AI Falling Back To Earth? What Fixed Income May Be Saying About The Cycle

DANO WEIR: Happy Thursday, June 25th, 2026, Thursday edition of On The Markets from Fermata Advisors and our private wealth brand, Sonoma Wealth Advisors. My name is Dan O'Weir, joined shortly by our managing principals and asking the question today, is AI falling back to Earth this week in the market, at least this week's market so far?

DANO WEIR: And what fixed income may be saying about the cycle we're in. We're going to take a deep dive on the SpaceX IPO, the highs and lows. And how hyperscaling AI companies are dealing with surging capital expenditures.

DANO WEIR: We'll take a look at how Bitcoin is experiencing its own volatility right now. What is the credit spread cycle and how that could be influencing AI growth? And finally, what tomorrow's rebalancing of the Russell 2000 could mean and could indicate about the future in the market. Let's get going.

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

DANO WEIR: Managing principles of Fermata Advisors and our... Private Wealth Arms to NOAA Wealth Advisors, Darren Blonsky, CFP, Chris Sipes, CFP. Chris likes to start with memes and cartoons, at least a little bit of a smile to start the episode. We got Hedgeye this week, Chris.

CHRIS SIPES CFP®: Yeah, and for those that are just listening, it's a guy with a tattoo of I heart gold, but the heart is broken. And boy, just... What a difference. What was it, the fall? I believe it was the fall that we were talking all-time highs, getting a lot of questions about gold.

CHRIS SIPES CFP®: Do I have it in my portfolio? How can we get more? Should we buy physical? And just a few months later here, and gold's really struggled this year. And that's despite having a war going on in the Middle East.

CHRIS SIPES CFP®: It kind of front ran that a bit in terms of the run up in gold. But also, I think it's related to the Fed in terms of the market's expectation of the ease, easiness of the Fed and the interpretation of the new Fed chairman, Kevin Warsh, as much more hawkish than what people expected.

CHRIS SIPES CFP®: So I think the expectation was that he was going to come in and immediately start cutting rates, loosen monetary policy. But at least according to his press conference last week, the markets now shifted that narrative to, hey, he's going to be the inflation fighter. And we might have tighter monetary conditions ahead, which has been an additional headwind for gold.

DANO WEIR: Darren, you're personally a bit of a... Gold bug. So what are your thoughts on what's happening with gold right now?

DAREN BLONSKI CFP®: I just think it ran way hard, way fast, got ahead of itself. I think one of the most difficult aspects of investing is that the market moves before anything else moves. You just don't know why it moves. In retrospect, it makes perfect sense why it moved, right?

DAREN BLONSKI CFP®: And oily gold had a big year last year. And it's pretty much been all downhill since, well, let's call it February. We've been pretty much downhill. We're at a kind of critical resistance or I guess support level that I'll talk about here in a little bit in my segment.

DAREN BLONSKI CFP®: But I suspect that gold is also telling us that going into midterms things at least geopolitically might calm down some.

DAREN BLONSKI CFP®: But we will see.

CHRIS SIPES CFP®: Digital gold, Bitcoin, or some have called it digital gold. And boy, are we in the doldrums of sentiment around Bitcoin. I'm seeing a lot of doomer stuff around Bitcoin right now, which is normal for when it's not doing well. But this was from Ben Johnson at Morningstar. I thought this was a pretty good little representation of, you know, the segments of Bitcoin people.

CHRIS SIPES CFP®: Cause it's, it's a polarizing asset class, you know, like gold and Bitcoin, I feel like are, are an asset class in some ways, real estate too. But, where it's very polarizing, like people are either like, yes, I'm, I'm for it. I definitely want it. I have to have it. It's the best, or I hate it. I don't want it anywhere near me. You know, why would you ever invest in that?

CHRIS SIPES CFP®: And so we've got that segmented here with believe in Bitcoin, do not believe in Bitcoin. And then Bitcoin moons, which is, you know, what the, what the kids call it these days, when you, when, when the asset price is going straight up, rocket ship up or, or when Bitcoin is worthless. So, what that means to the different groups. And I thought that I got a chuckle out of it. I don't know if you guys find it funny or not, but.

DANO WEIR: Darren, same, same. Same question, different asset. Do you feel the same about Bitcoin as you do about gold? Did it just ran too hard too fast?

DAREN BLONSKI CFP®: I mean, I think there's some other systematic things going on with Michael Saylor's micro strategy that I think are causing some. And this was always kind of concerned with his over allocation to Bitcoin. You know, if that starts unwinding, does that create too much sell and the market can't keep up again? Yeah, we're at a very critical support level with. With Bitcoin.

DAREN BLONSKI CFP®: It ran very hard, very fast. It's got a long history of big dips and recoveries.

DAREN BLONSKI CFP®: A little bit more, a totally different asset class, I think, than gold and different drivers of it. But I don't, again, I don't, like anything, go back to diversification. I think it would be unwise to fully dismiss Bitcoin. It's a lot right now.

DAREN BLONSKI CFP®: Just like it would be unwise to fully dismiss gold because it's having a bad little bit, you know?

CHRIS SIPES CFP®: So the bottom right box, which is do not believe in Bitcoin and when Bitcoin feels worthless, is Schadenfreude, which is German for taking pleasure from someone else's misfortune.

DAREN BLONSKI CFP®: I believe the pronunciation is Schadenfreude. Schadenfreude.

CHRIS SIPES CFP®: Yeah.

DAREN BLONSKI CFP®: The only thing I remember maybe from German class, but I'm not even 100%. That's four years of German at Casa Grande High School, Dan.

CHRIS SIPES CFP®: Wow. Four years.

DANO WEIR: My wife asked me things about French and I'm like, I don't know. I think I took two years, but I couldn't tell. Limousine? I don't know. Champagne? This is all I remember.

CHRIS SIPES CFP®: Yeah. So anyway, so we had the return of bullishness in the market this week with the Memo of understanding being floated out there, almost 45% bullishness, the bearishness backed off, fewer neutrals. The market seems to be like, even though there's a lot of holes in this MOU and whatever, but the market, I feel like, is saying like, hey, it doesn't really matter as long as we're out of there and oil can go back to normal.

CHRIS SIPES CFP®: Like that's, that's what, that's what the market seems to care about. So, we'll see if it flares back up. It's, you know, hopefully not. But as for right now, the market is feeling pretty good. We've got the CNN fear and greed index though, still at 26, which is fear.

CHRIS SIPES CFP®: And that's actually down from 37 fear last week, just right on the edge of, extreme fear. Now the CNN one is not, Hey, how do you feel? The CNN one is based on seven different positioning indicators in the market. So how are people actually invested? So that's interesting. And then we've got Bitcoin still down at 12 extreme fear.

CHRIS SIPES CFP®: Again, the sentiment I don't think could be much worse in the Bitcoin space right now, which take that for what you will, because as someone who's been on the wrong side of that many, many times, like I told you guys a few weeks ago, like.

CHRIS SIPES CFP®: As soon as you're like, this, this is dumb, it's going to zero. You know, it's what's, what's going on here. Usually for me, that's the bottom. And then as usually, as soon as I'm like, Hey, maybe there's something to this, you know, gosh, it goes up a lot and every, all these smart people seem to seem to be into it.

DAREN BLONSKI CFP®: Chris, you're so good at investing in Bitcoin, I do exactly the opposite of what you do.

CHRIS SIPES CFP®: Exactly. That's what I'm trying to say here. That's what I'm trying to say.

DAREN BLONSKI CFP®: Well, I love you, buddy. Bye. It's so antithetical to your whole investment thesis. It's just not something you should play with.

CHRIS SIPES CFP®: Right. And that's why I'm telling you, hey, use me as a counter, as a contra, as they say, and do with that what you will.

DANO WEIR: Chris is the Bitcoin cooler.

CHRIS SIPES CFP®: All right. So this from Isabel Nett and showing maybe why we might be seeing some of the. Weakness that we've been seeing in the hyperscalers. That's the MAG-7.

CHRIS SIPES CFP®: And here you see EBITDA, which is the earnings before interest taxes, depreciation and amortization. That's considered like a representation of cash flow. So kind of before all the accounting tricks come into play that the companies love to play. So it's not a perfect representation of cash flow. But it's one that's subbed sometimes. So you can see that in the dark blue.

CHRIS SIPES CFP®: That's continued to go up into the right. And then you see CapEx really taking off, really since maybe March of last year, but definitely March of 24. So we're two years into this CapEx boom for the hyperscalers. And then in the green, you see the net buybacks. Now that's buybacks of shares, which is one way that companies return return capital to shareholders, give a provider return to, to shareholders, or can.

CHRIS SIPES CFP®: So it's similar to a dividend, but just done a little bit differently in some would say in a more tax efficient way. So those buybacks are, are, are, are curling off basically. So these companies are using that free cashflow. Previously they were, they were funding it all out of free cash flow.

CHRIS SIPES CFP®: To build out the data centers, build out the CapEx. Recently, though, they've started to issue equity, issue bonds, which is borrowing money. So we're starting to go from free cash flow going into returns for shareholders via buybacks to let's spend this money on CapEx to let's go borrow some money to spend on this CapEx. And so far, at least this year, the market...

DAREN BLONSKI CFP®: That always works out well.

CHRIS SIPES CFP®: Well, yeah, the market is basically saying like, that's a no go.

DANO WEIR: It's kind of a worrisome trend there.

CHRIS SIPES CFP®: Yeah, but I think it's really not part of the, it's not part of the narrative yet for the average person, right? They're still thinking that AI is the main place to be. And now other parts of AI have still done really well, namely the semiconductors, which is, you know, at all time highs.

CHRIS SIPES CFP®: That segment, the semiconductor producers, have really shown immense strength, which has not only held up the semiconductors in the U.S., but also abroad because many of the emerging market index companies are semiconductor producers.

CHRIS SIPES CFP®: So it's been showing strength. The strength has been moving from the traditional area that everybody thinks of, which was the Mag-7, into the semiconductors. And who knows where it's going next, but it seems like that cycle has started to take place.

DANO WEIR: If you're watching our show here On The Markets from Fremont Advisors, our private wealth arm, Sonoma Wealth Advisors, thank you so much for checking out the stream thus far. This is an interactive experience.

DANO WEIR: So wherever you're at, whether you're on our Facebook, YouTube, Twitter, you can ask questions. We see them and we will answer them live during the show. So feel free to. Fire those off. Chris, what is a credit spread cycle?

CHRIS SIPES CFP®: Well, hopefully this is a little clearer because we do talk about credit spreads and those cycles fairly often. And so the spread is simply what an investor expects to receive in terms of return over and above what they would get from a treasury. In the credit market. So when you're going to go loan your money out, you can loan that money to the government.

CHRIS SIPES CFP®: You can loan it to foreign governments. You can loan it to local governments. You can also loan it to companies. And most investors are going to look at those different credit risks and say, okay, the government can print money. They can tax. I'm very likely to get my money back. The U.S. Government is considered to be...

CHRIS SIPES CFP®: To be a very low credit risk meaning you'll get your money back but if i'm so if i'm going to go lend to somebody else they're gonna have to pay me more or else i would just go with the government option right so that is a credit spread now those spreads go through cycles depending on what how people feel in the market so we can see here we're starting out with a booming economy bullish sentiment, stocks are expensive, credit risk is low, complacency.

CHRIS SIPES CFP®: I would argue that sounds very familiar for where we're at today.

CHRIS SIPES CFP®: You know, I, I think you could, you could argue all of those points are in place today and credit spreads are tight, which we'll see in a second, but typically that changes, which we might be seeing that change right now with Kevin Warsh coming in, who knows? I think that would be the craziest story ever.

CHRIS SIPES CFP®: If, if Warsh comes in and starts tightening rates and is actually a super hawkish, after what, after the way that they got rid of J-PAL. And, and kind of really gave him a hard time on the way out the door. But anyway, policy tightens, the economy weakens, sentiment sours, stocks fall, credit risk is high.

CHRIS SIPES CFP®: Meaning like when you go to loan your money, you're not sure you're going to get it back. Which this says often is a crisis. So, so then that, that credit risk premium gets, gets wider. People want more money to invest in a company that's got a questionable credit. And then that cycle continues where the Fed comes in and they do policy stimulus.

CHRIS SIPES CFP®: The economy recovers. Sentiment snaps back. A little stock starts to rebound. The credit risk is still high, but it's improving. You feel like the storm has passed. And then finally, you get down to where the economy is expanding again, the credit risk falls, and the risk-taking returns.

CHRIS SIPES CFP®: So remember that shape because the spread widens when things get bad in the market and in the economy and that spread tightens or goes smaller when things are good and there's low risk anticipated in the market.

CHRIS SIPES CFP®: So here's where we're at today in one of the spreads. This is a corporate spreads and you can see. This relative to history. Now those gray bars are recessions. And so typically going into recessions, those spreads start to widen out. And you look at the year 2000, that recession kind of was a gradual recession.

CHRIS SIPES CFP®: It was largely in the stock market, at least it was largely located in a few stocks that were overvalued. So it wasn't like a systemic crisis. Much different than 2008. 2008 was like, basically everything was too expensive because there was so much credit in the system.

CHRIS SIPES CFP®: And it turns out that credit was not the quality everybody thought it was. And so there you had more of a crisis and that's why you see that spike in the spreads. Same thing with COVID. That was a panic, like, oh my gosh, what's happening? The market spiked and the panic happened. And so you get a spike in spreads.

CHRIS SIPES CFP®: But where we're at today, really, the credit markets are saying, you know, nothing to worry about at the moment, right? In terms of like, even over the long term, even relative to other quote unquote, kind of normal periods, if you look at like the period from 2015 up to 2019, we're way tighter than we were then.

CHRIS SIPES CFP®: And really tighter than anything that we saw coming out of the great financial crisis. And all the way till COVID. So those credit spreads are very low. Now, the curve, which is the short-term credit rates versus the long-term credit rates, kind of a normal curve would look sort of like a Nike swoosh in that the shorter-term rates are lower than the longer-term rates.

CHRIS SIPES CFP®: And so if you picture that in your head and you plotted them all, all along in a graph over a long period of time, you should get paid more to have your money lent out over a longer period of time in kind of a normal curve.

CHRIS SIPES CFP®: But that curve's always changing. And right now we're getting a flattening in that curve, which we'll see in a minute. But kind of where are you in the cycle? And this is from Bank Of America, where I would argue we're in the... We're definitely in the earnings per share up.

CHRIS SIPES CFP®: Earnings per share is like at the highest, one of the highest expectations in history, which incidentally, a great interview with, and I don't have the name, but somebody from GMO was on with excess returns this week. And he was talking about the differences in these recessions about how the dot-com recession was really a valuation recession.

CHRIS SIPES CFP®: The great financial crisis was a credit crisis. This one... He feels like the bubble is a little different in that it's kind of spread throughout the U.S. Markets and that it's an earnings, what he calls an earnings bubble, in that the expectations for earnings are very high and they're projected to continue for a long period of time.

CHRIS SIPES CFP®: So maybe that happens, but maybe it doesn't. But anyway, if you see in the bottom right down there, it says the earnings per share up and interest rates up, which we would... So I would say we're in that boom phase, but we're getting a flattening of the curve.

CHRIS SIPES CFP®: So the credit markets are starting to flatten out a little bit, that bear flattening. So you would assume that we're kind of starting to head into that stagflationary environment where rates are going up. The Fed's having to raise rates to fight inflation, but then earnings go down.

CHRIS SIPES CFP®: In that. In that stagflationary environment, cash actually is a, is a decent, a decent asset to, to be in. So you can see each one of these different environments have an asset that performs extremely well during that phase. And so there's other assets that do well too, but this is kind of like, you know, singling out one essentially.

DANO WEIR: That was Ben Inker of GMO who was on excess returns, Chris.

CHRIS SIPES CFP®: Thank you. Thank you. It was really great. It's a really great interview. If you get a chance to listen to it and kind of go through the different characteristics.

CHRIS SIPES CFP®: Okay. So on the good news side of things, this is definitely a surprise. But this was from Kevin Gordon at Schwab. The pre-war oil price has basically come back down to where it was. The gasoline price is in white. So that's still... Takes a little while to catch up.

CHRIS SIPES CFP®: But with the straight being closed, I mean, it's definitely a case of the experts don't necessarily know more than everybody else. Maybe they know more about the market or the oil market in this case, but in terms of how that oil market is going to play out, we're all subject to overconfidence, essentially, the things that we feel like we know.

CHRIS SIPES CFP®: That just ain't so like Yogi Berra used to say, this was a perfect example where so many of the oil, experts were saying like, look, even if we reopen the straight tomorrow, oil is going to be elevated for a long period of time. And there's been so much damage done to the infrastructure and everything else.

CHRIS SIPES CFP®: And at least so far, you know, they're probably right about all those inputs, but as far as how the market has reacted, you know, another, another one of those where it's just not, not been correct. And you know, at the end of the day, you got to follow what the market is saying.

CHRIS SIPES CFP®: And, so really whether it's the fact that China just had so much oil stockpiled, whether there was a lot of oil getting through on the black market, I don't know, but the price is the price. And, like Darren always says, like the price is what you need to pay attention to. Cause that's. That's got the most information in it.

DANO WEIR: All these gas charts that we put up are always so cute because I'm looking at my Gas Buddy app right now, and it says it's about $5.60. So we get that extra couple of bucks per gallon. That's the Sonoma County beautification tax.

CHRIS SIPES CFP®: Yeah.

CHRIS SIPES CFP®: Now, we did get the price, the PCE price index. Personal consumption expenditure. Now, this was a favored indicator for the Fed under Powell, at least. I'm hearing that Warsh is more the trimmed mean PCE, but they're really slicing and dicing this thing as much as they possibly can. But this came out early morning.

CHRIS SIPES CFP®: Mid-morning and in the market, the market sold off initially when this news hit the tape, then recovered, didn't seem to care. And maybe it's a sample of the market saying, look, these inflation numbers are elevated because they're backward looking. And now that the straits, you know, calm down, it's smooth sailing from here and inflation is going to come back in.

CHRIS SIPES CFP®: Hopefully that's the case. But nonetheless. That inflation number jumping up pretty significantly and still on the rise, which is leading to expectations of higher interest rates where we do have expected. Interest rate hikes from the Fed by the end of the year.

CHRIS SIPES CFP®: Boy, a totally different spin on the market than what we expected at the beginning of the year. The market expecting cuts at the beginning of the year, and now we're halfway through, and it's now looking much more likely that we're going to get hikes.

CHRIS SIPES CFP®: And this is the two-year treasury rate versus the Fed funds, and you can see that At least according to the two-year treasury, the Fed is behind the curve a bit. It needs to tighten to catch up. Again, who knows, but the price is the price. And the price of the two-year treasury is saying that the Fed needs to tighten up those short-term interest rates.

DANO WEIR: And something to keep in mind too, Chris, is that, because you mentioned previously this sort of hilarious scenario where Trump finally gets to pick. His Fed chair, even though he picked the last one. But he makes a replacement. And here's he's been saying all this time he wants a cut. I want to cut. I want to cut. And yet the guy is replacing him with is likely going to have to hike.

DANO WEIR: One thing I think you always need to keep in mind with Trump is that he very much understands the showmanship and the show business aspect of his job. And so just because he is saying something, he very frequently will just say things either to say them or because he's trying to accomplish some other goal.

DANO WEIR: And then what actually happens or what the actual expectation is can be different. And we jokingly called out the 4D chess that he's, you know, when you're trying to explain something that he does, it's his 4D chess. But in this instance, I could just see him very much understanding that rates do need to go up. But publicly, he's, you know, going to crow all day about how they need to get cut.

CHRIS SIPES CFP®: Yeah, I agree with that. And I think if you look at it through the lens of entertainment, you know, sort of like, like we talked about a while ago, it's like the WWE or the WWF lens of modern politics, things make a lot more sense, at least for me. So what's the rate market showing us when you look at the... Spread between the short-term rates.

CHRIS SIPES CFP®: This is the three-month treasury rate versus the 10-year. This is the famous yield curve that they looked at for inverted yield curves causing recessions, or I shouldn't say causing them, being a preliminary indicator that a recession might be on the way. Now, famously, we got the inversion of the yield curve, I think, in April of 21.

CHRIS SIPES CFP®: I I think it went inverted on April Fool's Day, if I remember. Which is actually so appropriate now in hindsight because we had like one of the most inverted yield curves in the history of this chart. And it was inverted for one of the longest periods in the history of this chart. And we never got an official recession out of it.

CHRIS SIPES CFP®: So April Fool's. However, we disinverted, I guess if that's a word, where... The longer-term rates went higher than the short-term rates, which you can see, that's when the blue line goes above 0% in this chart. When the blue line goes below 0%, that means that the long-term rates are lower than the short-term rates.

CHRIS SIPES CFP®: So that's the market expecting something to happen that like people are okay taking a lower return for a longer period of time in. In those longer-term bonds because they somehow feel like that's still going to be a better bet for them than anything else, right? So the predictive nature of that in some ways. Now, so we've disinverted.

CHRIS SIPES CFP®: We started seeing the steepening of the yield curve. The long-term rates started coming up. The short-term rates started coming down. But that, who knows, might be changing right now. If you see that numbers kind of dropped back down, we've got a like a half a percent difference between the two 56 basis points between the two.

CHRIS SIPES CFP®: So it's going to be interesting to see if we can, if we continue to flatten and if those interest rates go negative again or go inverted again coming up, you know, something to consider because if it's expanding, if it's the longer term rates are going higher, that's typically a sign of, you know, there's growth.

CHRIS SIPES CFP®: There's growth in the markets and people want and need more return to invest in those longer-term treasuries than they do on the shorter term.

CHRIS SIPES CFP®: But if the Fed is expected to rate hike on the short end, so that would mean the short-term interest rates go higher. And then, you know, if the market starts pricing in some slowing down of growth that brings those longer ends, that longer end down, we might see this invert again coming up here.

CHRIS SIPES CFP®: So what's all this mean for the housing market? Lizanne Saunders posted that new months, new housing month supply is over 10 now. So this is still showing it at 9.7. Her chart had it over 10. But there was some research done that showed or implied that somewhere around nine was too much supply.

CHRIS SIPES CFP®: So once we get more than nine months supply, that tends to bring prices down on homes because there's... There's enough supply. Supply and demand drives prices, right? But what's interesting is that the existing homes, we still only have four and a half, which is a tight market. So if you kind of average those two out, since we have more existing homes than new homes, we probably are closer to that four and a half months.

CHRIS SIPES CFP®: So we're probably still in that tight zone that the market is somewhat balanced and that is probably going to keep... Pushing prices up a little bit nationally, but interesting to see the divergence in these two. And the home builders, incidentally, have been doing very well.

CHRIS SIPES CFP®: The home builders stocks have been doing pretty well. So that's interesting. But we'll see how these interest rates kind of play themselves out in the market. They've been elevated enough long enough that it feels like people are less... Worrying about that when they're buying homes today than they were a few years ago.

DANO WEIR: Got some interesting perspective on that this week, Chris, on our other podcast, It's All Money. We sat with Linda Zeiss, who's a mortgage lender from Rate in Napa, and we're talking about interest rates. We're talking about the new Fed president. And she shared something which made total sense, but which I just didn't factor in, which is that you think, you know, as a buyer, You want low rates, right?

DANO WEIR: That seems like you're going to be able to borrow at a lower rate. Who wouldn't want that? And yet, in the high rate environment, you have so much more leeway and so much more leverage with a seller to negotiate credits, to negotiate price, to, you know, you're not going up against 14 all cash offers. So in some ways, it ends up kind of evening out just depending on. Those factors. I thought it was kind of interesting.

CHRIS SIPES CFP®: Interesting. Yeah. It's a good perspective.

DANO WEIR: I wanted to throw one in here before we get to, Darren's, candles this week. Did you guys see the scandal that's developing around Polly market and the Wall Street Journal?

CHRIS SIPES CFP®: I did hear about this. This is wild.

DANO WEIR: All right. So, long story short, this, this slide coming from CBS news, it's at many different outlets as well. It's from an article in an investigation by the Wall Street Journal. Essentially, Polymarket is paying creators, Instagram people, TikTok people, to make posts about Polymarket and betting on Polymarket.

DANO WEIR: And according to the journal's findings, those posts weren't necessarily on the up and up in that many of the posters. Had access to a fake site, which looked like Polymarket, which allowed them to say, oh, I bet 50 bucks on this and I hit my bet.

DANO WEIR: Look, but it was really from a fake site. So Polymarket didn't outright deny it. They just simply said that they're going to be looking closer at at some of their marketing connections, they said. But I thought that was a very interesting aspect of, you know, some of the dangers around the betting markets.

CHRIS SIPES CFP®: It's the wild, wild west.

CHRIS SIPES CFP®: Schwab's apparently getting involved in these.

CHRIS SIPES CFP®: I don't think it's going to be like betting on the weather and stuff like that, but more like will the S&P do X or Y on a certain day and that kind of stuff. I don't know. You guys know how I feel about it. I'm out on that.

DAREN BLONSKI CFP®: You're such a gambler, Chris.

CHRIS SIPES CFP®: I know it's just.

DANO WEIR: It's crazy to, it's crazy to me with the, the amount of, you know, we have standards that we're held to for our business and for our marketing. And I believe in them. I think it's important.

DANO WEIR: And it helps you kind of tell the truth and it helps you, you know, talk about risk in real terms. To be doing some of the things that the Polymarket influencers purportedly were, if I could just imagine that in the stock market business. I mean, I can't even imagine it.

DANO WEIR: I just can't. So it's interesting that it's just this black hole where there's like, oh, there's no regulation over there. This one has a ton of regulation. That one, eh, what are you going to do? It's kind of like.

CHRIS SIPES CFP®: I don't know. Yeah, that combined with the insider knowledge and betting. Government people betting on stuff. It's just, it's gross. I think just stay, be buyer beware. Yeah. Buyer beware.

DAREN BLONSKI CFP®: I think it falls perfectly in line with where we are in history. And it's believe nothing you see online. Believe none of the videos you see, none of the pictures you see, because half of them are fake. And so is the betting markets.

DAREN BLONSKI CFP®: What I do think there's some value there and looking at it though because I do think there's a lot of insider stuff going on and that's not just rumor that's you know been backed up you know for example we we recently saw that special ops person who bet on going into Venezuela and made like $400,000 of course he got arrested but not our politicians whatever right you know.

CHRIS SIPES CFP®: Yeah, that one's the one where I'm a little sympathetic to that.

CHRIS SIPES CFP®: Here's somebody who literally is going to be putting their neck on the line for it, so betting on your team to do it. So I'm a little sympathetic to that one.

DAREN BLONSKI CFP®: I kind of feel like our soldiers would be able to bet, but then you're giving away... We're about to bomb Iran. Well, now Iran. Yeah, yeah, totally. We're about to bomb Iran.

CHRIS SIPES CFP®: Totally. But yeah, that bet was not without risk, you know. Now, had they bet against it going, you know, working, sort of like a sports player that like bets against their own team, like that's gross, you know, shouldn't be.

DAREN BLONSKI CFP®: The military equivalent. That's a whole different level. Like, yeah, we're going to lose this one.

CHRIS SIPES CFP®: Yeah.

DANO WEIR: The military equivalent of throwing the fight.

CHRIS SIPES CFP®: Yeah. Exactly. So it's, man, it's crazy.

DANO WEIR: Weird times. I can't imagine why this was outlawed before.

DAREN BLONSKI CFP®: No idea.

DAREN BLONSKI CFP®: Really, the story that's driving a lot of the market right now is inflation, right? It's Kevin Morse coming in last week and him saying, hey, we're going to be quite a bit more potentially strict. We're going to slow things down a little bit. We're going to cool down inflation. Inflation is crazy. Interestingly enough, Iran hit a boat earlier today and we didn't see oil respond, which I think is really interesting.

DAREN BLONSKI CFP®: So apparently, you know, we have this peace deal, but Iran hit a Singaporean flagged ship earlier today. A big part of this whole inflation story gets intertwined with this dollar story, right? And you can see this breakout in the charts here this week with this candlestick breaking out above. We didn't get rejected at this line of resistance around 100.

DAREN BLONSKI CFP®: And we broke out above 100. And this is the dollar index. This is the dollar in juxtaposition to the other seven major currencies and how strong it is. Well, a strong dollar actually has an inflationary fighting mechanism to it because it will slow down the economy, ultimately, if the dollar is stronger than weak. And so technically, politicians internally want a weaker dollar because that'll be more stimulative.

DAREN BLONSKI CFP®: But if we have a stronger dollar, that helps Kevin Morse and what he's trying to do is bring down inflation. Well, that also speaks bad for gold. We talked about gold earlier and gold going down. So if we have a strong dollar, we have gold going down because there's a cost to carry gold. It doesn't pay any interest, at least in its purest form.

DAREN BLONSKI CFP®: So then people move out of gold when the dollar gets stronger because you can basically it's more effective, not the whole gold. And that also then... We get into the oil story, which is a really interesting story because we're actually back to where we were before the Iran crisis kicked off, but yet we're still in the crisis. Apparently, we have this ceasefire, but we're still shooting at each other.

DAREN BLONSKI CFP®: I don't know what to believe anymore. But I think that's rather interesting that the market has now said the Iran thing's done, but it's not really done. So it'd be really interesting to see if we further break down. Finding support. Support right around $68 a barrel. Trump definitely wants to get this down before we hit midterms. It could also be signaling, though, with oil coming down the way it's.

DAREN BLONSKI CFP®: Down that maybe we're in for more of a slowdown getting to your credit spreads discussion Chris a little bit but interesting that we've returned back but we're still technically bombing so there might be something we're not bombing them but we're still shooting at they're shooting at ships i think there's also something to be said with Iran where we've fragmented that government so much by killing as many people as we have with the Israelis And I...

DAREN BLONSKI CFP®: I have a hard time believing that the government is all acting in coherence together. You just can't kill all the leadership and then go, oh, yeah, you know, now who are we going to negotiate with? It was like when they were over and I don't know if you guys caught that headline earlier in the week when they were over in Switzerland negotiating with vice president.

DAREN BLONSKI CFP®: And in the middle of the negotiations, Trump posted something like, we're going to kill all you guys. Just something like just off the wall. They walked out and were like super pissed the Iranians.

DAREN BLONSKI CFP®: And, but at the end of the day, like you can't shoot down their, their, their plane, I guess, because if you shoot down their plane, there's nobody left to negotiate with, because you've killed so many of the IRGC, like keeping all the factions in check within the country, you know, pretty hard to argue that the factions are now in check because you killed so much of the leadership.

DAREN BLONSKI CFP®: Well, that's why I, that's kind of me piecing together the various stories and why I tend to lean towards this idea that the war is pretty much done, but you still have independent actors kind of blowing off the missiles they control at each other and doing things that might look like the war is not done, but more or less, it's not going anywhere at this point.

DAREN BLONSKI CFP®: It seems like the political will in the United States is certainly not there to continue any substantial war. And then you look gap Bitcoin, which we talked about earlier, big, huge blow-off, really losing this long-time area of support that goes all the way back.

DAREN BLONSKI CFP®: That's not so good for Bitcoin and the fact that we've now closed below that. Although I will say and warn people carefully that Bitcoin has this way of dipping below important trend lines and then spiking back above them.

DAREN BLONSKI CFP®: But there is some interesting stuff happening with MicroStrategy because they're so long. And leverage so much of their business on Bitcoin that the debt that they owe on it and the interest they have to pay on it from the debt that they took out to buy more Bitcoin, I imagine that Michael Saylor... I've actually met the guy.

DAREN BLONSKI CFP®: Not like I met him, like he met me, knew him, but I was standing right next to him at this conference I was at. And he's actually a really strange fella. But I imagine he's got a pretty stiff drink at this point. And in feeling some pain where Bitcoin is at the moment. He's a strange fella. Two questions.

SPEAKER 6: That's really, I'm surprised.

DANO WEIR: It's what? Two questions. Detail, what do you mean strange fella, strange how?

DAREN BLONSKI CFP®: You know, I mean, he's a billionaire, right? And like he had these bodyguards. Is he though? Well.

DANO WEIR: Was?

DAREN BLONSKI CFP®: Was, is, I don't know. But he was at this, the. It was a Bitcoin conference, the Pacific Bitcoin Conference in Santa Monica. And it was kind of like a bro fest is what I call these conferences. All these people stand around whooping each other up about Bitcoin.

DAREN BLONSKI CFP®: And it was interesting though, at that conference, there's a lot of like CFOs for different boards and stuff. And he was there speaking and he was just kind of awkward. You know, he didn't have a lot of diplomatic sense, I guess, is the way I would.

DANO WEIR: Second question.

DAREN BLONSKI CFP®: He was sitting there by himself, surrounded by bodyguards, and would sort of take pictures with people, but not really.

DANO WEIR: Second question, this line of support is how old? Goes back to when?

DAREN BLONSKI CFP®: His line of support?

DANO WEIR: This line of support that we lost.

DAREN BLONSKI CFP®: Oh, this line of support. I mean, I got this thing dragged way back to 2018-ish, you know, depending on where you put this thing. So right somewhere along here. I mean, it's a long time thing. Definitely makes Bitcoin look like it's precarious. Where does it go? Well, you can see there's probably a lot of support right where it's at, but also down at 48. I could see it going.

DAREN BLONSKI CFP®: You know, let's look at it. We're looking at the weekly. Let's look at the monthly.

DAREN BLONSKI CFP®: You know, I guess we've got five days left here. We're probably going to close this candle down pretty ugly unless we get some kind of rip, which it can. But you'd want to see it recover this.

DAREN BLONSKI CFP®: Some support here from me and this guy in there for going to be more an art than a science he's running these trend lines anyway but it is into support looks like it's falling below this 60 000 which is super important you can see how important it was way back in 2021 that period of time big run up big run down again like i always say rubber band snaps one way it's going back the other way that's how the market works Interest rates, I think what's developmental and interesting about interest rates is we lost this line of rates going up.

DAREN BLONSKI CFP®: I think we're confirmed below it now. So it looks to me like the rates are headed down, which then kind of goes into my narrative that I'm building around oil being way down and that actually oil could be telegraphing that the economy is slowing down and there'll be less oil being used.

DAREN BLONSKI CFP®: Even though the war is like sort of going on, but not going on, but kind of dead, but not dead because there's these like individual actors still lobbing bombs at things.

DAREN BLONSKI CFP®: When interest rates go down, that could be signaling. But it's also interesting that dollar goes strong, worse is saying inflation's hot. The US is doing much better than Europe, which then money moves into the United States, which then drives the strength of this dollar. But politicians going into the midterms don't like that. Put on your tinfoil hat, you could kind of say, well, they're trying to make a stronger dollar.

DAREN BLONSKI CFP®: All the others around the world, because they're trying to undermine Trump going into the elections, take a look at the elections. And we look at politics and we look, okay, what's the likelihood that Trump wins the midterms and that he doesn't become a lame duck. It's not looking good for the guy. 81% chance the Democrats take the house at this point. So that puts him in a pretty precarious situation.

DAREN BLONSKI CFP®: We go through another two years of a whole bunch of, impeachment trials yay i just like like him hate him it's just so inefficient for the government to just start impeaching each other but that's democracy that's what we always say on this channel is that we don't really care who wins we just care that the power is dispersed because guess what the power dispersed and they're busy fighting each other and they're not coming after us we have to talk about SpaceX guys i mean SpaceX is just like i mean this is just played out like a fiddle when it comes to, don't get me wrong.

DAREN BLONSKI CFP®: I still think there's probably opportunity in longterm in SpaceX, but wow. I mean, what a ride people rode going into this thing. This is why when we did our, client only webinar a few weeks ago, I was like, it's attic. Yeah. If you're going to buy it, put it in the attic. Cause it was up 50%. And then guess what? Now it's down.

SPEAKER 6: Looks like a rocket. 32%. The outline of a rocket.

SPEAKER 6: It looks like the outline of a rocket.

DAREN BLONSKI CFP®: It looks like the outline of a rocket and the other, we'll not mention, form pattern that it shaped that I sent you guys earlier in the week.

DANO WEIR: A hand gesture.

SPEAKER 6: A hand gesture. We showed that chart last week, I think it was, that out of, I think it was 9,000 IPOs. It was a lot. There was a big sample size. The average pop... On the first day or two is like 20 some percent, which was SpaceX in this case. And then, so like, you know, it's, it's, it's the, all the hype kind of leads this burst of energy in the, in the position, which is totally normal, for an IPO.

DAREN BLONSKI CFP®: Totally. Right. And then what'll happen is, is we have these lockups release, you'll start seeing more people be able to sell their positions in it. And that could create further down. Pull. The fact though that it is like right around its IPO price, it's in that range, you can see it's trading. This is starting to show me a bottoming kind of look.

DAREN BLONSKI CFP®: This is only the one hour chart. Mind you, it hasn't been trading very long, but on a shorter timeframe, you can kind of see it hits here, find support, And the fact that it's holding right here, I'm really going to be watching this 20 hour moving Leap. Though to say, oh yeah, I think there might be some life there. Until we get above that red line, we'll forget about it.

DANO WEIR: I mean, right now, Darren, that looks like a meme stock, a meme coin pump and dump. I mean, you just, you have a big run up and, you know, and then boom, out.

DAREN BLONSKI CFP®: Well, it's only trading 1, 2, 3, 4, 5, 6, 7, 8, 9 days. So, like, let's not get too read into it. But yeah, it does look like a pump and dump for sure.

DAREN BLONSKI CFP®: But I mean, the hype around this thing, in retrospect, I was actually in New York City on the day of the IPO and in the financial hub. And it was like. You know, it was a big deal, right? There was a lot of people there. I think Elon Musk was in the building I was actually in on the day of the IPO, not because I have any connection to Elon Musk or anything like that, but just happened to be that way.

DAREN BLONSKI CFP®: I was taking a bunch of middle schoolers as a chaperone through, New York City in Washington, DC. And, we got them into the JP Morgan chase building to check it out for that day. And, and, and Elon Musk was there And it was like big excitement.

DAREN BLONSKI CFP®: Such a thing in retrospect will we we could easily look back and construct the story of like oh that was the high right that was mass hype but i'm sure a lot of people on wall street made a lot of money this day the day of the IPO so take a look at our mags right and so that to further cement that kind of story in our brains and that narrative like yeah maybe we saw hype top here right there was a nice double top and then we're down and we're trading down in these ranges Kind of looking to 57 on the mags.

DAREN BLONSKI CFP®: So this is just an ETF that tracks all the big mags or the stocks that really drove up the market in the S&P. What are we talking about? Well, when we look at the heat map of the S&P 500, these big dog stocks, the mags, they're just such a big portion of the overall market that when they go down, so does the rest of the market.

DAREN BLONSKI CFP®: The rest of the market actually looks pretty green. Not too bad, but when our big dogs are just getting smoked, it's pretty hard to make up for that.

DAREN BLONSKI CFP®: So that's what I mean by that topping pattern. And when those go down, everything else has to work so much harder to do any good by the market. NVIDIA in particular is that big one. Looking a little interesting.

DAREN BLONSKI CFP®: We did come back down and you could argue that this traded up and then came back down in, tested, and seems to be holding the minute. So I'm not super negative bearish on it. NVIDIA. But, you know, things are interesting there. So kind of an interesting, I'm in like a neutral to slightly bearish stance on the market at the moment.

DAREN BLONSKI CFP®: Could change drastically and quickly, but that's kind of where I'm sitting at the moment with where I see things and call them the spades of spade. When we look at the Q's, Q's are kind of showing this triple top and this gets back to the mags. You can see that. Triple top right here. There's a neckline.

DAREN BLONSKI CFP®: So we'd lose this area tomorrow because this is Thursday. We're filming this. We got family vacations all hitting the pipe here. And if we lose that area, then I would expect to see further downside. And NASDAQ's run hard, run fast. And again, if it goes up quick, it snaps back quick.

DAREN BLONSKI CFP®: I'd be watching kind of this 700 to 690 range and see how it holds tomorrow in the market and market close at one o'clock pacific coast let's take a look at developed markets look kind of similar more choppy but we're holding this long-term support here looks like of 49 on the developed markets etf been okay year for developed markets emerging markets similar kind of look though we lost our 20 period moving average We're holding the 20-period moving average undeveloped.

DAREN BLONSKI CFP®: Overall, I mean, that's why I see it. I think we're neutral and slightly bearish at this point. Rates coming down, gold coming down, Bitcoin coming down, and strong dollar being the headwind that the markets are dealing with at the moment. That's it.

DANO WEIR: Thanks so much for checking out our episode. So AI falling back to Earth, maybe for the moment, for the time being, what does the future hold? We will find out. Thank you so much for checking out our episode. This is On The Markets from Fermata Advisors and our private wealth arm, Sonoma Wealth. Thank you, Darren. Thank you, Chris Sipes.

DANO WEIR: Thank you for listening and checking out the show. If you want to subscribe, you will increase your chances of catching future episodes, whether it's this podcast or other podcasts, it's all money. So do subscribe on whatever platform you're on, whether it's YouTube, Spotify or Apple Podcasts. And we will see you next week On The Markets.

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