Episode 298: Musings

 In this week's episode David and Ian discuss the areas of the market at all time highs, including the Magnificent Seven, and how bullish it is for market participants being willing to buy at all time highs. They also discuss international areas that continue to perform well, whether we are witnessing a similar period to the dot com bubble of the late 90's and early 2000's, along with other macroeconomic narratives that are at play, and how the narratives truly don't matter at the end of the day.  

Transcript

David 0:54

Welcome back to the Weekly Trend podcast. Today is Friday, May 8th, 2026. S&P 500 currently sitting at seventy-three, ninety-seven. I'm David Zarling. I'm here with Ian McMillan. It's been a little bit since both of us have been on the pod together. Kevin has done an amazing job filling in.

Ian McMillan 1:11

He's holding it together as

David 1:13

He is. Well, are you really surprised? Kevin always holds us together.

Ian McMillan 1:17

Your dad's just good

David 1:20

he's always the peacemaker.

Ian McMillan 1:22

Think how many times he's had to step in between us

David 1:25

It's kind of crazy. He's our marriage counselor.

Ian McMillan 1:28

Yeah We see that Lets me speak Lets me speak I feel like I'm heard

David 1:37

S-speaking of speaking.

Ian McMillan 1:39

Speaking of speaking what's up with the stocks

David 1:42

Yeah.

Ian McMillan 1:43

They are going up

David 1:45

They are.

Ian McMillan 1:46

Still above seven thousand

David 1:47

Yeah, we-- Last week we talked about new all-time highs and the returns we see after new all-time highs if you bought there. Not necessarily a bearish scenario.

Ian McMillan 1:57

Yeah broke out on April fifteenth does not seem that long ago That's like three weeks ago Three Wednesdays ago Four Wednesdays ago Three And up six percent since then Wouldn't say it's been a straight line but I don't know As far as markets go

David 2:18

Some things have been a straight line.

Ian McMillan 2:20

some things we have definitely gotten some straight lines Nasdaq I don't know like five red days since March thirtieth

David 2:30

Really?

Ian McMillan 2:31

I'm trying to count them

David 2:33

red days in the month of April, is

Ian McMillan 2:35

remember didn't it go up like a bunch in a row

David 2:39

weird?

Ian McMillan 2:40

stats that people were sharing there for a little bit

David 2:44

Oh, like price, a price thrust.

Ian McMillan 2:46

Well there's like all semiconductors were up seventeen days in a row or Nasdaq was up twelve days in a row or I don't remember what the actual numbers were but that that was a big The stat accounts that's what I'll call them the FinTwit stat accounts the

David 3:03

The da- the data miners.

Ian McMillan 3:05

The data miners they were really big on that So yeah to use the phrase you just used thrusty This price thrust excuse me has continued Lots of things going on I mean lots of things picked up where they left off at like South Korea

David 3:24

Yeah. South Korea on the move. Well, in South Korea, aren't we really saying SK Hynix?

Ian McMillan 3:33

Yeah but don't they also have Samsung

David 3:35

You're right, they do. Fifty.

Ian McMillan 3:38

have heard

David 3:38

Fifty.

Ian McMillan 3:39

heard of the SK Hynix hype cause there's a two X

David 3:44

You're right, SK Hynix and Samsung are forty-eight percent of EWI.

Ian McMillan 3:50

Beautiful What's the SK SK Hynix Is is there

David 3:57

Well, ticker over there,

Ian McMillan 3:58

there an ADR

David 4:00

it-- there's no ADR for SK Hynix. It's A000660. Imagine if you had tickers like that, A000660, is SK Hynix. For those listening, you can look that up.

Ian McMillan 4:13

For all you home gamers

David 4:15

Yep.

Ian McMillan 4:16

That's what Jim Cramer He pr I don't know if he still says that I haven't watched his show in a while He used to say that when I was little though Home gamers

David 4:23

Hmm. Kind of a hybrid.

Ian McMillan 4:27

Kind of a hybrid yeah You know one area that has had a very strong move but was not a leader coming into this th this rally we've been in for a month or so

David 4:40

Yeah.

Ian McMillan 4:41

Momentum was dwindling pretty hard going into the end of March especially on a relative basis Below a two hundred if I'm using SPMO But yeah big move move out of What else

David 4:56

Well, I mean, you could, you could even mark-- you could even make the-- you've used MTUM versus S&P. I mean, that's a pretty big head and shoulders base that goes back to December 2021 that we're clearing out of this last week.

Ian McMillan 5:12

You think that's a positive for momentum?

David 5:15

and maybe that was the clue because that momentum factor was kinda holding up through the March correction, that beach ball, if you will, being pushed under the water. And then, of course, I feel like there's a great segue for the Adaptive Select ETF listed on the New York Stock Exchange under tickup-- ticker ADPV, which helps investors access- Two of the most prevalent factors in markets, momentum and relative strength. Using proprietary met- identification methods, the Adaptive Select ETF attempts to own the strongest twenty-five large cap stocks when the market is in uptrend. And since not all market environments are the same, Adaptive Select seeks to prevent extended declines by moving to short-term treasury bills and cash during long-term market downtrends. Investors can find out more, including how to invest in ADPV, by visiting adpv ETF.com or calling one eight three three eight eight zero five two hundred. Investing involves risk, including possible loss of principal. ADPV is distributed by Quasar Distributors LLC. To your point, Ian, though, yes, the momentum factor is alive and well.

Ian McMillan 6:19

That was a good segue The marketing team told me to do that

David 6:22

Yeah, they were in my ear. They said n-

Ian McMillan 6:24

Hey

David 6:25

they said now.

Ian McMillan 6:26

Tom momentum

David 6:27

Do it now.

Ian McMillan 6:29

pull the trigger like that meme with the director guy that's holding the

David 6:34

Yes, I know what you're talking about.

Ian McMillan 6:36

thing

David 6:38

What is that actor's name?

Ian McMillan 6:40

I don't know I think be wrong I think it's a scene from Westworld

David 6:44

I was thinking Truman Show.

Ian McMillan 6:46

Oh is it Truman Show

David 6:48

Yeah.

Ian McMillan 6:49

You're right it is But it's the same Ed Harris

David 6:53

Ed Harris, yeah. Fascinating. Yeah.

Ian McMillan 6:57

You're right You're right You're right

David 6:58

Do it now. So we did it, and momentum held up and is going higher. And the... I don't wanna say caveat to that. What's interesting about that is it, it-- the data was showing international momentum was holding up really well, domestic too. But it is really interesting to see how much outperformance US has gotten recently versus international. Now...

Ian McMillan 7:22

bar I'll order a domestic

David 7:25

Yeah. It's a-- That would actually be a great...

Ian McMillan 7:29

that may why don't you What kind of momentum do you want sir Do you have like a domestic like a light domestic momentum

David 7:36

Yeah. I don't need anything heavy right now.

Ian McMillan 7:38

No volatility tonight

David 7:40

Yeah, I don't need a high beta. I don't need a high beta gut issue tonight.

Ian McMillan 7:44

It's a Tuesday I gotta be up early

David 7:47

That's fair. But we've got momentum factor holding up really well. S&P, Nasdaq one hundred, small caps, new all-time highs. Dow Jones,

Ian McMillan 7:56

nope

David 7:57

still below the Pam Bondi levels. She might go down in infa- infamy between that and the Epstein letters. But now we got mags. We got the magnificent seven at all-time highs too

Ian McMillan 8:07

Mac seven I mean it can't be Yeah I mean Apple got back up there cause I mean Amazon's been good Google's

David 8:15

App-

Ian McMillan 8:15

good

David 8:16

Apple's at new all-time highs.

Ian McMillan 8:18

Apple's at all-time highs Microsoft

David 8:20

highs.

Ian McMillan 8:21

I mean Microsoft's I mean it rallied like the first couple weeks maybe but it's actually down since April seventeenth Could be gearing up I don't know

David 8:35

N- Well, Apple, Google, NVIDIA, Amazon, new all-time highs. Microsoft, Meta, Tesla, not so much, though Tesla, Tesla, interesting.

Ian McMillan 8:46

Yeah back above a two hundred-day Back above this four sixteen four fifteen level to the highs from October twenty twenty-one We'll see Gotta get over f probably gotta get over five hundred bucks though doesn't it Well I mean to be a breakout might have to wait till then Relative chart is messy though Mm

David 9:10

Yeah, relative to S&P. Come on, Megs. Meg...

Ian McMillan 9:14

What about so emerging markets It's just Korea

David 9:19

Well, I've-- What I-- I'll go back to emerging markets, new all-time highs.

Ian McMillan 9:24

Yeah

David 9:25

But so fascinating how, you know, if we use ticker EEM, emerging markets, semiconductors is 22% of that.

Ian McMillan 9:36

So

David 9:37

Technology is 38%.

Ian McMillan 9:39

TSM

David 9:40

Yeah, Tai- Taiwan Semiconductors is 14%. Samsung. So the top three holdings, Taiwan Semiconductors, Samsung, SK Hynix. There's SK Hynix again. Those total t- about 25%. 25%.

Ian McMillan 9:57

semiconductors

David 9:59

Yeah.

Ian McMillan 10:00

Samsung is considered semiconductors

David 10:03

That I don't know. That's a great... That might be part of the memory deal.

Ian McMillan 10:08

Oh I mean they're making money on something

David 10:11

But, you know, I, it-- if you just look at things surface level and don't dig deep, which we're a top-down, not a bottom-up shop. But just because you're top-down... Yeah, just because you're...

Ian McMillan 10:26

we're top down

David 10:27

Yeah, top-down doesn't mean-- Just because we're top-down doesn't mean we don't dig into what's going on underneath the surface. And you don't get to sit here and say,"Oh yeah, it's, Oh, yeah.

Ian McMillan 11:02

Lithography and foundries

David 11:04

Yes. The supply chain of AI is still alive and well. What do you think, what do you think about the comparison?'Cause this has been the narrative, uh, at least in our circles recently of this is 1999.

Ian McMillan 11:20

Let's do it I mean how Okay How or at least

David 11:25

Well,

Ian McMillan 11:26

I've always felt this way I think even like as a kid I mean I mean I grew up with certainly above average discussion around the stock market in our household And even you know then when I went

David 11:41

back to the old adage is... Well, well, okay, let me, let me paint some context before I say this. The environment that we're currently in with what happened in March, meaning mar- a little small market correction, extreme bearish sentiment, which still exists, which is still fascinating to me By the retail investor and even some of the, uh, institutional investors. You're now in a lockout period, meaning like

Ian McMillan 12:43

mentally.

David 12:45

if this market continues to float higher, it gets really hard to get in if you haven't been in. And so then is it, is it a bubble because you're in cash or are you in cash because it's a bubble? That's two different, very,

Ian McMillan 13:01

constitutes a

David 13:02

things.

Ian McMillan 13:03

You know like I mean weren't weren't people like quitting their jobs in 1997 98 99 to trade stocks

David 13:13

Oh, yeah, E-Trade, E-Trade Baby.

Ian McMillan 13:15

had the E-Trade baby I mean I remember obviously I mean I was a child so I'm not aware of what's going on in the adult world but I do remember the E-Trade stuff

David 13:27

Yeah, people, people were trading,

Ian McMillan 13:30

I remember pets.com

David 13:32

Yep.

Ian McMillan 13:33

I remember the commercials at least the little sock puppet guy

David 13:37

Yeah, is it-

Ian McMillan 13:38

don't And maybe that's why it keeps going because every time we do this the immediate response is Oh it's just another bubble It's Which I'm not saying it could be Soros likes bubbles

David 13:53

Well, and, and do you... Should you not participate? Because 2006 it was very apparent that there were some issues going on in real estate, and we continued to rise 30% higher

Ian McMillan 14:06

Yeah

David 14:07

in that market. So I'm, I'm not sitting here oblivious saying there's not issues, but rarely is there a market where there's no issues. And, you know, is it...

Ian McMillan 14:19

how to get out Right I think that that's I think that that's be part of it too Like if you were So if you were jumping in at this point there's probably no like technical Backdrop to your process

David 14:36

Right. You don't have a, you don't have a-

Ian McMillan 14:38

probably have no If there's no t entry if nothing about you getting into the market is based on technicals then most likely nothing about your process getting out of the market is based on technicals

David 14:54

Yeah, you're purely based on gut or narrative.

Ian McMillan 14:57

they'd be able to capitalize on it

David 15:01

No, I think that's very true. If you're, if you're not using your...

Ian McMillan 15:04

in their own skills I don't know

David 15:06

Well, and what technical analysis, what makes it so valuable is it tells you when you're wrong, which nobody can-- You know, like investors don't like to think that they're wrong, but it tells you where your thesis is wrong, because everything is a thesis. But it also tells you when the advantage is over, and that's where ratio analysis, relative strength come in. You know, when is the advantage you know, don't know that we have an advantage in this area anymore. Ratio analysis, relative strength analysis does that, and technical analysis, the study of supply and demand, tells you when your thesis is wrong. You know, like you, you brought up Apple before, new all-time highs. Well, if, if Apple can't keep the two ninety level, two eighty-nine, two eighty-seven, that would be information that you have to consider in your thesis.

Ian McMillan 16:02

Who was it with sharing I think it was you It was this week about your returns if you bought all-time highs

David 16:10

Yeah.

Ian McMillan 16:11

cost averaging or something like that

David 16:13

Yeah, if you-- The, so last week on the podcast, we had Peter Maluk, who... And again, I, I should reach out to Peter.

Ian McMillan 16:21

Okay

David 16:22

I should reach out to him to s- make sure I'm pronouncing his last name correctly. But since nineteen eighty-nine, money invested when the market is at all-time highs has actually outperformed money invested on any other given day, one-year, three-year, five-year returns.

Ian McMillan 16:37

Mm How about that

David 16:41

counterintuitive, right? Because the, the investing mantra-

Ian McMillan 16:46

All-time highs like

David 16:48

It's too hot

Ian McMillan 16:51

that with a you know a chart that's not in log scale If you put a linear chart in there with these big scary parabolic moves and then you say Wow look we're at all-time highs

David 17:06

Well, par-parabolic in arithmetic, but not parabolic in

Ian McMillan 17:10

Correct

David 17:11

Logarithmic. Yeah.

Ian McMillan 17:12

to the to the human eye

David 17:15

Yeah, and it's-- And that goes back to I encourage everyone listening to this, you need to live the percentage life. Don't live the nominal life. We see this, we see this with our clients and we help them through it. The retirement aspect of the daily movement of your account, if you have saved well, the daily movement can exceed your annual earnings.

Ian McMillan 17:40

Oh yeah

David 17:42

So-- And that can be very unnerving, but if you think in percentage terms and reframe your mind, renew your mind that we need to think in percentages, not in nominal terms, that's a g-huge, a huge advantage, a, a very powerful. And that's why as technicians, I mean, do not use arithmetic, arithmetic chart. Use logarithmic. Live in a percentage life. I-- While I understand the emotions that go around daily movements that could be the equivalent of what you used to earn on an annual basis, I totally respect that. But it is cheating the eighth wonder of the world compounding interest, which is based on percentages. Just is what it is. And, and the all-time high thing is probably there's also the emotion of too, you know, it's too high.

Ian McMillan 18:28

Okay that's weird right We're supposed to be buying at the lows

David 18:32

Right. The, the concept of buy low, sell high has been pounded in people's brains since academia, which we could go o-off on a huge diatribe about academia. However, there's also a thesis of buy high, sell higher. And is there anything more bullish than investors being willing to pay prices that have never existed before? I mean, that's, that's pretty bullish.

Ian McMillan 18:57

most that anyone's ever paid for Apple they're paying it today

David 19:03

Right. The most that anybody's paid for Google today, Nvidia today, Amazon today. Again, Microsoft, Meta, Tesla, of those three that haven't, Tesla looks the best. Semiconductor-- conductors get to, to rip, and going back to the original question of nineteen ninety-nine, it could be nineteen ninety-nine. I don't know.

Ian McMillan 19:22

Could

David 19:22

A-and that's fine if it is. And to your point

Ian McMillan 19:27

I also don't I don't wanna be the person that sits there I was like Wow I wish I like I wish I would have participated in that I wish I would've took my thumb out of my butt and like rode the trend You're not gonna pick the top It'll

David 19:41

You...

Ian McMillan 19:42

blow off in spectacular fashion But like you know I don't know I think it goes I don't I don't know I sh I It's a d uh uh it's not a mentality that I grasp Like I would want I would wanna sit back and say Yeah I participated in that and I got my fair share I made some money off that And not like you know worrying about every day you know telling myself co you know coping telling myself Oh it's too expensive It's gone too much It's gone too high too quick Whatever it is trillion reasons I've read them all I see them all in my comments on social media I don't know Kinda like life in general man Don't you wanna be able to sit back and say I got out there and participated

David 20:29

Oh, for sure. I just... And it, and it's just interesting because I go back to, you know, are we experiencing exuberance? Would you say, would you say market participants and investors, both institutional and retail, are exuberant?

Ian McMillan 20:46

I think the Koreans are here in America now But I never ne really know You know you read those headlines you know it was the Koreans that were going crazy over silver and now they're going crazy over There's an ETF that just launched over there and I think it's like five percent of all AUM in Korea

David 21:07

Go on.

Ian McMillan 21:09

Hynix like 2X ETF

David 21:12

Yeah, I could see that.

Ian McMillan 21:14

And it's already yeah five percent of all total invested assets in that country So they seem exuberant oh yeah

David 21:25

when you discu-

Ian McMillan 21:26

for you

David 21:28

internal client sentiment, public sentiment, survey sentiment,

Ian McMillan 21:38

You'd have a better grasp on that than me

David 21:40

I think there's a pretty healthy skepticism.

Ian McMillan 21:44

Nervous Okay

David 21:46

You know, it, it, it... When you, when you-- The backdrop Of the wall of worry has bricks in it like Iran, Strait of Hormuz, Hentavirus.

Ian McMillan 21:56

Oh yeah See if you're watching the news every day I could see it

David 21:59

you know, like when the AAII survey has more bears than bulls, and then you consider, which I-- It's one of the best quotes ever from John Templeton,

Ian McMillan 22:11

You

David 22:12

Investments."Bull markets are born on pessimism, grown on skepticism, mature on optimism, and die on euphoria." I, I guess I could see how there's optimism in the AI space and maybe euphoria.'Cause really when you talk about bubbles or like blow-off tops, what you're really talking about is just buyer exhaustion. That price moves in such a fashion that you just run out of buyers. It's not that sell- sellers are overwhelming, it's just you have no more buyers.

Ian McMillan 22:39

I still And AI still think Man that's tough I could see both I could see skepticism You know I think there's a lot of people that are skeptical of Sam Altman and whether What's he He owns OpenAI right Or he owns Anthropic

David 22:57

OpenAI.

Ian McMillan 22:58

OpenAI

David 23:00

And he's... I'm not afraid to say this. I'm just gonna call a spade a spade. He's a turd.

Ian McMillan 23:05

Yeah he sucks So I think that there's a lot of Is Sam Altman a bad actor so does that mean AI in general is a bust of an investment I don't I mean I don't know

David 23:24

and in, you know, if we can run the'99, 2000 comparison, what we're really talking about is the, the promises of the internet. So it's, for some listening to this, this is very gonna be hard to conceptualize because some may have never experienced life without the internet. But believe it or not, mid-'90s, there was a time where before that, like'95,'96, can't remember exactly when, you couldn't do commerce on the internet. There was no such thing as being able to buy something on the internet. And the promise of the internet was this frictionless way to do commerce. And so everybody was a- adding.com to their name. You know, you brought up Pets.com., You know. And there was definitely things like that. And, and really what happened is they pulled forward value It didn't mean that internet wasn't value years after that when the bubble burst. It just the, the timing, the discounting mechanism of the market

Ian McMillan 24:21

pricing it in very quickly

David 24:23

very quickly

Ian McMillan 24:24

Well and

David 24:25

work

Ian McMillan 24:25

happened NASDAQ went sideways for 13 years

David 24:29

Yes. And you, and you did, and you had to wait for your winners to show themselves like Amazon. And, you know, like early'80s, early'80s, a- advent of the computer. You had the Mac, and then all of a sudden you had this Microsoft thing, and that made it useful and usable. Same type of dynamics at play here is are we pulling forward the anticipation of the future? Could be. Could absolutely be. But I don't know how long that pull-forward process takes. And will there be AI winners? Yes. But is it 13 years later that we figure out who the AI leaders actually are? But for right now, AI semiconductors, supply chain dynamics of AI, infrastructure, you know, data centers, that, that's definitely a thing right now. But I

Ian McMillan 25:25

I mean you never know. Like, right? Y- Amazon comes along, they sell books. They don't make a profit for years, right Years they don't make a profit as they evolve into the behemoth that they are today I absolutely believe you'll see stories like that come out of AI that something today that's I mean maybe kinda cool unprofitable you know over the next two decades gets turned into I mean yeah what-whatever AI allows us I mean look what Amazon built I mean with just logistics it's really what it is logistics

David 26:08

Well, and I think, you know, there's, there... And there's definitely parallels. You know, we had Allbirds come out and say they're gonna be an AI.

Ian McMillan 26:16

Yeah it's true

David 26:18

Okay. So that matches.

Ian McMillan 26:21

But they got bought by a private equity company and I'm wondering if that Was that happening in dot-com where companies being bought and then being renamed

David 26:33

Yeah. Yes.

Ian McMillan 26:34

Okay Okay Okay

David 26:37

And then you have this IPO revolution that's coming up with SpaceX, OpenAI, Stripe, Anthropic,

Ian McMillan 26:44

What do you think about them And SpaceX is going right to the S&P correct

David 26:49

Yeah, it's, it's one of those unique things where

Ian McMillan 26:52

Unique

David 26:53

making,

Ian McMillan 26:54

unique

David 26:54

they're making an exception for it.

Ian McMillan 26:56

Hmm

David 26:58

Um, now I don't think we know the timing of those yet, like exact... Like I think it's this year, but I, I don't know that it's the exact dates. And there was a lot of IPO-ing going on in the late'90s too. And so I, I totally get the thesis. However, if you're going to sit out because of that thesis, it hasn't manifested itself yet. And, and who knows? This episode could be marking a top. I don't... You never know, know the top until after.

Ian McMillan 27:27

but I don't know We say we've said that a lot over the last five and a half years on this podcast and as trend followers I would say that more often than not it is not marked to top It kind of just Trend following man Why do you why do you think it's so hard to get people Right Because if you just got back if you got involved above a 200-day you're fine right

David 27:50

Yep.

Ian McMillan 27:51

You're It doesn't hold conversation very well at the cocktail party

David 28:29

Right. Like when, when...

Ian McMillan 28:30

shrug your shoulders and say I don't know man I just we're in an uptrend

David 28:34

Right. When you say there's more demand than supply. My, my wife loves me. She deals with my crap, and she still rolls her eyes when, w- when she asks the question,"Why is that happening?" I just say,"There's more demand than supply." That's not fun. The same with my kids. We have these conversations."Well, why is that happening?" Supply and demand.

Ian McMillan 28:54

know man

David 28:55

And that, the, the simple fact is people love stories. It's the, it's the story nature of our culture. It's, it's, it's from when God created Adam and Eve. The story is what we can relate to most, and We love complex over simple. So we have some of these behavioral dynamics that work against us.

Ian McMillan 29:18

But

David 29:19

so for example, like if, if I tell you a story about my son's baseball game and I just give you the stats and the end score, that's not as fun as when I tell you about this player that made a backhanded infield play, amazing throw to first, or some type of triple or whatever that happened. That's not as fun to tell it to you that way. It's the same thing with markets. It's way more fun to have stories and narratives than it is about just talking about price.

Ian McMillan 29:46

I was writing this client letter

David 29:50

Mm-hmm.

Ian McMillan 29:51

and so I wanted to go back and reference last month about like when I wrote the letter where were we at in the process of this bounce So it went on April third So were like two days into the bounce below

David 30:05

A 200-day.

Ian McMillan 30:07

still below the two hundred-day And we had this quote in there With that being said the stock market is still in a long-term uptrend any recovery back above the two hundred-day moving average and we will increase exposure to equities But until that occurs we will remain in a highly protective allocations We will remain in highly protective allocations for our clients So there you go Went to cash we were right for a week and then we were wrong Knew what we'd do The decision had already been made and communicated

David 30:39

And then quickly shifted back to aggressively involved.

Ian McMillan 30:42

no

David 30:43

Some might call that being adaptive, Ian.

Ian McMillan 30:45

It's not an emotionally draining decision do I roll my eyes at it from a trend follower Yeah But I'm not I w I don't think we spent any of those nights you know when we got back above the two hundred-day should we get back in No I mean it just is what it is Is it a risk that it goes right back below the two hundred-day Yep there is That is definitely a risk that will always be a risk That is the game but rules are rules

David 31:19

Rules are rules, and it's a process, right? You have to have a process. It's, it's, it's being athletic. When a, when a batter goes to the plate, if they have all sorts of stories going on in their head about where they are with their craft, what the pitcher is doing, all these different things, rather than just focusing on,"I've done my T work, I've done my BP work, I'm aware of pitch recognition, and I'm gonna, I'm gonna make the pitcher pitch to me," rather than have some elaborate story, you're better off as a hitter. Same thing in markets. You are better off as a hitter without stories, without narratives, and just diagnosing the data. In this box, I'm going to swing. And the market was in that box by early April. You gotta swing. Whatever the narrative is, and some- sometimes despite the narrative, the Iran war, oil prices, and I fully acknowledge, totally get, totally get the whole gasoline prices thing. Around here, we're up fifty, fifty cents on the gallon. Totally get it. And that's a narrative that's out there. Now, on the flip side, while you have a thesis, while we sit fastball, we acknowledge there's orange and red flags out there. For you, what are some orange and red flags? Like...

Ian McMillan 32:41

Financials

David 32:43

Yeah. Talk to...

Ian McMillan 32:44

is weird dude

David 32:46

to, talk to us about

Ian McMillan 32:48

All time This is correct right We ve I verified this with you All time relative lows on XLF

David 32:57

Yeah, XLF versus S&P. We've, we've, we've never been lower. Yeah,

Ian McMillan 33:11

up it's okay Which is true except they're not

David 33:17

it still moves.

Ian McMillan 33:18

falling apart The lack of participation over the last three weeks is concerning The fact that XLF can't get above a now flat two hundred day is concerning I don't know I just

David 33:34

Yeah.

Ian McMillan 33:34

Mor JP Morgan below two hundred today

David 33:36

Yeah, XLF below a two hundred day. Not at all-time highs. I think we could throw discretionary into this.

Ian McMillan 33:43

Discretionary man Everything besides Amazon

David 33:48

And

Ian McMillan 33:49

Yeah Tesla is Tesla's trying to come back but yeah I mean you're

David 33:55

But we're trying to record thirteen-year lows on a relative basis for discretionary using XLY. Financials all-time lows using XLF versus S&P. And then that becomes difficult for your investor who uses narratives because can you live in the world of ambiguity of here are the things that are doing well, but man, these other things aren't doing well? Just having things on high alert, like, oh, my attention is elevated. We've got this going on in AI and semiconductors and technology, right?'Cause we have mags going out to new all-time highs. We have XLK going out to new all-time highs. We have SMH versus S&P just ripping. On the flip side, not as great for financials and discretionary. And that's the power of technical analysis is you can sit there and say,"We have some evidence over here," but as being part of the jury, Uh, that's interesting that financials are below an absolute two hundred day going out at relative new all-time lows, discretionary below relative two hundred day and trying to record thirteen-year lows. Okay, we need to pay attention to that."

Ian McMillan 35:13

Well and I'm still kind of like Yes I'm we're aware of it but right now what do you want me to do Like sell it all You want me to sell the S&P while we're above seven thousand because financials are weak Like you can't you can't do that either

David 35:29

Right.

Ian McMillan 35:31

And that's the game

David 35:35

And, and you do get to-- we do get to look back six months from now and be like,"Hey, remember when we were talking about discretionary and financials being relatively weak? Maybe that was the clue." And you just wanna be aware of that. But until now, it's-- it continues to be semiconductors, the AI story You know, those are the, you know, emerging markets, and now that's twenty-five percent of emerging markets.

Ian McMillan 35:58

I have a I have a question for you posed to me by a let me see if I can find the exact

David 36:07

I'm ready.

Ian McMillan 36:08

Anyway so the gist of the question I'm not for the sake of I don't wanna keep everyone

David 36:15

Put them on pin-- Put them on pins and needles, Ian.

Ian McMillan 36:18

So a lot of times when we get these big rallies in stocks there's a lot of talk about forward returns Oh and the PE is at this high of a level you should only expect like zero one percent annualized returns maybe even negative returns over the next five ten years Thoughts on the Have you seen You've seen stuff like that

David 36:48

Yeah, for sure. Yeah. Yep.

Ian McMillan 36:50

Thoughts

David 36:51

thoughts. Yeah. So 09,'08, massive bear market lows. Didn't know they were lows at the time, but as they're happening, you had massive P/E ratios. You know, you, you had P/E ratios that... P/E ratios are backward-looking. And then you say to, say to me,"Well, Dave, give me the forward-looking. Give me the, give me the future." Well, I don't have the future, but I can tell you that price is the present, and price is a representation of future discounting mechanism, a measuring machine, a weighing machine of the market. And markets tend not to be these stable instruments that match some of those measurements. You can get outsized moves to one side versus the other. And as far as timing goes, P/E is terrible. P/E is a terrible instrument for measuring timing. So that would be, that would be my commentary to that question, is you don't get...

Ian McMillan 37:50

get any even tou Well did they ever confirm whether they're moving earnings reports to twice a year We doing that?

David 37:56

I have not heard

Ian McMillan 37:58

It's gonna get even harder predicting that forward stuff

David 38:01

But I do know there's the earnings estimates coming from the companies themselves have hockey sticked. They've g- they've gone extremely higher. So...

Ian McMillan 38:11

of this latest earnings season we're in right now

David 38:13

Right.

Ian McMillan 38:15

Let's go boys

David 38:17

Well, and so, you know--

Ian McMillan 38:18

out to the accounting departments

David 38:20

And I, you know, I don't know what that means for the future. Do I think this could be a ninety-nine, two thousand? I do. Like I, I think that's an interesting thesis. I, I, I'm not gonna sit here and say,"Nope, it's not that."

Ian McMillan 38:33

Dude that'd be amazing

David 38:35

And then are you gonna participate in that? And again, e-easier said than done because even, you know, oh seven, oh eight, again, I'll go back to there was evidence, well, how is the market going higher? Well, more supply than demand. People don't like that. People don't like that explanation. And it's-- Honestly, it's why you're involved in markets. If gas is gonna jump fifty cents and the market's moving higher, are, are you getting out of the market'cause the mar- the gas just jumped fifty cents a gallon? Right?'Cause the, the macro narrative there would be, well, every, every penny going into the gas tank is one penny less going into anything else that's consumable. That, that's totally reasonable and totally logical. I get it.

Ian McMillan 39:18

Is it though Like if you took yourself out of that situation

David 39:22

To me, it sounds stupid, but I...

Ian McMillan 39:46

To me it sounds stupid as a technician If you're a

David 39:50

But it sounds l...

Ian McMillan 39:50

I'm sure you can pull some data together that says

David 39:53

Well, yeah, it sounds logical from a macro perspective, right? Every penny that goes in the gas tank is one less penny that goes into something that you can consume. Totally. I-- It makes sense from that standpoint. But the other argument is the reason why-

Ian McMillan 40:07

how people behave

David 40:09

Right.

Ian McMillan 40:10

a little bit Maybe maybe people decide not to take the 2,000-mile road trip to you know Alabama But gas is At the end of the day are you forgoing buying new shoes for your kids because gas is more expensive How often is that truly happening

David 40:36

Yeah, it's a great question. I don't, I don't know the answer to that. And I, and I'm sure for some families that's a real consideration.

Ian McMillan 40:42

Sure it is You're right On a grand scale of is it going to affect affect the American economy I don't know

David 40:51

Well, and, and higher oil, higher gas, if we're gonna go macro, if we're gonna go that route,

Ian McMillan 41:00

be a macro podcast

David 41:02

the, the same thing applies, right? If, if... That also could mean that the transportation of goods is accelerating, and so more demand for energy to move product is happening.

Ian McMillan 41:17

I see what you're saying

David 41:19

Cause right now it gets really easy to talk about the Strait of Hormu- Hormuz, and I'm not saying that's not a real thing, but what if consumers are consuming, right?'Cause we still have transportation, Dow Jones Transportation above four-year highs. And so is there, is there a narrative here where the American consumer's just fine, retail sales are just fine, and the gas narrative is overplayed and is immediately tied to Iran rather than, oh, do we have economic ac- acceleration and that's why gas is more? Because the opposite would also be true. Some people view, oh, lower gas prices, that's good for the economy, or is it the deceleration of goods being moved,

Ian McMillan 42:00

cause everything's just slowed down

David 42:02

get to just live in one vacuum macroeconomically. You have to take everything under consideration. That's where price becomes so powerful and technical analysis becomes so powerful because we are seeing certain data points. And, and, and here's the thing, if, if your advisor says,"We're going to cash'cause ga- gas is now$5 a gallon," okay? Well, the reason why we're in markets to begin with is to keep up with inflation. We have to prot-

Ian McMillan 42:29

the inflation part piece of this would come up

David 42:31

Yeah, we're, we're... We need to protect our dollar, our purchasing power. The reason-- We're not in markets because they're fun. We're not in markets because they're easy. We're not in markets because we just love the story. Maybe for some. Maybe for some that's, that's their deal. I think that's a terrible reason to be involved. You're involved because you need to protect your purchasing power of healthcare, of your daily needs, et cetera. So if something else is going up that's an input cost and you're getting out because of that input cost, well, you could potentially be hamstring yourself on both ends of the spectrum. Gas is going up and you're out of the market not participating, and it's a double-edged sword.

Ian McMillan 43:09

It

David 43:10

We are in markets to protect our purchasing power.

Ian McMillan 43:13

cases Dave There are many such cases like that

David 43:17

A hundred percent. Overthinking the market.

Ian McMillan 43:20

hide out in bonds

David 43:22

Right.

Ian McMillan 43:24

Speaking of bonds I don't think we're going higher anytime soon Doesn't look like it I mean we could technically go higher but well we're here at eighty-five

David 43:37

TL-

Ian McMillan 43:38

on TLT

David 43:39

TLT versus S&P all-time lows.

Ian McMillan 43:42

If it

David 43:42

TLT on absolute basis.

Ian McMillan 43:45

I think it could This is like the fourth or fifth visit down here

David 43:50

Well, and tha- and that's why, like, one of the narrative stories this week is, like, some kinda shock and awe that later this year we could be raising rates at the Fed level. And people are like,"How could that be?" Well, when you look at what's actually happening in the bond market, is that really that much of a surprise when you have, when you have TLT at 2007 levels?

Ian McMillan 44:13

Okay so how

David 44:13

How-

Ian McMillan 44:14

how much do you think that I don't I don't know how I'm sure someone could quantify this or has an idea of how to quantify it But So we talked about the weakness in financials Do you see weakness in other areas cause people throw that stuff in the trash to go and grab semiconductors tech And then do you think the same thing has or could continue to happen on a much more mass scale with fixed income of you can't you just can't own long-term treasuries anymore Although then you th I I don't know You think people just do their more work and go buy convertibles go buy short I mean there is stuff in the fixed income world that is going up

David 45:01

Right.

Ian McMillan 45:01

just not long-term treasuries or intermediate treasuries.

David 45:06

a macro story there. You know, US debt, the interest payments on that debt. I'm not here to, like, say those aren't real things.

Ian McMillan 45:15

look at the chart You don't wanna buy TLT down here

David 45:18

Right

Ian McMillan 45:20

Look how low it is

David 45:23

So it, it, it's-- markets are a, a great way to expose investor biases and behavior. When you look at, you know, another warning sign, I kinda like junk bonds to be a little bit higher here. I... If I were to pick my preference,

Ian McMillan 45:41

wish

David 45:42

they'd be going out at, at new highs with some of these other areas, 100%. But the old adage that markets stay irrational longer than investors can stay solvent is absolutely true. We could be in a period of ir-irrational behavior, bull market, salivate... You know, like just chomping at the bit to own semiconductors.

Ian McMillan 46:08

access and awareness you have Okay so in 1998 yeah you're at you're at the golf club and your friend says Oh hey yeah Fred quit his job last week He's gonna go trade stocks full-time Okay that You hear that or experience that on an anecdotal level right But now you can get on Reddit you can get everywhere and there's people they're trying to sell you courses to convince you to get your quit your job They are You know you're reading stories of like well if this thirteen-year-old Korean kid can make four million dollars you know wow I could do that I'm an ed I'm an educated adult there's so much more um like so much more of a like a light on it I don't know if that makes sense

David 46:59

No, it does.

Ian McMillan 46:59

hypes it up even more

David 47:01

Well, I'm... You know, I've got a, a son and daughter in college, and my son's friends talk about stocks all the time and,

Ian McMillan 47:08

Which is great

David 47:10

try to... It is great. Try to make extra through options, and you get your butt kicked, and you learn your lessons. And nothing wrong with lessons being learned when you're in college. Better with a couple thousand dollars than a couple hundred thousand dollars. And same thing applies to markets, you know. I remember showing up Pick'n Save, it's a grocery store here in the upper Midwest, checking out. Checkout clerk, she hands me her real estate card. That was a clue. That was a clue. Like, we had people moonlighting as real estate agents working at a Pick'n Save. The same will be true For this period now. And it-- the op- the out... If, if this is a bubble, which I can get on board with as a thesis, there will be pain on the other side. The only process or field of study that I'm aware of to identify when that pain has started to begin is technical analysis. It is not macro, it is not fundamental. It is the study of supply and demand to understand when, oh, we have a little bit of an issue here. Time to step back, time to reduce exposure. It's only technical analysis that does that. Again, not sexy. Studying price is not sexy. Much better, much more fun for my pride if I interact on an earnings call about some narrative behind a subject. It's hard, it's a hard truth.

Ian McMillan 48:39

We can talk about next year's guidance numbers All that

David 48:43

Yeah.

Ian McMillan 48:44

They're paying

David 48:45

For sure.

Ian McMillan 48:47

buybacks So many cool narratives man

David 48:50

Endless.

Ian McMillan 48:51

Endless narratives

David 48:54

narratives that you can... I mean, shoot. And, and the, the, the appreciation I have for being involved with markets using technical analysis is I become so aware of my own outside of markets personal narratives that, that infect me.

Ian McMillan 49:08

Oh

David 49:09

And it makes me so, it makes me so aware and in, in... This is a weird thing makes me a better dad and, and husband.

Ian McMillan 49:17

I agree with that I definitely I think when you've been in the mi like you you've been in the analysis mindset after a

David 49:26

Yeah. Yeah, and it...

Ian McMillan 49:45

get thrown around

David 49:47

Yeah, you get much more comfortable with the ambiguity,

Ian McMillan 49:50

And

David 49:52

of the unknown, and that you might be wrong like...

Ian McMillan 49:54

what do you mean Of cour Like of course this is clearly gonna happen know And it could be sports related it could be markets related it could be politics And people just get so adamant the hyperbol Like and you notice the hyperbole in others especially on social media How many people speak in Like this is going like this will happen Maybe

David 50:19

Right.

Ian McMillan 50:19

Maybe Could be f and I'm not saying you're It could be five years So should I just not make money for five years it could be five days Like I don't know Maybe yeah I But I will I mean until the trend ends maybe

David 50:36

and, and that, that opinion communicated could end up being correct, but was it, was it truly correct or was it just a matter of timing and randomness? And I think that's the beauty of technical analysis is it just allows you to identify when risk outre- outweighs reward, when reward outweighs risk,

Ian McMillan 50:59

Yep

David 51:00

without getting married into all these different opinions that could be true, and they could appear really true. But are they a process? Are they something that's consistently able to identify ambiguity and deal with it? Most processes don't, including our own human behavior. And what I appreciate about the humble pie-making environment of markets and using technical analysis is, is it does allow me to accept I am wrong often, including in my own life. I can receive feedback without getting all my, you know, my underwear in a bundle because I deal with it every day. That's my life. I deal in markets. I deal in uncertainty. I think you used the phrase, someone comes and rearranges the puzzle every night. That is markets. It's okay.

Ian McMillan 51:44

Yeah a lot of I mean just accepting it I mean market market could yeah market Trust me dude every time we go below below the two hundred day like I'm right there with you Markets could crash Like I'm I'm in cash I'm waiting for it You know it's not like I'm it's this is not like a permabull thing it's... And then we go back above the two hundred day, and so you accept you're wrong you get back involved And I don't feel stupid I don't I don't think our clients think we're stupid they're aware yeah they I mean it's

David 52:23

You have to have a process over prediction.

Ian McMillan 52:25

think that

David 52:26

Anybody.

Ian McMillan 52:27

think they're stupid every time they strike out I would hope not

David 52:30

Right, it's--

Ian McMillan 52:31

I would hope not. That would be terrible

David 52:33

Well, there, there's Billy Beane

Ian McMillan 52:35

They're

David 52:35

and there's Lenny Dykstra. Billy Beane obsessed about the times he didn't succeed. Lenny Dykstra only focused on the times he did succeed.

Ian McMillan 52:44

Yeah

David 52:44

So the, you it, baseball is a process, athletics are a process,

Ian McMillan 52:49

from a

David 52:50

in markets is a-

Ian McMillan 52:51

like To me baseball striking out wouldn't be

David 52:58

Great.

Ian McMillan 53:07

you would swing at that same pitch that same trade 100 out of 100 times

David 53:12

Yeah, the only guy who batted 1,000 is a guy that went to prison, Bernie Madoff. Like, there is no such thing. You deal with the uncertainty, you swing at the fat pitches, and sometimes you even miss the fat pitches, and that's okay. It, it, it's just the way the markets are, and anybody that's telling you, you know,"Oh, I'm just-- I'm 100% right on my trades," well, they're a liar. No such thing.

Ian McMillan 53:39

Even big trades man.

David 53:42

a, we've done a great job going in all sorts of directions.

Ian McMillan 53:44

is a broad This is a broad Fri very Friday Very Friday of us Just putting it

David 53:52

Yeah, very,

Ian McMillan 53:52

there

David 53:53

Mary, very Mufasa. It's Friday then, then Saturday, Sunday.

Ian McMillan 53:58

That it is H They haven't changed that in a while

David 54:01

And you know what's on Sunday?

Ian McMillan 54:03

What is on Sunday Mother's

David 54:05

Mother's Day. Happy Mother's Day to all the moms out there. I know you and I have great wives that are amazing moms, and we also have amazing moms ourselves. So Happy Mother's Day to Emily, Kate, m- my mom, Mary, your mom, Nana,

Ian McMillan 54:20

Yeah Yes she'll

David 54:21

Bonnie, my mother-in-law.

Ian McMillan 54:23

game We'll go out afterwards for brunch

David 54:25

Yep. That's awesome. You know what? I've never met a mom that doesn't like brunch.

Ian McMillan 54:31

Yeah I mean I think with most moms you could take them to a Burger King and they would say I'm just happy to be with my family

David 54:41

Yeah, that's probably true. But we, we really wish all the moms out there a very Happy Mother's Day. You guys do tremendous things. Such a blessing to society, culture, and our families. What would life be without moms? I can't imagine it. So Happy Mother's Day to everybody out there. Ian, love being back on here with you. We appreciate everybody who listened to this. We hope you share it with your families, maybe even share it with your mom.

Ian McMillan 55:05

it and then she texts me about

David 55:14

this again in a week

Ian McMillan 55:15

a great weekend everyone