Welcome to another edition of the Chicks on the Right podcast where we talk to our friend and sponsor of the show, Zach Abraham from Bulwart Capital Management. Zach, it's been a very busy week in the financial market world, and on Monday we saw stocks and the Dow and the NASDAC tank and then a bit of a recovery on Tuesday. What is your prediction for what's next and how should we be feeling about all this?
And what are we calling it? We're calling it the Kamala crash, right.
Yeah, yeah, So, first of all, we've been talking about so I kind of think you need to look at this from a couple of different angles, right, So, we were prepared for this. We had raised a lot of cash and even had some short positions, which for what that means is stuff that goes up when the market goes down. Nothing crazy, but the way markets work. And it's always funny to me because people always cheer market dysfunction when it's working in their favor and they forget
about the flip side of it. Right. So, right, so we were looking at this record divergence unlike really anything we've ever seen in history between the popular tech names the NASDAC and virtually every other index. Right. So, and why that's a tell is because if you have and everybody's like, well, AI, and you're like, okay, but why
is AI so popular? It's so popular because everybody believes it's going to transform the world and we're going to do things with robots instead of you know, people from now on. So if AI is what everybody is making it out to be, then the whole market should be rallying,
not just that one group of stocks. Right. It's kind of this underlying thing that doesn't fit the narrative, right where you're like, wait a second, And those are kind of tells you look for where if something is so benefit for this that it's you know, you in that AI run up alone, those tech companies just off that bump, you know, you increase the value of the stock market by like three to four trillion dollars. Okay, So if that's possible, then that must mean that those companies are
delivering that level of value to the overall economy. So why aren't other companies rallying with it? Right? So that's kind of a tell. And then you looked at how extreme that got, like everybody was virtually selling everything they owned and piling all of their money into Nvidia and these AI type stocks. Well, markets are like a boat, so when everybody gets on one side of the boat, it becomes unstable and pretty soon people are going to start running back to the other side. Right, So a
it was something that we knew had to happen. You couldn't just keep loading up in this one sector without seeing things slashed back to the other boat. So that part of it, to me, is just mechanical. The other interesting part about that is that this market is still partying as if everybody's seeing stimulus checks and everything is growing great. Now. I think the people out there saying, oh my god, the economy is in free fall now, and that was the first salvo. That also isn't true.
But you know, if you look at the economic numbers just on balance, they don't look bad. They're slowing, you see signs of economic weakness. But where I think the breakdown is is it's not that everything looks horrible and stock market's about the crater. But if we look at the underlying data of the market, we look at earnings trends, revenue trends, price, and reality have just gone in the
opposite direction. Right, this market is still priced even now after the turbulence we've seen this week, it's still priced as if we're in the go go days coming right out of COVID, and we're not. It's just not at all cost. The living's gone way up. You're seeing employment fall down, job openings down deeply. You're seeing substantial wage decreases for construction jobs. Right. You're seeing all the signs of a slowdown. And it doesn't appear to me that
investors really want to take those signs. So, you know, I think that there's and and that's always the case in markets. It's so funny. It's like politics in life. Right, everybody wants to pick out a silver bullet and go, oh, this is what that means, or this is what happened, And it's just never that simple.
It's it's but are we in a recession or not at all?
No? I mean so by any and all definitions. No, okay, but that doesn't mean like we were talking about, we also need to take into consideration that the numbers we're dealing with here. So you know, and we've said this before, but if you think back to eight oh nine, the Great Financial crisis, right, biggest financial issue that we've had in this country since the Great Depression. That whole nasty sequence carved three point eight per sent off of gross
domestic product. The government is currently spending six and a half to seven percent of the size of the economy in deficit spending. So I think what you're going to continue to see is things that look very recessionary, right, Like, for instance, I think if you look at manufacturing, I think it's a really hard argument to make that manufacturing hasn't been in a recession for the last twelve to
sixteen months. I mean, the numbers are recessionary. You look at other sections of the market, especially those that are more closely positioned to all the spending coming out of Washington, and they don't look recessionary, and so I think you're kind of in this in between area. That on the
concerning side to me though, would be the turbulence. One of the most concerning signs I thought I saw this week personally was the incredible turbulence you saw on the price of the yen dollar swap, so the value of those two currencies, and then the nie k, the Japanese stock market being down twelve percent in a single session. That could be a byproduct of what was going on
in our markets that imbalance. But we were just having our investment meeting and one of the things I closed the meeting with was, Hey, everybody, everybody in the general media is going, oh, you know, the panic of twenty twenty four is over. Get back in there and buy stocks. And I'm sitting there going, eh, you don't usually see major indexes like NIEK dropped twelve percent in a single day for no reason.
So you would tell, would you? So you would tell somebody like if I were I just didn't look at anything yesterday when it came to stocks or anything like that. I just didn't look because I mean people like us were just like I just don't la la la, right, okay, right, So look because you think, okay, I'm just going to ride it out. Is that what you would tell somebody like us, Like you would just be like, okay, just don't worry about it. Just everything ride out. Nothing to
see here, nothing to be concerned about. It's gonna be fine. Everything's gonna be fine. Is that?
No? Not at all, Not at all. And I'm not saying this to be hyperbolic at all or even talking my own book. But what you saw just happen is something that we've been talking about for almost a year, which is everybody in their mother think back to the tech collapse in late nineties, think back to eight oh nine. Everybody was loaded up on banks because how could you go wrong? Okay, well what is that today? It's the big tech companies in the AI play right, Well, what
you saw and the what the what lesson? And this is what we've been talking about now for six months in our in our inflation seminars that we're doing and all that saying, guys, you are historically overweight the most expensive stuck stuff stuff in the market, and you are historically underweight virtually everything else. At the very least, you need to balance out your portfolio because you are. And look here, I feel like the message that everybody needs
to learn. Okay, Apple, it's safe, right, buy Apple. It can't go down. Did you see what Warren Buffett did over the weekend? He sold over half of it? Okay, well, you guys have heard me griping constantly about how Apple's price is a joke, their growth is stalled out, and that multiple on the stocks blown out. I just think people are ignoring a lot of normal warning signs. Yeah, everybody goes, why did Buffett sell Apple? Why do you think it's why he sells everything that gets too expensive?
Like you're selling a company that has zero growth over the last eighteen months at thirty five times earnings. I'd be hitting that bid all day long. As a matter of fact, we sold out of the last of our Apple last Thursday for the same reasons, right, like the other thing, And this is the part of it where you know, you don't ever want to be dominated by greed or fear, But I think these investor changes in the way people are positioned should be sponsored both by
fear and greed. Meaning not only has this stuff gotten to a point where it's really hard to justify the price based on you know, what's really going on underneath, But the flip side is is you look at a bunch of stuff on the other side of the market. It's just been completely ignored because everybody and their mother is levered up to their gills and this tech stuff, right, So I don't think it's just about avoiding disaster. Here's the other thing that nobody's really thinking about you're about
seven percent away. If the market pulled back another seven to eight percent, you'd have a market that was flat over the last three years. Wow, right, nobody. You don't hear anybody saying that, right. There's still this attitude of oh, you can't lose in the market and get in there while the getting's hot and all that. And I'm sitting there going, eh, guys, you got to You got a market that's trending sideways. And what that usually tells you is you have too much exuberance priced into a market
and the underlying reality isn't keeping up right. So that's that's the that's the issue you've got. And I think in an inflationary period of time, which we are most certainly dealing with, a portfolio that isn't growing is a problem. Now. What's one of the ways. There's a couple of ways to get to get around that. A have stocks that actually pay you to own them right by way of dividends.
Right where think over the last three years. If I have a stock portfolio that's flat too, So let's say it hasn't outperformed the market, but it's paying me six percent dividends. Now I'm up twenty percent over the last three years on a compounded basis as opposed to being flat right, Well, how many people do you hear run around talking about dividends nowadays? Nobody? Right, They talk about how they just triple their money in Nvidia and all
this kind of stuff. And it's just one of those anecdotal signs too of what should you be buying in the market. You should be buying the opposite of what all your buddies are talking about. And nobody's talking about their big dividend pair, you know what I mean.
Everybody needs a Zach that's done right, and they need to They need to be paying attention to you on your radio show.
They need to be going to your seminars. Tell people how they can find you and do those things.
Yeah, pretty easy to find I me. You just google Know your Risk Radio or Bullwork Capital Management. We do our daily show twenty to thirty minutes updates of everything important that goes on in the markets, in the economy, and politics as it relates to finance, and then we do our weekly show. Got a great a great interview coming up this week with a PhD economist that worked at the Treasury, but also has run a hedge fund and got some really interesting insight into what's going on
on a policy level and things like that. So it's gonna be a little wonky.
But good stuff.
All right. Well, thank you as always, You're always helpful.
Thanks, all right, thank you, ladies. And by the way, my wife has really been loving your content. She's she's laughing out loud multiple times a day following your Twitter feeds, so love it.
Glad to have her. Yeah, that's awesome.
Yes.
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