Is The Stock Market Now The Most Overvalued It's Ever Been? | New Harbor

**John Lodra** (0:00)
Not only are valuations stretched, they are categorically at all time highs on the metrics that are most reliable with future predictive returns. That is a black and white categorical statement we can make without anybody's opinion affecting that statement.
It's reality. Okay, so being okay with selling down from 80% to 40% or 30% and it not being the absolute high, that's okay. The worst sin and the worst regret that one may have to deal with is not doing that and having a massive, massive reset in their financial security, one that literally may be forcing decisions like, hey, I thought I was going to retire two years from now, now I got to work another seven.

**Adam Taggart** (0:52)
Welcome to Thoughtful Money, I'm Thoughtful Money Founder and your host, Adam Taggart. Welcoming you here for another monthly review with the team at New Harbor, one of the endorsed financial advisory firms by Thoughtful Money. I'm joined as usual by lead partners, John Lodra and Mike Preston. Hey guys, how are you doing today?

**John Lodra** (1:09)
Hi, Adam. Great to be with you. Thanks for having us.

**Mike Preston** (1:12)
Hello, Adam. Good to see you again.

**Adam Taggart** (1:14)
Thanks, Mike. And hey, thanks again, particularly to you, Mike and Justin there at New Harbor for hanging with us all day long at the Thoughtful Money Fall Online Conference a week ago. It was a great event, but great in part as well, you guys making yourselves available there and answering folks' questions in the live chat and all that. Look, lots even happened since that conference. Now, the day we're recording here, and again, we usually have you guys on every week. Usually, you're reacting to somebody's video and we talk a little bit about what the markets have done over the past week. But we have started this new routine.
I think we've been doing it 3 or 4 months now where we have you on, and you give your own hour in terms of your full outlook and any changes you're making in your portfolio and what you think might lie in the road ahead. So, lots to react to here. One thing we're not going to be able to react to too much is the Fed meeting, this week's Fed meeting, because the actual official release from the FOMC is going to come out about an hour after we finish recording here. So, we'll find that out, but I really don't think it's going to be too much of a surprise this week. It seems very clear that the Fed is going to cut by 25 basis points. They will likely announce the end of QT. If they do anything terribly different than either of those two things, then yeah, that probably will surprise the market. And if so, we'll talk about it with you guys next week. That being said, John, why don't we start with you? Love to hear any other thoughts you might have about this week's Fed announcement. But more importantly, I know you had pulled some charts together, and charts of the Fed balance sheet, and a few other things going on. But it looks like because the Fed has pivoted and is now going back to cutting and maybe ending QT, it's not because it's mission accomplished per se, it's because, hey, there's some real concerns going on. Now, the Fed has talked about weakness in the jobs market, but I think you're beginning to see some initial signs of stress in the credit markets, which of course, we know, that's where really all the chips are. That's where the big money lies. So what are you seeing right now?

**John Lodra** (3:28)
Yeah. Thank you, Adam. By the time this video airs, we will indeed have the Fed announcement and post-announcement press conference, so we'll learn more about their current thinking. But it's all but certain, at least the market thinks so, that the Fed will drop 25 basis points, a quarter percent on the short-term Federal Funds Reserve rate. And again, this affects very short-term rates. It doesn't affect, in and of itself, things like mortgage rates and things like that. That's more as released to QT, and we'll talk about that in a second. But the market is all but certain that the Fed will drop a quarter percent today. There has been some talk about the Fed starting to reach a point to end the quantitative tightening program that they started, well, restarted, I guess, back in 2023, I guess it was. And just to put that, you know, you talked about the whole idea of mission accomplished. Let's look at a picture here to kind of put that in perspective, because I think it's really just eye-popping where we've come from and where we are. This is a chart. It shows the total assets on the Federal Reserve balance sheet. And basically, just a reminder, when the Fed in the wake of 2008-2009 financial crisis, they entered several rounds of quantitative easing, QE123. And basically, what quantitative easing involves is the Fed printing money, literally out of thin air, paper dollars, based money supply to go out and buy bonds, treasury bonds, mortgage securities, and those bonds ended up on the Fed balance sheet. So in the 100 years, nearly 100 years of the Fed's existence prior to the GFC, they amassed a balance sheet of about $800-$900 billion. And then you can see what's happened since then, right? We've had QE1, QE2, QE3, and then QE4, you might call it, in the wake of COVID. Here we are today in October 2025 The Fed's balance sheet is still just a tad bit below $7 trillion. Again, I'll remind folks, before the great financial crisis, it wasn't even a trillion dollars, not even close. So, and back around here, I forget the actual date, but it was around the 2010 I can remember it like yesterday. Ben Bernanke made a rare appearance on 60 Minutes. At the time, Fed chairs didn't do these kinds of things. They didn't go on 60 Minutes and, you know, give up the ghost in terms of what their thoughts were. He basically, to paraphrase, said, hey, these are temporary measures. We're going to be able to reverse these measures, you know, not too far down the road once the economy stabilizes. And here we are today. And look, we haven't reversed those measures. We've had, you know, some normalization in the balance sheet. And what this quantitative tightening is, is basically the Fed hasn't sold these bonds. They've just, as these bonds have matured, they simply haven't reinvested the proceeds. So they've, you know, taken liquidity out of the system in that way. But we still are way, way higher than we ever were prior to the GFC. And we're at all time highs in the stock market. We have, you know, still relatively healthy economy. I know there's emerging cracks in employment and things like that. But to think, you know, if that, if anybody was asked back here, would we still be at nearly $7 trillion? And talking about an end of QT, I think people would have lied through their teeth saying, yeah, that's going to happen. So just a dramatic thing. And why is this happening? Let's take a look at some other data points. We're starting to see some stress in the system. This is a chart that shows some key spreads on some key interest rates. And I don't want to get into the weeds here. These are kind of technical things. But the one I want to highlight here is what's called this secured overnight financing rate. This is the rate that banks can borrow collateralized by their treasury holdings. And typically, when that starts to blow out relative to this thing we call interest on overnight reserves, that's a sign of some liquidity crunches, some balance sheet concerns, some credit concerns. And we've seen in recent weeks some defaults and stresses with some of the subprime auto lenders and other kind of non-bank financial institutions.