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We are back with another edition of the Daily Dots, and I am joined, as always, by the Brain Plus himself, Mr. Chase Taylor. And today's format is going to be a little bit different, right? So I was out of town down at CES and had another business engagement on Friday, and I had to record the show on Wednesday last week.
And with everything that's been going on, I hate to record the show that far away from the end of the week. So anyway, we are doubling down. So today will be the Daily Dots, but it's also going to be kind of a condensed version of the weekly show as well. Chase is going to join me.
I thought that would be kind of a fun way to switch it up. Then we will resume regular show schedules the remainder of the week and then with the regular show this Friday as well. So if you like the Daily Dots, you're getting kind of a twofer here. So anyway, let's move to indexes on the day.
But just instead of focusing on the indexes, kind of doing the market update here that we normally do on the weekly show. But where did we finish on the day? Kind of a lively session. Things were bouncing around quite a bit.
Yeah. Options, you know, it's negative. Things are moving a good bit, even though we closed pretty flat. But S&P was up 0.1.
NASDAQ down about 0.1. Small caps up over 1%. 1.14. MAG7 down 1%.
So nice little smalls versus bigs day. Equal weight was up 0.8. That's been – I mean, it's nothing great yet, but it's been doing a little bit better here lately. Oil closed the day down a little over 1%, but here in the after hours we're up about 0.5%.
NACAC has been doing well. Just under $4 now. But the weather models are backing down a little bit at the end of the second week. So we'll see.
You said oil finished down the day? Yeah, it was down a little over 1%. It was up big. On the session.
It was up big yesterday. It wasn't up 3% plus today? No. Oh, that was yesterday.
Yeah, yesterday. Okay, okay. Today, something happened today. There was some news.
I pushed it down a little bit. Yeah. I can't remember what it was now. Now, for those of you – you know, we throw around some words, and I want to make sure people have the context.
You know, I've said this since we started the show. So many of these podcasts, they can deliver good information, but I feel like it's a lot of people sitting around trying to sound smart, and so talking the vernacular of the day, we always want to make sure that we're breaking that stuff down so you understand it. So for those of you at home, if you don't know what Chase seems to be talking about negative gamma, in our opinion, this is extraordinarily important as it relates to this market due to negative gamma is referring to dealers. And when we say dealers, when you're making trades inside of a market, typically dealers are matching up, and now you've got market makers, and you've always had market makers.
But dealers, market makers, different titles for people that are effectively doing similar jobs, which is bringing buys and asks, or sells, people that want to sell a series of people that want to buy together, right? And this is especially a big deal now because exponentially more capital in this market is managed via algorithms, right? Equations, relationships. You know, quantitatively managed.
And so what that means is you've got, historically speaking, a massive amount of shares that are moving around and being bought and sold, not resulting in rational decisions by, and I'm not saying the decisions the machines are making are irrational. What I'm saying is, for the first time in the history of markets, especially at this scale, I mean, you've had quants, right? Jim Simons and his firm started in the 80s, but human beings were making up the majority of the transactions, and that is not the case today. You've got so many of these ETFs that are basically driven on autopilot.
And so when these dealers get a negative gamma, effectively what it means is whatever direction the market moves, they are forced to chase it, right? Exactly. Because sometimes if demand is really big for stocks, the dealers have to sell more, maybe even than they have, right? When the sell-off is really strong for stocks, dealers might have to sell more than they have, right?
They do all these. But when they're in negative gamma, what you know is whichever direction it breaks, that relationship is going to magnify whatever that movement is. Is that a fair way to explain that? Yeah.
And even when they get in negative gamma, like there's ways people try to figure out like how upside down they are in both directions. But yeah, just to make it simple, if someone buys a whole bunch of options, they have to go out in the market and trade to basically hedge themselves against that. So they're trying to be kind of like keep their exposure as neutral as they can, basically virtually just collect some income on it, right? They're trying to have a bet themselves.
So yeah, that's a great way to put it. So like if somebody goes out and buys a big pile of call options, right? Usually the dealer is the one selling them to them. Yeah.
They go buy the underlying to make sure that they don't have a problem. Right. And if that stock goes way up and that strike date or the date of that option, that expiry date starts coming close, that dealer is sitting there going, wait a second. I thought I was gonna be able to sell this guy option, collect the premium and never see him again.
I might have to pay him up with this stock, right? But now I've got to go buy the underlying at 25 to 30% premium to where it was when I sold the guy this option, right? And there you see it. So that buying comes into the market, which can make the frenzy even more and push the prices higher and it can feed on itself to the upside.
Same relationship happens with downside, right? Yeah. And when they're usually in their positive gamma and when they're in positive gamma, basically this means they have their books squared away to where they don't have to go chase and stuff. And that's when you tend to see the market really penned, small moves, really orderly, very low volatility.
But when they get negative gamma, it doesn't mean you're gonna have volatility. It doesn't mean the market's gonna go down. It just means the chances of a little bit more like amplitude in the way of just, it kind of picks up because of this thing where if it starts to run down really hard, then they gotta go sell underlying to catch back up. And they've been in negative gamma kind of most of the month, really.
So it's kind of an interesting setup. And I would argue that's one of the reasons we've had a little bit more volatility and a little bit, you know, not just going up 0.4% every day, like we've all become accustomed to. Well, that, you and I talk about it and we've said, look, again, it doesn't mean something horrible has to happen. But when you see a scenario in which the dollar is pushing up against levels like it currently is on the DXY 110 and you see rates doing what they're doing, it doesn't mean the world's about ready to fall apart.
What it does mean is that until one or both of those things shift and they're pretty tied at the hip at the moment, and they usually are, it's just hard to get markets to go up. You got to get a pullback in rates, you got to get a pullback in the dollar. That's one of the things that concerns me right here about this market chase, because if I look at, if I look at the charts and then the other thing too, just the economic data, I think the risk here, especially on the rate side is very much rates to the upside. How much higher they could go, I don't know.
It feels to me very much like we are right on that line that if we move any, any, any amount discernibly higher, I would think that that's going to really, really make some waves. I feel like every 10 basis points higher from here, it'd be just a little, a little more problematic, you know, it just feels like it's going to start feeding on itself. Yeah. Which if you think about the backdrop, first few days of the administration, we might get some, some fireworks on the, on the, like, tariff side, things like that, like, you can, you could start, it can get a little, you know, even less orderly on yields and on the dollar if some of that stuff comes to pass in the first 100 days.
Yeah. Yeah. And then not to mention the fact that just when you look at the trajectory of this market, when you look at it from a fundamental lens, when you look at it, you know, if, if, if, if you want to, if you want to remain bullish and long and strong in this market, you know, nobody ever likes watching things go down, but I kind of think you're looking at a market that really needs a pullback. I definitely still think so.
Yeah. For a lot of reasons. Well, look, when you look at it, like, when you're looking at an earnings basis, even on a forward earnings basis, first of all, like, it's another one of those years where, you know, I feel like, so what happened in AI, I feel like really bailed out earnings, earnings expectations, and, and especially for 23 and 24. And multiple expansion in general too.
And multiple expansion. And if you listen to all those guys, they'll be like, yeah, we told you earnings were better than expected. I'm like, yeah, but you didn't know that it was going to be better than expected because NVIDIA was going to 4X their earnings. Do you know what I'm saying?
So like, they're going to point to, like, earnings continue to be, and one of the things I want to look at tomorrow, I hope you remind me of this, is I would like to look at earnings on the S&P X NVIDIA. They're not saying I don't think it's going to be groundbreaking. I'm just curious to see what that is. I would expect that line to be a lot flatter.
It's sort of interesting too, because the rest of, well, not all of the rest of Max 7, but a lot of the rest of Max 7, that's their CapEx, you know? Yeah. So in some ways, it theoretically should even out as a negative for them and a positive for NVIDIA. But I guess, you know, at the same time, Microsoft still has already have pretty significant revenues on the AI side.
And so maybe it's already making enough sense for them internally. Like, no, yeah, let's keep chasing this and throw a bunch of money at it. Yeah, and it's definitely alarming, but I think you can already see the pressure on a lot of their earnings. I mean, it's not markedly.
It's not making a hole in them, but I mean. I think it's clear they don't get to mess it up bad without getting punished. No. That's for sure.
Yeah. Maybe Apple could, because Apple could be worth anything, I think. You know, it made me feel really a lot less crazy listening to Joe Rogan and Mark Suckover talk. I was just sitting there going, I don't.
He said what we all think, I think. Well, I just, look, I know for a fact there's still a ton of home gamers that are going to listen to this show. They're sitting with 15 to 25% of their portfolio on Apple because it's run so much. Congrats, honestly.
No, yeah. And I'm just looking at him going, look, take a cue from Warren Buffett. He has been selling that thing like it's going out of style. Why?
It's just, I got it back and forth. You know a guy named David Hu, H-O-U, Bloomberg guy. Maybe. Got it back and forth.
He was shooting shots at Mike Green in his passive. Respectful guy. We had a nice back and forth, and he actually asked me a couple questions. I was actually going to have him on the show to discuss it.
But, you know, he was talking about, oh, there's no empirical evidence that Mike Green is right, and all that kind of stuff. And I didn't want to get into it, and I'm like, buddy, tell me you're not a practitioner without telling you. Mike's side is so much academic research. Well, not only that, but there's certain things, and I understand where those guys are coming from, because, you know, they're going to give you the whole, where's the empirical knowledge, and da, da, da.
And I'm like, well, how do you define empirical knowledge, right? Because there's a lot of empirical data that I can't model for you that proves Mike Green is correct. But what I can show you is rotations in markets, valuation spreads that make no sense on any discernible level, even when they're related to each other, right? You see all these anomalies.
And am I sure that 100% of Mike Green's research is correct? No. And I would assume that it's not. Right.
Of course, it's not pure explanation for you. It's just playing a role. No, but look at how many things in this market have set new historical records, divergences, correlations, right? There have been so many long-held market axioms, rules, right?
Rules of thumb, all these things that have been blown up. How do we explain the fact that this is a market that is composed and behaves completely different than any other market that we've witnessed before, right? And then you look at the same time that we're identifying, watching, and seeing, and experiencing all these historical anomalies, you have this new form of passive investing that has taken over a larger share of the capital in said markets than any other form of investing before. And now you want me to simultaneously believe that that doesn't have an impact on market prices.
That to me is where I didn't want to get into a mathematical back and forth with a guy, because I'm like, listen, man, I'm already, I will stipulate that you are a far superior number cruncher than I am. You probably run circles around me. As a practitioner in markets, I can tell you that there are a lot of anomalies and there is no explanation I've heard to justify those anomalies outside of what's going on at passive. And I don't know, I really like simple, like the simplest ways of explaining things.
And like with something like that, my thing is like, all right, if we look at how much money goes into 401ks, IRAs every month, well, let's say we double that. Do you think all the money that would go into the capway to top end might move them up versus the bottom? And then regardless of what your answer is, just say, what if we doubled it from there? What if we doubled it from there?
And so you get to like, you know, trillions of dollars a month going into the market and you know, whatever, 70% of it has to go into the max seven. Like, do you think maybe that would make them go up more than the Russell 2000? If your answer is no, like, I don't, I struggle with that. Like, I don't, what do you mean?
So to me, like, that's kind of obviously true. It's, you just have to back it out to how much is it happening? Like, how big are those flows to where, like, what is the intensity level of what we're doing? Because to me, clearly like that's happening.
Yeah. Even, even like we talked about one pie research to show like all the yeah, buts on valuations and it made a lot of sense. I'm like, I'm kind of like half with you on this. It's a big winner.
Like I did all of it, but 9.24 times sales. Like that, that's still, that's tough. I mean, well, I look, I mean, when you're looking at nine and a half times sales, that has never not meant that everything good was priced in. Right.
And it's not like we're talking about one stock that's growing at 800% a year. We're talking about seven behemoths, collective whatever trillion dollars. Yeah. We're also talking about a market that's really hiding behind some other anomalies, right?
Meaning it's, it's, it's hiding behind. Look, there will be margin compression. Okay. The business cycle is different.
That's fine, but it is not over. There will be margin compression. That is not gone. That is not a lost feature of this market.
And when you were looking at a market where you're talking about those groups of stocks trading at nine and a half to 10 times revenue, and that valuation that they're sporting on a relative basis makes them look fairly cheap compared to a lot of other things in the universe. You know what I mean? And that's, and then I think a lot of what's dragging down, you know, I mean, you're still sitting at what 331 times earnings on the overall market. So that's not a cheap market by any stretch of the imagination.
But I think one of the things keeping that valuation in check is how unlocked so many of the things on the bottom end of that market are. Yeah. A hundred percent. You know what I mean?
Like that's so, so yeah, my whole point is I think the market is overvalued more so than, than most people think it is. And speaking of my green show, this like, even if you go, whatever it is, S&P 600, whatever it is, like the mid cap that brings all those in, even that, if you look at it historically, it's wildly overvalued. So it's not like it's just, you can pretty much pick out any segment, even if it hasn't done great in the last five, 10 years, it's still historically, you know, very expensive to its own, which pulls some of the, you know, yes, you can say like it's all more tech now and like that warrants higher multiple, but then if you go look at smalls or mids or like you can break it down however you want, it's trading more expensive than it used to. Yeah.
Yeah. Now mid caps it 16 times, PE like feels a lot better, but. Yeah. Well, you know, here's another reason.
I mean, there's a lot of stocks that have ridden the passive wave to the top of that index that, you know, typically speaking, you know, it doesn't always work this way, but the way we do a market cap, the one nice thing historically about a market cap weighted index is usually your biggest exposure to the most mature and most stable companies, right? Not there because they graduate. Right. They graduate.
And you're starting to see those anomalies showing up in all of these indexes where you're looking at it going, wait a second, that shouldn't be a top 10 holding. You know what I mean? Where you're like, that's a speculative position. That's not the way these things should be weighted.
Yeah. So what else we have? The rate thing. One of the things that is a bit perplexing to me and it makes me a little nervous here.
Is how you hear people talking about it, but how calm and sanguine this market seems to be about rates where they're at. I mean, you've got a 30 year push in 500 pips. I mean, we talk a lot about how big of a deal housing is to the entire economy, housing jobs. Yeah.
That can't be good. Yeah. And we spent all year last year talking about the lesson that I learned and the fact that rates don't matter until people have to pay them. We've talked about that, you know, back half of the year in 26, people start at some scale having to pay these rates as, I mean, everyone refied into, I saw, in fact, I saw a chart today that showed a mortgage origination volumes on a bar chart and the explosion around COVID whenever rates, you know, went so low.
I mean, the amount of people that refied into that was just our gambling. And we have to remember too, that happened on, you know, corporate loans, corporate bonds, personal loans, leverage loans, like basically any type of credit that you could refi or roll, you were going to do it. And everyone did. People extend the maturities, they refied into those crazy rates.
I mean, it's one of the reasons we had the banking problems that we had last year, people refied those rates and then those became a problem. But if you kind of do the math and back it out on where, you know, the average duration of a lot of that debt is and where those rollovers start happening, well, you know, back after you start looking at it pretty hard, like especially fourth quarter and in the 26, like a lot of people have to go get and roll their loans, including the U.S. government. I mean, U.S.
government has to roll a bunch of loans to the point of it being a problem. And speaking of this rate thing, like I don't think a lot of people realize this, but just entitlements and interest costs on the debt eat up 95% of tax receipts. Jeez. So those can't do anything about those two, you know, like if you add the Pentagon and the VA, you're well past 100, you know what I mean?
So like here's a metric that I was looking at the other day and I don't forgive me because I don't know exactly what the percentage is, but it's got it. It's close to this you're looking at. And I, nobody ever cites it in this, in this way, but it's a shocker day. I saw the numbers and I went, good golly.
Deficits are almost, they're between 40 and 50% the amount of the government budget. Yeah. I mean, they're borrowing a lot. You're spending 150% of tax receipts.
It's not quite 150, but it's right around 140. That's a big, yeah. A 40 per 40 of 50% above receipts. That's just wild.
And here's the deal. I don't really think I, you know, I talked about that. I mean, I think there's certainly some long hanging fruit that Doge can grab onto what they're able to get through Congress. I don't know the idea that you're going to get meaningful cuts.
I don't know. The other thing that's tough is I don't think, look, I'm not saying I'm not advocating this, but the more and more that I think of it, I'm looking at the U S going, I really think that I think that you're, if you're really trying to make the best decision for the long run and the end, right, you're trying to pick the lesser of multiple evils and saying, okay, what is the most constructive, healthy, least painful, but also effective path out of where we're currently at. I kind of think it's almost like an Argentina light situation, meaning you got to rein in government spending in some places, right? You got to do that.
And because government spending has become so large, you also need to expect that that's going to have probably more pernicious impacts on the economy than you than it normally would. And I think the only way you can offset that is by slashing regulation and try to cushion the blow. Um, the whole problem is legit. Right.
And that, which is also a decent start. Here's the problem though. You don't, I don't think you have, you don't have a political apparatus that's capable of making those calls. Yeah.
And because we don't have a population to accept the medicine of it. Well, for instance, if you think about this, if you got the left to come along with you as far as spending cuts, what do you think the chances are that you get any votes or enough votes to pass regulation cuts on top of that? I feel like it's like close to 0%. Yeah.
And because if you're going to cut spending, they're going to want something in exchange and cutting regulations is the exact opposite of what they're after. Yeah. I mean, either side, both sides are happy to cut spending, but only on, only on the stuff they don't like. Right, right, right.
Um, and the stuff they don't campaign on. And none of them, none of them seem too excited about cutting the big structural stuff that is, I mean, at the end of the day, behind the significant deficit, you know, most of it's just, it's baked in the cake when it comes to the demographics, uh, around, uh, I mean, cutting, cutting how much we spend on healthcare as a country is kind of the biggest one. And then finding a way to restructure social security. I mean, those are the two answers, but those are not the answers that anyone's going to go anywhere near.
Hey, I'll throw myself in the mix here. This is my idea for restructure social security. I say you draw a line at 45 years old, right? And you say, can we make 41?
No, no, no, this is a problem. No, no, 45. So I'm saying below 45, you and I both, but this, I mean, this, this is how you're going to grandfather somebody into something. I want to get in there.
No, I'm saying that you and I shouldn't be grandfathered. Oh, yeah, we should. No, what I think a really easy thing to do would be continue collecting the social security tax, go back to more of a lockbox system, use that, use that money to buy government debt, long, long, long, long end government debt, put it in a lockbox and then have a forced annuitization of that amount of money into a, into an income stream at retirement. And that way you quit, it quits being an obligation to the US government at that point, right?
You are simply funding a savings account. It's actual cash instead of open-ended. Well, yeah, remember, due to the changes they made to the lockbox, the whole quote unquote lockbox in the 60s when, you know, great society and all that stuff, they rated the social security coffers. The legal justification for that at the time was that social security is effectively a general obligation to the government, right?
Well, so are bonds, right? So, and we ran the numbers on this. If you took social security taxes and you averaged out the rate, so we took the average rate of social security taxes and then compared it to the average income. And I think we ran the thing from like 1970, this is years ago, we ran it from like 1970 to 2012.
We were looking at the average career span, assigned average wages and wage increase, all that kind of stuff. We said, okay, if all you would have done is taking your social security taxes, payroll taxes, and deposited those into a lockbox and they were used to purchase US government bonds, US government bonds, both general obligations to the government, your average social security benefit would be double, double. We're not even getting as good a deal as social security investors, as foreign purchasers of our bonds are. Yeah.
And why not? You know, since the flows don't bother the price at all, just put it in max seven. Well, there you go. I mean, now you're talking now.
If you took that same amount of money and would have invested in the S&P over the same time, the payout was something like 10X. I can't remember exactly what it was, but it was ridiculous, right? Especially since their flows make it go up 10X. Well, and that's the thing that people don't get.
And it really frustrates me because I understand why they don't get it. The markets are too volatile. You're going to blow us all up. You can't privatize.
And you're looking and go, guys, there are very few things that are less volatile than the S&P 500 over 30 and 40 year periods of time, right? You're looking at this in a vacuum. You're going to be putting money into this for 40 years. There's no way you don't win over traditional social security, investing in either the market or bonds or a combination of it.
It's impossible not to go like all world equity at that point or total world, everything investments where you can go JGBs. You can invest in Japanese government bonds and you do better. And then remember the minute you made that switch that completely eliminates that as a future liability on the, you know, on the bill of the U S government. It is gone instantly.
I mean, the government already does with the TSP for government workers for their retirement, you know, why not basically just TSP out everyone's retirement instead of, you know, this just will, we'll cut a check out of the budget for you. Yeah. Over, I mean the taxation system in this country, like I said, there's so many places where there's low hanging fruit that, you know, look at, and there's so many things like this. And I don't know if you've talked about this one before specifically, but you know, people, listeners might get irritated, but it's just so dumb.
How much money do you think it costs us to send out social security benefits, then process income tax checks out of those social security benefits, then sending a refund back to those same people if that's applicable. I don't even want to know what it costs. I guarantee you just that, that game of hopscotch they're playing there costs billions of dollars. It's completely unneeded.
How do you get around it? Suck income taxes out of the payments before you send them out and call it square for God's sake. And that's the kind of stuff where I genuinely hope Doge could like make an impact is even if they can't literally do it, you know, with some forceful, thoughtful recommendations of like, can we at least bring in enough technology to like streamline stuff like that, you know, because the inefficiencies and stuff like that really, I mean, they really do add up. Oh, and it's, it's, you have like a Frankenstein setup, right?
You have, you have, you have, and there's so many things like that in our government where you can only get something that is this bureaucratically bloated if it's been built over 50 years, right? Just cobbled together over time. And it's just, it's, you should see like the software license, the block the bottle had to deal with, with Adobe. I can only imagine that.
So, so essentially every person has to have the license, right? Every workstation has to have a license and because of different classification levels, one person might have four workstations. So this one person may have at least four licenses and that's just for one of the products and Adobe has a suite of products. So you just get into like a rat's nest of hundreds of licenses to pay Adobe.
Like, like, there's no way it makes sense to do this this way. Like, just give them, just kind of a flashback and tell them to like, to figure it out. You know what I mean? Yeah.
And, and I mean, I don't know. I look, I'm, I'm hopeful because I, the one reason I am hopeful is, is, and I'm not telling you, I'm certainly not telling you anything you don't know, is that if your goal altruistically was to go in there and to cut fat, that is the least pernicious to the underlying economy. There's a lot of it cut. Yeah.
It's just like everything else. There's a lot of middle, middlemen that can go away in our economy. Well, AI's going to hunt them down and find them. They may find the government last, but have we talked about, and I don't want to be too specific on this, but have we talked about my experience?
I know you and I have, I'm not sure if you've talked about it on the show. My experience operating, trying to navigate the DOD for, for product purchase. I'm involved in a company that's selling a product to the DOD. I don't think so.
Okay. Guys. And this is a very, very watered down example. We all hear about stuff like $20,000 toilets and it's, it's, you know, and $500 hammers and, you know, all these stories of grossly, you know, ridiculous crisis on things.
And I think it's one of those things sort of like the debt. When you hear it enough times, it shouldn't, but it desensitizes you to it. Right. And going through that process of helping this company that I'm involved with on the periphery is incredible because we've got some very smart people that I'm helping out and they've developed this wonderful product that will save the U.S.
government massive amounts of money, keep their military vehicles on the road far more often. It's just, it's one of those things that is win for everybody. Right. To the point where selling it has not been a problem.
Every time these guys see it, they're like, when can we get them? I want them now. Right. The process of getting quote unquote approved for the DOD is forcing you through a wicket.
Right. That adds zero value. They are quote unquote, an approved dealer or an approved contractor, if you will. And that fact that they're an approved contractor and they don't do any big due diligence or anything like this.
I was involved in the process from soup to nuts. There is zero value. Okay. But to sell to the U.S.
government, you must go through one of these contractors. They slap on a 40% surcharge and call it elsewhere. Right. On a simple little 40% surcharge for the privilege of selling it to the U.S.
government. And these people deliver zero value. It's now, thank God we found some people that do deliver value and they've made it easier and much more streamlined process. But you experience this and you go, this is a racket.
They're going to set this up in a way to say, oh, this is how we're protecting the American taxpayer. Nonsense. That license that they got from the DOD to be an approved contractor. It's a license to print money.
All you're doing is slapping a 30 to 40% surcharge on every item and just scalping it. Right. And that is happening all over the place. You should hear some of the stories I heard of what these guys, like let's say the U.S.
government needed something that was in short supply. You'd think they'd get a break buying in bulk. Uh-uh. They pay more.
It's just insanity where you're like, what did you pay for that? And you're go, the U.S. government is paying 40 and 50% above market prices. You and I can walk into it.
He was telling me about some ATVs they purchased directly from me. You and I can walk into Yamaha power sports. Yeah. Well, I dealt with this personally with like a GPS receiver that you could buy a radio shack for, you know, a fraction of what we were paying for it through the way we were paying for it.
It's just shocking. It's just shocking. I don't think, like I said, I think it's one of those things that most people, and most people on the political divide on either side of the political aisle, I think, and this is why I make this argument all the time, which is we have so many issues in this country that are not political, that have been made political, right? Government incinerating taxpayer dollars, that's not a political argument.
It's a democratic issue, right? It's one that we should all hold their feet because regardless of what you think about whether you're more on the left or more on the right or whatever, we can all agree the government is incinerating our money in a way that doesn't benefit us. It does no good for anybody, right? Look at the money that can be saved in the education system, right?
You've got an education every single test score side. Your entire education system is set up to give maximum bargaining power to teachers unions. It's not set up. It's not designed with the kids in mind.
The end user is not what drives the construction or the formation of our educational system. It's just not. It's not for the patient. There's another one, right?
And I'm going to take a lot of my socialized medical system. You got to go all the way free market or all the way. Brutally, brutally free market. Yeah, you got to go one or the other.
Yeah, and unless you are prepared to see people turned away from emergency rooms and die in the street, which I don't think, like, we can all talk tough about that, right? But do we want to see kids and families turned away from emergency rooms? No one's can. Nobody wants to see that.
That's the majority of Americans. Okay, so we've accepted that that's not a realistic. Now, why am I advocating for it? I'm advocating for it because you're doing far worse now, right?
Meaning, meaning. You do it better and cheaper. You really could. I'm not saying they would pull it off, but if you just sketched it out, you could definitely do it better and cheaper.
Yeah, because right now I feel like you've got the equivalent in medical industry of what you've got writ large in this country. You've got this unholy union of socialistic and capitalistic type things knitted together, and you're getting the most inefficient of both. You end up getting the worst of both. Yes, the worst of both.
Definitely in healthcare. There's no choice about it. Yeah, I mean, just think about the fact, like, just think about the ability a socialized system would give you in terms of just projecting costs year over year, right? You've got a huge component of medical costs.
They're just a black hole that nobody knows what that number is going to be this year, right? You could, anything you can plan for, in our business, we know that. Anything you can plan for gives you significant more leverage in terms of dealing with it and navigating it. And do I like the idea of that?
No. I don't like the idea of socialized medicine. Why? Because it's going to come at cost.
Right. Okay. But when you compare it to what we've currently got and where we're going and the fact that no matter how hard and ardent to the capitalist you are and believe in free markets, you are not going to sit there and watch somebody die on the street corner. Then we need to accept that as reality and go, okay, inside of those constraints, what is the best avenue?
And it's hard if you're really trying to solve a problem and figure out the shortest distance from point A to point B. Now, I think it should be a two-tier system. I think that you should have a way to opt out of it and sign up for a private system. But if you set it up correctly, I would assume that the private insurance costs would go down as well.
100%. And there are some fully private, like, co-op clinics and stuff. They work great. They show you that the free market in medicine can work.
Now, they tend to not do everything, which makes sense. It tends to be a kind of a preventative maintenance thing, not like a, oh, you have a complex brain thing. We'll take care of that too. But it shows it can work.
But at the same time, again, if you just sketch it out, one of the views, if you go full government, is you can get rid of a lot of the leeches in the middle because it's just probably everything. It's just, it's kind of in a weird way, government, like, oh, the middle man, for the middle man, by the middle man. You know what I mean? And to me, that's one of the cool things about AI is you instantly think of the use cases and they're not great for middlemen.
We need more. The way I describe it is by the, I think you just put it very, very succinctly and right on. And what people need to understand, whether you like them or not, is that regulations, think of them as synonymous as cost, right? The more regulation you have in the environment, the higher the cost is going to be, right?
So if you want to lower, and this is why I'm much, I'm a much bigger fan of what I call yeses and nos than I am regulations. Meaning, one of the examples I always use is Glass-Steagall, right? i think glass table was an incredibly effective regulation and the reason it was so effective in my opinion is it just said no there is no loophole where you can do this you cannot make investment banks insurance companies and commercial banks and regular consumer bank you cannot make them into one you just can't do it the answer is no right we didn't have a financial crisis in this country for eight years right until that law was not too long after right worked phenomenally as a matter of fact nine years after you repealed that law had the biggest financial crisis since depression right shock um and and the reason why i say that is because when you just have a yes or a no you keep the middleman out of it you keep the leeches out of the system right and you just have to deal with it there's no there's no increased cost there's no hoops you gotta jump problem is i think i think you can effectively describe what congress does as make a really tough law and then sell the loopholes to people yeah yeah you auction off the loopholes um if you pay up you get a loophole and if you don't like well the law's gonna be tough for you yeah at the end of the day that's kind of what they're doing yeah like the lobbyists aren't there you know for really much anything else other than a bid on the loopholes yeah at the end of the day hey now this is what i want to pick your brain yes okay yeah that's yeah i mean that's they're the people that end up with uh bars of gold in their boots apparently sewed into their sewed into their jacket um another one i want to ask you because i've got a lot of thoughts on this um that are all over the place but the whole greenland thing is interesting to me um part of me thinks that this is a trump maneuver to freak people out and they're talking about the wrong thing so we can focus on you know a little bit of 3ds uh part of me thinks that it may be a reflection of his disdain for nato meaning if you had a permanent and i'm not i don't know the numbers like i'm sure you probably do but would having a substantial military presence in greenland make the need for nato less acute if you will so i would say yes probably the u.s already has significant leeway to use greenland for military perspective we already have an air force base there right so my question let me make a really simple question what in the world do we want greenland for well if global warming continues having an enormous land mass in the arctic if it's going to melt becomes becomes pretty strategically important for if you think about the sea lands there the i mean so like transnavigational purposes flight like it's strategically important if it's not all ice anymore plus the there's significant resources in the ground now we've ignored that because it's like it's not really that fun to play with right are there significant resources in the ground even as it compares to us in canada i would have to double check the facts because the united states we're not really suffering from a dearth of oil no but if you look at the population there's like 50 and angry constituencies if you try to drill holding ground where you know in america like you drive a truck full of uranium through navajo country and you have a crisis underhangs that just happens to uranium company um wait what happened why were they upset about driving a long history of like stomach cancer and stuff on indian reservations from the way uranium was was mined and nuclear weapons were tested and they're not crazy to be like hey no thank you um well it's like what we do to the people at the bikini at the bikini at the world yeah yeah so it's not crazy but it's a microcosm it's not just the native american people they don't want this stuff it's everyone's like super nimy about i mean there's some projects in north carolina for some uh like important you know battery metals and stuff and like the whole community's absolutely absolutely not get somewhere else that's always well everyone says that in greenland there's 50 000 people no one will probably pay attention to the prize i i wouldn't even be a nuclear reactor no i'm all about it i can't bring it in yeah i don't know if i like open it or any mind or something but yeah well yeah i mean that might not be very scary but i mean i literally grew up i mean you could see the the reactor domes from my house yeah yeah so and he to my knowledge he never grew a third one that's correct no no free-eyed fish in our river so yeah wild wild so it's it's not that dangerous but what's the point like the resource there's a lot of resources and a strategically important location you know 30 years now the ice caps in the north keep melting well yeah let me let me put it another way if you wanted to dissolve or significantly scale back nato uh i would think a much larger impermanent presence in greenland would make that more viable wouldn't it yeah you think about missile defense missile offense and i encourage everyone kind of like no kidding get a globe out and look at greenland now obviously sometimes it's not the right size technically on the globe but the point being like where it's situated you can see like oh yeah this is important well i mean like you know i don't want to sound too calm here but for instance if russia wanted to lob some icbms over the united states it'd have to go directly over greenwood i believe probably it's it would at least come in play for some of them yeah um now they may want to go you know it doesn't help with like air launch cruise missiles and stuff right right but what's your point if you're gonna try to go shortest distance over the top uh it would help to have you know defensive stuff there do you think there's any thought process of getting greenland before china does would they have any interest in it i don't i mean interest maybe but i see them trying to do that now i think maybe if they had already largely secured asia or something because they could they could they could pretty easily access greenland without having to go into u.s or canadian airspace and they can just fly up and over yeah they already do business there i mean and the other thing too that's kind of tough on this is like denmark has been responsive to us uh whenever in the past like they almost sold like a mine because they have a lot of uh rare metals and they almost sold a rare metals mine to uh chinese company and we basically put in a column like hey let's not do that and they shut it down so like well even from that standpoint denmark has her back like if we lean on them when it comes to greenland they're like right sure well i i didn't check this but i heard somewhere there was a vote in greenland and they already said that they they there was a fairly sizable majority that said yeah we'd like to be u.s citizens oh that i've not seen yeah it could be nonsense i saw somewhere floating around i mean i mean i i can't imagine it would make their life worse anyway yeah i'm not gonna pretend that a lot is like in greenland so i don't know what i'm thinking on is gulf america though that's the big one for me i'm still gonna hold out for gulf of texas oh jeez you homer of course you are maybe just gulf you said i don't know yeah yeah you probably want to rename the great lakes after clinton browns that's a great idea yeah here we go yeah lake brown lake gram lake brown yeah lake kosar that's a good idea lake kosar okay uh what else we got going on um so one thing i think we're gonna talk about we got new in the last week new sanctions on on oil at least moving it out of russia um and unlike all the sanctions charade games we've played leading up these are biting so far doesn't mean they keep biting but we had you know 100 tankers put their anchor down because no one will take them anymore um that and that's why the largest reason oil is pushed up here um and the fun thing about this is you reach a threshold you kind of know all the all the ctas commodity advisor trend followers that buy futures contracts is what i'm talking about here uh they'll just see them they're like t-rexes if it moves they'll look at it right yeah and i'm not saying he's the only politician to do this but you want to know why politicians make people safe this is a perfect example you put these sanctions in a week before you leave office right right so you're putting up fake sanctions for three years yeah you're not you're not willing to the reason you do that you're afraid of higher oil prices but you're gonna send hundreds of billions of dollars to ukraine and the one defense i will say and i'm not actually defending it but the one defense i'll say is you know oil at 70 is different than oil at 110 120 um but your point is clearly correct like if oil was still 100 bucks they would have done it and if if you know what would be interesting to see though is if the administration keeps them uses them discards them how it goes look and all politicians do it and so i'm not trying to pile on but it's a fame of it's a form of fake and gross and gaslighting type morality right like saying well we're looking out for people's we're looking out for our consumers you're making sure we don't we don't want to get that inflation but we're gonna print another 200 billion dollars instead of ukraine it's just like i mean you're you know it's like talked off about about russian gas but they only mean pipe gas if it comes on a boat like if it's lg it's fine we'll take all that we can get those people are suicidal and i just want you especially the germans i like the germans i did like i mean it's like watching a whole country commit sepulchial like you're just like we you know we've talked about this enough and in that sense though they're there in that sense they're making i don't think the kind of the u.s view for a lot of this stuff yeah well the germans are paying it's just it's just you know they're not writing a check maybe as much as you like but they're taking it on the chin they're basically de-industrializing over energy costs now you know a lot of that stuff's like on on you know other forms of energy not just not just the pipe gas part but you know they are purposely taking a much pain to help them out it is look it makes perfect sense why the countries are different the way they are like why attitudes in the u.s are so much different they are in europe because if you were a person that had a u.s mindset and you lived in europe over the last 20 years you moved to america i mean right yeah it's a totally self-selection bias all the risk takers are here for a reason yeah just watching these constituents of these just completely inept and competent governments and again not making a political statement just talking about energy policy just talking about domestic policy you sit there and you're just scratching your head going you've got to be kidding you know the whole russia european situation is a perfect example both obama and trump warned him about this actually it goes back to reagan i looked into this warning russia against their excuse me warning europe especially germans about their dependence on russian gases happened since reagan basically every president says it's like hey uh if anything gets weird with that you have a huge problem you should probably do something about it right and think of the spectrum that that runs on the political ideology you know banned right like every president since then it's been honestly or completely agreed and said hey you can't be relying on it's a huge foreign foreign risk for you right here we are yeah um i'm speechless they still haven't reopened the new plants they shut down either no they probably won't but what can someone explain that to me no no one can don't even try don't what justification do they get for it i haven't read anything that's coherent enough to even repeat so there's no point honestly it's just that bad it's not like there's no natural gas in europe you know i mean you effectively got to the point where norway is like we'll do it and everyone else is like yeah we're not doing that why uh because it's bad has someone explained to these guys like using it yeah but did someone explain to them that the gas doesn't know where it came from yeah you know i mean we're just like so much land man did that oh my yeah well and that was and again again that was another perfect his little diatribe he went on where you're just like guys we've reached a point in american we're facing a lot of these issues where i don't care about being ideologically right but if you bring your old stencil if you bring the old rules that you've looked at everything through we don't have a chance of fixing any of these problems because so much of this is just ridiculousness right there's sacred cows being you know we're gonna shut down new plants in the middle of an energy crisis i just i just don't understand it yeah it's one thing you got to go after fossil fuels or coal or something but to go after nukes just kind of give the track record this is kind of wild especially since they had to go out of the way to burn a bunch of coal because of it and it's like all right like you can look at coal and objectively see like this is pretty bad for people i don't want to yeah i don't want to be when i say this i hesitate to say this because i don't want to be crass but i don't know any other way it's like watching putin and russia cuckold an entire continent you know i mean just like having their way with them and just telling them no just sit there and watch and just and you'll like it you know i don't mean that crass way i don't i mean it's just so bizarre you said everyone you all think he's the great evil yet you want to keep sending him your money that's what makes these sanctions a little bit interesting though is russia's been struggling lately like currency problems inflation problems um and now you're seeing like the their energy companies are starting to have some serious financial problems because of the stuff uh their exports are starting to fall so what do you think trump does when he comes in office you think he's gonna keep those restrictions there yeah i mean to me makes sense like he's a really good bargaining chip um and honestly i wouldn't even be shocked if he was part of like you know the process yeah right well i'd be so much surprised i wouldn't be shocked i think he wants as much gunpowder as much leverage as he possibly can get to end the war yeah because all the fake sanctions didn't didn't hurt russia but it's like i mean it's kind of this really does um not to mention you know all the the drone hits that have come out of uh ukraine that hit you know mainly russia and stuff like is russia winning this war yes are they having a good time doing it not at all so i'm sure that where where are we at in terms i'm hearing reports that and i don't know what to i don't know what to believe i i haven't i've watched this probably much closer than the average person but that being said the reports we all know we can what we can think of our media reports can't trust them as far as we can throw them but i was reading some interesting reports from people that i think are credible that were saying this thing's basically over it's largely frozen ukraine's a place where they just don't have anybody's left to throw this yeah yeah i mean there's a report a couple days ago that trump was going to tell them to lower their conscription age um so that was one support to you know just the man what's their conscription age now oh it's up in like 20s or something um i think so he was i think the headline was that he wanted them to take it 18 so that would suggest it above that um you know it'd be really interesting to know i would really like to i would love to be a fly on the wall and hear what trump and his the other people also really think about the ukraine like what their real goal is what their real you know right it's one of these like it's it's hard to see what anyone actually thinks about it because both sides if they're smart i mean and anybody i hear that has a really defined hard-held view on the russian ukrainian war i kind of dismiss them like everything right yeah just because i'm like look for you to have a really hard there are people get there people can rob deals on both sides of this it's a tragedy um you can you can try to play like russia's the great evil but they have a lot of points this has aspects of the civil war um you can try to play like russia's the good guy and they have just unapologetically and cold-bloodedly murdered hundreds of thousands of people i just see i just see atrocities on both sides and i think it's a horrible you know i mean like i just i hate how in the political in the politicization of so many of these things these things become artificially simplistic and then everybody throws their missiles at each other just because you know they're on the right side history everybody else is wrong right and like everything else like everything else becomes tribal to where you're supposed to say whatever your tribe thinks yeah even if i mean there's a there's a significant portion of people that in the u.s that are like outright pro-russian and yeah outright yeah and that's bizarre yeah well there's another thing happening on the right that i think that people need to pay attention to and there's also this now look i understand the origins of it the origins of it we're going to push back against virtually every single thing that the quote-unquote mainstream right that's true right well in the process they're throwing out baby with the bathwater and i'm hearing a lot of really concerning comments that are both anti-semitic that are both nazi sympathizing where you're sitting there going guys whoa whoa whoa whoa whoa whoa yeah and it did to a crazy level um and it's just this all or nothing fly you know you're like guys yes do we have some big issues here in the u.s government yes but the nazis weren't people that wasn't a lie and the way i heard one of them justifying is like you know what books the nazis are burning they were burning books about transsexuals and homosexuals and i looked at them and i went on their way to murdering six and a half million people and killing how many million people on the because they didn't like one thing you tend to agree with doesn't exonerate them from the horrific crimes um you know and even then i would sit there and say i'm not a big fan of i'm not a big fan of forcefully removing books and burning them in streets either even if they are those kinds of books do it through the legislative process and the school board process and get those books taken out of schools right but like don't sit there and use that one nugget to go well the nazis aren't so bad right i mean every horrible person did some decent things that you may agree with at some point right like i'm sure stalin walked a lady across the street at some point it doesn't make him a humanitarian right like even mal probably took care of his mother in old age it doesn't make him a well-made man of the year oh yeah there you go man nino brown baby so what was that from i don't know nino brown or uh sugarhill i think it was that wesley snipes movie sugarhill he was he was in a bunch of those movies where he played like a gangster and i feel like they all blend together that's fair anyway that's you don't seem to be too fired up about wesley snipes gangsters um anything else we got we got your dad come up we got job no no no inflation tomorrow uh what are you expecting i i think pretty close in line it's not even a little lower where did cpi ppi come out ppi came in cool so this is fun uh ppi came in a good bit cooler than expected what was it uh i think we were expecting like 0.4 came in 0.2 something like that okay on the month over month but you're still running at 3.3 percent year over year despite the fact it was 3.5 but that 3.3 if you go back and you look from 2012 until covid there's only two months it got that high wow and now like people don't backflips because it's only 3.3 essentially um and you bottomed out like a year ago uh and you just kind of keep keep creeping a little higher and and the big miss on this was food and like if i think if people are going to assume that you're gonna get a bunch of food deflation moving forward like good luck with that like we're having we're having a lot of weather issues globally that are going to make food prices higher and then if oil keeps doing what's doing i think well but if it does um then food's not gonna be cheap so taking too much i would take a lot of comfort from the fact that we had one you know milder than expected ppi interesting thing about oil all of a sudden too is you've got kind of you and i we always talk about this right when you're looking for moves you don't want to look for one wave you want to look for several waves coalescing coming together right the thing that's really interesting to me about oil that where i felt generally speaking over the last two to three months oil has been very uninteresting to me um but when i see the massive stimulus coming out of china the way it is and i see the sanctions going against russia i like that combo for a big time i mean getting these i had called my buddy jay plasti earlier today we talked about this like the fact and i looked at the numbers and you're like it's a flat on the s&p year today and you go look at the bloomberg commodity index and it's up four five percent yeah i mean obviously we're tweeting this could all just be over with the dxy i love that yeah rates up dollar up and yet commodities is punching above their weight so far this year i mean they had a terrible year last year yeah but and again like people don't realize what's going on china um but if you combine like pulling back on supply out of russia while you're probably going to add some demand in asia and if and if they're going to do the stimulus as big as it sounds like you're talking to demand in europe too because you're going to have to make stuff to sell to china yeah yeah the downstream effects are big and we're already in a market this tight physically right now like we're still drawing inventories globally right now um obviously there's much spare capacity to come on we expect growth out of places like the u.s canada guayana but if some of that growth disappoints at the same time that you're keeping russian barrels off and china comes back to the party in a big way demand wise like oh yeah you're now you got a hundred dollar oil and yeah with rates in the dollar doing what they're doing other asset prices and growth i would argue can't really handle that so it you know between rates the dollar and oil you can have one or two of those going if you have all three it becomes a tourniquet in my opinion you just turn it turn that rod on tourniquet look you and i have been looking at that for the last three four years and anytime we've seen those things come together we haven't been wrong on it once and and it's not instant it has a lead on it yeah it's not because we're clairvoyant i mean when you put those yeah when you put those factors together all you need to know is that that money is coming directly out of company's ranks it's just that in consumer's pockets and consumer pockets yep their money's going less far if you have to pay another 80 bucks if you're a low-income person and now you have another 80 bucks a month for gas or whatever like that's 80 less you're putting on something else well you're a fixed income 80 year old or something like the other thing that you brought up and it's not something that either of us wanted to be right about but we you know there's that whole meme on the internet again this is like my bad language day but that whole f around and find out that everybody's into right but you and i were talking about this when this whole first rate cutting thing our fear was you're gonna screw around you're gonna see a resurgence of inflation and you're gonna have to have rates uncomfortably high when people actually need to start paying them and we were referencing the deluge of corporate debt that comes due in 2025-2026 well here we are right they screwed around they candied it around with inflation we're getting inflation creeping higher again we got rates pushing back toward the highs right in time for the replies that need to happen in the corporate space yeah they basically flew mission mission accomplished banner you know on the aircraft carrier and a similar awkward time like they didn't finish the job like and it looked like they had do you think do you think that these companies are they gonna have a tough time getting financing or are they just gonna have to eat it yeah i don't think so i mean yes we'll have some bankruptcies from the low end they're gonna be some some small caps and some small businesses that but yeah i think if you look at on the aggregate i don't think it's gonna wreck the economy or anything but it'll slow us down and you know credits credits won't be at the highest they've been in a generation you know six months now if we keep going down this this this path that's for sure and then same with private equity private equity just keeps you know marking the bucket where they want things to be and hoping you get you know 300 basis cuts now it looks like you might be lucky to get another 50 basis cuts we've known spreads for tight for a long or for a long time and it just hit me yesterday where i was looking and going i can get 4.6 percent from a five-year treasury and junk bonds in master pay me 6.2 i i cannot imagine pushing that much further out on the curb for an extra 160 basis points i don't think people remember what credit risk is honestly it's amazing to me i was sitting there going i mean if i get four and a half from a five-year you better be talking seven seven and a half eight if you want my for me to look at junk you know i mean that's crazy yeah and we're talking about junk i'm not talking about corporates i'm not talking about double b rates right i'm talking about junk and like what is that 40 of the rest of 2000 is unprofitable like yeah it's if you're unprofitable and debt is really expensive it's weird it's not usually a combination anyway that should do it this is the new this was a combination of the dots in the show but for the show it's a new format this is the first quote-unquote show we've already read enough to stop and do commercial breaks it's got to be nice and i love it yeah i love it it actually feels like a podcast it feels like you got the advantages of podcasts i hated being on a clock it sucks i'm not good at clock i would be awful at that yeah it's well because it chops up the flow of the conversation right there's so many times where you get it rolling and then you gotta pause anyway uh we'll be back again tomorrow you guys thanks for listening today um should be an interesting week and then going right into the inauguration uh plenty of plenty of right power around for interesting moves and it'll be interesting no doubt all right guys so until tomorrow have a wonderful evening we'll see you again shortly if you're listening to know your risk radio podcast now please subscribe to know your risk radio dot investment advice cannot begin without a client service agreement zach abraham is an investment advisor representative of track financial and sec registered investment advice from boulder capital management is marketing name only and does not carry a separate registration