THE BULL, THE BEAR AND YOU - Episode 58 September 8, 2026

[00:00:00] Welcome to the latest edition of The Bull, The Bear and You as we navigate what is happening in the economy and we take a look at investing. I'm Stacy Smith and I urge you to subscribe or say that you like this podcast on whatever platform you happen to use. Well, the summer months are over and traditionally trading picks up on Wall Street. September can be one of the more volatile months of the year. We discuss if there are signs pointing to more volatility and what could trigger it. Also, is butter an indication of inflation?

[00:00:26] And whether it be September or December, the market focus will still be on AI. And one of my panelists offers a bold prediction about a couple of companies. That's coming up in this edition of The Bull, The Bear and You.

[00:00:52] And with me to talk about the economy and investing is my panel of financial advisors and experts and they are Frank Rossetti. Frank has his own alternative investment company, HF Management Company. Also joining us at the table is Kim Forrest, a founder of Boca Capital Partners. And always offering some great analysis is Michael Godwin of Fergasso Advisors. Michael is the chief investment officer for Fergasso. One of my regular panelists, Carrie Coghill, could not be with us today. I want to thank all of you for joining me once again for The Bull, The Bear and You.

[00:01:21] Now, excuse me for that, but well, we made it through the summer months with the market gyrating in, but in the end there was little really big movement one way or the other. We did see all of the indices post to gain in those three months, but Labor Day is now behind us. And as Carrie said at the end of our last program that trade volumes have been extremely low. September is the most volatile month of the year and paraphrasing what she said back away from the cliff. So, Michael, I'll start with you.

[00:01:50] What can we expect with increased volatility in the markets? Is this good or bad or neither? And what can trigger the volatility? I have some ideas, but I'll let you go ahead and start. Good question, Stacey. I'm not one to look at seasonality all that much and say, all right, September is going to be very volatile just because it's September. I get that it's happened in the past. People are coming back from the summer months of not trading, and now we're going to get back in the full swing of things.

[00:02:17] But just because it's September, I wouldn't expect it to be volatile simply because of that. That being said, what could trigger some volatility is a continuation of what we've seen so far in 2026. Periodic spikes in geopolitical conflicts will be one. The other one is going to be inflationary readings, I believe, with the Fed and kind of whatever the Fed does. We saw that last week a little bit with the good jobs number and then the Fed is less likely to cut rates.

[00:02:46] And so you saw a little bit of a spike up in volatility. But I was looking at the VIX earlier this morning, and the VIX is a measure of volatility in the markets, Stacey. And we're well below the five-year average in terms of volatility in the markets right now. Typically, when you have elevated periods of volatility, that's when the market moves significantly. And it's usually a movement to the downside, not the upside.

[00:03:09] So again, what's going to trigger that, I believe, would be just a continuation of new skirmishes in the Middle East with the U.S. Maybe an inflation bout. But anything regarding a slowdown in artificial intelligence spending, I think, is going to be the big one in the markets for the foreseeable future.

[00:03:29] So if you see, we don't really anticipate this, but any sort of big pullbacks in spending there or outlooks that aren't really great from, you know, an NVIDIA or Samsung or SK Hynix ought to send the markets a little bit lower. Just to play off of that, Mike, right now this economy is largely driven by AI.

[00:03:49] Most of the activity revolves around AI, whether it be power plants or the infrastructure necessary to deliver the AI or the proposed infrastructure and the trillions of dollars people keep talking about spending. And as Mike was saying, if that should slow down, it's only logical that what's been driving everything will slow down as well.

[00:04:16] What has started to happen is the manufacturing side started to pick up a little bit. But it seems like that's running out of gas a little bit at this point. And I can't put a finger on why that might be the case. So I'm somebody who kind of believes in seasonality and it's largely driven by the stocks that I watch, which are mostly B2B businesses to businesses.

[00:04:43] And what happens in the third quarter is this is shocking news. I know people go on vacation. People go on vacation from every walk of life. It's a big vacation time. Who cares? Investors. That's who cares. Because we're unsure of businesses being able to get large contracts over the line. If, you know, Jane and accounting is in her seat to sign the form that somebody wants to purchase something.

[00:05:13] Right. So it's a very twitchy time every year, largely because a lot of the businesses that are public do business with other businesses. And the big question is, did the deals get done? Now, some of those deals will go away depending on competition.

[00:05:33] You know, if they don't get done, some ultimately get done in the fourth quarter, which is, you know, third and fourth quarter are generally pretty robust for these business to business companies. But I think some of the volatility comes out of this natural fear that vacation has really messed up the purchasing cycle. So that's what I see, especially in my old beat software.

[00:06:00] It's almost impossible to get all the software deals done that the salesmen have lined up. So good luck with that. And here's hoping for a great third quarter. All right. Let me throw this one out for you because we have a couple of inflation reports coming out later this week, I think either Thursday or Friday, both on the consumer side and on the wholesale side. And then the Fed meets next week.

[00:06:23] A lot of speculation now with the increased if there is an increase in the inflation rate, the way the jobs report was. Michael, you said that they now expect not to increase rates. But I thought everything I read said that with the jobs report it could increase rates. So where do we stand and will that have much of an effect on things?

[00:06:46] My the markets had a rough day or two a week ago because I think the jobs report solidified that the Fed was very, very unlikely to cut rates anytime anytime soon. So, yeah, you're correct. The market is anticipating at least one rate hike by the end of this year now.

[00:07:09] Again, from an economic standpoint, inflation, I think, is my I don't say biggest concern, but the data point, along with the jobs numbers that I pay attention to kind of the most here. I'm I think the Fed is really hell bent on thinking that inflation is more still transitory and is heading in the right direction. I'm a little bit on the opposite side of that where it's going to remain sticky for longer. And because of that, I think you're going to see a situation where rates are going to remain higher for longer.

[00:07:38] You've already seen that with the 10 year and 30 year remaining relatively elevated. And I think we're going to be in a position where those rates are just going to stay there for a while. So any but any, you know, any new time home purchasers, we talked about houses ad nauseam here. I don't see any relief from a from a mortgage rate standpoint. Then again, what's 25 to 50 basis points savings on your mortgage rate isn't that material in the long run.

[00:08:06] It's the actual home prices that have skyrocketed since the pandemic, which really have kind of put new home buyers in a bit of a pickle. I'm sure the Fed chairman was hated to hear you use the word transitor, former head head chairman, hated to hear you use the word transitory again. Nobody even knew what that word meant until, you know, the 2022 or 2023. Sounds like an S.A.T. word, but just say, you know, vocabulary word.

[00:08:35] So I'm going to take the opposite side of that coin. I think it is transitory. And I do the grocery shopping for my household. And this is really weird. I pay attention to the price of butter at big box stores. And it has been like spot on at showing which way inflation has been going.

[00:08:56] So at the beginning of the pandemic, a four pound chunk of, you know, one pound butter quarters that one would use for baking. That's why I pay attention to it. It was at about seven bucks. Okay. In night in 2020, at the beginning of 2020, it went up to $15 during the height of. Yeah, I know. Right. That's a lot during the height of the inflation.

[00:09:26] And it's been bumping around 10 bucks. And whenever we've had a bump of inflation, it goes up to 11, maybe 1250, something like that. When my latest foray into the big box over the weekend, it was at 949. This is a low. This is almost getting back to 2020. Right. I mean, especially given these price swings.

[00:09:49] I think dairy products are interesting because some of them like butter can last not a long time, but it's not like fruit, which, you know, has a shelf life in weeks. Right. So this is why I've been watching butter and sour cream and other things. And I keep these prices in my head as I roll around. I think food prices are coming down for a lot of reasons.

[00:10:15] There's been some dysfunction in the, especially with dairy cows. Why do I know this? I don't know. I guess I care. I look at a whole range of information. But this is very good news to me. You know, I was really posed for an $11. And no, I didn't buy it. I just look at it every time I go. I was thinking $11 given, you know, the price of gas and the war and everything. Here we are, 949. Let's see what it is next time I go.

[00:10:44] But I'm very hopeful that especially food inflation is beginning its descent as it should. This is some, you know, this is a commodity and prices go up, prices go down. It's not like a more fixed sort of good. Can you translate though the price of butter to the rest of the economy? I think I can because like part of the agita and part of my agita is, you know, I'm a middle-class consumer.

[00:11:14] I go to the grocery store and say, I have three bags of what for $70, right? You know, I'm horrified. I am not alone. This slows down your spending, even though proportionally it's probably not a large part of your spending. It's stuff that you know how much it cost in the recent past. And people have a recency bias.

[00:11:36] They want things to go in their favor, you know, so having to pay $75 hurts more, believe it or not, than buying more for your house, right? Because you only buy your house a couple of times in your life. So yes, the home price is more important, but that daily grind of how much you're spending on food and gas, really does slow discretionary purchases and certainly those larger purchases.

[00:12:05] And if you just take that thinking over to, let's use Dick's as an example. Dick's announced earnings a week or two ago and they did not meet expectation. And the media got their information, I assume, from corporate executives and the shoe business has declined. Nike's earnings are weak.

[00:12:26] And the reason is these $200 tennis shoes, because butter is expensive, people aren't going to buy, they're buying $120 tennis shoes instead of $200, which squeezes profit margins. And it's, it's so, I guess I'm inclined to agree with Kim. Inflation is transitory. I disagree. I disagree. No, I don't disagree. I'm whole, I've been hopeful that it's been transitory for a while.

[00:12:54] You have, you guys know this, but you know, for the listeners, I mean, you have core inflation, which is what the Fed measures. That's housing, healthcare, goods and services, vehicles, et cetera. Then you have headline inflation, which is all of that plus energy and, and food. And because that's a little bit volatile, the Fed takes that out. So I'm hopeful that Kim's right.

[00:13:16] And I think she's right that grocery prices are declining, but the, the, the U S economy is still 70% services. And just based on my experience with all this, everything I have to do and purchase for my kids and all that fun stuff, I'm not seeing inflation come down quite a bit. So you're still seeing a very strong consumer who is still spending. And yes, there are outliers like Nike and Dick's Frank, I think where you're seeing that pair back.

[00:13:45] But I think it's going to be very, very telling to see where, if the consumer really does pull back spending, that will be helpful for the inflation story. And that will drive inflation a little bit lower. So it's a double edged sword. You're going to see consumers pull back spending, which is not a good thing, but it also could help inflation to the downside a little bit in the coming months and quarters ahead.

[00:14:07] Well, I can't wait for the next, uh, fed chairman's comments when he says that the, uh, when he starts relating inflation to the price of butter, I think that, and we'll know that Kim has got it. I'm totally going to email him. Are you able to email this podcast to him? Uh, maybe. Yeah. Yeah. You know, uh, I want to move on to something else. We've talked, uh, talk, talked about this before, but I'd like to bring it up again. And, uh, this is, uh, about AI and how you invest. And here's my thought.

[00:14:37] Well, my thoughts are normally wrong on this program, but I'll give it a try anyway. Here's my thought. The stock market is not as flippant as the news cycle, but it does react and overreact to some sort of report or comments made by a government official or CEO. Now we witnessed huge market reaction as more and more information about AI was released, what it could do, how much companies will use it in the future, how much they're investing into it, resistance to data centers.

[00:15:03] So my question is this, and Kim, I'll start with you since you're our software analyst here. As an investor, should AI be the overriding sector in your portfolio? Hmm. What an excellent question. It depends. Do you want to keep up with the market or don't you? I mean, that, that is the answer.

[00:15:25] So I'm a big believer in, um, what I do, which is I have a strategy that we maintain a close, uh, proportion by sector to the S and P 500 because, well, you know, that is the market. And then we do individual security selection for those slices of the market. So right now, uh, I think, I don't know the exact numbers.

[00:15:54] It's around 35 to 40% is technology. It's crazy. So if you go away from technology, which is largely AI right now, um, your results will vary according to the market. So if you don't care about benchmarks, if you have some vision that, you know, people are, um, impaired by AI and you don't want to participate in that, by all means, you know, invest the way you're going to invest.

[00:16:23] But if you want to keep up with the market, you're going to have to have some in AI. Now I'm going to make a bold pronouncement here. I don't think AI as it exists today, the winners are going to continue winning. I'll, I'll even bet you 10 bucks, $10. I usually make a dollar bet, but $10. You'll bet a pound of butter is what you're saying. I will bet a pound of butter or four pounds of butter. Yes.

[00:16:51] For, uh, that in five years, one or both open AI and anthropic are gone. Wow. Wow. And that's because I, they're innovators, no doubt, but the technology isn't as robust as either pretend. And right now they're really ramping up this whole, oh, please regulate me because they want to make sure competition doesn't come in. So just watch this space.

[00:17:21] But I still believe AI in the long run is going to change the way we, um, do business and carry on our lives. Michael, you like that advice from Kim? No, I do not. Um, no, I'm kidding. Um, um, no, I, she's really, really, really, really, really, really, really, really, because they're not going to be a lot of, really, really, really, really, really, really, really, really, really, really, really, really, really, really, really, really. That's right. I mean, you, AI is the story of the markets. And as I've said before, uh, going forward, so I think you need to have some exposure there.

[00:17:48] How you get that exposure, um, is, is what makes our job a little bit difficult. You can get it from the chips. You can get it from energy. You can get it from infrastructure. You can get it from materials, industrials to build out the whole infrastructure, uh, thesis. So, there's a lot of different ways to play the AI story.

[00:18:04] I also think, um, just given the dynamics of the world now, it's become a little bit more multipolar than, than a sort of, um, you know, a one size fits all, uh, investment strategy that we've seen over the past decade with, you know, just the, the FAANG stocks, the Magnificent Sevens. So, um, as an investor, I think it's very important now to become a bit more diversified, even overseas.

[00:18:28] So, um, again, the, the multipolarity that we're seeing now is, you know, you're, you're starting to see that other countries are now saying, well, we really need to rely on ourselves here as opposed to, uh, you know, Russia for oil or Iran for oil. So we need to build out our infrastructure. We need to build out our defense capabilities here. So starting to, to see even like countries like Germany, uh, going into a, a, a budget deficit now, I think is pretty interesting.

[00:18:55] So you're starting to see other countries spend a bit more also. So I don't think it's just an AI story, but I also, as an investor, I would want to have a little bit more exposure to the overseas markets going forward too. Well, that's very interesting. And to me, there's no question that AI is here to stay. And I tend to agree in principle. I agree with what Kim says. I'm not bold enough to say who's the winners and losers are going to be. All right.

[00:19:20] But I would say probably eight out of 10 AI companies, whatever that means will be gone, uh, 10, 15 years from now, which ones Kim have at it, but, uh, I'm not willing to go there. And, uh, uh, if, if you invest in an ETF, hopefully it will adjust as these things fall by the wayside or appear to fall by the wayside. Hopefully they're smart enough to see that. Uh, we know Kim is.

[00:19:50] Well, so Kim, I have to ask you this question. And if you think that within, I think you said five years, uh, that we wouldn't see these two major companies that we all read about just about every single day. Um, do you invest in those companies right now? Well, you can't, they are both coming to, uh, to, uh, uh, a stock market near you. They're going to IPO theoretically soon. Uh, whatever that means.

[00:20:15] Anthropic looks like it's the winner to that, um, metric to, uh, do an IPO. I'm always cautious on IPOs, even though I might like the company in the long haul companies, even though they're very smart, have to learn how to talk to wall street. They've been talking to private equity, to venture capitalists, to private owners.

[00:20:38] It's very, very different game to talk to the street and the street punishes you in ways you can't even imagine as a private company owner. So, um, I tend to not participate in IPOs and then wait a couple of years so they can have that earnings chit chat and learn how to talk to wall street.

[00:21:00] Um, that being said, I think the models themselves are flawed and the, just the way that the AI that they're doing works firstly depends almost solely on the internet. I don't believe the whole world has been encapsulated on the internet. Um, I wouldn't necessarily think people that have only experienced the internet would make good decision makers.

[00:21:24] Thus these companies are, these companies are kind of suspect, but I also believe, you know, just the models, the math behind it is not, um, giving the results that people are expecting to build businesses on top of it. And I don't see any, you know, developments coming in that soon.

[00:21:47] So I think these smaller models that I always talk about that are solving very specific problems are likely to be more winners, especially for investors, because they have a clear delineation of here's a problem. Here's the cost of the problem. Here's the cost of the problem. Here's the cost of the AI solution. If the AI solution is cheaper and gives me great answers, we use that as opposed to the nebulous build it and they will come. So it's for many reasons.

[00:22:17] I don't think that these big hunking companies are, are the solution for, you know, replacing humanity quite yet. Okay. Okay, good. Um, I think Michael mentioned this in the opening comments here and that is basically there's still this cloud that is hanging over the market, which is the war with Iran and the price of oil. Now, wars are rarely short-lived and even with the war, Wall Street seems to be doing quite well.

[00:22:46] Uh, but if this war continues and there's, you know, another flare up over the weekend again, is this a concern for investors? In other words, is there a safe haven or areas or sectors where they might grow despite the supply and the price of oil? Well, Frank, your thoughts. Well, in my career, I've seen numerous, uh, armed situations. None of them were bad for the stock market.

[00:23:17] And to be crass and put it kind of simply, you build it, you blow it up, you build it again. This is good business. And, uh, what's happening is we build it, we blow it up, we build it again. And, and this isn't bad. All right. The real problem with this particular war is the supply chain coming through the strait and how that's affecting us.

[00:23:46] Now I'm reading that China has pared back their consumption, which is fascinating that they can actually achieve that and use their reserves, uh, to keep demand for energy down. We've got our politicians trying to capture other people's oil so we don't need Middle Eastern oil. All right. You know, you can question the methods, but the concept is not a bad idea.

[00:24:13] And, uh, the, uh, so things are adjusting accordingly. We're letting a, we're escorting a few of these ships through the strait successfully. And when this will end, your guess is as good as mine. Uh, anybody's guess is probably as good as mine. I don't see any end near, but I don't think it's a big market event other than from the inflation perspective. Um, I agree.

[00:24:42] I don't think it's a big market event either. Um, in wars typically have that, had that effect of a near term, a near term, high spike of volatility followed by, okay, let's figure out a way to get oil. Let's figure out a way. I'm talking about from a company standpoint, let's figure out a way to operate in an environment where this is happening. And companies are smart enough and businesses are smart enough to do that. And consumers generally kind of put that thought on the, on the, on the back burner.

[00:25:10] So you're starting to see, I think more and more ships coming out of the straight up or moves, even though they might not be, um, as telegraphed or as, as, you know, making the news as maybe first thought. So companies are figuring out a way to get oil through the straight up or moves or finding other alternatives to get oil to where it needs to go.

[00:25:30] So even from that standpoint, you're seeing oil, um, back off its, its highs that were set, you know, four or five months ago or so and kind of settling in here in the, you know, mid nineties for, for, uh, for crude right now. So, um, again, I kind of agree with Frank that I think the markets are going to look past the whole Iran situation for the most part. I'll make it a three-peat and agree with everybody else. I too am shocked at how little reaction the markets had to the volatility of the price of oil.

[00:26:00] And I guess that really reflects that this time is different than the 1970s where it was a very different time. Um, we had a higher reliability on, or the nation relied more on imported oil and we used a whole lot more of it per dollar of GDP create, uh, created. So, um, it's an interesting time.

[00:26:25] Um, I think natural gas is probably a whole something that's saving us and we don't even realize it. So, uh, just tossing that out there cause it's a local concern here in Western PA where we have apparently a lot of natural gas. Good. Yeah. We also have a, not enough pipelines to get it out of here.

[00:26:50] So it's, it's just a storage problem, getting it, getting it from here to where it needs to be. So maybe that will help us attract manufacturing to where it is. You think maybe it might've come on already, but not yet, I guess. Who knows? Well, we had an, we had a, an executive of a major fortune 500 company move his headquarters to New York because that's where he wanted to live.

[00:27:20] Yeah. Out of here. Which I immediately sold the stock cause I said, what does that have to do with making your company profitable? Get on a plane and go take the company plane to New York when you want to go to New York. It's only an hour away. Yeah. But then you'll have Kim analyzing what the, what the CEO is doing with his plane and saying, ah, they're wasting money. I'm not going to invest in them. It's true. It's very true. It's a spin doctor who would spin it and say, we're doing it that way because it's cheaper to have our headquarters in Pittsburgh.

[00:27:51] Yeah. Exactly. I didn't know I was a spin. And that plane fare is chump change compared to what we're spent, what he spent to have it in New York. True. I just didn't know I was a spin doctor. Well, thank you for that. You're in the media business. Let's. At least I finally have a doctorate in something. All right. All right. Thank you guys. It's been a great session today. We've got a lot of good information out there. We'll continue our look at the economy and investing in our future editions.

[00:28:18] And if you happen to be watching or listening to this podcast, I ask that you hit the like or the subscribe button on whatever platform you happen to use. So that's it for now. Thanks for joining us for this edition of The Bull, The Bear, and You.