Stocks Likely To Run Even Higher Before The Top Is In | New Harbor

**Adam Taggart** (0:05)
Welcome to Thoughtful Money. I'm Thoughtful Money Founder and your host, Adam Taggart. Well, folks, we did a trial run of this about a month ago with a gentleman from New Harbor, one of the financial advisory firms endorsed by Thoughtful Money, where we brought them on and they just basically are going through the key issues that are both top of their minds, but more importantly, top of the minds of their clients and the people that reach out to them every day. We asked you folks whether you liked this new format. The reaction was pretty universally positive, so we're continuing it here. I'm joined as usual by lead partners John Lodra and Mike Preston. Boys, thanks so much for joining us. Mike, why don't we start with you here? There's a lot to react to this week. We just, the day we're speaking here, we just got the FOMC minutes from January, which have some interesting elements in them. I've had a lot of questions from the audience about what's going on right now with gold, hitting new highs with the gold miners, which have shown some signs of life, but are still far behind performance-wise, where many people thought they would be. Lots of questions around that. I have some other questions as well. One is the T-bill and chilled trade. Is that still a safe trade? A number of people are not only looking around them and hearing, seeing signs of layoffs in their local areas, hearing about friends who might be losing their jobs, but they're now reading the headlines about Doge and the potentially vast amount of government jobs that are being slashed here. And there seems to be a bit of a creep coming into the general consciousness that, wow, maybe I should be a little bit more worried about my job going forward. And so people are asking, what precautions should I be taking financially for that? If we have time, we'll get to that as well. Why don't we start, though, Mike, with you.
I've mentioned on this program many times of late that this year is unlikely to be as much of a blockbuster year as the previous two years were. Over 20% returns in 2023 and 2024 Folks would be greedy and somewhat unrealistic to expect a third year of those types of returns. It can happen, but the odds are quite low. And a number of people, for what I'm reading, are becoming increasingly pessimistic about the market's odds this year, which may or may not be true, and we can talk about that. But you folks there at New Harbor are looking at the data and saying, look, yes, this market is very richly valued on a number of dimensions, but if I'm reading what you've shared with me, Mike, you're not seeing imminent signs of a market correction on the horizon. In fact, don't let me put words in your mouth, but I think I've heard you and John say that the market top probably lies ahead of us here. So let me hand the baton to you with that question. Is this a time to be rushing to defense, or is this a time where this still may continue rising for a bit while?

**Mike Preston** (3:00)
Thanks, Adam. There's so much to talk about today, so many of the topics that you just mentioned. Hopefully we get to, and there's even more. Right now, it's a really anxiety-producing time in the market, because the market just relentlessly marches up, up and up and up and up it goes. And here we are today at 6,140 as we speak, new high on the S&P. It's just been relentless. It's certainly been relentless since the COVID recovery for the last four years. But honestly, it's been pretty relentless for a good 15 years. There's been some very brief declines that have been rescued very quickly with central bank interaction, or intervention, I should say. But all the while, we've been at these crazy high valuations. The Shiller PE is in the high 30s. If you adjust it for margins, it's even higher, probably in the high 40s to 50 If you look at market cap to GDP, it's at levels never before seen. That's the so-called Buffett indicator. But I know that we sometimes sound like a broken record because it's been this way for years. And it's true. It has been different this time in terms of relatively permanent overvaluations more so really than other times before in history. I think that perhaps, John, you could pull up that long-term chart that shows just how long market can stay overvalued. But one thing for people to understand is just how quickly all of those excess gains could be wiped away very quickly. So here is a chart of valuations. This is non-financial market capitalization divided by non-financial corporate gross value added. This is a twist on market capitalization divided by GDP. This is put out by Dr. John Hussman. And this is the highest correlated metric evaluation there is in terms of an R squared. It actually predicts future returns better than any other metric. And so you can see it's as high as it's ever been. Now, maybe you could say we touched as high as this back in 1929, but we're higher than the levels in 2000 And John, if you would just show, there's another chart on there that shows back in 2008 that we wiped out all of the gains back to 1996 Perhaps you can get to that one. But yeah, let me just mention this one here quickly. This is the Schiller adjusted PE that I just mentioned a little while ago.