SKEPTIC’S GUIDE TO INVESTING
Straight Talk for All, Nonsense for None
About - Our podcast looks to help improve investing IQ. We share 15-30 minutes on finance, market and investment ideas. We bring experience and empathy to the complex process of financial wellness. Every journey is unique, so we look for ways our insights can help listeners. Also, we want to have fun😎
Your Hosts - Meet Steve Davenport, CFA and Clem Miller, CFA as they discus the latest in news, markets and investments. They each bring over 25 years in the investment industry to their discussions. Steve brings a domestic stock and quantitative emphasis, Clem has a more fundamental and international perspective. They hope to bring experience, honesty and humility to these podcasts. There are a lot of acronyms and financial terms which confuse more than they help. There are many entertainers versus analysts promoting get rich quick ideas. Let’s cut through the nonsense with straight talk!
Disclaimer - These podcasts are not intended as investment advice. Individuals please consult your own investment, tax and legal advisors. They provide these insights for educational purposes only.
SKEPTIC’S GUIDE TO INVESTING
Trump Unleashes Tariff Chaos: Portfolio Protection, Powell, and Penguins, too!
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When markets plummet in response to unexpected policy shifts like Trump's tariff announcements, distinguishing between panic reactions and thoughtful investment strategy becomes crucial. Steve Davenport and Clem Miller cut through the market noise to deliver a practical framework for navigating financial turbulence.
The duo examines three potential market scenarios ranging from a further 20% drop with sluggish recovery to a milder 5% decline followed by stabilization. Unlike systemic crises of the past, today's market challenge stems from policy decisions that could theoretically be modified more easily—though international responses, particularly from China, add significant complication.
What makes this episode particularly valuable is their focus on financial resilience rather than market timing. Before worrying about portfolio tweaks, they emphasize foundations: Do you have adequate emergency savings? Have you minimized debt? Can you sleep well with your current risk exposure? This perspective shift from short-term market movements to long-term financial health provides immediate clarity during uncertain times.
For those contemplating action, they suggest incremental adjustments over dramatic moves—considering reducing exposure to high-beta stocks, companies with significant short interest, and those with elevated forward PEG ratios. Their nuanced view on mid-cap stocks (conducting approximately 80% of business domestically) offers an intriguing alternative to both large-cap tech and small-caps during tariff uncertainty.
Ready to strengthen your investment approach during market volatility? This episode delivers the balanced perspective you need to make confident decisions when headlines scream panic. Share with friends who could benefit from a dose of calm, rational investment thinking during turbulent times.
Straight Talk for All - Nonsense for None
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Welcome everyone. This is Steve Davenport with Glenn Miller as part of Skeptic's Guide to Investing, and we're sitting here on a Saturday or Sunday afternoon and we're saying what are we doing, talking to each other about investing on a Sunday, and then we realized that all of the major business networks are all having shows tonight from 7 to 9 to talk about the sell-off since Trump's tariffs. So we just looked at ourselves and said what would we do? What are we doing personally, and how will the different scenarios play out over the next six, three, six, nine months, over the next six, three, six, nine months? And we just try to get to the heart of what we think might happen, and therefore don't be surprised if this also happens, because I think that, at least discussing the possibilities, I think you become a lot more settled around something.
Speaker 1:When it does happen, you say it wasn't as bad as I thought, or this, this, this made that better and it helps you to become a better investor. When you look at the way markets react in these tantrum type moments, what do you think, clem, when that, when you look out there, do you see just stuff, uh, yelling at you to buy because they're so valuable, or do you still see. It feels to me like the multiples come down, but not as much and as quickly as it went up the last two years. So it feels to me like there's some value to come out of this market. Where do you?
Speaker 2:feel I would agree with that. Really, there's three parameters around which to make some judgments. The first parameter is how much further we have to go down after Thursdays and Fridays drops. The second parameter is when will we reach a trough in the market and how long will it take to reach that? And then the third parameter is at what rate will we recover from that trough? So those are the three parameters. Now, when you use those three parameters, you can build some scenarios around those parameters, and so I've sketched out three scenarios here.
Speaker 2:So the pessimistic scenario is that there's a further 20% drop over the next two weeks. So that would mean that two weeks from now we will have been down roughly 30% from last Wednesday. So a further 20% drop over the next two weeks, followed by a 2% per week recovery after that. So now remember, 2% per week, doesn't you know? The math doesn't work symmetrically. It takes more than 10 weeks to recover that 20%. It takes more than 30 weeks to recover that, or more than 15 weeks to recover that overall 30% drop. So we're talking about quite a long period of time before the market actually recovers.
Speaker 2:So the first scenario is truly a pessimistic scenario. Second scenario I have. Well, let's go to the optimistic one. The optimistic one is that we have a further 5% drop, probably over the next week, right, maybe even tomorrow, monday, and then the market goes flattish but volatile. So I think that's probably as much of a probability as the first one. I laid out that we're going to see things kind of flatten out but still maintain volatility. And under this 5% drop scenario I think it's going to be a while before we start seeing the market climb back up again. And then my middle scenario neither optimistic nor pessim, sort of the the lukewarm scenario is that we'll see a further 10% drop, say over the next couple of weeks, and then a uh, a 1% uh recovery. So not as dire as the first uh pessimistic scenario, uh, but still bad to that. So now, if you give sort of, if you give kind of equal probabilities to each of those scenarios, you kind of end up with the, you know, something close to the middle scenario can you honestly say that?
Speaker 1:that's the way you feel? The way I feel yeah, you feel like the moderate is you think the positive?
Speaker 2:right now, I have to feel the negative outweighs the positive well, no, when I say, when I say my middle one, I'm saying further 10 drop, yeah, yeah, and then a one percent per week.
Speaker 1:Uh, recovery after that right, but I'm saying you're offsetting the pessimistic and the optimistic or the positive. That's basically about the same probability and I'm just telling you based on what I feel from people talking to them about markets and some of the, let's just say, less than clear things that have been done like trying to tariff an island of penguins I think there's a lot of question marks in the air that make me feel like I'd have to go with maybe 25, 20 or 2010,. Some odds of the negative being higher than the positive right now odds of the negative being higher than the positive right now.
Speaker 2:Clearly there's a lot of incompetence going on you can see that across many different policy areas within the administration. So you know that would, I think, argue for a more pessimistic scenario. On the other hand, I think one thing to keep in mind is that what we're dealing with here is a kind of top-down policy decision on these tariffs and thus perhaps more easily rescinded to some degree. I mean it's not.
Speaker 2:COVID. Covid was something you couldn't, you know you had to wait for, you know, for vaccines to come in before you could deal with COVID. I mean, granted, the recovery occurred pretty quickly, but you know, the real big recovery after COVID was when vaccines came in.
Speaker 1:Yeah, I mean, I think you're going to the longer term and I'm just worried right now about what is the Fed going to do. Because if I was sitting here and saying I think the Fed is on hold and there's no way they get in until we see, you know, a quarter of negative growth and then the Fed comes. But then I look at some forecasters and they've gone from one or two cuts this year at the end of the year to a cut at every meeting the Fed has this year, and getting down to the half to one percent again. So I'm sitting here saying well, we saw during COVID a reaction in one weekend that we never thought was possible. Right, the amount of liquidity they flooded the market with by lowering 250 in one day, one meeting, was just amazing. And that's what I'm sitting here saying is, are they? Is every system going to operate in whatever way it can? And then there are these checks and balances like what's going to happen with some of these things in the courts? What's going to happen with the Federal Reserve? Maybe the markets go crazy until the Fed says we're not going to lower rates, but we're going to tell you we're aware of the volatility and we're going to do things to protect investors.
Speaker 1:I think that Trump is implying that he wants the Fed to cut and wants lower rates and he's not afraid of causing some upset for a period of time until that happens. And I mean, I think the most callous thing he did this weekend was to go play golf in the club championship. Yeah, I just think it sends, even if he is the richest man in the world. I think it would be the wrong image to say to the average working class person yeah, you're worried about your job now you're worried about your retirement account, and now, all of a sudden, you know he's out golfing On the Fed.
Speaker 2:you mentioned the Fed.
Speaker 1:Yeah, I think we're going to go into the Fed and what's I mean? Because that to me you make it sound like there's one and then there's the other in the market, and then there's Trump and they're going to have this battle. But I would say that there is this person on the sideline who's going to try to keep both of these characters in line so that we go in a direction that's not totally market based, but also not totally that everything can fail.
Speaker 2:So A few things on the Fed and Powell is tariffs can cause recession, obviously. Tariffs can also cause inflation, obviously, and so Powell is kind of stuck with his data right, right.
Speaker 1:That's why I think this is such a unique. Not only if Trump didn't hate the power of the Fed so much, it would be one thing, but then to have them kind of back themselves into a corner where they know they have trouble if they loosen money supply now and there's extra inflation. It's like they've made this bet and they just don't want to lower just because they look very hypocritical. And I think that Trump would look at it and say, hey, I texted on Thursday and this happened on Monday. I guess it took them a little longer to realize I was right. And I guess when I look at this I just wonder. And I guess when I look at this, I just wonder and it's crazy.
Speaker 2:You see all these conspiracy theories now on the net about how. Oh well, this is some kind of four or five dimensional chess that Trump is playing that is aimed at getting the Fed involved and this is he's trying to lower the overall debt, so that when we refinance $7 trillion in the next two years.
Speaker 1:I saw this post and there's going to be $7 trillion in refinancing and they want it to be at lower rates. So what they're doing by tanking the economy, is really going to save us in interest payments over the life of these loans. And I'm just sitting here going boy.
Speaker 2:I mean these are people who are trying to hawk Teslas from the White House. I'm just sitting here going. I mean these are people who are trying to hawk Tesla's from the White House. So I don't, I don't, I don't give them any, I don't give them any credence in terms of being smart about.
Speaker 1:I guess I'm just saying for the average investor and the average guy who's listening to the news how does he determine what's really right and wrong for him and what is the real problem here? And that's where I just like to say to people you know, we've always talked about investing here and how to get good returns and how to get a good risk adjusted returns, and we think that's the way that you add value in your life and in anything you do with your money. And I guess what we haven't really I think we've talked a little bit about is what are the things you need to make sure that a period like this doesn't derail you and push you off into a bad place where you're not going to recover financially for a long time? How do we avoid those pitfalls? And I guess I would say do you have money saved? Do you have money in case you lose your job or something happens and you get injured? Is there a way for you to cover what your expenses are? Do you know what they are? How much debt do you have? Is it a lot or is it a little? And, if you can, can you eliminate some of it so that if there was a bad event, you'd be more resilient and more able to respond.
Speaker 1:Do you have a HELOC? Do you have some capacity to borrow money? That's not going to be hard to get If you need the money. If you need the money, do you have a capacity to borrow from someone or someplace? And the last thing is do you have other assets?
Speaker 1:Because I think that what used to make me real happy when I was in the beginning of our marriage is we had a house and I used to look at the house and I used to look at the equity and look at what the market said it was worth and it gave me some confidence that there was some core there in my savings, because we put all our savings into our house and that just feels like that made me steady when the markets would follow. So I think you need to look at yourself and say, hey, what's my rent or what's my mortgage and how do I feel about where I live? And then I think it comes down to can you sleep well at night? If you can sleep well at night, then you've got the right amount of risk. So if you're having too much, then you're not sleeping.
Speaker 2:I think you've got to take care of you first, steve, you're laying out basic principles, and let me overlay something on what you're saying, which is thats, 30s, uh, you're going to have an entirely different um perspective, or you should have an entirely different perspective on what's going on now, uh, than somebody our age or, you know, somebody in their 40s or 50s, um, even right, should have a totally different perspective, because you got you, you who are younger 20s and 30s, and even to some extent in the 40s uh, are going to live past this.
Speaker 1:Really, this is going to be a line on the graph that you're going to say, wow, that felt bad when it was in it. But when you look at the life of the market, your time frame, 30 or 40 years, there is not a great deal of worry Even at this point.
Speaker 2:if you look at an S&P 500 chart, if you look at the 2008 drop, you look at the 2020 drop, these already look like small squiggles.
Speaker 1:Yeah, I'm not trying to diminish it, because there are different people right, we've got people who may just be retiring and they just saw what they thought was their total at the beginning of the month get hit pretty hard, and so I think that this gets into this whole point about what should be allocated and how much risk should you take, and I think that when you're getting closer to retirement, you want to be having you take the risk off at a higher level than having the market take it off, and that's what I just want people to be constantly looking at themselves and saying, hey, am I where I want to be?
Speaker 1:Am I doing the things I can do? And then you just leave the rest up to the assets and your allocation. I think that looking at it daily is not a good idea, and I think the media coverage tonight on bloomberg and cnbc and everywhere having a special because it was so volatile last week I find that to be like why do we celebrate the negativity instead of right, you know, celebrating the fact that we have so many great ai companies? Yeah, I don't, yeah, I don't. I don't think that we're, we're, we're a media of negativity.
Speaker 2:Let me say it. I think that negativity can affect you. I have no plans to watch those shows.
Speaker 1:Well, no, that's because you're going to be working on your podcast and trying to make sure you release the best you can release. So we're trying with this to take a different approach and be more reactive to the news around us, because we think that when we did some reaction pieces to what happened with CrowdStrike and what happened with the GLPs and what happened with NVIDIA and some of their questions, their early valuations, we felt those were good and were received well by our listeners. So we're looking at this saying what would you tell people if you gave them 20 or 30 minutes and you said, hey, this is really what you should think about in your overall perspective of money investing and the volatility of markets. It's a moment to learn and it's a moment to think about things that are important to you.
Speaker 2:And if you're doing those things, then you realize that that these squiggles, they aren't as big a deal yeah, so steve um just uh, you know, for our audience here, um, in terms of, uh, you know what I've been doing, okay, to prepare for this and during it, uh, this crisis, the last two days, as I've mentioned on prior podcasts and in some blog posts, I have been ratcheting in beta, lowering the beta of my portfolio. I've always looked for stocks with lower short interest. Yeah.
Speaker 1:I noticed today, this week, some of those really spiked up there, like I saw Exxon at 10 or 11%. Yeah, I mean it's crazy. So I wondered does Clem have to sell all his names if that number goes up, or does he you know? Does he say?
Speaker 2:no, well, I'm watching this. The only problem is is that a lot of the short interest comes out. The short interest data only comes out twice a month, so there's a data latency problem. I thought.
Speaker 1:I had somebody that was telling me live on TV that they were seeing short interest. I thought when I looked at it, maybe that was, that was yeah, maybe.
Speaker 2:Yeah, finra puts it out every twice a month. But and then forward pegs, well, they're certainly coming down a lot for some of these companies. And so you know, as you know, steve, you know I sort of grade these stocks. But one of the things based on those criteria, but one of the things that that I've done lately, and I think you would appreciate this is I kind of multiply through those three things. You know, I take the short interest, multiply it by the forward peg, multiply it by the, by the beta. That's cool and uh, and it gives me like a single number. And if I um, you know, if I see something that's above two, then, um, you know, short interest, times, beta times, forward peg, if I see something above two, then I want to get rid of it, right, and I like things that are sort of in the below one or, you know, somewhere between one and 1.5, somewhere along in that, in that range.
Speaker 1:Well, that's what I was going to ask you is this there's different ways to adjust your beta, right? Yeah, taking it all out, putting it into cash, and that's going to adjust your overall beta, yeah. And then there's all the stocks you want to own. Do I want to clip some in the front end to have that great run? Do I want to clip some on the back end so that I can take a loss, and that might help me with my taxes.
Speaker 2:So by getting rid, looking at those three indicators and getting rid of the ones that multiply out to two or above, I've added to my cash. Above I've added to my cash, I've added to my gold. And I've done something just on Friday that I think you're going to be very surprised at, which is I've added some bond exposure. But I'm going to add some more bond exposure, but just a little bit.
Speaker 1:Okay, I don't want you to leap anywhere.
Speaker 2:You're not comfortable with.
Speaker 1:I want you to gradually move places so that you might sit there for a while, right, I look at bonds now and I think about whatever duration you want to look at a two or a four year. I look at two mainly because it's kind of after. A lot of noise happens in the first six to nine months and I think that you get rates over four or two.
Speaker 2:So I like that kind of mathematics I mean, with yields coming down-.
Speaker 1:With yields coming down. It's going to help us with the little capital gain right?
Speaker 2:Yeah, TLT is going to go up. Correct, that's a longer duration item.
Speaker 1:So if you want to play, the longer duration TLT is going to go up. Correct, that's a longer duration item. So if you want to play, the longer duration TLT is to play. If you want to really play it, then you look at options on TLT and that's really applying leverage to something that's already kind of pretty clearly correlated to what the market's going to do?
Speaker 2:TLT has done okay through the last couple of days.
Speaker 1:Yeah, I mean one strategy an endowment told me about was they sell puts on TLT. So when it shrinks and there's demand for safe assets, they go down, the price goes up and you look at that and you have a put in place so you can take advantage of it.
Speaker 2:Yeah, so for our audience, if you're kind of confused, what the heck are Steve and Clem talking about with TLT? It's a long-term treasury bond ETF and so it's a way of investing in long duration, which basically is another way of saying that if yields go down, the price of this thing goes up, you're going to get a nice solid return, but vice versa, if yields go down, there's going to be a loss. So it's not something that would ever be like a core of my portfolio, but you know, maybe on the edges it would be.
Speaker 1:It would be like gold we are trying to help people with. We don't have information, so everybody should make sure that they tech with their tax and investment advisors. We're just kind of throwing around ideas and I looked at the three categories. I'd just be a little more like 20 or 30% in the bucket of the negative and the pessimistic and I put probably 10 in the positive and then the remainder in the middle, which would push you a little towards more like a 15 percent decline overall yeah, go ahead.
Speaker 2:Sorry, one of the things I was going to ask you, one of the things that surprised me on Thursday and Friday, is that gold actually went down.
Speaker 1:I know, and so did silver. I mean, there's a lot of people in the metal space who are saying silver has not really kept up in this move in gold. Yeah, and is it gold moving just because of the safety trade, or are there several safety trades going on? You want to be out of the market, but you're also worried about inflation, so you want to pick something that you think is going to benefit in both cases. And I think when you look at silver, it probably has more of a consistent demand from dental and chips, so it probably doesn't have the same amount of speculation in it. The gold is basically being held as a speculative asset for people to hedge their portfolios.
Speaker 2:Well, that plus also, there's a lot of central bank demand for gold right now and that was one of the theses by which I was holding gold, and you know also preparation for something that you know tariff drops or or some kind of crisis and and that hasn't played out as well as I thought it would. Gold was really, really doing well and it was a big contributor to my portfolio through through Wednesday and Thursday and Friday. It didn't didn't quite work as well, so I'm not selling any of the gold, but I'm not going to add to it, which is why I thought about the bonds.
Speaker 1:Right, I think it's good to have different levers you touch, and then I think the gold is one of those levers. When we look at government's gold, china needs and wants as much gold as it can to try to make its currency more of a reserve currency. Right now, the US is somewhere around 6% to 7% of its currency is based in gold, and China is below 1%. So they need an awful lot of gold because their economy is growing fast and so that number keeps getting bigger and bigger, and so they don't export any gold for the rest of the world. They're only buyers.
Speaker 1:And so when you look at a buyer like China out there and you see this demand for what they want to do, if they take their money out of treasuries, what do they put it in that's going to give them safety? Would they put it in some other currency? Would they put it in? Because they know that most of the currencies of their allies are going to be currencies that are probably going to behave opposite of the US dollar. So therefore, you don't want to block in a loss, you're trying to block in a gain, if anything. So I think the way that governments look at. This is a big part of what's happening.
Speaker 2:So, steve, let's take it back to tariffs for a second. One big catalyst well, two big catalysts would be if the EU decides not to retaliate and if China decides to pull back on its retaliation and reach some kind of an agreement. I'm skeptical about both. I'm more skeptical about China because China has actually come, really has had a very powerful reaction to this not just the tariffs, but also cutting off rare minerals exports and putting some more companies, us companies on their so-called unreliable entities list.
Speaker 1:Right. I mean you could tell they got serious when they told employees no holding Apple phones anymore. They are making a clear-cut delineation that they will develop the technology that will be the leading tech in AI or other spaces going forward. I think that if the US thinks there is not a fierce competitor there, we're missing the boat. But the bottom line is the US government has a lot of assets and a lot of resources, and the question I think that Xi in China is trying to figure out is will the US get so distracted by tariffs that they forget about security and they do things that are a mistake in either the Ukraine or Israel or in Taiwan, and I think those are the three international spots and you're going to say is there anything that could make this tariff story go worse?
Speaker 1:It would be some type of an upset in one of those two, three regions. That would just add to this negativity of the overall global economy. And I think that, when I look at the reasons that we're going to recover one, it could be that the market has overreacted. It could be that this you know, this stuff gets backed off after two to three days. It could be, you know, a much different scenario. But people are being set up for a longer term problem here.
Speaker 1:So if I was going to just pull the, you know, pull the wind, the, pull the windows open and say, hey, what's happening? I'd say that there's. There's more likelihood that this goes on for a period of time.
Speaker 2:So, as a longer lasting item, that's why I'm more pessimistic well, I think it's easy to be pessimistic about a lot of policies that we're seeing come out of this administration and the inability of Congress, of this Congress, to try to get its act together. I just you know we're at a bad juncture with respect to governance in the United States and that doesn't help.
Speaker 1:That doesn't help, I guess I would say that the thing that gives me some hope is that the Fed is sitting here and the Fed knows that if they were to do anything to make an indication of the market that they were going to support it.
Speaker 2:that would be like a moment where things would turn around and yeah, and here's the problem If the Fed decides well, you know, trump got into this himself, he's got to get out of it himself. If the Fed decides that the worst case scenario is, trump could decide to fire Jay Powell.
Speaker 1:Yeah, I think that I think there's scenarios that are more likely this week and more likely in two months and I think that it will take a while for the process to work where he fires Powell and I think it will be it will take some time and I think I honestly think the Fed will cave and probably lower rates in June instead of, you know, september or December, like they had been predicted. So I think they'll pull the cuts forward and they'll indicate that they'll cut more, and I think those two things will stabilize this market.
Speaker 2:They could stabilize this market.
Speaker 1:Yeah, it depends on-.
Speaker 2:There's a lot of other variables. Yeah, it depends on whether which is of greater concern at the moment inflation or recession.
Speaker 1:Right. I think the Fed doesn't want to not be at the switch, but I also think they don't want to feel like they're kowtailing to Trump tweets. So, in order for them to keep their respect, I think that you can't. You can't really see something happening in April or May. I think that they will want to see what happens with this budget and want to see what happens with the extension of the tax cuts. If you see two events after each other, being the Fed lowers and the tax cuts are extended, you're going to see an accelerated market and too much inflation, and I think the Fed would like to see that decided before it goes ahead with the question about cutting.
Speaker 2:They'd like to see what happens with the budget first Correct. I think that I agree with that.
Speaker 1:And I think that if we look at this thing and take a longer time frame, that's what I would say Make yourself comfortable this week with your allocations and if you want to sell, sell If you don't want to generate some. You know I'm selling myself in my IRA, my IRA account. I have no taxes, so I take back some S&P exposure and I looked and added some exposure to my FLQM, which is my mid cap, because on on a risk-adjusted basis, I look at mid-cap as a place where you get compensated and tariff risk doesn't affect mid-cap because the companies are 80% doing their business in the US. So mid-cap tends to have a small cap and even higher. But small cap doesn't have the balance sheets of mid cap. So I'm putting some money in mid cap and taking it out of large cap and saying, okay, I'm not sure what's going to happen here, but this is in a retirement account and every situation is different. So in my mind, we want to have more dry powder. We want to be able to deploy quickly.
Speaker 1:I think the question that Clem asked is a good question about what duration you want to be. Do you just want to be the shortest treasury you can and have no risk up or down. I feel like if the market's going to tell me something, it's telling me right now that there's more likelihood they're going to cut rates than raise rates. So I think it will take months of data before we know the inflationary effect of tariffs. It's going to take more than months because we don't even know how quickly somebody might be taken off right.
Speaker 1:We could have an agreement with France, but not with Italy. We could have an agreement. I don't know if the euro will act as one. Maybe they should negotiate as one, but Germany wants to do no. I can see Trump trying to fracture the euro and trying to fracture whoever is not in his good graces, and I look at that and say the damage here long term is not just that he did this tariff thing, but that it just created such disruption that people now have less likely to understand and respect the US in these markets that people now have less likely to understand and respect the US in these markets.
Speaker 2:Yeah, he may try to help out the countries that have governments that are more friendly to his ideological perspective Correct, and we could you know, we could see a long lasting impact from this.
Speaker 1:What I think is probably happening is he's under a lot of pressure as CEOs and financiers go to Mar-a-Lago and try to visit and say this is really bad for us.
Speaker 1:This is why you need to change, and I think he will do what he does, which is he will generate headlines. He would love to claim success. He's already said that tariffs are going to add trillions of dollars to the US Treasury. I think it's one of the things that has to happen with the market is you've got to look at it as a discounting mechanism and you need more data. Nobody knows. Therefore, I think a lot of these people on these shows and a lot of the people in the market here are trying to say I know what's going to happen and in reality, we know that if we sleep well, if we exercise, if we keep a balanced approach to life, there's a better chance we'll live well. I think that all of these things about market timing and market levels and how long the markets will go down, the markets will go up and if you allocate it reasonably, you should be able to participate in a way that adds value.
Speaker 2:That's all I try to do, mike GREEN. Yeah, the last thing you want to do is react. Don TAYLOR, don't sell 100% 100%.
Speaker 1:Person who gets out at one time says they know perfect information. Yeah, I look at it and say, do 20 percent, do 10 percent, do some number that makes you feel more comfortable? And you can look at the number and say, hey, my annual, my monthly expenses are three grand. I'm going to look at that and say I saved 30 grand. I get 10 months of expenses. That's more than enough. And that's how you have to look at your life and say, hey, these things can immunize me and make me feel better. Or I can continue to cognate and think about it and let it roam right around and bounce around at night.
Speaker 1:I think I've lived that life and I'd suggest another approach, which is get yourself to an allocation. You feel comfortable and from there I wanted to end with an opportunity where I see something and I see opportunity and energy, and I especially see opportunity in dividend payers. I think the overall sell off has taken some number away from some names that were already good values, especially European companies, and made them better values. And so when I look at what's happening, I think I'm glad I have this allocation to these types of securities and I think they add value, especially now, because what's the likelihood that any of these companies are going to cancel a dividend between now and the next two or three quarters? Almost none. They've got cash on hand to cover the dividends, but their businesses are still thriving.
Speaker 1:I went to Costco, I went to Home Depot, went out again for dinner. They are all doing fine. I think that if you look at US companies, there's some great companies and if the price goes down, I'd suggest that people think about it, but only think about it if you have the right risk perspective. What do you think we should buy?
Speaker 2:well, apart from, um, some bond exposure, um, uh, I would well, in terms of what to buy or what to sell. Okay, what, what do you?
Speaker 1:want to be lighter in. What do you want? You want to have more. Well, I want to have.
Speaker 2:I want to have less of all three of these things less beta, less short interest and less forward peg. And so when you multiply those through, uh, generally speaking, that means right now, what that means is uh is getting out of most technology almost all technology actually. Actually. It also means more consumer staples. It means more utilities and it means more insurance companies. What healthcare? It means some pharmaceutical companies in healthcare. Okay, surprisingly well, I don't know, not surprisingly there's no consumer discretionary in that mix. What about industrials? No industrials in that mix. What about energy? Energy, I'll tell you, we may have a difference of opinion on energy, right, and the reason? So just a few beyond the three indicators I talked about, a few observations I would make. One on energy is that we've seen a very big drop in energy prices over the last two, three, four days. That may make your stocks cheaper to buy more of, right, steve STEVE DIGGLE.
Speaker 1:That's why I'm reacting, because I think it's gotten for areas that have higher beta. I understand why there's a re-rating of Amazon and video, but when I look at Exxon and I say what's been re-rated, I agree. The thing that was a little bit that people aren't talking about, as the cause of that was the fact that OPEC agreed to increase production and so OPEC agreeing to increase production at the same time Trump puts tariffs on has kind of made a double whammy, double whammy right, and my question is is that whammy going to persist or is it a?
Speaker 2:temporary opportunity. It depends on whether we enter recession.
Speaker 1:Right and I think we're not going to know that for six to nine months.
Speaker 2:The other thing I would mention is that insurance which meets generally speaking insurance companies meet my criteria, but there is a problem, a qualitative problem, with that, in that some of these insurance companies, like All First, are dependent on automobiles and automobiles are subject to the tariffs, and so there's an issue there that I'm concerned about.
Speaker 1:Yeah, I mean, I think that all these ideas are valid, and I guess what I'd say here on Sunday afternoon is you know, it's a beautiful spring day In order to have a balanced view of your portfolio you need to Maybe where you are it's beautiful, but here it's raining.
Speaker 1:It's 65 to 75 today and it's a little bit hazy, but it's still warm and the stuff is blooming and it's really a pretty nice spring. And so I guess I'd say to people is make sure whatever you're doing, you're doing it with some thought and some care. If you are, you're likely doing the right thing. I think if you're reacting, hold on. You should be only acting on. You should be only acting. You're acting to achieve something that is going to make you feel and believe that your overall wealth is going to be sustained or increased in the way that you want. And if it's with taking more risk and you're comfortable with it and you swallowed a couple of times and you're still going to do it, that's fine. See how it goes for a week. You can always change.
Speaker 1:I think that when I look at things, it's trying to be a little more holistic and I know it sounds a little bit like I should have a tie-dye shirt on and I should be in the 70s, but I really don't think we're in a position where I have a lot of systematic risk concerns. I think there are concerns about tariffs. I think there are concerns about costs and inflation, but these are not like they were when we had financial collapse around the real estate market or we had a collapse around COVID a pandemic. So to me we've got a problem. That's a shorter term problem and I don't think it's been dimensioned yet. So when it gets dimensioned I think we can react more completely. But right now it's much too early and I think we need to step back and just make sure we're on the right path, anything else.
Speaker 2:Glenn, no, I think we've pretty much covered it. I would just say to everybody you know, don't panic, don't, don't react in in in really massive ways. You know, make changes around the edges if you need to, but but don't, you know, don't think that the world is falling apart.
Speaker 1:Yeah, I'm not going to a big box and buying anything. I was trying to think of some things. We thought about some baked beans, we thought about some tuna. But we're going to go with. The system will remain intact and we'll go shopping next week and we won't be really kind of stocked up on anything.
Speaker 2:Yeah, don't buy anything that comes from the herd in McDonald Islands.
Speaker 1:Stay away from the penguins. They've been trying to take advantage of America for years now and I think those penguins, we're going to get back at them. So live well, enjoy and until we speak again, it's Skeptic's Guide to Investing. Thank you everyone. Please tell your friends and share us with anybody who you think we can help. Thank you.
