP®: Careful. Now we're going to get teams messages. Rapid fire here in a minute.

DANO WEIR: I am driving and listening to the show. You need to stop.

CHRIS SIPES CFP®: Yeah, here it is.

DANO WEIR: We love it. We love it. We love you, Daren.

CHRIS SIPES CFP®: So revisiting our conditions slide from Mike Filabric at Resolve last week, where we show the different conditions and how different asset classes can perform based on the economic environment that you're in. And so half the time, it's difficult to tell where you're at.

CHRIS SIPES CFP®: But if we had to guess right now, if we look at the zone where gold is doing the best, where commodities are doing well, bonds are doing well, and equities, everything is positive to different extents, but gold is doing the best. I think you would have to say we're falling into the inflationary boom area of this chart. Okay. Because gold, while us equities have done well. Nowhere near as well as gold this year.

CHRIS SIPES CFP®: While bonds have done well, nowhere near as well as, as gold, the one area where that may not have fully happened yet is the commodity space. You know, we've looked at things like oil and, and, and even copper. There's, there's been several of the commodities we've looked at where you just really, it's, it's not been, it's not been. So that would be the only.

CHRIS SIPES CFP®: Thing where you say, ah, maybe, maybe not, but otherwise it seems like the inflationary boom. Now also given that the Fed has started to lower rates and yet we are seeing rates going UP from the market, that would also tell me the market's expecting more inflation.

CHRIS SIPES CFP®: And so I, I kind of lean towards that top right box here of an inflationary boom that But the powers that be are going to run it hot and try to outpace the debt, especially in the United States, through inflation and nominal growth. So we'll see if that ends UP being the case. Who knows? But that would be the best guess for today. Now, if we look at the other area where gold tends to do well and tends to outperform the other.

CHRIS SIPES CFP®: The other asset classes, that would have to be inflationary stagnation, in which case, bonds tend to do horrible.

CHRIS SIPES CFP®: And so do equities tend to struggle in that environment. So we're not seeing that at least this year. If you look at deflationary bust, that's something more akin to the great financial crisis. Now, bonds do great in that type of scenario but equities just get destroyed in that type of environment.

CHRIS SIPES CFP®: And we definitely have not seen that this year. So process of elimination here, it seems like that top right corner, and it never fits fully in the box, guys. It's going to be a moving target. It's in a spectrum. There's more art than science here. But I would say we're tilted towards that top right box.

DANO WEIR: So potentially even more inflation, which might be one of the first things to consider when we're talking about review your cash.

CHRIS SIPES CFP®: Correct. Correct.

CHRIS SIPES CFP®: Now this year in the S&P, and this is from Ryan Dietrich, we talk about this a lot, how, look, there's average returns and people love to talk about average returns in especially stocks as an asset class. However, this year being another year like that, you hardly ever get average returns.

CHRIS SIPES CFP®: So Ryan Dietrich says here, when the S&P 500 is higher for the year, big gains are perfectly normal. Now he doesn't put in also the returns when they're down are usually pretty big too, which you see here when the S&P is lower that it looks like the average is 13.9 down by 13.9.

CHRIS SIPES CFP®: But when it's UP, it's UP about 19. So the variation is very large whenever you're in one asset class exclusively. And so this year has been sort of a normal year in that standpoint where typically when you're having a good year, you're having a very good year.

CHRIS SIPES CFP®: Hardly ever see the average.

DANO WEIR: And you managed to sneak in a slide that starts in 1928, Chris.

CHRIS SIPES CFP®: That's right. That's right.

CHRIS SIPES CFP®: So we got the core PCE this week and that came in as expected. And so the market rallied today. That news came out today. Now, why is the core PCE important? Because supposedly that's one of the main inputs for the Fed, and they track that closely for whether or not they are going to lower rates.

CHRIS SIPES CFP®: So I guess the logic there is it comes in as expected. The Fed can still lower rates. If it comes in above expectations, the Fed's got to pump the brakes and not lower those rates. Now you can see the overlay of the CPI, the consumer price index here year over year, kind of tracking along with that. The core PCE is a less noisy version.

CHRIS SIPES CFP®: However, when it's not moving a lot, like currently, these tend to move kind of in lockstep. And so I think what you'll notice here though, is the downward trend that we saw, call it mid 2022 coming into 23. Has ended. So we are at best kind of in a sideways trend here when it comes to inflation.

CHRIS SIPES CFP®: And so to your point, Dan, this is where, okay, not only are the short-term rates lowering for those with cash, but also you've got inflation sticky, right? We've got close to 3% inflation year over year, and that is going to be eating at your buying power. So we talk about this a lot where there is no such thing as a risk, risk less asset.

CHRIS SIPES CFP®: Every asset class has risk. Sometimes it's apparent and sometimes it's not. Cash is one where it's really tricky because it doesn't feel risky because the principle doesn't change. However, it, it is risky when you look at it on a buying power basis. And especially over a long period of time, that, that can be. An issue.

DANO WEIR: Now I want to stop on that point for a second, because that was something before I worked in the business. And then now in the business, that point right there, the risk of cash was something I could not wrap my brain around because I had not lived long enough. So you have this really simple structure in your brain from when you're a kid.

DANO WEIR: You make money however you make money, mowing lawns or, you know, baby teeth or whatever. You go to the bank. You go to the bank. The bank is safe. You give them the bank. The number shows UP in your account. Boom, there's my number. If I want to get that bigger, I have to make more money and build that number UP.

DANO WEIR: And that's the way that it works. And it's safe in there, right? So that's like the reptilian brain understanding of, like, your cash. But the reality is over time. I've lived long enough to see the in and out double double meal go from literally five dollars flat to over 10 now and not that long and not that long.

DANO WEIR: And if you kept that cash in the bank, you're getting fewer double doubles, which is clearly the financial goal of most people. So that's right. That's a joke. So but my point is, is inflation is real. Price changes are real. And just sitting there and being like it's going to be safe in cash. You have to play their game.

CHRIS SIPES CFP®: Yeah. Yeah. And in some ways the, the COVID inflation was a gift for those that wanted to get educated on inflation because the tricky thing when it's 3%, when it's 2%, when it's one and a half percent, like it's so it's, it's less noticeable, right? Covid, you know, coming out of that, it was so noticeable that everybody got angry about it.

CHRIS SIPES CFP®: Right. Because you're like, Oh, I can't buy a car. I can't go to the grocery store. I can't buy a house. Every, everything is so much more expensive. And so you immediately understand, you know, oh, this is how inflation works when it's a little bit at a time, right? That's where it's less noticeable, right? It's boiling the frog.

CHRIS SIPES CFP®: And, so, back to, back to the train of thought here, what's the market telling us? What's the market telling us? Well, it's only been, you know, since the 17th. So we've only had like a little over a week, but look what has happened to short and long-term interest rates since the Fed cut a quarter percent on the 17th.

CHRIS SIPES CFP®: You've got all the interest rates and these interest rates are set by the market, meaning investors all over the world, you know, setting the price through supply and demand. And the market is saying, hey, we're not lowering rates right now.

CHRIS SIPES CFP®: And that could be for a myriad of reasons. A lot of times you see rates going UP because growth expectations are going UP. So that could be it. But it could also be inflation expectations. And in order to understand this, think of yourself as a bondholder. So think of someone that is going to buy a bond.

CHRIS SIPES CFP®: You want to get a rate of return. Big part of that rate of return is you're going to have to say, I need to earn more than inflation in order for me to put my money at risk. And so when you're buying a 10-year, when you're buying a 30-year, I mean, that's a really long projection. But that's what these buyers are doing is looking at, hey, I need to have some cushion to make sure that I can exceed inflation.

CHRIS SIPES CFP®: And so if investors are saying, okay, maybe inflation's going UP. They're going to require a higher rate of return in order to, to make those investments. So it could be too easy to tell or too early to tell this could be just noise, but at least so far across the curve, interest rates have gone UP despite the fact that the Fed has started to lower rates.

CHRIS SIPES CFP®: So again, going back to the point of this, your, your, your cash your your your money market rates, et cetera, going down because the super short term rates are going down. However, the rest of the world is expecting a higher inflation rate out there. And so those rates are going UP. Hopefully that makes sense, Dan.

DANO WEIR: I think it does. And it gets a perfect example of the market is the market. The market is a beast unto itself. And the Fed can do a lot. The president can do a lot. But they aren't actually in control of it.

CHRIS SIPES CFP®: Correct. Correct. And so how did those, how did those higher interest rates on things like treasuries flow through to the rest of the real world? Well, here's a perfect example with 30 year mortgages. Also since the 17th, you can see that those have gone UP by 0.64%.

CHRIS SIPES CFP®: And if you say yourself, ah, it's not that much. Well, yeah, based on a, based on a 30 year rate of maybe call it six. 6.3, somewhere in there. 0.64, that's a big move relative to that mortgage rate. So this is where it will come into, how does it flow through to the real world?

DANO WEIR: Yeah. And for people who've been sitting there, they bought at seven or some ungodly number nine, they've been dying for this rate cut and then here it comes and then to see it go UP. You know, that's one of the reasons why we preach, you know, making sure whatever you get into, whether it's real estate or whether it's investment or whatever, making sure that you can keep your head above water no matter what.

DANO WEIR: Because if you sit there and plan your life, hinge your life on something happening with the federal government, Chris, I'm going to tell you something. You're going to be sorely disappointed many times.

DANO WEIR: I try not to need the Fed or the federal government to do much for me.

CHRIS SIPES CFP®: Yeah. Yeah.

CHRIS SIPES CFP®: I don't know if you're able to remove our little logo there, Dan, just temporarily. So people, if they look at this, they can see the key takeaways. Okay. So we've got inflation erodes purchasing power.

CHRIS SIPES CFP®: So going back to the concept of this over time, this is the erosion from 1983. So you know if if you put 10 bucks in the bank and just let it sit there since 1983 That's worth about three bucks in terms of purchasing power today. So again, there's risk everywhere.

CHRIS SIPES CFP®: You cannot ever look at any type of investment and say it's no risk. There is a risk. You just need to know what it is, right? And you need to know balancing those risks.

CHRIS SIPES CFP®: Because even cash has a risk and its risk is losing purchasing power over time. Hence the need to, to take, to take risk in order to try to keep UP with inflation. Now we've got that combined with the fact that, money market funds are at an all-time high.

CHRIS SIPES CFP®: There's over 7 trillion in money market funds, in the U S and so there's a sizable amount. And for good reason, like we talked about, I don't remember exactly what date you said that was when, when it was 5%. But that's not that long ago.

CHRIS SIPES CFP®: But in terms of the Fed changes, that is accumulating. And so now we've got the Fed funds rate at, let's see, between four and four and a quarter. That's their target rate. And they're expected to drop again two more times this year for a total of another half a percent. So then we'd be down in the, three and a half to 3.75.

CHRIS SIPES CFP®: So that's going to have an effect on these, on these, on these, on these rates. So again, if you, if you don't need it for an, for an emergency fund, if you don't need it for some specific purchase, coming UP, if you don't have debt to pay off, that's another one, you know, we're, we're not keen on people carrying, any type of consumer debt.

CHRIS SIPES CFP®: And and, you know, investing at the same time, that doesn't make sense, right? You got, you got money leaking out one, one pocket while you're trying to stuff it into the other. It's probably going to be leaking out way faster in that, in that debt, out of that debt pocket.

CHRIS SIPES CFP®: So, but outside of those reasons, look, it's, you got to think about, you got to think about getting invested in risk assets to, to keep UP with, with that inflation over time. I think Buffett has some sort of saying that's like, there's not much you can bank on in life, but he says, you know, death, taxes. And I think he said the third one was governments will inflate. That's for sure.

DANO WEIR: That's for sure. So let's, I was thinking about it at the end, but just in case people are with us so far, when you're saying review your cash, we're saying that this episode, we're giving some of the reasons why. What would the functional next steps be for one of our clients or an investor?

DANO WEIR: Sit down with your advisor and look at the cash and then see, do some planning around, hey, I want to buy X, Y, and Z. I need to pay off these things, whatever's left over. How badly do I need liquidity in it? And should I put it in something else like mutual fund, bonds, et cetera? Is that what you're saying?

CHRIS SIPES CFP®: Yes. Yeah, I think that would be smart. So at least look at it yourself. Right. And if you can eyeball it and you're like, yeah, that makes sense.

CHRIS SIPES CFP®: That's my that's my three to six months or however long that I've got for my emergency fund. That's roughly right. And or or, you know, I need X amount of dollars for for my down payment on the house next year. So, yeah, that looks good.

CHRIS SIPES CFP®: But if you're like, man, I parked it there because I was just so afraid of, you know, this, that or the other thing. And I just I thought. I'm too afraid to put the money into anything else, but I can get, you know, formerly 5% in a money market. I'll just park it there. That's good enough. I'm cool with that.

CHRIS SIPES CFP®: That is the situation that you should go. I need to get with my advisor, see what the other options are, look at the pros and cons, and see if we should make some changes.

CHRIS SIPES CFP®: Okay. So I think this slide got a little stretched. It looks like, maybe we kind of cut off the top of it. Apologies there, but this is the top 50, versus the bottom 50, sorry, bottom four 50 of the S and P 500. And this is from jury and Temer. I'm not sure what I did to the slide, sizing there. As I was mentioning to you, Dan, I've been having a lot of scaling issues lately with Microsoft.

CHRIS SIPES CFP®: But anyway, Jury Intimerate Fidelity, he's showing the top 50 versus the bottom 50. And he says, it's worth remembering that while the top heavy concentration during the late 90s was quickly reversed in the early 2000s, during the 1950s and 1960s, The market remained top heavy for many years before excessive valuations finally took their toll.

CHRIS SIPES CFP®: This could take some time. And that's what we've talked about in the past where, hey, you know, you've got these valuation metrics, you've got this concentration metrics, all of these things, you know, increase the risk of the S&P on the surface, and you can't use it as a timing tool, right?

CHRIS SIPES CFP®: You can't, you can't expect to use it as a timing tool. And here, this chart. You know, shows that because really for most of the, fifties and sixties, the S and P was also highly concentrated. Then at the end of the sixties, the valuations got to a point where the nifty 50 just made no sense anymore.

CHRIS SIPES CFP®: In terms of, in terms of forward looking returns. And so that changed, over the, the, the period in the seventies. So you can see where elevated relative to history in terms of the concentration. However, Like Jurian says, this could go on for a while. We don't, we don't know for sure.

DANO WEIR: So this graph is showing what percentage of the market is the top 50 companies and what percentage is the bottom 450. Is that what I'm looking at?

CHRIS SIPES CFP®: That's, that's right. That's right. So now, you know, the top 50 is 63% versus the bottom 450 companies in the S&P would be 37% of the S&P.

DANO WEIR: Okay. Okay.

DANO WEIR: There we go.

CHRIS SIPES CFP®: Next okay so like we mentioned the beginning of the video things are changing kind of in the AI world with the introduction of debt to to the to the story and this is from Mike sicardi or i guess it's jp morgan but by way of Mike sicardi just talking about the debt to equity ratios. So the amount of debt the company has versus its equity, just like it says, of direct AI stocks.

CHRIS SIPES CFP®: Now this is, this is a number that changes, right? But you look at Oracle, it's got roughly five times, five times the debt, to its equity. So it's, you're getting some leverage in there. And even Apple, while it's not quite a two, like it was in this, in this chart. I think as of today, it's about 1.5. You know, it's not as bootstrapped.

CHRIS SIPES CFP®: Now, on the plus side, look at companies like NVIDIA, Google, Palantir, some of the real like, you know, stocks that have ramped, those have very low debt to equity ratios. So, so that's, that's on the plus side, right? But, but debt leverage is one of those things that can that can increase returns, but it can also increase losses.

CHRIS SIPES CFP®: So it amplifies, it amplifies whatever's happening. And usually most financially related issues are somehow related to excess debt in one way or another. So it's something to keep an eye on. I don't think maybe anything to panic about at this point, you know, but, but definitely something to keep an eye on as we flow through this narrative, you know. Cycle with the AI stocks.

DANO WEIR: So of all the players right now, this is who's gambling the most.

CHRIS SIPES CFP®: This is just who's using other people's money the most.

DANO WEIR: And that's what I mean. That's what I mean. They're on the hook. They're on the hook to somebody else.

CHRIS SIPES CFP®: Yeah. Yeah, exactly. Exactly.

CHRIS SIPES CFP®: So small cap earnings yet to recover. I thought this was really interesting. And this clearly explains why, you know, small caps have struggled because we've.

CHRIS SIPES CFP®: We've pointed that out here recently they've been doing great hit a long an all-time high recently that would also go you know for our thesis around the inflationary boom time small caps tend to to benefit during boom times and so we've seen an upturn in those those earnings of small caps however look look at the the drop off that we saw in 22 of those small cap earnings versus the large cap.

CHRIS SIPES CFP®: And that's why the large caps have outperformed so well, you know, because over time it's, it's earnings that matter. It's earnings. That's what, you know, the market follows, in anticipation of earnings. And I thought this was really interesting. This only goes back to 2000.

CHRIS SIPES CFP®: So it's only 25 years, but I would love to know the other times in history where these two earnings, drawdowns have separated as much as they did during this cycle, since the 2021 cycle. We talked a lot about how really 2022, I'm surprised they never called a recession because most asset markets got destroyed in 2022 and 23.

CHRIS SIPES CFP®: And there was just a few companies in the S&P that really held everything UP. And that's very clearly... Shown here. And it looks fairly abnormal, at least for this time period. I wonder if you could go back further what that would look like.

CHRIS SIPES CFP®: All right. So this is from Kevin Gordon at Schwab. Kind of a lot going on on this chart. But what you're looking at here is the white line being the Fed funds rate. Okay. And then the blue line is the, forward earnings, on the S&P, the forward price to earnings ratio.

CHRIS SIPES CFP®: And what Kevin says here is the S&P 500'S forward price to earnings is at the same level today as it was in January of 2021. Today, the effective funds rate is 4.09. In January 2021, it was 0.09. So I clearly remember at that time, Dan, that stocks were so highly priced.

CHRIS SIPES CFP®: And one of the narratives for the reason why they were so highly priced was because interest rates were so low. Therefore, there was such a small discount rate in the market that it justified higher valuations. I clearly remember a lot of smart people saying that. And it makes sense. It's like, oh, yeah. If there's a lower discount rate, of course, stocks can be more expensive.

CHRIS SIPES CFP®: The expected return on stocks would be lower because there's no hurdle to get over. Now that narrative obviously doesn't make any sense. We've got interest rates much higher. Stocks still at the same valuation metric forward price to earnings. And so just another one of those things in the investing world is like, sure, that makes sense. And it probably applies sometimes. And then sometimes it doesn't.

DANO WEIR: Until we feel like it doesn't. And then it's like, well, not every time. Like, it's counterintuitive.

CHRIS SIPES CFP®: Yeah, yes. Yeah, exactly.

CHRIS SIPES CFP®: Now, but going back to Jim Simon's quote of like, hey, I don't know why the planets do what they do, but I can sort of predict where they're going.

CHRIS SIPES CFP®: We'll see. But with forward earnings, price to earnings ratios as high as they are today, historically, that said predictable that we're going to get lower earnings in stocks moving forward. So that would be the prediction around, hey, where are these asset classes going?

CHRIS SIPES CFP®: Where the planet's going? Don't know why they're at where they're at now or why they do what they do. But mean reversion would say valuations are high now and you should expect lower returns in stocks moving forward.

CHRIS SIPES CFP®: All right, so let's talk the asset classes.

CHRIS SIPES CFP®: No sign of trouble yet. When you look at the technicals in the S&P, we've got the 50-day simple moving average in gray, which is kind of a more sensitive trend line. And then we've got the 200-day. Simple moving average in green, and that is a less sensitive trend line. And you can see that the S&P is comfortably above both of those indicators. The trend is obviously UP, looks pretty strong as of today, no signs of weakness.

CHRIS SIPES CFP®: We've got really the same picture in foreign stocks, foreign developed as represented by the IFA index here.

CHRIS SIPES CFP®: Again, you know, comfortably above the 50 day moving average, we're in an uptrend in foreign stocks as well. Foreign stocks, again, doing, doing great this year so far, both on the developed and the emerging markets, emerging markets here.

CHRIS SIPES CFP®: Strength, uptrend in the 50 day moving average price price is comfortably above that 50 day moving average. So, stocks kind of globally right now, Dan looking pretty strong, no signs of weakness in the, in the technicals at this point.

CHRIS SIPES CFP®: So if you're just following price as the truth, you know, sunny skies, out there right now, no clouds on the horizon There we can see. All right. Now we take a look at some of the small cap stocks here as represented by the Russell 2000.

CHRIS SIPES CFP®: Again, looking strong. You'll see here, these are a lot more volatile than the large cap stocks. You can kind of tell that through how squiggly these squiggly lines are, and even how rapidly the changes happen in the 50-day and 200-day moving averages. But you've got the 50 day moving average moving, moving UP. We've got that golden cross back earlier in the year where the 50 day crossed the 200 day on the upside.

CHRIS SIPES CFP®: It looks like no signs of weakness there yet. And the small caps are having, catching UP, not quite to where the large caps as represented by the S&P are for the year, but gaining ground as the months go by. And, so, look, looking strong. Same thing with the mid caps. Again, you got the 50 day above the 200 days. So we're in an uptrend, not approaching that 50 day on a technical basis.

CHRIS SIPES CFP®: So mid caps is kind of the medium size us based companies also looking strong. So bonds, Sorry, let's see. We got the emerging markets there. Here's the bond market as represented by the ag. So this would be the U. S. Bond market that the aggregate bonds looking looking strong, you know, so bonds are are are having a positive year price wise for the first time. And what probably feels like an eternity to investors.

CHRIS SIPES CFP®: So. Not only are you getting that decent coupon from the interest rates moving UP over the last few years, but also with interest rates kind of staying at least flat and trending down over the last year, despite what they've done since the Fed started cutting. We've got we've got some fairly good momentum going in the bond market as well as meant as measured by the by the ag.

CHRIS SIPES CFP®: Now, if we take a look at Bitcoin as represented by iBit here, which is probably the most traded, I would guess, ETF on Bitcoin, a little bit of technical damage this week. Like we said, Dan, Bitcoin's price was hovering down 109.

CHRIS SIPES CFP®: So we've broken down under the 50-day moving average, you can see that the price has struggled to stay above that 50-day moving average here recently since call it the end of August going into September. And so a little bit of technical damage done there.

CHRIS SIPES CFP®: I don't think it's, you can't say that it's confirmed a downtrend yet because that 50-day moving average is still, you know, pretty parallel to the 200, maybe curling over a bit. But we don't have a downtrend, you know, confirmed or anything. And Bitcoin's very, very volatile. So, you know, we can, you can watch this on Monday and go, what were those guys talking about?

CHRIS SIPES CFP®: Right. They're way off.

DANO WEIR: Yeah.

CHRIS SIPES CFP®: But, but that's where we're at today. So a little technical damage there, gold, the, the, the classic Bitcoin, Bitcoin classic, having, having a, a heck of a year.

CHRIS SIPES CFP®: Again, when we look in that, that inflationary boom thesis, gosh, gold's got to be telling us something. It just feels like it goes UP every day. I mean, that's not true. Of course it goes down some, but man, a lot of strength out of gold this year.

CHRIS SIPES CFP®: Technically looking strong, if anything, technically it's kind of getting a ways away from its 50 day moving average, which usually when you get to see some space, you get some stretch, you get, the overbought conditions is what they call it, which sounds kind of funny, but it's kind of measuring the panic with which people are buying and that fervor can die off a bit.

CHRIS SIPES CFP®: And so I wouldn't be surprised to see a little pullback here in gold now that it's just been ripping higher through the month of September again.

DANO WEIR: But overall, I feel like we've said that three times this year.

CHRIS SIPES CFP®: Yeah.

DANO WEIR: I mean, we've just been like, okay, now. Okay, now. Okay, now. No, but now for real. And it's just like higher and higher and higher. And one of our earlier episodes of this show On The Markets earlier this year, Chris, you and I were talking about how gold has no PR machine behind it. And so it's just not one of those things that you see headlines about. Not that headlines dictate our investing.

DANO WEIR: But... It contributes to the vibes in the room. I spend a lot of time on news feeds, Chris, and some of my news feeds include financial information. I get nothing on gold. I mean, the average person is talking about crypto before they're talking about gold, and gold just continues to be on a tear. And so it's just, it's interesting.

DANO WEIR: It's just very interesting that one of the reasons I think that gold doesn't get a lot of headline run, which is that it seems like kind of hokey, Like, it's like, oh, you know, we all, we've all seen gold commercials. That exact reason, I think, is one of the reasons why it is on a run is because it's almost like a, you know, a base level, like very primitive, feel safer, you know? So it's kind of interesting.

CHRIS SIPES CFP®: Yeah, that's very true, Dan. I haven't looked at it recently, but earlier in the year, I think, or maybe late last year, despite the huge run in gold, there was actually negative flows. From the ETFs, meaning that people are taking money out of the ETFs, like the average person, that tends to be a good sign when something, when something is doing very well and nobody likes it, you're not hearing about it everywhere you go.

CHRIS SIPES CFP®: People aren't asking about it. Like you said, nobody, nobody's really paying any attention and the price is still going UP. That's, that's usually a good sign. I don't know what that looks like today.

CHRIS SIPES CFP®: I'm assuming that it's caught a little bit more attention than, than it was say a year ago, but you know, Mike's Mike's comments on the fact that central banks have been buying it as an alternative to treasuries, after the, the sanctioning of the, of the Russian assets and, and seizure of the Russian assets.

CHRIS SIPES CFP®: I think that that makes a lot of sense, but also, you know, if interest rates are telling a story around inflation as well, that could be another reason why people are. Preferring gold as another asset class outside their equities as an alternative. So gold's definitely having a moment this year.

DANO WEIR: So we thank you for checking out the show today. Darren will return next week. In summary, let's just review since the title of the episode is literally review.

DANO WEIR: So number of economic and monetary factors that are indicating interest rates that you've been getting on things like money market accounts may be shifting. Who really knows? You can never truly know until after the fact, but there's an environment where that could definitely be more possible than it has been previously recently.

DANO WEIR: So our suggestion is to at least review your cash. And Chris, for someone who is hearing that call right now, what should they do? Let's say that again. What should they do?

CHRIS SIPES CFP®: Well, look at it and say to yourself, do I need this money for emergency fund purposes, call it three to six months of your expenses, and or do I need this money for a specific purchase that I know I'm going to need to make in the next year, year and a half?

CHRIS SIPES CFP®: And if you look at that number and say no i have way more than that and i don't have any say high interest debt or, or, or, you know, consumer type debt to pay off, then I would reach out to your advisor and, and take a look at some other options so that you don't get, so you have less of a probability of getting eaten UP by inflation over, over the long run.

DANO WEIR: And if we are your advisor, we hope that's the case. You should know at this point how to get in touch with your advisor. SonomaWealth. Com is One way you can get to us if you're just totally slipping your mind, or you can call our front desk, but just call or email your advisor to get a conversation started.

DANO WEIR: If we're not your advisor, perhaps you're checking out the show for the first time today, or you've been watching us for a long time, and you're like, you know what, today's the day. Fine, I'm going to do it. Those two same methods.

DANO WEIR: You can call our front desk, 707-938-7414, or check out our website, SonomaWealth. Com, and you can learn about. Our holistic approach to finance. We are Sonoma Wealth Advisors and the Fermata family of brands. Thank you for checking out our show On The Markets. We love doing it. And Chris, thank you for a great show and we'll see you all next week.

CHRIS SIPES CFP®: 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.

CHRIS SIPES CFP®: 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.

CHRIS SIPES CFP®: Find out how at fermatatax.com. Fermata Insurance. Appropriate insurance is an important part of a financial plan. Find out what coverages you may be missing at fermatainsurance.com. If you haven't already, like and subscribe to Fermata On The Markets on YouTube, Spotify, and Apple Podcasts.

CHRIS SIPES CFP®: Fermata On The Markets features human hosts, editors, and voiceover talent. Music by Dr. Delight on Soundstripe, voiceover by Joan Alloway Nash. Thank you for listening to the very end. We appreciate diligent viewers and listeners.

CHRIS SIPES CFP®: 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, DBA Fermata 401K, DBA Fermata Tax, DBA Fermata Insurance.

CHRIS SIPES CFP®: 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.

CHRIS SIPES CFP®: 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. Information presented is for educational purposes only.

CHRIS SIPES CFP®: 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.

CHRIS SIPES CFP®: 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.