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My next guest, he's in a suit right now. By the way, one of the most respected market observers out there and Biano Research President Jim Biano. Jim, let's start with the notion that the blue chip names are doing pretty well. America, Inc. is providing an upbeat picture of any absence of economic data. I think that I actually prefer hearing from CEOs more often than the data we get.

Charles

Jim Bianco

Yeah. And I'd like I'd like to prefer that they're non not AI companies that are actually telling us that they're actually going up. And there has been some numbers that have been coming out in the third quarter earnings reports that have been very optimistic especially in the financials financials the banks and stuff have been reporting very good numbers speaking of oldline companies.

Yeah. Tell talk about uh this right here. You know we every day on the show someone comes on and says Charles I don't like the market because we're trading at 23 times but a year later look how often this market is higher rather than lower. I mean, just so how do you use these PE ratios? How should someone incorporate them in their day-to-day decision-making?

Charles

Jim Bianco

It is a bit of a concern, but they're not timing tools. You're right that over the next year or two, the market could go up or down a lot, but they are expectation tools. If you're buying stocks at really high pees and saying where are they going to be in five or 10 years, you better hope that earnings are just through the roof. Otherwise, even buy stocks though to hold in five or 10 years anymore. I mean, really, in 60, I know the average holding time was like seven years. Now, it feels like six months. if you're long-term.

Yeah, I would agree with you there. But so that's where the timing that's where the PE ratios come in is that over the next several years, if they don't meet expectations, they're going to struggle. But for the next couple of months or year or two, not really.

Charles

Jim Bianco

And we know like if the market were to start going down, everyone would start to point to this. Oh, that's why, you know, but again, it's not necessarily the reason per se, but it does add pressure uh once if we do start to move a little bit lower. Although nothing's moving lower, right? You posted this chart. Essentially, the worst performing asset is up this month. So, everything is up and that's sort of bewildering to a lot of people.

Jim Bianco

Yeah. Stocks, bonds, cash, commodities, gold, it's all going higher. And that is I should check the beanie babies and see if they're making a move, right? And you mean your house is going up, too. Don't forget that. I we we've posted this chart with respect to what exactly is the Federal Reserve trying to fix by cutting interest rates because everything is going up and the Fed works through what they call the financial channel to try and spur markets to spur the economy. Well, if everything's up, I'm still trying to figure out what they're trying to fix.

Well, help me with this then. Uh because uh this is the the sofa uh you know the the secure overnight financing rate SFR. talk to our audience what it is and why this is starting to bubble up for some people as a potential concern.

Charles

Jim Bianco

So, it is a concern. It is not a crisis or anything like that. And that is that the amount of liquidity in the banking system seems to have been drained a little bit too much and we're starting to see higher short-term interest rates. That's always a concern that we could have issues if it isn't rectified. Now, the good news is everybody's talking about it, including the Federal Reserve, including Chairman Pal. So maybe they're going to resolve this situation, but until then, this is kind of one of the yellow flags that I have on my screen.

How would they resolve it?

Charles

Jim Bianco

By adding more liquidity or at least stop doing quantitative tightening for starters and then possibly they've already suggested they're going to, but that would be next year maybe.

Well, yeah, they'll probably make an announcement at their meeting next week. They'll stop quantitative tightening, but it might not be until the end of the year, but they'll not announce that it's coming next week.

Charles

And this is a chart that you all one of the many charts you put up uh that that that goes along with that. And let's let's talk about the gold for a moment. Uh this is a par there's a million charts out there. They're all sort of the same. This is sort of parabolic move. China has become also all of a sudden they have an insatiable appetite after not having any appetite for a long time. All the other non you know big central banks were buying gold big time since the Russia's invasion of Ukraine. But why now with China? It might be political in that they're taking their dollar assets and they're reserving them or moving their reserves into gold because of all of the negotiations they're having with Trump over the tariffs and they want to protect themselves potentially from being either sanctioned or something with the dollar and a but what it does show this chart is that a lot of the buying of gold is coming from Asia. It's not out here in the United States. We're just eating popcorn enjoying the rise. It's the Asians that are buying gold in big numbers. Although, we got to give props to Americans who bought it at Costco a couple years ago. They're doing pretty good.

Charles

Jim Bianco

This is an expectation of where Federal Reserve is going to go with interest rates. The two years very tied to the funds rate policy.

Does this add credence to three more rate cuts or at least 75 basis points this year?

Charles

Jim Bianco

It does. It does that. It believes that there's going to be three more rate cuts, but the the caveat I would give you is we're in a government shutdown. We haven't gotten any data. When that data comes out, if it's too strong, this could change.