Does The Market Love AI? Does It Now?

DANO WEIR: Happy Friday. And on this Valentine's Eve, we are asking the question on the markets. How does the market really feel about AI? Because we're seeing signs in both columns. My name is Dan O'Weir. I'm Marketing Director for Fermata Advisors, our private wealth bearer in Sonoma Wealth, joined soon by our managing principals.

DANO WEIR: This week, in honor of Valentine's Day, we're looking at how the market feels about AI. Do they want to go steady. Well, they're kind of... Giving mixed signals. So we'll look at the indicators, the market indicators are showing that the market has not yet priced in the impact AI is going to have not just on tech, but on all sectors of business.

DANO WEIR: And yet, the market still loves AI some of the biggest stocks not only in the United States in the world, wait until you see the lopsided chart for US Equities versus everything else in the world.

DANO WEIR: And yet, we also experienced the SAS. Software as a service apocalypse this week with major repricing of huge software stocks, potentially with the thought that coding is dead and all those were too high. And yet inflation is down. And according to the federal government, jobs are great. So which is it?

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: All right, let's get them in here. The managing principals of Fermata Advisors and our private wealth brand, Sonoma Wealth. Happy Valentine's Day, Eve, guys. We're going early today, Darren.

DAREN BLONSKI CFP®: We are indeed going early for market close. So who knows what will happen at market close or after, but we'll certainly give you the signals as they lay right now and dive into the interesting week we had at the lift with some AI disruption finally starting to reprice stocks, which is a turn of events, I guess.

DAREN BLONSKI CFP®: And the job's data coming in really strong. Stronger than expected, but it turns out if you delay job data by a bit, you can make it look really great. And that way this week.

DANO WEIR: It's Darren and Chris's morning zoo on our radio station today. It's a morning show. Chris, what's going on with this meme here?

CHRIS SIPES CFP®: This one made me laugh out loud. It's a picture of a dad with two... Two daughters and the daughters are talking to each other and they say, daddy's mad at interest rates. And that was funny to me because I have two daughters and they don't fully understand what I do.

CHRIS SIPES CFP®: But sometimes I'll be in my own headspace thinking about things like interest rates. And I think sometimes they're just like, yeah, dad's mad at interest rates.

CHRIS SIPES CFP®: I don't know if you guys get that at all.

DANO WEIR: My son, we were, gosh, what led to it? Somehow 2008 came up and I'm sitting there bedtime story time with my eight year old son, seven year old son. And he's like, well, what was the great financial crisis? And I was like, okay, so, you know, at 11 o'clock at night or something like that.

DANO WEIR: And he got it. He understands it now. So, you know, it's. It is fun to kind of explain it to someone who is, you know, just learning.

CHRIS SIPES CFP®: Yeah. Yeah. It's, it's very fun. My son is five. He, he always asked me, what do I do? Like how to, you know, what do you do for work, dad? And I try to explain it to him. Like, you know, I try to, I try to help people with their money and I try to make them more money.

CHRIS SIPES CFP®: So he's taken to this hilarious thing of now I'll drop him off at school and he'll be running into school and I'll be like, Hey, have a good day, buddy. And he'll turn around and yell at me. Yeah, dad, make lots of money.

DANO WEIR: That's awesome.

CHRIS SIPES CFP®: I hope you make lots of money today.

DANO WEIR: That's awesome.

CHRIS SIPES CFP®: Cracks me up. It's like a, like a rap video or something, you know, just, just go make money, dad.

DANO WEIR: Make money.

CHRIS SIPES CFP®: Yeah. So, anyway, interest rates. Well, what, what is one key that drives interest rates? Interest rates are. You can think of them as the price of money. And a big part of the price of money, like the price of anything, is the supply and demand.

CHRIS SIPES CFP®: And so while the Fed, which we talk about constantly, has a big impact on interest rates, a bigger impact comes from things like debt. And this from a visual capitalist this week showing the countries that own the U.S. Debt. You For those that don't know, the U.S. Is the largest debtor nation in the history of humanity.

CHRIS SIPES CFP®: We have the most in dollar terms in history, not the most in the percentage of our GDP, however, in dollar terms.

DANO WEIR: That's right, baby. Number one. Number one, USA.

CHRIS SIPES CFP®: That's how we do it. That's right. I was really struck by this. I expected, I guess I knew Japan was the largest. But I expected China to be the second largest. I did not expect the UK to be such a large holder of the U S debt. I don't know about you guys, but that, that was interesting.

DANO WEIR: I had heard of China. I had heard China for years. And so, I mean, let's just not, not ignore that Belgium is sitting there at 481 billion. Yeah. I mean, there's, there's some countries here where. The debt is far outsized to, you know, how their size as a country. So, I mean, Japan, I mean, Japan from a size, from a geography standpoint, certainly. So that's interesting. This is very interesting.

DAREN BLONSKI CFP®: Yeah. This is actually good, though, right? Because China historically has been such a huge proportion of that debt that it, I think, it froze a lot of politicians and policymakers in division from making decisions that... Thank you.

DAREN BLONSKI CFP®: We're not necessarily in the best interest of the U.S., but we're out of fear that China would start dumping our debt. In fact, they've already been dumping our debt. We're doing just fine. It gives us a little bit more leverage to go out and house down.

SPEAKER 5: Yeah.

CHRIS SIPES CFP®: Yeah. You know, now, Japan being the largest holder, Japan is also a major debtor country in terms of... Their debt to GDP. We've shown in previous graphs, they were over like 250% debt to GDP. Famously, their JGBs have been near zero in terms of yields for many, many, many years, where the Japanese bond market, basically the Bank Of Japan had owned most of the the debt issued.

CHRIS SIPES CFP®: Now that is changing. And the yields in Japan have started to climb very quickly. And that's led to something, an unwind of something called the yen carry trade, where essentially people were borrowing in yen. And because those interest rates were so low, let's just, for easy math, let's just say those rates were zero. You were borrowing at zero.

CHRIS SIPES CFP®: You would take that borrowed money and buy other assets. And a large portion of those assets were purchased in the United States, whether it was U.S. Treasuries, that's kind of the most common, or U.S. Equities. That is starting to unwind because those rates are no longer zero. And the differential between those rates that you could borrow at and the rates that you could invest in have...

CHRIS SIPES CFP®: Started to, to collapse to the point where, there's less of an economic incentive for, Japanese investors and investors around the world to borrow in yen and purchase us security. So what does that mean? Less demand for the debt that drives the rates up, that, that makes the price, higher, for, for those yield to entice the, the, more people to invest.

CHRIS SIPES CFP®: So it's an interesting kind of turn of events there that we're witnessing. A little Olympics humor for you here. Two guys talking to one another and it looks like somebody's kind of down on their luck, star-struck.

CHRIS SIPES CFP®: They say he competes in the downhill.

DAREN BLONSKI CFP®: Way to rub it in, Chris.

CHRIS SIPES CFP®: Way to rub it in. He says, no, Bitcoin.

DAREN BLONSKI CFP®: Yeah you know the the guy who started hedge i was actually floated as the Fed chair potential i did not see that that's interesting yeah Pretty wild.

CHRIS SIPES CFP®: Whoever does their cartoons, though, great job.

DAREN BLONSKI CFP®: You need to hire that person, dude. They're great.

CHRIS SIPES CFP®: Yeah, yeah, absolutely.

CHRIS SIPES CFP®: So I guess good news, bad news.

CHRIS SIPES CFP®: Bitcoin, what you're looking at here is a drawdown chart. So this is like the percent off high. So how many times in the past has Bitcoin been down further than it is today? And the answer is many.

CHRIS SIPES CFP®: So it's not abnormal to see this kind of volatility in Bitcoin. You know, there may be further to go based on, based on the historical, charts of it. But I don't know about you guys, but it feels like the sentiment and the stories and everything that you're seeing in the news, pretty washed out.

CHRIS SIPES CFP®: Maybe we go down further, but wow, it seems like the whole narrative on Bitcoin has flipped to the point where you're. Think. And if you're a contrarian, you're sort of like, this is the whole China is uninvestable. You know, I was just going to say.

DANO WEIR: It feels like it's, it feels like it's so obvious at this point. It's like, okay, well that, that wave has passed and it's like, that seems like almost like it's the opportunity.

CHRIS SIPES CFP®: Yeah. Yeah. It could be. So who knows, more, more to come obviously. But, we've always said, no matter what asset class you're investing in. If you're in a single asset class, you should be prepared for 50% drawdowns. That is very likely to happen at some point in your ownership of that one asset class.

CHRIS SIPES CFP®: And with Bitcoin, you have to have the extra caveat that it's a very highly volatile asset historically. And so be prepared, know what you're getting into. And no matter how good the story is remember that's Remember how everybody was extremely, extremely bullish on it, you know, not that long ago.

CHRIS SIPES CFP®: And now that is completely flipped. And so be aware of the narratives that are swirling around you. And are you being affected by FOMO or are you being affected by extreme fear? Because neither one of those emotions are good when it comes to investing.

DANO WEIR: Darren, you've been a... Focused on this not focused but you've been very into this asset class for a long time so is there anything you want to say to this chart yeah what's new i don't know like it doesn't most people have been a few cycles i think i.

DAREN BLONSKI CFP®: Started looking at this asset class back in 2017 and it's just volatile right just like any part of your portfolio that's high risk gonna be volatile you look at like tech stocks this week they're getting crushed financial stocks getting crushed this week and you just have to have your size your risk size appropriately in a portfolio you know and i think you have to resist temptation whenever you own asset classes like this or any stock for that matter i mean talking to a client yesterday and we were talking about how Amazon is twice down 90 percent and you know when Amazon's up and looks really great.

DAREN BLONSKI CFP®: Everyone goes, oh yeah, I held Amazon through it all. And we celebrate those who held it. Lots of people sold it too. And you don't make money by getting worried about these volatile moments. If you believe in the asset class, you understand the asset class, you hold it and you ride it. And that's how I look at this. It's more and more volatility. And for my investment strategy. An opportunity to pick up some more.

CHRIS SIPES CFP®: All right. We got, speaking of sentiment, this is the stock market sentiment through AAII. Dropped off the bullishness a little bit as we've seen some pullbacks in various sectors. The bearishness has jumped a bit.

CHRIS SIPES CFP®: You know, narrative follows the price or price follows narrative. Who knows which one is the case, but...

CHRIS SIPES CFP®: They they tend to correlate a bit so we saw a bit of a drop off there now the cnn fear and greed index has dropped down into 36 fear which is a little bit lower than last week at 43 it was also in the fear zone but a little deeper in the fear zone this week and then Bitcoin hitting 909 extreme fear last week was the same so we're in the single digits on Bitcoin sentiment according to that indicator.

DANO WEIR: Now let's Mark this moment and we're going to capture this real. And in the summer when it's up to 85 or some other number, you're going to say, Dan, what was that time? Remember it was into the single digits.

CHRIS SIPES CFP®: Yeah, yeah, exactly. Our memories are very short. Now, we did get CPI today. This is year over year. Inflation rate in the U.S. Is at 3.06. And this is you're looking at a 10 year chart to see, you know, kind of where we've been over the last decade. Obviously, coming out of COVID, we had that huge spike in inflation.

CHRIS SIPES CFP®: We returned back down. Towards the middle to end of 24. And then we've just been sideways in the 3% range on CPI. Now, this number affects a lot of those that receive social security, for example. Any type of, you know, financial payments that are tied to the cost of living adjustments will be tied to CPI.

CHRIS SIPES CFP®: And so this is an important number in that. In that regard. Now, we talked a lot about concentrating, even if you're concentrating in cash and how sometimes it can feel very safe because you look at the bank account and the number doesn't change.

CHRIS SIPES CFP®: However, if you're being honest, you should take that bank account number and subtract at very least whatever this official number is from the government. In terms of the cost of living adjustment. So if your stated rate in your bank account is zero, you subtract three off and that's what your actual purchasing power has done over the previous year.

CHRIS SIPES CFP®: All right, so the strange market conditions just keep coming, guys. This is a very cool chart from Michael Batnick. At Ritholtz, and he says, wild market. We haven't seen anything like this since the dot-com bubble burst. Over the last eight sessions, 115 stocks in the S&P 500 have declined 7% or more in a single day. The average drawdown when that happens is 34%. But right now, we're at 1.5% below the all-time high.

CHRIS SIPES CFP®: So you see those other red dots where we've had this kind of... Implosion like we've seen over the last week or two in single stocks. And most of the time that has been during some pretty major drawdowns for the overall index, the S&P 500. Not the case this time. Another, hey, this time is different, which is good, right? I mean, it's good that we're not and a huge drawdown, thankfully.

CHRIS SIPES CFP®: So we've seen... We've seen that AI narrative kind of going from one sector to the next, where it's, you know, notably for us, one of the sectors this week was financial advisors, where we saw a big sell off in several of the individual stocks that have to do with wealth management and financial advice.

CHRIS SIPES CFP®: Based on the narrative that AI is going to just replace us all. I was talking with a friend this week about about sentiment around AI.

CHRIS SIPES CFP®: And can you guys think of another time in human history where there's been an invention that has come along that people are not only like not really excited about, but it feels like it feels like the general sentiment around AI is more like existential dread than like, think about like electricity or cars or airplanes or even the internet.

CHRIS SIPES CFP®: When we all know, when we all knew that those things were coming along, we were like, this is going to be awesome. This is going to improve our lives in so many ways.

CHRIS SIPES CFP®: And maybe I'm projecting here, but I feel like the outlook on AI is like, it's going to take all of our jobs, possibly create weapons to destroy us. Like kind of people looking around like, wait, why are we doing this again? Like, is this going to make things better or worse?

DANO WEIR: I spend. I spend too much time in comment sections, Chris, because I use it as sentiment as like my own sentiment indicator, at least as like anecdotes and see what's what I do it as a vibe check. And as I've shared, AI freaks me out. I see potential, but there's a lot that is scary to me, especially when it comes to the creative side.

DANO WEIR: And so I spend time in the comment sections because I'm like, is this just me? Like, is this am I just being like Clint Eastwood saying get off my lawn? In Gran Torino, you know, like, and, and it is like 90, 10, maybe 85, 15.

DANO WEIR: There's a few people who are like, this is going to be great. And there's the, the, the puke emojis and the slop and the, like, you're absolutely right. There's at least for this generation, a prevailing sentiment that it's, that is not a good thing, but it's coming.

DAREN BLONSKI CFP®: The head of Anthropic, right? So Anthropic is the group behind Cloudbot, which has had some incredible breakthroughs over the last few weeks. He quit last week. And in his resignation, he said the world is in peril. So, I mean, I don't think being fearful is unfounded here.

DAREN BLONSKI CFP®: There are legitimate concerns here with AI and what it could do. And the deeper you dig into it, it's problematic, right? And I think that's why you saw when Altruist released their AI tax tool this week, it just literally wiped trillions of dollars off of financial services because of what it could do.

DAREN BLONSKI CFP®: And it does put a lot of jobs at a threat. And I don't think, you know, I've also heard the kind of thesis that, oh, well, I'll just get a job that's not a threat AI. If all professional services are not working, guess what? They're not hiring a plumber too. They're not redoing the roof because there's no money.

DAREN BLONSKI CFP®: And they're not paying the masseuse person or the massage person because there's no money. So it's going to really revolutionize society in one potential outcome, right? There's many potential outcomes of AI. I think there's definitely going to be a transition period that we're going to have to manage through.

DAREN BLONSKI CFP®: But in particular to the head of safety, what he said in his resignation letter, he said, Nevertheless, it is clear to me that the time has come to move on. I continuously find myself reckoning with our situation. The world is in peril, and not just from AI or bioweapons, but from the whole series of interconnected crisis unfolding in the very moment.

DAREN BLONSKI CFP®: We appear to be approaching a threshold where our wisdom must grow in equal measure to our capacity to affect the world. We face the consequences. Moreover, throughout my time here, I have repeatedly seen how hard it is to truly let our values govern our actions.

DAREN BLONSKI CFP®: I've seen this within myself, within the organization, where we constantly face pressures to set aside what matters most and throughout broader society too. Now, mind you, the people who started Anthropic were the people who left Sam Altman's group. At open AI because they felt like he was acting unethical so these were supposedly the good guys pretty trippy yeah well my.

CHRIS SIPES CFP®: My point exactly like it's just the the sentiment and i'm i'm actually glad to hear you guys say this in a way because i sometimes have to check myself and think is this just me being negative nancy here am i like i said just projecting or is everybody kind of feeling this like you know anyway it's it's interesting i don't know hopefully you know on the optimistic side that it turns out to be better than what we expect but to be determined the market continues to deal with this and what what the chart that we just looked at that showed hey we've got all these stocks selling off getting crushed on a daily basis?

CHRIS SIPES CFP®: And how is the overall index still barely off its highs? Well, the answer to that is that the money is rotating to these other sectors right now. So a lot of the quote unquote, you know, the AI can't attack this space. So Consumer Staples famously is doing very well right now. And so That has led to the equal weight outperformance.

CHRIS SIPES CFP®: Now, it's only a month and a half in, so who knows if this is going to hold or not. But this, according to Gunjan Banjeri, she says the S&P 500 equal weight index is outperformed the S&P 500 this year by the largest margin since 1992. And you can see, based on this chart, this is after, what, two years ago, where...

CHRIS SIPES CFP®: Remember all those shows we did talking about the fact that when the MAG-7 was outperforming, that was the biggest outperformance of the cap-weighted index versus the equal-weighted index in history. That was the other drop there in 23.

CHRIS SIPES CFP®: And now you see it going the other way. Typically with investing and, and, you know, markets. You're going to see these types of swings back and forth, and it's just been feels like amplified here over the last couple of years.

DANO WEIR: Let me put this in another term, in different terms, in case you're not following what this slide is saying. So we often look at, and Darren will show, the heat map, the boxes, the red and green boxes. And they show the size of the boxes determines and shows how big that particular company is.

DANO WEIR: So the NVIDIA box is massive. It's the biggest one on the board. But you can also weight the index by, well, regardless of the size of the company. What if they were all the same weight? What if they were all the same size?

DANO WEIR: Then all things being equal, how would they be performing? And in the past year, we've been talking about how that Mag 7, those big boxes have just been crushing and really holding up the rest of the market. And what this is showing is that for this year, at least, it's the exact opposite.

CHRIS SIPES CFP®: Correct, which is a great segue to the next slide. Why is the Mag 7 starting to lag now? And many of the... The mags have been selling off here recently. Well, a big part of that, at least this is the narrative that we're attributing it to at this point, is the announcements of their CapEx. So CapEx is essentially like what money they're going to pour back into the company for expansion.

CHRIS SIPES CFP®: And in this case, mostly data centers and infrastructure. And you can see these, what they call the hyperscalers. So you've got Microsoft, Meta, Alphabet, and Amazon, the amount of money that they've committed to and their guidance for capital expenditures. And you can see that relative to their historical amounts, and it's near $600 billion.

CHRIS SIPES CFP®: You guys remember the TARP program coming out of the great financial crisis when Paulson announced that, and it was $750 billion. I realize that's close to 20 years ago now, so that's a lot less in today's dollars. But imagine that was basically what the government announced was going to be the total bailout money for the worst financial crisis the country had been through in like 100 years.

CHRIS SIPES CFP®: And now we're talking about close to that amount for the amount of CapEx that these companies are planning to spend. And I think the layperson might look at that and go, well, isn't that good? Don't you want them to spend that kind of money for expansion and such?

CHRIS SIPES CFP®: Historically, no. Historically, the more that companies put into CapEx and into, you know, the more the companies need to put into CapEx in order to expand, the slower their growth is and ultimately the less performance you see out of their equities. So it's kind of counterintuitive, but it's proven to be the case many times in history when there's a large amount of CapEx that tends to be a drag on stock prices.

CHRIS SIPES CFP®: And you can see probably the next bottleneck, and this is no surprise to anybody, many investors have been talking about this for several years, is that The AI demand on power is going to be massive, and this is going to be a big bottleneck for the race to see who wins the AI Wars is going to be the power.

CHRIS SIPES CFP®: And the United States power grid is notoriously behind, especially behind countries like China. And when you look at the power center demand, I think this is probably the next political hot potato is as the utility prices continue to go up. Because remember, it's simple economics.

CHRIS SIPES CFP®: The more demand you have for something, typically the price goes up when the supply does not go up to meet the demand. If you've got the same supply and a lot more demand, the price is going to go up. And we're already seeing people that... Are saying we don't want data centers in our area, etc., etc.

CHRIS SIPES CFP®: And look at the exponential growth that we've seen in data center power demand here in the U.S. It's approaching 7%, and it's been climbing steadily as the AI story has started to play out. And this is before they've actually built as many of the data centers that they would like.

CHRIS SIPES CFP®: So this from Goldman Sachs by way of Mike Zaccardi showing commodities markets are small compared to bond and equity markets. So going along with those build outs, it's going to take a lot of commodities. It's going to take a lot of Copper. It's going to take a lot of metals. And so that's one thing to look at when you see a chart like this is the amount of demand that's going to be on.

CHRIS SIPES CFP®: On those commodities. But also, I think it's important to look at the size of the equity markets and the U.S. Treasury market that's privately owned. This is my pushback for the whole, don't worry about the markets because the government and the Fed will bail them out. They're so huge that bailing them out is, well, I agree that they're going to do everything they can to keep the markets elevated.

CHRIS SIPES CFP®: I would seriously question the proposition that the government and the Fed are able to prop up the markets in the long run. So I'm still a believer in staying diversified. Don't put too much weight in the government and Fed put and the fact that there's going to be a floor under the markets. Because they're so huge now that I just don't see how that's possible.

CHRIS SIPES CFP®: So is this showing that all of gold is only $199 billion? Is that what I'm seeing here?

CHRIS SIPES CFP®: This is showing the gold markets, and I think this is in thousands. So the U.S. Equities markets would be $72 trillion for this. Go. I don't know how to convert that gold one. I want to say, I want to say the gold markets. Like I don't want to quote it. Cause I don't know. I don't know.

DANO WEIR: But it's much smaller. It's much smaller. Yeah. Wow. Wow. Again, American number one. Hey, You asked number one. Yeah.

CHRIS SIPES CFP®: So I don't know about you guys, but watching the Super Bowl, the. Commercials, you kind of get a check on the culture and what's going on. One, every other commercial was AI, but the commercials that weren't AI were gambling. I thought it's all, it's kind of.

DANO WEIR: Or weight loss.

CHRIS SIPES CFP®: Yeah. But it's apropos of like everything that you're seeing is like, Hey, AI is coming. It's going to take your job. There's no future for you. So. We've got a solution. Take what little money you do have and gamble it. Maybe you can have a chance if you can gamble your money into a fortune.

CHRIS SIPES CFP®: I do not subscribe to that. But this was a study that was in Bloomberg. So this is by way of Joe Weisenthal.

CHRIS SIPES CFP®: And they were looking at the share of millennials. Surveyed who expect that they will always rent. So as you can see, it's nearly one in four millennials. They just think that they're never going to own a home, which leads to the bottom line here is that the discouraged renter accumulates virtually no assets over decades, living largely hand to mouth.

CHRIS SIPES CFP®: And what they attribute that to was if you're If you say to yourself in your early 20s, I want to own a home. In order to own a home, I need to start saving for that down payment. And it kind of starts this snowball effect of like, that's my focus. I'm going to build this nest egg to get a down payment.

CHRIS SIPES CFP®: Then once I own a home, or you're at least making payments on the home, it's in many ways a forced savings. We talk about this a lot with people. They say, well, should I? Should I buy a house or should I invest? Or what's a better quote-unquote investment over time? Well, historically, the public markets have been a better quote-unquote investment than your home especially.

CHRIS SIPES CFP®: But there is the behavioral side of that, which is a forced savings. When you have to pay your mortgage every month, you're going to do that. You're going to continue to, you know... To save over time. And we all know that Perfect plan is always going to be subservient to a plan that people actually do, whether it's weight loss or anything else.

CHRIS SIPES CFP®: You can have the ideal, the optimal plan, quote unquote, but if people aren't going to do it, then it doesn't matter. So if at very least people are maybe investing in something that's not the greatest investment over time, but they consistently do it. The chances of them being successful over time is much higher.

CHRIS SIPES CFP®: And so this whole housing crisis, I think, is really leading to more financial issues that are under the surface that we're kind of yet to see. But I think a lot of the gambling and promotion of gambling that you see is... Is a lot of that is tied to the kind of dystopian, like loss of hope for the youth, when it comes to, you know, first and foremost, owning a house.

CHRIS SIPES CFP®: Okay. So we, we got the jobs revisions this week. And I'll just read from, this one was from, Walter Bloomberg and he says, the US added just 181,000 jobs in 2025, which is about 15,000 per month after major revisions, making it the weakest hiring year outside a recession since 2003.

CHRIS SIPES CFP®: Despite the downgrade, January showed a strong rebound with payrolls beating forecasts and unemployment falling. The revisions reflect updated benchmark data and changes to the BLS business formation model.

CHRIS SIPES CFP®: So we've talked a lot about this over the last year that the numbers that come out in real time are almost always wrong and almost always wrong in a big way they've been they've been revising these and it's it's so crazy because the market reacts to the to the numbers that are released right and then they quietly come out six months or a year later and go ah just kidding those were all fake numbers.

CHRIS SIPES CFP®: Here's the real numbers. And it's like the market's like, Oh, okay.

DANO WEIR: Hey, Chris, I think we've got about 10 minutes left in the show. What do we think about a pivot to Darren and a couple of candles? Darren, what do you think about that?

DAREN BLONSKI CFP®: Let's launch.

DANO WEIR: Darren, does that sound good?

DAREN BLONSKI CFP®: Yeah.

DANO WEIR: All right, let's get that going. And I agree with you, Chris. It's very, I mean, in the one sense, what Trump says he's supposed to be doing or has been trying to do is, you know, get those numbers to be, quote, accurate. But I don't know if he can be. I don't know which of the past two presidents we can really agree is going to be accurate when it comes to that kind of data.

DAREN BLONSKI CFP®: Yeah, I don't think either is going to be very accurate when it comes to that kind of data. Unfortunately, I think the data has worked for political purposes on both sides of the aisle, but that is neither here nor there. Let's talk about the S&P 500 this week. So we're watching this candle finish out the week.

DAREN BLONSKI CFP®: Right now, you're looking at the weekly chart on the S&P 500, which is the largest 500 US-based stocks. You can see this red line I'll just draw your attention to first. This is a 20-day period moving average. It's kind of looked at the first line of defense when it comes to the short-term traders in the market and whether or not they're determining if there's an uptrend or a downtrend.

DAREN BLONSKI CFP®: You can see how important it's been on the weekly candles. You can see it checked in here. Find support goes up. Find support goes up. It's pretty important. For just a, is this trend up and still up? And you can see we're showing some weakness right now where we're coming right into it.

DAREN BLONSKI CFP®: But the fact that it traded into the 20-period moving average and then moved up, that's a positive sign for the market. It's just doing a normal check and correction and then move upward. It does appear right now that we kind of have this rounding pattern on or flatlining pattern on the market. It's getting harder and harder for it to hold up. That's how I would read this kind of flat line right here.

DAREN BLONSKI CFP®: But saying that, we had some strong jobs number come in, as we talked about earlier in the show, and we also saw some promising things with inflation coming down. Now, we watched this number called the true inflation number, which is a private organization measuring inflation. But the actual government inflation numbers are...

DAREN BLONSKI CFP®: Coming down and in. Right now, it would give the Federal Reserve a pathway to continue lowering rates, not exponentially so, but slowly. And again, that's what we want. We want rates to go down slowly. That's beneficial, right? We want things to remain in equilibrium.

DAREN BLONSKI CFP®: The markets move really fast in any one direction. That's when we have a problem. And that's what we saw with silver and gold. You can see shot way up and then it's going to come way back down. So we don't want big moves in asset classes. We want slow methodical moves are more beneficial. Silver holding its own at 77.

DAREN BLONSKI CFP®: Traded all the way down into 64. I'd say weakness is the way.

DAREN BLONSKI CFP®: On silver still and then gold holding its own with the flat line this week so we're basically just trending sideways on the gold markets egg the bond market had a really great week strong candle stick up or broke out into this area up here which was the all-time highs way back when in 2022 before bonds got destroyed so investors who have held their bonds and held onto positions are really benefiting from that at the moment.

DAREN BLONSKI CFP®: We've now back into fully recovered territory from the 2022 crisis. Only took three years, but hey, what the heck, that was the worst three years in history. So, Dan, let's give applause to those who held that asset. Oh, yeah.

SPEAKER 7: You know what? Where are they? There we go. Way to go.

DAREN BLONSKI CFP®: Yeah.

DAREN BLONSKI CFP®: And now they are seeing the fruits of their patience. Wanted to bring up oil. Oil looking kind of interesting on a shorter time frame. So this is looking at the weekly chart on oil. I want to go into the four-hour chart. And I'm going to point out to you on the four-hour chart what we're seeing. And we'll just look at this. It looks like there might be kind of a...

DAREN BLONSKI CFP®: Triple top forming oil, an oil which could be good news for going to war with Iran. You can see there's the left shoulder, the head, and here's the right shoulder. And then we're right at neckline right now. So possible this still gets invalidated, still too early. But the neckline for a triple top is right somewhere in there. We are below it at the moment. But that could be telling you that oil is headed back down.

DAREN BLONSKI CFP®: If it's headed back down, Down that likely means that things are going to be improving in the Middle East and that Trump and the Iranian regime are finding a way through their disagreements about life. Interesting Trump had a meeting with Netanyahu this week. It's the seventh time he's met with him, which I think is pretty unprecedented for a U.S. President to be meeting with the head of Israel as often as he is.

DAREN BLONSKI CFP®: Net non-new flew right back to Israel, I guess. There was some kind of quick leave after the meeting. We don't really know what that means, but certainly the charts in the oil markets say that things might be settling down just a slight bit there. We'll see. U.S. 10-year, which is kind of the base rate, just fallen out of bed this week.

DAREN BLONSKI CFP®: So that's pretty good for overall rates. We broke below this support line that was holding significantly. So we are down below it. We would expect to start seeing some support around 4%. That's also good news for interest rates coming down, which is positive for the economy.

DAREN BLONSKI CFP®: At least at this point, there was some talk this week about Trump making a mistake with the new Fed chair appointee. I don't know if that was just rumors. He said some stuff in an interview, but that didn't seem to pan out. But certainly we know that Trump's been very clear he wants to push rates down, mortgage rates.

DAREN BLONSKI CFP®: This is the 30-year rate for those who are looking at refinances, looking to push down. And you can see we're kind of losing this 6%, some may dropping below 6%. So those looking for refinances, the windows could be starting to open for you. Ideally, we'd want this to go slowly down. If it goes fast down again, we...

DAREN BLONSKI CFP®: Have issues right like that's not what we want to see when it comes to markets we want to see slowly moving down and giving people time and markets to adjust to the change all right so let's take a look at our dow jones transportation our stock signals are things that might be indicating if the market is you know getting ready to turn over dow jones transportation this arteries economy look pretty strong right nice breakout all-time highs that looks pretty good so that I put that on the positive side.

DAREN BLONSKI CFP®: The jobs date on the positive side. IBM, Russell 2000 on the positive side. That's broken out and looks like it's bull flagging us, meaning it's probably going to run higher. So Chris, yes, your value is looking good.

DAREN BLONSKI CFP®: Value investors certainly benefiting this year in their portfolios. They've been dogs for, oh gosh, years now. But value is looking good again and growth is out, folks. That's right. So. We are seeing this S&P 500.

DAREN BLONSKI CFP®: Shifting the heat map, as Dan mentioned earlier, these big squares appear to be growing smaller, or I guess not growing, shrinking smaller. And all these other little green guys underneath the hood doing all the work to lift the market are pretty much most of our magnificent seven all getting beat up today.

DAREN BLONSKI CFP®: But everything else looking good. This look at our one-week performance. And you can see still strong green here. We did see financials get absolutely smoked this week because some AI pools came out and market reacting and resetting value, saying, hey, maybe all these financial services companies aren't going to do any good in the future and they're going to lose value.

DAREN BLONSKI CFP®: And certainly we're seeing that play out. We don't believe that, obviously, but it's self-serving because we are a financial services firm. We think that it still matters, but certainly the market's repricing right now.

DAREN BLONSKI CFP®: But interesting utilities coming in strong. This week as interest rates go down. As interest rates go down, that's good for utilities because utilities often operate off a ton of debt. And so if they can start refinancing some of their debt, that looks better for the outcome of the utilities market.

DAREN BLONSKI CFP®: The downside of utilities going up is it could also be suggesting that that's a risk-off trade. And our risk-on trades are red, our risk-off trades are green, which is shifting to things that are more beneficial. You could also argue that the...

DAREN BLONSKI CFP®: AI coming out and Altruist saying, hey, we've got a new AI tax tool had nothing to do with the financial services going down, but the interest rates were going down. So money was going to start flowing out of financial services because interest rates were going down. Financial service was going to make less money. Lots of ways to argue it.

DAREN BLONSKI CFP®: The market does what the market does and then the humans fit the narrative, right? So that's why I like price. That's why I like the charts because the charts don't lie. They are what they are, and then we can all make guesses, and we can all create narrative as to why it's doing what it did. But at the end of the day, the market did what it did, and the price tells the way.

DAREN BLONSKI CFP®: All right, let's take a look at VIX, which is looking at volatility in a matter of complacency. Looking a few months out, you can see that the market is appearing fairly complacent at the moment. Typically, when we get these really low complacent moments, you have a little bit of a spike.

DAREN BLONSKI CFP®: But nothing I would say to write home about or be worried going into February, March. Who knows if we get Black Swan. At the moment, it appears the only thing that matters is the big, fat, what we call gray rhino of AI coming at all of our jobs and changing the world as we know it.

DAREN BLONSKI CFP®: This is a good bond volatility. A little bit of a spike. Bonds, I mean, really coming down. This is a measurement of Looking at how volatile bonds are in the fact that we kind of seem to have bottomed out is interesting. But this lowering volatility in the bond markets really helped drive that egg up higher. Take a look at Dr. Copper on one of our indicators.

DAREN BLONSKI CFP®: Interesting, Copper is spiking, which is good. That typically tells you industrial production going up. All precious metals tend to be going up. There's a scarcity throughout the world. It's finally starting to kick in. I do think it's interesting that... Let's go to crypto for a moment. Coming into the Trump administration, everyone's like, oh, he's pro-crypto, crypto to the moon, and he's a Trump coin.

DAREN BLONSKI CFP®: And the Trump family started shilling their own crypto, making billions off of it. And then now, well, we've got a triple top playing out, possibly complete in Bitcoin. I do agree with Chris. I think we're finding a bottom here. In Bitcoin... And I think I would not bet against a move at this point downward or upward. And so that's interesting.

DAREN BLONSKI CFP®: But I do think it's interesting that we have, you know, here a president comes in, I'm pro-crypto, I'm all about crypto, crypto gets tanked. And we saw that in the first Trump administration. It was like, oh, he's going to be all about gas and oil, and then gas companies got tanked.

DAREN BLONSKI CFP®: So it doesn't usually work. When you think, oh, this president or this administration is pro this. Oh, this asset class is going to go up. There's larger narratives, too. The economy is much bigger than any one politician.

DAREN BLONSKI CFP®: And that's the good news. So it looks like we're basing a bottom here in the crypto side of life. We are down like 47%, I believe, in Bitcoin at this point. So quite the sell-off. Again, we talked about earlier, size your bets accordingly. If you're going to buy volatile asset classes, then... Be prepared for and to experience volatility.

DAREN BLONSKI CFP®: It's just part of the game. All right. Well, I think I'm going to leave it all there for actually, I just want to check one more thing in video. We talked about triple top last week and you can see that that neckline didn't break and NVIDIA held it. So for now NVIDIA is holding it together and we'll close out there.

DANO WEIR: Chris, you want to jump back in and Darren, thank you for those. You want to jump back in and hit the rest of your slides. That sound, we can finish that out.

CHRIS SIPES CFP®: Yeah, that sounds good. Let me just, thank you Darren. You're back up here.

CHRIS SIPES CFP®: One second. Hold on. Sorry. There we go.

DANO WEIR: We ended up with some bonus time.

CHRIS SIPES CFP®: Yeah. So, to just talking about, you know, the, the financial, I guess, state of mind of, the average millennial and, this we were seeing in the financial markets. As well. So not only in the gambling markets, but also in the financial markets, which are, I would say, getting more and more gambling adjacent day by day in terms of if there are things that you would like to gamble on, there's plenty to do.

CHRIS SIPES CFP®: Now, this is levered ETFs, and there's a lot of nuance to that. So not necessarily always when you see leverage that it's a bad thing. However, what this is speaking to is when you are levering the same asset. So let's give an example of, we just talked about NVIDIA. There are two times NVIDIAs. There's, I think, more than that, basically, if you want.

CHRIS SIPES CFP®: And so you're trying to kind of turbocharge the reaction of your exchange-traded fund in regard to one asset. And so those have just skyrocketed in terms of what is available today in the market to do that gambling. Now, doesn't look like there's much on the horizon that is going to change the housing market anytime soon. And this is one example.

CHRIS SIPES CFP®: The mortgage delinquencies is almost non-existent, according to Compass. You can see the delinquencies on cars and credit cards. Which have been, you know, going back up, you can see on this chart, that gray line is the great financial crisis. So that would have been a significant financial stressor time and look at credit cards.

CHRIS SIPES CFP®: I mean, we're fairly close to the same delinquency rates as we were during the height of the, the great financial crisis. Interesting. However, the other areas, autos also elevated, And interesting that autos kind of seem to stay elevated over time. But then the big one, of course, that was the maiden player in the great financial crisis, mortgages, reached their peak somewhere between 5% and 10% back in 2008 and 9%.

CHRIS SIPES CFP®: And now we're under 1% in terms of delinquencies on mortgages. So not a lot of signs of stress there, which is leading to... The average homeowner staying in their house much longer than normal. This chart only goes back to 2000. However, according to Axios, US homeowners are staying put the longest since 2006 at 8.6 years is their average.

CHRIS SIPES CFP®: So people are staying in their homes longer. They have more equity. They're not as forced to move because of payments, etc. And if you would like to kind of keep an eye on certain areas as to where you might start seeing that stress, this from Data Arbor and the U.S.

CHRIS SIPES CFP®: Census Bureau by way of Lizanne Saunders at Schwab, just saying that there are two states, California and Florida, where homeowners are spending at least 30% of their income on housing, while North Dakota is a... The opposite end of that spectrum at only 15%. So a third of people's income in California, Florida, New York is not too far behind it, going towards housing. And so interesting data there on the housing market.

CHRIS SIPES CFP®: I think that's it for this week, Dan.

DANO WEIR: Well, isn't that enough?

DANO WEIR: Wasn't that enough? I just, I just want to say something on the, on the gambling piece. I didn't want to go too long on that, but since we have a little bit of bonus time, I, I am absolutely feeling that. And I am seeing that again, maybe I'm just, you know, we're all in our own echo chamber, so maybe it's just my feed. So who knows what's really going on in the greater populace, but I, I am seeing that among young men.

DANO WEIR: You know, 20 years younger than me, just, I call it, forgive the phrase, but it feels like kamikaze finance. Like it just feels like it just, it just feels like this, like I got one shot. I better do something extremely stupid because if I take the tried and true path, there's no way.

DANO WEIR: And it, I just don't know that that's true. In fact, I know that it's not true. And so, I've, I sure hope that we see a reckoning in that, in that sense, because I just, it just feels like, I don't know, there's just feel something wrong about it to me. Yeah. So there's my soapbox.

CHRIS SIPES CFP®: I totally agree, Dan. I know it feels extreme right now, and it feels like it may be tough to keep hope, but I will join your lonely voice and encourage the youth to stick with it, stick with the time-tested principles. I, you know, Jeff Bezos has that famous saying about instead of betting on what will change, bet on what won't change.

CHRIS SIPES CFP®: And I, I think that, you know, the old principles of just spending less than you make, you know, getting a job, working hard, trying to get noticed by people for being an honest and reliable and hard worker. Over time, you, you spend less than you make, You save what you can.

CHRIS SIPES CFP®: And I think that... That will pay off in the future as it has historically and would just encourage people to avoid the kamikaze finance as hard as it is. Because, you know, I mean, they didn't have this type of stuff. Thank goodness when we were younger, thank goodness.

DANO WEIR: Or it was extremely difficult to get to. You had to literally go to Nevada. It was not just sitting at my phone right now for, you know, two seconds away. And just another point I'll make too, because obviously, we're in finance, so we deal with money all the time. And some people say that the stock market is gambling, right?

DANO WEIR: That's perspective. You don't know what's going to happen. And I think what I try to bring to this show and what we do with the firm is I try to put it in a context that maybe a lot of people don't explain things in, which is that when you place a bet, you're betting that one thing is going to happen or in some cases multiple things are going to happen.

DANO WEIR: And at the end of the day or at the end of the game, you get the result, yes or no. And with the stock market, it feels a little bit, Chris, like it's like you're placing a bet every day.

DANO WEIR: Because as long as you don't sell, you're waiting to see how it's going to turn or turn out. So imagine if you had the Super Bowl and your Super Bowl bet didn't go the way you like, but the game just keeps going and you wait until the score is more favorable to your bet and then you cash out, right? I mean, that's how I've looked at it.

CHRIS SIPES CFP®: Yeah. And, and, and really it's super boring. It's nobody, nobody wants to hear this, but don't look at it as betting. Look at it as purchasing assets over time.

DANO WEIR: Right.

CHRIS SIPES CFP®: Stocks, purchase bonds, purchase commodities, buy those assets as you can. Don't try to think, is it going to go up or down? It's going to do both.

DANO WEIR: Right.

CHRIS SIPES CFP®: It's going to do both. But over time, you know, historically you get paid to own assets. You get, you get paid to take a risk. Whenever you're looking at buying something, look, if you don't know what the risk is, then you got to ask yourself, why am I getting paid to do this, you know, in an efficient market?

CHRIS SIPES CFP®: So, but, but over time, you know, it's that compounding of owning assets is what you, what has, has historically worked. As you said, nobody knows the future. Maybe it won't. Maybe AI is going to blow all this up and it's not going to matter anyway. But if that... Doesn't change if, if human nature continues and, and, and such, we're more likely. Yes. And we're, there we are.

DANO WEIR: I never actually seen this movie, but this is like the definitive get off our lawn, get off my lawn, meme and we can end it here. I don't know why I just do that. You brought that up and it's just something that's been out there, especially after the Super Bowl. It's just I'm not a gambling guy. Thank you so much for checking out the show.

DANO WEIR: Thank you, Chris, for a great show. If this is your first time checking us out, subscribe wherever you are. We appreciate you making it this far, especially for our wrap session here at the end. Learn more about us at SonomaWealth.Com. Subscribe wherever you found this show, whether it's YouTube, Spotify or Apple Podcasts. And we'll be back next week. Thanks.

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CHRIS SIPES CFP®: This content was produced by Fermata Advisors, LLC, DBA Sonoma Wealth Advisors, DBA Fermata 401K, DBA Fermata Tax, the opinions expressed by Fermata Advisors LLC on this show are their own. Information presented on this program is believed to be factual and up to date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed.

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.