Episode Transcript
[00:00:00] Speaker A: Foreign.
[00:00:05] Speaker B: With Matt Dahl of ARPG in Las Vegas. Matt, happy Friday to you. Happy was August 15th. So we're in the waning days of, of summer still. Still pretty muggy here. Not as bad as it, as it has been. This is, it's been wet last couple of last week or so. I think I need to invest in some, some swimmies to get to the car half the days, but. Good to see you, bud.
[00:00:28] Speaker A: Good to see you. It's hot here. It's just good old hot.
[00:00:33] Speaker B: You get hot and dry, though. What do y' all get? Like three days of rain a year if we're lucky.
[00:00:38] Speaker A: Seems like we took our son to like a baseball practice thing last night called Club Club, and there was a little bit of a breeze and it was 105 breezy. Yeah, it was just like standing in a hair dryer.
[00:00:54] Speaker B: I'll say. That's a breeze. Isn't really doing you any good when it's blowing 105 degree weather.
[00:00:59] Speaker A: No, no, there was no, there was no swamp cooling effect at all.
[00:01:02] Speaker B: Yeah, Good stuff, man. Well, good to see you as always. So we're just kind of doing a breakdown of the market. You said the market's kind of, it's been kind of flat. It's not really flat since we last talked. It's up about a percent, but it was, most of that was on Tuesday.
So what happened on Tuesday and, and what has that meant for the last three days? Wednesday, Thursday, and now first four and a half trading hours of Friday or what has it been? Three and a half hours, I guess of trading on Friday have been pretty flat. So what's going on?
[00:01:33] Speaker A: Well, Tuesday the CPI came in. Core CPI came in at 0.32. Consensus was 0.29. So it came in at 0.3.
Consensus was 0.3. It came in and met expectations. It wasn't overly hot. There's still, there's still no at that moment now, obviously that, you know, two days later on Thursday, it changed a little bit.
[00:02:00] Speaker C: Okay.
[00:02:01] Speaker A: With the PPI number. But what happened on Tuesday was CPI came in pretty good.
[00:02:07] Speaker C: Right.
[00:02:09] Speaker A: And the market obviously clearly immediately priced in maybe two tax or two rate cuts in September. Besant came out during the week also and said that, you know, he's looking for two rate cuts in September.
[00:02:25] Speaker C: Okay.
[00:02:26] Speaker A: So there's, there's, there's a lot of this debate now. It seems like the market, the bond market and the equity market has followed saying, okay, well, we're no longer in a discussion. Are we going to have a rate cut or are we not going to have a rate cut? It's are we going to have a double rate cut or a single rate cut?
And I think that kind of popped that leg up.
[00:02:45] Speaker C: Right?
[00:02:45] Speaker A: That's sort of from kind of mid, that 6300 level, 6350 and then six up into 6375.
And then we saw it kind of pop up. 6450, 6475 range.
[00:02:58] Speaker C: Okay.
[00:02:58] Speaker A: But we're starting to see, you know, on a weekly basis the momentum kind of roll over, which it should about this time of year anyway. We know this is a really rough time of year. That August, September, October time frame tends to be seasonally weak, you know, and there's always, you know, the market's always kind of looking for a reason for the shoe to drop. There's always looking for a reason for a pullback, which is probably why we won't get that big of a pullback. And everyone's going to want to buy the dip as soon as we get any sort of a dip. So. But you know what, what I found surprising was not so much that the market rallied 1.13 on Tuesday.
Was it at rally 0.13% on Thursday when we got that incredibly hot PPI number?
Okay, now we know, we know PPI typically leads CPI and it's, it's very, it's more component oriented than anything else. It leads CPI by kind of two to six month range depending on what sector you're looking at.
[00:03:56] Speaker C: Right.
[00:03:56] Speaker A: So if you look at groceries, PPI typically leads CPI by about two months.
[00:04:02] Speaker C: Okay.
[00:04:03] Speaker A: People like more manufactured goods. That's a bit of a wider delta that will lead CPI by three to six months.
[00:04:08] Speaker C: Okay.
[00:04:09] Speaker A: So we saw, we saw PPI come in at 0.92.
[00:04:15] Speaker C: Okay.
[00:04:16] Speaker A: Came in at 0.92 on a 0.2 consensus. So it came in a 0.9 on 0.2 consensus. It just absolutely came in not just hot, it came in like Buffalo Wild Wings. Blazing hot. Burn your eyeballs off. Habanero Ghost Chili pepper hot.
[00:04:34] Speaker B: First, first add break sponsored by Adderall your have you tried the Jersey Mike's Hot Honey sub Hot Honey Philly Cheesesteak.
[00:04:42] Speaker A: I have not. I'm a huge fan of hot honey pizza though.
[00:04:46] Speaker B: Really hot honey must be like a new, like this new phenomenon that seems to be all over the place now. There's hot honey everything everywhere and I didn't even know about it until I. There's a jersey. Mike's like walking distance. So that's in my regular rotation of. Of takeout. And I looked it up. There's a hot. A hot honey chicken Philly cheese steak. Fantastic sandwich. Hot as it is. Blazing hot. I mean. I mean, I'm. And I'm. I don't know. I like hot stuff. I don't have the highest tolerance in the world for hot, but I can usually handle. I mean, I've done like a hot wing challenge before. I mean, I got my teeth kicked in and only made it through, like one wing, but I at least tried it. I can handle hot stuff. This was hot, though. It's got your regular chicken philly stuff, but it also has pepperoni, which is a nice little addition I didn't see coming to add in. So totally unsponsored. I'm not getting compensated nearly enough to say this, but the. The chicken. The hot honey chicken Philly from Jersey Mike's. Fantastic. Highly encourage it.
[00:05:46] Speaker A: Well, now I'm gonna order a hot honey chicken Philly cheesesteak from Jersey Mike subs.
[00:05:51] Speaker B: You absolutely should like that should be that. Because you've not had lunch yet. This is only 10 o' clock in the morning for you. So that should be your lunch today. In fact, I may go ahead and just order it for you and doordash it to your office. You should.
[00:06:01] Speaker A: Honestly, in the next show. The next show, I'm gonna be wearing a jersey Mike's hat, eating that sub.
[00:06:07] Speaker C: Right.
[00:06:08] Speaker A: Just covered in like a nice. A nice honey glaze.
[00:06:13] Speaker B: I haven't had lunch. It is. I think that might be shiny.
What's up?
I don't. This could get really sidetracked if we don't get back on track.
[00:06:23] Speaker A: All right.
[00:06:23] Speaker B: Anyway. Yeah, that may be my lunch today too, actually, now that we think about it. But anyway, where did we get. Oh, you said it's the. The PPI number was scorching hot. That's where we got on the hot.
[00:06:33] Speaker A: It was forcing. So.
[00:06:34] Speaker C: Right. Yeah.
[00:06:34] Speaker A: But honestly, half of that number was.
Was manufacturer. Was margins on manufacturer wholesaling equipment and also portfolio like financial services. Because the stock market stuff, there's people doing a lot of trading right now that's caused kind of a spike in. In that.
So that caused. That was about, I don't know, 17, 18 of that. The other 30. So actually more than that was about. So between the two, it was half and 30% was. This man Was margins in manufacturer wholesaling. Now let's dive into what that means. Okay, so if 30 of July, the high PPI for the month of July was margins for machinery and equipment wholesaling.
[00:07:18] Speaker C: Okay.
[00:07:19] Speaker A: It jumped 3.8% month over month.
[00:07:22] Speaker C: Okay.
[00:07:23] Speaker A: It, the, it wasn't the pro. It wasn't just because the price. It was the margins.
They increased margin. Why did they increase margin? They're trying to put cushion in now for when the, for when the tariffs do show up which have yet to show up.
Okay so again here we are waiting for Goodell.
Now what, this is what, this is a fancy way to say what we, we baked in margin inflation. That's what they call greedflation.
[00:07:51] Speaker B: They raised their basically increased prices so that when their prices went up the.
[00:07:56] Speaker A: They wouldn't, so they would have the cushion there. But here's the thing. When the, when the, when the tariffs don't show up and obviously they have increased margins, I don't take them back down. I don't think they're going to give it back. So you know there's, there's, there's just a lot. Here's the thing is ppi. Ppi, even core PPI is a very, very volatile indicator and that's why the, that's why the bond market didn't freak out.
[00:08:22] Speaker C: Okay.
[00:08:22] Speaker A: Because if you notice the, the bond market was, was basically stuck. 425, 427, 424 most of the week on the 10 year didn't move all that much. It only actually popped up today a little bit because the good retail sales number that jumped 0.5% month over month.
[00:08:38] Speaker C: Okay.
[00:08:39] Speaker A: Strong retail sales. So we saw the bond market sell off a little bit because on the retail sales side but not so much on the PPI side because it's a volume. So if you look back to April of this year, PPI was negative 0.2. May was positive 0.42. June was negative 0.03. July was positive 0.92. So it's just all over the place. So the annualized, the annualized or the, sorry, the, the average month over month of the last four months is 0.27.
That's what it is now the three year average for the PPI 0.25.
So it's not out of whack. And I think the bond market saw it. I think, I think the bond market really dove in, lifted the hood of ppi. Saw was margin based, saw was financial services based and kind of just whiffed at it.
[00:09:30] Speaker B: So what is the, if you, if you take a slightly longer term view of the ten year, nothing major. I mean the, the tenure has been pretty quiet. For the last several weeks floating right around a midpoint of around 435 to 440. It looks like for the most part we did, we have seen just a little bit of a lift since August 5th. So we're about 419 on August 5th and we're up to 432 now. Nothing crazy, 20 basis points or so of, of lift.
What is the. If you take just a slightly longer view than just one week and look at the last couple of weeks, is that a trend or is this just a blip that doesn't really mean anything.
[00:10:11] Speaker A: Well, we're, we're of the view that the 10 years is going to start to roll over.
[00:10:16] Speaker C: Okay.
[00:10:17] Speaker A: Because we do see cooling labor. We do see, we did see the jobs come out that obviously was coal. We now have, we now have 37000 average 3 month average job creation which is very, very low now. Now obviously the break even rate is much, much lower without, without immigration and that's a whole other subject.
[00:10:37] Speaker C: Right?
[00:10:38] Speaker A: Break even, break even rate used to be about 100,000 jobs a month. Right now that's well below a thousand 100,000 jobs a month. We're not really sure what that number is now but it's much, much lower. So I think the market is really paying attention to that labor and it's not really the inflation numbers they're going to wiggle around.
But I think the bond market, we talked about this last week, it's the eye of Mordor, it's turned its eye to the labor market and it's turned away from the inflation side.
[00:11:08] Speaker C: Okay.
[00:11:09] Speaker A: And we're of the view that we're going to see. I don't think the labor market's going to collapse or anything like that, but I think the bond market is going to be very, very, very sensitive to any sort of developments in the labor side.
[00:11:22] Speaker C: Okay.
[00:11:23] Speaker A: And we think, you know, with the dovish Fed, obviously it's, it's, we're, it's going to start tilting very dovish clearly into 2026. Whomever takes that role as, as the Fed chair. But it's unfortunately or unfortunately it's going to be expected that this Federal Reserve is going to communicate the dovish side of the Federal Reserve whether the, the participating voting members are in agreement or not. The chairman, the chairperson is the voice is the face of that group.
[00:11:57] Speaker C: Right.
[00:11:58] Speaker A: And for good, bad or otherwise, Pal I think has been very measured, but he's been very measured leaning very hawkish and I think and like, and we've talked about this before. I've been a fan of, of PAL for a long, long time. I think he did a great job of fixing a problem that he created or they created.
[00:12:17] Speaker C: Okay.
[00:12:17] Speaker A: But again the, the moniker of, you know, too late J pal. I don't know that it's not deserved. I don't know that's not deserved. You know, we thought they should have cut early on probably in June, definitely in July. And now they're, now they're talking about a double cut in September.
So if the labor market doesn't about face.
Okay, different story. We might see a little bit of hotter, a little bit, you know, higher tenure, but I don't think we're going to see that.
[00:12:47] Speaker C: Okay.
[00:12:48] Speaker A: And based off, I mean we have pretty good jolts numbers right now, but I really believe that we're going to finish this year sort of in that three and a half to 375 range on the 10 year, which is what it's going to take for that, for the, for the equities to really get to that. You know, to get to that. Our tale of two markets. Whether we finished, you know, 6200 or 6900, there was there, there is no in between. There was no sort of a 6200 and a stretch target of 6900. That's. It wasn't. It was. It's either going to be this way or it's going to be this way. I don't see anything in the middle.
[00:13:23] Speaker C: Okay.
[00:13:23] Speaker B: If it lands 65.50. I will never let you live that down.
[00:13:26] Speaker A: Just it's going to 100 now land 6550 and I'm gonna wear a dunce hat. But it's gonna have with the straws into my mouth, it'll be Paps blue Ribbon.
[00:13:37] Speaker B: Now I'm second guessing my mouth. My math on that was that is the average right 65.50.
[00:13:43] Speaker A: Yeah. 6550. Dead on.
[00:13:45] Speaker C: Okay. Dead on.
[00:13:46] Speaker A: Good job.
[00:13:47] Speaker B: Nice.
[00:13:48] Speaker C: So.
[00:13:48] Speaker A: So we don't, I don't really see, I don't really see that taking place because I see the bond market really start to, to price in that Federal Reserve.
[00:14:00] Speaker C: Okay.
[00:14:01] Speaker A: Now this is assuming that, that the data directionally maintains itself for the most part.
[00:14:07] Speaker C: Okay.
[00:14:08] Speaker A: Now again, if the labor market makes an about face and all of a sudden we're producing 225,000 jobs a month and inflation, you know, spikes back up to, you know, 40 basis points a month, well that's a horse of an entirely different color. Now we've got a, you know, we're going to have a 10 year that shoots over five. But, you know, we're not seeing that directionally in the, in the, in the data.
[00:14:29] Speaker B: Let me ask you that because I don't follow politics that closely because I value my sanity and I don't like to get angry about things I can't control, so I don't follow it that closely. But when you talk about the Fed becoming dovish, is there a chance that the Fed moves hawkish next spring? I mean, is it just a given that everyone knows it'll be a more dovish Fed next year? Or is that just an assumption that the market has?
[00:14:55] Speaker A: It's the assumption the market has in the market will be right.
[00:14:57] Speaker C: Okay.
[00:14:59] Speaker A: So it's, it's a good thing for the market, it's a bad thing for the economy in the long term.
[00:15:08] Speaker C: Okay.
[00:15:09] Speaker A: Having the monetary policymakers be fully independent without pressure, without influence from the fiscal side, from the president, from the Congress, whomever is, is one of the tenets. It's one of the core cornerstones of our, of how our capitalist society functions.
[00:15:29] Speaker C: Okay.
[00:15:30] Speaker A: It's a cornerstone of capitalism. It's a covenant of capitalism, to use one of the terms.
[00:15:34] Speaker C: Okay.
[00:15:35] Speaker A: And are they still independent?
Yep. Ish.
[00:15:40] Speaker C: Okay.
[00:15:41] Speaker A: They are.
[00:15:41] Speaker C: Okay.
[00:15:42] Speaker A: But are they less independent?
Definitely, yeah.
[00:15:47] Speaker C: So.
[00:15:50] Speaker A: President Trump, knowing President Trump, he's going to nominate someone he knows is going to sing the song he wants them to sing.
[00:15:59] Speaker C: Okay.
[00:15:59] Speaker A: Good, bad or otherwise. I'm not, I'm not criticizing that decision at all. I'm just, it's clear from how he tends to nominate folks for his administration posts that they, they need to be in agreement with. He likes people taking the other sides. I've heard that, too. But in this, in this case, President Trump believes he knows better than the Federal Reserve.
[00:16:25] Speaker C: Okay.
[00:16:25] Speaker A: And that's, that's a matter for others to debate, not us. Okay.
[00:16:29] Speaker B: That's, that's pretty much the hallmark of, of Trump's just, entire ethos is thinking that he knows better than everybody else. Right. We have to make sure we get a Trump line into every show. I think, I think I told you a few weeks ago we need to rebrand this thing, the Intelligent Trump Update, because if you put Trump in anything, it gets like 10 times more views than everything else. So we got to get our weekly Trump plug in.
You mentioned something else. It was, Sorry, go ahead.
[00:16:54] Speaker A: Well, I was going to say, I mean, we talked about this, what, in March?
[00:16:57] Speaker C: We.
[00:16:58] Speaker A: Or it was in April? It was the, it was the show after the. The spike in April that he may be the most powerful human that has ever existed. That's up for debate because he has such an ability to communicate to so many people, you know, for very important topics at one time, and it tends to move markets and all kinds of geopolitics very, very quickly. So knowing that he. Knowing that we know and the world knows, that he thinks he knows better where interest rates should be than the Federal Reserve does. And I'm not here to say that he's right or he's wrong. I'm not here to say that. But he's going to make sure that he nominates someone who is going to agree with his take on things in this particular position.
At least that's our take.
[00:17:40] Speaker C: Our.
[00:17:40] Speaker A: Our take is that take.
[00:17:42] Speaker C: Yeah.
[00:17:43] Speaker B: And you mentioned something just a second ago that kind of. I've never heard this. You said there was a chance of a double cut in September.
[00:17:50] Speaker C: Yep.
[00:17:51] Speaker B: How does that work? Because we only have one Fed meeting, right. Am I. Did I miss something there?
[00:17:56] Speaker A: So there is a. Let me see.
Okay, so four times there. Well, no, now it's down to zero percent.
There's a zero percent chance, according to CME Fed Watch, that there's going to be a double cut.
[00:18:12] Speaker B: Okay, so. Totally kidding. We didn't mean that at all.
[00:18:16] Speaker A: You never know. You never know. Things could change.
[00:18:19] Speaker B: But double cut? Would that just mean it's not just. It's 50 base. So it's just one cut. It's just a bigger one. Okay. Gotcha.
[00:18:25] Speaker A: Right? Yeah.
[00:18:25] Speaker B: I was gonna say. I never. I didn't think. Are we gonna call, like a second meeting just for the fun of it? So I didn't. I misunderstood that.
[00:18:32] Speaker C: But.
[00:18:33] Speaker A: Well, that's. I remember. I remember my dad used to go to Jerry's Nugget and he would order the double cut prime rib.
[00:18:38] Speaker B: Nice.
[00:18:38] Speaker A: Yeah. There was the queen cut, the king cut, and then the double cut, and the double cut was two king cuts. And I'm telling you, that thing looked like a pot roast.
I mean, it had to be 3 inches tall.
[00:18:51] Speaker C: Yeah.
[00:18:52] Speaker B: I mean, what is that, 24 ounces of a prime rib?
[00:18:55] Speaker A: Oh, no. This thing was at least 36.
[00:18:58] Speaker C: Oh, wow.
[00:18:59] Speaker A: Yeah. I mean, you definitely wanted to throw it at people. You were not. You were gonna start a fight with. Because it'll definitely start a fight. It's huge.
Use it as a wheelchock.
[00:19:11] Speaker B: I wasn't that hungry. We got on this thing. Now I'm starving. Between the Jersey mics and the prime rip talk, I'm Like I'm, I'm this close to going to Golden Corral and just picking out of the buffet, you know what I mean? I don't even know what I want anymore.
[00:19:21] Speaker A: My dish. I'm gonna go grab a banana. Just start eating it.
My, my, my director of operations, she got me a cold brew coffee this morning. A big, big 24 ounce cold brew. I guess those have more caffeine than regular coffee.
So I chugged it with some protein and you know, I'm, you know, I'm surprised I'm not doing the show from the wall behind us right now.
[00:19:41] Speaker B: So, yeah, I think you're, I think your tempo is up just a little bit. You know, I, I think your average words per minute's up about 25, 30. This show. You're rattling them off pretty good.
[00:19:50] Speaker A: Someone, I'm surprised my heart's not like beating out of my chest like a cartoon right now. You can't see it on the screen.
[00:19:56] Speaker B: Someone recommended a diet to me the other day. They said that one of the monster energies, whatever they've been drinking these things, you drink one of them a day and it's like you're not hungry for eight hours. And I don't think that's healthy at all. But I did try it. It works really well. I have one for breakfast and I wouldn't eat again to like 8 o' clock at night. So you get enough caffeine, food's optional. But I haven't had enough today apparently, because I'm starving right now. But I wasn't hungry till we started talking all this food. So.
So anything else on the radar for the markets? We got, we're kind of in the, in a little bit of a cool, little, a cool period now before, you know, in between earnings season, it's the historically quietest month of the year or, or slice of the year. So anything coming up in the next little bit that can, can rock the boat or give something talk about.
[00:20:42] Speaker A: I mean, yeah, we have, we have Nvidia earnings coming out on the 27th. Of course, that's always a big deal. They are numero uno on the S now as far as the market cap is concerned.
You know, we're really interested to see how, how far they blow their earnings away. I think, I think they're going to surprise the surprise this time. And I think we're probably getting a little spike in the share price. There's just been a lot of, a lot of demand for the Blackwell. The, the, the demand on Blackwell has increased. You know, it's still 17 to 1.
You know, retail sales to kind of go back to that came in very, very strong.
Came in a 0.5 month over month. Again that's 70 of our economy. So that tells us the economy is still doing fairly, fairly well.
And that's why we sort, that's why we saw the bond market sell off today, you know. But yeah, it's, it's pretty, it's a pretty quiet time of year. I was, I was a little surprised to see the move in UnitedHealth today.
Moving it's up 13 and it's really moving the Dow.
[00:21:40] Speaker C: Okay.
[00:21:41] Speaker A: Because the Dow is a price weighted index. It's not, it's not a cap weighted index. So being that the United Health as it has a high price it tends to move the Dow significantly when it does move. But you know, I'm not a fan of that stock. I wouldn't be a fan of that stock unless I saw one handle on it.
[00:21:56] Speaker C: Right.
[00:21:56] Speaker A: Because you know you get all of the volatility and none of the return with that stock. But I was surprised to see was who came in. I wasn't surprised to see the guy from Cyan at Michael Burry from Science buying investments by because that's what he does. But I was surprised to see Berkshire Hathaway buy it because it came out as a 13F filing from the end of Q2. So it's, it's, it's lost some ground since then.
I was surprised they bought it so quickly on the pull down and not let it kind of base out a little bit. You know those guys over there, they're, they're pretty sharp. So you know it's, it's, and not only, not only is it, not only is it.
I think that's room to the downside from here because they have a lot of cleanup work to do. But that's typically not in a wheelhouse you would find at Berkshire Hathaway. It's a very volatile stock. You know we call it a bathtub stuff. It just sloshes from one side to the other. But you never really make any money. I mean it's, it's a trading stock. Is it investable? I think it probably will be with the right with this new CEO. But I don't see it something that I would invest in until I, I was very, very, very confident it had formed a very long term base or I was getting it at you know, something like nine times earnings. And it had, you know, it had a long term growth forecast of 27 you know, I might buy it at a 3 peg.
[00:23:14] Speaker C: That'd be about it. Yeah. Nothing more.
[00:23:16] Speaker A: Nothing really good. Otherwise it doesn't interest me. The volatility is just too much for me. Deal. It was like dealing with, I remember we owned, we owned its competitor for a long time, Cigna and we own Sentinel. And it was the same thing. It was just these things were, I mean we did okay on them, but I mean the return, the return versus the risk that we took as measured through volatility was terrible.
[00:23:37] Speaker C: Right.
[00:23:37] Speaker A: So when we own Sentinea, Cigna versus when we own the, you know, all the tech companies, the tech outperformed these five to one.
[00:23:45] Speaker C: Okay.
[00:23:46] Speaker A: But the volatility was two or three times these tech companies.
So it's just for, I mean the juice just wasn't worth the squeeze. And here I, that's what I was getting as I was surprised to see that Berkshire went into this position because a company like that, you know, that's, that's more of a trader stock than it is more of an investable stock. And those guys are typically, from what I gather are investors.
[00:24:11] Speaker B: You touched on something there that I don't think we've talked about before. I know we've talked about the S piece and the equal weighted index versus the traditional S&P 500, which is a market cap weighted index. I think a lot of investors don't realize how the different indexes are calculated. I think, I don't know what the percentages would be, but I'm guessing a large segment of investors would assume that The S&P 500 was just an average of all 500 companies. But they don't realize that Nvidia is what, 10, 12, 15% mark of that? Because they're by far the largest.
But the Dow is. You mentioned a price weighted index. Is there any good reason in the world to have a price weighted index? I've never understood that about the Dow. If it's literally the share price itself, the, the more the, it doesn't matter what the, the total company is worth. It's just the per share price that the more expensive stocks per share are going to be more heavily weighted in the index. And if you're a ten dollar per share, it doesn't matter how many shares you've got outstanding. If you're $10 a year, you're gonna be a little bit smaller. Is there any good reason to, to have it that way or to, for the Dow to be set up that way other than the fact that it has been for 100 years.
[00:25:26] Speaker A: No, I think it's a dumb idea and I think that's what I thought.
[00:25:30] Speaker B: I just want to make sure I hadn't missed something.
[00:25:32] Speaker C: Yeah.
[00:25:32] Speaker A: I believe it was Charles Dow and Edward Jones. The Edward Jones from Edward Jones that created, created that index. And I think it was just two old guys in the, you know, early 20th century putting stocks in there. Like let's just take the biggest stocks with the biggest prices and they didn't. And they put it in there and it's, it's a horrible idea. You know, I mean there, are there some of the, the better technicians find utility with the Dow.
I don't, Okay. I don't because I mean UnitedHealth is. The market cap of UnitedHealth, I want to say is about 180 billion.
[00:26:10] Speaker C: Okay.
[00:26:11] Speaker A: I mean it's versus Apple which is nearly 4 trillion.
[00:26:17] Speaker C: Okay.
[00:26:19] Speaker A: So it's almost 20. It's 20 times the size of UnitedHealth cap wise. But they have a, they have, but UnitedHealth has a 30% more effect on the Dow than Apple does.
Yeah, that's.
[00:26:32] Speaker B: Makes absolutely no sense.
[00:26:34] Speaker A: That doesn't make sense to me. Yeah. So, you know, I think it's, I think it's a bad idea. But it has big numbers and that's why people, oh, the dow was up 800 points today, you know, and it's, it was. The Dow lost 1200 points today. Lock up the women and children. They're coming for your bank accounts. So it's, it's the, it's the headline index because of the big numbers.
[00:26:57] Speaker C: Right.
[00:26:57] Speaker A: But you know, I find, honestly I have not found a lot of value in the Dow myself.
[00:27:04] Speaker B: And it's not just that it, and it's honestly.
[00:27:07] Speaker A: And it's for that reason that you brought up. Sorry to interrupt, but it's exactly for the reason you brought that. It's a price weighted index. It's not a cap weighted index.
[00:27:13] Speaker B: Yeah, it doesn't, it's, it's, it wouldn't, I mean there's, I don't know, dozens and dozens of indexes out there. It's just one more index. It's not that big a deal. It's just that it is such a popular index that I can guarantee you that I heard about what. I knew what the Dow Jones Industrial Average was long before I knew what the S P500 was. I mean by the time I was 12 years old, I probably knew what the Dow was. I didn't know how it was calculated or how it worked or any of that Stuff, but I'd heard of it, but once I learned how it was put together, it's like, why do we follow this thing so closely? We have our fantasy football draft tomorrow and I'm telling you, the way The S&P 500 is put together, it's like scoring fantasy football. Based on which one wears the color red on their wristbands, gives you, you an extra 10 points. And if you trip and fall on your way out of the tunnel, you lose five points. It has absolutely nothing to do with the way the game's actually played. The Dow itself, the way it's calculated, just doesn't make any sense. Like you said, Apple is 20 times the size and counts a fraction of what UnitedHealth does on the index.
So you will see some odd days there where the S P may be up, you know, 0.7% and the Dow's down 0.2. It doesn't happen very often, but if one of their big players has a big. Or if one of the big components has a big move, it can, you can see a bigger disconnect sometimes. But for whatever reason, it seems like the general market community just overlooks that and it's still.
Otherwise it wouldn't be so commonly followed. Anyway. That's my soapbox for the day.
[00:28:40] Speaker A: Yeah, I, I honestly, I, I think if people kind of knew how it was calculated and versus how it's should be calculated, I think it would be less, I think it'd be less popular than it is.
But again, you know, I, I tend not to follow it just for this reason. I mean, I mean, sometimes, you know, we're the beneficiary of it because the Dow will have a terrible day and it'll just be just because of something like Goldman Sachs had a bad day or, or, or UnitedHealth had a bad day. Something, something with a large share price that had one very bad day really move the Dow down three or 400 points or something like that.
[00:29:16] Speaker C: Okay.
[00:29:16] Speaker A: But the NASDAQ had a decent day, okay. And we tend, we, we tend to kind of lean into that, that growthy NASDAQ side a little bit. So clients are like, oh my gosh, I noticed the Dow was down like 400 points the other day or, you know, yesterday, but I was up, you know, like a half a percent. Great job. What are you guys doing over there? Well, nothing, nothing.
The Dow's a dumb idea and you shouldn't pay any attention.
You know, that's kind of it, you know. And they go, what do you mean? I go, it's never mind. You know.
[00:29:43] Speaker B: Yeah, you're right. We are brilliant. You're welcome. Yeah, yeah.
[00:29:46] Speaker A: Like I didn't eat a big enough breakfast to market cap versus price cap, you know, just. You're welcome.
[00:29:52] Speaker B: Well, it's not even, I mean, I think when the first version of it came out, it was actually an, it was actually an index of industrial companies. I don't know what it is now, but I mean we've talked about Apple, we've talked about United Health, we've talked about Goldman Sachs. None of those three are industrial companies. I don't even know if you looked at what it's comprised of. It's even necessarily heavily weighted in industrials or heck, there may not be an industrial company, I don't know, there's got to be a couple in there. But it's just, it's just a random list of companies that everybody tracks. I don't know.
[00:30:25] Speaker C: Right.
[00:30:25] Speaker A: Exactly.
I wasn't there. You weren't there at the table when, when those two guys put together that embassy. And back then, when they did it, you know, 100 years ago or whatever, it was companies, the larger the company, the higher the share price probably was because they didn't do stock splits and things like they do now.
[00:30:43] Speaker C: Right.
[00:30:44] Speaker A: And that may have been a, the most effective way to look at the size of a company. How big is its price, biggest price, that's the biggest company. Because we don't, we didn't have the communication apparatus as we have today.
[00:30:57] Speaker C: Okay.
[00:30:57] Speaker A: So there's that. So to be fair to them, that's probably why they did it that way. But they've kept that same calculus over, I think having the 30 of the largest companies, you know, in it, you know, from all sectors, you know, in an indices, but on a cap weighted basis would, would, would serve some usefulness. You know, in fact there's a, there's a, there, there's an etf, it's an Invesco etf, I believe.
I'm not sure. It's Q top. Okay, It's Q top ktop. I'm sorry, Qtop. It's the 30 largest positions in the NASDAQ.
[00:31:34] Speaker C: Okay.
[00:31:35] Speaker A: On a cap weighted basis.
[00:31:36] Speaker C: Okay.
[00:31:37] Speaker A: Now if you took that ETF and looked at that, that's, that's an interesting way to do it. Next Access one. We took a position Q Top this year, the very beginning of this year. And our macro portfolios, our macro portfolios use efs where our normal portfolios use individual stocks. So our macro portfolio, our core position in our macro Portfolio is the Q top.
[00:31:59] Speaker C: Okay.
[00:31:59] Speaker A: Because we like those positions. We like the biggest position in that and the nasdaq. But that's, but that's, that's the Q top in and of itself. I would find to be a very interesting indices.
[00:32:12] Speaker B: Is there an ETF out there that is a. Either equally weighted index of the Dow stocks or a market cap? Because you said that the Q top was nasdaq, right?
[00:32:23] Speaker C: Correct.
[00:32:24] Speaker B: So is there a, A Dow etf? That's basically what the Dow Jones would be if the Dow Jones. If the Dow Jones were done correctly. If not, we should totally create that. You should create it and pay me a small royalty for coming up with the idea.
[00:32:38] Speaker A: Hang on.
I'm going to consult Google here.
Dow Jones Industrial Weight Equal Weight Index etf.
So.
[00:32:52] Speaker C: Well.
[00:32:57] Speaker A: Let'S see. I'm not. I mean it sounds. If it was equal weighted.
[00:33:02] Speaker C: Yeah.
[00:33:02] Speaker A: E Dow.
The E dot.
[00:33:04] Speaker C: Okay.
[00:33:05] Speaker A: It's called the ew. It's equal weighted.
[00:33:07] Speaker B: Is there a market cap weighted.
[00:33:09] Speaker A: That was. But that's not cap weighted. That's equal.
[00:33:11] Speaker B: Is there a market cap weighted one?
Surely there's got to be one. We are not smart enough to be the first two people to think of this.
[00:33:18] Speaker A: You know what, Shame on us for not knowing this. Seriously, Cap weighted Dow Jones etf. There has to be.
[00:33:26] Speaker C: Okay.
[00:33:37] Speaker A: Well, I don't see one.
There might be one. And there's the, there's the, there's the, the dia. The dia, which is the, the normal price weighted etf. I'm not seeing a cap weighted. I'm sure there is one. I'm just not seeing it. But the E DAO isn't. The E DAO would be interesting because it would show breadth across those 30 companies.
[00:34:01] Speaker B: Yeah, the edot would make sense.
This should. If you have time for like a homework assignment, I want you to see what the performance of the EDAL is compared to the Dow Jones itself over whatever time period you can. And let's find a market cap weighted one as well and see what that performance looks like. And if there's not a market cap weighted 1, we seriously need to figure out how to. We need to. You need to start one.
[00:34:26] Speaker A: We are getting, we are getting better participation this year.
And I actually look at that through that equal weight. Equal weight s p. The RSP, the equal weight s p 500 ETF is up about seven and a quarter percent this year versus the, the, the intersect.
I think the s p 500 is about 10.
[00:34:46] Speaker C: Right.
[00:34:47] Speaker A: So you know, this time last year, I want to say was about 50 of the s P. So we're actually seeing more breadth this year. But, you know, they should have. They should have some sort of a cap weighted doubt.
Honestly. Somebody's gonna hear this and then, you know, there will be an ETF next week.
[00:35:04] Speaker B: Yeah.
[00:35:05] Speaker C: Yeah.
[00:35:05] Speaker B: It won't take them long.
[00:35:06] Speaker A: Yeah.
[00:35:09] Speaker B: For a show. I didn't think we had that much to talk about. We've gone actually a little long. We're at 35 minutes and we didn't have, like, two things to talk about. So between your coffee and my Jersey Mike stories, we've. We've filled quite a bit of time here today. So this is fun. We should do it again maybe next week.
[00:35:24] Speaker A: Let's do it next week.
[00:35:26] Speaker B: All right. Well, as always, we're here just for entertainment, education purposes only, all that stuff. I'll play the disclosures here in a second.
[00:35:33] Speaker A: We'll.
[00:35:33] Speaker B: Matt, have a great weekend. I will see you in. See you next week and hope you what you got going on this weekend? You got any big plans?
[00:35:44] Speaker A: Nothing really.
Maybe do a little barbecuing.
[00:35:47] Speaker C: That'd be about it.
[00:35:48] Speaker A: Clean out the garage. We just had our AC system fixed in the house, so, you know, it's gonna be a relaxing weekend. There's not much to do when it's 180 billion degrees outside.
[00:35:59] Speaker B: Yeah, I've got. I'm going to be catching up on podcast editing for a good part of this weekend and then being lazy as much as I can for the rest of it. So it should be a lot of fun.
So we'll see you next week. Always a pleasure. Have a good weekend, bud.
[00:36:12] Speaker A: Excelsior. I'll see you next weekend.
[00:36:14] Speaker B: See you, man.
[00:36:18] Speaker D: Discussions in the Intelligent Investment show are for educational purposes only. The information presented should not be considered specific investment advice or original recommendation to take any particular course of action. Always consult with a financial professional regarding your personal situation before making investment or financial decisions. The views and opinions expressed are based on current economic and market conditions and are subject to change. There is no guarantee that any statements of future expectations will come to fruition. All investing involves risk, including the potential.
[00:36:44] Speaker B: For loss of principal.
[00:36:45] Speaker D: Securities offered through United Planners Financial Services member finra, sip, CEE Advisory services offered through American Retirement Planning Group. ARPG and United Planners are independent companies. Garrett Lille and Wealth Partners are not affiliated with ARPG or United Planners. Any endorsement that I may have given during this recording, it is important to note that I am not a client of arpg. The views expressed should not be considered representative in any way of my past, present or future experience with MAT or arpg. No incentives have been provided to me in connection with any endorsements I may have given on the Intelligent Investment show. Investing involves risks and there is no guarantee of any future results, performance or success.
