The Bad Times Happen When Market Valuations Are Too Rich...Like Now | New Harbor Financial

Finance-focused summary (markets, investing, planning, risk)

Market regime & valuation thesis

• The hosts argue the US stock market is extremely overvalued, among the most overvalued points in history, drawing parallels to:
  • The tech bubble peak around ~2000
  • 1929
• Core caution: “bad times happen when valuations are rich.”
  • They emphasize timing is uncertain, but risks rise materially from stretched valuations.
• Macro/earnings framing:
  • Corporate profit margins are described as very wide, with analysts projecting margins to remain high.
  • Concern that margins may mean revert (attributed to Jeremy Grantham).
  • Historical context:
    • S&P 500 margins are typically ~6% to ~12%
    • Currently described around ~10–11%
    • Forecasts for 15–16% margins are described as unlikely.

What the market is doing (S&P 500 rally + technical signals)

• The S&P 500 is described as having produced one of the most powerful one-month rallies in decades after a sharp selloff.
• Timeline & key levels:
  • ~March 30: labeled as the market low so far in the selloff
  • After that, “almost every single day has been up”
  • 200-day moving average (200DMA): stated as taken out
  • 50-day and 21-day moving averages referenced as improving trend/technical conditions
• Technical indicators:
  • Bollinger Bands: the market is overbought but not extremely so
  • “Upper band” described as about ~2 standard deviations above the 50DMA
• Options/hedging:
  • Put options were put in place around March
  • They went in the money, helping hedges during the drawdown
  • After the reversal, they stated they took the put options off

Sector divergence / technology “froth” risk

• They note internal bifurcation within tech:
  • Semiconductors +67% over “a little over half a year”
  • Broad technology (XLK) +22.5%
  • Software down ~20% over the same period
• Takeaway:
  • They expect a likely pause/pullback after a sharp move, but not a “run for the hills” scenario.
• Tools and examples referenced:
  • XLK (Technology SPDR)
• Earnings season context:
  • “42% of the S&P reports earnings this week,” with mentions of major mega-caps such as Nvidia, Microsoft, Apple, Facebook/Meta (tickers not explicitly stated)

Portfolio positioning & risk management approach (New Harbor)

• Current equity exposure and how it changed:
  • ~48% in equities currently
  • Previously dipped to ~41% after adding hedges
  • With puts hedges in the money, effective exposure was described as ~30% equities
  • After the reversal, they added ~7% equities, reaching ~48%
• Geographic allocation:
  • ~48% equities total, with approaching half in non-US equities
  • Rationale for reduced US “froth” exposure:
    • Allocation to energy, basic materials, and non-US stocks
• Emerging markets / non-US structure (selective vs broad ETF):
  • International exposure described as:
    • ~Emerging markets and/or commodity/materials-type exposures
    • ~Developed non-US only about ~1/4 of international allocation
  • Claim: many non-US markets have less technology weighting than the US

Oil/war macro risk consideration (Iran / oil shock)

• They downplay headline-driven reaction (“markets don’t seem to care that much”).
• But they emphasize oil prices as the key variable for global knock-on effects:
  • The concern depends on whether oil stays elevated or rises further.
• Differential exposure examples:
  • Countries that import energy (e.g., Taiwan, Japan)
  • Countries with domestic energy (e.g., Brazil) plus claims of targeted Latin America exposure

Their stated investment “framework” & signals (methodology)

Mike describes the process as a system with risk management and signal-driven action. Tools/methods named include:

• System discipline
  • “Create a system and stick with it”
• Point-and-figure charting
  • Using a service: NASDAQ Dorsey Wright
  • Example: Apple (AAPL) described as on a buy signal (column of X’s) and having a double top break
• Relative strength analysis
• Bullish percent (breadth/participation)
  • Defined as: % of stocks in an index on a buy signal
  • Reported numbers:
    • S&P 500 buy signal: ~32% a few weeks earlier
    • Now ~62%
    • Prior “washed out” example last year: ~14%
• Dashboard confirmation
  • They look for reversal up, follow-through days, and other confirmation signals before reducing hedges
• Equity allocation windowing
  • They avoid going to 100% equities, constrained by the macro/valuation regime
  • Referencing an allocation “window” up to about ~50%
• Sector selection
  • They add/shift exposure toward sectors scoring well on the dashboard:
    • Transports, industrials, utilities, biotech (added 3% last week), basic materials, technology

Hedging / stop discipline and how they respond to drawdowns

• They explicitly state “nothing’s guaranteed.”
• If a crash occurs, they would act.
• Likely risk-reduction steps:
  • If the market reverses downward: reduce equity exposure from 48% toward 45%, then 40%, etc.
• Emphasis on sequence/risk around major downturns:
  • Warning: risk decades can happen where stocks drop 50%+, and it may take 10+ years to recover.

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Precious metals: price action, expectation, and instruments

• They discuss precious metals weakness and describe a stance of patience.
• Price levels (context):
  • Silver ~“$75/oz” (and ETF SLV)
  • Gold futures dropped below “4,700/oz”
• Instruments referenced:
  • SLV (iShares Silver Trust ETF)
• Technical approach / levels for silver:
  • Reference to “90 spot” as around ~80 SLV as a prior target area
  • A downtrend line: better setup if price breaks above and holds
  • 75 SLV cited as roughly 84 oz silver (approx.) as a key level for improving chart structure
• Recommendation tone:
  • “Not worried”—patience tested—expecting eventual upside breakout is more likely than downside continuation.

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Gold mining companies & valuation metrics

• Precious metals allocation in portfolios:
  • Around ~12.5% (stated by John/Mike)
  • Framed as not extreme; they mention rotation from gold miners into bullion for stability.
• Company mentioned:
  • Newmont (described as reporting “blowout free cash flow”)
• Valuation methodology discussed:
  • Free cash flow over enterprise value expressed as a multiple
  • Enterprise value as a multiple of EBITDA
  • Source referenced: RBC
• Key scenario numbers (from RBC charts):
  • At $4,000 gold/oz, estimated gold-miner multiple about ~8.5
    • Described as relatively low vs other sectors (only energy lower)
  • If gold resumes higher:
    • $5,000–$7,000 gold
    • Valuation case becomes more compelling (multiples remain attractive / “undervalued” framing)

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Financial planning themes (risk, sequence-of-returns, tax strategies)

• Planning is about aligning investments to life goals and retirement needs, not chasing headlines.
• Rebuttal to “more risk = more return”:
  • In certain cycle phases, taking more risk can increase the odds of larger losses.
• Sequence-of-returns risk emphasized:
  • Bad sequencing near retirement can cause failure even if long-run returns are fine.
• Retirement account exposures:
  • Retirees are often described as having equity exposure higher than historical “typical” targets, partly due to strong markets post-2022.
• Capital gains / taxes:
  • Rebalancing may involve booking gains and paying taxes at “favorable rates” depending on bracket
  • Selling to rebalance to target risk is not inherently harmful

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Roth conversions (explicit strategy framing + cautions)

• Framed as one of the “three planning gaps” people miss.
• Strategy: Roth conversion strategy
  • Timing windows:
    • Especially for people in lower brackets, described as 12% / 22% / 24%
    • “Almost a no-brainer” for conversions in the 12% bracket (their view)
• Cautions:
  • Not big fans of Roth conversions in high tax brackets
  • Pushback on generic calculators:
    • Many assume living to age 95 and earning ~8% returns
    • They argue these assumptions can bias conversions upward, especially for passive investors and uncertain longevity/returns.

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Three major “planning gaps” called out

1. Roth conversion opportunities (when bracket/timing supports it)
2. Passive exposure to risk (hidden risk concentration; “risk decade” framing)
   • Warn: market drops 50%+ may take 10+ years to recover (sequence risk)
3. Behavioral blind spots
   • Selling bottoms / buying tops under emotion
   • Advisors as “emotion filters” / guide rails

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Explicit disclosures / disclaimers

• The presenters discuss investment strategy and market views.
• The provided text includes no specific “not financial advice” line, but it does include:
  • Several reminders that charts are illustrative
  • A repeated theme that “nothing is guaranteed”
• They explicitly say an ETF list (e.g., XLK/software/semiconductors) is “not a recommendation”—it’s illustrative.

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Tickers / assets / instruments mentioned

• S&P 500 (index)
• AAPL (Apple) — point-and-figure discussion
• XLK (Technology SPDR)
• SLV (iShares Silver Trust ETF)
• Gold futures (price level referenced; no specific ticker)
• Gold (spot price scenarios)
• Silver
• Companies mentioned (tickers not explicitly stated in the text):
  • Nvidia, Microsoft, Apple, Facebook/Meta (and “Meta” reiterated)
  • Newmont (gold miner)

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Key numbers & dates highlighted

• Market:
  • Selloff low: March 30
  • Rally breadth: S&P buy signal 32% → 62%
  • “Washed out” example: ~14% buy signal last year
  • Technical moving averages: 200DMA taken out; 50DMA / 21DMA referenced
• Technology performance (over ~6+ months):
  • Semiconductors +67%
  • XLK +22.5%
  • Software -~20%
• Precious metals:
  • Silver ~ $75/oz
  • Gold futures: below 4,700/oz
  • SLV levels:
    • ~80 SLV as prior target area tied to “90 spot”
    • ~75 SLV as roughly 84 oz (approx.)
• Portfolio allocation:
  • Equities: ~41% → ~30% effective (with puts) → ~48%
  • Non-US equity share: “approaching half of equity”
  • Precious metals allocation: ~12.5%
  • Biotech added: +3% position
• Roth conversions:
  • Preferred bracket examples: 12%, 22%, 24%
  • Caution for “high tax brackets”
• Valuation scenario (RBC):
  • At $4,000 gold/oz: multiple about ~8.5
  • Upside case: gold $5,000–$7,000

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Step-by-step / framework items explicitly shared

• Market risk framework (signals → action)
  • Track point-and-figure buy/sell columns
  • Use relative strength
  • Measure bullish percent (breadth/participation)
  • Wait for reversal up and confirmation (e.g., follow-through days)
  • Adjust hedges (puts): remove puts / increase equities as signals improve
  • Use an equity allocation window (described as up to ~50% rather than 100%)
  • Build allocations using top-scoring sectors
  • If downside accelerates: implement a reduction ladder (e.g., 48% → 45% → 40%)

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Presenters / sources mentioned

• Adam Tagert (host; “Thoughtful Money” founder)
• John Lodra (lead partner, New Harbor Financial)
• Mike Preston (lead partner, New Harbor Financial)
• RBC (gold-miner valuation chart source)
• NASDAQ Dorsey Wright (point-and-figure charting service/source)
• Ed Slott (mentioned re: Roth conversions video)
• Jeremy Grantham (mentioned re: profit margin mean reversion)