Mindless Buying: The Driving Force Behind Modern Market Dynamics

Episode #331 | October 17, 2023

Episode #331 | October 17, 2023

Mindless Buying: The Driving Force Behind Modern Market Dynamics

In This Episode

On this week's Stansberry Investor Hour, Dan and Corey are joined by Michael "Mike" Green. Mike is the chief strategist and portfolio manager of Simplify Asset Management – an investment advisory firm. He has spent nearly 30 years studying markets and market structures, and he brings his decades of insight to today's show.

But first, Dan and Corey discuss the evolving landscape of the bond market, the opportunity in Treasury bills, and the potential impact of high bond yields on the broader investment world. Corey warns...

Take advantage of it now, because if the economy goes in the crapper in the future, the [bond] rates are going to go down when the Fed cuts [interest] rates.

Mike then joins the conversation to delve into the world of passive investing, which involves buying stocks without any reference to fundamental data. This leads to a strategy of mindless buying. As Mike explains...

[The stock market is] marching upwards, being led by a very few number of extremely large-cap stocks that have relatively limited growth prospects... In real terms, PepsiCo's sales are down over the last decade. This is true for companies like Apple where their sales growth, since the introduction of the iPhone 5, [is] stagnant... certainly not justifying the types of valuations that we see.

After, the discussion shifts to how necessary the markets have become in the modern age and how they could result in the implosion of the retirement system...

We've actually created a utility that we call the markets that are being used largely to fund the retirement of Baby Boomers and others... But that's not what markets are designed to do... Then you suddenly are trapped in a situation where you have to say, "Is the government willing to stand by and let the retirement system fail?"... What we're trying to do in using markets to create a retirement mechanism is wrong.

Finally, Mike details how the Federal Reserve can influence the markets with interest rates, and in turn how interest rates can affect passive investing. Moreover, he highlights the unique opportunity in the bond market and explains why bonds are an attractive option for investors.