00:00Joining our conversation now, I'm pleased to say, is Sam Husko. He is founder and CIO of SGH Wealth Management,
00:06joining us on set. Sam, it's great to see you again.
00:09Hey, hey, Mercury must be in retrograde again. I'm back, so, you know, get your sage out, whatever it might
00:15be.
00:16There you go.
00:16You know, when you were talking before, people are selling off, it's like, why don't people believe in this bull?
00:22You know, it's, any old bull is going to have some scars on it.
00:26But this is like, to me, the Keith Richards of rallies. You know, he's smoking, he's drinking, he's partying his
00:32whole life.
00:32He's still alive.
00:33Yeah, and he's healthier than people 30 years younger than him. So why can't we just look at it and
00:38say, hey, be thankful that earnings are growing faster than the stock market.
00:42We're seeing valuations come down, not because the markets are coming down, but because we're actually seeing growth in earnings,
00:50which got P.E. ratios at about 20.5.
00:52You know, it's overvalued, but it's not crazy. And usually in a zone like this, you know, the three-year
00:59mark is usually where it's a hurdle.
01:02After you get the three-year mark, historically, these markets go to usually to four, five, seven years.
01:08They don't usually just stop right here. So I think people need to get on board with this.
01:12What's that Steve Carell gif? Thank you.
01:16You guys are speaking the same language.
01:18Oh, my God. Every single column I see is, it won't last. This is a worry. That's a worry.
01:24Can't we just enjoy a nice bull market? Everything's fine. It's been great.
01:29Like, what's wrong with saying that? I get it. You won't get the clicks.
01:32OK, some worry articles get all the clicks.
01:34For sure.
01:35But there's a gap between the noise and the worry and the actual market. What do you make of that?
01:40I mean, so the term irrational exuberance, you know, that Greenspan, that's kind of what we're talking about.
01:46When he coined that phrase, the markets went up another 105 percent after that until the next bear.
01:53So we just want to be worried about things.
01:55But, I mean, it's a two-edged sword, right?
01:58Because then what we're seeing the flows are in is all greed investing.
02:01And so within that side of things, you know, it's 38 days in into SpaceX.
02:07We have a double-levered ETF that you can buy options on.
02:11We can leverage a leveraged product.
02:14That is not hot sauce, Eric.
02:16That is, wait for it, Katie.
02:18Tell me.
02:19Pregnancy cravings.
02:20Jesus.
02:21Peanut butter on a pickle.
02:23Like, it doesn't make sense. We don't need that.
02:25And is this a sign that it's 2008 and mortgage?
02:28No, it's not all that. We're just in agreed mode.
02:31And, you know, within that, the markets are psychology and math.
02:36Like, Cathie Wood parties way too hard for me.
02:39Cash flow models have a place.
02:41They're not an infinite tool, but why would you want to throw out a tool?
02:45Math has survived every market cycle.
02:47But on the flip side, we're factor-based investors.
02:50Fama-French parties way too hard.
02:52They're saying perfect markets, efficient market pricing.
02:55That's not right either.
02:56There is a middle ground to everything.
02:58And one of the bad actors within, you know, this whole greed movement, I would say, is
03:03the private markets as well too.
03:06You know, we have just beat up the word democratization.
03:10That has to be the hardest working word.
03:13Oh, my God.
03:14We've watered it down to nothing thanks to the 250-day or year anniversary or whatever.
03:19But by day, it's doing good work.
03:21You know, we're getting one-year-olds into the stock market, which is kind of a funny statement.
03:24But, you know, it is good.
03:26You know, they have long time horizons.
03:27It gets more owners.
03:28By night, it's hawking private credit to retail people that don't have the time horizon for it.
03:34Well, Sam, I want to talk about your positioning in all of these different cross-currents that you lay out.
03:38Because I'm taking a look at some of your key holdings.
03:41You're an RIA.
03:42I see JMOM, which is a momentum ETF.
03:45We were discussing it the other week.
03:47I see some equal weight exposure.
03:48I see some small cap exposure as well.
03:51So talk to us about, you know, how you put sort of what we're talking about into these different puzzle
03:55pieces.
03:56Yeah.
03:56I mean, JMOM gets a bad rep too.
03:58Like, it gets lumped in with the meme stocks and the IPO darlings and probably some of the green stuff
04:04that I said before.
04:05But it's a rotating investment.
04:07It has a 90% turnover.
04:10JMOM is like a Porsche 911.
04:12You know, it's fast.
04:13It's trying to move.
04:14It does have airbags.
04:15It might survive a pothole or two, but it could crash.
04:18But the recent turnover is going into health care, telecom, discretionaries, things outside of it.
04:25And let's be real.
04:26It is a memory stock play.
04:28In the moment, but it's reduced its holdings in AMD and Micron and other things of that nature.
04:34But where, you know, where great investing in is not just one investment on an island.
04:39Where the magic happens is if you can find two strategies that work on their own, but they're uncorrelated with
04:45each other.
04:45So you set up your next trade.
04:47Instead of looking at next week, look at two years from now.
04:50And that's where equal weight does come in.
04:52The correlation between equal weight and momentum is negative 0.52.
04:58So it's going to go in different directions.
05:00And both of them are beating the markets today.
05:02Because thankfully, well, and let's give some peace to the Mag7.
05:07It underperforms for six months.
05:08And we're already trying to coin new acronyms like mangoes.
05:12Like we have no loyalty in this business at all.
05:14But, you know, within that, moving on, it's in industrials.
05:18It's in real estate and things of that nature where, you know, people are selling the shovels as opposed to
05:23mining the gold in AI, basically.
05:26So I want to go back to the leveraged single stock ETFs because you talked about that briefly.
05:31South Korea is going to halt new listings of those.
05:33That's a I mean, that's a pretty clear sign to the U.S., isn't it?
05:36Yeah, I mean, yeah, of course.
05:37But it's not going to stop us.
05:39Like the argument years ago was, hey, should we even have active ETFs?
05:45And now the argument is, should we have ETF parlays?
05:49You know, like, hey, if SpaceX goes up 2% and the Fed lowers rates 0.25, you get 10x
05:55your money or something like that.
05:56It's just it's getting out of hand.
05:58It's getting out of hand.
06:00And so I would say that's where you just notice emotions.
06:03Again, don't get away from your math, but say, hey, if greed is creeping into the marketplace,
06:09why don't we get into some other areas from an emotional standpoint as opposed to chasing that shiny object for
06:15forever?
06:16Right.
06:17So within that, too, I mean, I do think the flows are missing small caps.
06:21Small caps has had an interesting run.
06:24The fastest first six months of the year in 20 years.
06:28Two thirds of issuances are above their 200 moving day averages.
06:32Right.
06:32And the shorted stocks are the ones that are underperforming.
06:35So quality matters on that side of the fence, too.
06:38And so some people are saying that on the small cap side that it's a sector play.
06:43It's just that regional banks are doing well.
06:45Right.
06:45But regional banks doing well, that's a great sign for the economy.
06:48Regional banks, you know, rely on people paying their bills.
06:52Right.
06:52But the stat I would leave on small caps is out of all 11 gig sectors, out of all 11
06:58of them,
06:59every single one of them, small cap is outperforming large cap.
07:02So that's a sector.
07:03That's a factor play.
07:05That's a size play, not a sector play.
Comments