• This is a special Market Alert — we are now in protection mode.
• As part of our Invest and Protect Process, we have reached step two and are protecting 50% of your equity portfolio.
• Our goal is clear: protect your retirement from potential catastrophic losses.
• We are following a disciplined seven-step process designed to navigate markets like this.
• From here, there are three possible paths:
• A quick recovery
• A deeper decline requiring more protection
• A normal downturn followed by recovery
• No matter which path occurs, we have a plan in place.
• One important concept to understand is opportunity cost.
• It is very possible we will reinvest at a higher level than where we went into protection mode.
• That is not a mistake — it is the premium we pay for protecting against large losses.
• Think of it as insurance for your retirement.
• Now let’s talk about what we are seeing that concerns us.
• First, the recent 3% market rally was likely driven by short covering.
• Short covering happens when investors who bet against the market are forced to buy stocks to exit their positions.
• That kind of rally is often temporary and can be a “head fake.”
• It is not something we can rely on as a true market recovery.
• Second, we are now seeing signs of stress in private credit.
• Private credit has grown significantly since 2008 due to increased regulation on traditional banks.
• This “shadow banking” system has expanded for over 15 years with far less oversight.
• One of the largest players, Blue Owl, is now experiencing what appears to be a run on the bank.
• Investors are trying to withdraw their money, and withdrawals are being limited.
• That is very similar to what we saw during the 2008 financial crisis.
• If this spreads, it could create broader contagion in the financial system.
• Third, we are closely watching global oil supply dynamics.
• Oil that cannot be transported is being stored, and storage capacity is filling up.
• If storage reaches capacity, production may have to stop.
• If production stops, it can damage oil wells and reduce future supply.
• This could lead to severe global shortages.
• In extreme scenarios, it could disrupt supply chains and economic activity worldwide.
• We are already seeing early signs of strain in parts of the world.
• All of this creates a potentially dangerous backdrop for the global economy.
• We are not predicting a worst-case scenario, but the risks are real and growing.
• That is exactly why we are in protection mode.
• Our job is not to predict — it is to prepare and protect.
• We want you to have peace of mind while we manage these risks for you.
• Our goal is for your money to last as long as you do.
• We will continue monitoring developments closely and follow our process step by step.
• In the meantime, we want you focused on enjoying your Second Childhood Without Parental Supervision.

Transcript:

Ken Moraif
Hello everyone, and welcome to our weekly market alert video. And this is a very special one, because we’ve entitled it. Look out below. We have so much to talk about. What are the dangers ahead? We are in protection mode. We’ve got, I mean, I’ve got a whole list of things we’re going to talk about, and it’s going to be exciting. And as usual, we’re going to have more fun than a human being should be allowed to have when talking about all this stuff. And so before we get going, I just want to say a big shout out to SCWPer nation, all of you out there that are retired. We love you. We hope you are enjoying your second childhood without parental supervision. And for all you clients that are not retired yet, our goal is to get you there so you can go play, have fun, enjoy your grandchildren, play golf, whatever it is you want to do, we want to facilitate that. So let’s get started, and let’s talk about the fact that we are currently in protection mode. And as you guys know, we are invest and protect process has seven steps to it. Okay? And hopefully all of you watched the video that we sent out and that all of you have signed up for the webinar, actually, the town hall meeting, we’re going to have the one on April 15. Sold out. It’s it filled and so now we’ve added another one for April 13. Okay, so mark your calendar and make sure you sign up for that. We want everybody to be there. It’s going to be essentially a town, a town hall meeting with with me and with Jordan, and we’re just going to answer your questions on our philosophy, on our investment process, our investor protect process, what steps are still ahead, and whatever other questions you have about how we invest and what we do. Okay, so make sure you sign up for that as well. So let me go through the first thing I want to go over with you. We’re going to talk about the fact. You know, last week we said that private credit was going to be something that we needed to keep our eye on. Well, guess what? It may have already started blue owl, which is one of the largest private credit companies, is seeing a run on the bank right now. And that’s similar to what happened in 2008 we had runs on the bank. So we’re going to talk about that. We’re going to talk about short covering. I’m going to give you a quick lesson on that one, because you guys may have noticed the market went up 3% last whenever it was Wednesday or Thursday. That was called short covering. And you want to know what that means, because it’s a head fake in most cases. We’re also going to talk about something that is really kind of scary, and that is the supply of oil around the world. And what could actually happen. I saw a very interesting conversation on Bloomberg, and what it talked about was the fact that if we go longer than about 20 days, we can actually start seeing global shortages, and that’s already starting. And so we’re going to talk about that with you as well. So I want to go over through the whole thing. And what we’re going to start off with is where we are now. So we are in step two of our seven step process. And if you go and you look at the email that you got, you look down, you’ll see that all seven steps are there for you to look at. Okay, so you can see where we’re going from here, but we’re in step number two, which is that we look we reached our protect signal, we looked at our sanity checks, and that told us we need to protect 50% of your equity portfolio. So what does that mean? Well, it means that if you were, for example, a 60 stock, 40 bond client or SCWPer, then right now, we have taken half of your equity portfolio, and we’re protecting that for you. Okay, so three ways it can go from here, it can go back up again, in which case we’ll invest back in it could go way down, like a 2008 situation, in which case we have what we call a safety net. And the third scenario is, it turns out to be a four month thing, and it comes back, and we will reinvest based on our invest signal. So we’ve got it all covered for you, but the thing I want to make sure you know is this is a seven step process, and our goal is to protect your retirement from catastrophic losses. That’s what this is all about. Our invest and protect process is to protect your retirement from catastrophic losses. And the potential here is there. And so taking protective measures is a very good insurance policy to have. Okay, so we’re going to talk about about that so. And by the way, this is one of the things that could very easily happen here, if it is not a big, bad bear market, is that we will invest higher

than where we protect it. Okay, now that is a known thing. We know in advance is going to happen. It’s not a surprise. Our investment principles that I’m holding right here, that we’ve had for years. I look at number five. It says the invest and protect process comes with opportunity cost. Opportunity cost means we missed out on upside, and we’ve agreed that we’re willing to give up upside in exchange for protecting against catastrophic losses. It’s the definition of what we do. Yeah. So if we invest higher than where we protected, then the difference that what you missed out, call it the premium on the insurance you bought to protect your retirement from that catastrophic loss. Okay, so what I want to do now is I want to go into what are the things and we actually believe that it is possible we could have a significant downdraft from here. So I want to start first with what happened a couple of days ago, or three days ago, the market went up 3% why is that? One thing that happened there is we didn’t see oil prices change, so that wasn’t it? Therefore, what was it? Well, what was it? Was short covering. So short covering is where people think the market’s going to go down. So they short the market, meaning, if it goes down, they make money. But now all of a sudden they thought, wait a second, the market’s going to go up. If it goes up, we lose money. So what they have to do to undo their short is they have to buy the stock that they sold. I know it sounds backward and crazy, but that’s what they have to do to it’s called a short squeeze. People were scared that they were hoping the market would go down, and suddenly they thought it wouldn’t. They were going to get caught in a short squeeze. And so what they did is they have to buy the stock that they own to undo that short squeeze. And when that happens, they’re buying stocks. And guess what that does to the market? So that 3% rise we saw was probably in retrospect, now that we’re looking at it, it was mostly a short squeeze covering so therefore we can’t hang our hat on it. So what can we look at? Well, we told you last week about private credit. So private credit came along. Because in 2008 what happened was that all the banks were laden with regulations and all these, you know, they had to have certain amounts of money set aside to cover loans and this and that in the third and fourth, and so it became practically impossible to borrow from banks. Well, we live in an entrepreneurial society, and all these people said, You know what, if you can’t borrow from a bank, then we’re going to create this private credit thing where we and all these other places where you can borrow, and we don’t have the regulations of the government on us. And so it created this shadow banking, and you’ve probably heard that term shadow banking. So that’s been going on since 2009 so what is that? That’s 17 years, and during those 17 years that shadow banking has grown and grown and grown, and now there’s the possibility that the whole thing could unwind, and that could create, essentially 2008 except that was with banks, and now it’s with private credit. So you look at a company called Blue owl. They’re one of the largest private credit companies. They’re getting a run on the bank right now. People want to get to their money. They want to sell out. Give me my money now. Give me my money now. And what they said was, we can’t do that, so we’re going to limit your ability to get your money to only 5% 5% that means your money is stuck in there. You know what that was? That’s like 2008 that’s exactly what happened, where people were stuck and they couldn’t get to their money. And if that leads to contagion, Katie barred the door, which is why I’m so glad we are in protection mode right now. So let me go over one other thing with you, which is I saw in it, I saw a I saw an interview on Bloomberg with this guy who’s a global expert, and his name escapes me, I’m sorry, on oil, right? And what he said was that there’s something very interesting that’s happening right now in a bad way, and that is that the

storage for the oil coming out of the Middle East is there’s only so much storage that you can have, right? So because the oil is not leaving, it’s not going through the state of strait of Hormuz. It’s not being shipped everywhere. You know what’s happening? They’re filling up all their storage because they have to store it somewhere. And when that storage is filled up, they can’t produce anymore. And we’re about 15 days, 20 days, according to this, this, this expert from that, all that storage being filled, if the storage is filled, they can’t keep producing, because if they keep producing, you know what’s going to happen, they can’t put it anywhere, so they stop producing, and you know what that does. And again, I’m talking over my pay grade here, but based on what he said, is what happens is, is that these oil wells, if they’re not producing, they need the oil to be flowing through them. If that oil is just sitting there, then what happens is it starts to stagnate, it starts to get sulfur in it, and the oil becomes bad. Think of, you know, your wine that’s been sitting there for too long, and suddenly it turns into vinegar. And if that oil all becomes bad, those wells become useless. So there’s the potential. Oil, that we could have hundreds of bare millions of barrels of oil that we can’t use. And if that happens, then we’re going to see potentially famine around the world. I mean, this is what this guy was talking about. Suddenly you can’t produce stuff because the oil is bad so and we’re already starting to see things like this happening in Asia there. You know, if you if you watch the news, you’re seeing that they are now starting to ration food and gas. It’s happening already. So that’s all kind of a doomsday scenario. I’m not trying to scare you or anything. I’m just trying to make it make you aware that it is incumbent upon us to protect your retirement from catastrophic loss, and this could turn into that, and that’s why we’re in protection mode. So I hope this gives you the peace of mind we want you to have. We want you to have peace of mind. We want you to let us worry about it so that you don’t have to. That’s our that’s our goal in life. We want your money to last as long as you do. That’s why we do this. We want you to retire to enjoy your SCWPerness, your second childhood, and your money outlasts you even, but at least last as long as you do, the greedy, unwashed, undeserving heirs can take care of themselves, right? So anyway, did I say sign up for the did I say that? Yeah, we filled up the one on the 16th the town hall with me and Jordan. So make sure you sign up for the one on the on the 13th. We want everybody to attend that. It’s gonna be fun. We’re gonna answer your questions. So make sure you go there. So that’s all I got for you this time. The good news is we’re in protection mode. The bad news is this could turn out to be something really awful, and you know, for people, they’re gonna suffer. I feel terrible. Happy Easter. Everybody on that note, and I hope this video found you healthy, wealthy and wise, and we’ll talk soon.

Please note: transcript has been modified after the time of recording. 

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