Speaker 1: Welcome to another episode of the Chicks on the Right show.
We have our special guest friend and sponsor of the show,
Zach Abraham from Bulwark Capital Management with us and it's
a very we live in interesting times, Zach as.
Speaker 2: I, so you know, it's a good way to put it.
Speaker 1: And today there was a recently there was this article
on the Daily Mail about a fellow by the name
of Mark Spitznagel who is the president and CIO of
Universa Investments, and he is like mister doom and gloom
Man in this article saying that we should basically be
all like holding on to our hats because there's going
to be a crash. And I want to know your
take about that.
Speaker 3: Well, So Spitznagel is one of those guys that I
don't think that you brush off. There's a lot of
guys that talk a lot in this industry, and it's
his much marketing, or maybe even more marketing than it
is substance. He is not traditionally one of those guys,
so I definitely think he's someone to listen to. Look
and you know, this is something that we've been trying
to talk to our clients about. I think It's really
hard for people to understand because you know, markets keep
going up, and you know, greed or missing out on
potential gains gets people do a lot of stupid stuff.
But the bottom line is is that you have big
swaths of this market, and the parts of this market
that have really driven the market, they're just really disconnected
from any sense of risk or any sense of underlying
fundamentals they've got priced into them, just complete optimism. Again,
I've said over and over it is not the same
as ninety nine, right, the difference being that I think
a lot of what's driven this is you have really
good companies that are just at valuations that don't make sense.
So the companies are really good, there's no knock on them.
But remember, at the end of the day, you get
into these periods of times where a business pays you.
If you invest in a business, you get paid by
profit right, and if you pay too much for that business,
it takes you way too long to get your money back,
right because investors, technically speaking, we don't begin making profit
until our original investment has returned to us. Right. Well,
when you when you approach that, when you use that
kind of valuation method, to look at some of these companies,
there's just a disconnect there. It's just nobody would nobody
would pay, you know, nobody would pay for a company
that has a point six percent earning yield. Meaning if
I invest one hundred dollars into the company, my profit
I'm getting off that per year is sixty cents. Right.
When a company is growing at twenty five percent a
year or thirty percent a year, that's a really good
growth rate. Okay, but you do the math real quick,
and if I'm paying, if I'm buying it at a
point six percent earn that growth rate better keep up
for a really long time, because I needed to in
order for it to make any sense. Right, So when
you look at it from what Mark Spitznegel's talking about,
the length of this run, look at debt levels, you
look at all these different things, I agree with them
at the same time, you know, and it will culminate
in the crash at some point right now, though my
anticipation would be that it's going to get crazier before
it before we see that crash. And at the end
of the day, you've just got this dynamic going on
where when you have all this money printing going on.
When you're running deficits that are six and a half
to seven percent the entire size of the economy, that
money has to go somewhere.
Speaker 2: Yeah, so like right, all right, So then Mack is
buying a house, and there's all sorts of stuff, I mean,
interest rates like because there's say I call them the
people with the big heads that get together and they
sit at the table and they decide that, So what
do you think indust rates are going to do in September?
Speaker 3: So I think that you can just bet your bottom
dollar at the very least, I will be shocked if
you don't see a cut of twenty five basis points cut. Yeah,
you're oh, they're.
Speaker 1: Gonna cut for sure, and then twenty five point.
Speaker 3: Probably that'd be my guest. Twenty five to fifty. I
would say the odds are at twenty five because remember
that you still have, like you see, areas of weakness,
but all of the areas like unemployment, retail sales, all
of the stuff that's really supposed to be you know,
probably the most important inputs for these interest rate decisions.
Those things are not really in a position where traditionally
you would be waving a flag going, oh, we got
to cut rates, we gotta cut rates. Right. That being said,
the longer we're at these higher interest rates, you know,
you know, the more things are gonna the more bad
things I would anticipate popping up. So the way you
look at this, though, is it's really easy. I think
people put a lot of ambiguity around interest rates. Markets
have markets have all this stuff priced right, So what
you can do is you can look into the interest
rate futures markets, okay, which you're looking at interest rates
out and right now those markets are pricing a thirty
two basis point hike or cut excuse me, in September, Okay,
So that's why we're saying. Basically, the market is saying
odds are twenty five, could be fifty, right, That's why
it's at thirty one or thirty two basis points. Only
one time in the last twenty five years has the
FED made an interest rate decision that wasn't told to
us ahead of time in the futures markets. Okay, so
once in the last twenty five years. So when you
go into Fed day, whatever is priced in in the
futures markets, you've got about a ninety six to ninety
seven percent chance. And that's a real number, ninety six
to ninety seven percent chance that that's going to be
what the decision is. So I would say, you know,
there's a lot of ambiguity. Are they gonna cut? Are
they going to raise? They're not, They're not raising, they
are gonna cut. The question is twenty five to fifty
basis points. I think you got a ninety percent chance
that it's twenty five bass.
Speaker 1: So that Spitznagel guy, which I just love his name.
Speaker 3: Yeah, he's a sharp guy too.
Speaker 2: Not to be confused with Mark Spitz.
Speaker 1: Yes, probably different different marks.
Speaker 2: Different mark right right, But part of.
Speaker 1: That article was him saying that the reason that he's
predicting this giant crash is because of the Feds. Like
how long they've kept interest rates so high? Do you
think that's true? Like should they have already lowered them?
Are they too late? I mean, is it going to
do anything? Is it going to matter?
Speaker 3: You know, this is such a this is such a
complicated conversation because if you put me in the FED
seat right now, Like so if I took your own
Powell's chair right now, looking at what he's looking at,
I would cut by twenty five basis points. Okay, But
that being said, we should never have been here, right,
They should have raised way quicker, way earlier that it
would have allowed them probably to raise less. But here's
the other side of it. We shouldn't have been at
zero percent interest rates for twelve or thirteen bloody years
to begin with. Inky, So zero it was zero, it
was yeah. So the yeah, the Fed funds.
Speaker 1: Okay, yeah, because I see what you're saying, because like
bank interest rates were like nothing, right.
Speaker 3: Right, So the Fed funds rate, which is think about that,
the Fed funds rate. If the economy is the house,
the Fed funds rates the foundation, right, So that's the
base interest rate that impacts everything else. Well, that is
the rate that we were at coming out. I think
we went to zero in eight toward the end of
eight we didn't. We came out of zero for a
couple months. In twenty eighteen, we went right back to
zero or twenty five basis points, you know, effectively zero.
So you know, if you look at it, what are
we at like twelve of the last last fourteen years,
you've been at zero percent rates. So that to me
was the big anomaly. That was the big and one
of the reasons you say that is because you knew. Look,
at some point, when inflation shows up, you're probably going
to have to hike higher than you should and faster
than you should. And that's certainly what's happened. But here's
the thing, like, and I agree with guys like Spitznagel,
but I think that I think that we have to
throw something else in here. Look at what happened last year. Okay,
so everybody is just whistling past this, but last year,
had the FED not intervened with an additional three hundred
and fifty billion dollars that they just printed out of
thin air, the entire regional banking system would have collapsed.
And I'm not being hyperbolic, because what happens we're all
of those banks insolvent. No, we're all of those banks
is irresponsible as Silicon Valley bank. No, But what happens
when two or three banks collapse. Everybody else runs, right.
Remember it's a wonderful life, right, Everybody else runs to
the bank, pulls their money out, and it's a bank run. Right.
You were in the early innings of an absolute national
bank run on regional banks. So everybody's like could hire
interest rates damage things? And I'm like, you darn't. You
had to use artificial means and three hundred and fifty
billion dollars worth of printed money. To put that in perspective,
Remember Occupy Wall Street. Oh ye, we're throwing fits over
the bailouts that happened NOWETO nine that was over eight
hundred and eighty billion. Right. The FED just threw three
hundred and fifty billion about it, and it barely made
the nightly news last year. Right, So where I look
at a guy like Spitznagel and I go, I agree
one hundred percent. But as long as the problems that
we are facing can be fixed with printed money, that's
what they're going to do. And they've showed us that
right at every turn. Oh, reality is starting to set
in and they're like, we'll print some more money, right,
So I don't see that coming to an end anytime soon.
But what I would say, and this is what we're
telling people, look at where you're at right now. Go
look at gold. Gold hits another all time high today.
We look at gold miner stocks this year, everybody's so
you know, focused on you know, all these other companies
that oh, attacking. Look at the Nasdaq nasdak's up seventeen
eighteen percent on the year. Gold companies are up twenty
eight percent on the year. Right, So what that now? Look,
it's not what it's telling people though. And what I
do think is that this age of there's only ten
stocks that matter in the world and nothing else matters,
that seems to be changing. The other side of it
that we've been talking to you guys about and all
the people on our on our webinars and everything is Hey,
I'm not telling you we know exactly what's going to happen,
but what you do need in this environment is thea
for now anyway, the days of zero percent rates are over,
Inflation is here, macroeconomics are, macroeconomic indicators are becoming a
big thing. China's got some issues, right, things matter again,
And so you look at the average portfolio. You know
how much the average retirement portfolio has itosed to those
gold companies that are up almost thirty percent on the
AAR zero, Right, do you know how much? Historically speaking,
in a time of inflation, it would make sense to
have more exposure to commodities and natural resources, right, So,
historically speaking, if you owe the S and P five.
If you own the S and P five hundred, that
would give you a twelve to thirteen percent exposure to
energy stocks. Today it's about three and a half percent, right,
So you have maximum exposure to all the things that
have worked and historically low exposure to all the things
that are starting to And the brilliant thing about those
things that are starting to work, they're still ridiculously cheap,
especially when you compare them to the rest of the market. So,
you know, I think I agree with Fitznagel. I see
all the dangers, but I just look at it and
I'm like, until there is an issue that doesn't get
fixed with printed money, they're just going to keep going
back to the well and printing money.
Speaker 1: Well, so you mentioned your seminars. How can people join
in on those reindeer games because those are super important?
Speaker 3: Yes, I like that term reindeer games. So you can
go to Bullwardcapitalmanagement dot com, Know your Risk Radio dot
com and sign up. We've got another one coming up.
I want to say, like at the end of this
month or early next month anyway, free of charge, and
we just basically what we show you is look at Okay,
here's the market, here's what the vast majority of all
of your portfolios are based off of. Here's what the
market looks normally like, here's where it's at today, and
you just see it for what it is, right, because
the reason people invest in the stock market is because
it's automatic diversification. Except today it's not. Today, it's just
a giant tech fund. So it's a one way bet
and you're betting on the most extended, the most expensive
part of the market. Where we're looking out and going
there's phenomenal valuations to be had out there. The catches
is just nobody owns that stuff.
Speaker 2: Interesting. I love this.
Speaker 1: Yeah, well, thank you once again, Zach for all the
insight and people should definitely check you out Know your
Risk Radio dot com.
Speaker 3: Thanks Thanks Lady un As always, investment advisory service is
offered through Trek Financial LLC and SEC Registered Investment Advisor.
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