Speaker 1: So the stock market, So the stock market. Didn't Donald
John Trump say I feel like Joe Biden, it's gonna
be an economic bloodbat. The stock market's gonna drop. Didn't
he say that? I think he did say that, and
then it done and done it. But fortunately we've got
the swap out and now we have a new figurehead Harris,
and she'll make things so much better. We'll talk about this.
Zach Abraham, Chief Investment offs for Bulwark Capital Management. No,
you're es gradio dot com. Thank you God Almighty for
wise counsel.
Speaker 2: The Todd Herman show is one disapproved by big pharma
technocrats and tyrants everywhere. Now from the high mountains of
Free America, here's the Emerald City exile Todd Herman.
Speaker 1: Today is the day the Lord has made, and these
are the times to which God has decided we should live. Oh,
the chief investment officer of Boat Capital Management, my friend
and a guy growing a rough and rugged, manly looking beard.
You know what that's not they do in the finance world.
You're supposed to be all clean, shaving and sitting there
in a double triple quadruple windsor h had a stack of
business cards in the thing had a small child in it.
There's some packs of cocaine. Is what they do back
in the West East Ghost, How are you, brother?
Speaker 3: I'm doing good man. Cocaine free?
Speaker 1: Wait, free cocaine or cocaine free? Well, it depends, right, okay, right, gotcha?
Speaker 3: You know we can get you whatever you need.
Speaker 1: Yeah, I gotcha. No, I get it. No, I told
you get it.
Speaker 3: Ye got to stay away from the Peruvian marching powder.
Speaker 1: Got it? No, do stay away from them.
Speaker 3: Refer to uh no man, yeah, I Uh, it's just
it's hard. It was hard to let go of the
free and beard man, and then.
Speaker 1: Uh, don't let go man, don't look out.
Speaker 3: Yeah, And then the two most important women in my
life said that, no, you don't look as good without it.
So I said, all right, you know, so.
Speaker 1: There it is. There it is.
Speaker 2: So.
Speaker 1: I guess I was hoping to have some drama this week,
but there isn't any in the finance world.
Speaker 3: No, everything is normal.
Speaker 1: Tan was a thousand point drop in a single day,
and I read a statistic that that ain't never happened before.
Speaker 3: Uh, probably not one that big. I'd have to go
but back and look at it. But we've had you know,
we had I would say that's probably not accurate because
I know there was a day during the COVID crash
where at least the Dow was down thirteen percent in
a single day.
Speaker 1: Yeah, but that was planned.
Speaker 3: Yeah, well shut down the economy, right right, right? So yeah,
but in naturally speaking, I mean it's it's certainly up there. Yeah,
it's big.
Speaker 1: Okay, So this is what zero Hedge posted, and you know,
me and zero edge, Meg seven down over a trillion.
That was August five, twenty twenty four, six twelve am
Navidia down three to twenty five billion, Apple three hundred billion,
Google two hundred billion, Amazon one hundred and thirty five billion,
Microsoft one hundred and twenty five, Meta eighty billion, Tesla
down sixty billion. Remind all the gentle ladies and gentlemen
and find people on both sides of the issue, you know,
from the charles. Remind them of how many of those
companies automatically get to help themselves to the A orders
financial a orders of people using the electronic trading platforms.
Speaker 3: Well yeah, not just that, but I mean I think
the biggest day order is just the the the passive investing, right,
the ETF.
Speaker 1: Meanscause I mean, yeah, the ETF.
Speaker 3: Yeah yeah, yeah, yeah. So I mean, you know, ETFs.
It's hard to get an exact number around right now,
but I mean in passive indexing ETFs, you've got about
fifty five somewhere in neighborhood of like fifty five. Maybe
it's a hi as sixty percent of all dollars going
around the marketplace are invested that way, And people are like, well, okay,
fifty five, that's a lot, and you're like, no, no,
Like all things, you got to look at it in context.
You've never had a form of investing period, any form
that dominated that much of the money flowing around the markets. Now, look,
you've had a couple bounce back days here, But there's
two things. First of all, I think that way more
of that got blamed on the economy being on the
edge of recession than it should have. We had some
weaker economic data. Obviously, people I think know my attitude
or my take on what I think of current economic
policies that are in place and the long term pernicious
impacts of those. At the same time, I think that
that economic data probably made up you know, let's call
it four to six percent of the chaos that we saw.
It certainly added to it, but the biggest part of
it was what you and I have talked about before,
which was whenever you see things, and we kept talking
about how small and mid cap stocks were just getting
left in the dust and the Nasdaq was just going
through the roof, and that became what we call a
carry trade, meaning so what or a pairs trade is
some people refer to it meaning if I short the
Russell two thousands small and mid caps, so I bet
against small and mid caps, but then I bet for
big tech if something bad happens, And this has been
the way it's played out over the last several years.
Even if I lose money on my big tech bets,
the Russell two thousand and the small and mid cap
stocks are going to get hit worse. So even if
I lose, I still win, right because my bets against
the market are going up faster than my bets for
the market, right yep. So, and this always happens in markets.
The longer those types of pair trades go on, the
more people that pile into them, and the more fragile
they become because they're flawed in the very way that
they're looking at it. Right, the average guy goes, well, yeah,
that makes sense because those companies suck compared to big tech. Right, Well,
if AI is as powerful and as transformative as the
prices of the big tech companies would have you believe,
then the only way they can be worth that is
if they're providing such unbelievable utility to the rest of
the economy. Therefore, maybe the AI companies should be going
up more. But you can't have a scenario where you've
got whole indexes of small and mid cap companies not
going anywhere and these transformative AI companies going through the roof. Right,
those two things can't exist. If those AI companies aren't
going to have a really positive impact on the small
and mid cap companies, then why are you bitting them up?
Speaker 2: Right?
Speaker 1: And if the small and mid cap companies can't afford
to buy the AI and then where's your customer base
you're going to sell to each other? Because all the
tech companies are getting into AI. And I found myself
some news on AI pricing on our share with you,
But I want to go through a quick checklist in
just a second here with you, Zach on these companies
because I really this concerns me, and maybe it's wrong
for me to be concerned about it. So we'll go
through this checklist in a second. If you guys go
through a checklist in your physical life, can I just
ask you this question? Does it take longer to recover
from even something like playing football with the kids on Sunday?
And I'm quoting a John mellencamp song. Bonus, bonus bonus
if you know, playing football with the kids on Sunday,
roaring with the lions all weekend long. No roaring with
the Lions all week long. Just no, gosh, that's just
to tell ourselves we're still the young Lions. It's check
it out now. I screwed it all up. Well, just
start over, all right, let's start over, John Mellencamp ard, No,
here's the deal. If you go through the checklist, does
it take you longer to recover from exercise? And I'm
talking about muscle soreness, or if you begun to break
bones or even little bones? So can I just suggest
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Now we'll go through the checklisters ex. So here's what
I was asking these electronic trading platforms. So a lot
of people involved in this is passive investing. Every month
they're sending this money to these companies. I don't think
the Video gets that right. They don't get that automatically
usually right, NA Video is to Volta or is Nvidia
getting that automatically?
Speaker 2: Oh?
Speaker 3: And Vidia is the second, well I think the second
or first largest company in the SMP. So they're getting
they're getting between six and seven percent of everybody's dollar
they're putting into that ATF That's insane.
Speaker 1: That's insane because that company is going up billions of
dollars a day or a second. It's hard to keep track.
Speaker 3: Hundreds of billions a day, yeah, a day, and the
profits aren't increasing the companies.
Speaker 1: That they that they rely on for their raw goods
are increasing. Insane, Apple they get seven percent? Is that right?
They're getting seven percent automatically yeah, they're right.
Speaker 3: Around six or seven now. Now in Nvidia's profits and
revenue have gone up unbelievably.
Speaker 1: So, but they're not tracking to two hundred you know,
two hundred per day.
Speaker 3: No, that's the insanity is You've seen multiple days where
you see one hundred and fifty to two hundred percent
of their annual revenue. So you see market cap movements
that are equal to one hundred and fifty to two
hundred percent of their annual revenue in a day a day.
Speaker 1: That's my point. It's not that they're not going up, right,
but it's the comparisons. It has no grounding in. In fact,
Apple has said Tim cook time and again, we are
not a gross stock, right, We're not. We're six percent.
We're not.
Speaker 3: We're not.
Speaker 1: We're not going to return you twenty five percent or
hundred percent anything like that. Right, we're setting out a company.
They're down three hundred billion. Google is getting seven percent, right,
at least Google has thinned the metal five five percent.
So every one of these companies, even Tesla, gets a
taste of this stuff automatically.
Speaker 3: Yeah. Yeah, it's just whoever's this? See, this is the
problem with market cap weighted ETFs, right, especially when they
control more than fifty percent of the money in the market.
Is that what happens is the companies that go up
the most quit being the companies that are performing the best.
They just become the companies that are the biggest, right.
And it's a self reinforcing wheel, because the better those
companies do, the better the market does comparatively to any
other form of investing and value stocks and all that
kind of stuff. So more people jump on that train,
and pretty soon they control sixty sixty five percent, seventy
percent of the entire market. And these things make markets
more fragile, which is why it's one of the reasons
you saw this whole market gyration. But there's another really
interesting tell in there, right, the father of value investing.
I've been telling you that so many of these things
don't make sense on a fundamental basis, right on price basis. Well,
guess who is now sold about somewhere in the neighborhood
of sixty to seventy percent of all their applestock and Buffet, right,
And I've been hearing these wonder why Buffet's selling. I've
heard people saying Buffett doesn't know what he's doing. And
I'm like, Okay, you may not like him, but to
say he doesn't know what he's doing or doesn't understand
the valuation of a company, right, come on, right, give
me a back, right, right? Why do he sell it
for the same reasons that I've been saying. The price
doesn't make any sense, right, Like they quit growing and
now they're trading at thirty three times earnings, and it was, oh,
it's the refresh of the AI empowered phone, and I go, guys,
that that's a one year, one off type thing. And
then the other thing is is you got to start
looking at the numbers. Right when you get a company
that's as big and as successful as Apple, you can't
just see a ten percent increase in earning, right, Like
to increase their earnings by ten percent, you'd have to
have the most amazing phone launch they've ever had by
four right, So you just you start bumping up against
law of large numbers. And look, I mean, you know,
I mean Apple's already you know, bounced off if it's
low by seven and a half percent, and it's already
higher than it was when Buffett sold it, So you
know you're still in a place even though you have
these market gyrations, nobody cares, and the market's been trained
to think that. Look when when stocks sell off, just
buy them. And everybody's like, well, isn't that true, and
you go no, no, when stocks get cheap, you want.
Speaker 1: To buy them, right, not when Yeah, but there is
a difference, right, Yeah, you can still different lose billions
of dollars in value and still still be way way overvalued.
Then there's this, This is a fun piece. Intel says
gouty three. That's I guess their AI focused product is
going to be one third the price of the competition. Yeah,
oh okay, so wait a minute, we see let's go
back to Nvidia. Okay, so they're going to be powering
the AI revolution Apple man, they're still in a bunch
of new phones based on AI. You got that Google AI.
That's fantastic because it turned our founders into into black
women who are same sex attracted in some women with penises.
So that's and that's an AI, right, that's a beautiful AI. Amazon,
you know, Amazon, or at least they're not really betting
on it. Microsoft is, but they're outsourcing it. It's going
to be one third the price of the competition, and
Intel has the ability, I don't know, they're relatively big,
they might be able to make a market. So is
that going to change the price of these AI companies
that Google's going to come in and now start a
price war.
Speaker 3: Yeah, well, we've had this conversation before too, right, not
doubting the efficacy of AI and its ability to transform
things right from the beginning, we've said that. But you're
attributing all of these wins like to think, maybe you
know how many times have you and I had the
conversation if you think all of these big tech companies
are just going to sit back and let Nvidia own
this market, You're out of your mind, right, It's it's
not going to happen. So you're and you're already seeing
that competition come to the four. Now Intel actually has
the new chip that they came out is actually better
than the Nvidia chip is. Right now, now in Vidia
has a new chip on the on the on the
uh you know, on the deck you know, getting ready
to come out. That's delays in that and that ship
will be another step forward. I'm just saying, like in
video is unquestionably in the lead, but when you can
get something that you know, a lot of people are
building AI tools off of the existing in Vidia chip, right, Well,
that means that it's functional and like you and I know,
you know, anytime a company's making an investment in AI
or anything else, you don't just blindly go out and
buy the absolute best thing. You're looking for a merger
of utility and costs, right right. So I'm not saying
people are gonna quit buying in videos chip. What I
am saying is you're going to increasingly see chips on
the market that are more than suitable to do what
a bunch of other players are doing. They may not
be suitable for the top players, but the point is
one of the biggest driver for in Vidia's revenue and
profit surge is they were the only game in town.
They now they're not, and you haven't even seen that
be reflected in the stock price.
Speaker 1: Yeah, and that's insanity. I can remember when people told me, well,
no one's ever going to use an AMD ship, you know,
and I remember Microsoft not ites Intel when an Intel
world it is an Intel world. Plus you know Apple's
never going to use Intel, So this is a way
for us to have a competitive advantage. I remember one
day reading, Oh well, look there's an Apple with an
Intel in it. Oh wait, there's a Microsoft with an AMD.
But wait, I was told in no uncertain terms that
would never ever, ever happen. I want to bring politics
into this in a second, Zach, because there was a major,
major shakeup, a huge shakeup, and everything is different. So
I want to present that scenario too, because there's people
who believe that with this huge shakeup in politics, that's
why the market took a nose dive, and we'll talk
about that in a second. So, Zach, there was a
major shakeup politically. We went from a demented old man
who's probably suffering from Parkinson's who believes in open border
policy allowing the cartels to sex traffic children across our border,
changing the electrical from the back end, using the presence
of these bodies, who believes in funding both sides of
the war between Iran and hamas money laundering through Ukraine
boys or girls. Girls or boys. Government should be able
to steal your kid and trans them, allow crime to
run rampant in the cities, and give all control to
presidents to be able to jail their political opponents. Then
they swapped and they put in a woman who doesn't
have Parkinson's but believes all those things and more. And
she has said that she's going to bring about the
Green New Deal, that she will be the one who
will make this happen, that finally this country will get
off of our sick addiction. It's a carbon based energy,
and she's going to duel with all carbon based things,
which we are. I mean, you know, we're carbon based.
So maybe she doesn't mean all because she doesn't mean herself.
So there were people, but just us, there were people
who say that this switchover to figurehead Kamala Harris, that's
why the market dropped. Do you think there's any reality
to that?
Speaker 3: Look, I think that I think that it probably again
played a role on the margins. But look, when we're
talking finance and investing, and this is a warning I'll
give to everybody. I would like nothing more to sit
here and tell you that this is a market freaking
out at the idea of Kamala Harris and this complete dole.
I mean, he's smarter than she is, you know, but
that's like, that's not saying much, right. I would love
to tell you that's the reason the market freaked out, right,
I would love It's not okay, the market freaked out.
We've been talking about it for more than a month,
month and a half. The market freaked out because you've
had this insane environment going on so long that people
start doing insane things because you know, getting way over leveraged,
and those things always come apart like it just it,
you know, and people go, how do you know that?
Go go black guy back and listen to the shows
that we've been doing for the last month. We were
saying that this was going to unwind, and it was
going to unwind very violently, because that's what always happens.
It doesn't make us a prognosticator or no stradamus. What
I will say, though, is it I think that that
certainly played a role, you know, again on the margin.
I don't think that it was a serious role. But
but all all one up that I think one of
the most concerning things about this whole deal is that
that market drop isn't attributed to that, right, Okay, got
to explain that, Meaning I would feel much more comfortable
about the rationale and the foresight and the thinking of
the American populace or the American investor if that was
attributable to it. But here's the thing, A Kamala Harris.
And again this is going to be offensive to people,
but I'm just telling you a Kamal Kamala Harris president
see on balance, probably means that big tech deserves to
go even higher. Why because they're going to pad her pocketbook.
This is not a smart human being. Okay. As a
matter of fact, I think we could be looking at
the lowest IQ that's ever been on a major ticket.
Speaker 1: No, and people think that this might just be because
you lean conservative and I'm slightly conservative. I'm mostly mattered.
But this is demonstrable because anytime this and I've taken
a pledge because people are saying, look are you Christian
or not? Because if you're Christian, stopped calling your Cami.
I mean, have at least the respect to use her name. Okay,
I'll say figurehead Kamala Harris because she's a figurehead. She's
not going to be afraid. This woman. Anytime she leaves
her notes, you get things like this. Today, we're here
to celebrate a very important relationship with North Korea. They've
been an ally for a very long time. Or we're
thinking about the significance of the passage of time, I
mean time. Let me think about that, the significance of
time and the passage of it. And then this, and
this is why I called her Cami. That cackling laughter.
She here's what she is.
Speaker 2: Though.
Speaker 1: You know who else is not smart? You know what
else is not smart? A wolverine. A wolverine is not smart.
But if you have what a wolverine wants, and you
are alone in the woods and you don't have yourself
a pretty serious weapon, the wolverine will have what you
have and it will have you.
Speaker 3: Yeah.
Speaker 2: Right.
Speaker 1: They're weasels too, by the way. Those are the people
think they're bears. They're not. They're huge weasels, right, And
they'll come and they'll get you, and they'll stalk you.
Or you know what else, a komodo dragon. Yeah, yeah,
do you know how kmodo dragons kill you?
Speaker 3: Yeah? They bite you and follow you for like two
weeks until diet.
Speaker 1: Right, they don't even bother. I'm not gonna waste energy.
They've got disgusting bacteria in their mouths. So they come
and they'll bite you in a big muscle and they know, oh,
Dud's gonna rotten the vine, and they're just sitting there
with you. You know, you can climb a tree, and
they're like, whatever, I mean, you're gonna fall out when
you die, right, And then as your muscles are riding
from them on the side, they're going, no, that one's
cooking up nice. And they're looking at you with those reptiles. Yeah,
I'll eat you in a little bit. And here's the
thing with with with figurehead Kamala Harris. She's not smart,
but she's got the instincts of a political killer. And
don't tell me she wasn't working the phones in the
back end and maybe working some other things in the
back end with Barack Obama saying we got to get
Joe out, And don't tell me she wasn't looking at chops.
So don't tell me she's not mobbed up. And there's
not big companies in there saying Okay, look, here's what
we're gonna need. We're gonna need more infusions of cash.
We've got to have a new flu like we got.
We tried that cow flu thing that wouldn't don't tell
me that she's not the perfect political predator to be
to be taken advantage of by other political predators and
cause to do their will.
Speaker 2: Right.
Speaker 3: Yeah, well she has to be mobbed up. There's no
other there's no other way she'd make a ticket. And
me sitting there saying that she's adult and as an
incredibly low IQ. Look, my faith is my guiding light
in my life too, right, I take it very seriously. Yeah,
And this, this person has injected themselves into the public
sphere saying that they're dumb. Right, that's that's not being
anti Christian. It's what we got to think of ourselves
as being on the board of us A right, And
we're and we're effectively picking a board chairman, right. And
if that board chairman walks in and can't string together
seven words in a cohesive manner, it probably doesn't really
look good to their you know, to their mental acuity, right. Right.
And and so me saying that she's dumb, that's an observation, right,
I say, I'm not making a judgment call. I'm not
judging her. She's she is asking for me to approve
her in a job that impacts my life. My job
as a citizen is to put her through as many
filters as I can and try to sit there and say,
is this person if she walked into the boardroom of
a single fortune five hundred company and she didn't have
the weight of the federal government behind her, would she
be elected to a single board position or the CEO
position in any one of those five hundred companies? And
the answer is resoundingly no, It's ridiculous. I know. Would
Donald Trump? Yes? Multiple Right now, I'm not saying I'd
hire him from I you know, right, but I'm just
saying you have a competency issue. Joe Biden, you could
say the same thing circa twenty sixteen was was he
more mentally fit or more capable that none? There's no question, right.
Like I said, I even know liberal people and people
that disagree with me that will sit there and admit
to you objectively and be like, yeah, she's not a
sharp knife.
Speaker 1: Well no, no. And in fact, there CNN did a
piece about how she was a drag on the ticket.
Guess what they mentioned, ha ha and her laugh, her
laugh and her voice and the perception that she's not smart.
They did it in a pre produced package that went
through a whole bunch of different reviews. And now they're saying,
oh wait, wait, she is a black woman. She grew
up in the deep hood. She was with the crips.
She survived to drive by shooting. Then she dealt drugs
for a number of years until she made a rap album,
and then she got her imprint, and then she went
to prison for a while. She did a stretch there
for a killing she did back in the gang days.
And then she turned her life around and she adopted
four hundred black children and raised each of them individually,
with one minute of the day. They're all now MBAs
and she's been through the struggle. But was she ever
an Indian American? Well a little bit.
Speaker 3: Yeah, all right, Well I didn't believe when it was convenient.
Speaker 1: I know, race of convenience. I know you made me
spit take. Yeah, I watched the video, just just witnessed
the spit take, and it also went over to the screen.
I do have a question about the stock market in
people's lives, because I'll tell you something I did one
day back when I was doing a film for a
client who does not what you do. They do it
very very differently. But back in the day, they did
some investing by and hold investing. I'll tell you what
I did, and I want to ask you about I
want people to understand the stock market and their lives.
People understand this about their lives that you have. Okay,
I don't know how to put this all right, this
is a very impolite thing to say. But if you
have someone in your house who has to take a
lot of medication, you love them dearly and you are
sacrificing time and money to care for them, and they're
living in these circumstances where they can't get out. You
produce a smell of a hospital or old person smell,
and they know that. I can remember going and visiting
my aunties and they were not nice women. One of
them was an angel. Kay was an angel, but the
other ones were not nice and they didn't like kids.
But they did apologize for the old lady's smell. Now
they shouldn't have to do that. They're human beings. They're
in bed. They don't want to be in bed. You know,
you can give peace like this a gift. The the
oxyoxy leaf too thunderstorm device. It'll take that smell away.
Their room will smell like it's been a thunderstorm in there.
And it does this with three that's ozone. So you
don't get the chemical smells and the medicine smells and
the I'm trapped in bed smells. That happened to my dad.
He didn't want to smell that way in bed. He
was in bed for a year before he died. He
didn't want to smell that way. But there's all sorts
of other smells. Like, for instance, I think about you
guys who are long haul truckers and you listen to
the podcast as you drive Number one, Thank you number two.
Like if you're living out of the cap of your
truck on these long cross country stretches, it can't always
smell nice. So you put the oxy leaf to thunderstorm
device in there, and these ozone molecules just negate the
bad smells. That works with the things as awful as
cat litter or kid puke that baked in a car
over night, and it just negates it. It also does
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That's not smell, that's stink, right, a bunch of kids
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dot Com use code Todd bogo. So back in the day,
Zach I made a little film for some friends who
do buy and hold investing, and that's not something I
can sponsor anymore. I think buy and hold is insane.
And we would go make little films and we made
it outside of Fidelity, and then we made it outside
of a first interstate bank. Two places. These are people
leaving Fidelity, okay, people walking out of Fidelity. And we
had a sign that said free twenty five dollars Amazon
get certificate. This was like fifteen years ago when that
met something. So just come and do an interview. People
walk up to us, Hi, thanks, Hey do you want
to sign up for the Amazon Gifts a fig? Okay,
you just have to answer some questions for us on camera.
Do you invest in the stock market? Nine out of
the ten people walking in and Fadilia said, oh no, no,
I don't. I don't do any investing in the stock market.
Oh you don't, So where do you put your money?
Oh no, I'm all about mutual funds. I think this true.
I think the stock market's too risky. Plus that's for
rich people. So I'm just in mutual funds. What are
mutual funds? Well, wait, is that the stock market? Yes?
So there was that. Then this was the golden one
because that was very embarrassing for people to laugh. Oh
my gosh, I'm so stupid. Of course I'm on the
stock market, and that was funny. We give them their certificate.
Then we went to the U district where the college
is Universe Washington. We went outside of a first inner
stint bank twenty five bucks. Now they're college students. Man,
we got a line, but we have to take them
around the corner so they don't get the answer. So
people come up, okay, hey, thanks, Hey you're in there.
You have a checking account? Yeah, what about a savings account?
Speaker 3: Yah?
Speaker 1: Absolutely saves the account, too cool. Do you invest in
the stock market? No, absolutely not, I'm not rich, it's filthy.
It's for a stinking, disgusting capitalist. Or I don't have
enough money or no, okay, but you have a savings account. Yeah,
so where does that money go? These are college students. Well,
it's in the bank, like it's in there right now. Well,
not all of it, I mean some of it. What
do you think the bank does with it? Stock markets?
They would figure it out socratically within three questions. They
would socratically.
Speaker 3: Wait.
Speaker 1: Wait, so I am invested in SCRAA. No, no, you're not. No, no, no,
you're just getting your little one percent return. They're investing
your money in the stock market. So everybody's in the
stock market. My point is this a thousand point drop
in a day, And it didn't I mean, okay, it
really affected some people for sure. Now retirement's different. Now
retirement's not five years, it might be seven. How tied
in to the lives of folks? Is the stock market
in your opinion?
Speaker 3: Well, it's certainly much more today than it ever has been,
even if you're not invested in it. And the reason
why is, and look, I don't There's a lot of
empirical data that I could present, but this is still
kind of something that's in the theory stage because it's
I wouldn't say it's widely recognized, but I think that
I think the empirical data really points to it, which is,
I think that the stock market has a bigger impact
on the economy than at any other time. Meaning, you know,
the way we think about it is that the stock
market is a reflection of what's going on in the economy.
But I think you've reached a point where I think
the inverse is true. I think one of the largest
inputs into the economy and the consumer spending is the
stock market. And the reason I believe that is this
A lot of us know that this, know these stats,
but baby boomers, let me just give you and I'll
pull up the real numbers while we're sitting here. If
you had to guess how much of the country's wealth
is held and owned by the baby boomers.
Speaker 1: The country's wealth, I'm going to say eighty five percent.
Speaker 3: Let's see just very no, so it's a little less
than that.
Speaker 1: But this is looking You can look me and say
you're an idiot. It's it's a no no no, no, no,
no no no.
Speaker 3: Because because these numbers are a little bit deceiving. Meaning
if we say total wealth, that includes real estate holdings
and things of that nature. So it's not going to show.
But baby boomers, by definition, okay, make up about twenty
percent of the population of this country. And if we
look at the total percentage of the country's wealth, baby
boomers control fifty two percent of it.
Speaker 1: Okay, I thought it was eighty two, but I was guessing.
I was guessing that might.
Speaker 3: Well, so that well, that's like top one percent, right,
So the top one percent controls, you know, eighty five
to ninety percent.
Speaker 1: This goes to the question of what is wealth. And
I'm going to defend myself a little bit here because
I think most of those people in the top one
percent are baby baby boomerage. Could be wrong, but I
think most.
Speaker 3: Of them are over ninety percent. Ok for sure, Okay,
for sure? All right, okay, so if if but let's
just think about let's let's just think about grandma and
grandpa okayan are dead.
Speaker 1: Why are you doing it to.
Speaker 3: Me, our mom and dad? Whatever?
Speaker 1: The kid's dead. Hold on a second, what do you think.
Speaker 3: Of a retireing. We're looking for eighty year old retireing.
A righty yeah, and they're getting ready for Christmas with
the kids. In that individual year, they got two to
three million dollars in the investment portfolio, and that year alone,
the investment portfolios of twenty five percent. Does that increase
their propensity to buy some extra Christmas presents for the grandkids? Well,
you know, twenty five percent on a two to three
million dollar portfolio, you're talking about five seven hundred grand Okay,
So I think it's so. Then what you've seen, and
you've seen this multiple times, You've seen the stock market
drop and you've seen consumer spending start to tip over.
Then you see the stock market recover and you watch
consumer spending recover with it. The layman would sit there
and go, oh, the market's so smart. The market's looking
ahead and knows what's going to happen, And we've sat
there and gone, huh. I don't think that's the case.
I think the case is is that consumer spending by
way of baby boomers especially, and then just the country's wealth. Right,
the country's wealth by a percentage, is far more represented
by the stock market today than it was, you know,
forty years ago. Meaning if we look at the percentage
of if you add up all the millionaires in the
world and say how much of their or in our country,
how much of their net worth is in the stock market.
It is a substantially higher percentage than it was forty
years ago. So even if you're not invested in the
stock market. And this is why I tell you, yeh,
don't invest in the stock market. I'm like, that's not smart,
and they're like why, and I go, because the stock
market is ground zero for inflation, right, it's the first
s of inflation, right, meaning it's where people are putting
you know, it's where people are putting money to grow
and protect themselves from inflation. Should it be all of
your investments? No? Should it be risk managed? I think so.
But whether or not you think you're impacted by it.
I mean, if you had the stock market drop by
let's let's say nothing economically changed, and you had the
US stock market drop by forty percent, you would a
in a very short period of time, you would see
unemployment go up sharply, and you would watch consumer spending
come down rapidly.
Speaker 1: Okay, and then unemployment would go up even more.
Speaker 3: Yes, if you go back thirty years ago, right, if
you could go back and look at nineteen eighty seven.
For instance, in nineteen eighty seven, the stock market dropped
over twenty one percent in a single day. Okay, it
didn't even spur on a real recession. Right, you had
a little bit of economic slowdown and things like that
as people were a little under If you did that today,
think about like COVID. Right, so COVID markets dropped thirty
six percent in five weeks. That effect actively happened. That
was market dropped about twenty nine eighty seven over the
course of four weeks. Okay, So but you didn't have
a shutdown, right, you didn't go compare the outcome different.
Speaker 1: Well, and then look at the lasting change to the
commercial real estate prices small businesses. There are states that
lost forty percent of their small businesses and have not
come back. And people working one small business JOP are
now working three. And that's great for the economy because
then they've got three jobs, and hey, look at the
job numbers.
Speaker 3: Right.
Speaker 1: So I want to ask you a question about this
happening again, and I want to remind people some trust
in charos and horses and others trust in the everlasting
word of God. If your charos and horses are in
the form of your four to three B and your
four one K. Hey look b wise stewards. You know,
get risk management. My judgment, this is the dude and
his company to work with. That's my judgment. That's what
we do. But please please make sure that your trust
is parked with God Almighty. Please make sure that my
friend Tim Krukshank on his coffee company, Bone Frog Coffee,
every Begs is God country team. And this weekend, Tim
at Bonefog Coffee is a proud sponsor of the Navy
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So Zach, you are very very careful to always say
you're not a prognosticator. You don't know the future. Always
appreciate that this was a big, big drop do you
think it's the worst we'll see in the next three
years if you're guessing, Or do you think we'll see
a thing like this again? Or was this the was
this the tremor and the earthquake and now the tectonic
plates are kind of relaxed for a little while, Or
do you do you think this was the tremor leading
to the bigger, the bigger earthquake.
Speaker 3: Well, you know, I don't know what's coming up around
the corner. What I will say, though, is I think
history is probably our best guide. If we're looking and
we're paying attention to what's going on, you should notice
that these once in a lifetime aberrational market looks are
a lot spright who lifetime, right, And And I think
what that reflects is the growing fragility in the market,
meaning the market is becoming increasingly brittle the further it
goes up, because the concentration of money is going and
fewer and fewer companies. The longer it goes up, the
more that the average investor is comfortable using using leverage. Right.
The I mean the other part to look is look
at the relatively violent snapback you've seen, right, What you're
seeing as a market that is unbelievably volatile both ways,
and so I think you're going to continue to see
that volatile grow. I was sitting there thinking about it today.
I think that you know, you watch entire indexes and
I'd have to break it down and have somebody sit
there with me through the day, but you'll watch entire
indexes swinging, you know, half a percentage point to a
percentage point and inside of a minute. Right, if you
were like, well it's just one percentage point, I'm going
to think how much value you're talking about.
Speaker 1: You're talking about what I mean, You're talking hundreds and
hundreds of billions of dollars of value in a second.
Speaker 3: In a second, right, and just things should not move
that virus.
Speaker 1: Well, unless let's say that you are a big time
investor and you buy deal flow, which is the thing
where you get to get in front of what the
little people are doing. The little people are all lining up,
We're all going to go out and buy Apple. Hey,
Apple's low by low, right, and this is the common wisdom.
Apple's low buy Apple today, and their brother in law
by Apple. And so the people who get deal flow,
these massive, massive investment companies so mobbed up somehow made
it leagal for them to go, oh, look at that.
All the little people are buying Apple, get us some
deal flow. They don't even need to see anything. Their
software goes out, it gets ahead of that, they buy,
they bump themselves in line like it like at a
Ticketmaster line, they go one hundred to the front that
we're cutting in front. They buy, then turned it around
to the little people. So what I'm saying is, Okay,
that happens, and it's theft. In my judgment, it's utter theft.
It's no different than someone butting in line at Ticketmasters
for the pearl Jam tickets and then turning around and
selling you out of scalpers price. But with this violence
market flow, you're talking two hundred billion here, two hundred
billion there. Am I honestly to believe that there aren't
people who have software systems seeing that and even shaving
one percent of the one percent?
Speaker 3: Oh for sure. I mean there's whole investment strategies built
around that. That's why they're not running in the first place.
Speaker 1: Right Oh wait, wait wait wait wait wait, So there
are investment strategyies in software that are sitting there monitoring
two hundred billion dollars. Hey, this company's worth four hundred billion. No,
it's not. It's worth two hundred Oh it is, well
it's worth six hundred Wait now they're doing that one
hundred percent.
Speaker 3: Yeah, it's like you said, it's front running data. I mean,
that's what that's what they're looking at. And you have
so many of these things that have been built into
the market now that have created this reflexivity, which is
you know, and and and that's why there's a really
good argument to make to be like, it's going to
get even crazier. But I think as the further and
further you go up, the more and more volatility you're
going to see to both sides. I mean, for instance,
look at this snapback right, Like the reason the market
tanked the way it did was because you had this
ridiculous over you know, over levered scenario where people were
shorting small and midcaps going long tech. Okay, well, now
what's getting bid back just as hard tech right now,
like in the last two days anyway, Right, And so
you sit there and go, what's the problem with that?
And go, guys, the the whole reason we were so
off sides is because people have bid tech up. So
then the storm hits, you unwind that trade and everybody's
first idea is well, text down, you gotta go buy it,
and you go no, no, no tech was where was that
because of this ridiculous carry trade? Right?
Speaker 1: But okay, this is let me see it this way,
because this is how my small brain thinks in terms
of your big brain. We're all gifted differently. You see
this stuff, so clearly this would be alike a lot
of people showing up at the Chick fil A and
they all go into the Chick fil A. They've got
a special Chick fil A is the place there's foreigner
people in line. You know what they're doing. They're giving
you six of the Chick fil A chick sandwiches. Never
I've only been there Chick fil A once. Someone brought
it to me once in Texas. It was like a
billionaire meeting. I'm not kidding. It was like we were
in the lobby and there's Carl Rove and it was
like billionaire investors wanted to invest in, you know, politics
and win office. So they brought us into present and
we're in the lobby and I see Carl Rove, who
I knew. I mean, he wouldn't remember me. Well, he
probably remembered me. He cooked me breakfast in his house.
But you know he's in the he's in the lobby.
I go through this meeting Zach and I'm presenting all
these ideas and they're going to buy us lunch. And
I'm thinking, okay. We're on the forty fourth floor of
this building in downtown Dallas and they've got all the
custom made furniture and the walls are white and they're soft,
and the windows move and it's just there's like a
waterfalls over the place. I'm like, oh, man, I can't
wait to see lunch. And I know, hey, lunches here,
you guys, what is it? Chick fil A? What Chick
fil A?
Speaker 3: Shit good?
Speaker 1: I I thought, okay, this has to be genius. And
the Chick fil A comes in like this is like
a KFC sandwich. No, this is really good. What was
they gonna talk about?
Speaker 3: Oh?
Speaker 1: It was this? Four hundred people in line at the
Chick fil A. Here's what they're doing. They're giving you
twelve Chick fil A sandwiches in one bag for this
much money. And there's people going, wait, there's only six
sandwiches and they leave, Wait, there's only six. There's only
six sandwiches. And then other people are like, I'm out, man,
I'm getting out of line because there's not twelve but six.
And then they go in. They're yelling at each other,
and then some guy goes and get back in line. Wait,
he's back in line. I've bet they're doing twelve. No,
I bet they're doing two twelve. Now they're doing twelve.
Then everybody goes back and gets in line. Now they're
doing eight. Yeah, okay, does that compare?
Speaker 3: Yeah? Yeah, no, Noah does. And and the other thing
that's gone on. This has gone on so long now.
And the reason it's gone on so long is because
I did an interview with a PhD economist from Harvard
that's also a money manager, and believe it or not,
has his head on pretty straight, really straight. Actually I
did it today and he and I were talking about that.
The reason it's gone on is because we live in
a new age of government intervention in the markets. If
you look at the last fifteen years or fourteen years
out of the last fourteen years coming out of the
financial crisis, you had stimulus activities going on in eleven
of the fourteen years, okay, in one way or the other.
And in the years where you didn't have stimulus going on,
you had government spending an amount of money that they
can't afford to spend in the long run. Right, you
were running trillion plus dollar deficits, which is a form
of stimulus in and of itself. Just last year, you
know fed, Oh, the Feds raised rates, they're so constrictive. Well,
the Treasury on the other side of it was effectively
doing quantitative easing by not issuing any long term bonds.
So you're building up this market and this economy that
only function quote unquote correctly, right, i e. Going up
in perpetuity as long as somebody is fueling it.
Speaker 2: Right.
Speaker 3: And so I think what you're seeing as a market
that is increasingly reliant on artificial inflows, artificial stimulus. But
here's the thing. I Now you've got a scenario, okay,
and this is what people need to be worried about too.
Now you have a scenario where, look, we all know
that the powers that be are not going to sit
back and let a great depressionary collapse happen. Okay, They're
not going to They've showed that right. As a matter
of fact, go back and look at the last fifteen years.
Every single time the SMP gets down twenty to two
twenty five percent from its high, they stimulate every single time. Okay,
So what I think is, now you're sitting here looking
at you just got a pretty decent jobs report this morning.
It was significantly better than the last one and it
and it does not point to imminent recession. You got
stock markets knocking on the door very close to all
time highs and valuations that are absurd. And now what's
the Fed going to do in September? They're gonna cut rates? Okay,
Remember though, now we were talking about this six months ago,
but now you're kind of starting to see the path forward.
Remember the last time the Fed cut rates into a
strong economy, you do nineteen ninety eight. Oh right, tech bubble, right,
NASDAK went up. So look, people shouldn't And this, guys,
this isn't me advocating you go out and buy this
stuff either. What I'm saying is you're going to see
the moves of this thing continue to get exacerbated and
blown up to both sides. And if a guy from
the future, let's say, twelve to sixteen months in the future,
we're to come back and say, hey, the market's going
to be up one hundred and fifty percent over the
next sixteen months. I'm not saying I'd make a bet
on it, but I wouldn't bet my house cities wrong
because in this environment, you're about ready to go cut rates,
with the Treasury doing everything they can to stimulate running
deficits that are six and a half to seven percent
of GDP, and you got the economy still running at
two point eight to three percent growth, unemployment at four
point two.
Speaker 1: I think you and I are talking after this. So
for a business I'm thinking of starting, and you told
me it's capital intensive, sounds like pretty stinking good time
to go out and raise capital because people are going
to put a whole bunch of money into risky ideas
like mine.
Speaker 3: Not Yeah, yeah, I would say that that, Anya, I'm
not guaranteeing that. Look, nobody knows for sure, including me,
these things are going to happen. But what I'm saying
is we always think about crazy markets being to the downside. Yeah,
you may be, this is yeah. I mean, you look
at today's rally the NASDAK up virtually three percent on
the day. It's absurd. It's absolutely absurd. The entire index
is trading it nine times revenue. At the height of
the dot called mania, you know what, the Nasdaq was
trading at six point eight times revenue.
Speaker 1: Okay, then I'm calling you. Let's just quit this, this
this public conversation, and I'll phone you after this and
you're gonna tell me Todd, put your fund raising back on,
get your suit and tie, get ready to got to
shave that I am shaved, you're not.
Speaker 3: Yeah.
Speaker 1: No, by the way, I got another face for the company.
Will believe the faces by pac and same sex attracted
plus indeterminate sex. And we had the genetic shrinding done.
They can't tell. They can't tell. It's x Y. They
had it masked. It's like shaving your fingerprints, so perfect,
genderless and yeah no right, yeah no. And oh, by
the way, can say the words ecosystem and mean it.
It's so I mean, and it's solid right really right? Oh,
by the way, ten million followers on the socials. I mean,
this is a ten billion dollar company already.
Speaker 3: I push for a twenty or thirty billion dollar.
Speaker 1: Value right business plan? No that I meet Did you
meet the CEO? I mean this is this is what
we're doing right. Yeah, in fact, I demand money now
before I leave. All right, Zach thinks for the wise
counsel is always good to see you, say hi to
your precious family. And I actually will call you after this,
not necessarily because that's the CEO. But would God have
mercy on us for our prides and worshiping of the markets.
This is the Todd Hermanshaw. Please go, be well, be strong,
be kind, and please make every effort to walk in
the light of Christ.