0:04 Investors seem to be changing sides right now. What is happening in markets? Are they buying bonds? Are they buying the dollar? Why are they selling gold and silver? Wasn't that supposed to be the safe haven investment for all of us? Or is it just a fact that they're sitting on massive profits in the precious metals and the mining stocks in particular, and they are selling them now and taking money off the table while there's so much uncertainty out there? We're recording this on Wednesday, March 18th, ahead of the Fed meeting. And is that maybe the reason why the markets markets are so skittish, although it seems very predictable what the Fed will do here today. I don't expect any big surprises. Maybe my guest does. His name is Jason Shapiro. He's with the Crowded Market Report. He's the author. He's the brain behind the Crowded Market Report. And I'm really looking forward to catching up with him because he can tell us where is the herd going, where is the herd headed, and where
0:54 is the crowd of investors perhaps wrong. So lots to discuss. Very short time. Hit that like and subscribe button. We tremendously appreciate it. We just like it. Thank you so much. Now, Jason, thank you so much for coming back on. Very timely to have you back. How are things? Yeah, can't complain. And, you know, as I say, even if I did, no one would care. So we're doing okay. Ah, people care. At least the five people that will tune into this, right? So that should be fair. But Jason, maybe we'll start at the very top. You just put out a video today or 15 hours ago, 16 hours ago. So that was yesterday, Tuesday, talking about how crowds are changing sides. The question is from what side to what side are they changing? What is market sentiment right now? Yeah, I mean, it seemed to
1:40 me that when the war first broke out, um, There wasn't really a lot of concern, it didn't seem to me, you know, because I think the last time that there was a thing with Iran, it lasted like 12 days and was kind of not that big of a deal. You know, it's kind of recency bias type of stuff, right? And then obviously the latest thing that the U.S. had with Venezuela was over in a day and it was the easiest thing they ever did. So therefore, I think when this Iran thing broke out, there wasn't really very much concern really long-term worry. Nobody really believed that oil prices were going to stay up and therefore normally believed that stocks were going to stay down. And that worried me at the time. But I think now that's kind of switched.
2:31 Now we're hearing a lot of people talk about how the war is getting worse and not looking like it's going to get any better and how bad that's going to be for oil prices and then all of the the follow-ups to what higher oil means, lower stocks, higher inflation, all that. And now all of a sudden, everybody seems to be, in just two weeks, totally going the other way. So clearly the, and strangely enough, as they've gone the other way, now the stock market is acting better. So that's kind of how the sentiment looks to me right now. Sentiment clearly is not going to determine every single thing, but it does help
3:17 to determine what is being discounted into the markets. You know, I mean, clearly if God forbid someone were to set up an atomic bomb, then the sentiment that I'm talking about is not going to make a difference. Right. The market is going to get crushed. But just from a general perspective, sort of how things have looked in typical times, I think that there has been a shift in that in that sentiment. Absolutely, which brings me to the next topic, maybe just a follow-up as well. It's really about the Fed put. Is the market just expecting to be saved by the Fed? QE has already started despite it only being a minuscule amount, just $40 billion. But is the market maybe expecting to be saved again? Maybe private debt market is
4:05 the example here? I think that that's a good thesis as well. We have a lot of things going on, obviously, in the debt markets that can be seen as troublesome, right? Like you say, the private credit thing is kind of, it's causing a problem. Clearly, the government, not just the US government, but the global need, China, US, Europe, everywhere, for capital by these governments, it does nothing but grow interest payments do nothing but grow. That can't be stopped. The need for capital to fund the AI thing is growing
4:55 as these companies like Meta and whoever, who at one time, not too long ago, had so much cash on their balance sheets that it seemed like it could never be drained. The big thing was, what were they going to do with all that cash? I guess they have found what they're going to do with all that cash. And now, and then some, right? Now they're actually going to the markets. It seems unheard of just a few years ago, those companies are going to the market to borrow money. You know, Meta is firing 20% of their staff to try and save money because they need it for the sale. So you have that capital need. And now of course you have a war, which I don't know, $2 billion a day or whatever that number is, right? So there's clearly a lot of
5:42 issues there and you can't not fund the war. You can't not fund AI because it's the future and national defense depends on everything depends on it. You can't not fund the governments. So there is issues, potential issues there. And like you say, If there's a problem, which to this point there hasn't really been, but if there suddenly becomes a problem and spreads are widening and you get sort of that, then they're going to come in, you know, they have to. And I think that should we get to that point, should this dislocation start showing up in the markets in particular fixed income markets and should the fed then have to come in and start to do more QE and all
6:29 this. Then, you know, that's when it gets super interesting because I've been saying for years and it's never happened. But that's there is a limit at some point. We have no idea what it is. We have no idea if this is it. We have no idea if it's in 20 years and 50 years or whatever. But at some point, there's a limit. And if we do reach that limit, then clearly we're in a hell of a lot of trouble and we'll know. Because the markets will tell us, you know, if they come in and do QE in a big way to solve these other issues and the markets don't respond well to that, well, then we got a problem, right? If the markets reject that, if the dollar rejects that, if the bond markets reject that,
7:19 then we have a serious problem, probably the biggest problem that we will come across in our lives. But We have to get there first. A, we have to get to the point where the markets lock up. B, we have to see if they, well, they will, but when they come out and create this QE or however they handle it. And then three, how the markets respond to it. We got a while to figure those things out, but I think that those are without a doubt the important things to be watching for here. Well, there's a famous saying, the market is always right until it's wrong, right? And it feels like the market is right. As you pointed out at the beginning, there seemed to be complacency about the Iran war, perhaps. And the question is, when will the market completely shift momentum? Do you think there will be a single trigger that'll set off the crowd moving in another direction?
8:06 I'm looking at the dollar, I'm looking at the bond market. Nothing is really breaking there in either direction, up or down, right? S&P is a little weaker, but it's nothing, again, nothing to be nervous about, 2%, 3% lower, no problem. The only pressure I see is really in the precious metals. But how wrong is the market right now? You're the perfect person to ask because you write the crowded market report. You usually go to places where the crowd is not. So what will maybe trigger that move back? Who the hell knows? I never really know what's going to trigger In fact, people always, when I do, by coincidence, get something right, get a market right, I'm long and it ends up going up, I hear
8:57 all the time, oh, well, you never could have known that this was going to happen. I get long, some bullish thing happens, the market goes up. Oh, you never could have known that was going to happen. And I agree, I never could have known that those things were going to happen. I approach it from a risk-reward point of view, where if people are way too short, I'm looking to get long. and then hey if something bullish does happen you get a big move the other way a because it was bullish and b because people are caught short so i get a big move in my favor doesn't happen with every trade but hopefully it happens with more trades and you know and all that so um i don't know what the trigger could be but i don't see the positioning here as as to one-sided either way by the way which means that like in stocks, for example, I don't have any positions here because I don't really see a lot
9:45 of crowdedness going on, which is quite frankly why I think the market is just whipping around and going nowhere because there's no real positioning to force it to go one way or the other. The only real sort of majorly crowded positioning I see, which could be seen as dangerous, is in the long bond, people have gotten pretty extended long in the 30-year bonds. So that could be dangerous because obviously then we get some news, we could get a big move down and that would be a big move up in interest rates. And then we got the possibility of a problem here. But other than that, I'm not seeing a lot of extended positioning. The metals, look,
10:37 The metals have been seen now as kind of the no-brainer trade for a while, right? Gold and all that. And you would think that that would be, in a way, you could argue, be the no-brainer idea of where you want to belong if we go into an extended war. And yet, it's gone nowhere but down during the war. But oftentimes, the no-brainer trade turns out to be not the no-brainer trade, right? And that's probably what's going on with gold here. I personally would be bullish gold, but I don't play alongside of markets that act terribly. I was going to ask maybe
11:24 as a follow-up, do the markets make sense to you right now? Are they behaving rationally or completely irrational? Are they off the rails? is it just difficult to make sense? I don't know. In some way, it's like, I feel like the markets always act irrationally, but at the same time, they always kind of act, this is what they do. They don't make sense. So not making sense makes sense, you know, because the markets aren't meant to make sense because they're discounting mechanisms of an unknown future. And the future changes every day, you know, so... the markets have to adjust to that so and if they made sense well then it'd be it'd be pretty simple to to make money over time doing it right
12:11 um and that's the whole thing about crowding and and psychology and why i try to fade it because if it made sense everyone would see what made sense they would all pile into something and therefore the market would go the other way being a discounting mechanism so um or at least the risk reward would go the other way so I think it's pretty typical of what always goes on, which is you can argue every side you want, depending on which way you feel. What I have noticed a lot with this, and I spent a lot of time reading stuff and listening to people that are experts and all that, and it just goes to where I think society is now, which is so
12:56 divided politically. that I find, I read these things about the war, or I watch an interview with somebody about the war, and they seem very, very well researched, very well written. The person doing it seems very intelligent, and they are very bearish because they think the war is going to get a lot worse. And to no coincidence, that person has always been a Trump hater. And then I read something that's the opposite from someone who sounds very intelligent and very well researched and very well read and all this. And they're very bullish because they think that the war is going to end and oil prices are gonna, it's gonna save the world, this whole thing. And of course that person
13:43 has always been a big Trump supporter, right? So you can make either argument and people tend to make the argument right down that political line now with everything. So therefore, I find it all net net to be useless because it's all biased. You know, what good is biased analysis, you know? Um, Let's look at some data, Jason. Like we got a bit of data. The US GDP number, for example, that's been revised twice now, I believe, down to 0.7 for Q4. Just about 20 minutes ago, we got the PPI number, the producer price index for February, Jason, 3.4% above expectations of 2.9%. So inflation is spiraling out of control again, or spiraling higher, not out of control yet. Let's not go that far. But let's use these hard data points. And yes, they can all
14:32 be manipulated. We shouldn't trust them. The CPI lie or whatever they call it, the CPI lie. But those are numbers we've been provided. Those are the numbers I have to work with here because I don't go from house to house and ask how much their grocery bill was last week versus this week. So I'll have to rely on that. But given this data that we have here, what should the market be doing if it was rational, Jason? We had worst GDP number. We had a worse PPI number. We had news overnight of worsening war stuff. Iran was saying some pretty mean stuff about what their plans are.
15:18 The S and P's are down 20 points. They haven't even given up yesterday's gains. Now the day's not over, I understand, but you know, the market continues to act better. And I'm not the only one that says, everyone's saying this and it's the same thing. It's like, gee, the stock market is acting very well relative to the news. Why is that? And the bulls will say, because it's giving the message and 99% of the time, that's what I would say. I go with what the tape says, right? It's because the market knows that it's going up and that's why it's fighting off this bad news. And of course, the bears will say, well, because people in the market don't realize what the hell is going on here. They're overly optimistic, which was my view at first.
16:07 Like I said, I didn't think people were discounting in enough issues. Which one is it? That's the big question here, right? I was of the opinion that the market was missing it, which is rare for me. at first, but I have now kind of, I'm switching over to the idea of the market is giving us a message that it's a lot stronger than people think and that's bullish. But, you know, the net of it is that the market has gone nowhere for a very long time. You know, it really hasn't gone anywhere since October. And that's probably the most likely scenario here is that we're going to continue to just whip around and just and just mess people up, right?
16:56 We had a nice bull market, obviously, for the last four plus years that one could argue was strictly based on money, liquidity pumping, which we've really had since 08, since the whole crisis when they pumped all that money. And then we had the COVID when they pumped all that money. And then, you know, we've had pumping since. So that's sort of done now. And so now we're just kind of going back to sort of an efficient market. You know, you have so many people involved in the markets now with Robin Hood and all this that
17:45 I would argue the more people that get involved, the more efficient that becomes, you know, and therefore the less net movement there is. That's what I would argue. But like you mentioned, there might come another time soon that they're going to pump again. And maybe that's the next leg. Or maybe the market just rejects it totally and we're screwed. Again, I'm not here to predict which one of those things there is. Unfortunately, I wish I could predict the future. I can't. But fortunately, I can watch how the market reacts to these things. And that can help me decide what to do in terms of that. Absolutely. No, I really appreciate that clarification there, Jason. And you touched on the bond market earlier as a topic I wanted to touch on with you as well, because I'm looking at the 10-year
18:31 yield and just from mid-February to mid-March now, Mid-February, we're at the same level we're at today. We've dipped down to 4% on the 10-year yield. Now we're back up to 4.23 as we speak here. Doesn't sound like much, but there's a massive dent in the bond yield chart. I'm just curious, what is the bond market telling you right now? I'm trying to read the tea leaves here. I'm just looking for any signs of maybe struggle or cracks in the system or signals perhaps, Jason. That's why I'm fishing here with you to understand or help me understand what is really happening in the background. So like you say, it doesn't look like much because rates had come down and bonds had gone up quite a bit
19:18 from, sorry, I'm just looking at the chart here, but from early February, to early March, rates had come down quite a bit. And now that whole thing's been reversed. So it doesn't look like net net for that whole period. It's nothing, right? They went down, then they came back up to where they were. But the move in the last few weeks is not pretty to me. And like I say, there are some pretty serious risks out there as to the needs, the capital needs that all these entities need. And if that results in much higher yields,
20:08 then we're in trouble. And that could be the case, you know, that could very well be the case in particular, like I say, with so much crowding going on on the long end in 30 years, It could be, that could be, I think that's the whole thing, quite frankly. That's the thing to be watching. Not just the net, the yield, but the spreads and how they're doing, you know, how are the corporate spreads doing and whatnot? Are they widening? If we get yields going up and spreads widening, we have a problem. We have a problem and, and, and it would make sense to use your word. Um, if that happened because of all these, these needs. So,
20:55 and it would also make sense if they were going to eventually do a new QE, they need to be forced to do that new QE. Um, and that would force them to do it. You know, if, if yields and spreads started blowing out, um, they're going to have to come in and do something. Yeah. And this quite frankly is what makes it so hard to be short anything, bonds, stocks or whatever, because if they come in, they're most likely going to be a squeeze higher and everything. So you're short for the right reason. And then they come in and everything gets squeezed and your short position gets squeezed. which makes it very hard to be short. And look, maybe that's the problem here, right?
21:42 Maybe nobody wants to be short because nobody wants to be caught up in that. Maybe that's the problem. It's a very difficult puzzle here. Yeah, you don't want to be caught on the wrong side of the trade, that's for sure. Right? Yeah. Because that Fed put, like, I think that's the term everybody uses these days in a newspaper is, okay, when does the Fed step in? Yield curve control is the other buzzword. I think we got BS bingo here in a second as well with the next word, I guess. But we'll get all of them in there in this 30-minute conversation, Jason. But yes, I fully agree. Yield curve control. Is there a magical mark? One of my guests mentioned 5% before on the yields, especially long end. Do you have any magic number in mind? I don't know. I never believe in magic numbers, but a lot of people talking 5%.
22:28 It's a round number. Fair enough. People tend to benchmark to round numbers. So that in a way makes sense. But it ain't my thought that matters. Clearly, it's the Fed's thought and the Treasury's thought. And I unfortunately They don't take my calls. I'm really curious what the economic outlook is going to be from the Fed today once it's released here, so in a few short hours. But Jason, let's talk about some more fun stuff, maybe more positive commentary as well. Where are you positioned? Where do you see the opportunity? Where are you as Wayne Gretzky going? Where is the puck going to be, Jason? Quite frankly, I
23:17 have one trade on right now, which is short the Canadian dollar. I had been short the Russell from before the war. And that was covered just because the data and the psychology kind of changed this week. That was covered Friday on the close when my data came out. So that's the only position I have on right now, which I'm not unhappy about because clearly, It's not a great environment here. It's not a great environment for the type of trading that I do. It might be a great environment for day traders because there's some good volatility, I guess. So the day trader can make the argument that there's some, it's
24:05 a good environment, but for what I do, which is picking sort of major turning points in the market, it's not really a great environment. What's the major turning point, you know? So I'm just kind of sitting, waiting, in the weeds. What's your thesis for short Canadian dollars? Because my assumption, and I had that discussion with somebody actually yesterday, I would think Canada, oil, energy-rich country, the Canadian dollar should be, I wouldn't say getting stronger, but at least be stable. What's your thesis? I'm curious. There it is. It should be that, and yet it's weakening. So the way I trade is, first of all, it gets too crowded. People are too crowded to the long side, so I'm looking to
24:53 get short. And then it stops reacting well to news that should have it reacting well, which is what it's done, as you just said. So that's what got me short. Let's talk about your mindset a little bit further here, because you've said before that, or you just said it's a difficult trading year. It's really difficult to do anything. How do you control your emotions and not get involved? Meaning you put a trade on long short. How do you stay out of it? How do you manage to control your emotions there, Jason? I have a process that I trade. If I don't get the signal via that process to do something, I don't do something. It's very simple for me now because I've been doing this for a very
25:39 long time. And I am quite frankly allocated money by clients who are allocating money to me for the very specific reason of they are looking for the return stream that i provide um and i provide that return stream by following my process so if my process is saying don't do anything then i i don't do anything it's it's fine i've been doing this long enough to realize that there are times when there's nothing to do you know no one will hold them knowing the full of that whole thing um Can you elaborate on some of the markets? I always say that like, hey, I've been running my process now for 26 years. I've
26:25 never had a down year. That's true. But it's not to say that there haven't been some single digit years in there, 2%, 4%, you know, and if this happens to be one of those, well, then, well, truthfully, the down year for me, it is coming. One of these days, unfortunately, I just hope that it's small. You know, if I keep my risk right, then it will be small. But even if it's not a down, if I'm up two or three or four or 5%, you know, I've had plenty of those in 26 years as well. So I, my expectations, I think over the years have become realistic, I guess is the way to say it. So therefore I don't feel the need to trade. If I do, well, I have a retirement account that I can do stupid things in if that's what
27:12 I feel like doing. You know, 10% of my retirement account sits there. And I can do stupid things there if that's what I want to do. In the last six months or 12 months even, is there anything that made you think or rethink your process or even adjust a couple of variables? Anything like that? No. I haven't changed my process in 26 years. Okay. Can you give us, without giving away the secret sauce though, Jason, any parameters you look at? Obviously, when it's a crowded trade, I'm guessing volume is a factor. But... Anything else? The Commitments to Traders report is what I look at to determine if things are crowded in the futures market. That and then, like I say, I do a lot of reading and a lot of listening to hear what people are saying and what they're doing. I
27:58 watch a lot of people that talk about what they're doing to get a value for that. It's about positioning and COT. It's about the psychology and listening and reading. And then it's about the market action. which I just observe, you know, is it up when it should be down? Is it stronger than you would think? Is it weaker than you would think? You know, it's those three things. That's all I do. That's all I do. Do I sit here and build macro thesis and all that? Yes, but I don't trade off of any of them. I just find that part interesting because I have a degree in economics and all that, and I like to follow it. And I like to just like a lot of people, I like to build these thesis. Thesis, thesi, I don't know, but I don't trade off of them because I lose money doing that and I
28:46 would prefer not to lose money. Now, if we speak again in six or 12 or six months, six months time here, Jason, what is the one topic or one market we're going to talk about that might keep us both busy for the last six months then? I think fixed income is the most important thing here. Fair enough. That's the thing I think that we'll be talking about. Awesome. Jason, I really like your process and how you present, you know, your strategy as well. Where can our audience follow more of your work? Crowdedmarketreport.com. You don't even have to go there. Just go on YouTube and do Crowded Market Report. I have a lot, lot, lot of free videos on there, hundreds of them that talk a lot about my process and trading in general and mistakes that I
29:36 see a lot of people make trading and good habits, bad habits, all that type of stuff I go into. Fantastic. Awesome. Jason, half hour just flew by. Tremendously appreciate you joining us here. And can't wait to do this again in six months and see if it was fixed income that kept us busy for six months and whether that was the trade or the market that we should have been following or whether the eye of mortar should have been looking elsewhere. right? Absolutely. Fantastic. Jason, stay on for a second. Thank you so much. And everybody else. Thank you so much for tuning in. Really enjoyed the conversation here with Jason. If you did as well, go check out his website, go check out his YouTube videos. They're usually informational. They're short seven, eight, 10 minutes long sometimes. So really easily digestible as well. And if you haven't done so hit that like and subscribe button here as well on our channel,
30:22 we tremendously appreciate helps us get phenomenal guests like Jason onto the program. And it's We just appreciate it. I said that before. So thanks so much. Take care. And don't let the emotions run your investment strategy. Take care.
