In this week's Stansberry Investor Hour, Dan and Corey welcome Alan Gula back to the show. Alan is an editor and member of the Investment Committee for The Total Portfolio and Stansberry's Forever Portfolio, as well as a senior analyst for Stansberry Research's flagship newsletter, Stansberry's Investment Advisory.

Alan kicks things off by sharing three concerns he has for the current market rally. He looks at the market's credit spreads, as he uses that as a sentiment indicator for the broader market. Then he gives an in-depth examination of the high bids of stocks by looking at the high beta (the measure of market risk) relative to the S&P 500 Index...

I'm sort of worried that the high bid of stocks [has] really dominated so much during this recent rally... There's obviously a lot of tech right now. There are some cyclicals, consumer discretionary, there's cruise lines and airlines, some financials and Robinhood and Interactive Brokers, Goldman, Morgan Stanley... The chart shows me that the bull market the last nine months has been driven by high bidder stocks, and that's not necessarily a good or bad thing. I just think it increases the risk for the overall market.

Next, Alan discusses gold's history during secular bull markets, highlighting how the precious metal has had impressive spikes but serious drawdowns along the way. As such, he states that investors should be cautious during the current bull run and trim any risk. He then reflects upon The Total Portfolio outperforming its benchmark and the framework that contributed to its success. And he gives his take on "whether AI is in a bubble or not"...

There [are] high-conviction takes on it. "Yes, it's a bubble." And "No, it's not a bubble." Well, I'll say this. I update this free-cash-flow yield valuation model for the S&P 500 each month. And we started this several years ago. And it's just a great way to track the overall valuation of the market... Way back when I created that chart initially, we put these levels on it. So there's an average free-cash-flow yield, and I said, "OK, here's there's a band for average. And then cheap, dirt cheap, there's expensive. And then bubble"... The bubble-like band, we're almost at it. And so, just based on that, we are on the cusp, I think just based on free-cash-flow yield for the S&P 500. Yeah. We're on the cusp of a bubble... [But] I think the term bubble, it just gets overused.

Finally, Alan expresses why you shouldn't focus so much on previous earnings over the long term for rapidly growing companies. Instead, he says it's better to examine their free-cash-flow yields. He also warns investors to be mindful of what to invest in to protect themselves during a bear market. Companies that provide opportunities during bull markets might be poor performers during drawdowns, so it's wise to plan accordingly when diversifying your portfolio. He illustrates this with one sector...

You just have to be careful what's going to protect you in a bear market... If you're looking at unloved sectors, staples was... 12% of the aggregate S&P 500 market cap [in the early '90s]. And during the tech bubble, that fell to like below 6%. And then staples came back. And that's a function of staples being unloved but also tech... But then staples grew, too, and at the end of the financial crisis, staples were back to like 12% to 14% of the overall market. And now they're back down to less than 6%.

Click on the image below to watch the video interview with Alan right now. For the audio version, click "Listen" above.

(Additional past episodes are located here.)

This Week's Guest

Alan Gula is an editor and member of the Investment Committee for The Total Portfolio and Stansberry's Forever Portfolio, as well as a senior analyst for Stansberry Research's flagship newsletter, Stansberry's Investment Advisory. After graduating from Villanova University, Alan joined Goldman Sachs as a financial-database expert in the Investment Banking division. While there, he witnessed a merger-and-acquisition boom. Later, at Barclays Investment Bank, he had a front-row seat to the financial crisis on various trading desks. Alan was also a statistical arbitrage trader at an independent proprietary trading firm. He joined Stansberry Research in 2016.

Alan has been a CFA charterholder since 2011. He also has a Master of Business Administration with a specialization in quantitative finance from the Stern School of Business at New York University.

Dan Ferris:                 Hello and welcome to the Stansberry Investor Hour. I'm Dan Ferris. I'm the editor of Extreme Value and The Ferris Report, both published by Stansberry Research.

Corey McLaughlin:    And I'm Corey McLaughlin, editor of the Stansberry Daily Digest. Today we talk with our colleague, Alan Gula, senior analyst at Stansberry Research.

Dan Ferris:                 Alan has a very good mind. He's a very smart analyst. We're going to talk about a lot of topics. Get out your pens and pencils, take some notes. So, let's do it. Let's talk with Alan Gula. Let's do it right now.

                                    Alan, welcome back to the show. Always a pleasure to see you.

Alan Gula:                  Yep, thanks for having me back.

Dan Ferris:                 All right. Well, Corey and I are going to do the usual job of peppering you with questions and finding out what you have to say. And e-mails before we hit the record button indicate that you have quite a bit on your mind actually, so maybe we should just kind of jump into the deep end. Actually, is there one thing – you sent me a list of stuff that you're thinking about, which didn't surprise me. Is there one thing right now that really is kind of either bothering you or that you're really excited about among all the topics that you sent?

Alan Gula:                  Well, I think I have some growing worries. We've been cautiously optimistic and trying to just look for opportunities, but yeah, there are some – there are sort of three things that I'm watching and worrying about. It's not like Defcon 1 yet, but yeah, just like cash levels. I think credit spreads are really tight and high beta of stocks have really carried this rally. And so, those are some of the things I'm watching.

Dan Ferris:                 You know what I want to know? As soon as you say that list, what I want to know, I've said things almost exactly like this. I've been saying this stuff for – off and on since like 2017. You know what I'm saying? How long have you felt this way? How often have you felt this way in the last three years or whatever?

Alan Gula:                  No, it's – this is new. This is just like the things that I'm looking at. And yeah, maybe we can get into the cash levels first because we often hear there's this $7 trillion or $8 trillion of cash on the sidelines in money-market funds.

Dan Ferris:                 I love the sidelines.

Corey McLaughlin:    Right. Cash on the sidelines. Yeah.

Alan Gula:                  And I just think it's mostly a myth. And first of all, if I have cash and I buy stock from you, then you have the cash and that cash just went from one sideline to the other. Plus, if you look at the aggregate amount of assets in money-market funds over the long term, it just grows ever larger over time. And there's some variability, but basically the money-market assets generally grow with the economy. And plus, there's a lot of financial institutions, corporations that use money-market funds. It's not just investors. And it's important to keep in mind that the money-market funds, whether it's a mutual fund or ETF – that's just the wrapper. The underlying assets are largely Treasury bills. And the amount of T-bills outstanding is a function of the federal debt and the Treasury's preference for long and short – long- or short-term issuance. So, it has nothing to do with investor preference.

                                    And lastly, when you look at the overall money in the economy,  the Fed controls base money, the monetary base, and then the overall amount of money in the economy is a function of commercial bank lending. And so, none of that is really – none of that is predicated on what investors are doing or sentiment. And so, I think if – however, if we look at subsets of investors and their cash levels, and I think we can get a gauge of sentiment through that, so – and I know that survey – quality surveys are polarizing, like, the survey quality especially for economic data has deteriorated. But there are a couple surveys that I still like. And one of them is the Bank of America – it's Bank of America Research. They have their fund manager survey that they do monthly.

Dan Ferris:                 Yeah. I knew that's where we were going. Yeah.

Alan Gula:                  Yeah. And there's – it's 200 or more institutional money managers surveyed and several hundred billion dollars in assets under management. And even though these are professional money managers, they're typically wrong at turning points. Specifically, they tend to hold a lot of cash at the lows in the stock market. And I have a chart of the fund manager survey cash levels, and you can see maybe – if we can focus on the last 10 years – this goes back pretty far, but the last 10 years the jumps in cash levels correspond with lows in the stock market. And so, cash levels spiked in late 2015 and 2016. That was a great time to buy stocks. Cash levels spiked during the COVID-19 crash in April 2020 – so, it jumped from around 4% to 6%. And then cash levels fell back to down to 4% during that bull market. And then cash levels rose into October – during that bull – that bear market cash levels rose to 6% by October 2022. And that was –

Dan Ferris:                 It's almost like you're telling me these institutions are run by human beings.

Alan Gula:                  Right. Exactly. And, well, this sort of makes sense. If everyone – this is why the market has bull markets, bear markets. It's a function of all these investors moving in and out of the market. So, yeah –

Corey McLaughlin:    And right now it's starting to – when cash levels get low, that's what you're talking about now. Looking at –

Alan Gula:                  Yeah, cash levels are now low. It's down to 3.3%. It's the lowest on record for this survey. And this is – it's not a catalyst. We still need to see a catalyst. But this is sort of worrisome where there's not a lot of cash in the silence.

Dan Ferris:                 It's sentiment based on actual investor action, in other words. It's not like they're saying what they think the stock market will do. They're saying it by the small amount of cash they're holding.

Alan Gula:                  Right. Right.

Dan Ferris:                 That's what I would call real sentiment.

Alan Gula:                  Yeah, and the – this also mirrors what's going on in retail accounts. There's another survey run by the American Association of Individual Investors, AAII. And they ask, "Well, are you bullish or bearish?" and that's fine. But there's also an asset-allocation survey which they do, which I think is even better, stocks, bonds, and cash. And here's the cash component. And it's similar behavior as the institutional survey. Retail investors were – they generally hold a lot more cash, but retail investors were holding a lot of cash at the April lows in 2020 – or, March 2020 lows, the COVID-19 crash, and then also holding a good amount of cash at the end of the bear market in 2022.

                                    So, now cash levels have unsurprisingly fallen. These investors have deployed a lot of their cash. They still have a good amount, but 15% – 14%, 15%. Certainly, if this gets below 14%, that's going to get me more worried. But yeah, we're getting to point where it just seems to me risk/reward is not really all that great.

Dan Ferris:                 Yeah, I love this chart. The spikes tell the whole story. It's like late 2018, COVID-19, bear market, tariff tantrum, the four spikes that I'm saying.

Corey McLaughlin:    Yeah, and those dips –

Dan Ferris:                 People can't hide what they're doing. They can call themselves long term or whatever, or contrarian. They can't hide it.

Corey McLaughlin:    Right. And the dip in 2021 into – because that's really when – that was when the real mania phase of – and all the techs and the meme stocks and everything were happening before the bear market began in 2022. So, you see that that's an early indicator of what could come.

Dan Ferris:                 So, let's do the credit spread thing. I want to hear about this. We talk with Mike DiBiase periodically, Stansberry's bond guy. And I've probably put the credit spread chart in the Digest two or three times over the past few years. What do you see when you look at this? How are you feeling about this? Is it another sentiment, real sentiment type indicator?

Alan Gula:                  Yeah, I think it's a good sentiment indicator. And just for people out there – so, credit spreads are the additional yield that investors demand above risk-free Treasurys. That yield spread compensates investors for the risk of default. And yeah, you're right, credit spreads are sort of like a sentiment gauge in the credit market. When spreads are wide there's risk aversion and when spreads are tight there's risk seeking. And right now spreads are exceptionally tight. There's not a lot of worries in the credit market. Bond issuance is – the credit markets are wide open.

                                    And so, for intermarket analysis I like to look at BBB credit spreads because – and I know Mike looks at high yield spreads, too, but BBB is – it's the largest tier for corporate bonds and around half of S&P 500 companies are rated BBB, whether it's BBB+, BBB-, which is the lowest investment-grade bond. And yeah, so BBB spreads are below 100 basis points, nearly the tightest of the past five years. And so, risk/reward is, I think, poor in investment-grade corporate bonds. But that also suggests risk/reward is poor in equities because everything is connected.

                                    And so, what's interesting is credit often leads equities. So, in 2021, the tightest spreads were actually in the summer and fall of 2021, and then the stock market peaked at the very beginning of 2022. So, spreads had widened already, giving a big negative divergence. And so, we could see – we could be seeing something similar, a similar signal now with spreads having been their tightest last September at 93 basis points in BBB and we're slightly wider than that now. So – but overall this is painting some of a picture where it's telling me that it's not a good time to be adding to risky positions.

Dan Ferris:                 Right. And I didn't realize it was the largest tier. I always looked at BBB and never understood exactly why I was doing it. But that's a pretty good reason. And just for our listeners' sake, this is – one way to think of this is that you are – you're going up the capital structure. So, Alan said the credit problems precede the equity market problems. You would think – I would think it would go the other way around because the riskier layer of the capital structure ought to kind of go south first. I wonder why that is. Should we even ask that question?

Alan Gula:                  Yeah, it's a good question. I think it could be just a function of – yeah, I think in general fixed income investors are more risk-averse. And so, if there's – if there are things that are going wrong, there's – they're are sort of very attuned to what's going on in the economy, what's going on with the underlying fundamentals. And so, if – yeah, it's – and they're less prone to fear of missing out and things like that. So, yeah, if – that could be why – it's not always the case, but yeah, that could be why often credit gives you this early warning signal.

Dan Ferris:                 Right. The more risk-averse. I think that's the answer. That's it. And generally, some people say, "Well, the bond market is the smart money." Well, dumb things happen in the bond market, too. But, well, the analysis tends to be more – less forgiving, I think.

Alan Gula:                  Yeah, it's not that the – yeah, I don't really think that one group is smarter than the other. I just think that it's – and then also, if you look, credit spreads, where they’re widest at – in late 2022, so if credit was so – credit markets are so smart, why are they so worried when we're about to have just a risk-on bull market and things are going to get better. So, it's early warning signal, but at the peak of maximum pessimism credit doesn't really give you that early risk-on signal.

Dan Ferris:                 Got it.

Corey McLaughlin:    Yeah, that's interesting because I've noticed in shaky times the credit spread tends to widen but pretty quick, too. And then, the stocks tend to follow. But what you just said, too, at the other end, the stocks will rally back quicker than the credit spread – when it's tightening again. I think. Not all the time, but what – that example you just gave now is interesting. If you're following this credit spread chart for some signal, that – those are things to look at.

Alan Gula:                  Right.

Dan Ferris:                 So, of your three worries, the next one is the one that is most intriguing to me. Talk about that a little bit and I'll probably have a decent question for you at some point here.

Alan Gula:                  Yeah, the – I'm sort of worried that the high-beta stocks have really dominated so much during this recent rally. And so, beta is a measure of market risk. And if I plot the S&P 500 high-beta index, which includes the 100 stocks and the S&P 500 with the highest beta, if I plot that against the S&P 500 equal weight, then it shows the high beta has just massively outperformed since the April 2025 lows.

Dan Ferris:                 Boy howdy. Yeah. Just ballistic.

Alan Gula:                  And it's not always the case. So, in prior bull legs, it's not really – high beta hasn't really outperformed to this degree. But – and then, also, over the very long term, high beta actually doesn't perform all that well. So, if you – you don't want to be just structurally long high beta all the time because –

Dan Ferris:                 So, wait a minute. I realize we have to stay something for our listener, Alan. What does high beta mean?

Corey McLaughlin:    What is high beta?

Dan Ferris:                 Why watch high beta?

Alan Gula:                  So, a beta of one is basically a stock that'll move sort of in lockstep with the market. So, if you have a beta of, say, 1.5, then that stock has 50% more market risk than the overall market. So, it's – if you – if the market's up – and this is just a oversimplification, but if the market's up 20% in a year, then the high beta stock, it might be up 30%. And so, yeah, the – and the high beta, this index changes. So, it's – if this is the most – if this measures the highest beta stocks in the S&P 500, that also changes because the characteristics of stocks can change. So, but yeah, in this there's obviously a lot of tech right now. There's some cyclicals, consumer discretionary. There's cruise lines and airlines, some financials, say, Robinhood and interactive brokers, Goldman, Morgan Stanley. And yeah, the chart shows me that the bull market the last nine months has been driven by high-beta stocks. And that's not necessarily a good or bad thing. I just think it increases the risk for the overall market on top of stretched valuations. If this reverses, if high-beta stocks start to underperform, then yeah, we could have – and we've had very sharp declines in the market. The COVID crash. The tariff tantrum. And so, this could just add fuel to the fire.

Dan Ferris:                 And let's face it, the past year, especially – basically since April, since the tariff tantrum, there are – several things have just screamed. Precious metals, commodities generally –  copper, platinum, whatever. I had somebody talking to me about solar power stocks, anything with electricity in it because of AI. The Sprott Nickel Fund went nuts. Copper. Yeah, silver is going nuts now. There's been a lot of just screaming performance in the past almost year now. One of those categories, of course, is one of the things that you had said was really on your mind, which is gold and silver right now. So, maybe this is a good time to segue into that. When I see it, when I see gold and silver, I see ballistic performance. And I'm like "Well, ballistic performance doesn't usually just kind of level out and go sideways." That's – whenever I see a ballistic chart like that, I just – it's visceral. What do you see?

Alan Gula:                  Right. Well, remember – it's amazing how fast things change, where just not too long ago, gold, I remember gold, people were lamenting that gold was lagging because bitcoin was doing so well. And it was like "All right, it's gold." Is gold dead because the older people loved it but the younger generations are going to gravitate toward digital assets instead? And so, that's sort – that's just completely thrown out the window.

                                    But yeah, the – gold has these secular bull markets. It's – the bull run from 2001 to 2011 was about a 650% increase. But there are these huge drawdowns. There was a 22%, 29%, 13% drawdown along the way during that secular bull run. And so, we're in another secular bull run. It's up around 370% since the 2015 lows. We've already had a 20% drawdown in 2022. And so, yeah, we – I just think people have to be careful. There's a lot of people chasing this now. We've – as a firm, Stansberry Research has been – in general, our analysts and editors are mostly bullish on gold. We just – we are proponents of having gold exposure in our portfolios. We've said this for – since the beginning of the founding of the firm in 2000. And yeah, it's – now it's you're getting some hot money come in and it's – and I just feel like people need to be careful if they're trying to trade it or – and then especially silver. Silver is just completely bonkers. Yeah, but yeah, we –

Dan Ferris:                 That's – historically, that's the action though. It's like gold moves and then silver moves, and when silver moves, it takes off like a rocket ship. And that's exactly what's happening now. And that's like –

Corey McLaughlin:    It really moves. Yeah.

Dan Ferris:                 Yeah, it feels like late stage, is what we're saying here.

Alan Gula:                  Well, it's – yeah, silver – we were talking about high beta stocks before. Silver is like a high beta gold. And yeah, the silver picture, what's interesting is when the Hunt Brothers tried to corner the silver market – I'm sure you guys are familiar with that story – the COMEX raised their margins. And that's what sort of started this conspiracy theory. I don't know. What do you guys think of this – in silver, what do you think of the conspiracy theory of this grand suppression theory?

Dan Ferris:                 I question it for sure. Every time I hear it, I go, "OK, but can you tell me a whole lot more?" Because all I've ever seen is people pointing at price charts and saying, "Oh, there was a big dump this morning." OK. And we – people have been prosecuted for spoofing in precious metals. It's happened. But those strike me as – if that was – if we were going to get a real look at the conspiracy coming true, it seems to me that that case – I think it was JPMorgan a few years ago – that would have been it. That would have blown the whole thing wide open. And it didn't. So, I don't know.

                                    And the other thing is there's a lot more paper metal than there is physical metal, and that's going to be a crisis, too. OK, I've heard this for 20 years as well. I keep hearing these things and they keep not coming true. Now, sometimes it's like that. But so far, it just doesn't seem – it's like I can buy all the silver I want. Can you – you guys having trouble buying silver? Have you heard of anybody who can't get the silver they need? No. They're going to pay a gazillion bucks an ounce now, but that's the way it goes. So, yeah.

Corey McLaughlin:    Yeah, that's my thought. Your last point there was my thought. You could buy gold at Costco and silver and elsewhere. Yeah. But the price action is what it is. It is pretty crazy now, to Alan's point.

Dan Ferris:                 I will say this. When I couldn't get gold during COVID – the refiners actually – in Europe, they actually shut down. And I was like, "Oh, this is it. I'm going to go long." And of course, that was the dumbest thing you could ever do, because you actually couldn't get it and you couldn't buy it and the price crashed and it was like "Oh, wow. OK. I see how this works now." So – and even that, it passed and here we are. I just – you sound skeptical as well.

Alan Gula:                  Yeah, I just think that – well, getting back to the raising margins, the COMEX raised margins and the – for futures and – when the Hunt Brothers tried to corner the market. And then in the 2011, that spike in silver, the COMEX raised margins then, too. And now we've seen the CME Group, COMEX, raise margins for futures again late last year. And, yeah, I just think that there's no grand, I don't think there's a grand conspiracy to suppress the prices. There might be short-term games going on that – and maybe some people did some legal things.

                                    But yeah, we've – I think it comes down to how are you navigating this? It's like – so, we've had – and we talked about this last time. You should have gold exposure in your portfolio. That's part of – it's part of a diversified portfolio. And I talked – I think I talked about how we have our gold royalty plays in The Total Portfolio that we like. And then, yeah, you just have to be careful. We've trimmed some of those positions. We added a silver miner, which – a silver miner but it has a lot of gold exposure. But anyways, we added a silver miner to The Total Portfolio mid last year and it doubled. And so, we – we're going to – we've trimmed that position.

                                    And we're just managing our risk. We're not chasing things. We're not trying to time this too much because, who knows, this could continue farther. I do think we're going to have some big drawdown, so people just need to be careful. I think trimming positions makes sense. Although, look, maybe the miners, the prices of the miners don't reflect a full confidence that these precious metals prices are going to stay where they are.

Dan Ferris:                 By the way –

Alan Gula:                  Maybe that's the case.

Dan Ferris:                 By the way, Alan, congrats on Total Portfolio for 2025. I love that the last time you were here we talked about Total Portfolio and it had a fantastic 2025. All people needed to do was tune into that episode, buy The Total Portfolio, and they're good right up until now.

Alan Gula:                  Yeah.

Dan Ferris:                 It worked.

Alan Gula:                  Yeah. Just – yeah, just to – yeah, so the precious metals positions there in The Total Portfolio – and just for anyone unfamiliar, Total Portfolio is Stansberry Research's fully allocated portfolio. This is a collection of our most compelling recommendations from across our various publications and those securities are handpicked by our investment committee, which I'm on. And we size positions relative to the risk and we do everything for you. You don't have to read any financial newsletters if you don't want to.

                                    But anyways, the – yeah, our precious metals exposure is in our stay rich bucket. So, we have these – we think about this portfolio in two halves. There's the two buckets. There's the "Get Rich" positions and then there's the "Stay Rich" positions. The Get Rich are the higher risk positions that are designed to benefit from a prolonged, continued secular bull market and stocks and are compounders, and that's where we get our capital appreciation. And then we have our Stay Rich securities that are more defensive and that are going to provide ballast during the downturns.

                                    And what's great is even though – what's great is when we have our Stay Rich positions, which include gold and silver and these things, when those – and they're supposed to be low risk and protect us in the downside – when those positions just are some of the highest performing in the portfolio, that's great. So, we have – we're getting it on both sides. We're getting the capital appreciation actually from the Stay Rich position sometimes. But yeah, it was a great 2025. We were up nearly 20% for the calendar year. And that return is – it's even better than it sounds because we're not taking equity-like risk. It's a fully diversified portfolio and our benchmark is a 60/40 stock/bond balanced fund, which was up about 13.5% last year. So, we were – we outperformed by more than 600 basis points. And yeah, it was  a great year.

Dan Ferris:                 Diversification is so boring, though, isn't it?

Alan Gula:                  Yeah, it's this – 2025 was the revenge of diversification. And I hope it continues. But yeah, it's not –

Corey McLaughlin:    Well, it works and then everybody wants it. It's – I'm looking at the chart of the performance of The Total Portfolio right now, and really, it looks like the big difference versus the benchmark was in early of last year, February, March, when all the tariff questions were really legitimate and people were fearing a lot. That's when you were able to – the performance, your – the return was actually up during that period, to your point. Right?

Alan Gula:                  Yeah. Yeah, we – it's not a tactical – we make some tactical decisions and short-term things and – but yeah, that – a lot of that was just preparation and not – so, look, for example, we added a – and just like looking for opportunities, just constantly – not being too bearish, not being too bullish, constantly looking for opportunities in our – during our February 2025 rebalance date. And we have an annual rebalance and it just happens to be in February each year, but we added a water utility to the Stay Rich bucket. And that actually rose during – as stocks started to sell off in March, that actually rose and it remained strong through the tariff tantrum. And then, we have a pawn shop operator. So, yes, we own a pawn shop operator in this portfolio. And as you might imagine, it's a countercyclical stock and it outperformed during the sell-off. And yeah, the – it was the Stay Rich section really pulling its weight during that March and April disruption.

Dan Ferris:                 That's so great. I'm going to steal that phrase, by the way, or maybe Corey will beat me to it in the Digest: the revenge of diversification.

Alan Gula:                  Right.

Corey McLaughlin:    No, you can have that one, Dan. I'll say no.

Dan Ferris:                 Yeah, it's like one of those things – actually, Corey just said it best. He said nobody wants it until everybody just feels like they've got to have it – until it works and then everybody wants it too late or something. It's sort of a typical human foible. Everybody's backwards-looking. But you guys look forward and it works. I don't know how else to say it.

                                    So, let's see. I wanted – I'm glad that we sort of talked about all of this stuff so that we can have a good chunk of time left to talk about what you appropriately characterized in your e-mail to me before we started, before we hit the record button today, AI is like the thing nobody can stop talking about it. You can't – on a podcast you must talk about it or people think you're out of touch with reality. And I think they're right. You are. If you don't say something about it – you could hate it, you can think it's a bubble, you could – whatever you want, but you do have to talk about it. And let's see, I don't have your e-mail in front of me, but you don't think it's a bubble, correct?

Alan Gula:                  Well, it's – I think I have a nuanced take, which is not good for – so, everyone wants to – want these high conviction takes on if, yes, it's a bubble and, no, it's not a bubble. And –

Dan Ferris:                 Alan, I just want you to know I want all the nuance you can throw at me.

Alan Gula:                  Yeah, so –

Dan Ferris:                 Bury me in nuance. Love it. Serious. Serious.

Alan Gula:                  I'll say – well, I'll say this. I update this free-cash-flow yield valuation model for the S&P 500 each month. And we started this several years ago, and it's just a great way to track the overall valuation of the market. I think it's better than price-to-earnings (P/E) ratio, or price of sales, or CAPE ratio. And we published that as part of our flagship newsletter indicators, Stansberry's Investment Advisory. And way back when, I just – I ran the data. And so, we exclude – it's actually tougher than it seems, but – so, we exclude financials, but – or most financials we include, but we still include, say, Visa, Mastercard, the exchanges, those stocks that I think – they're financials, but I think they should be included on a free-cash-flow yield model.

                                    But anyways, way back when, when I created that chart initially, we sort of put – we put these levels on it. So, there's an average free-cash-flow yield and I said, "OK, here's –" there's a band for average and then cheap, dirt cheap, there's expensive, and then bubble. And we were really far from – we were – it was – I think it was just an average valuation when I first created it. And then we – the market has oscillated. It got – it actually hit dirt cheap the day of the COVID crash – or, the day of the low, March 23, 2020. It go to dirt cheap. It went from cheap to dirt cheap in one day.

                                    And I don't know, it's something that – it's not – it doesn't give you any actionable signals because it's just like "This is –" well, I guess that is, that was sort of an actual signal. But anyways, it's more just "OK, how are – what are the – what are our perspective long-term returns going to be?" And the higher the valuation, the more expensive evaluation, the lower your perspective long-term returns. I think that's actually become sort of a controversial view because a lot of people think valuation doesn't matter anymore. But anyways, this – the bubble band, we're almost at it. And so, just based – and just based on that, we are on the cusp – I think just based on free-cash-flow yield for the S&P 500, yeah, we're on the cusp of a bubble. And –

Dan Ferris:                 I don't think it doesn't matter. But I've stopped telling everyone it does all the time. I've been saying it for too long. It's just like "OK Dan, we get it."

Alan Gula:                  Yeah, no I think valuation matters.

Corey McLaughlin:    That's another thing. It doesn't matter until it does. The valuation.

Dan Ferris:                 I think your metric is better than anything I've used. The free cash flow makes more sense.

Alan Gula:                  Right. So, that was that. And whether – I think the term bubble, it's just – it gets overused. And really what's – it just becomes meaningless because people want to call everything a bubble. And I just don't think that something – like, a narrow pocket of speculation, I don't think that that's a bubble. If you had [Software as a Service] stocks in 2021, I know there's – 2021 got crazy. I don't think that that was a bubble. And I think a bubble is – my definition would be does the market peak and then not return to the highs for an extended period, like over 10 years? Right?

Dan Ferris:                 Yeah, I talked about that a lot, too, and stopped talking about it. But I want to hear what you talked about it?

Alan Gula:                  But my main point is, and I wrote a public article about this in late 2025, it was my first public article in a long time. My main point was that we are – the market is extremely expensive, but I don't think we're in a mania phase. And the mania phase in late 1999, in early 2000, that was a proper mania. And we're – the craziness we've seen recently is not – it pales in comparison to that craziness. And so, I wrote that article and I basically had these five category sections and that showed, look, the dot com bubble had much bigger first day IPO pops averaging 70% in 1999. There were crazier stock price moves, like Qualcomm's 2,600% rise in 1999. The overall index valuations were much higher back then. The top 10 companies were more expensive back then. And then, the most egregiously expensive stocks back then were just much more extreme. So, the Nasdaq 100 traded – the entire Nasdaq 100, the index traded at a P/E of nearly 100. So, it was just – and when people try to compare AI and things going on now and they say, "Well, this is craziest I've ever seen it," well, it's not – objectively, the tech bubble in late '99 and early 2000 was much more excessive.

Dan Ferris:                 Let me ask you this. One of the things that's kind of cooled my jets from always saying "The market's so expensive" is that I took a long-term perspective and I used some moving averages to kind of smooth things out. And generally speaking, it really is true that by different measures valuations have risen. The overall level has risen in the past call it two or three decades. So, it was, I think – we could use anything. To me, it's all relative and they all – all the charts look the same. So, you can use CAPE even if you hate it. But CAPE was 44 or something at the top of the dot-com bubble. And what if it goes to – if it goes to 55 or 60 or something the next time around, that wouldn't surprise me a whole lot. And if the S&P 500 bottomed out at – I think it was 13 in 2009 – if it was 15 at the very bottom this time, that wouldn't surprise me. I just feel like there's all this – software has eaten the world and all these asset-light kind of businesses, the internet and software have eaten the world. The internet has touched every business and every human being, basically. So, those things are less capital-intensive, aren't they? And that would make sense that they get higher multiples. And they're massive market caps, so they move the overall level up, it seems like to me.

Alan Gula:                  Yeah, I think that makes sense. One of the –

Dan Ferris:                 I really. had to twist your arm on that one.

Alan Gula:                  Yeah. But – well, I just think the CAPE ratio, if you're going to look, if you're looking at 10-year trailing average earnings and when you have companies that are growing really quickly like you do now, and the S&P 500 is dominated by these large tech companies which are growing quickly – so, Nvidia's last 10-year earnings are completely irrelevant. It's what's going to happen over the next five, 10 years. And for a lot of those tech firms it's the same way. So, that's why I like to look at the free cash flow yield. It's – and that is – that's – also, that's backwards looking but at least it's the current situation.

                                    It also factors in [capital expenditures ("capex")]. So, if you have Microsoft and these big tech companies investing more in their infrastructure buildout, then that may not be reflected in their earnings, but it's going to be reflected in free cash flow because you deduct the capex. And Microsoft's free-cash-flow yield is – late last year it basically got to almost where it was during the tech bubble, the peak of the tech bubble. Not quite there, but yeah. And it's true that these companies have wide margins. That's why I don't like looking at the price-to-sales ratio because that's just – it's blind to margins. So, if you have margins steadily growing over time, that price to sales just doesn't reflect that at all. And that's why I think the price to sales is just – it's not really a useful valuation metric.

Dan Ferris:                 It also has trended upward over time for good reason. Profits are a bigger portion of sales. So, another thought I've had that I – you're the kind of person I want to run things by. I respect your mind, I respect your work, and I want to run things by you. I have this idea – I noticed over the past couple of decades several large banks have shut down all or some portion of the commodity trading operations and Wall Street and investors generally have pushed asset-light, high-margin, cash-gushing kind of businesses. And now, this past year all the capital-intensive stuff largely on the back of AI – so, right, I get it – has screamed. Like I said, nickel miners and – not even precious metals but nickel miners and copper miners. And utilities have done pretty well because of course they're – most of that is electricity and the utilities are flying up.

                                    So, it seems like – and then when I think about someone like Warren Buffett who said his favorite business would be just a royalty on something else that has – I put no capital, it requires no additional capital, he made as much hay of that idea as anyone. And then over time, he's – as he got larger, he built in these more capital-intensive-type energy operations and things. And I feel like 2025 was like the revenge of – but besides being the revenge of diversification, the revenge of capital intensity. We're – and I've seen these various pieces by some pretty smart folks who feel like finance is running headlong, is crashing headlong into the limits of physics. You can print liquidity – you can't print a copper mine. And we just need more of this stuff. I don't know. That's all I've got. That's the idea. It's an outline. It's a feeling. It's a feeling. I've got a feeling. I want to know – I want you to tell me what you think of my feelings, like a psychotherapy show.

Alan Gula:                  Well, what if everyone's so bullish on AI and investors are – most investors are overweight? So, what if – yeah, what if the industrials and materials, those sectors of the economy start to lead an AI sort of – actually, see, the Mag Seven have already started to lag, so that's a big development. And so, maybe the rest of the market sort of can sort of carry the weight for a little bit. I think – yeah, so you mentioned utilities. A lot of those have become de facto AI plays. And you have to be careful there because while we're trying to – utilities have typically been this defensive sector and that's – we're – OK, we're going to – it's going to protect you in a market drawdown. But yeah, I think a lot of those utilities, some of them are even in that high beta index now. So, Constellation Energy had a beta of less than one from 2022 to 2024, and then in the past two years its beta has jumped to 1.5. And so, now Constellation Energy, NRG Energy, Nucor, Vistra, those are actually in the high beta – the S&P 500 high-beta index. And so –

Dan Ferris:                 And Utilities, the return is regulated. They're not allowed to make too much money. So –

Alan Gula:                  Yeah. And well, there's – you have to –

Corey McLaughlin:    Well, they're making more money right now as we speak in certain parts of the country, but there's going to be – there's – we're getting political backlash and whatnot now heading into a political cycle too. So...

Alan Gula:                  Yeah, there's definitely some secular tailwinds for utilities. But yeah. And what's going to protect you? And we've been long utilities, but yeah, it's – you just have to be careful. What's going to protect you in a bear market? I don't think it's going to be utilities as much. Staples. If you're looking at unloved sectors, staples was – in the early '90s staples was 12% of the aggregate S&P 500 market cap and during the tech bubble that fell to below 6%. And then staples came back. And that's sort of a function of staples being unloved but also tech the tech value multiplying. But –

Dan Ferris:                 Sure. Yeah, it's a relative thing, but it works. Yeah.

Alan Gula:                  Yeah. But then staples grew to – at the end of the financial crisis, staples were back to 12% to 14% of the overall S&P 500 market cap. And now they're back down to less than 6%. And it's like basically at the – at that lows from the tech bubble. And so, staples, I think is – it's a great place to look for opportunities. Most investors have just no exposure to staples. They're not interested in them. And yeah, we – that's going to be an area in our stay rich bucket that we're going to focus on and try to build that up and get ready for.

Dan Ferris:                 Every time you say the word staples I wince because I recommended LP months and months ago, or maybe even a year ago. It was like "OK, a little early or wrong." I think we're into wrong territory now. But this is a good place to ask my final question. And I thank you. I'm so glad that we got the chance to cover all the things that you e-mailed us about because I was really, really curious. So, thank you for that. But the final question is – you've answered it before. It's the same for every guest no matter what the topic, even if it's a nonfinancial topic, identical question. If you said the answer already, feel free to repeat it. The question is simple. It's for our listeners' benefit. If you could just provide them with one takeaway or one thought today, what would you like that to be?

Alan Gula:                  So, when my – when I was 14, my dad opened up a custodial brokerage account. And so – and so, he helped me call up the broker and buy my first stock. And so, there's this new initiative from Invest America, giving all kids under 18 investment accounts. And I think that's just a great thing. My kids were born before January 2025, so they're not eligible for the $1,000 that that will automatically go into newborn accounts. But anyways, both my kids have custodial accounts. I think parents should open investment accounts for their kids, fund them and contribute to them annually. Let's get those kids investing from a young age, but make sure that you teach them to be diversified.

Dan Ferris:                 All right, succinctly put. Thanks for that and a great message. And it's always great to talk with you, Alan. I'm glad that we – we're going to keep you on the rotation, man. I've  just got to check in with you now and then. So, thanks for being here.

Alan Gula:                  Yep, great to hear. Thanks for having me.

Corey McLaughlin:    Thanks.

Dan Ferris:                 All right.

                                    Tomorrow, Stansberry Research is opening its doors and letting you into a rare behind-the-scenes investment board meeting. Five of Stansberry's top experts are coming together to reveal their most important buy call of 2026. They'll walk you through how they're navigating today's markets from AI bust fears to the massive surge we've seen in gold and silver. They're going to walk you through what they're bullish on and what they're avoiding right now and their number one stock idea for the year. That's six top idea stocks for 2026 from Stansberry's top experts. But you can only learn if you tune in. So, I'm going to send you to stansberrykickoff.com. Again, that stansberrykickoff.com to see this presentation.

                                    I have a little bit of a confession to make about Alan. I just think he's a really smart guy. And that's why – I sort of admitted it there in the interview. I need to check in with him on things. I want to bounce ideas off of him because I just like the way his mind works. He's a very good analyst, very smart analyst. And so, that's what I want to do. That's what I like – when Alan's on I want to talk to him about seven different things and take notes and figure out what I think based on what he says as well. He's an important input for me, I'll put it that way.

Corey McLaughlin:    Yes, he has a – brings a valuable perspective on any topic. You could just throw any topic at him and he has some argument and data to back it up. And he mentioned his article when we were talking AI. If you just Google it, it's "Five Reasons the AI Boom Isn't in Dot-Com Bubble Territory Yet." And he goes through exactly what he was saying, very detailed on just why this isn't as wild as the dot com era, for example. So, yeah, no, it's – he's very, very good. And that's why he runs The Total Portfolio, which has – touches everything that we do pretty much and picks from the best of all our editors recommendations, your recommendations and everything else.

Dan Ferris:                 Yeah, that's an interesting mandate, isn't it? You've got to pick from Stansberry and you've got to put together a portfolio that really works well under certain circumstances in the case of The Total Portfolio, like any circumstances. That's a big job. I wouldn't want it. If they wanted to put me on the investment committee, I might say, "Oh, geez, guys, I'm kind of busy." You know what I'm saying? Because it's demanding. We make a lot of recommendations, –

Corey McLaughlin:    We do, yes.

Dan Ferris:                 – but we don't recommend – I don't know, do we even recommend – I know we recommend more than a hundred stocks as a firm in a year, but when you've got to put out new ideas for The Total Portfolio. I could see that being difficult. I could see myself going "Well, let's see. We've only got these three other ideas left and I don't like any of them" or something, let's just say. So, it's difficult. And obviously, they do it very well because they beat the hell out of the benchmark last year, as Alan told us. So... and I like the idea of the revenge of diversification. Hopefully, that's not just a rotation thing. I would like to see that be a better long-term thing because I think long term it is a good idea – for everybody who's not Warren Buffett. You know what I'm saying?

Corey McLaughlin:    Yeah. Yeah, long term, if we're talking about the high beta being overextended right now, I would guess that – I would suspect that the risk/reward for that isn't where it was a year or two ago and maybe diversification will be the thing again this year. We're already seeing it with – we saw it last year too with out of U.S. stocks into foreign just with all the geopolitical stuff going on, and already we saw that briefly already to start 2026. So, we'll see. But I know they'll be ready for it. Alan and the investment committee will be ready for it.

Dan Ferris:                 They will. I'm glad – like I said in the interview, I'm really glad that we talked about total portfolio last time and we kind of – we pounded the table a bit on it because we thought it was a great idea. And I liked some of the pics in it because one or two of them were mine. And it did great. So, I feel like, "Hey, listener, there's something valuable for you here," just to be very blunt about it. But yeah, that was fun. That was a – I thought it was a great conversation and a great episode of the Stansberry Investor Hour. I hope you enjoyed it every bit as much as we really, truly did.

Announcer:                 Opinions expressed on this program are solely those of the contributor and do not necessarily reflect the opinions of Stansberry Research, its parent company, or affiliates.

[End of Audio]