7-20-26 Why Retail Traders Keep Losing

And now for something completely different. Forget everything you've been told by others before. I have a cash problem. Yeah. Every time I put cash in my wallet. Get ready for the real deal. Kind of like this is a really old thing, right? Old people have cash in their wallet. It's just one of those things, right? We're just not into this full digital thing everywhere. The full story. I just feel comfortable having cash in my wallet. I like cash in my wallet. The whole enchilada. But every time I put cash in my wallet, things happen. It's money news and information you can use. Like, my daughter shows up and needs gas money. To grow financially healthy, wealthy, and wise. Or, you know, in our neighborhood, we have Girl Scouts all over our neighborhood, so we can't obviously buy from one of the girls in the neighborhood and not the other girls in the neighborhood. Because that wouldn't be fair. That would not be fair. Now, welcome in The Real Deal, The Real Investment Show with Lance Roberts. She showed up yesterday, and so $20 out the door. Thin Mints. Presented by RIA Advisors. Welcome to the show this morning. Of course, it is Monday, July the 20th, as we start to wrap up the second half of the month of July. That also throws us into August and September. Tends to be weaker months of the year, but not always the case. Of course, markets have struggled last week just a little bit. We covered kind of the momentum meltdown in this past weekend's Bull Bear Report. So if you haven't got that yet, be sure and go to the website, Real Investment Advice, kind of go through the whole kind of semiconductor trade so far this month. Of course, it's been under pressure. Semiconductor is down about 20% from the peak. Again, not surprising. Huge run up. You're going to give back some of that. Question is, of course, is that the case? Kind of what happens next? That's what we're all kind of focused on right now. Has the demand kind of for semiconductors shifted in any meaningful manner? Is this just a pullback that buyers are going to step into? We're going to find out. over the course of the next few days, for sure. This week and next week is going to be the drivers for that. This week we have Google and Tesla, and then next week we're going to get Apple, Microsoft, Amazon next week. So we're going to start getting some of the reports, earnings reports from the hyperscalers about demand. Are they, you know, the big concerns like, are they going to cut back on spending on data centers? Are they going to change the outlook for data centers? You know, whatever it is, lots of questions out there that we're going to get some answers to this week so that we'll be moving the market. So be a little bit cautious this week as we get ready, you know, because, again, we're going to and again, just outside of those guys, just lots of earnings this week. We're over the next two weeks, we're going to be having just a plethora of earnings coming in. We're going to have about, you know, 70 percent, 75 percent of all S&P 500 companies reporting by the end of July. So it's going to be the big rash. Now, we'll get into NVIDIA and some of the other tech stocks in August. But again, we're going to have a big chunk of these this week coming up that are certainly kind of set the stage, so to speak, and either accelerate fears over what's happening with data centers and AI and all that. It's either going to accelerate that or it's going to quell a lot of these arguments. Because again, at this point, everybody's been talking about, you know, one side of the camp, bullish AI, revenues are great, etc. Then you've got the other side of the camp. It's all a bubble. It's all going to blow up, you know, kind of any moment. But, you know, companies keep operating. So we'll figure all this out this week. We'll cover it as it happens, of course. But, again, this week's going to be a little bit volatile. So if you've got a lot of exposure in your portfolio towards these stocks, you know, kind of measure your risk a bit. Because, again, you know, we'll see what happens. But as we've seen, you know, in previous earnings cycles, a company can report really good earnings, but just say one little thing about outlooks or guidance, whatever it is, and the stock's down 20%. And that's, you know, that's a big hit to take to a portfolio. So just be careful with kind of your exposures. Remember, you can always add back to positions after they announce earnings. And so if you want to decrease your risk going into earnings reports, not knowing what's going to happen, nothing wrong with that. If they report great earnings, stock goes up. You can always buy back some more shares. You're not precluded. You get kicked out of the Google club, as an example, just because you trimmed some positions going into earnings reports if you're uncertain about what's going to happen afterwards. Of course, let's talk about what happened over the weekend. Of course, over the weekend, bombs started flying back and forth between Iran and the U.S. again. Lots of bombing over the weekend. Tons of headlines out over the weekend. It's like, oh, just wait until the market opens on Monday. It's going to be a disaster. So, of course, all weekend I'm waiting for the futures to open up, and futures opened up last night at 5 o'clock, and the market's positive. So despite, you know, all the headlines and all the scary X posts and everything all weekend long, markets are opening up this morning on the upside. Dow's up about 115 points right now at the open. S&P's up a bit. NASDAQ's going to be up about 24 points. So, you know, again, it's not going to be a strong open this morning, but we are seeing some money flow into semiconductors. So here's what you need to know before the bell this morning. So again, lots of headlines over the weekend, lots of scary headlines, bombs flying, it's going to be terrible. Oil prices are going to 100. This is all kind of the story, all day Saturday, all day Sunday. And this morning, futures are pointing positive. And actual oil prices actually on the decline this morning. Despite this, oil prices are sitting down at about $82 a barrel this morning. Again, we rallied in oil. Remember, we talked about this a couple of weeks ago. Oil prices have gotten very oversold and basically had got kind of a very big, you know, kind of oversold extension below moving averages. Oversold on a relative strength basis. We said, hey, something's going to happen here. You're going to get a little bit of a rally in oil. That's exactly what's happened back on a buy signal. But oil prices back to being overbought. We're right into that resistance level. We talked about previously in between that kind of 82 and 86, 87 level where these two moving averages are sitting right above it. So again, you know, despite the headlines over the weekend, everybody expecting a big surge in oil prices this morning. So far, markets aren't open yet, but so far that's not the case. Futures are pointing a little bit lower this morning. We ran right into the 50-day moving average, kind of bouncing off that resistance level, at least for right now. Doesn't mean we can't break and move higher, but if we do break and move higher, We're going to run right into the 100-day moving average, right around $89 the barrel at the moment anyway. So just kind of keep watching that. But again, you know, despite the headlines and the risk, like I said, the market's going to be opening up positive this morning along with the NASDAQ. S&P is trading right below support. We broke the 50-20-day moving average on Friday, rallied right back up into it. So again, as we've talked about before, kind of that knee-jerk reaction is, oh my gosh, I broke the 50-day moving average. I better get out, you know, because we broke support. We've done this before, you know, we broke it back over here. And when we broke it previously, back in June, I said, hey, give it a day or so. Let's see what happens before you make any reactions. And then the market recovered right back above it. And then we kind of rallied, you know, back up from there. So we're breaking it again. Now, could this time be different and the market work its way lower? Absolutely. Yes. Right. That's when we pay attention to moving averages, but you want to give it a day or so here. Markets did sell off a little bit, so we reduced some of that overbought condition. You know, sitting very close to a sell signal right now, the market needs to move back up today, get above those moving averages. If they don't over the next day or two, then the risk of further decline becomes much more probable. And again, we've got a lot of earnings this week that could certainly drive that as well. Now, one side of that is to pay attention to that is looking at the volatility index because, again, the volatility index continues to remain extremely suppressed. Now, we did pick up a little bit on Friday with the market action on Thursday and Friday. We did see a little bit of a pickup in the VIX. We were down about 15, 16. We did move up to around 18. Still very, very compressed, running at pretty low levels right now for the VIX. So, again, if the VIX starts to move higher, and this was kind of one of the things that we were expecting over the weekend And with the news coming out of Iran, we'd see a sharp, sharp pop in the VIX this morning. Markets down fairly sharply. At least that's not the case right now. So we'll see you kind of what, but watch what happens with the VIX here. We are on a buy signal for the VIX, which does suggest that we could see a bit more of a correction over this week. So again, earnings driven, more Iran news headline driven, get a spike in oil prices driving it. there's certainly some support here at least in the near term for a bit move higher in the VIX lower prices in the S&P so again just kind of maintain and manage your risk right now not expecting a broad sell-off but again just because of the market setup we're kind of in a real tenuous position we're below that 50-day moving average if we don't if we fail to get above that turn lower and take out Friday's low we could see a bit more of a decline maybe three to five percent we'll see what happens. But that's what you need to know before the bell this morning. We'll come back and talk about why most retail traders lose money over time. We'll kind of get to all the stats and the causes of that coming up next on the show. Don't go away. Get daily investment news you can use. Delivered at the speed of the internet at realinvestmentadvice.com. Looking for more income and less worry in retirement? Our next dynamic learning series will guide you with savvy social security planning. How delaying taking social security is worth thousands of dollars for you. When and why you should claim. And personal couples guidance from Jonathan McCarty and John Penn. Savvy social security planning, Thursday, August 6th. Register today at realinvestmentadvice.com. The RIA dynamic learning series. Savvy Social Security Planning, Thursday, August 6th with McCarty and Penn. Savvy Social Security. Register now at realinvestmentadvice.com, realinvestmentadvice.com. You're listening to The Real Investment Show. All right, good morning. Welcome back to the show. If you did get a chance this weekend, I hope you joined us for the candy coffee this weekend. I was hanging out with Danny and Richard just chatting about some live Q&A that was in the chat over the weekend. It was a lot of fun. Took a whole hour of my Saturday away from me. I precious my weekend moments. Once I get the newsletter, I had to get up at 4 o'clock Saturday morning. Yeah, because I had to get the newsletter out before we did the candy coffee. So I had to get up extra early. It was time well spent. The dog was wondering, like, what the hell is going on at Saturday? Right. But I still get up normally at 530 on Saturday mornings, right? I get up in the morning. It's quiet around the house. You know, I sit in the living room, get a cup of coffee. It's my one day I get coffee. So I sit in the living room. I drink a cup of coffee. I look out the window. Just enjoy the quietness. Sure. before my wife gets up and starts telling me all the stuff we have to do all day. Here's your list. What's your plans for the day? I don't have any until you tell me what they are. This is a comment for the women out there listening to the show this morning. Y'all always wondering what we're thinking. We don't think anything. We're like dogs. We just sit around and wait for you to tell us what we have to think. Like, what are you planning today? I'm not planning anything. I'm just waiting for you to tell me what I have to do. So just you know whatever plans I had we going to go out the window anyway as soon as you said this is what we have to do So I just wait I in monitor mode Exactly See this is i think this is the problem between when you know kind of men and women the venus and mars thing yeah well i just think women think that we have all this stuff going on up here oh yeah yeah and you know we're mostly just thinking about how the romans made the roman empire that's pretty much it i mean outside of that you know how did we be how did we beat the gauls right that's that's the that's the real thing going on up here oh yeah yeah and some guys it might be civil war stuff but you get the point and then they're like what are you thinking it's like i'm not thinking anything i'm listening to paul mccartney's baseline exactly depending on what your what depends on what your hobby is yeah what your proclivities are that's what we're that's mostly what we're thinking about proclivities and food one of the two and what's for lunch and then we wait for you to tell us what we have to do today and then we're happy to don't don't mistake that comment by the way that you know we we begrudge that no we we live our life to serve our wonderful wives and so we just wait to make you happy it's like you know this is the big debate over what to eat women are like what do you want to eat i don't know what you know you ask your wife you know what do you want to eat tonight i don't know what do you want to eat no i just want to make you i'll eat anything It could be dirt on a plate. If that makes you happy, I'll eat that. A marketing idea for restaurant. Yeah. Name it. I don't care. That's a great idea. Where are we going to go eat? I don't care. Got the place to go. Just name it. Exactly. Anyway. Glad we got that solved. If women were listening, we've just solved it. We've just made men's lives easier. Cut our audience in half. What's it meant to be rude? It's just meant to be true. If you want to be a happy wife, happy life, that's what we live to do. Happy husband. Don't ask him. Just tell him what he needs to do. He'll be completely happy. And get chickens. I'll tell you a story off, Mike. Okay. Anyway, we've got to get to work this morning. Good morning. Sorry. Side rant. So a couple of things over the weekend. And first of all, I wrote an article on Friday before we get into the trading issue this morning. I wrote an article on Friday talking about home affordability. And, you know, this is kind of one of the kind of the big narratives going on. Brent, you can be sure. It's kind of one of the big narratives that's going on. It's like, you know, when you were young, you could buy a house for a loaf of bread and a dozen eggs. Right. and we actually touched on this a little bit on uh saturday on the uh candid coffee but two and three americans right now think it's a bad time to buy a house right it's not affordable and these are the headlines right and so when there's a lot of headlines like this this is what people tend to believe and especially younger people tend to believe this and so i was like okay is this true right because part of the problem is the narrative that we get from the mainstream media and of course then you got youtube channels everybody else coming i was like housing's not it's so unaffordable i can't afford to buy a house it's this it's that it's the other thing and i was like okay well let's take a look at it so first of all you know a big problem with home affordability is how we measure it in terms of just prices of homes and we price this by looking at the 10 major city or 10 or 20 major metroplexes across the U.S. and we assume that that is the and then we take that we make that the average price right so you're looking at 20 major cities and you're extrapolating your average price out of 20 major cities which are the highest places to live right the most costly places to live is living in a city that's where it's the most expensive because that's where the population clusters, supply and demand drives prices up. You move outside of that story, right? House prices are vastly different. So in other words, you know, the house prices in Austin are different than the house prices in Katy, Texas, right? The house prices in Houston, Texas are different than the prices out in Montgomery County, wherever it is, right? So, you know, you have to look outside of the headlines and start actually looking at the data itself. And I did some Google searches. I was saying, okay, you know, show me some houses that are less than $250,000. And, you know, there's a lot. There's a lot of houses out there that you can buy for $250,000, $300,000, about $100,000 less than the median $400,000 that comes out of the major metroplexes. So part of it is doing a bit of homework. So if you want to afford a house, you know, that's part of doing the homework. And, you know, move, and the other issue, of course, is moving where the jobs are. And you can't afford a house in a city if you can't get a job in the city, right? And so you may have to move somewhere else where houses cost less, and there's work. And so part of, if you really are kind of, you know, instigated to buy a house, you may have to look outside of the place that you live that's just kind of part of it but what a lot of this comes down to though is at least from the mentality of it is that interest rates have risen from kind of a pandemic lows when everybody was running out and you know home affordability wasn't a problem during the pandemic we were sending checks to households giving people down payments and they were having zero interest rates and so we had this house buying mania that was going on you know young young people were buying houses sight unseen and getting into them so now rates have risen loan values have tightened up here a bit mortgage rates have risen a bit and it's like no well the houses are so unaffordable i can't afford to buy a house but and but boomers could you know boomers could afford to buy a house for a loaf of bread and a slice of cheese whatever it was but i can't afford to buy a house and and so I said, okay, well, that's not really true. And so we went and looked at the data. So we pulled all the Fed data going back to the 1970s, and kudos to Richard Rosso on this because he was one that turned me on to this data to start with. But back in 1980, for example, and you bring this chart up, just the mortgage part, right? So in 1980, housing cost as a percent of income was about 39% versus 32% today. All in with property tax, it was 47% versus 43.5%. So I'm not saying that it's more, you know, it was like, oh, it was more back then, but it was about the same. In other words, buying a house back in 1980 is not that vastly different than buying a house today. and you also have to remember that back in the 1980s there was no split payments money down those type of things we didn't have you know all these types of extra benefits that you have today to buy a house that makes it easier to buy a house back then it was 20 down that was it you had to come up with a 20 down payment put it down and then you had your mortgage payment going on after that. Today, you can get into a house for 3.5% down with an FHA mortgage. You could split your mortgage 80-20 to avoid PMI. You can do a lot of things. So, you know, when you start factoring the two time periods in, it's not that vastly different. And, you know, so, and again, we talk about one of the other topics, years of income to buy a house. Very true story. In Iowa, it takes about 3.7 times in the U.S. nationals 5.1 times and in Montana it's 8.7 so again this goes back to the point about choosing where you live I mean Montana is vastly expensive you know everybody wants to live in Montana I guess because of Yellowstone but Montana is very expensive you know if you want to buy a house right U.S. national average is 5.1 but you can move and move to Iowa up 3.7 so again looking where you live is just as important as you know this idea about the price of the home anyway i wrote this whole article about it and you know and went through you know where the skeptics were right but you know the real point is is that when we start looking at you know the differences between you know 1980 and and you know today two real two real things kind really popped out, right? So here's a table. This was to buy a house back in 1980 versus today. You know, the median new home size was about 1,600 square feet versus 2,200 square feet today. So houses are larger, right, than they were back then. We want more amenities today than we wanted back then. You know, so there's a lot of variables that, you know, we're complaining about how the boomers could afford to buy a house back in the 1980s versus I can't buy one today. A lot of it comes down to personal financial ability. And again, when you go through all the stats and all through the data, buying a house in 1980, not that vastly different than buying a house today. So once you strip out all that data, then what's the real differential? The real differential is, is back in the 1980s, we didn't have to pay for internet. We didn't have to pay for a cell phone. We didn't have to pay for subscriptions out the wazoo for everything. We didn't have all this extra bleed in our financial statement that kept us from being able to afford to come up with that down payment for the house. And this is really, and honestly, when we get down right down to it, the biggest problem is personal on a lot of different fronts of just being able to create the free cash flow needed and still maintain the lifestyle that you want, right? So you're kind of, the big difference what this article really comes down to, and once you start doing all the analysis and really get down to it, a lot of it is about personal financial responsibility. You can't afford to buy a house just like you could afford to buy a house in the 1980s. Again, we just went through all the stats. It's not that much different. So that means if it's not that much difference to buy a house today than it was in the 1980s, it has to be, the only logical conclusion is, is it has to be personal financial responsibility, where you're spending, how you're spending. Back in 1980, we didn't spend $5 a day on Starbucks coffee. Again, we didn't have 12 different subscriptions to different services. We didn't have, you know, we had a television with five channels on it, rabbit ears. We didn't have internet. We didn't have cable. We didn't have all these. And I'm not saying that these things aren't necessary, right? What I'm saying is that these all bleed into the financial capability of individuals to be able to buy a home. and so it's not the boomers fault because we just went through all the data the data says right there that it's just the same to buy a house today pretty much as it was back then and so it's not the boomers fault on houses and the boomers didn't cause the housing bubble in 2008 and they didn't cause the housing bubble and you know following the pandemic that wasn't the boomers fault they were already in houses so it has to be personal responsibility and so So, you know, again, we go and then, of course, we go through at the end of the article, as we always do, is that if you're interested in buying a house, we go through all the kind of the requirements necessary to start doing that. And I encourage you to go to the website and download the e-book. If you go to our resources tab, download our e-book on the 10 laws of money, because we actually outline a budget in there to follow to help you save up that down payment for the house. So you can't afford to buy a house. You can afford to buy a house. It's no different than it was in 1980s. Financially speaking you have a lot of benefits today to buy a house that you didn have back in the 1980s like a 3 down mortgage So you can afford to do it You just have to set aside and sacrifice and build the financial capabilities to do that Investing is part of that right Save your money invest your money get it to grow, save up the down payment for the house, so forth and so on. Which brings us to today's article about why retail investors perform so poorly over time. And this is, you know, a lot of studies that have been written on this topic. And this is one of the things that we talk about here a lot on the show is what happens. And this is decades of data, right? We have decades of data on this to prove this. This isn't something that we just started talking about six months ago. You can bring up this table. Here's some stats. 848 basis points. That's the investor return gap between what the retail investor generally generates and the S&P 500. 6.5% is the annual performance penalty for the most active stock traders in the market. 72% of day traders ended 2020 with financial losses. Remember, 2020 was a big return year, even though you had the sell-off earlier in the year. $3 billion, that was lost by retail traders in options markets, and from 2010 to 2021, that was from an MIT study. 1.81% was the actual monthly gross loss for retail options traders. 25%, this is the Dow Bar's guess-right ratio. In other words, retail investors only guess right about one-fourth of the time. And again, this is just something that we continue to see repeatedly over time. And again, this behavior gap is an important understanding of when you're managing your own portfolio. Sometimes action is we feel like we have to take action for some reason. Oh, the market's correcting. I've got to do something. And sometimes the best thing to do is to do nothing. And doing nothing is sometimes the harder thing to do because there's so much action going on in the markets. And every day it's some headline on this. again over the weekend bombs are flying bursting in air and you know we oh my gosh Monday morning I got to sell everything and this is one of the things that you know there's a big push right now to open up financial markets to trade 24 7 I hope they never do this it will be the worst thing ever for investors but over the weekend lots of concern right this morning markets open up you know Nasdaq's going to be up 200 points now. So again, if you were knee-jerk reaction, had the ability to trade over the weekend, you would have sold a bunch of stuff over the weekend. Market opens up today, and you're like, God damn, right? That's what happens in the markets. But what this chart shows you is that over time, there's this big performance gap that builds between just buying an index and what investors actually get. Can you bring this chart up for me, Brent? And this is the investor return gap, which is, you know, over time, retail investors, they're the red, you know, typically lag what happens in the overall market by a significant degree. And that impairs returns over time. And this is primarily now. Look, I'm not promoting buy and hold here. Right. Buy and hold has its own problems. but what's causing this gap is the emotional bias that creeps into our trading not having it you know like over the weekend i had a conversation with a gentleman by email and it was like you know every time i buy the market i buy at the top i sell at the bottom you know i just you know this i'm just consistently making mistakes and i'm like okay what's your investment strategy and basically didn't have one. It's like he was just kind of buying stuff that he hears on television and hears from his neighbors, whatever. And, of course, by the time he's hearing about it, these things have already had huge runs, and so you're buying semiconductors at the peak, so to speak. And, of course, then you get a lot of the confirmation bias from the media. It's like, oh, there's this supply-demand imbalance or whatever it is, and this is going to happen, and that's going to happen, and this is going to cause this price to move up and to the right forever. and then things correct because things always correct, right? And that's what causes that gap. And so my conversation with him was, okay, write down on paper what your investment strategy is and email me back. I haven't heard back yet. But writing down an investment strategy is difficult, right? We think we know it in our head, but putting it down on paper is a much more difficult thing and when I can put it down on paper and visualize it, I can also start to kind of pick apart the problems with it. But once it's down on paper, set of rules to follow, you have to be disciplined to follow those rules, whatever they are. And we publish them a lot here. We write articles with trading rules in it. And most every week when I write the newsletter, I put tactics for the week in there. It's like, hey, do this, raise cash, whatever it is. you know so having some type of discipline some type of process to follow will make you a better investor over time and this is so you bring up the chart uh this is the from the dal bar qi qaib report they put out every year they've been studying investors for like 30 years 35 years now they're 40 years or forever it's been a long time but they've been consistently tracking investors for retail investors for a very long time and this is the gap between what happens over time. So when you talk about this percentage gap, you know, one and a half percent, it's like, ah, just underperformed by one and a half percent this year, no big deal. It compounds over time. So this is why when you take a look at the vast majority of Americans, and, you know, this is one of the things that we point to in the markets is like, oh, look, you know, the top 10% on 97% of the market, you know, whatever number it is. And, you know, there's a lot of truth to that. But the reason that, you know, the bottom 80 or 90, you know, the bottom 90 percent don't have a lot of invested wealth is a they don't invest. They spend everything they make. They don't have any money to put into the market. So they're not investing. That's first of all, it's a very big problem with the wealth disparity gap is that they literally just live paycheck to paycheck for the most point and go into debt. So they're not saving or investing. So when you take a look at the breakdown of uses of cash, 25% are going into debt. The other 25% of it is needing cash for other things other than investing. The 50% remaining basically just are putting minor investments into the markets. In other words, my 401k plan, I put in the bare minimum to get my match in my 401k plan because I need everything else to live on. So they just The vast majority of investors don't invest a lot, but the ones that do also make all these mistakes. And this is why when you take a look at the average balances of 401k plans and IRAs, the average balance is $250,000 for the average American. But you strip out the top 1%, get down to the median, it's about $65,000, $69,000, something like that. about one year's worth of income and savings on average. So this is why you have this kind of this wealth gap within the economy. But of the ones that are investing and invest aggressively, they make more mistakes that impairs their returns significantly over time. And so when we take a look at the stock market, we go the stock market did X, Y, and Z over this period of time. the vast majority of Americans did not do that because they were making all kinds of mistakes. And these mistakes add up. So this is annual returns by trading frequency, which is the important part of this. The least active individuals had the best returns. The more active you are, the worse your returns are over time. And again, this is just study after study after study confirms this. This was a study by Barbara and Odeen. But again, we know this data exists, and we've seen it. And this is why really great investors, if you go back and like, oh, I want to invest like Warren Buffett and Peter Lynch and these guys, they traded, right? They bought and sold stocks. I'm not saying that you should just be buy and hold and forget about it. but they didn't trade frequently. They were long-term investors. They bought fundamentals. They held for time. They let the markets work for them. And so the point of the article is not to say that you shouldn't trade your portfolio. The point of the conversation is that you shouldn't manage risk. I'm not saying that at all. I'm not saying that you should just sit around and just kind of let the market wash over you. But having a discipline, having a process to manage the risk in your portfolio so that you can let time work for you as well is very important because the fundamentals do matter. So if you're buying a good, you know, and look, there's lots of headlines right now about the MAG7 stocks. Okay, lots of stories about data centers and, you know, will all this money they're spending turn into revenue, so forth and so on. Maybe not. But one thing I know about Google and Amazon and Microsoft is a good example. Microsoft, when they came out with Azure, their cloud, everybody was like, ah, stupid, you're going to lose all kinds of money on that. It's a terrible idea. They're printing money off that. When Amazon first launched, they sold books on the Internet. Everybody was like, that's stupid. That is never going to work. Right? Google. Internet's a fad. And then when they bought YouTube and started running, everybody's like, who's going to watch videos on a computer? That's crazy. That's never going to make any money. Point is, is what I know about Google, Amazon, and Microsoft, after having been investing in them for 30 years now, is that these guys are very, very good allocators of capital. They don't make really big mistakes. Now, I'm not saying that their whole endeavor into AI is going to work out exactly as planned. I'm not saying that at all. But if you're in the camp that says AI is a fad and they're never going to make any money out of this, I wouldn't bet against those guys. Because historically, maybe they're wrong. Maybe all of them are wrong this time. Could be. But what I do know is when I look at their balance sheets and I look at their income statements, I can see the revenue growth. I can see the earnings growth. I can see the assets they own. Right? I can do the fundamental analysis on these companies and I can measure valuations. And if I'm an investor of capital, would I rather be invested in a Google or Microsoft or an Amazon versus a company that's just starting out that has no history? Right? But we seeing a lot of bets And again we seeing a lot of bets right now in semiconductors that this time is different It all changing But what we know about semiconductors for a fact hands down is that commodities are very very cyclical and go through boom cycles And this time is likely not different. But we have a big speculative binge in semiconductors right now. Now, I'm not saying that these companies aren't great allocators of capital because some of them are. But they are also in a very cyclical industry. So, you know, kind of the important thing, going back to that last chart I was showing you, is that, you know, sometimes being less active in your portfolio, rather than chasing memes, chasing themes, those type of things, being less active and letting the fundamentals work for you, despite all the headlines that come at you, right? You're getting flooded by all these headlines. You can take that. You know, you're getting flooded by all these headlines that are telling you, oh, this is bad, and this is bad, and this is this, and this is that, may all be true. But if you go back to your fundamentals and your earnings growth and those type of things, where do you want your invested capital hanging out? Do you want it in a company without a proven track record? Do you want it with a company with a proven track record? And, yeah, the same thing goes for companies like Coke and Procter Gamble, Walmart, Costco. I mean, it doesn't have to be, you know, we're just kind of talking about the AI bubble at the moment. But it could be any of these companies. JP Morgan, right? These are all great companies. They have proven track records. They have weathered the effects of time. They have been through the dot-com crisis. They've been through the financial crisis. They went through the pandemic. They're still here. And they're still growing capital. Now, they may not be creating 75% a year type things, right? They might not be in the heat of the moment where people are speculating trading options and those type of things and making money hand over fist. Maybe that's the case. But what I do know from having been investing in markets since 1990, that's a long damn time, just kind of dawned on me. I have seen people, you know, I've seen these phases come and go. I have seen the speculative binges, and I have seen the guys that were just absolutely killing it go completely bankrupt over and over and over again. And I've also seen the guys just consistently be stable, grow their capital over time, and make money and survive. And that's where you want to be. And this kind of goes back to buying a house, right? If you want to buy a house, don't speculate with your savings, right? Get off Polymarket. Get off Calci. Stop speculating in day trading options and those type of things. Start investing your capital properly. Growing rich slowly works. It's not fun, but it absolutely works over time. And again, the studies after studies after studies continue to show the same thing. This is a chart on day trader survival. this is the attrition rate over time 1% and I know I personally know one guy that is a very very successful trader and he's been doing it for about 30 years I know one guy most of them don't make it more than 3, 4, 5 years before they blow themselves up at some point and you can see the attrition rate. And this happens over and over and over again with people that trade actively. They win for a while. They do really, really good because bull markets make you smart. When everything's just going up, it's easy. And we get comfortable. We get complacent with that. And so when markets are going up, we can take on risk. Market bails us out. We take on more risk. And then we get really cocky that we really think we know what we're doing. And then the market turns. And the market starts to correct. And we start betting that, oh, I'm going to buy the dip. I'm going to buy the dip. And we're going to buy the dip. And the market just keeps declining, right? And then the margin calls come. And then the liquidations come. And before you know it, you get wiped out. You know, I told you, I wrote that article on the website about the guy in Canada that turned options. He was trading options, turned like $100,000 into $100 million and then lost all of it. Right? So we had that whole article we wrote about that. And, you know, the point of that article was simply saying, well, at what point did you not think about taking $20, $30, $40 million, life-changing money and putting it in treasuries and trade the rest of it? So if you lost it all, at least you had your nest egg, right? Never dawned on him because he thought he was smarter than the market. And we saw this after 2020, 2020, 2021. Everybody's making money in SPACs and SPACs and IPOs and everything else. And the Wall Street Journal was writing articles about how these kids were turning, you know, $5,000 into a couple of million dollars. And they were doing fantastic. And then the articles came in 2022 where a lot of them had lost everything, gone back to work waiting tables and right back to where they started. And that's just the way it works. so you know this is um i'll give you one more chart here before we wrap this up this is the average retail options losses again when you start taking a look at you know the return on capital of taking on excess risk now Look, I know all you guys in our chat are extremely smart. You're extremely adept. Y'all are all very professional at trading options. Y'all never lose money because y'all tell me that in chat all the time. That's not the average. Every one of you in my chat apparently are way above average. Congratulations, that's awesome. But these are the stats, the real stats, and they're pretty ugly. And this is why, again, when we go back to the mechanics of losses and we talk about kind of the common themes, et cetera, these are the things that are most important. So what are the five tactics that, you know, I told you, I always try to end my articles that we go through this type of stuff with things to help make you a better investor, a better trader. So here's five things for you. The first is, you can bring this up for me if you want, Brent. The first is to write a personal investment statement. Here, let me try to reduce this. You'll scan it? Okay, thank you. Write a personal investment policy statement, right? Again, we talked about this before on the show. If you can't write down an investment policy statement and get it on paper, you shouldn't be investing to start with. You should buy an index and just dollar cost average. Because if you're going to be trading and you can't write it down, that means you're just really just kind of shooting off the hip. You don't have any structure, and that's going to work out badly for you over time. Rebalance on a schedule, not on sentiment. Replace speculative options with defined risk structures. Covered call rights, buy puts, do covered call writing. Those things actually reduce portfolio risk. Just trading options for the sake of gain increases that risk. require a three-day wait period before any non-scheduled trade. So in other words, like, oh, man, I want to buy, you know, semiconductors are just going up. I need to get into Micron. And we do this all the time. This is one of our primary rules. Oh, I really like this stock. It's really running right now. I'd love to get this into the portfolio. Wait three days. A lot of times we don't even wind up buying it. Sometimes that works. Sometimes it doesn't work. But requiring a three-day wait period reduces that emotional pull. So you don't make decisions based on a knee-jerk reaction. This is particularly the case like over the weekend, you have these headlines about Iran. And it's like, oh, my gosh, Monday morning, you're loading up the trades on Sunday night. It's like, oh, I've got to get my trades in. So they execute first thing Monday morning, and I'm going to sell everything on Monday because markets are going to be down 20% Monday morning because of this situation. and then markets open up 30 points on the S&P on Monday. And now you sold out at the open. Calculate your own behavioral return gap every year. This exercise is very straightforward. Look at your portfolio. Look at how you did versus the market. Now, let me say this. It's okay to underperform. It's going to happen. If you're running any type of risk management strategy, you're going to underperform the benchmark somewhat. Some years. Some years you're going to outperform because of it. But run that return gap and then find out what are the reasons why I had this return gap. Well, I had a return gap in the first half of 2026. Real story, right? We had a return gap in the first half of this year in our portfolio because we didn't own all the semiconductors. Right? We have a diversified portfolio. We own bonds in our portfolio. So we're dragging relative to our benchmark by a small amount this year because of that lack of semiconductor exposure. Now, that's been paying dividends here over the last couple of weeks. When semiconductors have been correcting sharply, we haven't had that exposure, so our portfolio has been doing a lot better. So sometimes it's okay to underperform. You don't have to beat the benchmark every single year. That's not the purpose of the exercise. The purpose of the exercise is to reveal the things that you're doing wrong in your portfolio. I traded too much. I bought bad stocks. I sold too late. I didn't do this. I didn't do that. That's the purpose of the exercise. And so if you do that exercise, it helps you worry. Look, I still make mistakes. I've been doing this for 30 years, and I still make mistakes. I still have the emotional biases. We'll always have emotional biases because I'm human, right? But what these exercises and what these tactics do is help you slow down the mistake rate over time. You're going to make mistakes. The point of all this is to not make mistakes that inherently destroy your capital to a degree you can't recover from over time. That's the real point. Anyway, that article is on the website, and it's there for you to help. also the article on home affordability is there as well. So if you want to read that, you can certainly get all the stats on that as well. Anyway, appreciate the time today. Be back tomorrow with John Penn for Two Dads on Money. Be sure and like and subscribe to the channel. Appreciate it a whole lot. And we'll be back tomorrow. Y'all have a great day. See you then. guitar solo We'll see you next time.