Repeat Of 2008 Financial Crisis As Wave Of Foreclosures Coming | Chris Vermeulen
Summary
TLDRIn this financial discussion, Christopher Mullen, Chief Market Strategist at TechnicalTraders.com, warns of an impending real estate market crash due to over-leveraged properties and skyrocketing mortgage rates. He identifies a potential opportunity in the market downturn, while cautioning against the pain it will bring to over-invested homeowners. Mullen also discusses the current tech bubble, suggesting that while sectors like AI show promise, a market correction seems inevitable. He shares his bullish stance on gold and the US dollar index as safe havens amidst market volatility.
Takeaways
- 📉 The guest warns of a significant downturn in the housing market, suggesting that overleveraged property owners may face severe consequences as share prices and bank valuations are hit hard.
- 🏠 The Canadian housing market is under stress, with many mortgages up for renewal at much higher rates, potentially leading to a surge in defaults and a significant impact on the market.
- 📈 Christopher Mullen, Chief Market Strategist at Technical Traders Ltd, sees opportunities in the market downturn but advises caution for those who have invested heavily in real estate at high prices.
- 📊 Mullen discusses the divergence in the US single-family housing construction starts, suggesting a potential market breakdown and a bounce that could precede a larger decline.
- 🏢 He highlights the skyrocketing multi-family construction starts as savvy investors look for profit in a challenging market, despite increased building costs.
- 📉 Mullen anticipates a major decline in real estate, drawing parallels to the 2006-2007 housing market situation, and warns of the potential for a significant drop in real estate ETF values.
- 💡 The interview discusses the potential for a banking crisis as a result of the housing market downturn, with banks setting aside large amounts for bad loans, indicating a brewing issue.
- 💼 The conversation points to the tech sector driving the market, with other sectors lagging behind, suggesting a potential bubble and a warning sign for a market correction.
- 🤖 Mullen expresses bullishness on gold and silver for the long term, expecting a multi-year rally despite potential short-term pullbacks as the market corrects.
- 💰 He also sees the US Dollar Index as a strong play during market chaos, expecting it to rise significantly during times of crisis.
- 🚀 Lastly, Mullen's investment strategy involves rotating assets based on market conditions, moving entirely into the asset class that meets specific criteria, such as low volatility and strong trends.
Q & A
What warning sign does the guest mention regarding the mass public's impact on the housing market?
-The guest indicates that a big warning sign is when the mass public starts to panic and dump properties, leading to a precipitous fall in housing prices and affecting banks and share prices.
What is the potential impact on the housing system according to the guest's perspective?
-The guest suggests that the housing system may be under a lot of stress, with banks possibly knowing something the public does not, which could negatively translate to the financial markets.
What is the guest's view on the current state of the Canadian housing market?
-The guest believes that the Canadian housing market is experiencing a bubble, with many people facing the challenge of renewing their mortgages at significantly higher rates, potentially leading to a 'bloodbath' of defaults.
How does the guest analyze the real estate market trends using chart patterns?
-The guest, being a chartist, uses chart patterns to analyze market trends, identifying signs of breakdowns and bounces, and uses historical data to predict potential future market movements.
What investment opportunities does the guest see in the current real estate market?
-The guest sees opportunities in multifamily properties, as they believe this is the last spot where investors can squeeze some profits out given the current market conditions.
What does the guest predict for the banking sector in relation to the real estate market?
-The guest predicts that the banking sector will be hit hard, with share prices falling and earnings collapsing, as they will be on the other end of the debt from real estate going into foreclosure.
How does the guest view the current situation of people buying houses at their upper limits?
-The guest expresses concern that most people buy houses at their upper limits, which could lead to a significant number of people defaulting on their mortgages when rates skyrocket.
What is the guest's opinion on the potential collapse in real estate and its impact on investors?
-The guest believes that there could be a significant collapse in real estate, which would be an opportunity for some but very painful for those who are overleveraged and bought properties at high prices.
What indicators does the guest suggest could signal the bursting of the real estate bubble?
-The guest mentions personal anecdotes, market analysis, unemployment rates, and the behavior of other investors as indicators that could suggest the bubble is bursting.
How does the guest approach trading in a market dominated by a single sector?
-The guest prefers trading indexes like the S&P 500 and NASDAQ due to their liquidity and trend consistency, even though the market may be driven by a single sector.
What is the guest's strategy for wealth preservation in the market?
-The guest's strategy involves rotating 100% of the portfolio into the asset class that meets their criteria for low volatility and strong trends, and scaling out of positions as they hit targets.
Outlines
📉 Warning Signs of Economic Downturn
The speaker warns of an impending economic downturn as the public begins to panic sell, affecting banks and share prices. This is an opportunity for some but could be painful for those over-leveraged in the property market. Christopher Mullen, Chief Market Strategist at Technical Traders Ltd., discusses the stress on the housing system and how banks might be aware of issues not yet apparent to the public. He suggests that the real estate market is showing signs of strain similar to those seen before significant financial corrections.
🏠 Housing Market Vulnerabilities and Bank Exposure
The conversation centers on the Canadian and US housing markets, with a focus on the potential for a significant market correction due to rising mortgage rates and the expiration of fixed-rate terms. Banks are setting aside record amounts for bad loans, indicating a concern for upcoming defaults. The guest, Christopher Mullen, anticipates a severe impact on banks as earnings may collapse and share prices fall. He also discusses the potential opportunities that may arise from such a downturn for those prepared to invest.
📈 Tech Bubble and Market Divergence
The speaker and Christopher Mullen analyze the current state of the stock market, noting a divergence where most sectors are underperforming while the tech sector booms, particularly driven by AI and Nvidia's strong performance. They discuss the potential risks of a tech bubble, suggesting that when it bursts, it could lead to a significant market downturn. The conversation also touches on the potential for a shift in market trends and the importance of recognizing when the bubble may pop.
🤖 Impact of AI and Robotics on the Market
The discussion turns to the potential long-term impact of AI and robotics on the market, with references to Elon Musk's comments on the future of robotics. The speaker and Christopher Mullen consider the possibility that the tech sector, particularly AI and robotics, could continue to outperform the market even after a potential bubble burst, due to the transformative potential of these technologies.
💰 Wealth Preservation and Market Strategy
Christopher Mullen outlines his wealth preservation strategy, which involves rotating assets into the market leader at any given time, such as the S&P 500 or the NASDAQ. He explains that this approach, despite appearing risky to some, actually results in lower drawdowns compared to traditional diversified portfolios. The strategy focuses on capitalizing on upward trends while avoiding assets that are in decline.
📊 Market Analysis and Predictions
The speaker and Christopher Mullen delve into technical analysis, discussing chart patterns and market indicators that suggest potential future trends. They talk about the current state of various sectors, including utilities and technology, and the potential for a significant market correction. The conversation also includes predictions about the performance of gold and the US dollar index in the context of a turbulent market.
🚀 Long-Term Bullish Outlook on Gold and Silver
Christopher Mullen expresses a long-term bullish outlook on gold and silver, predicting potential price increases despite acknowledging a possible short-term pullback due to market corrections. He discusses the formation of bull flag patterns on gold charts and anticipates a significant rally in mining stocks, suggesting a multi-year uptrend for these commodities.
💡 Unique Trading Philosophy and Risk Management
The conversation concludes with Christopher Mullen explaining his unique trading philosophy, which involves going 'all in' on a single asset class at a time based on specific criteria. He emphasizes the importance of wealth preservation and the management of risk through low drawdowns, as opposed to traditional diversification strategies that may expose investors to greater volatility.
Mindmap
Keywords
💡Market Strategist
💡Real Estate Market
💡Overleverage
💡Mortgage Rates
💡Housing Bubble
💡Financial Crisis
💡ETF (Exchange-Traded Fund)
💡Asset Allocation
💡Interest Rates
💡Wealth Preservation
💡Market Correction
💡Dividend Stocks
💡Sector-Driven Market
💡Asset Reves
💡Risk Management
Highlights
Public panic selling in real estate can lead to a significant drop in bank share prices and a potential market collapse.
The housing market is showing signs of stress, with mortgage renewals at higher rates leading to potential defaults.
Christopher Mullen, Chief Market Strategist at Technical Traders Ltd, discusses the current state of the Canadian and US housing markets.
Mullen predicts a 'bloodbath' in the housing market due to skyrocketing mortgage rates, affecting those who have over-leveraged.
Construction starts for single-family homes have declined, indicating a potential downturn in the real estate market.
Multifamily construction starts have increased, suggesting savvy investors are moving into this segment of the market.
Real estate ETFs show a potential for a significant market downturn, similar to the 2006-2007 housing crisis.
Banks are setting aside billions for bad loans, indicating a possible upcoming financial crisis due to housing market issues.
Mullen suggests that the banking system will be hit hard, with share prices and earnings expected to fall.
Alternative asset allocation, such as investing in contemporary art through platforms like Masterworks, is presented as a way to diversify investments.
Canadian banks are particularly exposed to the real estate market, with significant loans at risk.
The US housing market may not be as affected by mortgage renewals due to longer fixed-rate terms, but economic downturns can still impact homeowners' ability to pay.
Mullen shares personal anecdotes about real estate investment opportunities during market downturns.
Overbuilding of condos and other properties in big cities is leading to an oversupply and difficulty in selling.
Mullen's strategy involves rotating assets to preserve wealth, moving entirely in or out of the market based on favorable conditions.
The current market shows divergence with most sectors underperforming while the tech sector drives the market higher, signaling potential risk.
Mullen is bullish on gold and silver for the long term, expecting a multi-year rally despite potential short-term pullbacks.
The US dollar Index is seen as a strong asset during times of market chaos, with potential for significant rallies.
Transcripts
to me it's a it's a big warning sign
when the mass public starts to dump
those and they start to panic it it
creates a a precipitous fall the banks
are going to get hit share prices are
going to get hit this is an opportunity
but for those who are over leverage and
just piled in and bought a lot of
properties at these what I believe lofty
pricing um it's going to be very painful
going to get ugly out there says our
next guest the housing system may be
under a lot of stress the banks know
something we don't how is going to
translate to the financial markets
Christopher Mullen joins us today he is
the chief Market strategist at the
technical traders.com link to below to
learn more about Chris's work welcome
back Chris hey thanks David always a
pleasure we're going to start with
something we don't usually talk about
every single time but something that
affects everybody whether or not you're
in the markets it's IR relevant housing
affects us all how you reading the
Canadian housing markets and and US of
course a lot of my viewers are based in
the US but I think there are
similarities playing out you're an
expert on real estate actually people
probably don't know that about you let's
get your take and then we'll get into
the details sure yeah there's there's a
lot going on in the real estate market
um I was talking to somebody uh this was
uh late last year and he was talking
about how he had to sell his house soon
because he in April this year his
mortgage was going to come up for a
renewal he was paying like a percent in
a quarter he had some crazy amazing rate
but he going to renew it like 5 and a
half percent and he's like I'm not going
to be able to afford my house and most
people always buy a house you know
stretching their upper limit and in
Canada spe more specifically most
mortgages are three or five years and
we're coming up to that from the covid
bubble this is year three and uh really
over the next two two more years from
now is going to be this bloodbath of
people having mortgage rates that are
going to Skyrocket quadruple in value
potentially and hit them with these
massive mortgage rates and they're going
to go into default and I think we're
going to see this slowly continue to
pick up we've got real estate pricing is
going to start to struggle more and more
and there's a chart here that shows some
us real estate uh um construction uh
permits here if we take a look at this
chart this is just one of of many but
this is single family housing
construction starts they it broke down
uh back in 2021 early 2022 and it's it
has kind of climbed its way back up now
I'm a chartist when I look at chart
patterns to me this is a sign that
things are really breaking down and this
is just a bounce there's kind of this
final push of typically what happens is
after there's been a really good
investment real estate has done well
stocks have done well when there is a
pullback especially a fairly decent one
we had about 18% pullback in in my area
in real estate value um people pile back
in they think it's you know it's reset
and they drive the markets up for a
final kind of Bounce uh but overall if
we look at um there's other charts in
this data which I don't have here but we
look at multifam construction starts
they they've skyrocketed and that is
because Savvy Real Estate Investors I'm
a I'm a big fan of multif family I have
multif Family Properties myself it's the
last spot right now you can squeeze a
little bit of profits out of these
buildings materials are up labors are up
uh you have you know economy a scale
when you build multif family and that's
why we're seeing them Skyrocket happened
back in7 we saw a huge rally in multif
family starting starts and that's
because investors are saying hey that's
the only spot we can get a little bit
out of this market and then we see the
the financial sector and real estate
pricing uh really fall apart and there's
a really good chart if we take a look at
the real estate uh ETF this this is a
pretty interesting value way to kind of
see what's going on in the market let's
just go way back here to um here we had
2006 2007 was the last time we saw very
similar housing starts for multif family
and single family dwellings and then of
course we had a big selloff well we had
we had the similar type of blowoff phase
we've seen real estate cool off and it's
put in this big pause and this is this
is again this is the 200 um
708 well we've done the same thing we've
pulled back we've got this pause right
now and people don't realize real estate
is is primed and ready for another major
leg down if we look how how much it
collapsed last time it was about 64 % in
owning a real estate ETF that's how much
could fall we could see another huge
collapse in in real estate itself and
now this is a bit different than holding
your house doesn't mean your house is
going to fall 50% in value this is more
so investors panicking out of real
estate companies who own a lot of real
estate and they'll they'll drive the
value down but this just is a really
good visual of um average Market
participants right now are thinking real
estate's a buy this is a complacent type
of move they think real estate's good
they're they're they're buying right now
because there's been a pullback but the
reality is I think we're going to see
this collapse and banks are going to be
as you said David on the other end of
this holding all this debt of real
estate going into foreclosure people
can't pay their mortgages and they're
going to have a ton of properties valued
much less than their mortgages and it'll
be kind of rinse and repeat from the
last more or less Financial uh kind of
Crisis before we continue with the
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away I've got a few clips from the CBC
who's done um a very good job analyzing
or reporting on what's going on in the
Canadian housing markets take a listen
to this clip I'll play it for the
audience turns out Banks right now are
building a bomb shelter just this
quarter Canada's big six banks have set
$4.3 billion aside to cover bad loans
that's almost double what they set aside
in the first quarter of last year and
more than 11 times what they set aside
in the first quarter before that banks
are setting aside a larger amount of
money than they ever have before not
just now but in the previous quarter and
in the quarter before that and the
quarter before that the experts we spoke
to say a big issue has to do with home
ownership interest rates Rose uh fast
and by a large amount in a way that's
never been done in Canada's history so
that's kind of the issue you were
talking about foreclosures are probably
predicted by the Banks because people
are refinancing at higher rates so how's
this going to impact the banks in your
opinion oh they're they're going to get
hit real hard I think um they're they're
going to see the share prices fall down
earnings are going to collapse um and
then our interest rates will eventually
start getting cut from the FED as blood
hits the streets and they they need to
try and lower rates to to save people
save investors and um we're going to see
the banking system get hit very very
hard it's an opportunity uh you know
short term it's going to be painful for
a lot of people but it is an opportunity
my dad was huge into real estate he had
over about 1,500 units at one point and
he gave me a box of his his real estate
stuff and he literally had Banks uh this
was like 20 plus years ago send him and
call him packages saying here's a here's
an apartment building like give us an
offer and so him and his Partners would
go and buy apartment buildings out in
Edmonton and Calgary and all these
places for like 25 Grand uh a unit and
they'd buy multi hundred units and then
you know there would be a rebound and
they sell them for like 75 grand a unit
type thing the whole building so these
are opportunities but the banks are
going to get hit share prices are going
to get hit I believe uh most equities
are going to crash and a lot of assets
as well real estate and commodities you
know there's going to be a lot of
selling so um this is an opportunity but
for those who are overleveraged and just
piled in and bought a lot of properties
at these what I believe lofty pricing um
it's going to be very painful you know
they're gonna have to hold through it if
they wanna
and be able to service the debt uh when
when things get tough I'm just going to
read to you a few uh stats about how
exposed the banks are in Canada to real
estate so according to Bloomberg uh when
it comes to commercial real estate we're
not talking about commercial here but
just is an idea uh real estate loans a
question mark for Canadian Banks profits
commercial property lending accounts for
about 10% of the loan books on average
at Canada's five largest banks when it
comes to residential housing which is
what we're talking about according to
this Seeking Alpha article Royal Banks
exposure is roughly $367
billion uh which is a significant chunk
of their balance so it really depends on
the bank um real estate uh commercial
tends to be less exposed or there's less
exposed to commercial than housing so uh
yeah housing seems to be a problem in
Canada less so for the us though right
uh Chris I mean most people in the US
have fixed mortgages rates they're not
they're not up for Renewal anytime soon
and theyve do
yeah they you're you're right it's not
the same mortgage rates are they get
locked in for like 20 30 years in the
States but the the problem really isn't
so much the
reoccurring um or the change in mortgage
rates so much the problem is it people
their psychology they buy a house that's
beyond their their limits if things get
tough or if they lose their job they're
they're not going to be able to pay for
it uh and and that that's kind of one of
the problems like we're just starting to
see unemployment cross above the 24mon
moving average almost every time we have
one of these red lines these periods we
go into uh some type of financial crisis
and people just can't afford their
mortgages um everybody always buys a
house that has like oh like you know
it's a little outside of the range and
as soon as one of the homeowners one of
the couples or or somebody loses a job
it doesn't take long for people to burn
through their cash yeah I mean I think I
heard a stat just last week that 70 or
71% of um Americans um are living
paycheck to paycheck uh or have I can't
remember what it was something like that
it's it's it's a lot well personal
savings have been depleted for Americans
according to the St Louis fed data so
there yeah yeah you and I touched on
that in our last talk uh talk real EST
our um people's savings is now below
covid people are have burnt through all
their Capital um and so this is this is
going to be the problem is and this is
this is the thing even though the US
doesn't have uh you know mortgages
renewing in three or five years it's
like 30 years the problem is times get
tough people can't afford the mortgages
because they run out of money and a
perfect example is um a property that uh
we had looked at in Florida we go to
Florida every year we've got a place
there they wanted 550 grand for this
little tiny place by the water and after
the financial crisis 2008 uh my parents
ended up buying one for like
$178,000 and now it's valued at over a
million when was this this how many
years ago was this this was this was
2007 to like 200 and 12 window it went
from 550 to 178 and now it's back up
over a million dollars so almost 10x in
15 years that's pretty good it's it's
unbelievable and that's like I I don't
want this to sound bad but Americans are
very very leveraged I think Canadians
are probably equally leveraged but I
find I find American Real Estate is more
volatile it moves percentage wise I
think people panic more or there's just
more people when the wave happens
there's a lot of people selling I mean
it's got 10 11x the the the amount of
people we have in Canada so I think once
the Stampede starts it creates a bigger
Stampede of everybody saying I got to
sell my house I got to sell my house we
talk about wealth preservation you and I
a lot asset investing is a theme which
we'll discuss in B more detail today uh
but what what what's your take on just
holding real estate for a 20 30y year
period real estate can't go down forever
is the adage right at some point it has
to go up real estate is the only asset
that goes up forever borrowing a few
dips so they say true or false true I I
think real estate is great so every
piece of real estate that I buy um the
last few I built from scratch and I
built them to last like you know solid
40 years they're multif family um I
don't care you know they're worth a
fortune right now they might be worth
30% Less in a couple years I don't
really care I built them years ago and
you know I've
got they make a ton of money and that's
all that matters I bought them for the
long term I want passive income I want
to you know I want to make you know
thousands of dollars every month like
clockwork and have somebody manage those
properties and it's just a business and
income stream I think that's the key you
don't want to buy an old jalap put
lipstick on a pig and expect it to last
40 years you're going to have to
eventually probably do some serious
rental or get rid of it because it's
starting to break down the key is to buy
near cycle low in real estate's
difficult preserve your Capital so that
you can get approved for a mortgage
because mortgages get really tough when
there's blood in the streets um so you
do need to put more down initially
generally um buy buy something quality
that will last that's low maintenance
you can get a premium or a fair rent for
I'm a big fan of buying everything I
have is for high-end PE like higher net
worth individuals I don't want cheap
little apartments or little Bachelor
pads I want uh people who have strong
income or they're retired and they're
easier to work with they have the money
um and you know they just value your
property and your belongings a lot
better than younger cheaper people right
so i' I'd stay away from the the
lowincome uh pocket when it comes to
real estate and focus on having a
handful of of really nice properties
that are going to last a long time
buying right now and holding 40 years
you're probably fine but you're
definitely you know you're not going to
see a lot of equity value increase uh
for probably some time I think let me
share with you another clip from the CBC
now this one has to do with housing
Supply this is a pretty interesting clip
take a listen want to show you something
cute little condo in Toronto's Harbor
front neighborhood bustling part of the
city it goes on the market in the summer
of 2022 the sellers put it up for
$480,000 it didn't sell early 2023 it's
back on the market for
460k no luck later that year posted
again at 450k still nothing and a few
months ago the sellers tried again at
$430,000 no takers this condo was
sitting on the market for more than 400
days without a sale right now in
Canada's biggest cities there's a ton of
condos like this struggling to sell
condo sales in Toronto for example
haven't been this low since the
financial crisis in 2009 uh what's your
take on this issue the title of this
video is why are so many Big City condos
sitting empty do you have an answer to
that question because everybody just
built too many I mean it is I I drive
around here the amount of multif family
new subdivisions going in is scary um
our town had just had a record amount of
new starting builds they actually just
put a freeze on it last year that no new
permits can go in um everybody's just
piling in thinking there's there's easy
money in it and that's how we know we're
in a bubble um it's pretty scary it a
lot of people are going to get hurt one
of my good friends his dad is huge into
um subdivisions and a bunch of their
deals their investors literally dropped
their money and and walked away they
said I'd rather just take this loss and
move on he's like like they don't want
any part of it they've seen what happens
and unfortunately the momentum for Real
Estate has ended uh so there's just a
lot of a lot of properties up for sale
and getting built like you know so many
right now that um there's just an an
over overabundance of them and not
enough people at this point to to fill
them okay so bottom line then for Real
Estate are you uh staying away from the
um real estate ETFs are you well you
don't like shorting right so you're
staying out of them for now correct yeah
yeah okay when it comes to real estate
I'll wait for wait for the bubble to
burst and wait for uh lots of properties
to come up and then go on a shopping
spree how do we know when the bubbles
bursting I know that's kind of a in
hindsight always it's 2020 oh yeah I
went down 20% last year I guess it burst
but any signs of any coincident
indicators that we can see I'll give you
a personal anecdote so I was in New York
last weekend and I was talking to this
guy who is a manufacturer of of DEC
tiles and they ship a lot out to Canada
they're based out in the Midwest
and he said he's expecting a slow down
in Vancouver he just you know the
Market's slowing down he said and this
is this is like somebody who's working
on the ground he knows the field what's
your what's your read any other
indicators you're looking
at
um you know a lot a lot of it like I
take a lot of my stock market analysis
and and a lot of what's going on with
unemployment and I take a lot of stuff
and scrape it together to get a
highlevel view of feel a lot of it is
just gut of of being through these
cycles and watching them in the past and
uh um so there I don't think there's a
shining anything shining like right off
the Hop I know when the time comes it'll
be a lot of stars will align I'll start
to probably see um things start to firm
up or in different areas maybe
employment starts to pick up and uh
maybe rates might not be falling too
much more they might have kind closer to
where they could find a new bottom uh so
I'm not exactly sure but there is a gut
feeling involved of just experience of
being okay there's now so many homes on
the property they they they flow
positive like right now to to make to
buy an a single family house you got to
put a crap load of money down uh to
cover the mortgage payments and be able
to turn a tiny profit or break even when
when I can put five or 10% down on a
property um and it's cash flow positive
from the rent I know it's a great value
uh but I don't want to go put 20% 30%
down on an expensive property just so
that I can I don't have to you know pay
a part of the mortgage every month to me
it's just not feasible so when the
number numbers work that's when you're
like okay well if the numbers work and I
don't have to like you know Fork out a
ton of money because you want to buy
real estate with borrowed money and uh
you want to you want to leverage that
and have it working for you but you
don't want to go dumping in life savings
to make a piece of property work and
that's what people keep doing which um
they're just sucked into the bubble of
the hype thinking that they want to get
into real estate everybody else is doing
it but it's to me that's not the way to
do it I want to show you something let
so let me share my screen and then I'll
let you share yours and then we can talk
about some charts here for the markets
we're going to move on to now uh the um
this the charts that you're following so
here I have the S&P 500 uh and the
orange line is showing IW or I YF rather
iyf is the iar's financials ETF close
correlation throughout the year year to
date um Divergence ever since the middle
of may actually beginning of June now
this exercise can be repeated for pretty
pretty much the other nine sectors of
the S&P 500 just as an example let me
show you utilities um this is the S&P
500 utilities and well it's kind of it's
kind of a uh same same story yeah xlu
yeah XL let me yeah let me yeah let me
do xlu so this
is uh
XPS yeah it's uh year-to date uh close
correlation and then Divergence this is
I switched them that orange line is the
S&P anyway uh let's take a look at the
tech sector the NASDAQ Composite uh year
to date uh the S&P 500 here is the
Orange Line the NASDAQ is outperforming
the S&P 500 probably not probably the
only sector outperforming the S&P 500
one of the um comments I've heard from
people I've talked to is that the S&P is
now the tech and P credits to a
newsletter writer that I know so I I
want to just get your take on how to
trade create a very concentrated
Market yeah that yeah that brings up a
really good point so if we take a look
at um at my charts here if you take a
look on my my left hand side where my
cursor is we can see these are these are
the sectors more or less you were
talking about you can run through and
today for example every sector is green
except for technology it's down 1.4%
Nvidia a big part of that um but it just
goes to show how this one sector is
completely disconnected from everything
else um and as as you said like when we
look at technology uh it has just been
screaming to the upside while the sp500
has been struggling a little bit more
the technolog is definitely outpacing
things so this is telling me like we're
in this bubble phase and I I believe
we're in this like AI bubble this Tech
bubble I mean everybody's heard it a
million times uh if we if we take a look
at Nvidia uh nvidia's actually got a
really interesting chart pattern I mean
it has if we look at it typically from a
short-term Trader standpoint when you
have a very very strong run in price and
you'll have a really sharp pullback on
volume which uh I can I can pull up the
volume here um for example here we had a
run up of multi-day volume when you have
a sharp pullback to a key moving average
which this pink line is the 20day after
a very strong run the first pullback is
usually a bounce and and so we we we saw
that what's really interesting here is
if we fast forward to today we've had
another huge runup and we just had a
sharp pullback on increased volume to
the 20-day again and when I look at my
short-term analysis chart here of um of
Nvidia we've got this lime green and
this is telling us it's an oversold
condition people are panicking and uh it
should Bounce from here now it might not
make new Highs but it should have a a
bounce and it is starting to bounce from
uh early this morning when it when it
kicked in uh so it's going to be very
interesting that uh Nvidia could still
have quite a bit more upside the last
time we saw this type of scenario we
still saw a very big run in fact this
type of pullback can be the halfway
point you have the first half it pulls
back it puts in the second half so
Nvidia could still have this blowoff
phase we just saw the world like the
most inflow into technology um funds
ever and that means the masses are
piling in and while I feel like the
market is trying to top and is getting
close the biggest moves in most um
Trends happen right at the very end and
while us as in vors are or at least most
of us I think are getting very nervous
about the market topping and Nvidia
topping the problem is you have the the
herd of average investors who Pile in at
the last minute at the same time and
they can shoot Nvidia rocket higher for
like a crazy parabolic move from here so
we could still see Nvidia just based on
this chart we could see um I think we
could see it run to potentially
$200 um if this reverses and we have
that Final blowoff Phase uh in the
second half of this move and that's
going to keep the tech sector moving up
it's going to keep the major indexes
moving up um uh and again when we look
at the general sectors in general which
is to me more so the Russell 2000 I mean
we're in this complacency move the
Russell might work its way up but I
believe we're going to go off a cliff
here uh and sell off and this is kind of
I think what the financial sector uh the
financial sector will eventually do as
well uh financial sector is pushing up
near these Highs but I believe it might
be putting in more so of a major top I
think banks see the end coming and I
think we're gonna see something very
similar to this covid we got up we poked
to a nominal new high and we have a big
correction so I think the banking sector
uh is going to have a very big uh
correction just like in the the um the
financial crisis I mean I think we could
see much more than just this pullback I
think we could see back down to the
covid I think a lot of sectors and
indexes could get back to those covid
lows or lower it's a long ways from
where we are well generally speaking
Chris when you see most sectors
diverging from the S&P 500 trailing down
and only one sector outperforming the
rest what does that signal to you yeah
that I mean that's it it means we're
it's a sector-driven market one sector
is doing almost all the heavy lifting um
a lot of people are moving out of stocks
last week we saw distribution selling we
had one big high volume day everything
got dumped um I think we're seeing a lot
of money move away uh from more or less
small caps and risk risky stocks and
they're all moving into
technology um but to me it's a it's a
big warning sign when you have
Divergence of most stocks going down but
one sector is going up and it's dragging
the entire index higher with it yeah
when that one sector rolls over and dies
it's going to be a blood bath because
not only will the stocks that are
already going down pick up speed and
sell off even faster but now you got
these heavyweight techs that everybody
is in those are going to sell off and
when the mass public starts to dump
those and they start to panic it it
creates a a precipitous fall and this is
like one thing a lot of people uh don't
even realize with when it comes to
dividend stocks um I think it's spyd I
think is the dividend um stocks for the
SP 500 so David this is something a lot
of people don't
understand most investors our big uh
heavyweight investors in the market are
45 years plus they own majority of the
stock market well they get into dividend
stocks they're told to Dividend reinvest
all that stuff well the people who own
the dividend stocks they saw during
covid they saw their portfolio fall
47% for those who said you know their
advisers are saying hey move into
dividend stocks collect the dividend
they they're slow Big Blue Chips they'll
be safe well you lost 47% and that's why
we saw so much Panic during covid is
because all these people in retirement
are literally crapping themselves going
how the hell is my portfolio in freef
Fall um going down when we look at the
SP 500 for the same time frame you could
have been invested just in the um in the
SP 500 itself and you wouldn't have lost
nearly as much the SP 500 only fell like
34% so if everybody's in technology just
like every all retirees are in dividend
stock when that group of people starts
to panic those supposedly conservative
safe positions become way more risky
than owning the index itself and that's
the problem we are Tech heavy the whole
world is now ai and they're driving it
up and just wait till the bubble bursts
the momentum changes you know Nvidia
could wipe out a ton of value in their
share price and it'll bleed over into
everything else so um it's going to be
very very interesting lots of
opportunity but lots of blood in the
streets I think over the next 12 months
okay the mechanics of trading a market
like this Chris do you just trade the
S&P sorry do you just trade the NASDAQ
then or just the few stocks like Nvidia
driving the entire Market I mean what's
the point of buying or selling the broad
S&P 500 is if it's driven by one sector
well I mean I like I like the indexes
like the sp500 NASDAQ those are the two
that we focus on trading um there's lots
of liquidity um so we can move we can
move in huge money huge positions in a
blink of an eye and get in and out I
like them because they they Trend very
nicely for example obviously if we go
back in time here and we look at at the
markets we have these beautiful Trends
you have nice strong uptrends you have
Market Corrections and uptrends and
Corrections I find them very
straightforward to trade uh it's like
we're trading the the ocean tide which
you and I have talked about before uh
this is the weekly chart of the SP 500
we have analysis that tells us when
we're in when we're in a a rising tide
we have analysis that tells us when to
not be in stocks when we're in a falling
tide right now we're in a rising tide um
and and when you can understand these
things it allows us to just safely kind
of navigate these markets and move
around I mean 2022 was the year we
traded the US dollar Index ETF it went
up 18% while the stock market sold down
uh you know 24% at one point um so it's
all about understanding where to go and
I love the indexes because they even
though it is driven by one sector it
still is very to me um consistent it's
not random um I find it's much more
accurate to trade than everything else
and over the past couple of years since
2021 when we saw more or less um small
cap stocks and and growth stocks cap out
and put this big blowoff top in Phase
most sectors are just like the Russell
2000 um they are chopping around they're
in favor for a month and then they're
out of favor they're in favor they're
out of favor um I've got our hot list
that we follow and we track and just a
couple weeks ago the top sectors were
all commodity um driven it was like
marijuana it was uranium it was gold and
silver and copper and water and oil and
and now they're now it's pretty
scattered but a few days ago they were
all down near the bottom actually few of
them are still hail wood or not hail but
wood and copex so we're in a difficult
time to trade individual and sectors the
indexes I find are way easier to trade
through all stages of the market and
that's what I love about it is I can
focus on one or two open positions at a
time take advantage of the rising tide
falling tide uh and not worry about
stocks popping and dropping and rotating
in favor and then out of favor uh it's
very difficult um in this type of Market
condition that we're in which uh is like
a stage three topping phase it's just
really dangerous difficult for most
people yeah this reminds me of post 200
uh and one when the tech bubble bursted
uh the few remaining big tech companies
uh that survived ended up being
outperformers for the rest of the decade
alphabet formerly Google uh Microsoft to
some extent apple as you know I wonder
if the tech sector is just going to be
long-term outperforming the rest of the
uh markets uh this is more of a
fundamental question I like to get your
take I know your short-term bullish on
Nvidia for the technical reasons you've
just stated I'm just wondering if maybe
medium term it's not going to get into a
stage three that particular sector won't
get into a stage three um topping phase
and then and then crash maybe it'll just
lead um that's just one opinion what do
you think yeah let's take a look at the
the semiconductor space let's just zoom
way out let's take a big picture view
here see how far back we go uh looks
like that's as far as it loads I mean
there there's there's no doubt I would
say you know we're in this parabolic
move I don't follow like fundamentals I
don't even know what the PE Ratio is for
NVIDIA or the stock market in general
right now because it plays no part of of
my analysis but we're definitely
screaming to the upside um I do feel
like the AI space is like still in the
infancy space I don't know what the PE
Ratio or how overvalued uh Nvidia is if
it even is overvalued um and that's why
I really stay away from news and I stay
away from this kind of fundamental kind
of Outlook is because no one knows and
I'd rather just follow price yeah but I
do feel based on this price action I it
feels like the air is going to get let
out of this balloon at some point and
it's going to pop and we'll see some
sharp pullback in this you know the
semiconductor space could as you said
hold its value much better than the rest
of the market because this is a brand
new sector and the sector is really just
getting started and it has like
unbelievable potential long term um so
this could Buck the trend and outperform
stock market might fall 60%
semiconductors might fall 30% or 40%
they'll still fall but they just might
not fall as much um so that's the way I
see it and I think the one of the
biggest things I really open my eyes was
hearing uh Elon Musk talk about like
Tesla and yeah the robots and he's like
you know everybody's going to want one
if not two or three add them into
manufacturing there's going to be you
know billions of these robots that can
do all kinds of stuff not that this Taps
well it Taps into AI but I mean we're
really just starting this new process
and I think if if Tesla's going to do
robots I mean there's huge potential for
Tesla um I think they're it's gonna be
pretty exciting stuff maybe robots will
need housing too Chris and that'll uh
that'll push up housing demand hi kid
okay they're not gonna need housing
probably warehouses though that that
well that'll take up real estate space
we'll see robots will be definitely a
game changer for society let's talk
about something you're bullish on Chris
talk about things that you are you know
a little bit hesitant to get in what
about things you know or have a good
strong conviction by on um I mean I'm
not really that I mean on gold I'm I'm
I'm bullish on gold and silver uh longer
term I do think there's going to be a
bit of a rougher ride in them going
forward as we see the stock market and I
think a recession hit I think they'll
get pulled back a little bit but I still
really like gold and silver they've
built beautiful chart patterns when we
look at the chart of gold it's been you
know rally a pullback a rally a pullback
multiple bull flag patterns I I still
think we're going to see gold hit 2650
2750 uh 2750 in the next month or two um
so I like those I do think they're going
to pull back with the market correction
I don't know where they they might pull
back to I think you could probably buy
gold at the price it's at right now or
maybe actually a little bit lower you
know 6 8 12 months from now so um and
and when that opportunity comes around
we'll probably also start seeing mining
stocks really start to come to life and
that to me will be like okay now gold
will be off to the races for what I
think will be like a five six 10 year
rally a lot like um uh we saw let me go
way back here back going into you know
20112 I think we could see multi-year
run uh after this I believe kind of
where we are right now is uh we're
climbing this this little Spike here
people moving into gold uh as a a safe
kind of defensive play this was the 2008
financial crisis bare markets pull most
assets lower because of panic Force
selling people going broke needing to
raise capital I think we'll see gold
pull back and then I think when the
bottom comes in you know it'll be off to
3,000 5,000 whatever it'll start this
next massive run and um it'll be
interesting to see what cryptos do at
this time during this phase as well so I
really like gold short term I like it
longterm I like it uh intermediate term
over the next like 12 months it might be
a rough ride um so that's there's you
know those are the three time frames but
I really like this and um other than
that I I mean I like the US dollar Index
as well so I I think when the stock
market is selling down uh we'll see gold
sell off as well and during that time I
think we're going to see the US dollar
um scream to the upside the dollar to me
is in this very strong pattern and I
think it's going to go up to about 120
if not um even higher than that so uh I
think the dollar will be a very good
play while the world is falling apart
the US dollar Index tends to to do very
well it had a huge rally in 2020 uh 2008
it had a massive rally going into the
the financial Tech bubble it pushed up
and I believe we're going to have
another crisis and it's going to push
back up and and probably get up to these
lofty levels so the nice thing about the
dollar Index is is low vol ility I mean
it rallied like 18% in 2022 biggest
pullback was less than 4% along that
move so very slow moving nothing in
there should have scared the crap out of
you you just ride that Trend um and I
and I think we're going to see something
like that again uh so those are the two
assets that I like they're both going to
perform a bit different at different
times um the Dollar's still trading
sideways it might struggle for several
more months um while gold moves higher
and then eventually a chaos hits the
dollar will rocket the chaos will pull
gold down temporarily until the dollar
tops out and the chaos comes to an end
and then things will change gold rallies
dollar collapses uh so there's a lot of
things I think that could unfold let's
finish off we talking about you now
Chris you know I've known you for a
while I don't think you're a gambler per
se I think some some Traders take that
approach they lever up concentrated
positions uh you're more of a wealth
preservation kind of guy I'll let you
explain your strategy but it's also
interesting because your entails going
all in or staying all out 100% cash or
100% in I don't know if there are
certain points in time when you're like
20% cash 10% cash um and it's just very
interesting to me because most people
that I know are are Diversified because
they're not all in at a given time um
you you are at times at some points in
time and you're still not I would say
somebody who takes excessive Risk please
explain yeah so I think this huge
misconception of of risk in general so
people people see my strategy and and I
call it asset Reves or or Reves and more
or less we were in one asset at a time
and so if the stock market is favorable
we move 100% of our money into the SP
500 and the NASDAQ we split our
portfolio down the center half goes into
each because they both move differently
and um so it's a little bit of
diversification but the thing is people
are like well you're 100% into the stock
market yeah um that is super risky
you're in all your money's in one basket
in one position I'm like well the way I
see it is well you're Diversified
against a in a whole bunch of crap and
they're all much more volatile than what
we're holding and uh if you hold them
you're going to have much more
volatility than than we are um so just
it's because we move all of our money
into the stock market and we don't have
any bonds or anything else uh people get
nervous but the reality is we manage
those positions are are our biggest draw
down is less than 6% whereas a lot of
people with their portfolio can lose six
or eight% in a week um with a fully
Diversified holding bonds and things
like that um so what we do is I I
identify what asset class meets our
criteria of low of volatility of of
Trends and all these things and we move
our money into this sector now this is
an example of covid I should show one of
uh maybe next time on here of 2022 how
we navigated the falling market and
continue to pull money out of the market
um but more or less we exit the stock
market which is the Spy because it gives
us a sell signal red bars we moved into
bonds and 100% into bonds and bonds
rallied like 19% for nine days and it
hit all of our targets and then nothing
else met our criteria so we closed the
position and we move into bill which we
earned a monthly dividend and we sat in
cash until there is a new trade setup
and these are like the three assets we
trade the US dollar Index as well there
wasn't a uh a trade at this point so I
didn't add it in here um and then of
course once the markets firm up we'll
move back into the stock market so um
the key here is our draw Downs are very
low less than 6% the average portfolio
has about 35 to 50% draw Downs during
bare markets and Corrections we're like
you know an eighth of that we're we're
less than 6% so if you can look at it
from a risk point of view we risk a lot
less because we rotate into whatever
asset is going up we don't hold stuff
going down if stock market goes up 10%
and bonds go down 15% which is you know
it's possible bonds have fallen like 40%
uh you're gonna you're going to take a
big loss because you're Diversified and
you're holding something that's going
down so I'm just like hey something's
going up let's move in let's hold it and
we scale out of it as we hit targets and
as we scale out we move that money into
bill so that we're still earning daily
interest we get a monthly dividend check
um to so that our our side capital is
still protected and growing and and
that's just how we we rotate we rotate
through these uh various markets it is
very different people um from the
outside says it feels really extreme but
once they do it they're like why didn't
I wish I knew about this 15 years ago
because we can just dance through this
market and um yeah it's uh it's
something that most people don't do
great well uh click on the link down
below to learn more and uh Follow Chris
there thank you very much Chris we'll
speak again soon great updates today
yeah thanks David always a pleasure take
care pleasure is all mine and thank you
for watching don't forget to like And
subscribe Follow Chris down below
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