The Times They Are A Changin'

DANO WEIR: Happy Friday. It's time to go on the Markets. My name is Dano Weir from Sonoma Wealth Advisors, the Fermata Advisors family of brands. And this week we are looking at the Times they are a change in.

DANO WEIR: Every once in a while there are certain weeks where there's not one specific thing, but we're seeing a confluence of just kind of little things, soft things, and we're going to see some change, especially with respect to the dollar this week. Especially in light of a huge conference that happened, the World Economic Forum happened this week.

DANO WEIR: So you got a lot of soundbites in your newsfeed from huge big name individuals. We'll get you some thoughts on the economic impacts of purchasing territories for the United States in the past. Some shocking stats Chris found on the number of people living alone and the number of Americans with no income. How is that possible?

DANO WEIR: Changes in the market. May be better than expected, depending on your perspective, because is concentration easing and a huge drop in the relative strength of the dollar index, which is why we see on this picture that the dollar is going into a black hole. Let's get the show started.

SPEAKER 2: The stock market, the economy, your money. What's the latest and what could be next? Find out now with Fermata On The Markets. Straightforward financial market updates for the brands of Fermata Advisors, Sonoma Wealth Advisors, Fermata 401k and Fermata Tax. On the Markets starts now.

DANO WEIR: Managing principals of Sonoma Wealth Advisors, Daren Blonski CFP, Chris Sipes CFP. Chris, you found... You found in a chapter of a book you were reading this week that Warren Buffett had a $10,000 bet with his kids and his weight.

CHRIS SIPES CFP®: Yeah. So a little health advice to get started. I know a lot of people do the New Year's Resolution and we're not through January yet. So maybe there's a few people that are sticking with that. I thought this was pretty interesting. Warren disciplined himself to maintain his own weight by dangling money in front of his kids.

CHRIS SIPES CFP®: When they were younger, he made out unsigned checks to them for $10,000 and said that if he didn'T weigh 173 pounds on such and such a date, he would sign the checks. Little Susie and Howie went crazy trying to tempt him with ice cream and chocolate cake. But the prospect of giving up money pained Warren far more than giving up a treat, which is interesting.

CHRIS SIPES CFP®: We all have to figure out ways to trick ourselves into... Sticking with our discipline sometimes. And we know our, our weaknesses and for Warren wasting money was just something he couldn'T, it couldn'T bring himself to. So he fought off the temptations, to do that.

DANO WEIR: And that's a guy who probably had enough money to buy a cake factory at that time too. So even 10,000 for a piece of cake probably wouldn'T have been much to him. That speaks to discipline for sure.

DAREN BLONSKI CFP®: You know, Chris, if I, I was thinking, I should write a check to each one of my kids for $10,000 and not sign it and say, make me eat these sardines every day.

DAREN BLONSKI CFP®: For those who don'T know, Chris is the most dedicated health eater I've ever met and eats sardines every single day because they're super good.

CHRIS SIPES CFP®: I somehow feel like you'd be signing a check on like day two or three, Daren.

DAREN BLONSKI CFP®: In day two, for sure. I told you that I tried that once though, right, Chris?

CHRIS SIPES CFP®: Yes, I do remember.

DAREN BLONSKI CFP®: During COVID, I tried it and it lasted two days. I'm like, I taste like sardines all day. I can'T do it.

DANO WEIR: I as well tried it and I got them. I was at Costco and I was on the hunt for lean protein and value protein. I'm a smart guy. I'll find something that is a good value. And canned sardines and canned mackerel, I think it was, Holy grail. I got it. Let's go open up a can.

DANO WEIR: Nope, nope. So Chris, you're, you're one of a kind.

CHRIS SIPES CFP®: Well, the good news is people have started to give me like specialty sardines, especially ones from other countries where apparently they really know how to do their sardines in a can and they come in all different kinds of flavors and mixed with different spices and everything.

CHRIS SIPES CFP®: I think you would find those slightly less offensive, although you probably have to go to like Spain or France to get them. And so it's a little tougher to find than just your neighborhood Costco.

DAREN BLONSKI CFP®: There is a restaurant in Sonoma. What's it called? You know what it is, Chris. I was telling you about it.

CHRIS SIPES CFP®: Are you thinking of Tosca Tosca?

DAREN BLONSKI CFP®: Yeah. No, not Tosca Tosca.

DAREN BLONSKI CFP®: It's the one that is right almost on the corner. It's two doors in from the corner on the square. It's right next to like the leather shop.

DANO WEIR: Okay.

DAREN BLONSKI CFP®: What is it?

CHRIS SIPES CFP®: Yes. Is it Valley?

DAREN BLONSKI CFP®: Yeah. They have anchovies or, is it anchovies? No, sardines. They're amazing. Like I went there. And you weren'T there. I think it was last Christmas.

CHRIS SIPES CFP®: No, you got, you, last time we went there, you, you.

DAREN BLONSKI CFP®: You got some.

CHRIS SIPES CFP®: Yes.

DAREN BLONSKI CFP®: They were so good.

CHRIS SIPES CFP®: Yes.

DAREN BLONSKI CFP®: One of the only ones I've ever like liked.

CHRIS SIPES CFP®: See, if they're prepared correctly, they're not so bad. Now.

DANO WEIR: Shout out to them real quick because they actually just, they're James Beard semifinalists. They just announced that today. So shout out to Valley.

CHRIS SIPES CFP®: What's a James Beard semifinalist?

DANO WEIR: James Beard award is a massive award in the culinary industry. Kind of like a. I don'T know if it's on par with the Michelin star, but I know it's a big deal.

CHRIS SIPES CFP®: So it's not sardine specific.

DANO WEIR: It's not a sardine award. No.

CHRIS SIPES CFP®: All right. Back to investing this. What you're looking at guys is a breakdown of a global portfolio. So this is from wisdom tree. And if you're a person who believes in, you know, efficient Markets and market cap weightings of different asset classes. Well, this is roughly the global market weight of publicly available asset classes, according to WisdomTree.

CHRIS SIPES CFP®: And you can see that equity makes up about half of that, so stocks a little over half. You've got fixed income at about 32%. And then you've got gold, commodities, digital assets, alternatives in there as well, which...

CHRIS SIPES CFP®: Very rarely do you see people actually allocated this way, especially if you look at equities. Most people don'T own foreign stocks. Most people don'T have alternatives. Most people don'T have gold, which they're going to be upset about over the last year. With the runs that we've seen in gold and silver, you wonder how much that's going to change.

CHRIS SIPES CFP®: Than this, then you are taking tactical weights either for or against these different asset classes in the market. Because if you're going with like a, you know, kind of fully efficient approach, this would roughly be your allocation for the global market portfolio.

DANO WEIR: And just to be clear, so this is different than, you know, 10 years ago, this having gold and crypto in there.

CHRIS SIPES CFP®: Well, yeah, I think crypto definitely is showing up more than it would have been 10 years ago. But this will change depending on what's happening with the asset values through time. But when you think of a global market portfolio, it's considered like that's the collective Markets pricing of a portfolio.

CHRIS SIPES CFP®: The different assets in the world that are publicly available to buy, this is what the market has priced them at. So if you're an efficient market person, that, that would say, Hey, this is, this is kind of the most efficient market portfolio I could have. You know, based on that. So we saw a lot of volatility this week. This meme cracked me up because we had one day, I believe it was Tuesday. Yeah.

CHRIS SIPES CFP®: It was Tuesday when the market opened or. Everything was red stocks bonds the dollar everything was red so we've got the the seinfeld meme here he says kramer what's going on in there everything is red and he says he wants Greenland Jerry and then the next day very next day everything was green almost the mirror opposite which was Wednesday and Jerry says you know kramer what's going on in there everything's.

DAREN BLONSKI CFP®: Which was so stupid because I've spent a fair amount of time trying to understand the Greenland deal. I'm not a macro guy on this stuff. I'm just like, why do we want Greenland so bad? Is it really strategic to block all the missiles that could be flying at us from China and Russia? Is there precious metals? Is it as the North Sea melts? Is it just because we really need to protect that area?

DAREN BLONSKI CFP®: The treaty that we already have with the Dutch allows us to put a military base anywhere we want. We just need to say, hey, we're going to put a military base here. On the island of Greenland.

DAREN BLONSKI CFP®: But yet, then this framework came out, which I thought was funny, but if you've actually researched it a little bit, it's basically what the treaty we already have with the Dutch, which I don'T know. I think there is some other ulterior motive by just going on that drove Trump to say this. I just don'T know what it is because I can'T find it.

CHRIS SIPES CFP®: Well, I find it. Maybe it's our next meme. Okay, you guys watched The Office, right?

DAREN BLONSKI CFP®: Yeah. Right? It Times.

CHRIS SIPES CFP®: You have? Okay. All right. I don'T know if you remember this episode, but there's an episode where Dwight says, through concentration, I can raise and lower my cholesterol at will. And Pam says, why would you want to raise your cholesterol? And Dwight says, so I can lower it.

CHRIS SIPES CFP®: Yes Yes So why are we doing this? So, well, we tank the market. We bring it right back. Maybe that's, that's it. I, I don'T know. But that, that, what that, that Tuesday, Wednesday just reminded me of that, that episode. Cause it was like, ah, that's why we're doing it.

DAREN BLONSKI CFP®: It's kind of like there's like a dopamine addiction going on, right? Like, well, there's, it's kind of boring today. What can I do today just to grab a headline? That's what it feels like, right?

CHRIS SIPES CFP®: Yeah. Well, I mean, I don'T know. So the way that he's approaching it obviously is rubbing people the wrong way. But if you look at our previous purchases as a country, we've got a track record of doing pretty well on our purchases.

CHRIS SIPES CFP®: Guess i can'T say for sure because i haven'T read the details of all these purchases but i doubt the previous administrations approached it the way that we're approaching this one but look at some of these purchase prices i mean the whole state of Alaska for seven million a great deal even in 1867 apparently that one really makes putin mad by the way like yeah he's made a few comments like we stole it from Russia and Yeah, it'd be interesting to know the details on the history of that.

CHRIS SIPES CFP®: The Louisiana Purchase, of course, is probably the most famous one in history where we got that for $15 million back in 1803. And that's pretty amazing. So history is dotted with these different purchases. They've always seemed to be a good deal for the United States in the long run. Who knows what's going to happen with this one, but interesting to see these past deals and the prices on them.

CHRIS SIPES CFP®: It's also a reminder of the time value of money, right? Why we talk all the time about, hey, just putting your money in cash is also taking a risk because obviously $15 million now is a lot less than it was way back then when we purchased. The Louisiana territory for that amount 250 years ago or whatever that is 220 years ago.

CHRIS SIPES CFP®: So we don'T know much about the future, but one thing you can almost bank on is the fact that things are going to be more expensive. Dollars that you own today are going to be worth less. Own assets over time, be diversified, and steer clear of feeling safe, having everything in cash when over the long run that money tends to lose probably more than anything.

DANO WEIR: I think something else too, when it comes to the purchasing of Greenland or the desire to do so, Darren, as you said, I don'T know that I understand it and I certainly don'T know that I agree with the way that it's being done. But it is very unsettling just as a person to be like, what? You know, this is the map.

DANO WEIR: I learned the map when I was a kid. The map doesn'T change. There's not going to be a 51st state. But really that is actually a rare scenario between basically Post-World War II until now where we had like a lot of stability and a lot of those things stayed the same. Prior to that, look at all of these purchases.

DANO WEIR: If you're a person in 1803, you just pick up a paper. You know, whatever, however you talk to them and went, oh, I guess we got 11 more states now. You know, I mean, this is actually the norm is rapid expansion and change of borders and things like that. What we've been living in is actually. A rare scenario, I think.

DAREN BLONSKI CFP®: You know, I think that's a really good point, Dan. And I think just generally, if you look at through history and Chris, we know how, and you can confirm this because you're such a history buff. Like the last 30, 40 years have been relatively very, very calm when you compare it to history.

DAREN BLONSKI CFP®: And so the Times are changing. You know, we've talked a lot on this channel about the fourth turning and a lot of the work. That's been done on looking at demographic shifts. And it was interesting because I was just thinking about my dad and his life and what he lived in.

DAREN BLONSKI CFP®: In the first part of his life, he lived in World War II, and then there was Vietnam. And then there was this period of 50-plus years where it was just quiet, not a lot of wars, skirmishes, and some proxy wars, but nothing extensive. It certainly seems like the powder keg is looking out right now.

CHRIS SIPES CFP®: Yeah, I think that's why we titled this week that the Times are changing with the meeting in Davos. That's apparent, you know, that there's changing relationships between the countries around the world, but also within the Markets.

CHRIS SIPES CFP®: We're definitely seeing a lot of changes happening and it makes sense given that, like you said, over the last 40 years, it was kind of a certain kind of regime, like relatively peaceful between the larger powers.

CHRIS SIPES CFP®: We had interest rates coming down that entire time. Inflation was benign and coming down really since the 80s, early 80s. And all of those things seem to be changing at the moment. And the Markets are reflecting that.

DANO WEIR: Darren, can you define for someone who doesn'T know, we've referred to the meeting in Davos. Can you define what the World Economic Forum is real quick?

DAREN BLONSKI CFP®: Yeah, it's super controversial.

CHRIS SIPES CFP®: In as PC way as you possibly can.

DAREN BLONSKI CFP®: Without like going off on house job and Soros. What's crazy is like what's actually happened there this week has been so irreverent in the stuff that's being said, especially like look up some of the stuff that Governor Newsom has said, plus Secretary Besant this week. I mean, it's crazy.

DAREN BLONSKI CFP®: Crazy that unlike one of the prominent world stages that you have these politicians that are saying the things like pulling out knee pads as props i mean just weird stuff going on but basically the the World Economic Forum is a the idea is that all the countries and political powers that come and are come together in Davos and i'm sure they party and hang out And.

DANO WEIR: Davos is a town in Switzerland.

DAREN BLONSKI CFP®: Correct. And so they're in Switzerland, so it's supposed to be neutral territory. So kind of like, I guess UN-esque, but with a different function. And this is where a lot of the Green New Deal kind of stuff shifted and came out of and a lot of the push for different immigration policies and kind of a coordination for global powers. And we certainly saw a lot of...

DAREN BLONSKI CFP®: A consistent message coming out during the Biden administration from Davos. And this week, Trump and his crew went in there and said everything they could irreverent. Elon was even there running, saying things.

DAREN BLONSKI CFP®: So it was quite interesting, but you know, a good signal in the sense that, yeah, Times are changing. Like here's where a lot of the world powers used to come together and talk and collaborate. And I think half of it, they were making fun of each other.

CHRIS SIPES CFP®: Yeah. All right. So sentiment check.

DAREN BLONSKI CFP®: How was that for PC, Chris?

CHRIS SIPES CFP®: That was pretty good. That was pretty good. It was very nice. Well done.

DAREN BLONSKI CFP®: That's a tough ask.

CHRIS SIPES CFP®: Well done. Yes.

DANO WEIR: That was not irreverent.

CHRIS SIPES CFP®: Yeah. Well done. So sentiment check. We've, we had a little downtick in bullishness this week, although we're still firmly in the forties. Range, which is overall bullish. The historical sentiments are roughly a third in each of the buckets. And so we're more bullish than bearish, not too many in the neutral zone. Now CNN's fear and greed index is at 55, which is unchanged pretty much from 53 last week, which is neutral.

CHRIS SIPES CFP®: Which last week it was at 49 neutral. So a little bit of action in Bitcoin, but really not as much as I would have guessed. Like had you told me, you know, silver was going to be up 40% this month and gold was going to be up, you know, 75% in the last year. Like, you know, I would have thought there would have been more.

CHRIS SIPES CFP®: More out of Bitcoin. So that's a little strange. But you know, anything, well, Hey, things could change over the weekend. That's, that's one thing you should know about Bitcoin, right? You can wake up the next day and it can be way higher than it was the night before. So it's like, you never know. Right.

CHRIS SIPES CFP®: So, so anyway, sentiment wise, that one is, is the one that's kind of flashing a little bit of a contrarian. Take like, Hey, people are probably not as bullish about that versus silver being over a hundred bucks. I would guess if you could read the sentiment in silver, it's probably pretty, pretty euphoric at the moment.

CHRIS SIPES CFP®: So with taxes right around the corner, this one was a shock to me, households with no income. Now, if you're not familiar with the tax, code or the way that we do taxes here in the U. S., there's taxes on income and then there's taxes on investments. And we tax income more heavily in general than we do investments, you know, just kind of a broad brush.

CHRIS SIPES CFP®: Now, of course, there's exceptions to that. This isn'T tax advice, et cetera, et cetera. But in general, income taxes are higher than they are in I wouldn'T have guessed this, but if you look across the U. S., roughly about a quarter of people report no income, households with no income. So this isn'T just individuals. This is actual households that are showing no income.

CHRIS SIPES CFP®: And while some of the states have a little bit more or less, Utah at only 17%, so I guess most people in Utah are bringing in an income, but most of the states are in that mid-20% range. So interesting, interesting little stat from a tax perspective. So even if you raise income taxes, roughly a quarter of the households in the United States are not going to be affected by that.

DANO WEIR: Chris, is this saying like if someone's making below poverty, 17 grand, is that counting them as no income in this? Or is this literally people with zero?

CHRIS SIPES CFP®: I don'T know that level of detail here. But this is, this is showing no, I'm what I'm guessing it would be is that you, the income that you do have has been eliminated by the deduction. The standard deduction. Yeah.

DAREN BLONSKI CFP®: So yeah.

CHRIS SIPES CFP®: So tax credits or whatever it might be where basically it just for tax purposes, you're, you're reporting no income. Now we all know too, that there's ways that, you, you can be making income, but after all your offsets, you're reporting none.

DANO WEIR: I was going to say, there's some seeing DC there. So I can think of one guy in DC who makes no money.

CHRIS SIPES CFP®: Yeah. It's not necessarily that people are living off of no income because I don'T see how that would be possible. But for tax purposes, there's no income. Now this one was striking from Apollo, 29% of US households. So that's one in three. One in three U. S. Households consists of only one person.

CHRIS SIPES CFP®: I don'T know about you guys, but when I saw that, that seems a lot higher than I would have guessed. Probably a big reason behind some of the political upheaval as well.

CHRIS SIPES CFP®: If we're not spending as much time with other folks, it's probably that tension can kind of build up a little bit more.

CHRIS SIPES CFP®: You know, my household with four kids, we're able to get our anger out on a daily basis. There's no buildup.

CHRIS SIPES CFP®: So anyway, you know, culturally though, it's an interesting, it's an interesting stat. I never would have guessed that it was that high.

DANO WEIR: And so Darren, this is what you talk about all the time with, with birth rate collapse and, similar things which have happened in Japan as far as you know that you've got further and further and further isolation and there's so many options digitally now to have less and less need for people in your life Chris I didn'T I can'T say I've thought about this but I mean I'm not surprised to see this at all frankly Yeah.

CHRIS SIPES CFP®: And it possibly leads to, we got the consumer sentiment readings today. And while they ticked up a bit from last month, so we're on the upswing there, you can see that for the history of this reading going back into the 50s, we're still extremely, extremely low on consumer sentiment. Really, the only other Times that we've had consumer sentiment this low were during periods of recessions.

CHRIS SIPES CFP®: Or right after recessions. Now, in 2022, when we were experiencing the very high inflation, that also was a time where sentiment was very low. But we've been kind of camped out here for a while in the low consumer sentiment. And it's interesting because it's one of the many indicators that you go, how can the Markets be hitting all-time highs?

CHRIS SIPES CFP®: How can the economy be doing well according to a lot of readings. And yet indicators like this are showing recession level sentiment. And with the consumer making up such a huge part of the US economy, somewhere around 70%, you would think that it would be flowing through to earnings and and be hitting the economy a little bit more.

CHRIS SIPES CFP®: But that has not been the case because as we've discussed, most of the spending is done by the top 20% of wealth holders. And we've got a record high concentration of wealth in the United States. And so it doesn'T so much matter from an economy perspective like when you're measuring the spending.

CHRIS SIPES CFP®: It's not as important to know kind of what the whole swath of how people feel. It's most important to know how the top 20% feel, which is probably mostly tied to the financial Markets. They hold most of the financial wealth in terms of the stock Markets, the Bond Markets, et cetera. And so when we've had strong Markets that has flowed through, continue to flow through of these companies.

CHRIS SIPES CFP®: So not necessarily saying that's a good or a bad thing, but there is that concentration of spending, which is different going back to the Times they've changed. Look at where we were in the mid-90s. It was roughly even. The consumer spending was roughly even, but now that is totally bifurcated in terms of the spending in the U. S.

CHRIS SIPES CFP®: Okay. It feels like, you know, if you think of the U S as a reality show this particular topic feels at least two seasons ago at this point, but we were talking about mortgage spreads. You know, I think that was maybe two weeks ago and it feels like a long time. But when you look at the mortgage spreads, this hopefully will help people visualize what that means a little bit.

CHRIS SIPES CFP®: That is the spread of the 10-year treasury yield, so what you can get in a 10-year treasury versus the 30-year mortgage. Now, this from Lance Lambert by way of Resi Club showing that historical spread in the gray there, and we just got back down to kind of a normal historical spread after it kind of going all, you know, going into COVID essentially.

CHRIS SIPES CFP®: We went, we went really high. We went really low. We got to historically low spreads. I think it was in May of 20, was when we hit the low and, and then we went much higher with the inflation that we saw in 21 and 22. But now we're kind of back down to normal.

CHRIS SIPES CFP®: However, it doesn'T feel as normal because if you look at the period prior to COVID, you'll see that we were we were lower than we are today. And for most of that time, we were in the historically narrow range. That was kind of what people got used to in terms of mortgage rates, which is a lot of that is tied to the government's involvement in the mortgage market.

CHRIS SIPES CFP®: And so a lot goes into that. However, we're kind of back into that normal. Range. Now, we did see rates sell off this week, meaning that rates went up. And, and that is set by the market. Treasuries were selling off.

CHRIS SIPES CFP®: And so if that 10 year treasury rate goes up because the market is demanding a higher return for, for that investment, then you'll see mortgage rates go up as well. Because of that spread, it's going to be, they're going to kind of move together, over time. So hopefully that makes sense.

DAREN BLONSKI CFP®: Yep.

CHRIS SIPES CFP®: Now, one of the other changes that we're beginning to see and it's early in the year and also we've sort of had tastes of this over the last decade or so randomly. And so I hate to even say that it's happening because we don'T know that it's happening for sure. But we're seeing a broadening out in the Markets in terms of where you're starting to see the returns come from.

CHRIS SIPES CFP®: And this is from Ned Davis Research. They say 63% of S&P 500 stocks are beating the index year to date. That was as of January 14th. This is the best market participation since 2001, so 25 years. As of yesterday's close, this number is now up to 65%, the second best in 50 years.

CHRIS SIPES CFP®: Strength continue. Now, strength as measured by breadth, meaning that more stocks are participating, as you can see by this chart is kind of more the norm. So the higher these bars go, the more participation in the Markets. And you can see that this three-year stretch that we just went through was more of an anomaly.

CHRIS SIPES CFP®: Only other Times we've really seen that type of anomaly was the dot com era in 99 and going into 2000. So we had a three year stretch of it here most recently. So, you know, are these Times changing? Are we starting to see a broadening out and that concentration shrinking in the market? And if so, what does that mean? Right.

CHRIS SIPES CFP®: And so from Bank Of America, they're showing the decade winners during the 1970s. And this is another thing I wouldn'T necessarily have guessed. Small cap, so small companies, value and commodities were really the winners of the 70s. And for those that don'T know, the 70s was a very high inflation period of time.

CHRIS SIPES CFP®: Coming out of the 60s, we had a ripping stock market in the 60s, a lot of expansion. And then There was a lot of spending on social programs. There was a lot of spending on the Vietnam War. The government kind of got upside down in terms of how much they were spending, and then that led to money printing, a lot of pressure on the Fed to keep monetary policy easy.

DANO WEIR: Which all led to talking about the seventies and not now. Right.

CHRIS SIPES CFP®: Yeah. Right. Right. Well, exactly. The parallels and maybe that's why we're starting to see some of the returns that we've seen. We've seen finally some strength in the small caps. Commodities have done really, really well, especially gold. Gold was a, was a great performer in the seventies. So are the Markets telling us that there's more inflation around the corner. Are the Markets telling us that inflation's already here?

CHRIS SIPES CFP®: Maybe we're just not measuring it as accurately as we could be, right? I don'T know the answer to that, but the Markets seem to be with the shift that we're seeing in the Markets, the Markets seem to be sending a very clear signal that we are not in the same environment that we were a few years ago and not in the same environment that we've seen over the last few decades for sure.

CHRIS SIPES CFP®: So, which I think may come as a surprise given we got really good GDP growth numbers last week that this from Bank Of America again historically periods of strong earnings per share growth and strong GDP growth were the worst phase for the S&P 500 based on average annual returns. Section when we get above GDP nominal, and that's the key word nominal, which means that that's inflation. Plus a return.

CHRIS SIPES CFP®: And so when GDP is high, because inflation is high and earnings per share growth is also high, likely because inflation is high. Because remember when inflation flows through, a lot of Times companies show higher revenues, they end up showing higher earnings just because it's measured on a nominal basis. You can'T buy... The Louisiana Purchase, you can'T buy that for $15 million anymore. Right?

CHRIS SIPES CFP®: And so those earnings, those, that GDP is going to go up with a nominal amount. And when you're in a higher inflation environment, the S and P actually tends to not do as well, the large, the larger companies. And that's maybe a part of that is because those are, those companies use less debt for their They're not benefiting from the fact that their debt rate is fixed while their earnings are going up due to inflation.

CHRIS SIPES CFP®: Now, another area that we're starting to see possibly things changing again, this one's from Bank Of America showing the emerging Markets versus the US.

CHRIS SIPES CFP®: Is going up, that is the US outperforming emerging Markets. When it's going down, that is the emerging Markets outperforming. And you can see the last time that the emerging Markets were outperforming were during the decade of 2000 to 2008. That's important because we're going to look at another chart here in just a second. But maybe, maybe, maybe we've just seen at the end of 24.

CHRIS SIPES CFP®: And we've got this little, little tiny one-year outperformance of emerging Markets that we're seeing. Now, this is the small cap stocks because the important thing to know here from a diversification standpoint is that all asset classes go through drawdowns. And sometimes those drawdowns, which just means that it's fallen from its high price, Those drawdowns can last a long time between new highs.

CHRIS SIPES CFP®: This is the Russell, which is the small caps. And you can see that, yes, the small caps are doing great over the last few weeks, really since the liberation day in April. We're barely above where we were five years ago at the end of 2021. So maybe that's a good thing for the small companies in this case, because we've had a long period of time where they've just really gone nowhere.

CHRIS SIPES CFP®: But there have been several Times in the past where large asset classes essentially go nowhere. Going back to the emerging Markets for a second, remember that 2008 when they peaked or that strength that we're seeing in the emerging Markets now, guess what?

CHRIS SIPES CFP®: That's an 18 year channel here in a major segment of the global stock market has essentially gone nowhere for 18 years. And I think most people would be surprised to know that that's happened several Times in the past concentration is a dangerous game, no matter what stock market you're in, no matter how good that economy is, no matter how good those companies are.

CHRIS SIPES CFP®: In stock Markets around the world, it's happened in Japan, it's happened in the US, it's happened in emerging Markets, it's happened everywhere where you can go nowhere for multiple decades along with having some pretty big drawdowns in the midst of that.

CHRIS SIPES CFP®: While diversification never feels great because you're never the top performer, right? And it's the most boring thing ever to talk about at your cocktail party. Diversification can help you avoid these decade plus drawdowns channels in any one asset class because they happen all the time and they'll probably happen again in the future.

CHRIS SIPES CFP®: Long and short of it, on the economy side, who knows if this is an actual breakout in the emerging Markets or if we're just going back into that channel that we've been in for the last 18 years. Too early to tell. Definitely too early to make any celebrations.

DANO WEIR: We need to throw a firm wide barbecue and then we can finally have the good conversation about diversified assets.

DANO WEIR: Going to the barbecue at the cocktail party and people talking about their crazy risky stuff, bragging about their big fish. We're going to have an entire barbecue about bonds.

CHRIS SIPES CFP®: That's right.

DANO WEIR: We move on to our second half of the program. Mr. Darren Blonsky, CFP, managing principal of the firm. He spends his wee hours in the morning looking at technical. Charts. He's a technical analyst and we let him take over the show now.

DAREN BLONSKI CFP®: This is the part of the show where we get to nerd out on the charts a little bit more.

DAREN BLONSKI CFP®: Let's see. So we're, you know what? I'm going to stop share on this one real quick and grab a different one because I'm grabbing All right. Let's see if I can get this to work right.

DAREN BLONSKI CFP®: We're all right.

DAREN BLONSKI CFP®: Let's see if this is going to work. Try that. All right. So what I thought we would start today talking about is the dollar and the U. S. Dollar. This is the DXY index. So what this tracks is the relative strength of the dollar in juxtaposition to all the other major currencies.

DAREN BLONSKI CFP®: So there's something going on in Japan. There's something called the carry trade. It appears as if the Japanese government, as of this morning, has decided to start selling treasuries. So they hold U. S. Treasuries and they start selling that for dollars and then they take those dollars.

DAREN BLONSKI CFP®: And use it to strengthen their currency when there's issues there. It does appear there's some issues, which is enforcing the value of the dollar down. That's one theory.

DAREN BLONSKI CFP®: The other theory is all the noise that went on in Davos this week and all the macroeconomic chaos that's also impacting the value of the dollar and impacting the value of gold and silver. So gold and silver, gold making an all-time new high, almost 5%.

DAREN BLONSKI CFP®: Thousand dollars an ounce that's pretty insane and how fast it's gone up just as a comparison this is the gold chart let's compare that with the s&p 500 wow so this blue line is the s&p 500 and it gives you a sense s&p 500 has done okay it's had pretty some pretty good years recently but look at how much better the gold market is done Pretty wild when you look at it from a comparative standpoint.

DAREN BLONSKI CFP®: And that tells you what's going on. You will notice, though, which is interesting, is this kind of negative correlation, gold going up, stock market going down, gold going up, stock market flat.

DAREN BLONSKI CFP®: So could that be a sign of things to come? I don'T know. Now take a look at silver compared to the S&P 500. I mean, that's crazy. Silver trading like a meme stock, breaking $100 per ounce.

DAREN BLONSKI CFP®: And I mean, the way that silver has grown in the last few months. And so you ask why? Why is silver going up? Why is gold going up? What's driving this? Well, I think a good chunk of it's macroeconomic uncertainty, political uncertainty, the change of the guards, the change of the world order. You saw politicians in Davos. Calling for a return to the world order on some level.

DAREN BLONSKI CFP®: And certainly when we have one of the most powerful people in the world running around saying, we're going to take your island, regardless, that tends to shift things up. And that's what we've seen. So you're seeing these hard physical assets appreciate people feeling less secure in treasuries, people feeling less secure in buying the dollar and more secure in buying hard physical assets.

DAREN BLONSKI CFP®: I mean, for silver to go up 7% in one day, trading at $103.26, that's crazy. That's like Bitcoin-Ethereum type moves. Interesting that Bitcoin's not really moving. We're not really seeing a lot of shifts in Bitcoin right now.

DAREN BLONSKI CFP®: When I look at it on the chart, I think it's weakness ahead for Bitcoin. And the reason why I think that is because you have a double top right here with a neckline at 90. And then we traded up and got rejected off of that today. So that building momentum we had from last week, I think is gone.

DANO WEIR: And that, you mentioned before, 85,000 is kind of line of support in there. So you feel like weakness and probably just chilling in that channel for a while?

DAREN BLONSKI CFP®: I don'T know. I think you got to watch 88, right? You can see this channel here and see how important this channel was back in this area. You can see how important this channel was back here in 24. We're kind of in there. I think you got to watch 88 right now and see what happens there. We break below 88. There's certainly some support. In this arena in the 70s to 80 range. Wouldn'T be shocking.

DAREN BLONSKI CFP®: I will say, though, you can see that it's traded into this area. This is support right now in this channel. And we're still in support in Bitcoin. But the fact that it keeps lingering around support levels tells me that we're probably closer to weakness than we are to strength at the moment. But it's had a history when you really look at these kind of sideways trades. For a while and then it just breaks out.

DAREN BLONSKI CFP®: Interesting, one of the co-hosts or whatever of Davos was BlackRock's CEO, Larry Fink. And BlackRock is heavy Bitcoin, been talking about Bitcoin. He talked about it in Davos. And interestingly enough, this is who will Trump nominate as the next Fed chair?

DAREN BLONSKI CFP®: None other than Rick Reeder, BlackRock's chief investment officer. And that's up at 48%. So it's looking like the street's leaking that Rick Reeder is going to be the next chair of the Federal Reserve. I've actually seen Rick Reeder speak. I was at a conference maybe five years ago in New York City.

DAREN BLONSKI CFP®: And so I show up and... In California, we dress a little more casual. We don'T wear full suits all the time. Sometimes if you're in the city and stuff, but most clients are just like that's over the top if you're dressed up in a full suit and tie. I had one guy once when I first started in the business.

DAREN BLONSKI CFP®: I was walking down the street and I had a tie on. I used to wear a tie every day to the Office. He says to me, he was always in the peats and I was walking over to get something to eat. He says, you know, Darren, you're in Sonoma. You don'T need to wear a tie.

SPEAKER 8: And I was like.

DAREN BLONSKI CFP®: Thanks for the permission. I don'T think I'm going to wear a tie anymore. And so I don'T wear ties. But anyway, so I showed up this BlackRock thing and just no tie and sport coat. And he showed up with his BlackRock and everybody's super conservative, dressed to the T's in New York City.

DAREN BLONSKI CFP®: So anytime I go to New York City, I got to remind myself like, okay, I got to dress more formally. And they were all dressed super formally and Rick Reader came in to talk. The dude is brilliant. I mean, he just rapped about Bond and this and that and like you sit there and you're like blown away by everything this guy's saying. Super smart dude.

DAREN BLONSKI CFP®: But deceivingly so. Like if you met the guy in like a subway, you would not think who he is. He just doesn'T have like that polished look. But when he starts opening his mouth, you're just like, this guy is brilliant. So anyway, that's kind of interesting, right?

DAREN BLONSKI CFP®: So I don'T know if you're want to believe in, you know, deep state or anything, but the fact that Rick Reader is now being positioned and head of BlackRock was the guy at Davos. And I guess Klaus Schwab decided he didn'T want to be the main dude anymore. So he's putting up these other figures that people started calling Klaus Schwab too much of a conspiracy theorist. Or so.

DANO WEIR: We said we'd leave the tinfoil hat at home, Darren. Come on.

DAREN BLONSKI CFP®: I mean, but Besson didn'T even do it, dude. Did you hear Besson's comment about eating bugs at Davos? Yes. I'm just like... You know, say what you want about Trump's admin, but Besson, you listen to that guy. He is one smart, unforgiving guy. He just read somebody and he's funny.

DAREN BLONSKI CFP®: Anyway, I divert. I wanted to point out oil today because we see something building in oil you can see this pattern right price of oil going up right now this is when the Venezuelan see no yeah we started moving up when the Venezuelan thing happened and we've continued to move up we were looking at this support level of 56 and i believe this is right around when we went in and took Maduro.

DAREN BLONSKI CFP®: And then now we're seeing this build. And it looks like we're going to break out the higher highs in oil, which makes me suspect, right? It's Friday. What happens on Friday, Chris?

 CHRIS SIPES CFP®: Well, something that would have moved the market that we just need a couple of days to let things simmer.

DAREN BLONSKI CFP®: That's right.

CHRIS SIPES CFP®: So I thought I'd never know what's actually going to happen on Friday.

DAREN BLONSKI CFP®: But it does seem even during.

DAREN BLONSKI CFP®: The Biden administration that a lot of things they were going to do that could move the Markets, did it happen on Friday afternoon, Friday evening, Saturday morning? The politicians have now figured out that if we do the things we're going to do that could be kind of nerve-wracking late Friday, the market can'T really respond and then it can recalibrate.

DAREN BLONSKI CFP®: If we end up getting 24-7 Markets, which sounds like we're headed that way, makes you wonder if the politicians are pushing back on their like, wait, If you make it 24-7 Markets, we're not able to do all the things we want to do without sending the Markets crazy. And so it's really hard to tell, right?

DAREN BLONSKI CFP®: And you don'T want to get conspiratorial, but you also want to like, it is interesting that oil's building, the price of oil is building, which likely means attentions in the Middle East are building and there's something getting ready to pop off. So I said, okay, it's all garbage. Let's look at the flight tracker. So these are the flights.

DAREN BLONSKI CFP®: This is where the pilots are flying the planes and the people who insure the planes are telling the pilots where they can and can'T fly the planes. And there is, you know, some emptiness in Iran right now. It's not like as empty as I saw last time when they hit it. But I am seeing whisperings in the OSINT community, which is the open source intelligence community of stuff building. We delivered our second.

DAREN BLONSKI CFP®: Aircraft carrier to the Middle East this week. One of them turned off its beacons. So no one knows where it is hit the Indian ocean and turned off its beacon in the OSINT community was like, what you turned off that? Well, they're not going to tell you where they're parking that thing, I guess.

DAREN BLONSKI CFP®: Anyway, that is interesting. So to me, like these are connected, the building oil. Flight radar looking kind of empty in Iran. We dropped off our second, so I think we're probably closer to some action there than we are away from it at this juncture, just based upon those indicators.

DAREN BLONSKI CFP®: So if that's an impact to the market, that could be a shock to the market. Now, when we look at that and then we look a little bit through, so this is like, do you guys know what the whispering pines are? Have you ever heard of whispering pines?

DANO WEIR: No.

DAREN BLONSKI CFP®: You ever heard that term?

DANO WEIR: No.

DAREN BLONSKI CFP®: So I have a bunch of pine trees above my house, and when the wind comes in, like the pines whisper, there's just like this noise of the pine trees just going back and forth in the wind. It's like one of the best sounds ever, and it's kind of like the Markets have whispering pines, and they're whispering something at us, right?

DAREN BLONSKI CFP®: So we try to read the tea leaves, as they say, when we're looking at these charts, trying to figure out what's going on. And so one of the areas where I try to pay a lot of attention to is the Japanese yen and the dollar. And the reason is because USDJPY, the dollar-yen trade is interesting.

DAREN BLONSKI CFP®: And we're seeing this massive drop in it. See this right here? I talked about a little earlier. The value of the dollar to the Japanese yen. And there's something called the Japanese carry trader, the yen carry trade. And that looks like it could be unwinding, which could be an indicator of something more nefarious going on underneath the hood in the stock market.

DAREN BLONSKI CFP®: And then I was looking at the silver Japanese silver dollar trade and I noticed an interesting pattern. So you look at the dollar, or silver versus the dollar. So this is looking at silver, the price of silver, versus the U. S. Dollar.

DAREN BLONSKI CFP®: And let's see, let's look at the daily chart. So we'll go up there. And remember...

DAREN BLONSKI CFP®: Chris, you're the market historian here. What happened in March of 2025?

DAREN BLONSKI CFP®: March that was coming up to liberation day that's right liberation day so everybody freaked out and you can see we've been building similar so this was the build in the liberation tariffs day right and we're building here and then we compare and we add spy into this mix look at this dip in the spy right here this blue line that corresponds with the ratio of silver to the dollar.

DAREN BLONSKI CFP®: And then it's interesting, we're getting the same build in the dollar.

 CHRIS SIPES CFP®: Yeah, it looks like that relationship holds previously too. Look at the 22.

DAREN BLONSKI CFP®: Right here you can see it was 20. So I noticed this interesting correlation, we'll call it. It's not necessarily causation. But it seems that when people flow towards precious metals like they are, it's a precursor for the market correcting.

DAREN BLONSKI CFP®: So this is putting my spider sense up, right? Like I don'T know for sure what's going to happen, but it is interesting. Like you're seeing this build here. Market hasn'T really, the stock market, it really hasn'T reacted to this silver versus dollar increase.

DAREN BLONSKI CFP®: And here we are at the S&P 500. And the theory that you and I, Chris, have offered in recent years is like, hey, this whole NVIDIA thing isn'T going to last forever. And when it comes off the rails, all these stocks better step it up because it's going to be ugly.

DAREN BLONSKI CFP®: And so it does make you wonder like something's...

DAREN BLONSKI CFP®: Building like there's a correctional event getting it starting to whisper in the pines as they say or the tea leaves are suggesting maybe the way and Chris you and i were talking earlier today and we're like silver going up like this i mean this is juxtapositioning the silver to the s&p like look at that i mean it's had a pretty decent correlation until you know, late last year. And then it just changed.

DAREN BLONSKI CFP®: So something's up. And whenever the market, something moves as fast as it does move, as it has moved, somebody's breaking. Some institution was Too Short or too long and they're blowing up. We don'T know who it'll be, but it's going to be somebody.

DAREN BLONSKI CFP®: What the U. S. Government's learned to do is just bail people out when that happens. So next bailout incoming, because this is just too fast. It's too much of a dislocation and institutions don'T, just can'T get on the right side of that trade fast enough.

DAREN BLONSKI CFP®: And there's nobody, even the people I know who are diehard like gold and silver lovers and you know, think every other asset but gold and silver, they're like, oh my gosh, this is crazy.

DAREN BLONSKI CFP®: The people who trade silver don'T even know what to do with this. Three weeks ago, just to see what would happen, I ordered some silver coins. I still haven'T gotten delivery of them yet, which is crazy from a very rapid old dealer because I suspect they got all these orders in and don'T have the inventory to fill. I'm waiting for my kids.

 CHRIS SIPES CFP®: You sure your kids didn'T just snatch it off their front porch when Amazon dropped it off? That happens to me sometimes. I'm like, I never got this.

DAREN BLONSKI CFP®: Highly probable, actually.

 CHRIS SIPES CFP®: Find it ripped up in a box, like in a closet somewhere. You're like, yeah.

DANO WEIR: Kid comes rolling in with a bling chain and you're like, hey, dad, guess what I got?

DAREN BLONSKI CFP®: Totally. So then we look at the Dow Jones transportation, right? Because this can kind of be a sign that, and so this is showing you that like these other stocks out there in NVIDIA. Et cetera, are doing really well.

DAREN BLONSKI CFP®: And you can see this huge build and move here. This was the spike that came from the Dow Jones transportation happened when we got the vaccine. We just made it back, interestingly closed right on that vaccine announcement today.

DAREN BLONSKI CFP®: So the Dow Jones transportation can be kind of like an early warning sign if that's going down because think about that. It's like the arteries of the economy, we're not necessarily seeing that huge. Sell-off and IWM finally broke out. Sox is a semiconductor index. I would expect to see this start blowing up if we're going to see a huge market correction.

DAREN BLONSKI CFP®: And then IGV is the front end of the risk curve. It's like these are your tech startups, and that's definitely rolled over. So I think there are the makings of our spring correction because that's all I think it would be at this point, some type of correction. I would not get on the wrong side of this trade. Because the chances of Trump coming out and stimulating the entire market are very high.

DAREN BLONSKI CFP®: Ag looking like it's going to break out, Chris. You'll like that. It's like the bonds are actually going to take off. That ascending wedge is a very bullish pattern.

DAREN BLONSKI CFP®: And our Qs are holding on. But they almost look like they're getting ready to do distribution. And you can kind of see right here, here's an example of distribution. Very similar pattern to right there.

DAREN BLONSKI CFP®: Here's another example of distribution, the top. So what happens at the top is like the price point hangs there and just lingers and lingers and buyers keep buying, but eventually those buyers get worn out and then it falls through the floor. And then we see.

DAREN BLONSKI CFP®: So, you know, good time to be very mindful, not good time to get on the wrong side of it because I suspect that if we get any hiccups, we're going to get the politicians piling in. I don'T think there's anybody on this that listened to this would disagree with me that Trump is a narcissist. And one thing I can tell you is that he attaches his ego to the market.

DAREN BLONSKI CFP®: I take hope in that because I feel like he's attached his ego so much to the market that he's going to do anything to prop this thing up. Not good for the long term, but all right for investors in the short run. So yeah, interesting. There's definitely some things changing underneath the hood here that we're going to want to watch over the next couple weeks.

DAREN BLONSKI CFP®: I think we'll leave it there and hopefully we'll get through. The weekend without our East Coast friends and our Southern friends in Florida, et cetera, not freezing like nine inches of snow. Or is it nine days of snow? I saw, I mean.

DANO WEIR: Like record snowfalls potentially across the United States.

DANO WEIR: Speaking about potentially some kind of correction, maybe in the S&P 500, you've got fear based assets like gold and silver spiking at unprecedented levels for the average investor who's sitting there with their portfolio. That sounds pretty scary. So what types of things should they be thinking about with respect to fear around what we've just presented in the show?

DAREN BLONSKI CFP®: Well, I think he. I mean, this is general advice. This is not to anyone specifically when I say this. I would have to know what your situation is to give you advice. But generally, you want to be in a portfolio that has what we call an expected volatility of a certain, you know, a certain, there's an expectation and you want to stay in that regardless of these conditions.

DAREN BLONSKI CFP®: We're not sharing all this to say, oh, you should go out and change your portfolio tomorrow. But more to educate you on what's going on, what we're looking at, how we're... Thinking about the Markets.

DAREN BLONSKI CFP®: Generally, you want to be in a portfolio that you're okay with the expected volatility and just stay put. But again, we always joke on this show because over the last couple of years, the people who really won and did well, it's because they weren'T diversified. They were super concentrated in tech and tech just ripped. And maybe we're starting to...

DAREN BLONSKI CFP®: It might not be, but maybe we're starting to see that moment where diversification is going to win the day and it is going to be the way to go. So if my portfolio was just super heavy, concentrated towards high-tech AI, you might want to think about that. It's not going to go on forever. And it could absolutely keep going, but it could also not.

DAREN BLONSKI CFP®: It could pull back. And so you want to really think about, are you okay with the expected ball of your portfolio? If you don'T know what your expected volatility is, reach out to us. We'll help you figure it out real quick and we can guide you through that. And thinking about how you might want to make adjustments.

DANO WEIR: Thank you so much for checking out the show. Thank you for following along with the education. And that's what it is, just what Darren said. It is not advice. It is this is what we're seeing going on. You should be aware of where you stand. And if you don'T, call us. We'll talk to you.

DANO WEIR: We're happy to fill you in. Even if you're not a client, we'd love to meet you. SonomaWealth. Com is where you can take our free wealth analysis. Also, wherever you found this podcast, whether it's on our YouTube channel, Apple Podcasts or Spotify. We have other podcasts, including It's All Money.

DANO WEIR: Dropped a new episode this week on data recovery, which is a part of your financial plan you didn'T even realize was part of your financial plan. So make sure you subscribe where you are and find our other podcasts. They're also all at SonomaWealth. Com. Darren and Chris, thanks for the presentation.

CHRIS SIPES CFP®: We will see everyone next week. Learn about how the Fermata Advisors family of brands can help your family and business in finance. Sonoma Wealth Advisors, a comprehensive, holistic finance solution offering financial planning, asset management, and tax planning. Take our free wealth analysis now at sonomowealth.com.

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CHRIS SIPES CFP®: Fermata On The Markets features human hosts, editors and voiceover talent. Music by Dr. Delight Thank you for listening to the very end. We appreciate diligent viewers and listeners. Fermata Advisors, LLC is registered as an investment advisor with the SEC and only transact business in states where it is properly registered or is excluded or exempt from registration requirements.

CHRIS SIPES CFP®: This content was produced by Fermata Advisors, LLC, DBA Sonoma 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.

CHRIS SIPES CFP®: Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Information expressed does not take into account your specific situation or objectives.

CHRIS SIPES CFP®: And is not intended as recommendations appropriate for any individual. Viewers and listeners are encouraged to seek advice from a qualified tax, legal or investment advisor to determine whether any information presented may be suitable for their specific situation. Past performance is not indicative of future performance.