Moody afternoon. This is Josh Arnold, mister Monday Talk with Judd 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. Don't hesitate to give us a call nine two nine five five six eight. That's nine two five five six oh eight. You always get straight talk, not sure coded advice. Say before we jump in, we have to do the standard disclaimer.
Everything that we discuss on this show is for discussion purposes only, and nothing should be construed as investment advice. Some are all of the securities that we discuss in the show may or may not be suitable for you as an investor. Do not make an investment decision without consulting a financial advisor. Investing in the stock market contains risks, including the risk of loss. Well, Friday finished out with not too many losses at least on my screen, an
awful lot of green on the screen. And this despite the fact that we had twelve Fed governors speaking this week, all seeming to say this, I'll say, continue with the same mantra higher for longer, but we do reserve the rate or that we do. We do reserve the right to increase interest rates. Should should data indicate that inflation is picking up, because we are
still ways away from our two percent inflation target. Meantime, you know, the bond market first, UH went up earlier this week, then came down, and the bond market finished on a positive note. So bonds increased in price, yields came down in price, or and that was a nice spur
for the for the market. Oil has come down despite some of the issues in the in the Mid East, and earnings seemed to be a little bit better than had had been It had been expected, particularly amongst some UH technology companies, and even even Walt Disney jud came in a little bit better than than expected. I mean, well, I know you're not big on Disney, but I'm just saying I don't if we don't spend anything better than expected.
Sure, but you know the Disney earnings were okay. If we don't spend any money on content because of the writer's strike, we have free cash flow. You're guiding towards not spending a lot of money on content. Well, if you don't spend money on content, you don't know content. So Warner Brothers, which is the other big media conglomerate, had dreadful, dreadful
earnings. Media we continue to stay away from. But I think you hit the nail on the head, which is the running joke for thirteen fourteen years, is some combination. Today it's the Mags seven, the Magnificent seven. It used to be the fang stocks, but it's all the same stuff, Facebook, Microsoft, Apple, Google, Amazon, Tesla in video? Did I forget any of I forget? I think I think you hit them. You hit them all. Obviously, big big companies. That's where the money
goes. It doesn't matter, it doesn't matter. Everything is good for these companies. Every bad piece of news people say, well, I sleep well at night with those seven. Every good piece of news people say, well,
those seven are going to make money. And I think you started your soliloquy, if I may, with what I thought was a very interesting development for the last two weeks, which is, as many politicians and i'll say activists scream from the hilltops that the war between Israel and Hamas in the gaysa strip is going to expand into World War three, I would humbly point out
that the oil market can only go down. And in a debate between people screaming, you know, excitedly and ecstatically, with no agency in the overall outcome, and one where people actually have to bet money, that being the oil market, it says a lot that the oil market isn't doing anything. In fact, it's going down during the worst piece of the worst time I
should say, of Middle East conflict in recent memory. So there you go, and you just have to have to have to look and say Opek has continued to curtail production, the Russians have continued to curtail production, and we're not seeing a massive amount of drilling, at least in the United States. More of the fact, you're seeing a lot of consolidation in the oil patch.
Well, you got a few dynamics there in the oil patch, which is the US oil patch, particularly the Permian basin which is in West Texas, which is effectively produces more oil than two kuwaits at about five and a half million barrels a day, and the world uses about one hundred and two million barrels a day. For context, the US does about twelve in total.
But shale growth is share oil growth is slowing, and we're seeing you know, my portfolios are certainly positioned for offshore oil to come back in vogue, and that's been an issue. But you know that takes a lot of time to drill my favorites there at Tidewater and Noble. You can also look at Valaris or rig But or Slumbers if you want something more liquid. But
yeah, this is this is the theme oil in general. The energy stocks had two huge years in twenty one and twenty two and have done absolutely nothing this year. It's been a year of consolidation where semiconductors and the NASDAK stocks have really taken the lead after a drubbing in twenty twenty two, so that's been interesting. As we wrap up, twenty twenty two is rapidly approaching the rear view mirror and it's amazing how fast, how fast this year is gone.
And I'll say, as I get older, the years go buy a lot faster. Yes, yes they do. And as we sit here today, the S and P five hundred of fifteen and a half percent for the year, while the equal weighted S and P five hundred is down thirty four basis points for the year. That spread of fifteen percent that we have talked about all year. It was sitting at ten percent for a while, and now it's fifteen. It's the Mag seven, separate from everyone else, and
it's really causing a lot of questions for people. It's been a year very much of a lot of macro noise and nothing really changing. Mag seven, Mag seven, Mag seven. We've talked, We've gone through at least one banking crisis that I'm aware of, which is the Silicon Valley bank crisis and First Republic. It looks like we're going to have another one. But you know, you just buy the Mag seven and you go to bed at night. I guess, well that they have they have been the they have been
the leader. We own two two of the Mag seven, Apple and Amazon.
But if I start looking at at the other uh, the other parts of the Mag seven or the Magnificent seven, But I start looking at the amount of cash that these companies have on the balance sheet, and very few people have a very few analysts have said jeez, with interest rates up even on a short term basis, and the amount of cash that these companies carry, analysts are not even looking at the cash that or I'll say the cash that, the cash that they have on hand generates particularly for you know,
for short term money. I mean, I think you can look at you I think you can look at a niche point like that, and I I think that's fair. I think what what I would push on is just simply the spread we talked about, which is the gap between the S and P five hundred market cap weighted uh in the equal weight. Or you can look at small cap stocks, which is the Russell two thousand, which is the bottom two thousand of the top three thousand biggest stocks is down three percent for
the year. Investing inherently is momentum. The only thing getting a bid. The best business is the best capital structures, the least amount of debt. It's the mag seven And well, we'll see how long this plays out. It could go on for a while. You never you never know. But what we have to come back now, we do have to come back. When we come back, we can talk about some or other earnings besides Disney
and where things look for the balance of this year. This is Josh Arnold, Mister Money Talk with Jut Arnold here to answer your questions on stocks, bonds, mutual funds, how you should position your investment dollars. Call us nine five two nine two five five six oh eight. We're always here to help you. This is Josh Arnold, mister money Talk with Jut Arnold here to answer your questions on stocks, bonds, mutual funds, how you should
position your investment dollars. 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. We're always happy to meet with you. When we're concluded talking about the mag Magnificent seven and how they have separated themselves from the pack. Jud And you brought up the equal weighted S and P five hundred being negative for the year, the overall market tap weighted S and P representative of how most
people track the market being up fifteen percent. We have not really touched on how much the bond indices are down for the year. The long term Treasury TLT is down twelve and a half percent for the year. Three years in a row. That's three years in a row. You've gotten your face ripped off with bonds. I think peaked at three year total return in bonds in
treasuries is I think it's minus thirty five percent. You like corporate bonds, the LQD, which has investment great bonds down three percent for the year. Again, this is all interest rates. And this is the part of the show that we do every week where we remind people it's all nice for warm and fuzzy. When people say, hey, look at that yield, don't you want to buy it? T bills and chill, so to speak.
But if you buy long duration bonds and you're wrong on that rate and it goes up, you know, one hundred base points or one percent, that's typically about seven eight points on your bond, so you're stuck in that bond to where you can take a loss and until interest rates subtle, I just think the idea of taking duration. We're not bond people. Let me just we'll start there for table stakes. I get why people are bond people. Actually I don't get it. Equities always out for fom bonds in the long
term. I mean, obviously, that's why the economy works. Like the idea that a lower risk instrument's going to have a higher return than a higher risk instrument is just it's it's lunacy. But some people like bonds, and all we tell people, if you really want bonds short duration right now, the idea of locking it in long term and potentially exhorbing losses, it's just
crazy. But that's just us. Some people, you know, really like the long term bonds and they can lose twenty percent in them, and they can feel warm and fuzzy at night because they say, we'll hold it for twenty years and all amortise. Focusing on well, here's my yield. I can't get that, you know, four and a half five percent yield on
stocks that you cannot on most stocks. But in total, on a total return basis, we would just humbly point out in a rising interest rate environment, which is something that has not existed since nineteen eighty two, I want to say, well, that would be pretty pretty close to correct. It's if you buy a long term bond, you have to be prepared to hold it to maturity or accept losses, and that is a risk that most people are unaware of. But let's talk. Let's go back to stocks. We'll
let these bond people do their like we can. We can kind of segue from the bonds into the stuff because I'm sure you might have well that's kind of interesting, I'm sure, which is a definitive and then I say, well, you might not have, but you might have heard the interview this morning on CNBC with Ron Baron and Ron Baron talking about he's never owned a bond, and he points out that in his investment career, which dates back to the late sixties when the Dow first hit a thousand, and today the
dal Jones' is thirty four thousand. If you would put money into bonds and bonds in nineteen seventy, we're yielding about seven percent. So if you locked in, we'll say, a fifty plus year bond and got seven percent over that periodiod of time, you would have been paid for each one thousand dollars that you put into a bond. You would have been paid seventy dollars a
year, and today you'd get your thousand dollars back. If you put the money into the Dow, with all the ups and downs that have transpired in the last fifty three years, your money would have gone from one thousand up to yeah thousand, significant amount of money, even with all the volatility, all the problems that occurred over that period of time. Buy stocks, buy stocks, buy stocks, but not all You can be very diversified. You can buy an ATF you can do very well. You can do what we
do where we buy individual stocks. Be careful out there. It's a hard game. Speaking of speaking of hard game, Now what up? I'm I'm I gotta get some off my chest. I am exhausted. I am exhausted from bond treasury bond auctions. And everybody having a view, and everybody having a view on J Powell, the Federal secretary. You know J Powell speaks this week or he spoke this weekend. Sp J Powell spoke twice this week. And then you had eleven other FED governors speaking. The most hawkish was
the Minneapolis FED governor, Neil cash Carry. None of these people know. Look, you don't have to listen to any of them, because they've already told you. We don't know. We're data dependent, we're monitoring, we're closer to the end. In the beginning. There's a lot of Fed policy discounted in stocks. And that's it. And this myopic Oh he said this, he said that. Get over you. I it's just it's exhausting,
my cheap stuff. Close your eyes. But some people, we got a warrant market on Thursday, reacted negatively to comments from FED governors, and yeah, that's why I'm saying that didn't go as well as they thought. We are in a period where nobody wants to take risks stocks or jittery. The only stocks working are the biggest, most liquid stocks. These are high risk
periods of time. What I can say is in my career historically, when we've been in times like this where nobody wants to take risk and only the big liquid stuff is working, is typically a time when you can make a lot of money if you hold for one to two years on stuff that's perceived to be more risky. So I'm just I continue to not see a major credit event, which is the only way in my lifetime that the markets have really blown up. What's a credit event? Jud What do you mean?
What is a credit event? Jud tell us a credit event is a major financial institution blows up. That's a credit event. You can have the European sovereign debt crisis from twenty that was late twenty eleven. You can obviously have COVID where a lot of banks could have gone under if the FED wouldn't have
been there. Obviously, the global financial crisis and so forth. We had a mini credit event with Silicon Valley Bank that the FED acted decisively to stop, but absent a credit event, and I just don't see anyone defaulting so well. Would you say a credit event could occur in the commercial real estate market, I'd say ones already occurring in terms of losses, but those losses aren't big enough to dislocate the market. The stock market that is, so
it's really hard to get a commercial real estate loan. We're seeing buildings in San Francisco and Chicago sell for relative pennies on the dollar relative I mean fifty to seventy bucks a square foot when new build is I don't know, six hundred seven hundred to square foot. You know what I'd say, joke.
You know what I what I call a joke on replacement costs. The problem is most people are aware that San Francisco is a really hard place to be and if there's ever going to be worked from home forever, it's going to be in the San Francisco tech bubble. You've got an urban spiral there where you have failed politicians, failed policies, lots of crime, and you know, flight of people who want to be there. Which is pretty scary. At the same time, I'm sure people are going to make a lot of
money buying that. But that in and of itself, it's gonna hit some banks. It's going to hit some people. But it's just not enough. It's just not enough to cause you know, a massive seizure of markets. You need to see commercial paper go under. You need to see mortgage bonds go under. That's the individual mortgage. I just don't see it. We've got two wars going. We got the mint. Well, actually, there's way more than two wars of people are you know in Armenia. Oh that's
the Armenians once again. If you know an think about history, man, it's it's never good to be an Armenian for the last one hundred and fifty years apparently, and they're getting slaughtered again. But the two wars the people in the west are focused on is Ukraine and Israel Hamas And we're just chugging along the stuff. You know, we'll see we're in a touchy of political
moment. We'll see on inflation. But as we said at the start of the show, and we'll just keep repeating, the market shrugs all the stuff off oils down, interest rates are down, and the mag seven are up and we'll be right back. This is Josh Arnold, miss 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 at nine five two nine five
five six eight. That's nine five two nine two five five six eight. You'll always get straight talk, not sugarcoated advice. This is Josh Arnold missed or money Talk with Judd 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. Don't hesitate to give us a call at nine to 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 sure coded advice. Say if you missed the start of our show, we got to make another reminder to you. Everything we say on this show is for discussion purposes only. Nothing should be construed as investment advice. Do not make a financial decision without consulting your investment advisor. Some are all of the securities we discussed in the show may or may not be suitable for you. Investing in the
stock market attains risk, including the risk of loss. All right, let's get back to it. Not a lot of risk of loss for the Magnificent seven. Interest rates down in oil down, mag seven up. No other stock can work, That's where we are. I'm s sure that there there are other stocks that can can work in this environment. Uh. Do you have the semiconductor segment that is he is working, whether it's Micron advanced micro devices. The video, the video seems to be more of a trading sardine
than any anything else. Taiwan Semiconductor has has done very very well recently. You know, others might have have some some issues. You've got the next week, the President Biden is meeting with Chi in San Francisco, and I'm sure they're going to be discussing technology, among other things. Uh. And when it comes to technology, these are things that I'm not sure are going to work. Uh. Coming up next week or in the future, you're
going to start seeing earnings coming from retail. Next week is big, big week with for retail including Walmart, Target, and Costco reporting reporting some numbers and one of the and I'll say an interesting development. Just this is a company that I that keeps popping up on my solitaire game Team MoU h people people wanting to shop or wanting me to shop on Teamu another internet retailer that is owned by p d D Corporation, which is a Chinese internet retailer,
which also owns a company called Pin Duo Duo. But I noticed that Timu has overtaken another internet retailer, Shine in Japan and South Korea, and has
been making inroads here in the in the United States. H. So there is we'll say, more competition for internet retailers from We'll say this happens to be a Chinese, Chinese backed company, but that that is one thing we've we've been seeing and maybe it'll have some some impact on Walmart's earnings, Costco's earnings, and Targets earnings when they and others other other retailers when they I just I'll say a million times every time we talk about it, I don't
think big retail earnings mean anything to the economy. I think I'm the channel of consumer behavior. I just don't think it means anything. I think this is old school. Read the tea leaves stuff. We get all these data feeds now, and it's just not how people's lives lives work that you would have to get a cross section of people spending, which you get from the credit card people. To look at Walmart's spending, it tells you nothing, and to look at Costco, it tells you nothing. Okay, Costco is
a great business. Walmart's an okay business, But I just don't think it matters. And I think this is this is old school. So I was really speaking of retail. I am there's this great podcast out there with Charlie Munger. It's one of the first podcasts he's done. I think I mentioned it last week, and I am just keep going back to Charlie pitched worn on Costco for more than a de gate to buy it, and it's worked,
and Charlie was right and Warren was wrong. And they asked Charlie, this is a couple of weeks ago on this podcast, so why do you think Warren didn't buy it? Why? And Charlie said, We've invested in retail for seventy years, and Warren just said, Charlie, it never works. Out in retail, they always go to zero and I'm okay missing this one. So you brought up Walmart. They beat out Sere. You know, they bankrupted Sears and Kmart. There was still plenty of room for Amazon.
If you told Walmart investors twenty years ago what Amazon was going to do, they probably would have sold their Walmart. Amazon's done it and Walmart's still here. But we'll see. I just it's a very hard space to make a lot of money. Now. The flip side of this is typically the richest person in almost every country is a retailer. So you can look in Europe with the zar Uh the family that owns Zara, and you can also look at LVMH. Yeah, and so I think what I would modify that
as and you can look across most economies. This tends to be very true. And I think what it is it's people who can hold on to a brand value and extract economic rents. And I would just say, from you know your portfolio, you largely do that. I don't think conceptually there's very there's a big leap between the role in people's lifestyle that LVMH and their own
brands play in people's lives and Apple or Amazon. It's all a play on the same thing, which is you want mind share and you want something, you want ease of use, and you want something that brings you utility. And so that's part of where how you've ended up in the portfolio that you've had. It's a different expression of the same concept. Well that that would be, that would be true. You have Louis Vaton moway Is. We'll
call it an aspirational, very aspirational brand. They did have, Uh, they did have some issues when they reported their numbers, which brought the brought the stock down, but longer term, they've done very well, very well.
Walmart has recently hit hit another new high. But I know from their last meeting or their last earnings report, Uh, you know, it was quite concerned that their food business was not doing as well, and they said, well that was that's because of all the we'll say new diet drugs that are out out there that come from companies like Nouveau Norse and Eli Lilly.
Uh talking I hear issues unrelated to food. Yeah, well, look, Walmart's the biggest grocer in the country, so you know you brought up the weight loss drugs, and I'll just say a lot of stocks have been obliterated by the weight loss drugs, and I belief that Americans are gonna be healthy, healthier. I will just humbly make a courageous prediction that we're going to find out five years from now that these weight loss drugs have a lot of
side effects and people aren't aren't going to use them. Well, you probably probably find that out sooner than than five five years. It's my understanding. A lot of these weight loss drugs if you stop taking them, like anything else related to to weight loss, if you if you stop doing something, the weight comes back on. We've seen that before with you know a lot of the other weight loss weight loss products. We'll say, other than some
other than a company that might help you modify your behavior. Oh yeah, oh yeah. So that's that's something something work out. It's it's super simple, work out. Do it during the break and we'll be right back. Okay, this is Josh Arnold, mister money Talk with jud 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 two nine two five five six oh eight. We're always
here to help you. This is Josh Arnold, mister Money Talks with Judd Arnold here to answer your questions on stocks, bonds, mutual funds. You should position your investment dollar including your IRA and four 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. You
always get straight talk, not sugar coded advice. Well this week too, jud some of my favorite companies did report earnings, including the likes of Win and they've got very nice hotels MGM, Mirage reported, DraftKings had reported a week ago, and and Caesars had reported a week ago. And then Flutter which owns Fandel reported reported numbers. UH Market did not treat you know those those companies very very well, particularly Win Resorts, which beat, but analysts
didn't like the results from one of their hotels in Macau. In gaming gaming is the problem with it is it they have a lot of leverage, and anything with leverage in this market is not working. That goes across industries. Everything with leverage is a sideway stock. There's just no demand. And we're in this jump ball and we started the show talking about MAG seven and forget
everything else, and this is a perfect example MAG seven. The S and P five hundred market cap weighted index is up fifteen and a half percent for the year. The equal weighted S and P five hundred is down slightly. The Russell two thousand, which are small and MidCap stocks, is down three and a half percent. There's bid for the MAG seven and a few big gross stocks that have no debt. When I say leverage, it's a fancy
word for debt on their balance sheet. And everything that is perceived as cyclical or economically sensitive and if it has leverage, forget about it. And we've gone through periods like this many a time in my investing career, and it's frustrating if you own those stocks. And what I like to think about it in a positive way as well, I've got deferred P and L deferred profits. They're coming to me once they turn the light switch on in the market.
I'm gonna get paid, but you might not. So it certainly is testing your conviction. This year has been for me, it's been a beautiful year, but a big test The ones I thought were gonna work didn't, the ones that reported great numbers didn't work, and a few random ones worked really really well. But if you told me what the results of all my stocks were at the start of the year, I would be stunned at this
return distribution. Well i've been, I'll say, since I get most of my returns from Apple and Amazon, since that covers the bulk of i'll say, my portfolio, my client's portfolios. I've been pretty happy this year. It's a lot of crazy than I was disappointed last year, particularly with Amazon and how people were treating Amazon. This year, as Amazon Web Services has gone and gotten a little better, uh plus at continuing to add customers.
You know, Amazon stock is going up despite the FTC suit against them, the ft Oh god, don't even get me started. The FTC. We got we've got two wars going on over the world, and the FTC is suing everybody for antitrust with with legal cases that wouldn't make it out of junior varsity you know, night school. It's just wow, junior varsity night school. You can't. I mean, it's just so terrible, and you know, not to get on the soapbox here but I mean one of the just
infuriating things. You look at what's going on in these college campuses and just the sheer lunacy. I don't mind when people disagree with my opinion, but when you when you make up your facts and dogmatically hold on to them, that's no longer a school that becomes a religious institution. And if we're going to if it's a religious organization, that's that's why the school don't have to pay taxes and can claim five oh one C three tax status. Yeah.
Well, I think that's all going to change, and I think the political earthquake is coming, but not just in the U. I like the fact that you start talking about they become dogmatic or and or you make up your own facts. Well, we talked about oil. I'll just bring up the
oil example that we brought up in the start of the show. There's a lot of people out there trumpeting around this thesis that World War three is coming and the world's going to end and all the other stuff, and I will just point them humbly to the price of oil and the price action of oil since the Israel Hamas War began, it is way down, and the difference between people who bet on oil oil prices and the people who protest the college
campuses. Is one of those people has their own money at stake? Yeah, the people who bet on oil bet on oil. So which one are you going to believe? But so be it. I'm not sure anybody on the college campus who says anything at stake, No, of course not. They've got, you know, five hundred grand of student debt backed by Uncle Sam being forgiven. We're gonna make non college graduates pay for degrees in post colonial studies, whatever the heck that means. But that I always thought the
colonial colonial period was was prior to eighteen ten. Well just remember no different than the priests from five thousand years ago, who when we ran out of bad people had to invent new ones. So too is it with the postmodernists and the intellectuals. You know, when bad ideas it's the old saying. When bad ideas have nowhere to go and die away, they go to college
campuses and become courses. But so be it, you know. As as the other thing I like to say to those people occasionally is listen, we can continue that debate, but as long as you acknowledge that I have made my order and yes I want fries with that. Then we can continue. Oo. That's very very good here, seaky, cheeky ky, very good. As we preview next week, as you mentioned, we got a few more earnings coming up, we've got more fed speak. At some point we're
gonna have the seasonal effect kicked in. And maybe it kicked in on Friday, where typically mid November through mid January the best time of the year to own stocks. That is a seasonal phenomena. It doesn't have to be true this year, past results or no guarantee of future success. As we sit here though, and as I look out at the setting sun, and as you do as well, I'll tell you we're both we both had some great
years for our clients this year. It feels nice. It's nice to be up big, and you know it doesn't happen every year, but it's been a beautiful year. Well. As you said, patients can get rewarded, and particularly if you're investing in companies that have rising sales, rising earnings and provide a product or service that people want. Amen, Amen, Amen, Amen to that. So give us a call next week. In the meantime, don't hesitate to give us a call nine five two nine two five five
six eight. I am Josh Arnold, Mister Money. Talk with Judd Arnold. See you next week. Josh Arnold Investment Consultant is a registered investment advisor located in the state of Minnesota. All securities discussed are for informational purposes only. Investing contains risk, including risk of loss. Consult your investment professional before making any decisions about your investment portfolio.