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Dollar Collapse Fuels S&P 7000 Melt-Up · The PhilStockWorld Investing Podcast

• 0:00
  Roy: Welcome back to the deep dive. It is Wednesday, 01/28/2026. And I have to say, looking at the data coming out of the Phil Stock World Morning Report today, I feel like I'm wearing two different pairs of glasses. It is a completely schizophrenic morning in the markets.
• 0:15
  Penny: It really is. Depending on where you look, the world is either booming or collapsing.
• 0:21
  Roy: Exactly. Because if I look at one screen, the S and P 500 is literally knocking on the door of 7,000 points. We hit a technical record close yesterday at what 6,978. It's a party.
• 0:32
  Penny: On the surface, yes. Confetti, champagne, all of that. It looks like an unstoppable bull run.
• 0:38
  Roy: But then, and this is the whiplash, I look over at the commodities pit. Gold has just shattered every record in the book, crossing $5,100 an ounce. Silver is sitting over a $100.
• 0:48
  Penny: And that is the paradox right there.
• 0:50
  Roy: It's more than paradox. It feels like a glitch in the matrix. Usually, stocks, you know, the risky stuff are rallying like this, gold, the ultimate safety blanket, is asleep in the corner.
• 0:59
  Penny: It's supposed to be.
• 0:59
  Roy: So why are the risk assets and the panic assets rallying at the exact same time? It just it feels like an anomaly.
• 1:05
  Penny: It is an anomaly, but it's an explainable one. And that's really our mission for this deep dive. We need to unpack this confusion. We're gonna look at the massive split opening up between what we call the paper economy and the physical economy, why the US dollar is taking such a beating, and why the very definition of safe is being rewritten in real time.
• 1:27
  Roy: Okay. Let's unpack this because 7,000 on the S and P, I mean, that is the headline number everyone is gonna be talking about. It feels like the economy must be roaring to support that. Is this genuine growth?
• 1:40
  Penny: Well, this is where we need a reality check, or I should say we need to check the measuring stick.
• 1:44
  Roy: The measuring stick.
• 1:45
  Penny: Think about it this way. If you're measuring your living room for a new rug and suddenly your tape measure shrinks by 15%, your room is gonna measure bigger.
• 1:53
  Roy: Right.
• 1:53
  Penny: You'll say, wow, I have more square footage. But the room hasn't actually changed size. The house didn't get bigger, the ruler just got smaller.
• 2:00
  Roy: Okay. I follow. The room is the economy and the ruler is the dollar.
• 2:04
  Penny: Exactly. Since the current administration took office about a year ago, the US dollar index has fallen 14 points. It is currently breaking below 96.5. That is a massive devaluation in a very short amount of time.
• 2:19
  Roy: So the dollar in my pocket and the dollars buying all these stocks are just worth significantly less.
• 2:24
  Penny: Precisely. So when you see analysts cheering that S and P earnings are expected to grow, what, 11 or 12%, you have to ask, is that real growth?
• 2:33
  Roy: Or is it just repricing assets in a weaker currency?
• 2:36
  Penny: That's it. Take a multinational. Right? If they sell widgets in Europe, they earn euros. If the dollar crashes, when they convert those euros back into dollars for their earnings report, it looks like a massive wind fall.
• 2:49
  Roy: So their earnings per share shoot up.
• 2:50
  Penny: They do. But did they sell more widgets? No. Did they innovate? No.
• 2:55
  They just benefited from the currency conversion.
• 2:56
  Roy: It's an inflationary melt up.
• 2:58
  Penny: That's the technical term. Yes. The stock numbers go up because the money goes down. And if you want proof that this isn't healthy organic boom, just look at the consumer.
• 3:06
  Roy: I saw the consumer confidence number in the report. It was not good.
• 3:10
  Penny: It was terrible. It plummeted to 84.5. And to put that in perspective, that is lower than the absolute depths of the COVID pandemic.
• 3:19
  Roy: That's shocking. With the market at all time highs, you'd think people would feel wealthy. Right?
• 3:23
  Penny: But the wealth effect of the stock market only hits the top bracket, the people who own the assets. The person pushing the shopping cart is feeling a, what, 15% cumulative price hike on their grocery bills. You have this huge disconnect. Wall Street is cheering the devaluation while the consumer is being crushed by it.
• 3:42
  Roy: So the market is up because the money is broken. But when I was digging through the sector performance in the Phil Stock World notes, it's not just a blanket rally, is it? It looked like some huge names were getting taken out back.
• 3:53
  Penny: Oh, it's definitely not uniform. We are seeing a great divergence and nowhere is that clearer than in health care.
• 4:00
  Roy: Yeah. Saw United Health, UNH, and Humana were just cratering. I think UNH was down something like 16 to 20%. That's a crash for a company that size.
• 4:08
  Penny: It is. It's dragging the whole Dow Jones down.
• 4:10
  Roy: It's just a bloodbath. But why?
• 4:12
  Penny: The reason is fascinating. It basically signals the end of free money.
• 4:16
  Roy: Walk me through that. How were they getting free money?
• 4:19
  Penny: For years, these insurers have relied on government subsidized growth through Medicare Advantage. It was a reliable gravy train. But the government specifically CMS just proposed a rate increase for 2027. The industry was pricing in a hike of say four to 6%. CMS came back with zero
• 4:38
  Roy: nine Zero point point zero nine. Yep. That's a rounding error that's effectively zero.
• 4:43
  Penny: It is zero. It signals that the regulatory environment has turned hostile. The government is in effect turning off the sticket.
• 4:50
  Roy: So if you're an investor holding these paper economy stocks that rely on government policy, you're in trouble. Yeah. But if the market is at highs, money has to be going somewhere. So who's winning?
• 4:59
  Penny: The physical economy. The people actually making, moving, and building things.
• 5:03
  Roy: Give me some names. Who is thriving in this?
• 5:05
  Penny: Well, look at General Motors. They beat earnings, raised guidance. UPS beat revenue expectations. Baker Hughes, the oilfield services giant, posted a record backlog of over $32,000,000,000.
• 5:18
  Roy: That's interesting. So despite everyone talking about recession fears and confidence crashing, people are still buying cars, shipping packages, and drilling for energy.
• 5:26
  Penny: They are. And more importantly, smart capital is rotating. Investors are fleeing sectors vulnerable to political whims like those insurers and moving into sectors backed by tangible orders and hard assets, machinery, logistics, infrastructure. That's where the new safety is.
• 5:44
  Roy: Speaking of infrastructure, that actually leads us right into tech. Usually when we talk tech, we're talking about software or maybe the chips. But there was a deal on the notes involving Corning that really caught my eye.
• 5:54
  Penny: The glass company.
• 5:54
  Roy: The glass company. Corning stock popped about 15%. And the catalyst was Meta Facebook writing a check for $6,000,000,000.
• 6:03
  Penny: 6,000,000,000. Just for glass?
• 6:04
  Roy: Just for fiber optic cables.
• 6:06
  Penny: See, this is a huge signal people are missing. We get so caught up in AI as this magical code floating in the cloud. But AI has a physical body. It has a nervous system.
• 6:16
  Roy: Right, you can't just wish the data from one data center to another.
• 6:19
  Penny: Exactly. Wireless can't handle the bandwidth these models need. You need glass, strands, fiber optics to carry that massive tsunami of data. This deal confirms that big tech infrastructure spending is real cash. It's not just hype.
• 6:34
  They are buying the plumbing.
• 6:36
  Roy: And the plumbing is changing inside the data centers too, specifically with the chips. I saw Samsung has finally entered the chat.
• 6:43
  Penny: Big time. This is a critical development for the semiconductor market. Samsung has passed qualification to supply HBM4
• 6:50
  Roy: Okay. Hold on. H b m four. Let's define that for someone who isn't a chip engineer. Why does that matter?
• 6:55
  Penny: H b m stands for high bandwidth memory. Think of it as the super fast short term memory for the AI brain. The GPU, the NVIDIA chip is the brain, but it needs a workspace to hold the information it's processing right now. That's HBM.
• 7:08
  Roy: Got it. So why is Samsung getting approved a big deal?
• 7:11
  Penny: Because until now, SK, Hynix, and Micron basically had a moat. They were the only game in town. If you wanted the best memory, you had to pay their price.
• 7:19
  Roy: That's
• 7:19
  Penny: good. Exactly. Samsung entering breaks that scarcity. It floods the market with supply. That is bad news for Micron.
• 7:27
  Their stock was down about 2% because their pricing power just took a hit. But who is it good for?
• 7:33
  Roy: The guy buying the parts. NVIDIA.
• 7:35
  Penny: Correct. NVIDIA's component costs go down. Cheaper parts mean better margins for the guy building the final brain. So we see this rotation within tech. The commodity component makers might struggle, but the integrators and providers are booming.
• 7:50
  Roy: Okay. So we've got physical infrastructure booming, the paper economy of insurers struggling. But I want to zoom back out to that dollar issue we started with. We know the dollar is crashing, which is pushing up asset prices. But why is it falling so hard right now?
• 8:03
  Penny: It's largely geopolitical. It comes down to a game we might call tariff roulette.
• 8:07
  Roy: Tariff roulette. I like that. Or, well, as an investor, I hate it, but it's a catchy name.
• 8:12
  Penny: It fits perfectly. The president just threatened 25% tariff on South Korea. Now keep in mind, South Korea is a major ally. We have troops there.
• 8:19
  Roy: Right. Why the threat?
• 8:20
  Penny: Because their legislature hasn't ratified a trade deal fast enough for the administration's liking.
• 8:25
  Roy: So it's a punishment.
• 8:26
  Penny: It's a highly transactional approach. Problem. The market hates unpredictability. This creates what the Phil Stock World Report calls a volatility tax on the dollar.
• 8:39
  Roy: Break that down. What's a volatility tax?
• 8:41
  Penny: Think about why people hold US dollars. They hold them because it's the boring asset. It's safe, stable. But if holding dollars means you might get hit with a random tariff tweet at 3AM, the dollar stops being boring. It becomes a source of risk.
• 8:55
  Roy: And if the dollar is risky, global capital looks for a workaround.
• 8:59
  Penny: And they are finding them. We call this the bypass America strategy.
• 9:02
  Roy: Who is bypassing us?
• 9:04
  Penny: Everyone who can. Look at the news from just the last 48. The EU and India just signed a massive free trade agreement. That covers 2,000,000,000 people.
• 9:12
  Roy: And The US isn't in the room.
• 9:14
  Penny: We aren't even in the building. Then you have The UK prime minister in Beijing right now explicitly refusing to pick sides between The US and China.
• 9:21
  Roy: So global capital is literally routing around The US to avoid the drama.
• 9:25
  Penny: Exactly. And that brings us right back to the start of our conversation. That is what is driving gold to $5,100 and silver over a $100. They are the ultimate anti dollar assets. If you can't trust the reserve currency, you go back to the ROP.
• 9:39
  Roy: That is sobering. It really reframes the whole all time high celebration. But let's bring it down to the ground level for you. We've got the Fed meeting starting today. Powell is expected to hold rates right?
• 9:50
  Penny: Correct. Rates are sitting at 3.5 to 3.75%. Powell is stuck between a rock and a hard place. He can't cut rates when inflation assets like gold are soaring. That would just pour gas on the fire.
• 10:00
  Roy: But he can't really raise them with consumer confidence crashing to pandemic lows.
• 10:04
  Penny: Exactly. So he holds. He does nothing.
• 10:07
  Roy: So in this environment, high stocks, crashing dollar, frozen Fed, what is a regular investor supposed to do? The report highlighted a couple of actionable ideas. Let's start with one that seems counterintuitive, American Airlines.
• 10:20
  Penny: Right, ticker AAL. This is a classic bad news is good news value trade.
• 10:25
  Roy: I saw they missed earnings. Usually when a company misses, we stay away. Why do we like them?
• 10:30
  Penny: They missed because of winter storm fern.
• 10:32
  Roy: Okay, but a miss is a miss.
• 10:34
  Penny: True. But the market looks forward, not backward. Everyone knows about the storm. That's already priced in. But despite the storm, they raised their full year guidance.
• 10:43
  They are optimistic.
• 10:45
  Roy: And they're cheap.
• 10:46
  Penny: Very Trading at about seven times forward earnings. And look at oil hovering around 60 to $62 a barrel.
• 10:54
  Roy: Which is the biggest cost for an airline.
• 10:56
  Penny: Exactly. Low fuel, high demand. But the strategy here isn't just buying the report suggests selling premium, specifically selling puts.
• 11:07
  Roy: Okay. Let's explain that like I'm five, selling puts. How does that work?
• 11:11
  Penny: Think of it like being the insurance company. When you sell a put, you agree to buy the stock at a certain price, say, a lower price than it is today if it falls. In exchange for that promise, someone pays you cash right now. That's the premium.
• 11:23
  Roy: So I get paid cash upfront to promise to buy a stock that I actually wanna own anyway.
• 11:28
  Penny: Exactly. It's a win win if you like the company. If the stock goes up, you just keep the cash. If it drops, you buy the stock at the discount you wanted but your cost is lower because you already pocketed that cash. You're generating income while you wait.
• 11:41
  Roy: I like that. Getting paid to wait is always nice. Now let's talk about the other side, protection. With the market at all time highs and a government shutdown possibly looming Friday, a lot of people are nervous. How do we hedge?
• 11:56
  Penny: The specific idea here involves SKU QQ.
• 11:59
  Roy: Which is the inverse ETF for the Nasdaq. So if tech goes down, SKU QQ goes up.
• 12:03
  Penny: Right. But simply buying SKU QQ is dangerous because it decays over time. The methodology in the report is what's important. It challenges how most people think about hedging.
• 12:13
  Roy: Pasco.
• 12:14
  Penny: Most people hedge based on their total portfolio size. They say, I have a million dollars, so I need a million dollars of protection.
• 12:20
  Roy: That sounds logical. If I have a million dollar house, want a million dollar policy.
• 12:23
  Penny: It sounds logical, but in the stock market, it's incredibly expensive. It's overkill. Instead, you should hedge based on your pain tolerance.
• 12:30
  Roy: Pain tolerance. Ask Explain
• 12:32
  Penny: yourself. If the market drops 20%, how much will I actually lose? Maybe on your million dollar portfolio, your real loss on the risky stuff you might panic sell is closer to $20,000. You don't need to hedge the million, you just need a hedge that pays out about $12,000 to take the sting out of that specific loss.
• 12:51
  Roy: That makes it feel much more manageable. You're ensuring the deductible not the whole car.
• 12:54
  Penny: That's a great analogy and you use leveraged instruments like call spreads on SweetQQ to get convexity.
• 13:01
  Roy: Convexity, that's a buzzword define that for us.
• 13:04
  Penny: It's a fancy word for spending a little to control a lot. It's leverage. The example in the report is spending say $50,000 to control $450,000 worth of protection.
• 13:14
  Roy: So if the market crashes, that 50 ks explodes in value to cover your loss elsewhere.
• 13:19
  Penny: Exactly. Because in a market this volatile, you need insurance, but you don't want the insurance premiums to eat up all your gains from the winners like General Motors. If you spend all your profit on hedging, you might as well just hold cash.
• 13:30
  Roy: But as we've discussed, holding cash might be the worst idea of all right now?
• 13:34
  Penny: It might be. You have to stay invested, you have to be smart about the risk.
• 13:39
  Roy: So let's wrap this up. We're looking at S and P 7,000. It feels like a party, but the bouncer is eyeing us suspiciously. What is the big takeaway from the Philstock World Report today?
• 13:49
  Penny: We are at a major crossroads. Yes, S and P 7,000 is here. But you have to realize it's built on a devaluing currency and a struggling consumer. The paper economy, the insurers, insurers, the subsidized industries is getting regulated away. The safety is moving to the physical economy, infrastructure, machinery, the plumbing of AI
• 14:09
  Roy: And the commodities.
• 14:10
  Penny: And the commodities. Gold isn't rallying for no reason. It's telling us that the US dollar is being repriced by the world due to political volatility.
• 14:17
  Roy: It really makes you wonder, we grow up thinking cash is safe and stocks are risky. But looking at this split, are we seeing a regime change where holding cash is actually the riskiest move of all?
• 14:28
  Penny: That is the big question. If your cash is losing 14% of its value a year against the things you actually need to buy food, energy is it safe? I'd argue it's a burning match.
• 14:37
  Roy: Something to chew on. Keep watching that ten year yield and the dollar index. That is where the real truth is today. Thanks for tuning into this deep dive.
• 14:46
  Penny: See you next time.