Said Josh Arnold miss your Money talk with jud Arnold here to answer your questions on stocks, bonds, mutual funds. You should position your investment dollars including your IRA in four oh one k, but you do have to give us a call nine five two nine five five six oh eight. That's two nine two five five six eight. Before we jumped in. We have to note our disclaimer. As per usual, everything on the show is for discussion purposes
only. Nothing should be construed as investment advice. Some are All of the securities we discussed in the show may or may not be suitable for you. Investing contains risk, including risk of loss. Do not make an investment decision without consulting and investment advisor. Jut a very very interesting week with concerns concerns about expanded war in the Middle East, concerns about the price of oil we'll say skyrocketing due to concerns about a war or expanded war in the Middle East.
The Federal Reserve back, I'll say back, while I've been continued in the forefront all year with a higher than expected producer price index and consumer price
index. That not to mention the reading of their minutes and then the start of earning season with Pepsicola surprising a little bit, Delta Airlines having mixed results and cutting guidance, United United Healthcare crushing it with their stock up a lot and probably providing the bulk of the upday on Friday for the doll And then we have up to me some surprising, surprisingly good results from the few banks that reported to begin the season, with more banks to go next week.
And when I say surprise to me, the surprise is how the market reacted to the bank's numbers with and saying, oh, well, they had better than expected interest rate results, but nobody bothered to mention what was happening to the value of their underlying bond portfolios. I'm not sure I would agree with that characterization so big. There's four big banks that are too big to fail, which is City Group, Bank of America, WELLS Fargo, and JP
Morgan respectively. They were, you know, Wells Fargo's a three percent today, JP Morgan up one point five percent, and City and Bank of America were down very very small. The regional bank index was down two percent today. And what you are seeing in banking and the regional bank index is approaching its lows from the Silicon Valley bank crisis in March. And so what you're seeing is a flight to quality in banks, no different than you see in
the Nasdaq, which is for active managers. They're not allowed to not own one of them, so they all own the four that are too big to fail, and everything else is just being absolutely torched. And we can add the next three, which is US Bank, Court, Truist, and PNC. Those three together, if they all merged, would be the fifth biggest bank. As it is, those are banks five, six, and seven in the country. But that's just to give you an idea of the scale
of the difference. Those are all about five hundred million dollar banks. The smallest of the big four is about one point six trillion. But you know, the next three did fine too, but every other bank just getting taken to the woodshed along with I would point out the emerging story it's not really emerging. Is there is just no bid for anything that isn't big caps.
So the Russell two thousand, which is the two thousand of the top three thousand stocks, it's the smallest two thousand, is back below its pre COVID level. And I would point out on a five year basis, if you go back the total return, if you held the Russell two thousand for the last five years, your total return is under two percent a year. Going back for how long five years? Wow? You know, so essentially you're
taking far more risk. I mean the Russell two thousand, we are taking a line of risk with mid caps and small caps, and you made a poaltry two percent a year. So it is, you know, outside the Magnificent seven, things are just really getting taken out to the woodshed. And I think, what's going on. We're still in a seasonally week period of the period of the year. You just have too much. I think the events in the Middle East that put us to a level of uncertainty that is
just simply unbearable, and there's just nothing. We're gonna need some resolution. I think the fear with the Middle East, and I'm leaving politics aside here, I'm just saying the market fear is that this spreads, not that it isn't horrific. What is going on in Israel, in the Middle and in the West Bank and the Gaza Strip, certainly in an emerging humanitarian crisis in the Gadsa Strip and obviously a brutal, horrific war crime and program in Israel
a week ago. The Middle East is a very tough place, but the market fear is that it spreads if it is contained. From a market perspective, I think the markets will see past this. But you add that plus Ukraine, plus the Republicans can't pick a speaker, which you again we leave that is unbelievable. Well, it's not really Unbelievable's a six seed majority and
it's not even a party, no different than the Democrats. It's hard to form a caucus, and the most likely caucus for the Republicans is the center. And what you historically saw was moderate Democrats or modern Republicans being the filler and controlling a lot. This is on the Democratic side. This is where the blue dog Democrats historically had a lot of power. And the push to polarize everyone is really making this hard. Now from a market that's a political
commentary. From a market perspective, the immediate and upfront issue is, hey, we only have a forty five day continuing resolution. We're gonna have a government shutdown, and I mean, they can't pick a spe If they can't pick a speaker, they're not gonna be able to, you know, to avert a government shutdown. And in fact, McCarthy I quite obviously lost the speakership because he made a deal to avert the last shutdown. So correct.
You add all this stuff up, and then you mentioned the really good healthcare earnings for United Healthcare. It's an interesting way to start. I would point out that healthcare is specifically Medtech has gotten it's clock cleaned, as they say this week on the unbelievably positive results from Nova Nordis and there get skinny pill
or reduced fat pill. And the reason why that's terrible for Medtech is diabetes is the fastest growing type two diabetes, which is if you're obese, you get it, is the fastest growing component of health care costs in this country. And the highly effective skinny pill, if you will, means that far less people are going to be obese, which means far less people are going
to have type two diabetes. And you can add in all the other health care impacts for a health insuran like United Healthcare, this is amazing, this is great. It means medical loss ratios get better. Hospitals which require people to go and they make money on surgeries are getting destroyed. So it has been an earthquake in healthcare, which is really messing up a lot of people. And that's, you know, not an insignificance. Fifteen percent of the
economy about the same part of the S and P five hundred. So you add in all this stuff in the context, you add in the fight with inflation and what's interest rates, and I think people are just simply throwing up their hands and saying, I don't know, I don't want any of this. And that's why this market is listless. Small caps and midcaps have been, you know, utterly obliterated. I mean you are. If you bought the absolute low for the S and P five hundred last October, you have
not made no money in small caps and midcaps. That's a pretty terrible indictment. Oh so you're What you're saying then, is if you bought the app the low of the equal weighted SMP index last October thirteenth, that this October
thirteenth you went nowhere. You went nowhere. And if you bought the the market weight S and P index the spy, how does the spy then, and you bought that at at the absolute low last October thirteen, you're up about eight you're up thirteen percent for the year, and you're up about eighteen percent from the low. So it's a dicey market. It's just there's no two ways to shake it. It's a very dicey market. So well, I would throw throw in if you want, you know, some at dicey
market. I look at some of the quote unquote defensive names, Well, what we're gonna so, et cetera, and they're all on that discussion. That's another piece, and we come back. This is Josh Arnold, Mister Money Talk with Judd Arnold here to answer your questions on stocks, bonds, mutual funds. You should position your investment dollars including your IRA and four oh one K, don't hesitate to give us a call nine five two at nine two five five six oh eight. That's nine five two nine two five five
six oh eight. We're here to help you. This is Josh Arnold, miss her Money Talk with Judd Arnold here to answer your questions on stocks, bonds, mutual funds. Now, you should position your investment dollars, including your IRA in four oh one K. Don't hesitate to give us a call. At nine five two nine two five five six oh eight. That's nine five two nine two five five six oh eight. You always get straight talk, not sugarcoated advice. Well, here's something interesting, Jed that I just
saw come across the tape. We record this on Friday after the market closes. But Pfizer, when we're talking about healthcare and healthcare related stocks pharmaceuticals, eyes are just warned sighted delayed packs world voide commercialization and also lower COVID demand. So that happened after the market closed, and that also brought down the stock of Moderna and maybe that that would also have an adverse effect on Merk
and possibly Johnson and Johnson as well coming up next week. Yeah, you would you had brought up, you know, and uh the Novo norsk uh weight well diabetes drug that's also used for weight loss control. Uh. Eli, Lilly has a drug that does works in a similar fashion. Uh. And I know that when you're talking about i'll say weight loss and weight loss drugs. Walmart mentioned the adverse impact to their food sales due to those drugs.
The bookman of the weight lass lost drug is gone haywire. This week, we even had pet stocks down on the theory that people will be better looking, hence less lonely, hence we'll have fewer pets because more we'll get married. It's out of contunt Well, how come then that the match dot com did not go up? You know? These are these are the deep
questions. I think, fewer people on it and what have you. But I will just say, I mean you can start as locally and concentrat as you can, which is de Vida, which is a kidney dialysis clinic, big holding of Warren, buff and Berkshire. Hathaway down thirty percent this week, wows so and you can expand you know HCA, the biggest you know hospital in the country this week down about twelve percent. So this has been an earthquake in a healthcare sector earthquake, and it's going to take a while
to sort out. So I think some of it's an overreaction. But we we shall as they say, we shall see. Well, I have not been a I have not been investor in pharmaceutical stocks or you know, medical technology stocks. That's but I know you've been, you know, pretty big on some of the we'll say healthcare, well for the value based care say and I don't know any right now. Like the value based care stocks. It's the same thing with the insurers, which is medical lass rates are going
to go down, which it means is good for them. For the healthcare stocks, it's really bad my point for people who aren't even invested in healthcare. And that's really what I'm saying is this is fifteen percent of the S and P five hundred and people woke up at the start of this week, and you have moves in these stocks. This is typically a defensive sector, and you have stocks moving ten to fifteen to twenty percent outside of an earning
sprint that typically move one percent in a week. And it is one more of the wet blankets on this market, and just the wall of uncertainty that people just don't know what to do and they are being besieged across their portfolios and that is generally bad. Well, you know, that's that all those things add to putting the market into a we'll say extreme oversold the position.
Then the market is completely oversold. And you know, but for we start, we had a nice rally last Friday, and you know, because of the Mid East conflict, we that's been completely upended. You had oil stocks start to rally a bunch on Friday of this week because of they're going to start enforcing the Russian price cap, so oil was up four percent. This is not conducive to risk. It's just really and this is this is what a bottom feels like. And you don't need to feel pressure to call a
bottom or do anything. If you have stocks, I'm not really selling them. I'm just sort of sitting there. I'm accepting the fact that I'm probably going to keep losing money for a while. And that's just the nature of the game. Because you can't called when it's this terrible, you can't call bottoms. The market's completely over sold. Relative Strength index is under thirty, well, it's about it's about thirty for the mid cap indecks, which is
incredibly low. Eighties overboad the S and P five hundred. We are, you know, generally over slightly below over sold, although only about forty about thirty five percent of stocks are in an uptrend. It is there's just too much and one by one these things get resolved and we move forward, and that's what happens. But for right now, you should wake up in the morning and you should expect to lose money. It just is what it is. Well, at the end of the last segment, I was talking about
the number of you know, defensive names. Well there is another This is another issue, which is all the defensive names which typically trade on diving and yield I have now gotten slaughtered over the last two months as they've repriced higher for longer. And that the ten year treasury is somewhere between four and a half and five percent, And so all these things that we bid bid up to a two percent yield, we now have to move to a four percent
yield, And so they're just gonna all go down for a while. And what happens when the safe part of your portfolio gets annihilated allow you sell more of the risky stuff too. It's just a lot, you know, there's just so many things coming at you. If you are running a large portfolio right now, it's just really hard. And prices typically need to go lower to account for all those risks or uncertainties need to be removed to allow people
to be comfortable holding their existing risk. Okay, well I think they slow, but sure some of these uncertainties should be The world always the world always gets better and this is one. This is part of the reason we hold a lot of cash. Two, you gotta be patient. That's it. You gotta be patient. A few people have called and asking and they say,
well, do we have the highs for the year in July. I gotta tell you, we got two and a half months of the year, and those are two and a half, you know, especially November December or usually two of the best months of the year. We could we could take out the high for the year. It wouldn't surprise me. We could also go negative for the year. With the S and P five hundred, the
equal wave is negative for the year. We could go negative. And I think what I'm getting at is the range of outcomes is incredibly wide, and that's what's difficult, and that's what the market's reacting, and that's why it feels like nobody wants to buy a stock. So that's just where we are.
We got more earnings coming up. He's got starting having more bank earnings next week coming up, and probably start starting with some technology related We'll also say related technology companies related being like Netflix will report the next next week, and I'm not so sure how how good Netflix is going to be given. You had a writers and an actors strike going going on for a good chunk of the last quarter. You have an actors strike that's still going on.
But isn't that Isn't that awesome for Netflix? It means viewerships up because there's no new content and they have a big library. See, these are the hard things to figure out, and a lot of the time we just try not to figure them out because they're too hard. I'll tell you right now, Warren Buffett isn't doing much. He's just sitting there waiting, and that isn't a bad thing to do. No is nothing is is bad like that. We have more earnings to discuss, or more potential companies that are reporting
next week, and more to talk about in the world of investing. When we come back. This is Josh Arnold, mister money Talk with jud Arnold, always here to help you. Nine five two nine two five five. This is Josh Arnold, miss or money Talk with jud Arnold, here to answer your questions on stocks, bonds, mutual funds. Now you should position your investment dollars, including your IRA in four oh one K. Don't hesitate to give us a call at nine five two nine two five five six oh
eight. That's nine five two nine two five five six eight. You always get straight talk, not your coded advice. Well, Netflix might have a big, a big library, and maybe that does does provide it a boost boost for them when they report their earnings. But I'm really really not so sure because people are also going to be looking at Netflix for what else do they have in their upcoming events that would be attractive for me to continue paying
you know, their their subscription cost. I don't. I think Netflix seems to me like more of a winner than a loser. We've been Media is just really hard, and you brought that up before. Now, speaking of media, Disney just got an activist. Nelson Pills is back involved with Disney. Looking for three board seats doesn't matter. And this is the scary thing. First off, Nelson Pelse was there. He once I hear, came
back and announced the restructuring plan. He withdrew his nominees. Now he's saying he's going to re engage because the stocks eighty four from one to ten. Okay, the problem with Disney is an activist can't solve this problem. They have a terminal value question with the rest of media. They disaggregated the bundle, the cable bundle. They all went direct to consumer, and none of them are making money a direct to consumer, and that's the problem. They
don't know how to monetize content. They all have to because it's everybody's direct to consumer. Now you've got to advertise, and you got to spend money on customer acquisition, and that's the problem. When you had the cable bundle, you didn't have to do any of the cromer acquisition, so you can
make money on the carriage fees. And so when you have direct to consumer, and this is the hard concept for people to get, if you keep your subscribers exactly the same, you have a three times worse business direct to consumer because you still have to market to those people, and you need to handle your customers and have all the back office stuff. When you were just a cable company, you need to do any of that. Oh, Comcast is running great. I don't have to end up billing, I don't have
to handle any of that stuff. I don't have to recruit customers. And so that's the problem, and the consumer experience is terrible because we disaggregated the cable bundle, and now you add up all the darn apps that you got, and you're paying the same or more. It's completely inconvenient to dance between these apps. It's gonna take a very long time to solve this problem. And I don't know if Disney it you're still paying I think seventeen eighteen times
earnings for Disney. Oh and I'll tell you expensive stock. And you look at the local broadcasters, or you look at Viacom where it trades, and those are you know, seven eight times earnings multiples. So what you're really doing is if you mark the Disney content assets to where paramount is or where the local broadcasters are, what you're really saying is I'm paying forty times earnings for the theme parks. Well, theme parks are probably not worth forty times
earnings. It's just really hard to see a pat You got a lot of debt on this thing. This is going to take a long time to sort itself out. And they're selling assets, so they're locking in the losses. I just I see no point in touching media. It is too hard. The industry blew itself up. I don't know what's investible, and I would
stay away. Well, I certainly. Uh. I'll say my media exposure right now is is through Apple and Amazon just through because they have media exposure, you know, for what they for what they offer, uh in a in a streaming streaming vein with Amazon Prime and Apple and Apple Plus. Well but that's but that's it. But I'm not investing in Apple or Amazon with That's the other problem. Do you think Amazon or Apple have any pressure to
make money? And they're they're they're still building. This is a disaster. You don't need to touch this stuff. It's just awful. Well we will, we will stay stay away from stay away from that. Well with all that going on is the I know you you like energy, So energy is was up this week. Energy was up. Everybody's got to own a little energy. I've been talking about the off shoorge drillers for two years and it was nice to see those guys breaking out this week. Obviously Midi's conflict.
And the nice thing about owning a little bit of energy is it it doesn't correlate with the rest of your portfolio. We also saw a huge deal announced this week with Exon buying Pioneer. Biggest deal I think going back since Mobile. All the way back in the late nineties. Huge deal. That's a six sixty billion dollar deal. You're gonna see a lot more energy M and A. The reason you're going to see a lot more energy M and A is Exon and Chevron trade a seven eight times earnings and the rest of the
EMP companies traded three to four times. And what the market's saying is, I hate energy. It's burned me for a decade. I'm only going to invest in the top two and or anyone who can show me scale and so that the industrial logic and the math of guys saying, if we all just keep merging, maybe we can capture this multiple. I think that's a big deal. Well, if you were looking at, you know, potential candidates, is there any any of these E and P companies that you would like?
I like, I hate the E and P. The only one I kind of own is Northern Oil and Gas ticker NG. At the same time, I'll just tell you offshore drilling is way better. My daughter's portfolio, she's five years old. Her biggest position by a country mile is Tidewater Tickers TDW stock seventy bucks. I think it's three times forward earn it people debate what the forward rings are going to be. I think it's three times. The thing can trade north of ten times twenty five dollars to share a free
cash flow seventy eight dollars stock. You know, I don't know what to tell people. I think we got five six more years at least in the offshore cycle. We may never build another offshore drilling rig. You may just use the existing fleet that we have. Offshore drilling is massively increasing as shield tops out. I think that what are some of the risks? What are some of the risks then to drilling offshore, Well, the risk is offshore
versus energy specifically offshore. Yeah, I'll say offshore drilling versus drilling or having been in an E and P company, just do all right, these are radically different businesses. And let's just for the sake of simplicity, let's just say this. If you buy any energy stock onshore, offshore, wherever the heck it is, the market goes down, you're gonna lose a lot of money. Most of the time in the recession, go down, you're gonna
lose a lot of money. Energy stocks should be treated incredibly voluatarily for most people earning more than five percent of your portfolio and energy and energy is wrong. It is not for the faint of heart. These stocks are twenty times more volerable than every other stock, so be careful. But as part of a broader portfolio, I would point out that most people can benefit from having some energy exposure, and I think the officer drillers are the place to be.
Okay, that's it. But one thing you should never do, if you did not notice it, The one thing you do not want to do with energy or any other risky sector is find the quote unquote safe stock in a risky sector. That is the recie. A safe stock would be a pipeline company that we've learned that lesson the hard way. There is no such
thing as a say stock in a risk risky sector. You want to buy medium to high risk stocks and risky sectors that are going to pay you for the risk that you're taking, because you're going to lose money on all of them. Safe included on the way down. Okay, because you know a lot of the pipeline companies, people might get attracted to touch the h one pole. There is no such thing as a safe energy stock. If you
want safety, don't get it from energy. Will sind When we come back, we'll look at a few other areas of investment and we have a big week next week with earnings. Stay tuned. This is Josh Arnold, mister money Talk with Jutt Arnold always here to help you. Two nine two five five six oh eight. This is Josh Arnold. Missed your money Talk with Judd Arnold here to answer your questions on stocks, bonds, mutual funds, how you should position your investment dollars including your IRA in four oh one,
K, don't hesitate to give us a call. Nine five two nine two five five six oh eight. That's nine five two nine two five five six oh eight. So if you miss the start. If you missed the start of the show, friendly reminder that everything on the show is for discussion purposes only. Nothing shall be construed as investment advice. Some are All of the securities we discussed in the show may or may not be suitable for somewhere.
All investors speak to an investment representative before making any investment decision. Investing in the stock Marke contains risk, including risk of loss. There you go. Well, when you start talking about about risk jud interest rates at the end end of the week came down a little little bit. But when any worry about the FED and what the FED is going to do with short term interest
rates, you know, as those rates have moved up. And I brought this up earlier on bank earnings that nobody bothered to or I didn't hear too much mention of the bank's bond portfolios, which on a mark to market basis have got to be underwater. And that's one, well, you know I'm not You're not a bonding You framed it this way at the start of the show, and I'm going to politely push back. Which is, while the top four banks were off the four two big to fail banks, the banking
index, the KRI which is the regional banks, got absolutely torched. This is Friday of this week. Or cour got torched down two percent, and they are the bank. The regional bank index is at the what the Sulkon Valley bank one loads. So what you're seeing in banks is a flight to quality, to the bigot, to the two big defoul banks, and then the acknowledgement that the banking sector is really in a bad spot. And we would expect the k R e to go a heck of a lot lower.
And we've been talking about it all year. Well that you know the bond You know, I keep seeing and reading and I know we've covered this before, but I just continue to want to hammer hammer this home. You know that your yields are going to fall, Yields are gonna or the feed is done. Yields are gonna uh, yields are going to come down. Lock in these high yields. Now, buy bonds, buy bond funds. And I just shake my head and wonder it's I know, that's just a straight
up buying a bond or a bond fund. Yes, you're going to get the income I'll say you're making, you're making an interest rate back, and we just our eyes roll. Let's just give you some stats. It's been a horrific year for the markets. Guess what the S and P five hundreds of twelve and a half percent this year, the TLT the twenty year at the United States Treasury, the quote unquote thing you're supposed to be buying is
down twelve percent, twenty four point difference in performance. That includes the coupons, Okay, twenty year bonds. If you try to call the low. You have lost money three years in a row. If you owned investment grade bonds for the last five years, the LQD index on a five year well, first off this year, you're down four percent. Let's start there. Great bonds this year and we are at thelows for the year. So everybody who bought them is down all right. Secondarily on a five year total return
basis, they've returned one percent annualized. It is really hard to call bonds. It's really hard. You're never compensated for the rate. Equity is always outperformed. If you have a multi year horizon, equities always outperformed. And when you look at the market and you say, wow, the market's been decimated. I want safety. I want to buy bonds, buy and large the people over time. As long as you have a multi year horizon, you typically are leaving a heck of a lot of money on the table when
you buy bonds instead of stocks. And that is the empirical evan there's tons of empirical data on that. Now, the flip side is you do take more volatility with stocks. Typically the peak the trough drought on in stocks is typically bigger than bonds. That being said, bonds are coming off historically low interest rates. Right now they are very high risk. So before worn, well it's been well, thank you, was it forewarned and forearmed with that?
Well, now I've got it. Just another before we move on. Look, we got to the point you're really hammering is people sold the sixty forty portfolio for the last forty years, and any idiot could have could have bought the thing and felt great about themselves. As interest rates which peaked at eighteen percent under Paul Volker in the early eighties when I was born, and bottomed at one percent or less than one percent, Okay, guess what now
we're back to four and a half to five. You don't have the tailwind. And all these people who were counting on the bond portfolio offsetse stock fall flatility have woken up and said, oh my goodness, oh my god, it was a one in a million shot. Doc. It wasn't supposed to happen where I lost money on bonds and stocks in the same year. It's only happened twice since the nineteen twenties. Yep in twenty twenty two, and I believe a period of time in nineteen twenty well it's gonna happen again this
year. For most of these people, bonds are already down and stocks maybe me down. So just remember, folks, like just because something's happened thirty years in a row, you have to dissect the reason those things are happening and take an educative view on what will happen prospectively. Well, I think that's that's always made a lot of sense to me, and that's one of the reasons, you know, I invest and recommend investing the way I do,
primarily in individual stocks. And if you want safety, keep the money in in in cash or a money market interest instrument. So it's dollars in, dollars out plus plus interest. Yes, the you'ld might be a little bit lower, but you've got all that all the safety there, yep, yeah, you have liquidity. As we look to next week to wrap up number one, front and center, we're gonna wake up Monday to warn them at least and again, if you missed the start of the show, please
go back and listen to the webcast. The War in the Middle East from a market perspective, nochumanitarian, which is actually horrific. The market what it is looking for is Does this work spread to Lebanon, Syria and potentially Iran and Jordan? I will throw this out. Jordan looks incredibly unstable, as it has looked unstable for the last fifty years. Does that fall apart? Two? Does the Middle East become a powder keg? That's front and center,
number one, two and three. Number four, What happens in Ukraine? Number four? What happens the Chinese inspect the press into Taiwan during this period of global unster. Beyond that, we have a looming government shutdown. I mean, we could just show the risks. We got banks that are blowing up. We have no clue which way interest rates are going. All this stuff's really bad. The market feels really hard. Do be careful. You don't need to do anything. Just sit there. Know the better times
are coming. If you own good stocks, it'll all be okay. If you don't know how good stocks is always is not going to be okay. Take a deep breath. We're all going to get through this. Happy to help give us a call. Thank you, stay tuned. Any questions. We're here two nine, two, five, five, six eight. Do have to thank the twins for a good season and a lot of fun and we're looking forward to spring training in twenty twenty four. Josh Arnold Investment Consultant
is a registered investment advisor located in the state of Minnesota. All securities discussed are for informational purposes only. Investment contains risk, including risk of loss. Consult your investment professional before making any decisions about your investment portfolio.