A Market Reversal Is Inevitable | Chance Finucane, Oxbow Advisors ​

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**Chance Finucane** (0:56)
When there's greed involved and a potential bubble, as long as people want to keep chasing prices higher and keep talking themselves into it further, it can keep going. But the reversal of this trend of the last few years, and it's accelerated even more in the last few months, the reversal is inevitable.

**Adam Taggart** (1:21)
Welcome to Thoughtful Money. I'm Thoughtful Money Founder and your host, Adam Taggart. Welcoming you here for a special discussion with the Chief Investment Officer of Oxbow Advisors. This is Ted Oakley's firm.
Chief Investment Advisor there is Chance Finucane. Chance, great to have you return to the program. How you doing, sir?

**Chance Finucane** (1:41)
Doing great, Adam. Thanks for having me back on your show.

**Adam Taggart** (1:44)
Hey, it's a real pleasure. One of the things I love talking to you guys about is, obviously, you're very smart guys, and you do a great job of servicing your clients, of which full disclosure, folks, I am one of Oxbow. You guys are a high net worth firm, and we'll talk maybe a little bit about that later on in this discussion. But one of the things I really appreciate you guys is, you help take the counsel that high net worth families get to receive and share it publicly here in these videos, as well as in the videos that you do on your own channel. So I really value your guys' mission in terms of just trying to help as many people as possible. So in that vein, we're at a point here right now, Chance, where the markets appear to be caught back up in another big speculative fervor here, and I'm referencing the AI trade.
I know it's something that you and Ted have been talking about a lot recently.
You guys do such a good job of saying, look, over the long scope of your guys' investing careers and Ted's got a few more decades on you, money is made mostly by not making big mistakes and being well-positioned when mal-investment gets flushed out of the market, valuations come down to attractive levels, sometimes extremely attractive levels, and deploying capital then. Give me a sense of where you think we are right now in the markets with this AI trade, and do you see this as another cycle like that? Is this one of those moments in the market where things are getting too distorted to the upside due to excessive speculation, and you are expecting a big corrective event, at which some point you guys would hopefully step in and get some, I don't necessarily use the word generational values, but at least very attractive values to then ride the next upcycle with.

**Chance Finucane** (3:55)
Yeah, we would agree with that. I think if you just look at the second quarter, that was the best quarterly performance for the semiconductor industry of stocks in its history.
In the last 14 months, the semiconductor index has appreciated by more than 230 percent, which has only happened one other time, which was the last 14 months of the.com bubble.
Momentum stocks have outperformed minimum volatility stocks by more than any time on record in the last 30 years. So there's a lot of examples of that that just say that this move and this chase into the hot AI trend has probably run too far. But I don't know that we're trying to time when exactly this ends. When there's greed involved and a potential bubble, as long as people want to keep chasing prices higher and keep talking themselves into it further, it can keep going. But the reversal of this trend of the last few years, and it's accelerated even more in the last few months, the reversal is inevitable. And so for us, we've actually been looking in other places to try to allocate money in a reasonable way, at good valuations, and continue to generate a decent return for our clients. But at this point in the cycle, where you've already had a significant appreciation in people's stock portfolios, we're starting to explain that it's important to focus on preserving capital. Because despite this move from, say, the end of 2020 up until now, about five and a half years, 140 or 50 percent bear market and you give almost all of it back. And so if you've been lucky enough to participate in the upside over the last half decade, you need to really be mindful of how much you still are invested in stocks, maybe rebalance, maybe rebalance within stocks to some other sectors that have been unloved. It's okay to take some of those chips off the table so that you can get through whatever the next bear market is that we think could be more severe than just the typical bear market. You can get through that okay, preserve most of the capital you've appreciated, and then you're ready for the next time to buy in at cheaper valuations.