Stocks Headed Lower Say Key Indicators | Jesse Felder

**Jesse Felder** (0:00)
Insiders are still extremely cautious. We're seeing almost no insider buying. Last week, insiders bought about $20 million worth of stock, which is nothing. Near major lows, you can see hundreds of millions of dollars bought in a single week. We're not anywhere close to that. So that's one thing that I'm paying close attention to. Another is what Stan Druckenmiller has called the inside of the stock market. He's called this the best economic predictor he's ever seen.
That's the relative performance of economically sensitive sectors. What are the home builders doing? What are the retailers doing? What are those major lows? Those are the groups that lead to the upside. Those stocks have been extraordinarily weak over the last couple of weeks when the market's been trying to rally.

**Adam Taggart** (0:56)
Welcome to Thoughtful Money. I'm its founder and your host, Adam Taggart. Wall Street's hoping that once the current uncertainty and unpredictability of the Trump tariffs starts dissipating as new trade deals get struck, that things will get back to normal. Well, today's guest thinks that yesterday's normal may now be an artifact of history. And that like it or not, we've experienced, quote, a geopolitical and economic paradigm shift. That means the future of investing may look quite different from the past. To discuss, we welcome back to the program macro analyst Jesse Felder, founder and editor of the respected market research firm, The Felder Report. Jesse, thanks so much for joining us today.

**Jesse Felder** (1:38)
Thanks for having me, Adam. Always great to talk with you.

**Adam Taggart** (1:41)
Thank you. And I appreciate you saying it's good to talk with me after this is take two of this interview. We started and we're about 20 minutes in, and I realized I committed the sin of not having the recording on. So thank you. All right, look, lots to get into here. As I mentioned in the intro, your latest piece is titled, quote, a geopolitical and economic paradigm shift.
Why don't we just roll up our sleeves and get straight into that? So why do you think we are experiencing something that transformative right now?

**Jesse Felder** (2:13)
Yeah. Well, this was a really eye-opening piece that Bridgewater actually put out last week. And I thought I highlighted it as the basically the top thing that I came across last week. And this is really what I try to do in my free weekly report, is take the top five things that I found during the week, whether it's a report like this or a chart, and kind of synthesize them into a larger theme. And this paradigm shift is a theme that I think cannot be overstated right now. I think it's very clear that the paradigm of the last 30, 40 years, really, the trend towards increasing globalisation, increasing profit margins for corporations, and increasing usage of kind of the dollar in overseas trade. All of these things are potentially at a breaking point, clearly a turning point. And so, a shift from de-globalisation, or from, sorry, de-globalisation to de-globalisation, like we're seeing today, has important ramifications for economies, for markets, for all kinds of things. And so, there's another piece that I highlighted, written by Ruchir Sharma, who wrote a terrific book last year called What Went Wrong With Capitalism. Highly recommend it. But his piece last week in the Financial Times highlighted the fact that the biggest beneficiaries of globalization, offshoring labor, were these multinational US corporations, which were able to open their products to new markets overseas, finding new markets for their products, boosting the revenue line, and at the same time, able to offshore production of those products and lowering the cost line. So profit margins, this enabled profit margins to go to record highs.
And so potentially, it would stand to reason that the biggest risk from de-globalization would be to these corporate profit margins from both the revenue line, meaning that places like China have decided that it's in their nation's best interest to encourage Chinese consumers to buy Chinese goods, to buy Chinese EVs, to buy Chinese smartphones, to develop Chinese semiconductors. And at the same time, to the cost line, that if we cannot produce any longer at the lowest possible production cost in China and have to find alternative places to produce, that's going to boost costs. And so I think that that's something, that's just one of the consequences of this paradigm shift. And it might be the most important one for investors to consider.

**Adam Taggart** (5:11)
Okay. So this is sort of rooted in the fact that corporate profits through globalization really got much fatter than they should. I shouldn't say fatter than they should, but got much fatter than they were before. That really kind of came at the expense of labor. We're now starting to see the pendulum shift the other way. As you say in your piece there, that does make these companies that were enjoying this super normal profits that Sharma talked about, it's now making them perhaps tomorrow's losers, right? So from an investing standpoint, kind of the best returners in terms of equities to own may actually be some of the poorest stocks to own going forward. I think one of the things your piece said is, problem is, is those are still priced right now for out performance going forward? So investors need to be cautious that there may be some surprises in the future? You're nodding?