I'm roam. Yeah, but you let me drive? No, no, no, no, this is not a toy. Please, I'll do the riding gravels. I want to drive. It's a good question, but drive. This is the Drive to the Clobell on Bluebird Radio. All right, folks, just got about ten minutes left in today's trading session. Here Doug Krisner breakdown the trade. We're just coming off our highs of this session, but nonetheless definitely a risk on trade. Feared really too much in the markets today. Let's get to it. The Drive to
the Close with Dave Gilreath. He is managing director, chief investment officer and Innovative Portfolios, joining us on the phone from Indianapolis. Innovative Portfolios, by the way, a money management firm for registered investment advisors. Hey, Dave, good to have you here with Katie and myself. It's been an interesting couple of days. We're bouncing back here today. How do you see the market environment fundamentally? Does it look like we are headed for more gains heading into the new
year or less? Okyl, thanks for having me back, h Katie and uh I appreciate the invite and thanks for having me on the darkest day of Yeah, it's getting getting lighter from here on. So that's the good news, right, Um, as far as fundamentally, I mean, COVID is improving. Um, I think most of us a lot of year ago say that it had been probably in the rear view mirror. But it is improving. And you know that it was the economy was and a lot of other things were
in complete chaos on the way into the pandemic. And now we're coming out of the pandemic maybe I think, at least slowly. Uh. And so I don't know why people are surprised that it's chaotic on the way out, but you know, there there is some chaos, but there's you know, supply chain is improving. I mean even the semiconductor people are saying that today, and most big corporations are saying that. And inflation is a problem, but um, you know, maybe it's not. It might not be here
to stay. So wait, I'm sorry, are you glass half full of glass half empty? I can't tell am I what I'm sorry, glass half full or glass half empty at this point, glass half full, glass half full? But people would tell me I've been class half of all my whole life so um, But I mean commodity prices will take care of themselves. They always do. And in fact, the CRB index, which is you know it's index, are like nineteen different commodities that we use all the time.
It's down from a tie in October, and it seems to be going in the right direction. Um. And labor labor is they're flexing their muscles right now, which they can, and I don't blame them, but union labor is still it's only of all the jobs in the US, so you know, the union wage pressure isn't what it used to be. So the evaluation of the mark it isn't cheap um anyway you slice it. But earnings should grow
pretty well next year. I mean, the estimate for the SMP is like two thirty bucks, so you would think the SMP could go to without you know, some other big surprise coming and hit across the face. And Dave, I want to talk more about inflation because you mentioned I mean, if you look at results from Micron, from Nike just in the past twenty four hours, there were maybe some signs that the supply chains are on snarling themselves, but the fact that now we're dealing with a macron
that we could see more variants to come. I mean, does that introduce the possibility that supply chains come under even more pressure and maybe that feeds into inflation. Um, well, good question, Katie. I don't know. The earlier today you had someone on that was talking about how the UM the movement that you know, I attracked people's movement and all that in Asia and how it's been going up and up and up every month. Where tells you? That kind of tells me the supply chains are probably improving
and not getting worse. So and I think they will. And as far as variants go, I mean, we're going to have it seems like we're going to have more and more variants all the time. Um. But we're starting to learn to live with it. I mean, in the Midwest anyway, the malls, you know, they couldn't find a parking lot at lunch today and or parking space in the parking lot at Wench today, and office buildings they're may be not full, but there's quite a few people
in them. So it seems like we're learning to live with all of this. Um. It does feel like we understand we've seen the playbook we've got some tools. But I'm curious though, Dave is, all right, where are you putting money to work? From my understanding, you guys, you know, are really leaning in big time when it comes to industrials, names like snap On, like commins um talk to us little bit about that play right. So our firm we kind of focus on downside risk of a stock versus
the upside potential UM. And in one of the strategies when you're mentioning, we combine the divot into Chiever's index, which is the fifty or so stocks that have raised are diving into every year for a decade at least, and then we score them with these downside risk risk metrics, and then we buy fifty stocks and we reconstitute the list twice a year UM and right now and so
the stocks kind of fall through the funnel. We don't necessarily make conscious decision to buy certain groups or anything, but right now half of the positions are industrials UM, which to me is interesting given the fact that there's been so much uncertainty of the market, so um, you know, right now. And then over and above just buying the stocks and holding them, we do an option overlay using SMP index options to uh, we use set credit spreads and add a little bit of income like three or
four d basis points a year. So right now, the industrial I think, are very cheap. If you look at the x l I, which is the spider for the industrials, Uh, that chart, if you look at it, it's been building this bay for months and months and months. Uh. And the industrials as a group have a pretty low forward pe. And the ones that I had mentioned to you, snap On Cummins a b M Industries, which is a stock not a lot of people have heard of, all have really low pees forward pees like in the you know,
thirteen fourteen twelve kind of area. Um. And and if not really if, I mean, I think it's pretty evident that the global economies are starting to chug back to life in a pretty good way. Um, the industrial should continue to pick up steam. And Dave just quickly curious how you feel about tech, because I mean, I don't think anyone would accuse that sector of being inexpensive or chief, but it just seems like you can't keep that sector
down for too long. Yeah, the big tech isn't all that expensive quite honestly, Some of the small to the unprofitable tech. I guess you might call it um you know, the ones that don't have really earnings, those have those got really expensive and they've been falling back to earth
pretty rapidly. But the big tech, you know, I mean the big ones that everybody you know, the uh, Microsoft and the Google and Facebook and those kind of things, those are not particularly expensive right now, and they're continuing to gain market share and make money. And they've got you know, the zillion dollars of cash on their balance sheets,
and they're buying back stocks. I mean, that's another thing that supports the market, is is the stock buybacks at the end of the third quarter was the biggest, you know, there's an all time record. So corporate executives got a lot of heat. And but it's it's certain it's certainly what makes stocks moves. And whenever we see it, you know, they cross, whether it's on an earnings announcement or other, you definitely see a lot of action on the stock
when when they talk about buybacks. Hey, listen, we've got to run. Dave, thank you so much. Happy New Year's Stay safe. Dave Gilreathi's maging director, Chief investment Officer over at Innovative Portfolios,