Why Are Investors Seeking Safety?

DANO WEIR: The broadcast has started. We are live. We are Sonoma Wealth Advisors and the Fermata Advisors family of brands. And we're about to go on the Markets. This is our weekly market check-in, see what's happening, break through the headlines, and get you our take on why investors are seeking safety right now. We read the vibes. That's kind of one of our jobs is to see beyond just the technical indicators.

DANO WEIR: What are some other indicators that... Are telling us things, sending signals, and there's definitely a sense of risk off at the moment. Inflation numbers continuing to heat up. What could that mean for a rate cut or dare we say it rate cuts? And yet, why is the 10 year perhaps not telling the same story if inflation is really going to stick around? Speaking of inflation, why is everything so expensive?

DANO WEIR: Well, maybe it's because over the past four decades, California real estate is up. Guess how much? Guess the percentage. I'll tell you. 596% on average. Spoiler alert. That's not the state with the highest increase. We'll look at that. Gold and Silver still cooking this week. And is the U. S. Military once again targeting Iran? And is the oil price confirming that narrative? We'll get to all that once we start the show.

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DANO WEIR: Joined by our co-hosts here, Chris Sipes, Daren Blonski, the managing principals of the firm, Chris It's the afternoon, but let's go for a cup of coffee. Let's wake up and look at this meme together, because I feel like, speaking of the vibes, I've been seeing this on my feed as well.

CHRIS SIPES CFP®: Have you? I don't know if it's the algo just picking up on our scrolling or what, Dan, but this one says, the millennial urge to delete your entire internet presence and go back to a landline, Walkman, and digital camera. And I think I am... In the cohort of the oldest millennials, even though I would self-identify as a Gen X.

CHRIS SIPES CFP®: But this is one of my theories. I think, as you know, that as everything gets so technical, I think there's going to be a revolution among the young people where they're just going to say, you know what? I'm going to opt out of this and go back to a more analog life. I think I told you my daughter asked for a... And I, what's the one that just plays the music?

CHRIS SIPES CFP®: That's it. Ipod. Ipod, yes. That's what she wanted. If she knew what a Walkman was, she might have wanted one of those. But simpler times, you know, we kind of grew up in the last of the, not, you know, everything digitized age. And I got to say this week especially was one where it just felt nostalgic for that time period for sure.

DANO WEIR: I try not to have the old confirmation bias because I do know that, you know, your feed is curated to you and you're likely to think that your own emotions are accurate. But I am seeing a lot of interest in physical media and disconnecting. And you talked about iPods making a comeback when probably you could have got them for pennies, you know, five, 10 years ago.

DANO WEIR: There's a store in Petaluma I've shouted out a couple of times before. They're called Nostalgia Alley in downtown Petaluma. All they do is sell old retro video games and they are cooking every weekend with kids under 10 who are in there buying the oldest games that you could have got at a garage sale for a dollar in 2005. Right.

DANO WEIR: And now they're selling for 50. Right. A market unto itself. So it's interesting to try to track the American consumer because just when, you know, big business finally gets all... You know, spooled up and they're ready to really serve at a high level, they change and go, yeah, no, I don't want that. I want what you used to do. I like your old albums.

CHRIS SIPES CFP®: Yeah, absolutely. Well, everybody's favorite time of year, we got taxes and this from the spokes showing income tax refund season is progressing along at a healthy clip with year to date refunds up about 15% in aggregate versus last year. Refunds would be running.

CHRIS SIPES CFP®: Below last year if they were responsible for weak liquidity. So we got the tax cuts in the one big beautiful bill. So a reminder to do some tax planning, make sure that... You're doing what you can to not get a huge refund, right? Of course, you don't want to owe, but ideally, you're kind of even.

CHRIS SIPES CFP®: A refund means that you've basically lent your money to the government all year, zero interest, which isn't a super efficient way of doing things. So it's boring, but good to do tax planning where you're not getting anything back, you're not owing.

DANO WEIR: Wasn't the... President whose name triggers some people. Wasn't he talking about refunds being up in his state of the union and that it was such a good thing, if I recall? And I think that's what he said. And, and it's, and it's, I was like, well, that just means that you didn't really, that you, that you aimed poorly. It's not like a refund is not a stimulus, buddy.

CHRIS SIPES CFP®: Yeah. Yeah. Well it's, It's difficult because taxes change every year and people's individual situations change every year. So it's not easy to hit that Mark, but you're correct. So anyway, we got the producer price index lovingly known as PPI today, which was up higher than expected.

CHRIS SIPES CFP®: So the producer price index is kind of the gauge of what... You know, the producers are paying for their inputs, which is important because that leads through somewhat to CPI, the consumer price index. So what we all pay at the end of the assembly line, you can see here, this is the PPI versus the CPI, consumer price index, and PPI, the producer price index, tends to lead the consumer price index a bit.

CHRIS SIPES CFP®: So And PPI tends to have been one of the main inputs that the Fed looks at for gauging whether inflation is under control or not. So an uptick there is not a great thing. That was released this morning.

CHRIS SIPES CFP®: And with that, we look at the expectation for rate cuts. Remember coming into the year, it was around three. Was the expectation of the Markets, three rate cuts this year. And you can see that now the leading probability is two rate cuts, but one cut is very close now.

CHRIS SIPES CFP®: So you're going to have Kevin Warsh coming in in May and expected to cut rates by the administration, of course, but at least if you're following the prediction Markets. He might have his hands tied a bit with these inflation numbers coming in hotter than expected. So we've got the AAII sentiment indicators this week. That bearishness ticked up a bit again to the high 30s. We're just shy of 40% on the bearishness this week.

CHRIS SIPES CFP®: But nothing extreme, not an extreme bearishness, not an extreme bullishness. The CNN fear and greed index is at 42, down slightly from 44. Fear one week ago, those are both fear numbers. And then we've got Bitcoin all the way up to 13.

CHRIS SIPES CFP®: Still an extreme fear, but much out of the doldrums of last week when it was down near seven. So Bitcoin continues to be, you know, from a sentiment indicator, pretty washed out. Because it spent some time here in the mid-60s for quite a while.

CHRIS SIPES CFP®: So coming into the year, expectations and pricing of the S&P were very high. So we're looking at the trailing price-to-earnings ratio. The price-to-earnings ratio is one common valuation metric of the S&P 500. You can see this from Bank Of America showing you Other times in history where it's been a little bit higher than where we're at, where we started the year of January at 28X.

CHRIS SIPES CFP®: Now, we've lamented for some time that fundamentals really haven't mattered, hasn't seemed to have mattered in this post-COVID era where there's just been so much liquidity, so much risk-taking, so many things happening that were just, you know.

CHRIS SIPES CFP®: As as someone who studies the art of investing over time and and tries to to look at it as somewhat of an academic study things like nfts and such where We're really, it's been a rough time. I'm not going to say the name of the crypto coin that is referencing body, human body.

DANO WEIR: Don't go there.

CHRIS SIPES CFP®: I mean, all kinds of things like this where you're just like, what are we living in? The speculation is insane. So now this year has been a huge rotation. We're talking between.

CHRIS SIPES CFP®: You know, to begin the show that even though the S&P is kind of flat under the surface, there's a lot of turmoil going on, a lot of sector rotation out of technology, out of the hugely speculative risk on type of areas and into more of the defensive areas, more of the value stocks. So this rotation has really masked a lot of turmoil under the surface.

CHRIS SIPES CFP®: And so we'll see if gravity is going to eventually have its impact on the S&P 500, the mighty S&P, because we're near record highs in terms of valuations coming into the year.

DANO WEIR: And it's interesting, Chris, because, how do I put it? The vibe has changed, right? The title of this week's episode is Wire Investors Seeking Safety.

DANO WEIR: Back in October, that would have been an insane title for an episode because it was just go, go, go. When's the next NVIDIA earnings? How high is it going to get? AI, AI, AI, AI, AI, AI, and just something changed.

DANO WEIR: And, you wonder when you're in it, you know, how long is it going to last? And then all of a sudden it's changed. It had nothing to do with you. And it's just up to you to recognize that it's changed. It's what kind of what it feels like, Daren.

DAREN BLONSKI CFP®: Well, I don't necessarily think it's changed other than it's just shifting, right? Like the focus is we're washed with chips. Now we need to build the infrastructure and the energy for AI.

DAREN BLONSKI CFP®: I think given the fact that President Trump just canceled Anthropic for not being willing to let them use Anthropic in autonomous weapons and or. For doing civilian surveillance tells you that this tool is very powerful and it ain't going away. So get on the bus because things are about to change with it.

CHRIS SIPES CFP®: Yeah, the narrative seems to have advanced, let's say, because we got the earnings from NVIDIA this week, which were, I mean, I think they met expectations from what I saw, but the stock reacted very poorly. We've already seen a lot of the smaller. AI-related stocks just get completely wiped out over the last six months or so. And then stocks that might be affected by AI or replaced by AI also taking huge hits.

CHRIS SIPES CFP®: The big news yesterday was Block, Jack Dorsey's new company, announcing that they were going to cut 4,000 of their 10,000 employees. He he basically said it was related to the fact that they could be more efficient with AI, which is probably part of the story. But you also have to keep in mind that the stock is down something like 80% from its highs. So there's a lot going on on this surface.

DANO WEIR: I read a report too that they allegedly spent $68 million on a party they threw.

DANO WEIR: I have to see if I can source that. But there's... So it's it's right now, it's still difficult to tell, you know, when they make the layoffs, they're all going to say because AI and maybe it's true, maybe it's totally true.

DANO WEIR: But it's also a case where they can use that as an example, you know, to say, oh, see how efficient we're going to be, maybe, you know, or maybe you're running it like trash. And you're just laying people off. It's a better story if you say it's efficiency.

CHRIS SIPES CFP®: Well... And so we've seen that rotation out of the risk assets, riskier sectors, I should say, more growth oriented sectors and into the value sectors and the stock market. And you've also seen those flows into gold, which has been partly driven by, you know, that rush for safety, but also driven by central banks, you know.

CHRIS SIPES CFP®: Rotating into gold now this is from jp morgan they said the 19 billion in inflows into gold etfs in January of 26 was the highest monthly total in history so Who knows, maybe that's a sign of a intermediate term, top in gold. But people are piling in to gold at this point, and we're seeing record inflows there, partly driven by some stress that we're seeing in the credit Markets.

CHRIS SIPES CFP®: This is Mohamed El-Erian talking about the Financial Times piece. He says, shares of the biggest private investment managers. On Wall Street tumbled on Thursday after Blue Owl permanently restricted investors from exiting a debt fund for retail investors, sending shivers through the industry.

CHRIS SIPES CFP®: So private just means that the assets that are held, whether it's debt or equity of companies, is not publicly traded. However, these companies that hold those investments are publicly traded. And so they're... Stock prices, the public stock prices are somewhat of a reflection of the investor's confidence in those areas.

CHRIS SIPES CFP®: And here you see some of the larger firms and the sell-off that they've seen to start the year. So stress in the private credit market is starting to show, which is funneling its way through to the financial services. Now, it's too early to tell, of course, but this is one possible representation of the financial sector in the US, the XLF, and it's showing that we are under the 200-day moving average.

CHRIS SIPES CFP®: Still looks like we're in an uptrend. So it's very possible that that price reverses. But today, a lot of the banks were down pretty substantially. Who knows if that's AI-related? Hey, everybody's just going to be vibe coding their own Bank, I don't know what's going to be happening, but it could also be related to some of this stress that we're seeing in the credit Markets.

CHRIS SIPES CFP®: Typically, recessions in the past have been related to too much debt somewhere. And a lot of times that too much debt is in the quote unquote shadow banking sector. So not necessarily like on the Bank's balance sheets because If anybody's tried to get a loan from a Bank anytime recently, it's not easy to do that.

CHRIS SIPES CFP®: However, there are these shadow Bank areas, which is where you're going to get money from private credit, among others, that maybe don't have as stringent of underwriting. And we're seeing the stress there, but that could play through into the financial sector. And there's early signs of that stress today.

CHRIS SIPES CFP®: Which leads us to a possible reason on why the 10-year treasury rate was down on a day that you get a hot inflation print. Normally, when you see a hot inflation print via the PPI, that's going to be bad for rates, meaning interest rates are going to go higher to account for that higher inflation expectation, which higher interest rates means lower bond prices.

CHRIS SIPES CFP®: It's usually, you know, when you see inflation expectations going up, that's a, that's kryptonite for bonds has not been the case here recently. And so this is the 10 year treasury over the last 10 years. And you can see where we've been in this sideways zone here for, for the last couple of years, but interest rates down today, we actually finished below that 4%, magic 4% number today, which is a.

CHRIS SIPES CFP®: Possible sign of investors kind of running to the safety of treasuries and rather than rather than selling treasuries in anticipation of that higher inflation now we're not starting to see any stress yet in the junk bond market and that is that has been kind of some discussion, I would say, amongst some of these investors online is that, hey, public credit Markets, which is what we're looking at here, are not showing those same signs of stress that the private credit Markets are.

CHRIS SIPES CFP®: Now, this is the option adjusted spread on junk, BB, high yield. And so this means the spread between the yield on a junk bond versus treasuries. And you can see that's still around one and three quarters percent, meaning you're getting paid and one and three and a quarter percent more than you would be getting on a treasury.

CHRIS SIPES CFP®: And, and you can see in prior During recessions, that spread tends to jump. People get scared. They want a higher return for lending out their money. So those spreads tend to blow out during recessions. And we have not seen that yet. In fact, the spreads were very tight as of just about a month ago. Starting to spread out a little bit, but no signs of mass change.

CHRIS SIPES CFP®: Now, I wanted to go through some...

CHRIS SIPES CFP®: Charts here on employment, given all the, I feel like, I don't know if you guys felt this, but it feels like this week was just such a bummer in terms of, you know, story after story of like, hey, there's not going to be any jobs left, basically. The computers are just going to do everything and robots are going to take over and there's just no point, right?

CHRIS SIPES CFP®: To employment. It seems very bleak. I don't know if you guys are feeling that same way. Maybe I'm just projecting.

CHRIS SIPES CFP®: But that's what the market was feeling like this week to me.

DAREN BLONSKI CFP®: There's some projection there, Chris, but I do think that it's definitely hitting reality. I've had lots of anecdotal conversations with different entrepreneurs and different... Individuals who are looking at this stuff really closely and how it's going to impact all business.

DAREN BLONSKI CFP®: And the legitimate feeling is in how fast things are moving with AI. It's not moving in weeks anymore. It's moving in days. You wake up and you're like, oh, wow, I can do that now. Oh, wow, I can do that. Oh, wow, I can do that.

DAREN BLONSKI CFP®: I think that it's not something that... On the one hand, I would love to just be able to dismiss it all and say, ah, it's not really happening. On the other hand, I think all evidence points that way. So yeah, there's some bleakness coming out of it, but I think it's a reality that we all have to face and figure out how to adjust to.

CHRIS SIPES CFP®: Absolutely. So if we look at unemployment over the long term, I think one should prepare themselves for the narrative to be even worse when it comes to employment this time, given that usually you see unemployment go up. During recessions. So who knows if a recession's around the corner or if a recession's five years out or 10 years out.

CHRIS SIPES CFP®: Maybe there's no recessions ever again, who knows. But typically, unemployment goes up in recessions. I think the sentiment is going to be so much worse this time based on the fact that everybody's already worried about permanent job loss due to AI. However, we're not seeing, we're not seeing that yet, right? The unemployment rate is still very low.

CHRIS SIPES CFP®: 4.3, is, as you can see here, historically extremely low. And so, so when it does go up, know that it's gone up before, during COVID, it was over, it was over 12%. You can see here during the great financial crisis, it got in the, up over 10%.

CHRIS SIPES CFP®: There's been many times in the past when we've had recessions and that rate has gone up quite a bit higher than where we're at today, but this next time, the narrative is going to be a lot more powerful than it has been in the past, is my assumption when it comes to unemployment. Now, when you look at the labor force participation rate, and sorry, this... This chart is the one we wanted to show.

CHRIS SIPES CFP®: We're at 62%, 62.5, which is the participation rate of the employment eligible folks in the United States. Okay. Now, this number, I always thought this number, even before AI, I always thought this number was very low. I'm like, how could it be this low? And how could it be trending so much lower over time? Because you can see it peaked.

CHRIS SIPES CFP®: Maybe 2,000 in terms of the percent of the population, the working population that was actually employed. It's been coming down over the last 25 years. We had that big drop during COVID. Not everybody came back. Many people just said, you know what, I'm good. I'm not going back to work after this. And so we've kind of been in this 60-some percent range.

CHRIS SIPES CFP®: And so that's interesting. And I also think it's interesting, look at the percentage of the population that was employed prior to kind of the modern era of, you know, if you're a couple, both people in the couple are working. You know, there was a time, guys, where only one person in the house worked and the other one stayed home with the family.

CHRIS SIPES CFP®: And I guess that's illustrated there when that blue line was lower than we're even at today.

CHRIS SIPES CFP®: But I think that's another area that doesn't really get talked about where, hey, if AI does increase our productivity and we are able to return to a, say, Post-World War II, 1950s, 60s era of maybe both spouses don't have to work. Maybe Right. Maybe there's fewer days being worked by both spouses, some combination of the two. But this number has been kind of working its way down over time, which I think is interesting.

CHRIS SIPES CFP®: Now, if you look at what is the labor force in the United States, that continues to climb a little over 170 million. We've had little blips along the way.

CHRIS SIPES CFP®: The overall labor force has increased. And this is despite many, many, many technological changes in the past. Now, a lot of people would say, well, this one's different. AI is different than all the rest. That could absolutely be true. A chart that I wanted to include in here from Goldman Sachs, I didn't get in in time, I think was great because it said that 60% of the jobs today did not exist.

CHRIS SIPES CFP®: I think it was in 1940. So it was just saying that there's so many jobs now that did not exist at one time. And the historical outcome previously of big technological changes has been that jobs were created, not destroyed. Yes, some were destroyed, but overall, jobs were created. That didn't exist before from that technology.

CHRIS SIPES CFP®: So I'm going to choose to believe that that's probably what will happen during this revolution in that humans will use this as a tool to advance ourselves, advance our productivity, make things better for ourselves. And I just have a hard time believing that everybody's going to be unemployed, sitting at home, waiting for their... A government check. And I hope that that's not the outcome because that seems pretty bleak.

DANO WEIR: Chris, I think a good analogy to make here is think about your kitchen and think about the appliances you have in your kitchen to cook food. You could do it all in the microwave, the newest, latest, fastest device. But for some reason, you have a microwave, an oven.

DANO WEIR: A range and a barbecue out front and maybe other devices like an air fryer and and because they all have their different uses so that's represents technological change over time as far as cooking at home and even though you have all that ability at home to cook at home you could cook literally anything you want at home well what do you do you go do you go out to eat you do you go sometimes you go out to eat and you sit down And sometimes you go out to eat and it's a fast casual place.

DANO WEIR: And other times you're extremely lazy and you order it from your phone and it gets delivered to you. Or sometimes you call the delivery place, right? Sometimes you pick up and call the local delivery place. And then, you know, I mean, there's think of all those different options when they're all achieving the same thing. So did one, you know, completely blow out the other?

DANO WEIR: Probably a reduction in market share. But in another sense, there's just a massive expansion in food preparation technology. So if you wanted to go bright side with it, there would be a perfect example of what might happen. It's just that it's going to creep into so many sectors. You know, it's as massive as the expansion of electricity.

CHRIS SIPES CFP®: Absolutely. Yeah, I agree with that assessment. And in listening to Animal Spirits from Ritholtz this week, Ben Carlson had a great point talking about realtors and Zillow. Zillow, you know, think back.

CHRIS SIPES CFP®: You know, prior to, prior to Zillow, the only way to get much information about a property was to go through a realtor. And, and you know, you come out with Zillow and you can see all the pictures of the house, videos of the house.

CHRIS SIPES CFP®: Sales data, data on this, data on that, everything is in the palm of your hand. Did people stop using realtors? No. They continue to.

CHRIS SIPES CFP®: I think there's still going to be a place for these things. Hopefully, if anything, it's going to take away a lot of the drudgery and areas of all of our jobs that we don't like. One easy example for us that's made us so much more efficient is that it takes our notes for us, which is hugely helpful and was a part of the job that nobody loved, trying to listen to somebody talk, write down notes.

CHRIS SIPES CFP®: Then after the meeting that you had, go ahead and get those notes into your CRM so that you would remember those things later. That's all been taken off our plate, which is hugely helpful.

CHRIS SIPES CFP®: So I think there's going to be more optimism around this, I hope, than, than some of the doomsayers that we've heard from a lot this week.

DANO WEIR: Chris, I think humans will definitely have a place. It may be in a zoo, but, it will, they will have a place in the future.

CHRIS SIPES CFP®: Yeah. So home prices, Kay Schiller National Home Price Index. We got an update this week, that continues to move higher. Remember, that's important for many reasons. One among them is the CPI and inflation rates, given that housing is loosely tied to about 30% of the inflation measurements. Now, this was interesting. We talk about supply and demand all the time where it's like a base law of economics.

CHRIS SIPES CFP®: The more in general all else equal the more supply of something that you have if you keep demand constant the price is going to come down and so we we see that this from Resi Club and it's showing that rents in cities that built more came down more so the percentage rental change was the highest in areas that had the most inventory come on come online and And so, you know, there is a solution to this problem is the good news to the housing prices problems.

CHRIS SIPES CFP®: It's just where is that inventory going to get built? Now, if you're a home owner, you don't love more inventory coming on because that's not going to be great for the value of your property. So nobody likes that. Nobody likes building in their backyard, right? So that's normal.

CHRIS SIPES CFP®: But when you look at the 40-year change in statewide home prices, this also from Resi Club is kind of neat. And you see some of the areas that have had the largest appreciation over the last four years, the Pacific Northwest, Idaho areas, California, Nevada. Those have all done really well. Areas on the East Coast, the highly populated areas where you're going to have more demand.

CHRIS SIPES CFP®: But in general, areas where they add more inventory per se, like Texas has been building a lot. Gosh, the last times I've been to Texas, I was just blown away with everywhere you look, there's a construction crane. They're just building, So interesting stats nonetheless here to see the appreciation in those areas over the last 40 years.

DANO WEIR: Washington appreciating more than Hawaii is not something I had on my bingo card.

CHRIS SIPES CFP®: Yeah. Yeah. Interesting. Right. Very interesting.

DANO WEIR: It's not all the weather. We're going to get to there in a second. But I would did I dug this up because I referenced that this is from Yahoo Finance Block, which is Jack Dorsey's company. That's Square. If you've ever paid on Square just last September spent 68.

DANO WEIR: 8.1 million on a Block party, an in-person event for two, for their employees, for 8,000 employees. They threw a festival with Jay-Z, Anderson. Paak, T-Pain, Soulja Boy, and spent 68 million on this party. And then here, what is it? Six months later, they're laying off 40% of their workforce.

DANO WEIR: Guys, I've thrown a music festival and been intimately involved in the finances. You're an idiot if you spend 68 million dollars on a music fest. It doesn't cost that much, man. It just tells me that you work with somebody who fleeced you pretty good.

DAREN BLONSKI CFP®: All right. Well, I want to start off with vibe coding. So for those who don't know who vibe coding is, it's basically using agentic tools to create websites and really interesting ways to look at data. One of the things I watch, sadly enough, is the Pentagon Pizza Index, which tells you kind of what's going on. And the theory is that whenever...

DAREN BLONSKI CFP®: Dan, we can hear you typing, man. Whenever you know, something's going to go or go down geopolitically or war or something that we see start seeing these spikes to all these pizza places around the Pentagon, which is kind of interesting, right? Because, you know, there's all the narrative that comes out, like it just came out. Marco Rubio said that Iran, they designated Iran as a state sponsor of wrongful detention today.

DAREN BLONSKI CFP®: Not sure what they're doing other than just trying to build up a case to go to war at this point. But again, you don't really know what's true from the rumors to what the media is telling you and whether or not it's accurate. And so this is one way you kind of cut through all the noise is you check the Tongan Pizza Index.

DAREN BLONSKI CFP®: And right now there's a little bit of a spike at Papa John's, but Papa John's, well, I believe you got to take a hold of the cookies. So it's probably not people ordering at work. Another interesting, vibe code was the Iran monitor that just got put up. And like these sites get built in like matter of minutes, where it's digesting all of the information going on, in Iran.

DAREN BLONSKI CFP®: So you can tell from other sources rather than the official news if something's about to go down. There's something called the OSINT community. In the OSINT community, they are out, it's basically open source intelligence.

DAREN BLONSKI CFP®: So people that just literally sit around and look at different data sets to figure out what's happening before things go out of control. So this is another vibe coding. So this sure was done by AI. But what it's doing is digesting everything coming in the Iran situation monitor. And then this person coded in all the cams in Iran. So you could actually look at Israel and Iran all at once on screens and see what's going on.

DAREN BLONSKI CFP®: Happening in real time. This is the Iran monitor. And you can see it just looks at all these different X people posting all over and trying to discern what's going on or about to happen. The other, I would say, kind of more modern day tool I use to help me try and figure out what is happening in the world is Polymarket.

DAREN BLONSKI CFP®: People are literally gamifying geopolitics and everything you can imagine. And you can see U. S. Strikes Iran by March 9th is up by 16%. And you can see these different. So this is the prediction here. There's $13 million being bet on whether or not Iran gets missiles delivered by U. S.

DAREN BLONSKI CFP®: Today. And you can see that chances go up as time goes on. And you can see by March 15th has really started climbing. Usually by the time something actually happens, like Pete Hegseth saying, we're going to ban Claude came out today. You can see as soon as that announced, it went up to 100%.

DAREN BLONSKI CFP®: So yeah, there's people betting on what's about to happen in the world, which is pretty wild. Chris and I have used this over the last few elections, and it's been pretty accurate because it's just in real time versus the rest of the news cycle. But let's go to the Markets because there were the first betting market.

DAREN BLONSKI CFP®: And try to figure out, discern what's going on. And I've been talking about this for a couple weeks. It looked like we had a dip happening two weeks ago, and then we had this big move up last week, and we have this bull flag, and we broke out of that bull flag as we thought it would happen last week.

DAREN BLONSKI CFP®: And now we have cleared above $67 a barrel. What does that mean? Well, that means that there's possibly more tension going on in the Middle East, and therefore oil prices are expected to climb. And the market certainly seems to be telegraphing. That is what's happening, and that's where we're headed.

DAREN BLONSKI CFP®: The diplomats started getting all their people out of Iran today. That was a big deal in the OSINT community this morning. However, the other thing I like to watch to see, hey, is something about to go down and really happen, is I like to look at the flight monitors.

DAREN BLONSKI CFP®: And... Flight monitors just tell you where all the planes are. So the idea is that if there's about to be missiles flying back and forth between Israel, which is right here, and.

DAREN BLONSKI CFP®: Iran, which is right here, that you wouldn't see these commercial planes flying. You would have military planes that could turn off their technology telling us where they're at, but these are all generally commercial planes flying back and forth.

DAREN BLONSKI CFP®: And I think if the risk had increased substantially, the bombs would be and missiles would be flying back and forth. We would see these planes not flying here. So I don't think it's imminent in the sense we're going to see something happen. Now the market's closed.

DAREN BLONSKI CFP®: Certainly seems to be coming. And you can see that the patterns are planes are flying around Israel and Iran. All right, so let's go back to the Markets. Oil definitely whispering to us something might be up. Let's take a look at the S&P. S&P 500, nothing nada.

DAREN BLONSKI CFP®: That's 11 largest, it's 11 sectors made up of the largest US-based companies. And we haven't had anything really to speak of in performance this year. But that's not all of the story. If we go to the rest of the story, this is the RSP, the Equally Weighted Index. And what this tracks is it gives every stock in the stock index the same size Square.

DAREN BLONSKI CFP®: And when that same size Square, if the index is being measured and giving every company equal weight, then you can kind of see things happening when there's a rotation a little bit clearer. So you can see the market's gone up quite a bit.

DAREN BLONSKI CFP®: Since December here it's been a good year for the RSP when we look at that and we look at it on a heat map this is the S&P 500 and you can see this is one week performance you can see all these big dogs are red but everything else here look at all that green on the screen that's a sector rotation on we're seeing a very strong sector rotation happen through those 11 sectors we're seeing the shift we're seeing the shift away from these it companies to the actual build out of these energy infrastructure that's why i don't think everyone's saying oh NVIDIA is going to blow up it's the AI hype is over i think not i think yeah we'll have some some shifts and some changes but it's going to change everything in our lives in a bigger way than i think anyone can possibly comprehend right now and all you can do is try to stay ahead of it because it is happening whether you like it or not that's the thing with the Anthropic holding the line with The Trump administration saying, hey, we're not going to do autonomous weapons and hey, we're not going to do surveillance.

DAREN BLONSKI CFP®: The reality is all the other companies are and the Chinese will absolutely be doing that. So in some ways, now they're losing the ability to influence the administration and perhaps be more ethical with AI. We're likely to see more chaos happen in the AI space before it all calms down and we figure out its role in our.

DAREN BLONSKI CFP®: Lives. All right. So that's RSP I talked about equally weighted Markets doing well. We're seeing a hard sector rotation happening. We're also seeing our risk off assets do well again. So gold pulled way back, Silver pulled way back, and now we're seeing it continue to climb upwards. So gold and Silver looking good. Interesting that the PPI came out today.

DAREN BLONSKI CFP®: So the PPI is a producer pricers index, and it came out with inflation being a little high. Market says, so you can see this half a percent higher than expected. You come down over to the 10 year and the market says, meh, I don't think so. And interest rates headed down lower. If the market felt like that inflation was sticky and that we were going to see inflation, I think you would see that 10 year go up.

DAREN BLONSKI CFP®: We're not. We're actually seeing it break down below support here and go lower. That's great for people who want to refinance. It's great for people who want to buy homes. The Trump administration has been very clear. They want this mortgage interest rate to go down. And guess what? This week, we dropped below 6%.

DAREN BLONSKI CFP®: Opens the gates of the refinancing, which is great news for our friends in the mortgage industry because the mortgage industry has gotten absolutely pummeled since we went above 6%. So perhaps, maybe, we'll have a change and that will help the real estate industry, which has clearly shifted to a buyer's market. And there are more homes for sale right now all over the place than there are buyers.

DAREN BLONSKI CFP®: And most people can't afford them. And certainly not people who are just starting out in life because the American dream for the young, newlywed, whatever, just starting off in life is dead. So that will change hopefully over time. But right now it's pretty ugly. For anyone looking to get into the real estate market, we look at the ag. Let's look at the ag.

DAREN BLONSKI CFP®: The ag is the bond market risk off. And check it out, Chris. Wouldn't you know it, but we're almost back above where we were in 2021 before the bond market has worst three years in. History and we're climbing up above it right now. So that's a good sign for our diversified investors, for our people that held on and held other assets than just NVIDIA, Microsoft, Apple, Amazon, and Google over the last three years.

DAREN BLONSKI CFP®: That's the rotation. The rotation is into risk off assets. It's happening. And what it tends is when it happens, it tends to happen viciously and violently. And that's what's really hard. Everyone goes, well, I don't want to hold these value investments. They never perform. They don't until they do.

DAREN BLONSKI CFP®: And then when they do, they perform in a massive way that usually counterbalances all the outperformance by those high-flying growth stocks. So we're seeing that happen. So this is the MAGs. You can see the MAGs has rolled over. And now we're on this super important 200-day moving average. And that's holding up the MAGs right now. But it doesn't look like for much longer.

DAREN BLONSKI CFP®: It definitely looks like weakness is the way and the risk is to the downside in the mag. This is like a Bitcoin. Bitcoin looking weak, front end of the risk curve. Not showing much life at this point. Maybe we had a bottom right here. You could argue that maybe we're just bottoming out. We've got a trend upward right there. So that could be good news. But I wouldn't write home to anybody yet on that one.

DAREN BLONSKI CFP®: So the dollar, how strong is the dollar? Well, it's getting weaker. Which is actually good for our value stocks. It's good for our mid and small cap companies. They do well. They can ship stuff around the world. People can buy it because the dollar is weaker, which is kind of weird to think that the dollar being weak is better for our companies, but that's the reality of it.

DAREN BLONSKI CFP®: Let's take a look at our Qs. Qs were the high flyers, and you can see the Qs are doing nothing, not a zero zilch. They are trading sideways always since October-ish of last year. They're basically where they were October 7th. Of last year. All right. That is going to be my wrap for this week. That's the Markets where rotation is on. It's happening. Good time to enjoy diversification, like we always say.

DAREN BLONSKI CFP®: And we'll see what happens over the weekend with Yvonne. Thanks a lot for tuning in.

DANO WEIR: Chris, I'm a little concerned because you were talking earlier about shadow banking. Do you remember when you were talking about that?

DANO WEIR: And you were talking about it like you didn't really know what it was. And yet I found this photograph of, of is that maybe you, and there's even like a logo that says SB. I'm seeing like single dollars behind you. Is that, you have any, knowledge of this or just.

DAREN BLONSKI CFP®: Is that a nice vibe?

DANO WEIR: Yeah. Okay. Somebody vibe coded that. Okay. No, Chris, the shadow banker.

DANO WEIR: That was AI, everybody. So let's just wrap here. Chris, can you in any way answer why you think investors are seeking safety? What might be influencing that? Because there's clearly a move going on.

CHRIS SIPES CFP®: I don't think you can ever tell. Like in the moment, it only makes sense after the fact. So it could be the Iran thing. It could be the private credit. It could be something totally different that we don't even, you know. See on the horizon at the moment. So I think to Darren's point, when the changes happen, they happen so quickly and they, you know, no one rings a bell. So you have to be diversified ahead of time.

CHRIS SIPES CFP®: You have to be positioned for it ahead of time, for, for it to, to, to benefit from it. And, and so, cause by the time it's happening, most of the time it's too late to, to jump in, you know, and take. Take advantage of that move. So as boring as it sounds, just staying diversified is an aggressive strategy in some ways to make sure that you're there to take advantage of those benefits.

DANO WEIR: Thank you so much for checking out the show. We appreciate you making it this far. We appreciate all our listeners. We appreciate our clients. If this is your first time checking it out, subscribe wherever you are. We're on YouTube for the live video stream. We're on Apple Podcasts and Spotify for the audio feeds after the show.

DANO WEIR: And you can always find past episodes and more podcasts, including our podcast, It's All Money, which dropped a new episode this week. You can find that all at SonomaWealth. Com. That's also where you can book your... Wealth analysis. We will see you next week on the Markets.

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