Hey everyone me kevin here: it's your favorite long-term investor, who loves to make money, because you can be a long-term investor and trade out of bad positions and allocate to better positions. But folks we got to talk about the reality of where people are trading into right. Now and it's quite interesting, the allocation, because a lot of folks right now are hoping and are betting, and i originally have made this statement as well - that i believe there's a good chance. Small caps would see a quick rebound during whenever a rebound would come.

So far that has not been happening in fact. Take a look at this okay, i'm going to show you this chart, but before i show you this chart, it's just worth seeing a little bit of quick, math, okay and i know a lot of us don't like math, but the russell 2000, so the r2000, if You divide this by the nasdaq 100. These are our main indices right here that we watch right. If we divide these over each other and let's say the russell - i'm just going to make up numbers here - let's say the russell's trading 450 and the nas is trading for 200.

That would give you a ratio of 0.4 right. Well now, let's say the nasdaq went up to 400, while the russell only went up to. I don't know 70 right, and so now, if we divide this, the the what we're trying to see here is: does the ratio gets smaller or bigger and it gets a lot smaller? Now the ratio is 1.75, so in other words, as the nasdaq goes up so bigger tac goes up what's happening to small caps, and how do we look at yields in relation to that and we get a really interesting conclusion that i think you're going to like, But, of course first i have to just quickly remind you to check out extra go to metkevin.com extra check out that extra debit card build your credit without having a credit card. So that way you could really get into buying real estate and i think we're gon na have some sweet, real estate opportunities coming up uh in the next six to twelve months.

So get your credit up and get ready go to metcalf.com extra to learn more link. Your existing bank account and let's take a look at the chart. Okay, so at first glance this is a little tricky, but what i want you to know is you want to watch this 10-year treasury yield, which is right here from 2018 when we're up at three percent notice? How, when it goes down, the blue line is following it notice that blue line is following everywhere. It goes so, as the 10-year treasury yield fell, the ratio got smaller, which means that as treasury yields fell, people were buying more tech stocks and less small caps right.

So yields down people are buying here, we'll write it down, yields down more uh tech, less small for yields down. That makes sense right because we're discounting the future cash flows, uh of um, of of tech. Much more: when rates go up, when rates go uh down, we don't have to discount as much so we could be more bullish on tech and what happens? Tech valuations often go up, often at least that's what we're seeing here to the burn really of a small caps, because again, as that, blue line goes down. The ratio between the uh, the russell and the nasdaq goes down and uh, and it just basically means more money is flowing into tech right, uh, okay, but then what happens when yields go up? Well yields go up.

Often, not always you see tech go down in favor of small caps, so when this ratio goes up and yields go up, people are buying small caps, more and less big tech. That is what's happening here, and this has been pretty consistent. This relationship, okay, now we're going to get rid of all this and we're going to find something interesting. The relationship is getting destroyed.

Look at this! The relationship is in tatters, zoom out perfect relationship over here and all of a sudden over here, we've lost it. The relationship is getting destroyed. Why is this happening? Well? Why it's happening and what's happening could be two very different things, but let's clarify first what's happening here, so treasury yields are going up as treasury yields in the past went up. People invested in small caps more than they did big tech.

That's not what's happening right now, what's actually happening right now is people are investing more money into big tech and less is flowing into small, which is the ratio of the two? Is the blue line over here, uh and so you're, seeing more of this flight to safety, probably because of the uncertainty of inflation and pricing, power and war? I would say this last little drop that you've had over. Here is probably war based, but the first breakdown over here is because of inflation concerns, so in other words, right now it seems like investors, specifically retail leading the charge like we saw yesterday, are preferring big tech companies over smalls and when you look at just the Charts today i mean today's not an overall green day and look at tesla. It's up 3.3 percent uh. It's it just got rejected at the 1035, the 61.8 fibonacci line when tesla's absolutely killing it.

You go over to qqq you're, actually negative on the day. So if we're just pulling out some of the big guys like tesla and apple they're performing well today, now this isn't going to obviously work perfectly. I mean matterport's a small cap, but the point is that, more broadly, if we zoom out over here - and this makes sense - small caps have absolutely underperformed the big tech and, unfortunately, that trend doesn't appear to be getting better. If anything, it appears to be getting worse, and so i wanted to talk about that in this video, because when we're positioning and we're making bets on small versus a larger cap right now at least large caps winning - and this is a ratio to pay attention to When we actually finally start seeing small caps recover, maybe that's the time to jump in here, but so far we're not actually seeing that small cap recovery.

Yet don't get me wrong, i mean i'm in matterport, i'm in palantir uh and i've got some sofi, though i just reduced a little bit of my sulphide position, specifically because we have the lending risks and the small cap transition and instead i've moved into uh. Just this is about two hundred thousand dollars, so we're talking about one percent of the portfolio uh. It made it made a small little move in into a different company uh, who yesterday i re, fell in love with substantially. I already owned the company, but i added more allocation to it after i went through their last quarterly report.

It's amazing we'll talk more about that at a different time. Of course, i've already sent that alert to everyone in the stocks and psychology money group and in our course, member live stream. This morning, uh we're going to be spending a lot of time talking about some sweet trends that are going on uh within within the uh consumer world, but uh this year pay attention to it. Consider this in your investing and if you want to track this, just all you have to do is remember, divide the russell by the nasdaq.

You get the ratio, compare it to what the treasuries are doing and when we start seeing this ratio go back up. That's going to be a good sign for small caps overall. So if i were to write down - let's say a little rule of thumb, i might go to, let's just say: cnbc.com, really, quick and i'll - take what the russell actually is, which is 2069 divided by what the nasdaq actually is, which is 14 000.. That puts us at about 14.69, so i'm gon na have to see the russell probably go to about 24.

I mean, even if we get 400 points on the russell, it's barely going to move. That and that'll must be 20 right there uh. You know that would bring us uh. No, actually that would bring us back in line 17.5.

That would bring us right over. Here, probably need the nasdaq to stay stable and the russell to go to about 25.69, and then we'd be here at 18.2. We'd almost be back lined up with uh with that treasury yield curve, so you've definitely got a rust lag and, and that of course assumes nas is staying stable. But my opinion, interesting thing to observe, doesn't necessarily mean you always want to follow the trend.

But if you're, making big investments solely into small caps, you might at least for the time being, it looks like be getting slightly left behind, and this is not me to me trying to bag on small caps. Don't get me wrong again. I got some small caps. Uh but um yeah, it's it's a trend that we need to be aware of.

It's a the the previous trend that we had with uh yields, rising small caps doing well, it's not happening. It's broken apart. All right folks check out mckevin our commission jackster check out the programs on building your world thanks. So much and we'll see in the next one goodbye.