Powel's Giving Out Full Sized Candy Bars?!

DANO WEIR: Happy Halloween. It's Friday, October 31st. Literally right on the dot. We actually are doing the Halloween show on Halloween. The stars are aligning. My name is Dan Weir. I'll be joined shortly by our managing principals, Chris Sipes and Daren Blonski. And we are talking about the Fed President, Jerome Powell, giving out full-size candy bars.

DANO WEIR: Well, basically indicating this week that a big cut, or at least a cut of some manner, is coming very soon to the Fed rate. Also on this week's show, we're going to talk about inflation. You think it's high? Wait till you see healthcare. What baseball cards might be saying about every market right now, and what's Bitcoin doing in this environment. Let's start the show.

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DANO WEIR: Get them in here. They are your managing principals of Sonoma Wealth and the Fermata Advisors family of brands, Daren Blonski and Chris Sipes. Chris, are you going trick-or-treating tonight? Are you dressing up? What's happening at the Sipes House?

CHRIS SIPES CFP®: Yes, the kids are dressed up. We've got, let's see, Ghostbusters, Batman, Glenda the Witch, and Minnie Mouse, I think is what the little one is. Yeah. So should be, you know, so I get hit twice as hard because one, you know, I'm a health nut.

CHRIS SIPES CFP®: So, you know, the whole candy thing drives me crazy. And on top of that, my whole family's in the dental business. So it's like, this is a tough holiday. Halloween is a tough holiday for me.

DANO WEIR: Daren, did you make your kids dress up as a theorem?

DAREN BLONSKI CFP®: Sola and bitcoin is solana come on yeah sorry did i say sola whatever no they dressed up i don't think my daughter dressed up she just wore a halloween shirt my son had one of those blow-up costumes where it's like an alien holding the person or something like that and then my other son put on a dinosaur a blow-up dinosaur nice Nice. Have you guys seen those videos going around of people who put on those blow-up?

DAREN BLONSKI CFP®: The blow-up like dinosaur, blow-up alien, or blow-up whatever.

DANO WEIR: With the little arms and then they run around. Yeah.

DAREN BLONSKI CFP®: They run around. Yeah. People who squirt fart spray in the vent. Oh, okay. Whoa. It's the funniest thing ever. Oh, man. You see that person start going, whoa, whoa. They're convulsing because they're locked up in the suit. Oh my God. Wow. I'm in that junk. That's funny. Yes, I threatened my kids. If they didn't behave, then I would get them.

CHRIS SIPES CFP®: You know, we sat down and watched some retro Halloween movies with the kids. We did the Peanuts one, the Great Pumpkin.

DANO WEIR: Oh, yeah.

CHRIS SIPES CFP®: And refreshingly simple. It was just nice to sit there and relish in that simplicity. And then the Garfield one. Do you guys remember the Garfield? Halloween special from when we were kids. Did you guys ever watch that? Yeah. Yeah. We watched that. That was actually a little scarier than I remember it being when I was a kid and, it was good too. It was, it was excellent.

CHRIS SIPES CFP®: So highly recommend taking some time to, to watch those.

DANO WEIR: Chris, let's talk about today's theme. I was trying to connect what's happening in the market to something fun, Halloween.

DANO WEIR: What did Chairman Powell say this week and how do you see it affecting the market?

CHRIS SIPES CFP®: Well, we got the rate cut. This meme is actually from Anthony Pompliano who, you know, essentially his argument and a lot of other people's arguments is like, hey, don't fight the Fed. You know, you've got a even if this Fed chairman is not trying to pour gas on the fire, he's going to be gone in May.

CHRIS SIPES CFP®: And it's widely expected the administration is going to replace him with somebody that's ready and willing to throw gas on the fire. And so the Markets are sort of like, you know, even if Powell is kind of holding the line right now, because even though they lowered the rate by a quarter percent, the take from the meeting was that he basically said, look, December is not a lock, which it was previously considered a lock.

CHRIS SIPES CFP®: Uh... For another quarter percent. And he said, you know, we don't, the data's foggy. We're not getting, you know, information from the government right now being shut down. Inflation's higher than we expected. There's a lot of moving targets, you know, and so the market really didn't like that. We got a big sell off, the rates went up.

CHRIS SIPES CFP®: And as we'll see, you know, a little bit later, the rate expectations changed. And so Powell was not all that dovish in this last meeting.

CHRIS SIPES CFP®: But I think the market is looking past that and saying, hey, he's going to be gone in the spring and we're going to get a very accommodative Fed slash government that wants to run it hot. And so don't fight the Fed.

DANO WEIR: Okay, perfect. Well, the one thing that's been holding us all back is that they just need to print more money, right? That's going to be the solution then. That'll send all the stocks higher and we all win, right?

CHRIS SIPES CFP®: That's usually the solution. I like this meme, the Batman slapping Robin and Robin saying everything's getting so expensive. Batman said because the money is worth less. Right.

CHRIS SIPES CFP®: And that's that's kind of the deceptive part of, you know, when the Markets are going up due to devaluation and such is like, yeah, things are elevating in prices, including assets. But that's because the the dollar is losing value because the money is losing value.

CHRIS SIPES CFP®: So this one doesn't really have anything to do with the presentation other than who would have thunk it. I had to look at this. This is from Meb Faber saying that, of course, everybody knows NVIDIA is the top performer and the probably most important equity in the Markets globally today.

CHRIS SIPES CFP®: But would you guys have guessed that Dillard's, yes, the Dillard's youth are thinking of Dillard's has performed just as well over the last five years as NVIDIA.

DANO WEIR: Absolutely not. And I've seen other ones like this, like I think build a bearers way, way up. Like you do, there are these like, just like head scratchers where you go like, man, you think like, we really don't know anything.

CHRIS SIPES CFP®: Yeah.

DAREN BLONSKI CFP®: I want to show this to think about things like this for like, Dillards is being up and like so what does this say culturally right like i was thinking about that last night we were sitting around carving pumpkins with family and the kids all there was all the kids started talking six seven six seven again right and bringing that up and i was thinking about this i'm like okay so what is what is six seven saying uniquely about this time in history and and what is it culturally why is it culturally manifesting and what does that actually mean and how does that provide any context for the economy for the Markets that kind of thing i don't know this might be a stretch but i was thinking about how it's interesting that there's like this very disabled element in society now where like the younger generation can't afford homes they can't get ahead their jobs are staring down the invention of AI that's going to take all their entry-level jobs and so like this six seven like who cares whatever can't do anything about it six seven six seven i thought it was kind of interesting so then i asked okay so why is Dillard's outperforming NVIDIA what is that saying about culture in the economy i don't know.

DANO WEIR: It's funny that you say that, Daren, and I wish I had the clip here, but we referenced this last week where there's this betting app. I don't even want to say their name, but I'll say it. Kalshi and the one where the guys were talking about betting on the weather.

DANO WEIR: And it's just, I mean, a real base level bro conversation. And I was, I've been thinking about this ad for like a week and I'm like, why does that, why is that resonating? Why does that exist? And I do think it's what you're talking about, which is that the current generation...

DANO WEIR: Because of the current generation feels locked out of a lot of the basic necessities that were expectations of some of the prior generations and so it's like well bro we'll never be able to buy a house but guess what maybe we can make it betting on weather in phoenix you know so it's almost this like subculture that's being created because they feel like they can't have a piece of the of the bigger culture i don't know might be going a little bit too deep but that's kind of That's how I took it.

CHRIS SIPES CFP®: You both took this way, way deeper than I ever meant for, you know, but bravo. Maybe it says all that. The reason I put it in there was it's not a meme stock.

DAREN BLONSKI CFP®: Were you saying that we need to go to Dillard's?

DAREN BLONSKI CFP®: Yeah.

CHRIS SIPES CFP®: No, it's not a meme stock. It's actually an example of a stock with some pretty decent fundamentals, like the price to earnings ratio is mid-teens. Its return on equity is around 30%. So it's actually making money.

CHRIS SIPES CFP®: You know, like it's an example of like, hey, it's a company that's actually legitimately doing well, even though it's not a company that you would look at and go, oh, I'm sure that's a great business model. Like it's got a great story. It's AI. It's blah, blah, blah. No, it's just an example of a company with solid fundamentals that the market's rewarding for those fundamentals.

DAREN BLONSKI CFP®: Man, that must be such a relief for you to actually find a company that falls in line with your money. There's at least one out there.

DANO WEIR: A company with earnings? Wow.

CHRIS SIPES CFP®: Yeah, there's at least one out there.

DAREN BLONSKI CFP®: You didn't see the meme I sent you earlier today, Chris, where it was like the intelligent investor and all these famous investing books, including the Warren Buffett ones, just being thrown in the wastebasket.

CHRIS SIPES CFP®: Yeah, yeah, it's depressing. I did see that, unfortunately.

CHRIS SIPES CFP®: And so there's a book out right now called Breakneck about China and U. S. -China relations and such. And I think we mentioned it that he was on the podcast with Patrick O'Shaughnessy. I shared it with all of you. I'm sure you listened to it diligently because I recommended it.

CHRIS SIPES CFP®: But anyway, he goes through a lot of he lived in China for a while and he's a U. S. You know, he was born in the U. S. He came back to the U. S. After living in China for a while. So it's really, I thought, a very balanced, you know, take on what's going on. And, you know, given that we're in the middle of these trade talks, you know, here's one big reason why the U. S.

CHRIS SIPES CFP®: Has been able to push around some other countries but had more difficulty with China. And they, according to Lizanne Saunders, in this chart from Bloomberg, the Chinese dominate rare earth mining. They command a share of nearly 70% per the U. S. Geological Survey.

CHRIS SIPES CFP®: And that's kind of what this author's take was, is that, look, maybe in the long run, these cultural things make it tough for China to outperform the U. S., but in the short run, they're going to be a very formidable foe if it comes to a trade war.

CHRIS SIPES CFP®: Due to their manufacturing capabilities and their stockpiling of some of these elements. And it's not like this is something that they just started doing recently. It's something that they have been building on for decades. And so I guess keep that in mind as all the headlines come across with the U. S. And China trade wars.

DANO WEIR: I could just be way out on a ledge on this, but that's been the rhetoric the last year.

DANO WEIR: When whenever anything comes up it's like well we gotta catch China if we don't do this China will do it and it's the first time in my life that like we're really worried about what China's up to you know and it's so it's just we gotta keep up with them and it's just like i just i don't know it's it's i mean what's what's the fear if we don't keep up that what everything's going to get more expensive these are the lower prices you know it's like it's already it's you know it could it's going to get worse than this i mean short of a war war okay that's a real concern but economically it's like well it's people are already in some cases in ruin so if you're going to tell i just it just seems like i don't know it it's it's an empty threat i think when i hear it at least yeah.

CHRIS SIPES CFP®: Yeah anyway it's it's interesting So getting to this week's news with the interest rates, this is the expectation for Fed funds in December. And this number dropped significantly down to 63% today, 63% chance that they lower rates by another quarter percent at the December meeting.

CHRIS SIPES CFP®: And this was over 90% just a day or two ago before. Powell spoke. And so that's kind of why we've seen a little bit of turbulence in the Markets here and the rates kind of responding by going up.

CHRIS SIPES CFP®: Markets recovered today. Some real mixed kind of responses. We saw Meta get crushed after earnings, while Amazon today skyrocketed. Chipotle crushed after earnings. And so some real mixed messages in, in the, in the earnings calls this, this quarter.

DANO WEIR: Well, that's because Chipotle stopped putting meat in their burritos. I think that people are finally catching on that you need the meat in the burrito Chipotle.

CHRIS SIPES CFP®: So there's a lot of back and forth about how, like, if you order online versus if you go in the store, you know, the different size of the burritos and such. And my favorite, and it. Anecdote was that there was a Wells Fargo analyst, apparently, that ordered burritos from 73 different locations, weighed them all, and charted them as part of his analysis. And they were all over the board in terms of sizes and such.

DANO WEIR: Fargo doing the Lord's work there, Fargo.

CHRIS SIPES CFP®: Thank you. That's right. That's right. Whoever got assigned to the Chipotle analysis, they lucked out. So what is the short-term treasury market saying about the Fed funds rate? Well, we're definitely getting closer between these two. Fed funds still looks a little tight, about 41 basis points it looks like in terms of the two-year treasury versus the Fed funds.

CHRIS SIPES CFP®: So they're closing that gap pretty quickly. But as you can see here, that two-year treasury rate's really kind of staying pretty flat. From where it's been really all year. And so if they do cut another quarter, that's going to put the Fed pretty close to that two-year treasury rate if it stays where it's at today.

CHRIS SIPES CFP®: So closing the gap, we'll see where that ends up. Now, anybody can go to the Truflation website to see what Truflation is saying inflation is because we were supposed to get the CPI. Numbers today. Of course, we're not getting those because of the government shutdown. But you can see here, at least according to Truflation, since the tariffs were implemented in April, we've seen an increase in the inflation rate.

CHRIS SIPES CFP®: And that was one of the things that Powell cited in the speech was a concern for the Fed is that inflation is at least staying stubbornly high. Even if it may not be increasing, it's staying higher than what they are comfortable with.

CHRIS SIPES CFP®: And so they don't want to see those high rates of inflation coming back. And with all the, you know, potential trade wars and such, and given that we get so much of our goods from China, you know, that's a real potential headwind for the Markets moving forward.

DANO WEIR: Chris, what is this difference here with trueflation? What is that exactly?

CHRIS SIPES CFP®: Well, it's right in the name, Dan. It's more true than anywhere else, right?

DANO WEIR: Oh, perfect. Is this coming from Truth Social? Is that where it's coming from?

CHRIS SIPES CFP®: You know, they use a different basket, and a lot of people cite it as a more, I guess, real-time measurement of inflation.

CHRIS SIPES CFP®: It's not. You know, put out by the government. So some people trust it more.

CHRIS SIPES CFP®: But, but anyway, it's just one of many different places you can look for, for more kind of real-time data. Now that the, you know, now that the government data is gone.

CHRIS SIPES CFP®: So, and this is from Renaissance Macro. And according to Renaissance Macro, tariffs are putting upward pressure on goods. Still, businesses' inflation expectations remain well anchored, suggesting companies see price pressures as manageable rather than structural. So, of course, on the chart here, they say that, recall, the core goods represent roughly one-fifth of the CPI, so 20%. Not a lot compared to housing.

CHRIS SIPES CFP®: You know, shelter inflation accounts for about 30% of the CPI. But I think that goods inflation is the second largest behind housing. So it is significant. And we've definitely, that looks to be on the uptick, according to this chart. It's after it's been flat for several years, and now we're kind of back on the upswing.

CHRIS SIPES CFP®: Given there's benefits time and given that the government is shut down largely over budgets and what's the biggest single cog in the wheel of the government budget or I guess wrench in the wheel of the government budget, it's healthcare. And it's healthcare for everyone across the country, healthcare inflation.

CHRIS SIPES CFP®: This is from Peter Malouk at Creative Planning showing that the CPI has gone up about 80%. 87%. This is in the last 25 years. So going back to 2000, US inflation is 87%. While the average family health insurance premium is up 319% over that same period of time. So healthcare costs definitely skyrocketing, continue to do so. It doesn't seem to matter which party's in power.

CHRIS SIPES CFP®: The healthcare costs are just... It's just crazy. And I know, you know, anecdotally is, is someone involved in that for the company? It's just definitely a huge cost for my family. It's a huge cost. I know multiple people that just say, I can't afford it and I won't pay for it, which to me is crazy. But, you know, there's a lot of people rolling with no health insurance coverage.

CHRIS SIPES CFP®: And, since they took out the penalties for, you know, no longer requiring the individual mandate, you know, it's, to me, it's a huge mess. It's a huge mess. Nobody seems to be able to fix it. And it's really the single biggest input to the, to the government budgets that are, they're out of control and it doesn't look like there's any solution in sight.

DANO WEIR: Just signed up for mine and they went up. So everybody's feeling the pinch.

CHRIS SIPES CFP®: Yeah. Yep.

CHRIS SIPES CFP®: Now, bullish, bearish, how are investors feeling this week? 44% bullish. We're getting kind of to that a little bit higher in the 40s. The neutrals have dropped off. The negatives have dropped off.

CHRIS SIPES CFP®: The CNN fear and greed index is at 39, which is just slightly in the fear, up from the sentiment of 33 fear one week ago. Bitcoin at 29 fear. Last week, it was at 30. Bitcoin is really kind of flirting with its 200-day moving average. We saw a drop-off.

CHRIS SIPES CFP®: I think it hit like maybe 125 was the high of this cycle, somewhere in there. We're down at like around 109, I believe, now. So some fear in that particular market. But if you look at the Euphoria guide, or I guess global equity risk, from Bank Of America.

CHRIS SIPES CFP®: And Bank Of America says their risk love contrary. And this is from Neil Sethi. Sorry, from Neil Sethi. B of A says their risk love contrary investor sentiment indicator. That's a mouthful, which uses 35 factors tracking positioning, which would include put call ratios, investor surveys, price technicals, volatility spreads, and correlation measures exhibits borderline exuberance.

CHRIS SIPES CFP®: In air quotes, our contrarian sentiment gauge continues to exhibit early signs of investor Euphoria. As global equity Markets push towards record highs, the indicator has remained steady over the past month, holding at the 89th percentile relative to its historical range since 1987. You can see there's been a few times in the past where we've been above that in 2018, a couple of times in 2020 and 2021.

CHRIS SIPES CFP®: Most recently, we got kind of down in the panic in April, but now we're back in that Euphoria zone. So I guess it depends on which measurement you're looking at. Investors are either pretty bullish or very bullish and borderline euphoric, according to Bank Of America, which, as we know, is a contrarian indicator, as they say in their description.

DANO WEIR: Chris, hold here for a second, because we've been saying this for literal months now. People have been comparing it to the dot-com bubble. People have been making all kinds of, you know, we just shared last week that, like, a significant percentage of the performing stocks right now are NASDAQ tech stocks with zero earnings. Like, there's a lot of bubble talk.

DANO WEIR: And yet, at the same time, a lot of times we say stick with your allocation, depending on what your allocation is. So if someone's hearing this, maybe a client, maybe a prospective client, what do you think they should consider at this moment? Would this be a moment to consider what risk you're comfortable with?

CHRIS SIPES CFP®: Yes, I think more so than normal. Now, when you say everybody says it's a bubble, they're talking about US stocks, basically. Now, that's just one asset out of many, many, many that are available in the world. Right? So not everything is in a bubble. Not the whole world is in a bubble. It's one asset class.

CHRIS SIPES CFP®: It just happens to be the kind of the most popular and common and most talked about asset class U. S. Stocks. Now I'm, I'm a believer that if you're an investor in U. S. Stocks, and let's say that you're, you're a Jeremy Siegel stocks for the long run, that's all I invest in. I'm a Warren Buffett, US stocks are all I need for life. Okay.

CHRIS SIPES CFP®: And you should be prepared as Charlie Munger, Warren Buffett's partner says, to be prepared for a 50% drawdown at any time for any reason and just sit through that because you should expect that to happen somewhere along the way, probably multiple times. And so whether you're in a bubble or not in a bubble, if you're concentrated in one asset class, that should be your expectation that you're okay with that type of.

CHRIS SIPES CFP®: Volatility. If you're not, then you should consider being diversified in other asset classes to avoid that type of volatility or do your best to avoid that type of volatility. But as anybody that can tell you that's invested in one thing, whether it's gold, stocks, even bonds, Bitcoin, hey, you better be prepared for big drawdowns at any time for any reason.

CHRIS SIPES CFP®: And so it's just elevated probably, I would say, when Markets are priced as they are today.

DANO WEIR: And one more thing on that, Chris, I'm glad you said that because Darren, not your whole portfolio personally, but you obviously have been a big proponent and you discuss Bitcoin a lot. So you've been through a 50% drawdown or worse. So just for someone who is hearing this, then can't conceive of what that's like. Darren, what's a 50% drawdown feel like as an investor?

DAREN BLONSKI CFP®: Don't look at your portfolio.

DAREN BLONSKI CFP®: I mean, of course, all the emotions go through that fear and that will it come back? Will it not come back? And, you know, there's no way of knowing. Right. But if you're invested in a diversified way and assets that you believe in, then you just hold them for the long run.

DAREN BLONSKI CFP®: And, you know, it's kind of like I think one of the big issues we have with modern day finance. Is that everybody, generally when they buy stocks and they buy investments, they treat it like it's this day trading thing.

DAREN BLONSKI CFP®: I try to buy investments that are like buying a home just because the neighbor's house forecloses and my house is worse worth less than it was six months ago because of that foreclosure. It doesn't really matter because I'm not going to sell it.

DAREN BLONSKI CFP®: Right. So if you own good assets, it doesn't really matter. You're not going to sell it. It's when you own junk that you're not sure if it's coming back. That's when it becomes problematic.

DANO WEIR: Thanks guys. I just want to stick on that for a second. Chris, you may resume. I'll allow it.

CHRIS SIPES CFP®: Okay, so going back to the angst of Gen Z, you know, 6-7, Dillard's, etc., etc., that whole conversation.

DANO WEIR: You just invented a new 6-7, dude. Kids are going to be like, Dillard's.

CHRIS SIPES CFP®: Yeah, yeah. Well, this headline, which was put out, or I guess posted by Joe Weisenthal at Bloomberg. UPS stuns Wall Street with strong profit, but cuts 34,000 jobs. And here you can see how the stock has reacted over the last month. Now, of course, if you zoomed out on this, UPS has been really struggling.

CHRIS SIPES CFP®: But it does seem to be a lot of stories about companies cutting jobs and the job market being pretty... Pretty tough, especially for young people, as Darren mentioned, people that are trying to get an entry level positions. Of course, we don't know for sure because of the way the market is, the job market is being measured right now.

CHRIS SIPES CFP®: You know, the immigration policy is obviously having an effect on the job market as well. But, you know, we talked and we'll talk further about how so much of the spending and the drivers of the economy are. Focused on the top 10% of, of wealth holders. So, and the top 10% of stocks essentially. And, so everything else that's kind of going on in the surface, beneath that really has not had an impact On The Markets so far.

CHRIS SIPES CFP®: And who knows how long that, who knows how long that continues right when you look at things like Credit card debt. This is from Lizanne Saunders by way of, I think this is Arbor Research that posted this, but she says nine of 10 states with the highest average household credit card debt per income are located in the Southeast region.

CHRIS SIPES CFP®: Louisiana is at the highest end of the spectrum. And so you can see the darker red areas. And a lot of that is concentrated in the South. I was kind of surprised to see Texas with number four.

CHRIS SIPES CFP®: You know, Florida obviously struggling with its housing market as well.

CHRIS SIPES CFP®: And so there's a lot kind of going on for many people in the economy. It's definitely a K-shaped recovery, a K-shaped economy at this point. Which You know, you wonder how long it takes for people to go from kind of apathy with the whole six, seven mentality to, you know, something different.

CHRIS SIPES CFP®: There's there's some there's some forecasting that the populism escalates, you know, Jim Carson from Kai, I think, is the name of his his investment firm. He's he's been out there. For a while now saying like hey populism is and the responses of the market to populism is going to be the theme of this era and at some point does this angst and debt and not being able to get started lead to fragility.

DANO WEIR: Within the society down the road i think i think the the position here Based on because you're absolutely right about what you're saying and something that, you know, Darren, I've heard you say this. Chris, I've heard you say this. I believe this.

DANO WEIR: If you try to take, you know, if you try to take the standard path that they're telling you is the way that you should do things, the average American life, you're going to get this result. You're going to be in one of these red states. And so you have to find ways to try to play a different game, because if you're living the average American dream right now. I do think it's a nightmare.

CHRIS SIPES CFP®: So maybe some shifting going on underneath the surface of the Markets this week. This from Bank Of America, borrowing to fund AI data centers spending exploded in September and so far in October. But what you'll notice here is that instead of it being funded from cash flow, which is that dark blue. You look at the investment grade bonds and loans.

CHRIS SIPES CFP®: So, you've got Oracle borrowing quite a bit to facilitate its, spending in the AI space. And so that I'm noticing that the narrative is starting to shift at least in the investment circles, because that's what I'm listening to. The narrative is shifting from these companies are funding all of this via cashflow via their huge margins.

CHRIS SIPES CFP®: And now it's shifting into they're borrowing to fund this and or are they going to get a return on this investment? So this week, an excellent podcast from the guys over at Excess Returns. They had, I believe his name's Kai Wu on their podcast this week. Yeah. Kai Wu, and he's out with some research right now on a couple of things.

CHRIS SIPES CFP®: One is the value of intangibles when it comes to evaluating companies, which is excellent. But also he's talking about the risks of the CapEx boom in AI and how we're now starting to follow that cycle that we've seen many times in the past with big technology of It goes from being funded through cash flow.

CHRIS SIPES CFP®: All these companies used to be light CapEx, and so they were light on capital burn, which was their huge advantage over other companies, to now, that's why Meta got hit so big, or part of the reason why Meta got hit so big was the amount of money that they're gonna be putting into AI.

CHRIS SIPES CFP®: So they're heavy on CapEx spending now. And according to Kai, historically, that has led to underperformance in companies in the past, is those companies that have a heavy CapEx spend. So we'll see where this goes. But an excellent podcast if you're at all interested in some of the historical research on that.

DANO WEIR: And another way to think about this, if you're not really conceiving or able to figure out what we're talking about with the data center piece. They're chasing this elusive AI goal, whether it's AGI or whatever they want to call it. And so in order to get that to beat China, to beat whoever, to beat the other tech company, they're building out all of these data centers to try to catch it.

DANO WEIR: Well, that's just like 2008 when there was a housing environment where because of the finance, because of what was going on with mortgages, you need to build houses as fast as you can to try to get as many people into these houses. And then As soon as the finance piece fell out from under it, then what did you have?

DANO WEIR: You had these ghost towns in Vegas that were built out and you couldn't, you know, there were mountain lions living in them because they were all abandoned. So does that happen with data centers or is it really the moment where they, you know, tripled down and they got ahead of it? You know, that's I think that remains to be seen. That's kind of what that's how I'm reading it, Darren.

CHRIS SIPES CFP®: Yeah. So now historically, now the other thing that keeps coming up in the narrative now is the famous George Soros apparently quote about bubbles and that you want to run into a bubble.

CHRIS SIPES CFP®: So not run away from them. You've got to stay invested and you've got to be invested in a bubble. So the narrative is shifted from there is no bubble.

CHRIS SIPES CFP®: To yeah maybe we're in a bubble to it's okay if we're in a bubble you need to invest in it because George Soros does okay which to me is a little dangerous but anyway historically all-time highs due to you're gonna run into a bubble you have to have a way to get out of the bubble before everyone else right well i i guess the implication is hey if George Soros can do but why can't you, right?

CHRIS SIPES CFP®: It's the old... Sure. Michael Jordan, Michael Jordan can do, you know, slam dunk from the foul line. Can't you?

CHRIS SIPES CFP®: Anyway. S&P tends to, the all-time highs tend to cluster. And so, you know, the Markets tend to do well. So there is a kernel of truth to the whole, when there is a bubble, you have to be invested. If you're all the way out, then maybe you're missing on some of these gains too. So there tends to be a kernel of truth to these things.

CHRIS SIPES CFP®: And the S&P has continued to do well this year. However... When you look at the dividend yield of the S&P, as far as I can tell, there's only one time where that dividend yield has been lower than it is today, which was the dot-com bubble there in 2000. And a low dividend payout rate is just another sign of valuation extremes, one of many. And so be careful, right?

CHRIS SIPES CFP®: Be careful. The importance of dividends, you can see growth of dividends with dividends reinvested over time versus the growth of the S&P without dividends is much lower. And so dividends historically have made up a big portion of overall returns. No longer the case, at least right now, with yields being as low as they are today.

CHRIS SIPES CFP®: So I think on the last one, Dan, I appreciate you putting an Ohio State player on here, Ted Ginn Jr. We've got Ohio State at Penn State tomorrow at noon Eastern.

DAREN BLONSKI CFP®: Do you follow Dave Portnoy on X? Yes.

CHRIS SIPES CFP®: Unfortunately.

DAREN BLONSKI CFP®: He does this thing where he tours when he goes to these games. Big game he's going to with Ohio State tomorrow. He was touring the bookstore and he tours the bookstore of all these colleges. And wow, man, he just clowned on you guys.

CHRIS SIPES CFP®: You know, I don't know why I follow him because he pumps meme stocks and he's a huge Michigan fan. So I guess we call that a hate follow, Chris. It's a hate follow, I suppose. Yes. I suppose it's a hate follow.

DANO WEIR: Well, I included this slide this week because as Chris astutely pointed out to me, he said, hey, Dan, I noticed that more and more of the posts you're sharing are finance. I think your feed is getting taken over by your job. And he's right. I keep coming across stuff that I think is interesting. And it's.

DANO WEIR: I have this theory that everything is a market, and it's not just a theory, it's right.

DANO WEIR: But this was a LinkedIn post from the president of the Upper Deck Trading Card Company. So if you ever had trading cards when you were a kid, or if you have them now, baseball cards, football cards, basketball cards, this guy, he runs that company. I'm going to read this whole post.

DANO WEIR: He says, everything, this is talking about trading cards, everything speculative is up right now, the stock market, Bitcoin. Trading cards, and it's pricing some collectors out. Here's what the data shows. 50% of consumer spending in the U. S. Is coming from 10% of the population.

DANO WEIR: Rich people are carrying the market, not just in cards, but across every category. He goes on to say sports cards have always had speculation built in. You collect a rookie hoping they become a Hall Of Famer, but what's happening now is different in scale, and when Markets become this speculative, they become fragile.

DANO WEIR: So this is something which has no connection to the stock market. This is literally pieces of cardboard with players' pictures on them. And yet what he's describing here on the trading card market, Chris, sounded exactly to me like some of these tech stocks which have no earnings.

CHRIS SIPES CFP®: Yeah, absolutely. And interesting, like I used to collect cards when I was a kid. I used to love going through the Beckett magazine and seeing what they were worth. Was it going up or going down? You know, that kind of stuff. Really cool. Probably.

CHRIS SIPES CFP®: Big reason why like what i do today but you're right it is it is pervasive across society like you said people are betting on what the weather's gonna do it's it's i don't know it it seems like kind of dystopian man to be honest with you the gambling across you know kind of every aspect of our lives and i i want people to know there's a difference between gambling and investing It's being someone who's followed investing my whole life.

CHRIS SIPES CFP®: I feel there's an artwork to it. There's an art to it, right?

CHRIS SIPES CFP®: And there is a difference between gambling and investment. Chris just doesn't want to be grouped with the gamblers. That's right. I do not want to be grouped with the gamblers. You're correct.

DANO WEIR: And I'll just say this before we go to Darren, Chris, which is that there is definitely a fundamental difference, which is that, yes, you're hoping for a particular outcome and you're laying money on it. But if I buy insert name of stock, if it doesn't perform today how I want, I've still at least got that stock and we'll see how we do tomorrow.

DANO WEIR: You know, versus and say actually even the same thing with trading cards versus if you're betting on a game or something like that, say, I don't know, the Dodgers to win the World Series. You're going to lose that bet, we hope. So, you know, and then you're just done. So I do think there is a fundamental difference there.

CHRIS SIPES CFP®: Yeah.

CHRIS SIPES CFP®: I hope so. I hope people remember it. And, you know, this too shall pass like everything and it will get past it. But in the meantime, it's, it's a time to be, you know, keep an eye on what's, what's being sold to you, you know, and try to keep your head about you.

DANO WEIR: Darren. I'm fiending for some candles and some charts and some spikes. Yeah, I just haven't had it in a full week, man. I mean, I need that sugar high.

DAREN BLONSKI CFP®: This is how you go into the weekend, right?

DANO WEIR: I need that sugar high from my candles, man.

DAREN BLONSKI CFP®: Oh, wow. Wow.

DANO WEIR: Trick or treat.

DAREN BLONSKI CFP®: My sarcasm is blaring.

DANO WEIR: Trick or treat. You have any Bitcoin charts?

DAREN BLONSKI CFP®: You know, I thought I'd just start with Bitcoin since you brought it up to begin with. So... We talked a little bit about how Bitcoin's in a bit of a precarious moment. And you can see this support line. This is something we've drawn. So this is candlesticks. And these candlesticks are a function of a week in the market.

DAREN BLONSKI CFP®: So each one of them represents one week with the high during that week, the very top of that candlestick, that wick, and the low being the bottom of that wick. And this chart will close here at five o'clock. So it's still got a little bit of time yet. But you can see it's been trading sideways for some time on this one moving average that we've got on the chart here.

DAREN BLONSKI CFP®: There's lots of moving average. The one that everyone's talking about is this moving average at 200. So if we put a 200 moving average on this on a daily candlestick, this is the one people are talking about that it went below that. And then now it's traded up and it's getting rejected at this.

DAREN BLONSKI CFP®: Moment in time and so this is lots of hubbub on the internet about the rejection of this candlestick on it's below the 200-day moving average for bitcoin which when something falls below 200-day moving average that's not historically a great thing at least in the short run And Bitcoin has had such a tumultuous experience when it starts going down and that it tends to get fairly violent pretty quick.

DAREN BLONSKI CFP®: So hold on to your seat if we lose the 200-day moving average. Although I'll point out here, you can see we lost it and it kind of hung on underneath it. And you can see it was lost here, but we're hanging in that zone again.

DAREN BLONSKI CFP®: So that could be the front end of the tip. Of the risk curve right and we tend to see that we see tend to see bitcoin go down first and then we see the rest of the market go when we look at the S&P 500 on a daily chart you can see it's way above that 200 day moving average not even close to it at this point but you can see we are in the last three days we made an all-time high and now have sold off Oh.

DAREN BLONSKI CFP®: And ended the week inside this red candle. Let's look at the weekly candle on here. And you can see it's what we would call a shooting star. So candle, which could lead us to believe that this is a top, that we hit a short-term top. Wouldn't be shocking to see the market sell off and come down into this trend line before it takes on a new high.

DAREN BLONSKI CFP®: You can see every time it tried to break out of this long-term trend line, since all the way back here. 2015, it's got rejected, rejected, rejected. It broke above that pretty substantially here. Now we're back above it. So I would expect the market to come back in and test this low.

DAREN BLONSKI CFP®: So I think understanding that conceptually is really important. If things do get a little noisy in the market in the near future, that perhaps we're just coming back in to test this long-term support line. So I still think the outlook has to be bullish on the S&P 500. We want to see a lot more breakdown before we would feel like things have significantly changed.

DAREN BLONSKI CFP®: When we look at the VIX, which is a measure of volatility, looking 30 days out, you can see we did have that spike of volatility for like a week in the beginning of October, and it settled right on down. We had a little bit of pop today, but nothing really substantial. When we look at the ag, fortunately, Chris, you might get eggs thrown at you if you dress like an ag.

DAREN BLONSKI CFP®: Tonight for halloween we were making jokes about Chris dressing up his ag halloween and the it looks it looks at least at the moment that the ag has been rejected right along this kind of area here that you know it's been pretty important that was rejected there broke above it came back in there this area this zone seems to be a pretty important zone and it was rejected right here on the egg Interesting that interest rates went down 25 basis points, but we actually saw the 10-year go up today.

DAREN BLONSKI CFP®: So you can see this week went up, and Terrell Powell came out and said, hey, we're going to lower interest rates by 25 basis points, and the interest rates are up.

DAREN BLONSKI CFP®: Because that's because the Fed only really controls the front end of the risk curve, the front end of the interest curve. They don't control the rest of the market, and the market controls that.

DANO WEIR: I always press on this point because it's not understood still, and that's okay. So when the Fed president announces they're cutting interest rates, that doesn't necessarily mean that the mortgage rate you're going to get from insert name of lender where you get your mortgage from is going to be better. Could be up.

DAREN BLONSKI CFP®: Could be down.

DAREN BLONSKI CFP®: It just depends on the pricing, right, too, because mortgages are just as much a factor of supply and demand is anything so there's a lot of factors that go into the mortgage it's more likely the mortgage is going to go lower eventually if interest rates go down but we've been looking at this long-term support line for the 10-year for a while and you can see it's been pretty important for quite a few years and we traded below that and then traded right back up above it and we are holding support at the moment and when we look at the oil chart i think is particularly interesting given what's going on with the rumors of war with Venezuela supposedly we're going to be striking them i don't know if some levels i saw it as a rumor but we shall see the you can see we traded down into this support area and then ultimate let's actually look at the day chart so you can see here we traded right into this support zone and then bounced up then we're holding it But it'd be interesting if things calm down with Venezuela.

DAREN BLONSKI CFP®: I could see that hurting the price of oil. Whereas if things get...

DAREN BLONSKI CFP®: Noisy with Venezuela then that might impact oil prices significantly i think long term if we're going to pull off a regime change which it seems like the trump administration is keen on doing then i think you'll see better oil prices because it'll change the regime and basically make Venezuela a a proxy government to the us like it traditionally has been We'll see how that impacts oil, but keep an eye on that next week.

DAREN BLONSKI CFP®: Let's go back to the gold Markets. Gold was off to the races, almost to $4,400 an ounce, and has really sold off since. It looks like it's finding support, though, right around this $3,900 zone or $4,000 an ounce.

DAREN BLONSKI CFP®: Considering how fast gold went up, it's not shocking to see it sell off. People just start... Digging through their basement, finding all the gold coins that grandpa gave them and walking into the gold dealer to sell them. That impacts gold prices.

DAREN BLONSKI CFP®: But a perfect example with Venezuela, US is going to come and force itself. This is why we're seeing a lot of the governments like Russia, et cetera, trying to denominate themselves in gold. Because if we're going to confiscate their dollars, if they don't behave, they're not going to like that. Gold down.

DAREN BLONSKI CFP®: Right now, it looks like it's finding support. Silver found big old support candle. I mean, you can see on $46 an ounce, it traded right down to there and got bought right up. I mean, a lot of buyers stepped in. That's what that shows you. That's a hammer candle.

DAREN BLONSKI CFP®: This could be a sign of a short-term bottom. So then maybe we start seeing some trading upwards for a few weeks. What else? Let's take a look at NVIDIA. NVIDIA hitting a... $5 trillion company this week. $5 trillion, or is it five or is it four? $4 trillion. It was $4 trillion this week. That's pretty crazy. One company, $4 trillion.

DAREN BLONSKI CFP®: But just continues to blow this bubble. If it's a bubble, I think it's a bubble. I don't know, but I would assume even bigger. And it's going to make the fall even more messy when it does come down. But I guess, like Chris says, if... George Soros can lean into a bubble, so should we. I guess we don't know how to get off the bubble, though. That's the trick.

DANO WEIR: $4.97 trillion.

DAREN BLONSKI CFP®: $4.9 trillion, so almost $5 trillion. That's incredible. Look at that candle, though. Just a strong candle.

DANO WEIR: Yeah, but show me the Dillards, man, okay? I want to see the Dillards, bro.

DAREN BLONSKI CFP®: Do you want to see the Dillards?

DANO WEIR: Same performance. Same performance as NVIDIA.

DAREN BLONSKI CFP®: I don't even think I've ever walked into Dillard's store.

CHRIS SIPES CFP®: I honestly, I didn't know that it still existed until Meb Faber posted that stat on Twitter.

DANO WEIR: Dillard's near me.

DAREN BLONSKI CFP®: The closest Dillard's I could find was in Stockton, California. Stockton. Yep. Stockton. Like that is not the pivot place to go shopping.

DANO WEIR: Let's go there and buy the stock there in person, boys. Come on. They got to sell it at the back desk.

DAREN BLONSKI CFP®: We should do a show of It's All Money at Dillard's in Stockton.

DANO WEIR: That'd be amazing.

DAREN BLONSKI CFP®: Like, you know, we could make it like a road trip to see the stock that's outperforming NVIDIA. I'll bet you we could film that.

CHRIS SIPES CFP®: In like a live way and get more views on it than anything it would be interesting to like ask the employees like hey do you do you own Dillard's stock like do you know what your stock price is doing i mean i'm sure if you walked around NVIDIA people know what their stock price is doing but i can't imagine people at Dillard's are the same maybe he's probably different demographic working at Dillard's than working it maybe it's just robots You know, maybe that's...

DANO WEIR: Oh, an AI at Dillard's. There is an A and an I in the name.

CHRIS SIPES CFP®: Maybe there's more AI than we think, guys. For all we know. It could be all AI.

DAREN BLONSKI CFP®: Who knows? More than what we'll solve in this episode, that's for sure. So all in all, I mean, you've got a market that looks like it's topping this week and showing a sign of a topping in the SPY. The fact that Bitcoin is... Flirting with its 200 day moving average tells me that the front end of the risk curve is weak.

DAREN BLONSKI CFP®: And that we've got a topping pattern showing up inside the s p 500 could be time for some down maybe we'll see a cold November and pop into the end of the year maybe we'll see the rest of the year be kind of sour we'll see we certainly didn't get that pullback i thought we were going to get in September so the guns didn't get loaded into the end of the year interestingly enough that's what we saw in the first trump presidency was that sour end of the year.

DAREN BLONSKI CFP®: I sure hope we don't have a sour end of the year. That wouldn't be as fun.

DAREN BLONSKI CFP®: All right. Well, I think we're going to leave it there. Have a wonderful weekend, everybody.

DANO WEIR: We know what Chris is going to...

DAREN BLONSKI CFP®: Wow.

DANO WEIR: You know, Darren has encouraged me to really embrace and use AI. And the number one thing I've used it for so far is making memes. Yeah, I don't know why it's Chris either, but he's just, Chris is such a happy-go-lucky. He's an easygoing guy, and so I know I can goof with him a little bit. So there's Chris in his Savings Bond outfit that he's going to wear tonight. So have fun with that.

DANO WEIR: Thank you, everybody, for checking out the show. We really appreciate it, especially if you've made it this far into the show, the whole way to the end. If you're a client, we are here for you. We are here to support you. This is our ongoing education. And communication about what we're seeing in the market.

DANO WEIR: And if you're new to the firm, well, gosh, we're happy to have you too. Make sure you like and subscribe wherever you are finding us, whether it's on YouTube, Apple Podcasts, or Spotify. And you can learn more about the firm at SonomaWealth. Com. Happy Halloween. We hope you have a really safe night, and we will see you next week.

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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.

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